/raid1/www/Hosts/bankrupt/TCRLA_Public/241231.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, December 31, 2024, Vol. 25, No. 2
Headlines
A R G E N T I N A
ARGENTINA: Sells Most FX Reserves Since 2019 on Importer Demand
B R A Z I L
ACHE LABORATORIOS: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
C A Y M A N I S L A N D S
EDO SUKUK: Fitch Affirms 'BB+' LongTerm IDR
C O S T A R I C A
REVENTAZON FINANCE: Fitch Affirms BB+sf Rating on Fixed-Rate Notes
J A M A I C A
JAMAICA: BOJ to Auction $30BB Certificate of Deposit on January 6
JAMAICA: Central Bank Vows to to Keep Inflation Within Target Range
JAMAICA: Export Earnings Down
M E X I C O
TOTAL PLAY: Fitch Hikes LongTerm IDR to 'B-', Outlook Stable
V I R G I N I S L A N D S
WANDA PROPERTIES: Fitch Affirms 'C' Rating on Sr. Unsecured Notes
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Sells Most FX Reserves Since 2019 on Importer Demand
---------------------------------------------------------------
Buenos Aires Times reports Argentina's Central Bank on Thursday,
Dec. 26, sold the most foreign reserves in one day since October
2019 after officials eliminated a key tax on imports, igniting
corporate demand for dollars.
The country sold US$599 million in foreign exchange reserves,
monetary authorities said in a post on X, according to Buenos Aires
Times.
Most of the sales were made to meet the needs of Argentina's
automotive industry, which pays its suppliers abroad in dollars, a
central bank spokesman added, the report notes.
The sale exposes some faults in President Javier Milei's campaign
to re-build the country's war chest of foreign reserves that are
essential to eventually lifting capital and currency controls next
year, the report discloses. The buffer is money that they can ill
afford to lose with payments on international bonds set to jump to
some US$9 billion in 2025, half of which come due in January, the
report says.
Central Bank policy makers added that they're aiming for a more
flexible currency policy in 2025, saying in a separate emailed
statement that they're keen on adjusting the pace of the peso's
slide, in a policy known as the crawling peg, if monthly inflation
cools further, the report notes.
Officials also said that a new agreement with the International
Monetary Fund or private financing could help accelerate the
removal of capital and currency controls, but the report did not
provide more specific timing on policy changes besides next year,
the report says.
The peso that trades in Argentina's parallel market, known as the
blue-chip swap, slipped by about 1.6 percent to 1,193 pesos per
dollar, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of
South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
In March 2022, the International Monetary Fund (IMF) approved a
new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of
monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings has upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC'
from 'CC', and its Long-Term Local-Currency IDR to 'CCC' from
'CCC-'. Argentina's upgrade to 'CCC' from 'CC' reflects
developments that have improved Fitch's confidence in the
authorities' ability to make upcoming foreign-currency bond
payments without seeking relief of some sort.
S&P, in March 2024, raised its local currency sovereign credit
ratings on Argentina to 'CCC/C' from 'SD/SD' and its national
scale
rating to 'raB+' from 'SD'. S&P also raised its long-term foreign
currency sovereign credit rating to 'CCC' from 'CCC-' and affirmed
its 'C' short-term foreign currency rating. The S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress
in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. upgraded Argentina's Long-Term Foreign and Local
Currency
Issuer Ratings to B (low) from CCC on November 25, 2024. The
trend on all ratings is Stable.
===========
B R A Z I L
===========
ACHE LABORATORIOS: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings affirmed Ache Laboratorios Farmaceuticos S.A.'s
(Ache) Long-Term (LT) Foreign-Currency (FC) Issuer Default Rating
(IDR) at 'BB+', LT Local-Currency (LC) IDR at 'BBB' and LT National
Scale Rating at 'AAA(bra)'. Fitch also affirmed the LT National
Scale Rating of its unsecured debt at 'AAA(bra)'. The Rating
Outlook for the LT LC IDR remains Negative, while the Outlooks for
the LT FC and National LT Rating is Stable.
The Negative Outlook on the LT LC IDR continues to reflect the
increasing difficulty in recovering EBITDA margins and preserving
market share amid a competitive environment. Ache's LT FC IDR is
capped by Brazil's Country Ceiling of 'BB+', as its operations are
concentrated in Brazil.
Ache's ratings reflect its strong business position in the
defensive Brazilian pharmaceutical retail market, with leadership
in the prescription segment, and strong and well-established brands
with pricing premiums.
Key Rating Drivers
Gradual Margin Recovery: Competition with local pharmaceutical
companies remains fierce, as they acquire brands from
multinationals, expand their generic products across segments, and
operate under aggressive commercial conditions. Fitch expects
Ache's EBITDA margins to stabilize around 20%-22% through 2028,
down from a previous expectation of 25%.
The company continues to face challenges in defending its market
position. Additionally, its strategy to increase investments in
sales and R&D may take some time to prove successful. Increased
inventory levels have strained cash flow and Ache is expected to
attempt to restore it to historical levels.
Strong Operating Cash Flow: Ache's pre-dividend free cash flow
should remain strong. Fitch forecasts EBITDA and cash flow from
operations (CFFO) of BRL1.0 billion and BRL700 million,
respectively, in 2024, and BRL1.2 billion and BRL850 million in
2025, compared with EBITDA of BRL785 million and a negative BRL150
million in CFFO for 2023. This growth is supported by increased
sales from new product launches and lower working capital
pressures.
Its base case considers average annual capex of BRL350 million and
dividends of 7%-10% of net revenue, resulting in neutral to mildly
negative FCF in 2024 and a positive FCF of BRL150 million in 2025.
Ache has the flexibility to reduce dividend payments to manage cash
needs.
Unleveraged Capital Structure: Ache has maintained low leverage
ratios and strong credit metrics. Net leverage is expected to
remain between 1.0x-1.5x between 2024 and 2028, as margins improve.
In 2023, net debt/EBITDA was 2.0x and averaged 0.6x between 2020
and 2022.
Strong Business Profile: Ache is the fourth-largest retail
pharmaceutical company in Brazil and leader in prescription drugs,
with a well-established brand and a diverse product portfolio. Its
presence in the rapidly growing over-the-counter, generics and
dermo-cosmetics segments underscores its strong business profile.
Ache also has one of the largest sales forces in the domestic
market, enabling broad outreach to the medical community, which is
crucial for driving prescription drug demand.
Low Portfolio Risk: Ache is not significantly exposed to license
renewals or patent expirations. Like other emerging market
pharmaceutical companies, Ache has a narrower R&D pipeline than
multinational competitors and a weaker portfolio of patented
products. The company's mature and consistently renewed portfolio,
alongside its capacity to sustain product launches and increase
innovation, will be key factors in maintaining its competitive
position.
Positive Industry Prospects: The pharmaceutical industry has
positive long-term fundamentals in Brazil, driven by an aging
population, increased demand for chronic disease medication and
improved healthcare access. Sector growth has consistently outpaced
that of the Brazilian economy, with annual increases of 13% since
2021. Innovation and investment in specialized treatments are
expected to enhance medicine consumption. Investment in R&D,
maintenance of a sustainable volume of launches each year and the
expansion of the ability to benefit from sector growth will be key
for Ache.
Derivation Summary
Ache's lack of geographic diversification, small scale and
relatively narrow research portfolio compared with top
pharmaceutical companies constrain its 'BBB' LC IDR, while the
concentration of revenue in Brazil, together with the lack of
operating and financial assets abroad, caps its FC IDR at the
Brazilian Country Ceiling of 'BB+'.
Ache is rated below AstraZeneca ('A'/Outlook Positive), which has a
large scale and solid position in the innovative global
pharmaceutical sector. AstraZeneca leverages a strong R&D pipeline
to sustain revenue growth, particularly in oncology and rare
diseases. AstraZeneca maintains an EBITDA margin above 30% and a
net leverage well below 2x, supported by its robust cash flow.
Ache's National LT Rating is in the same rating category as
Eurofarma Laboratorios S.A. (AAA[bra]/Stable), and both companies
are well positioned in the Brazilian pharmaceutical market
landscape. While Ache has a more conservative financial profile,
Eurofarma has larger scale and better geographic diversification.
Ache is rated one notch higher than Blau Farmaceutica S.A.
(AA+[bra]/Stable). Compared with Ache, Blau has limited operational
scale and revenue concentration in a few products, with a focus on
the nonretail segment. Both companies have strong credit metrics.
Ache is positioned one notch higher than Cimed & Co.
(AA+[bra]/Stable) given its larger scale and leadership position in
prescription drugs and two notches higher than Uniao Quimica
Farmaceutica Nacional S.A. (AA[bra]/Stable). The latter has a good
operational scale and diversification, but Ache's capital structure
and financial flexibility are stronger.
Key Assumptions
Fitch's Key Assumptions Within its Rating Case for the Issuer
Include
- Stable sales volume in 2024 and average growth of 4% per year in
2025-2027;
- Average revenue growth of 8% per year in 2024-2027;
- Average annual capex of BRL350 million in 2024-2027, which
includes the expansion of the new plant in Pernambuco;
- Dividend pay-out of 7% to 10% of net revenue per year.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Net debt/EBITDA above 2.0x on a recurring basis and EBITDA margin
consistently below 25% could result in negative rating action for
the LC IDR;
- Competitive pressure that results in continuing loss of market
share or brand deterioration;
- Negative rating action on Brazil's sovereign rating and Country
Ceiling could result in negative rating action on Ache's IDRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- For the FC and LC IDRs, positive rating actions are limited by
Brazil's Country Ceiling of 'BB+' and sovereign rating of 'BB'.
Liquidity and Debt Structure
Ache has historically maintained robust liquidity. The company
reported cash and marketable securities of BRL419 million as of
Sept. 30, 2024 and strengthened its liquidity with the debenture
issuance of BRL650 million in November. Pro-forma cash position
comfortably covers debt maturities of BRL688 million through
year-end 2025. Liquidity is further strengthened by a BRL300
million revolving credit facility, all of which is undrawn; strong
pre-dividend FCF; and flexible dividend payment to manage cash
needs.
Ache's total debt of BRL1.8 billion consists of long-term
transactions from development banks such as Banco Nacional de
Desenvolvimento Economico e Social (6%), Banco do Nordeste and
others (16%), debentures (49%) and Certificates of Real Estate
Receivables - CRI (29%).
Issuer Profile
Ache is the fourth-largest pharmaceutical company in the Brazilian
retail market, and is a leader in prescription drugs with solid
brand recognition and a diversified product portfolio.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Prior
----------- ------ -----
Ache Laboratorios
Farmaceuticos S.A. LT IDR BB+ Affirmed BB+
LC LT IDR BBB Affirmed BBB
Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
===========================
C A Y M A N I S L A N D S
===========================
EDO SUKUK: Fitch Affirms 'BB+' LongTerm IDR
-------------------------------------------
Fitch Ratings has revised Energy Development Oman SAOC's (EDO)
Outlook to Positive from Stable, while affirming its Long-Term
Issue Default Rating (IDR) at 'BB+'. The rating action follows the
recent revision of the Outlook on Oman's sovereign rating.
EDO's rating is constrained by that of its sole shareholder, the
government of Oman (BB+/Positive), due to their close links, in
line with Fitch's Government-Related Entities (GRE) Rating Criteria
and Parent and Subsidiary Linkage (PSL) Rating Criteria.
EDO's 'bbb+' Standalone Credit Profile (SCP) is supported by its
large-scale oil and gas operations, strong and resilient cash flow
generation, due to contracted sale prices for gas and a flexible
royalty framework, a flexible dividend policy and low leverage. The
SCP is constrained by a single country of operations, a solely
upstream-focused business model, and a mature reserve base with a
low proved reserve life compared with peers'.
Key Rating Drivers
Sovereign Constrains Rating: EDO's rating is constrained by that of
Oman, due to strong linkages between EDO and Oman. Under its GRE
Rating Criteria, Fitch assesses the precedents of support as
'Strong' and decision-making and oversight, preservation of
government policy role, and contagion risk as 'Very Strong'. This
assessment results in an overall GRE support score of 55 points out
of a maximum of 60.
'Very Strong' Decision-Making & Oversight: EDO's 'Very Strong'
decision-making and oversight reflects full ownership by the state
with no near-term privatisation plans. The company's strategy and
activities are directed by a board of directors nominated by the
government. Its gas business is subject to regulated pricing, and
its Block 6 oil and gas concessions are critical to the domestic
economy.
'Strong' Precedents of Support: The government in 2022 provided a
shareholder bridge facility by permitting EDO to defer dividend
payouts and allowing the company to instead allocate its excess
cash towards near-term investments. The government also established
a flexible royalty regime - whereby royalties are based on average
oil prices during the relevant period - to allow EDO to preserve
cash flow at times of low hydrocarbon prices. Fitch expects the
government to continue providing support, due to EDO's pivotal role
in Oman's infrastructure and economy.
'Very Strong' Government-Policy Role Preservation: The oil and gas
sector is a major part of the Omani economy, with EDO's Block 6
concessions accounting for a large portion of the nation's total
oil and gas reserves. The company sells gas mainly on the domestic
market. Further, EDO is one of the largest corporate employers in
Oman.
'Very Strong' Contagion Risk: EDO currently has a growing presence
in capital markets. Its default would significantly impair the
financial standing of the sovereign and the ability of either the
government or other GREs within the country to raise financing.
Fitch views EDO as a benchmark issuer for its government in the
financing market. This underlines its 'Very Strong' assessment of
contagion risk.
Scale Offsets Limited Diversification: EDO is the largest oil and
gas producer in Oman via its interest in Petroleum Development Oman
(PDO). PDO operates the onshore Block 6 oil and gas concessions,
which comprise over 24% of Oman's land acreage and have more than
50 years of production history. This slightly mitigates EDO's focus
on a single country of operations. Fitch expects an average output
of over 800 thousand barrels of oil equivalent per day (kboe/d)
until 2028 in its rating case.
Flexible Payouts Under Fiscal Framework: EDO has been subject to a
unique fiscal framework since 2021. The fiscal terms include
royalties paid to the government weekly, based on EDO's revenue
from the sale of oil and condensate and taxes paid on income
derived from its oil and gas operations. Royalties and taxes paid
are significant under its price deck, but they are structured in
such a way to ease the burden on cash flow when market conditions
weaken.
Strong Financial Profile: Fitch expects EDO will maintain a strong
financial profile until 2028 under its base-case oil and gas price
deck, despite growing capex and high royalties and tax payments to
the government. Dividends are distributed from excess cash flow
after all debt service obligations and working- capital
requirements have been fulfilled, while maintaining minimum cash
levels for cash flow flexibility.
Conservative Leverage Target: Fitch expects EDO's EBITDA net
leverage to average below 1x in 2024-2028. EDO plans to maintain
company-defined net debt below 2.2x funds from operations (FFO).
This is a target set by the board, although it is no longer
covenanted in its new USD2 billion term loan agreement.
Favourable Unit Economics: In 2023, EDO's total production costs
before royalties were about USD4/boe of direct production costs and
about USD12/boe of capex, which place the company at the lower end
of the global cost curve. Adding generous royalties, which Fitch
estimates at about USD15-USD20/boe, significantly increases total
production costs. This is partly mitigated by EDO's still strong
financial profile, the broad alignment of EDO's and the
government's interests, and progressive taxation on oil prices.
Improving ESG Footprint: EDO continues to reduce greenhouse gas
emissions from operations and flaring as well as improving energy
efficiency. PDO also aims to expand its renewable power generation
capacity up to 30% of total capacity in the medium term. Fitch
views EDO's and PDO's environmental targets as broadly in line with
Middle Eastern peers', but lagging those of their large European
peers such as TotalEnergies SE (AA-/Stable), BP plc (A+/Stable) or
Eni SpA (A-/Stable).
Derivation Summary
EDO's closest peers in EMEA oil and gas are Saudi Arabian Oil
Company (Saudi Aramco; A+/Stable), QatarEnergy (AA/Stable) and OQ
S.A.O.C (BB+/Positive).
EDO has a stronger SCP than its Omani peer OQ, as OQ has modestly
higher gross leverage metrics, lower through-the-cycle EBITDA and
cash flow, and smaller scale, which are partially offset by greater
diversification and a much lower dividend burden.
Fitch assesses all three companies under its GRE Rating Criteria
and PSL Rating Criteria. Their IDRs are constrained by their
respective sovereign ratings.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Brent crude oil prices in 2024-2027 in line with Fitch's base
case price deck
- Gas production sold at current fixed prices to 2026
- Upstream production volumes averaging around 810kboe/d in
2024-2027
- Capex averaging USD3.9 billion per year in 2024-2027
- Dividends in line with the company's financial policy
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The Positive Rating Outlook makes a negative rating action
unlikely. However, a revision of the sovereign Outlook to Stable or
a negative rating action on Oman would be mirrored in EDO
- Weakening linkages between Oman and EDO - which Fitch believes
its unlikely - coupled with significant deterioration of the
latter's SCP
- FFO gross leverage or EBITDA net leverage rising above 1.5x on a
sustained basis due to, for example, persistently negative free
cash flow (FCF) driven by high capex or large acquisitions, which
may be negative for the SCP but not necessarily for the IDR
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- A positive rating action on Oman would be mirrored in EDO's
rating
- The SCP is capped by limitations of the company's business
profile
For Oman's rating sensitivities, see 'Fitch Revises Oman's Outlook
to Positive; Affirms at 'BB+'' dated 18 December 2024.
Liquidity and Debt Structure
At end-June 2024, EDO had readily available cash and cash
equivalents of USD315 million and undrawn revolving credit
facilities of USD390 million. In June 2024 the company refinanced
its USD2.5 billion term loan, which had begun its first repayment
in 4Q23, with a USD2 billion term loan due in 2029. EDO has no
near-term repayment obligations until 2026.
Fitch expects EDO to maintain robust liquidity, due to strong
pre-dividend FCF, proven access to international debt markets and
strong linkage with the sovereign. Fitch expects EDO's flexible
dividend policy will allow for liquidity preservation during
periods of restricted capital-market access or lower oil prices.
EDO has a stated minimum cash target of about USD220 million plus
additional cash reserves for the next quarter's debt service
obligations, which Fitch takes into account for determining cash
flow available for dividends.
Issuer Profile
EDO is Oman's national energy company and owns participating
interest in two concessions, accounting for approximately 65% of
Oman's oil and gas production.
Public Ratings with Credit Linkage to other ratings
EDO's rating is constrained by Oman's sovereign rating.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Energy Development
Oman SAOC LT IDR BB+ Affirmed BB+
senior unsecured LT BB+ Affirmed RR4 BB+
EDO Sukuk Limited
senior unsecured LT BB+ Affirmed RR4 BB+
===================
C O S T A R I C A
===================
REVENTAZON FINANCE: Fitch Affirms BB+sf Rating on Fixed-Rate Notes
------------------------------------------------------------------
Fitch Ratings has affirmed Reventazon Finance Trust's USD135
million fixed-rate notes at 'BB+sf'. The Rating Outlook is Stable.
Fitch's rating addresses timely payment of interest and ultimate
principal at legal maturity.
Entity/Debt Rating Prior
----------- ------ -----
Reventazon Finance Trust
Notes 76138QAA5 LT BB+sf Affirmed BB+sf
Notes REGS USG75463AA02 LT BB+sf Affirmed BB+sf
KEY RATING DRIVERS
Repayment of Notes Reliant on ICE Lease Payments: The notes are
backed by 100% participation interest on the Inter-American
Development Bank's (IDB) B-loan acquired through a participation
agreement, which gives the right to receive payments under IDB's
B-loan. ICE's lease payments from a non-cancellable financial lease
agreement for the operation and maintenance of the hydropower plant
will cover all payments on the loan.
Transaction Rating Linked to ICE's Issuer Default Rating (IDR):
Given the unconditional and irrevocable nature of the lease
payments, Fitch views the credit risk of these payments as linked
to ICE's credit quality. On March 21 2024, Fitch affirmed ICE's
Foreign and Local Currency IDRs at 'BB' with a Stable Rating
Outlook. Grupo ICE's ratings are supported by its linkage to Costa
Rica's sovereign rating (BB/Stable; upgraded Feb. 28, 2024), which
stems from the company's government ownership and the implicit and
explicit expectation of government support.
Lease Payment Obligation Supported by IDB as Lender of Record:
Fitch assessed the strength of the lease payment obligation by
considering IDB's role as the lender of record for the obligation
covered by ICE's payments, which is tied to ICE's ownership
structure. Since the IDB will remain the lender of record and
administer IDB's B-loan, Fitch believes that holders of the rated
notes will benefit from the B-loan's preferential, de facto, status
conferred by IDB. Consequently, the credit quality of the payment
obligation aligns with other Costa Rican obligations to the IDB and
was notched upward by one notch from ICE's IDR.
Noteholders Benefit from IDB's Preferred Creditor Status:
Sovereigns often prioritize certain obligations from multilateral
development banks when unable to service all external debt.
Although the B-loan is not a direct sovereign obligation, Fitch
believes IDB's preferred creditor extends to ICE, a strategic
government-owned entity with sovereign support. Despite Costa
Rica's past default in 1981, neither it nor ICE has defaulted on
preferred creditor debt. IDB holds about 13% of Costa Rica's
external debt, maintaining its essential role as a preferred
creditor.
Adequate Liquidity Present: The rated notes benefit from a debt
service reserve account equivalent to the next principal and
interest payment due amount. This liquidity provides certainty in
case the transaction is exposed to temporary liquidity shock. As of
November 2024, the account had sufficient liquidity to cover debt
service on the issued notes payment due in May 2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The notes' ratings are linked to ICE's Long-Term Foreign Currency
IDR; so a downgrade of ICE's IDR would proportionally trigger a
downgrade of the rated notes;
- Changes in Fitch's view of the treatment of the IDB as a
preferred creditor may trigger a rating action on the notes.
- Although the IDB (AAA/Stable) has an operational role in the
transaction by collecting payments due on the A/B-loans and then
transferring the B-loan portion of the proceeds to the transaction
account bank, Fitch currently deems this exposure immaterial.
However, should the IDB's credit quality deteriorate below the 'AA'
category, Fitch will reassess the exposure that the IDB poses to
the transaction.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The notes' ratings are linked to ICE's Long-Term Foreign Currency
IDR; so an upgrade of ICEs IDR would proportionally trigger an
upgrade of the rated notes.
CRITERIA VARIATION
Fitch's "Single- and Multi-Name Credit Linked Notes Rating
Criteria," dated Dec. 18, 2023, establishes that the credit quality
of the risk presenting entity (RPE) in a credit-linked notes
transaction is typically determined by an IDR assigned by Fitch.
However, in some situations, a committee would consider using the
actual bond rating (e.g. senior unsecured rating, subordinate
rating) of an asset in place of the IDR.
For this transaction, Fitch has determined that the RPE's credit
quality is not commensurate with the IDR or any particular bond
rating of the obligor, as sovereign/corporate ratings do not
directly address all forms of obligations. To determine the credit
quality of the obligation and its notching from the RPE's IDR,
Fitch incorporated perspectives from other analytical groups.
During the analysis, it was determined that the appropriate
notching uplift from the primary risk contributor would be one
notch.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The ratings are linked to the credit risk of ICE as measured by its
LT FC IDR.
=============
J A M A I C A
=============
JAMAICA: BOJ to Auction $30BB Certificate of Deposit on January 6
-----------------------------------------------------------------
RJR News reports that the Bank of Jamaica (BOJ) says it will on
January 6, 2025 be auctioning a 26-month fixed rate Certificate of
Deposit at 6.50% per annum.
The amount on offer will be $30 billion or 0.8% of GDP, notes the
report. Of this amount, $28.5 billion will be offered under
competitive bidding and $1.5 billion under non-competitive bidding,
according to RJR News.
All bids from government agencies must be submitted under
non-competitive bidding and the settlement date will be January 8,
2025, the report notes.
The instrument will mature on March 8, 2027 and the interest paid
is taxable at 25%, the report relays.
The first installment of interest will become payable on April 8,
2025 and thereafter on a quarterly basis, the report says.
Minimum subscription or the minimum amount which can be applied for
is $100,000, the report notes.
The total amount of Certificates of Deposit outstanding is
currently $136 billion or 4.13% of GDP, the report discloses.
Meanwhile, the central bank says it received 217 bids, valued at
$30.64 billion for the $10 billion it was offering in 6.5% per
annum fixed rate Certificates of Deposit, the report says.
The BOJ accepted only 86 bids valued at $10 billion, while pointing
out that the average yield on these bids was 6.21% per annum, the
report notes.
The lowest bid was for $60 million at 5.3% per annum, while the
highest bid was for $400 million at 8.% per annum, the report
adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. Jamaica
is an upper-middle income country with an economy heavily dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable.
In September 2023, S&P Global Ratings raised its long-term foreign
and local currency sovereign credit ratings on Jamaica to 'BB-'
from 'B+', and affirmed its short-term foreign and local currency
sovereign credit ratings at 'B', with a stable outlook. In
September 2024, S&P affirmed 'BB-/B' sovereign ratings on Jamaica
and revised outlook to positive.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook
is Stable.
JAMAICA: Central Bank Vows to to Keep Inflation Within Target Range
-------------------------------------------------------------------
RJR News reports that the Bank of Jamaica says, although inflation
is trending down, it recognizes that prices are still high, and as
a result, it will continue to pursue its primary mandate to keep
inflation within its four to six per cent target range during the
medium term.
This, as consumers continue to complain about the high prices of
agricultural items during the Christmas season, according to RJR
News.
Food and non alcoholic beverages account for 37.5% of the weights
included in the basic basket, used to measure the rate of
inflation, the report notes.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. Jamaica
is an upper-middle income country with an economy heavily dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable.
In September 2023, S&P Global Ratings raised its long-term foreign
and local currency sovereign credit ratings on Jamaica to 'BB-'
from 'B+', and affirmed its short-term foreign and local currency
sovereign credit ratings at 'B', with a stable outlook. In
September 2024, S&P affirmed 'BB-/B' sovereign ratings on Jamaica
and revised outlook to positive.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook
is Stable.
JAMAICA: Export Earnings Down
-----------------------------
RJR News reports that the Statistical Institute of Jamaica [STATIN]
has reported that for the period January to August this year,
Jamaica imported US$1.35 billion in oil and US$1.36 billion in raw
materials and intermediate goods.
Food and consumer goods imports were valued at US$1.29 billion
while capital goods imports amounted to US$558.38 million for the
eight-month period under review, according to RJR News.
Export earnings for January to August took into account US$576.95
million in manufactured items, as well as US$422.28 million from
bauxite and alumina, the report relays.
Additionally, Jamaica earned US$52 million from the export of
agricultural items and US$11 million from other domestic crops, the
report discloses.
Total exports for the period tumbled by 13.8 per cent to US$1.2
billion, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. Jamaica
is an upper-middle income country with an economy heavily dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable.
In September 2023, S&P Global Ratings raised its long-term foreign
and local currency sovereign credit ratings on Jamaica to 'BB-'
from 'B+', and affirmed its short-term foreign and local currency
sovereign credit ratings at 'B', with a stable outlook. In
September 2024, S&P affirmed 'BB-/B' sovereign ratings on Jamaica
and revised outlook to positive.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook
is Stable.
===========
M E X I C O
===========
TOTAL PLAY: Fitch Hikes LongTerm IDR to 'B-', Outlook Stable
------------------------------------------------------------
Fitch Ratings has upgraded Total Play Telecomunicaciones S.A.P.I de
C.V.'s (Total Play) Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) to 'B-' from 'CCC+'. Fitch has also upgraded
the company's senior secured notes to 'B-' with a Recovery Rating
of 'RR4' from 'CCC+'/'RR4'. Fitch has additionally affirmed the
senior unsecured notes at 'CCC' and revised the Recovery Rating of
these notes to 'RR6' from 'RR5'. The Rating Outlook is Stable.
The upgrades reflect the improvement in the company's liquidity
position, supported by positive FCF generation during 2024, and the
reduction in refinancing needs in combination with an extended
maturity profile. Fitch expects neutral to positive FCF in 2025 and
leverage to remain below 3.5x. The ratings consider the high
proportion of secured debt and increasing financing costs, with
close to 57% of accounts pledged as collateral, which limits Total
Play's financial flexibility. They also consider the company's good
operational performance, important market share, and
diversification.
Key Rating Drivers
Governance Concerns: Fitch believes Grupo Salinas'
governance-related events add uncertainty about similar practices
in the future. TV Azteca's default and Total Play's private
exchange support Fitch's previous assessment that Grupo Salinas is
uneven in its treatment of stakeholders. Fitch believes these
practices could impact Total Play's ability to access funding.
Expectation of Neutral to Positive FCF: As of the last 12 months
(LTM) ended in September 2024, Total Play generated close to MXN3
billion in FCF, supported by a lower capital intensity of around
27% (2023: 39%). Fitch expects FCF to be neutral to positive in
2025, with a capital intensity closer to 30%, and for the company
to use available liquidity to repay close to MXN3 billion in 2025
notes, bank loans and leases.
Debt Refinancing: Total Play was able to reduce its refinancing
needs and extend its debt maturity profile during 2024, mainly
through a debt exchange offer on its USD575 million unsecured bond
due in 2025, and the rollover of its Certificados Bursátiles
(Cebures, local bonds). The company's capital structure is heavily
weighted towards secured debt, with a proportion of subordinated
creditors.
The original 2025 notes that were not tendered in the exchange and
the original 2028 notes are subordinated from the IDR given that,
in Fitch's view, they have lower recovery prospects in an event of
default as a result of a higher secured debt proportion. Fitch
expects around 75% of total debt to be secured by the end of 2024
(3Q24: 72%) and expects this proportion to increase as further
refinancing takes place.
Increasing Cost of Debt: The use of secured debt further limits
Total Play's financial flexibility. The secured senior notes'
interest rate is 10.5%, which is higher than the original 2025
senior unsecured notes, and the recent Cebures issuances were
between 50bps and 150bps above previous spreads. The company's
percentage of secured debt and cash interest expense will increase
given its limited financing options, impacting cash flow
generation.
Profitability Continuously Improving: Operational performance is in
line with Fitch's expectations, with solid revenue and EBITDA
expansion in recent years, backed by extensive network deployment
that increased homes passed, business scale and profitability.
Increased network penetration, while maintaining a low-cost
structure and working capital requirements, is key to growing
revenue and expanding margins. Fitch expects network penetration to
increase to between 31% and 32% by YE 2025, compared with 12% in
2018, while EBITDA margins reach about 45% at YE 2025. Fitch
expects EBITDA to continue to improve in 2025, maintaining leverage
ratios below 3.5x.
Market Share and Diversification: Total Play is an important
participant in the industry in terms of network coverage, homes
passed, and revenue-generating units. The company has maintained
strong growth despite operating in a competitive industry. Total
Play reached 17.6 million homes passed and 5.1 million subscribers
in 3Q24, with about five times faster annual average subscriber
growth compared to the industry average since 2019. Total Play has
a balanced revenue mix and customer and service diversification.
ESG - Governance Structure: Fitch believes Grupo Salinas'
governance-related events add uncertainty about similar practices
in the future. TV Azteca's default and Total Play's private
exchange support Fitch's previous assessment that Grupo Salinas is
uneven in its treatment of stakeholders. Fitch believes these
practices could impact Total Play's ability to access funding.
Derivation Summary
Total Play's ratings reflect its limited liquidity position and
refinancing risk. Compared with Grupo Televisa, S.A.B.
(BBB/Negative), which has a more diversified business, Total Play
has higher net leverage, a smaller market share and lower network
penetration in the local market.
Cable & Wireless Communications Limited (C&W BB-/Stable) has higher
leverage than Total Play and a solid liquidity position, with a
long-dated debt amortization profile, and better service and
geographic diversification. C&W benefits from operations in a
series of mainly duopoly markets, excluding Panama mobile. Revenue
mix per service is well-balanced, with mobile accounting for around
28% of total sales, fixed-line at 25% and business to business with
47% of revenue in 2023. C&W's strengths are tempered by Liberty
Latin America Ltd.'s financial management, which limits any
material deleveraging.
VTR Finance N.V. (CCC) has higher leverage than Total Play and also
faces limited financial flexibility. Its rating also reflects the
expectation of a weak operational performance due to the
continuation of a highly competitive environment in Chile and a
sustained negative FCF.
Key Assumptions
- Revenue CAGR from 2024 to 2026 of 6%, due to the company's
strategy of increasing in-network penetration;
- EBITDA margins of 44% in 2024 and 45% in 2025;
- Capex more aligned with customer increases, with a capex to sales
ratio at around 30% in 2025;
- FCF generation neutral to positive in 2025;
- No dividend payments.
Recovery Analysis
Fitch's criteria consider bespoke recovery analysis for issuers
with 'B+' IDRs and below. The bespoke recovery analysis assumes
that Total Play would be considered a going concern in bankruptcy
and that the company would be reorganized rather than liquidated.
Total Play's going concern EBITDA of MXN9.7 billion is based on
Fitch's expectation of a sustainable, post-reorganization EBITDA
level. This compares with a LTM EBITDA as of 3Q24 of MXN19.5
billion and reflects the increased competition in the Mexican
market and the company's limited financial flexibility. The
enterprise value/EBITDA multiple applied is 5.0x. This figure
reflects Total Play's market position.
Fitch applies a waterfall analysis to the post-default enterprise
value based on the relative claims of debt in the capital
structure. Fitch's debt waterfall assumptions consider total debt
as of Nov. 30, 2024. The waterfall results in a 'RR4' Recovery
Rating for the senior secured notes due in 2028, and a 'RR6'
Recovery Rating for the 2025 and 2028 senior unsecured notes. Fitch
considers that given the high amount of cashflows that go the
master trust, there is subordination in the unsecured 2025 notes
and 2028 notes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Failure to address its refinancing needs and short-term
obligations, launching of a coercive debt exchange or announcing a
debt restructuring;
- Neutral to negative CFO-Capex/Total debt ratio that prevents
further liquidity improvements;
- Weaker operating performance and loss of market share;
- Unfavorable regulatory changes.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The possibility of any positive ration action in the short term is
unlikely. However, factors that could be considered positive for
the issuer's credit quality include:
- Change in the funding mix towards unsecured debt and a
diversification of its funding sources;
- A more balanced capital structure between liabilities and
equity;
- A CFO-Capex/Total Debt ratio consistently at or above 2.5%.
Liquidity and Debt Structure
Limited Liquidity: Total Play's financial flexibility remains
limited, with exposure to risks coming from short-term obligations
and an increasing share of secured debt. However, lower capex
intensity has driven positive FCF generation during 2024, improving
the company's liquidity position. As of September 2024, Total Play
had short-term debt and obligations of MXN9.2 billion (including
factoring and leasing of MXN3.1 billion) maturing in 2025 and
accounts payable of MXN16 billion. At the same date, the company
had readily available cash and equivalents of MXN3.5 billion and
restricted cash of MXN2.4 billion, which Fitch assumes will be used
for debt repayment.
The company expects to refinance around MXN5.0 billion maturing in
2025 and use cash to pay for the remainder of the 2025 notes and
amortizations related to bank loans and leases.
Fitch factors accounts payable of approximately MXN1.5 billion in
its debt calculations. The factoring adjustment allows Fitch to
compare issuers that may use different sources of funding, as
immediate replacement funding is required if the payables financing
shuts down.
Issuer Profile
Total Play Telecomunicaciones S.A. de C.V. is a Mexican provider of
fixed telecommunications services to residential and enterprise
customers including government entities. The company offers
pay-television, fixed-broadband and fixed-voice services through
its competitive fiber-to-the-home (FTTH) via a gigabit
passive-optical network (GPON) network.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
Total Play Telecomunicaciones, S.A.P.I. de C.V. has an ESG
Relevance Score of '5' for Governance Structure due to the
ownership concentration and the company's aggressive related-party
treatment toward different stakeholders, which has a negative
impact on the credit profile and is highly relevant to the rating
in conjunction with other factors.
Total Play Telecomunicaciones, S.A.P.I. de C.V. has an ESG
Relevance Score of '4' for Financial Transparency due to the level
of detail and transparency of financial disclosure that is weaker
than other industry peers. This has a negative impact on the credit
profile and is highly relevant to the rating in conjunction with
other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Total Play
Telecomunicaciones,
S.A.P.I. de C.V. LT IDR B- Upgrade CCC+
LC LT IDR B- Upgrade CCC+
senior secured LT B- Upgrade RR4 CCC+
senior unsecured LT CCC Affirmed RR6 CCC
===========================
V I R G I N I S L A N D S
===========================
WANDA PROPERTIES: Fitch Affirms 'C' Rating on Sr. Unsecured Notes
-----------------------------------------------------------------
Fitch Ratings has downgraded Dalian Wanda Commercial Management
Group Co., Ltd.'s (Wanda Commercial) and Wanda Commercial
Properties (Hong Kong) Co. Limited's (Wanda HK) Long-Term
Foreign-Currency Issuer Default Ratings to 'RD' from 'C' on
completion of the distressed debt exchange (DDE), in accordance
with the distressed debt exchange section in Fitch's Corporate
Rating Criteria.
Fitch has simultaneously upgraded the IDRs to 'CC' from 'RD',
reflecting Wanda Commercial's post-restructuring profile. Fitch has
also affirmed the ratings on the US dollar notes guaranteed by
Wanda HK and issued by Wanda Commercial's subsidiaries at 'C' with
a Recovery Rating of 'RR5'. Fitch believes that the margin of
safety from Wanda Commercial's liquidity in 2025 is still low, as
it still faces significant short-term financial obligations, even
with the completion of Zhuhai Wanda Commercial Ltd.'s new financing
arrangement.
Wanda Commercial's IDR reflects its Standalone Credit Profile (SCP)
of 'cc', which is at the same level as the consolidated profile of
its 45% parent, Dalian Wanda Group (Wanda Group), in line with
Fitch's Parent and Subsidiary Linkage (PSL) Rating Criteria. Both
entities' ratings are constrained by their limited financial
flexibility.
Fitch also rates Wanda HK based on its PSL criteria. Wanda HK's and
Wanda Commercial's IDRs are the same because Fitch assesses their
SCPs as being equal and reflecting very high credit risk. Wanda HK
is Wanda Commercial's fully owned sole offshore financing platform
and overseas investment-holding company.
Key Rating Drivers
Restricted Default: The downgrade to 'RD' reflects Wanda
Commercial's completion of a consent solicitation. Fitch considers
the transaction necessary for the company to avoid default given
its limited liquidity. The terms of the transaction materially
reduced those of the existing notes, with extension of the maturity
date and elimination of major covenants.
Subsidiary's New Financing Completed: Wanda Commercial has
confirmed the completion of a new financing agreement with a
consortium, which includes disposal of a 60% stake in Newland
Commercial Ltd. (NCL). NCL is a newly incorporated investment
holding company of Zhuhai Wanda, Wanda Commercial's asset-light
property management service subsidiary. The majority of the new
financing proceeds have been received and will be used to repay
CNY45 billion to Zhuhai Wanda's pre-IPO investors and meet Wanda
Commercial's bond maturities in 2024.
Tight Liquidity, High Refinancing Risks: Fitch believes that Wanda
Commercial's liquidity is still tight and there are refinancing
risks with the company's remaining short-term obligations,
including a USD400 million bond originally due in January 2025 but
restructured to be repaid by instalments, a USD400 million bond due
in February 2026, a USD2.3 billion domestic bond maturing in 2025
and other short-term bank loans.
Wanda Commercial reported CNY14 billion in readily available cash
at end-September 2024, of which Fitch believes a substantial
portion sits at Zhuhai Wanda and may not be available to repay
Wanda Commercial's debt. Wanda Commercial held around CNY18 billion
in bank loans maturing within one year in 3Q24. It is still
renegotiating payment schedules for the majority of these loans.
Fitch believes Wanda Commercial will seek to pay the upcoming
maturities via asset sales and internal cash generation.
Limited Access to WMPs: Wanda Commercial also holds around CNY48
billion of investments in wealth management products (WMPs) and
CNY35 billion of tradable financial assets. However, Fitch believes
they may not be readily available for Wanda Commercial's debt
repayment purposes, in light of the recent debt restructurings.
These WMPs were excluded in its assessment of Wanda Commercial's
liquidity calculation.
Operations Steady Amid Financing Stress: Fitch expects Wanda
Commercial to keep generating strong recurring cash flow despite
its liquidity stress. It had a net addition of four malls as of
end-September 2024 with its total number of malls reaching 501.
Fitch expects its total EBITDA to be at least CNY25 billion in
2024. Fitch estimates consolidated recurring EBITDA interest
coverage of 2.8x in 2024, from 2.6x in 2023. The company's revenue
increased by 2.8% yoy to CNY39.9 billion in 3Q24 and gross profit
margin was stable at 64%. The company's performance is in line with
Fitch's expectation.
Linkage Assessment: Fitch has determined that a parent-subsidiary
relationship exists between Wanda Commercial and Wanda Group. Fitch
currently assesses Wanda Commercial's IDR based on its SCP, which
is the same as the group's consolidated profile under its internal
assessment. Any improvement in the subsidiary's SCP without a
corresponding improvement in the group's consolidated credit
profile could constrain Wanda Commercial's rating, based on the
'Open' legal ringfencing and 'Open' access and control under the
PSL criteria's "strong subsidiary, weak parent" approach.
Derivation Summary
The IDRs on Wanda Commercial and Wanda HK are driven by the high
level of credit risks related to the repayment of its debt
obligations.
Key Assumptions
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
- Available cash balance maintained at below CNY5 billion in
2024-2025.
- CNY45 billion of Zhuhai Wanda's pre-IPO funds to be repaid by new
financing from the consortium by end-2024.
Recovery Analysis
Recovery Rating on Notes Guaranteed by Wanda HK
The recovery analysis assumes that Wanda HK would be liquidated in
a bankruptcy. Fitch assumes a 10% administrative claim.
Liquidation Approach
The liquidation estimate reflects its view of the value of
balance-sheet assets that can be realised in the sale or
liquidation processes conducted during a bankruptcy or insolvency
proceeding and distributed to creditors. Fitch assumes the
following:
- Advance rate of 0% applied to excess cash after netting off
payables and other payables.
- Advance rate of 50% applied to investment properties, supported
by Wanda HK's hotels and shopping malls, which generate rental
yields of above 6%.
- Advance rate of 0% applied to accounts receivable and other
receivables from Wanda Group-related parties to reflect the
parent's liquidity stress.
- Advance rate of 30% applied to account receivables and other
receivables from third parties, based on the likelihood of the
collection of the receivables.
The allocation of value in the liability waterfall results in a
Recovery Rating corresponding to 'RR5' for offshore senior debt.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Any announcement of a default or default-like process
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Improvement of Wanda Group's consolidated profile.
- Financing separation that indicates greater separation between
Wanda Commercial and Wanda Group
Issuer Profile
Wanda Commercial is China's largest shopping mall owner and one of
the largest commercial property owners rated by Fitch.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
Wanda Commercial has an ESG Relevance Score of '4' for Financial
Transparency, because Wanda Group is a private company and its
financial disclosure to Fitch is limited. Fitch has obtained
audited financial reports and access to Wanda Group's management,
but information about the group's other principal subsidiaries may
be limited. The uncertainty over Wanda Group's financial
transparency has a negative impact on the credit profile and is
highly relevant to the rating.
Wanda Commercial has an ESG Relevance Score of '4' for Group
Structure, because there is a lack of transparency, particularly in
intragroup transactions between Wanda Commercial and Wanda Group.
This includes the issuance of guarantees or other forms of credit
enhancement or contractual features of debt, such as subordination
or ringfencing, that affect the risk profile of Wanda Commercial,
which indicates a weak group structure. This has a negative impact
on the credit profile and is highly relevant to the rating.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Dalian Wanda
Commercial Management
Group Co., Ltd. LT IDR RD Downgrade C
LT IDR CC Upgrade
Wanda Commercial
Properties (Hong Kong)
Co. Limited LT IDR RD Downgrade C
LT IDR CC Upgrade
Wanda Properties
International Co.
Limited
senior unsecured LT C Affirmed RR5 C
Wanda Properties
Global Co. Limited
senior unsecured LT C Affirmed RR5 C
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2024. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *