/raid1/www/Hosts/bankrupt/TCRLA_Public/250207.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
Friday, February 7, 2025, Vol. 26, No. 28
Headlines
A R G E N T I N A
ARGENTINA: S&P Affirms 'CCC/C' Sovereign Credit Ratings
[] Moody's Takes Actions on 6 Argentinean Regional & Local Gov'ts.
B A H A M A S
BAHAMAS: PM Wants IDB to Increase Cap on Policy Based Loans
B E R M U D A
CARNIVAL CORP: Moody's Rates New Senior Unsecured Notes 'B2'
B R A Z I L
BRAZIL: Shatters Soybean Production Records, Reshaping Markets
COSAN SA: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
UNIGEL PARTICIPACOES: S&P Hikes ICR to 'CCC' on Debt Restructuring
C O L O M B I A
COLOMBIA: Unexpectedly Halts Key Rate Cuts After Trump Scare
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Potential USAID Closure Could Cost US$200M
J A M A I C A
JAMAICA: BOJ Floating $46BB Certificate of Deposit
JAMAICA: Could be Affected by Trade War Between US and Canada
M E X I C O
MEXICO: JPMorgan Says Peso Could Drop 12% if Trump Tariffs Hit
P U E R T O R I C O
BMF INC: Case Summary & 20 Largest Unsecured Creditors
- - - - -
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A R G E N T I N A
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ARGENTINA: S&P Affirms 'CCC/C' Sovereign Credit Ratings
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S&P Global Ratings affirmed its 'CCC/C' long- and short-term
foreign and local currency sovereign credit ratings on Argentina.
S&P also affirmed its 'raB+' national scale rating. The outlook on
the long-term ratings remains stable. At the same time, S&P revised
up its transfer and convertibility assessment to 'B-' from 'CCC'.
Outlook
The stable outlook on the long-term ratings balances the risks
posed by persistent economic vulnerabilities with:
-- Recent progress in fiscal outcomes,
-- Easing inflation,
-- A narrowing gap between the official and unofficial exchange
rates, and
-- Structural reforms undertaken to address long-standing
weaknesses that have contributed to poor economic performance for
many years.
Downside scenario
S&P could lower the ratings over the coming 12 months if negative
developments undermine the sovereign's already limited access to
financing. Failure to advance difficult exchange rate, monetary,
and other reforms could lead to instability and raise the
likelihood of default.
S&P said, "We analyze any debt exchanges at this low rating level
on a case-by-case basis and in the macroeconomic and political
context. We could consider debt exchanges at such low rating levels
as distressed and tantamount to default."
Upside scenario
S&P said, "We could raise the ratings during the coming 12 months
if we see improved external liquidity and declining economic
vulnerabilities, setting the stage for continued economic recovery.
Skillful management of inflation and the exchange rate could create
conditions for sustained stability and growth. Under such a
scenario, the government would enjoy better access to voluntary
funding from external capital markets and multilateral lending
agencies."
Rationale
S&P's ratings on Argentina reflect its high external
vulnerabilities, still weak--though improving--public finances,
lack of access to global capital markets, and low monetary
flexibility. A 'CCC' rating indicates that the obligor might not
meet its financial commitments in the event of adverse business,
financial, or economic conditions.
Argentina's long-term economic performance has been volatile and
poor. Its economy has been in recession for one-third of the years
since 1950, more than any other country in the world.
Argentina has defaulted five times on foreign currency sovereign
debt and seven times on local currency debt in the 21st century.
The latest default was in March 2024 when the government announced
a peso-debt exchange offer that S&P deemed a distressed exchange
tantamount to default. Subsequently, the government has remained
current on debt servicing but faces large foreign currency debt
service to commercial and official creditors in 2025 and 2026.
The government undertook two local currency debt exchanges in late
January 2025, with investors tendering bonds worth around $14.5
billion. Continued recourse to debt exchanges at such low rating
levels could lead us to consider such transactions as distressed
and tantamount to default. S&P will evaluate any potential future
debt exchanges based on, among other things, the government's
overall financial profile and access to alternative liquidity.
S&P revised up its transfer and convertibility assessment to 'B-'
based on our perception of modestly diminished risk of the
sovereign interfering with the ability of domestic entities to
access, convert, and transfer money abroad.
Institutional and economic profile: President Milei has maintained
public popularity while implementing ambitious reforms to address
deep-seated weaknesses in the economy
-- President Javier Milei has made radical changes to shift toward
market-oriented economic policies.
-- Milei's party stands to gain seats in Congress during midterm
elections in late 2025 if inflation continues to fall and the
economy keeps recovering.
-- A history of macroeconomic instability and sharp changes in
economic policy underpin the low credibility and predictability of
Argentina's governing institutions.
The election of libertarian president Javier Milei in late 2023 has
led to radical changes in Argentina, including shifting toward
market-oriented economic policies designed to stabilize the
economy, controlling high inflation, running a primary fiscal
surplus, shrinking the size of the government, and deregulating
many sectors.
President Milei has challenged previously dominant views that
envisaged a large role for the public sector in economic
decision-making and production. If successfully implemented, the
reforms could result in a significant reduction in the public
sector's role in the economy and set the stage for better long-term
economic performance.
President Milei has secured Congressional approval for fiscal and
economic laws despite his party's weak position in Congress. His
party, Freedom Advances (La Libertad Avanza, or LLA), has very few
representatives in Congress, leading it to rely on Republican
Proposal (Propuesta Republicana), a centrist party. LLA stands to
gain seats in Congress during midterm elections in late 2025 if
inflation keeps falling and the economy recovers, but it will still
depend on negotiations with allies to pass a more robust reform
agenda in Congress.
Although the administration has made progress on stabilizing the
economy, S&P's ratings on Argentina reflect its weak institutions
and history of major swings in economic policy following shifts in
political leadership. Volatility and lack of predictability of
policies have led to swings in exchange rate regimes, approaches to
monetary policy, the size of the state, and its influence on
investment and growth--all contributing to low GDP growth. This has
also impaired sovereign debt payment capacity and undermined the
debt payment culture.
Recession in 2024 was shallower than expected, with GDP contracting
around 3%. Both investment and private consumption started to rise
in the second half of the year but remain below previous peaks. The
rapid fall in inflation has started to boost the real value of
salaries and pensions.
GDP is likely to grow 4% or more this year, but our projections are
subject to uncertainty. Reaching a new agreement with the IMF could
help gain more access to external liquidity and support growth.
Argentina's growth remains worse than that of other countries at a
similar level of wealth. S&P said, "We calculate 10-year real per
capita GDP growth of 0.6% as of 2025 (based on a combination of
past and forecast growth). We expect GDP per capita will be around
$13,000 (at the official exchange rate)."
Flexibility and performance profile: High debt, vulnerable external
profile, poor access to external capital markets, and monetary
inflexibility
-- Argentina has a vulnerable external profile, with substantial
financing needs, and poor access to external capital markets.
-- Year-end inflation is likely to decline toward 30% in 2025 from
118% in 2024 and 211% in 2023.
-- Persistently tight fiscal policy based on primary surpluses
could further anchor investor expectations and limit exchange rate
volatility, thereby stabilizing the economy.
Still high inflation and exchange rate uncertainty underpin low
monetary flexibility. Inflation (year over year) fell to 118% in
2024 from 211% the previous year. The monthly rate fell below 3% in
December 2024 from nearly 26% in December 2023.
Inflation is coming down more rapidly than originally expected, but
some uncertainty remains. S&P forecasts yearly inflation to fall
toward 30% in 2025. The final number could be lower if inflationary
expectations ease more rapidly, but it could also be higher due to
potential changes in exchange rate policies. In any case, S&P
expects inflation to continue to decline as long as the fiscal
anchor remains solid.
In pursuing an additional decline in inflation rates, the
government cut the planned monthly depreciation of the official
exchange rate from 2% to 1% starting in February, at the risk of
seeing a further appreciation of the real exchange rate. The
government plans to unify multiple exchange rates and scrap
controls on foreign exchange. Delays in changing the current
exchange rate arrangements could lead to further appreciation of
the currency, weakening external competitiveness and potentially
undermining investor confidence.
However, abolishing exchange controls carries risk. A sharp
depreciation of the currency after the removal of exchange controls
could boost inflation, undermining the recent gain in stabilizing
the economy. Gross foreign exchange reserves rose to roughly $30
billion in December from $23 billion in 2023. But the central
bank's net foreign exchange reserves (gross reserves less
short-term liabilities) remain negative, limiting its ability to
intervene in the market to prevent a potential overshooting of the
exchange rate after the end of capital account controls.
The government has taken measures to boost the effectiveness of
monetary policy. The central bank has transferred its remunerated
liabilities to the government and stopped issuing new debt. The
government began to issue new treasury bills (Letras Fiscal de
Liquidez) to replace central bank short-term bills that had been
used for liquidity management.
A diminished trade surplus is likely to result in a current account
deficit around 0.1% of GDP in 2025 and small deficits in future
years. The energy sector could run a trade surplus of $10 billion
in 2025, but this could be partly counterbalanced by higher imports
and a growing deficit in services (partly thanks to a bigger
tourism deficit due to a strong currency). Foreign direct
investment should fund the external deficit.
S&P said, "We project narrow net external debt to exceed 190% of
current account receipts (CARs) in 2025-2026, assuming some
increase in official and private-sector debt. We estimate gross
external financing needs to usable reserves and CARs to average
about 153% over the same period. The forecast assumes international
reserves rise with net disbursements from the IMF and other
official lenders.
"Regaining access to global capital markets would be an important
step to support refinancing, in our view, and is key to better
creditworthiness. The government faces external debt payments of
over $17 billion in 2025 ($8.9 billion to commercial creditors and
$8.1 billion to official creditors, including $3 billion in
interest to the IMF), highlighting the need to boost its external
liquidity."
The government ran a near balanced budget in 2024 and a primary
fiscal surplus of just above 2% of GDP, largely due to a
substantial decline in social spending (including pensions),
followed by capital spending and subsidies (in real terms). A
fiscal adjustment from the previous year of around 4%-5% of GDP was
unprecedented for Argentina.
In 2025, the government is likely to run a near balanced fiscal
outcome and a primary surplus exceeding 2% of GDP. Revenues may
decline as a share of GDP, largely because of the removal of
special export and import taxes. At the same time, spending may
remain stable, with higher social security outlays compensating for
modestly lower economic subsidies.
The high share of foreign currency debt and volatility in inflation
create much uncertainty about our projections for debt metrics
because they are vulnerable to swings in the currency. (Foreign
currency debt is 55% of total debt, after the transfer of local
currency central bank liabilities to the treasury.) More than half
of the peso-denominated debt is linked to inflation.
S&P said, "We expect net general government debt to be about 58% of
GDP in 2025. (Net general government debt excludes estimated
holdings of central government debt by ANSES, the pension system,
and includes estimated provincial debt.) We estimate the change in
net general government debt will be 10%-20% of GDP during
2025-2026, largely owing to the impact of currency depreciation and
indexation to inflation. Interest to revenue may remain below 10%
during 2025-2026. We estimate that roughly 30% of total central
government debt is held by creditors in the public sector (such as
the central bank and ANSES), which mitigates domestic rollover
risk.
"We view contingent liabilities, including those posed by the
banking system, as limited. We classify the banking sector of
Argentina in group '9' according to our Banking Industry Country
Risk Assessment (BICRA), with '1' being the lowest risk category
and '10' the highest. Argentina has a small financial system, with
domestic credit to the private sector less than 10% of GDP (among
the lowest in Latin America)."
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Ratings Affirmed
Argentina
Sovereign Credit Rating CCC/Stable/C
Argentina
Senior Unsecured CCC
Upgraded
To From
Argentina
Transfer & Convertibility Assessment
Local Currency B- CCC
[] Moody's Takes Actions on 6 Argentinean Regional & Local Gov'ts.
------------------------------------------------------------------
Moody's Ratings has taken rating actions on six Argentinean
regional and local governments (RLGs), including:
(1) the Province of Buenos Aires (Buenos Aires),
(2) Province of Chaco (Chaco),
(3) Province of Chubut (Chubut),
(4) Province of Rio Negro (Rio Negro),
(5) Province of Tierra del Fuego (Tierra del Fuego) and
(6) the Municipality of Cordoba (Cordoba).
In turn, the ratings outlook for all six RLGs was changed to
positive from stable.
These rating actions were prompted by the upgrade of the Government
of Argentina's (Argentina) sovereign rating to Caa3 from Ca, and
change of rating outlook to positive from stable.
RATINGS RATIONALE
Municipality of Cordoba and Province of Rio Negro: the BCA and
ratings upgrade to caa3/Caa3 from ca/Ca reflects the upgrade of the
Argentinean sovereign rating. These issuers have a high correlation
between their operating balances and the macroeconomic performance,
as such ratings are closely linked to the sovereign credit quality.
Their ratings further acknowledge these regional and local
governments' fundamental credit strength, balanced by a history of
volatile financial results, tight liquidity and high exposure to
foreign-currency debt.
Provinces of Chubut and Tierra del Fuego: the BCA and ratings
affirmation at caa3/Caa3 incorporate an anticipated improvement of
hydrocarbon royalties which increase the provinces' US
dollar-linked revenue bases providing a natural hedge to secure
their international notes balanced by Argentina's historical
intervention over local oil and gas prices. The risk differential
with higher ratings assigned to regional peers is related to their
track record of weaker fiscal policies, more volatile operating
results and higher leverage.
Province of Buenos Aires: the BCA and ratings affirmation at ca/Ca
reflects the ongoing fiscal challenges that the province still
faces, including weak cash financing results and high debt levels
relative to peers. The rating acknowledges the province's
positioning and strategic importance, counterbalanced by immediate
credit challenges related to debt affordability given projected
fiscal deficits and limited visibility on the sufficiency of its
cash reserves.
Province of Chaco: the BCA and ratings affirmation at ca/Ca reflect
a weaker economic base than local peers and high dependence on
federal government transfers to address fiscal deficits. While
Chaco presents moderate debt levels, Moody's view that its tight
liquidity position, exposure to unhedged foreign-currency debt and
weak fiscal results diminish visibility on the Province's ability
to meet debt service compared to its regional peers.
RATIONALE FOR THE POSITIVE OUTLOOKS
The positive outlook for all entities is aligned with the positive
outlook for the sovereign rating and it captures Moody's
expectation that continued improvement in the country's economic
and financial conditions will benefit the credit quality of these
six regional and local governments.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the strong macroeconomic and financial linkages between the
Government of Argentina and RLGs, an upgrade of Argentina's
sovereign ratings that leads to an improvement of the operating
environment and/or diminishing idiosyncratic risks could lead to an
upgrade of the sub-sovereigns ratings.
Conversely, a downgrade in Argentina's ratings and/or further
systemic deterioration or idiosyncratic risks arising in the rated
issuers could exert downward pressure on the ratings.
LIST OF AFFECTED RATINGS
Issuer: Buenos Aires, Province of
Affirmations:
Baseline Credit Assessment, Affirmed ca
LT Issuer Rating, Affirmed Ca
Senior Unsecured, Affirmed Ca
Outlook Actions:
Outlook, Changed To Positive From Stable
Issuer: Chaco, Province of
Affirmations:
Baseline Credit Assessment, Affirmed ca
LT Issuer Rating, Affirmed Ca
Senior Unsecured, Affirmed Ca
Outlook Actions:
Outlook, Changed To Positive From Stable
Issuer: Chubut, Province of
Affirmations:
Baseline Credit Assessment, Affirmed caa3
LT Issuer Rating, Affirmed Caa3
Senior Secured, Affirmed Caa3
Outlook Actions:
Outlook, Changed To Positive From Stable
Issuer: Cordoba, Municipality of
Upgrades:
Baseline Credit Assessment, Upgraded to caa3 from ca
LT Issuer Rating, Upgraded to Caa3 from Ca
Senior Unsecured, Upgraded to Caa3 from Ca
Outlook Actions:
Outlook, Changed To Positive From Stable
Issuer: Rio Negro, Province of
Upgrades:
Baseline Credit Assessment, Upgraded to caa3 from ca
LT Issuer Rating, Upgraded to Caa3 from Ca
Senior Unsecured, Upgraded to Caa3 from Ca
Outlook Actions:
Outlook, Changed To Positive From Stable
Issuer: Tierra del Fuego, Province of
Affirmations:
Baseline Credit Assessment, Affirmed caa3
LT Issuer Rating, Affirmed Caa3
Senior Secured, Affirmed Caa3
Outlook Actions:
Outlook, Changed To Positive From Stable
The principal methodology used in these ratings was Regional and
Local Governments published in May 2024.
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B A H A M A S
=============
BAHAMAS: PM Wants IDB to Increase Cap on Policy Based Loans
-----------------------------------------------------------
RJR News reports that the Prime Minister of The Bahamas wants the
Inter-American Development Bank to increase the cap on policy based
loans.
Prime Minister Phillip Davis made at call at the opening of the
13th Annual Consultation with IDB Caribbean governors, according to
RJR News.
He highlighted the need for developing countries to have greater
access to funding, the report notes.
Mr. Davis is also of the view that the current lending models need
to be revamped and for adjustments to investment loans, the report
adds.
As reported in the Troubled Company Reporter – Latin America, S&P
Global Ratings, on Sept. 25, 2024, affirmed its 'B+' long-term
foreign and local currency sovereign credit ratings on the
Commonwealth of The Bahamas. The outlook remains stable. S&P also
affirmed its 'B' short-term sovereign credit ratings.
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B E R M U D A
=============
CARNIVAL CORP: Moody's Rates New Senior Unsecured Notes 'B2'
------------------------------------------------------------
Moody's Ratings assigned a B2 rating to the new backed senior
unsecured notes (Notes) that Carnival Corporation (Carnival)
announced earlier. The Notes will be guaranteed by the same
subsidiaries that guarantee the company's other unsecured notes.
Carnival will use the net proceeds plus cash on hand to redeem the
$2.03 billion of 10.375% senior priority subsidiary backed
unsecured notes due May 1, 2028 issued by subsidiary, Carnival
Holdings (Bermuda) Limited. Moody's existing ratings assigned to
Carnival and Carnival plc, including the B1 corporate family
rating, Ba1 backed senior secured bank credit facilities, Ba1
backed senior secured notes and B2 backed senior unsecured ratings
are unaffected by the debt issuance. The SGL-2 speculative grade
liquidity rating and positive outlook are also unaffected.
RATINGS RATIONALE
The B1 corporate family rating balances the company's number one
position in the global ocean cruise industry based on revenue
against its still high financial leverage relative to before the
pandemic. Carnival operates nine brands, the highest in the
industry. It also accounts for about 40% of the industry's annual
revenue, operates the most ships -- representing 37.5% of industry
capacity in 2023 -- and boards the most passengers. Its diverse
brands offer cruise experiences across a wide range of customer
demographics. Moody's expect strong aggregate demand for cruise
vacations inclusive of loyal repeat customers to support growth in
the customer base and passenger cruise days in upcoming years. The
B1 rating also reflects the potential for the pace of deleveraging
to trail Moody's expectations as free cash flow fluctuates from
year to year with the variable timing of capital investment for new
ships and fluctuations in operating expenses. Risks include cost
inflation, including for fuel, demand's exposure to economic cycles
and customers' many options for alternative land-based vacations.
Moody's project debt/EBITDA of about 4.5x at the end of fiscal
2025. Moody's also expect operating margins in the high teens and
funds from operations + interest to interest coverage to approach
3.5x at the end of fiscal 2024 and improve further in fiscal 2025.
Moody's expect Carnival to maintain good liquidity. Moody's project
annual free cash flow of about $1.2 billion in 2025 with an
increase in 2026 on lower investment in new ships. Moody's expect
cash to remain above $1 billion and the $2.9 billion revolving
credit facility to remain undrawn.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Ratings could be upgraded if Carnival continues to retire debt,
resulting in declining financial leverage. Expectations for
debt/EBITDA falling below 4.5x and funds from operations plus
interest to interest approaching 4.0x could support a ratings
upgrade. Ratings could be downgraded if Moody's expect free cash
flow will be no better than breakeven, if funds from operations
plus interest to interest will be sustained below 2.0x or if
debt/EBITDA will be sustained above 5.5x.
The principal methodology used in this rating was Business and
Consumer Services published in November 2021.
Carnival Corporation & Carnival plc is the largest global cruise
company, and among the largest leisure travel companies, with a
portfolio of world-class cruise lines -- AIDA Cruises, Carnival
Cruise Line, Costa Cruises, Cunard, Holland America Line, P&O
Cruises (Australia), P&O Cruises (UK), Princess Cruises and
Seabourn. Carnival Corporation and Carnival plc operate as a
dual-listed company and are headquartered in Miami, Florida, US and
Southampton, UK. Net revenue was $19.111 billion in fiscal 2024.
===========
B R A Z I L
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BRAZIL: Shatters Soybean Production Records, Reshaping Markets
--------------------------------------------------------------
Rio Times Online reports that Brazil's soybean harvest for
2024/2025 is set to reach a record-breaking 168.15 million tons,
according to Biond Agro. This unprecedented yield surpasses
previous forecasts, solidifying Brazil's position in global
agriculture, according to Rio Times Online.
Favorable weather conditions across most of the country drive this
remarkable growth, the report notes. Felipe Jordy, manager at
Biond Agro, attributes the success to ideal climate patterns. The
average yield has climbed to 58.9 bags per hectare, exceeding
initial expectations, the report relays.
Brazil's Midwest region leads production with an estimated 80.79
million tons, the report discloses. However, the Southern region
faces challenges due to La Nina, causing dry spells that affect
productivity. Logistical hurdles also pose obstacles, potentially
impacting exports and prices, the report says.
Meanwhile, Argentina's projected production of 52 million tons may
decrease further due to drought, the report discloses. This
situation indirectly benefits Brazilian farmers by increasing
demand for their crops, the report says. The Argentine drought
raises concerns about global soybean supply, influencing
international prices, the report relays.
The report discloses that Brazil's bumper crop demonstrates its
agricultural prowess and adaptability. As global markets adjust to
this surge in production, Brazil's role in food security grows.
This achievement underscores the importance of strategic planning
in modern agriculture, the report relays.
The implications of this record harvest extend beyond Brazil's
borders, the report notes. It affects global food prices, trade
relationships, and agricultural policies worldwide, the report
says. As Brazil strengthens its position, other countries may need
to reassess their agricultural strategies, the report notes.
This success story represents Brazil's growing influence in global
agriculture and trade, the report relays. As the world grapples
with food security issues, Brazil's achievement offers valuable
lessons for sustainable and productive farming, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
In October 2024, Moody's Ratings upgraded the Government of
Brazil's long-term issuer and senior unsecured bond ratings to Ba1
from Ba2, the senior unsecured shelf rating to (P)Ba1 from (P)Ba2;
and maintained the positive outlook. S&P Global Ratings raised on
Dec. 19, 2023, its long-term global scale ratings on Brazil to
'BB'
from 'BB-'. Fitch Ratings affirmed on Dec. 15, 2023, Brazil's
Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB'
with
a Stable Outlook. DBRS' credit rating for Brazil was last
reported
at BB with stable outlook at July 2023.
COSAN SA: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed Cosan S.A.'s Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) at 'BB' and its National
Scale Rating at 'AAA(bra)'. Fitch has also affirmed all
cross-border debts unconditionally and irrevocably guaranteed by
Cosan at 'BB' and its unsecured debentures at 'AAA(bra)'. The
corporate Rating Outlook is Stable.
The affirmations reflect the sale of Cosan's 4.05% stake in Vale
S.A for about BRL9.1 billion. The sale will enable leverage and
debt reduction, aligning the company's financial profile more
closely with the current IDRs. As Fitch previously anticipated,
Cosan enacted this divestment strategy to address its future
financial obligations.
Additional portfolio rebalancing will be necessary for Cosan to
further deleverage amid rising interest rates in Brazil, as
interest expenses surpass expected dividends from its invested
companies at the holding company level. Strong financial
flexibility, along with the quality and diversification of the
portfolio, are important rating factors.
Key Rating Drivers
Leverage and Indebtedness Reduction: Cosan depends on asset sales
to reduce its high leverage and indebtedness. The BRL9.1 billion
proceeds from the sale of Vale's shares will play a crucial role in
this effort, as they represent 37% of the BRL24.2 billion debt at
the holding level as of September 2024. Although Vale pays
meaningful dividends, Fitch believes the sale benefits Cosan's
financial profile in a high-interest-rate environment.
The base case scenario forecasts the holding will receive around
BRL4.6 billion as dividends from 2025 to 2027, compared to around
BRL8.8 billion in interest expense and no debt maturities at the
same period, with additional asset sales needed to avoid debt
increase. On a consolidated basis, the adjusted net debt-to-EBITDA
ratio should decline to 3.4x in 2025 from 4.0x on September 2024.
Strong and Diversified Asset Portfolio: Cosan's asset portfolio
diversification, featuring subsidiaries with sound credit profiles,
is a key factor supporting its solid consolidated business model.
The company's operating assets lead in the sugar and ethanol (S&E)
sectors, fuel and lubricant distribution, railroad operations and
natural gas distribution. Raízen S.A. (BBB/BBB/AAA(bra)/Stable) is
the world's leading producer of sugar and ethanol (S&E) and energy
from sugar cane bagasse. It is also Brazil's second-largest fuel
distributor by volume, operating under the Shell brand.
Cosan accesses the natural gas distribution sector through its
stake in Compass Gás e Energia S.A. (BB/BB/AAA(bra)/Stable).
Compass owns Companhia de Gas de Sao Paulo (COMGAS;
BB+/BBB-/AAA(bra)/Stable), Brazil's largest natural gas
distributor. COMGAS has a large footprint, robust credit metrics, a
solid business profile and a long-term concession with pass-through
mechanisms for non-manageable costs. Cosan's stake in Rumo S.A.
(BB+/BB+/AAA(bra)/Stable), the sole railroad transportation
operator in Southern and Midwest Brazil, also provides cash flow
visibility for the group.
Moderate Cash Flow: Fitch expects Cosan group to report
consolidated adjusted EBITDA of BRL6.4 billion in 2025, including
dividends from Raízen and COMGAS, according to Fitch adjustments.
High interest payments due to the substantial debt volume should
moderate cash flow from operations (CFFO), estimated at around
BRL2.0 billion in 2025 and negative free cash flow (FCF) due to
capex and dividends above BRL3.0 billion.
Adjusted Consolidated Financials: Fitch's analysis relies on
Cosan's adjusted consolidated financials, excluding 70% of Rumo's
and 100% of COMGAS's results, while including dividends from COMGAS
and Raízen in adjusted EBITDA. The 30% proportional consolidation
of Rumo reflects economic rather than control of the subsidiary as
per Fitch's "Corporate Rating Criteria". COMGAS is deconsolidated
due to its insulated and ring-fenced structure. Raizen, a joint
venture with Royal Dutch Shell plc, operates its own financing and
investing strategies, and Cosan's accesses its cash is solely
through dividends.
Derivation Summary
Cosan's ratings compare unfavorably with Votorantim S.A.'s (VSA;
IDRs BBB/Stable and National Scale Rating AAA(bra)/Stable), one of
Latin America's largest industrial conglomerates. VSA has a
diversified business portfolio, strong market position in the
industries it participates and geographic diversification with
strong operations in the Americas. Cosan's assets are primarily
located in Brazil, with a representative share of its cash flow
generation capacity in the more volatile S&E business. Cosan is in
a weaker position regarding cash flow generation and leverage
compared with VSA.
Cosan similarly compares with KUO S.A.B. de C.V.'s (KUO; IDRs
BB/Stable), a Mexican group with diversified business portfolio in
the consumer, automotive and chemical industries. KUO is exposed to
volatility in product demand and input costs across its business
units. Fitch expects KUO's net leverage level to be moderately
lower compared to expectations for Cosan.
Compared with India-based Oil and Natural Gas Corporation Limited
(ONGC; IDRs BBB-/Stable), the notching difference from Cosan
reflects ONGC's status as India's largest oil and gas producer,
with significant reserves and production, and a vertically
integrated, geographically diversified business model. ONGC's
ratings are constrained by its status as a government-related
entity owned by the state of India.
Key Assumptions
- Adjusted consolidated revenues of BRL19.9 billion in 2024 and
2025;
- Average EBITDA margin, including dividends received, of around
30% in 2024 and 2025;
- Divestments of BRL2 billion in 2024 and BRL9 billion in 2025.
RATING SENSITIVITIES
Factors That Could, Individually Or Collectively, Lead To Negative
Rating Action/Downgrade
- Adjusted consolidated net leverage sustained above 4.0x;
- Inability to sell assets in timely manner or secure credit lines
to rollover debt.
Factors That Could, Individually Or Collectively, Lead To Positive
Rating Action/Upgrade
- An upgrade is unlikely in the near term given the sizable
indebtedness and net leverage at the holding level.
Liquidity and Debt Structure
Cosan's holding company debt of BRL24 billion as of Sept. 2024 is
high relative to its expected dividend upstream. The debt
amortization schedule is extended with reduced pressure until 2028,
following the use of proceeds from the sale of Vale's shares to
prepay debt. By the end of Sept. 2024, the adjusted cash position
and financial investments totalled BRL2.0 billion. The issuer's
financial flexibility benefits from its high-quality asset
portfolio.
Fitch estimates that Cosan will maintain an adequate liquidity
profile on adjusted consolidated basis over the next three years,
with pro forma adjusted liquidity of around BRL10 billion during
this period. Cosan group's consolidated adjusted debt should be
around BRL41 billion in 2024 and BRL32 billion by the end 2025.
Fitch considers 50% of Cosan group's BRL8.4 billion outstanding
issued preferred shares as debt, according to the agency's
criteria.
Issuer Profile
Cosan is the holding company of a Brazilian conglomerate with
presence in sugar, ethanol and energy production, natural gas
distribution, railroad operations and distribution of fuels &
lubricants. The group is controlled by Mr. Rubens Ometto with 35.9%
ownership.
Summary of Financial Adjustments
Fitch added net derivative balances for foreign exchange risk
management to Cosan's adjusted debt figures.
Cosan's Fitch-adjusted consolidated financials for 2021 onward
differ from published consolidated financials by excluding 70% of
Rumo and 100% of COMGAS. Cosan's adjusted consolidated EBITDA
includes dividends paid out by Raizen and COMGAS.
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
----------- ------ -----
Cosan Luxembourg S.A.
senior unsecured LT BB Affirmed BB
Cosan Overseas
Limited
senior unsecured LT BB Affirmed BB
Cosan S.A. LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
Natl LT AAA(bra)Affirmed AAA(bra)
senior unsecured LT BB Affirmed BB
senior unsecured Natl LT AAA(bra)Affirmed AAA(bra)
UNIGEL PARTICIPACOES: S&P Hikes ICR to 'CCC' on Debt Restructuring
------------------------------------------------------------------
S&P Global Ratings raised its global and national scale issuer
credit ratings on Unigel Participacoes S.A. to 'CCC' and 'brB+',
respectively, from 'D', and it placed both ratings on CreditWatch
with positive implications.
The CreditWatch placement indicates the potential for another
upgrade once S&P has more clarity on the company's strategy and on
the expected progress with the business plan that it disclosed to
the market.
In addition, S&P withdrew its 'D' issue-level ratings on Unigel,
because the previous debentures and senior notes were all canceled
as part of the exchange for the new instruments.
The closing occurred with the conversion of about R$5.1 billion of
old debt (at current foreign exchange rates) into two new debt
instruments:
-- Restructured notes, totaling about US$352 million, and
-- Participating titles, totaling US$440 million.
The titles were issued by a new holding company, Unigel Netherlands
Holding Corp., and they will likely be converted into equity by
2029.
Also as part of the reorganization, Unigel raised US$100 million in
new money from existing creditors. The company will use these
proceeds to complete the construction of a new sulfuric acid plant,
support its working capital needs, and strengthen its cash
position.
As a result, Unigel has no relevant liquidity needs in the near
term. But it faces challenges related to still weak industry
conditions and the pace of the revamp of its operations in the next
few quarters--a revamp that should support stronger cash flows
going forward.
S&P thinks there's the potential for another upgrade in the next 90
days, once it has more clarity on Unigel's strategy and on the
expected progress with the business plan that it disclosed to the
market.
===============
C O L O M B I A
===============
COLOMBIA: Unexpectedly Halts Key Rate Cuts After Trump Scare
------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Colombia
unexpectedly halted a series of interest rate cuts that began in
2023 as policymakers fret about the worsening fiscal outlook, a
large minimum wage hike and tariff threats from US President Donald
Trump.
The central bank kept its benchmark interest rate steady at 9.5% in
a split decision, Governor Leonardo Villar said after the meeting,
according to globalinsolvency.com. Eight economists in a Bloomberg
survey correctly predicted the move while 24 had forecast a
quarter-percentage point reduction, the report notes.
As reported in the Troubled Company Reporter in August 2024, Fitch
Ratings affirmed Colombia's Long-Term Foreign Currency Issuer
Default Rating (IDR) at 'BB+' with a Stable Rating Outlook.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Potential USAID Closure Could Cost US$200M
--------------------------------------------------------------
Dominican Today reports that the possible closure of the United
States Agency for International Development (USAID), as reportedly
planned by U.S. President Donald Trump and businessman Elon Musk,
could result in the Dominican Republic losing over US$200 million
in aid—equivalent to more than 12,000 million pesos. USAID,
which has operated in the country since 1962, has provided
approximately US$1,900 million in funding, supporting areas such as
education, security, climate change, human rights, and judicial
modernization, according to Dominican Today.
A five-year USAID investment of US$251 million (2022–2027) was
announced in 2022, but if the agency shuts down, the country may
not receive the remaining US$200 million, the report notes. This
could severely impact government agencies and NGOs that rely on
USAID funding, the report relays. The agency has played a crucial
role in combating corruption and strengthening Dominican
institutions, as emphasized by U.S. diplomat Robert W. Thomas, the
report notes.
USAID has contributed to major initiatives in the Dominican
Republic, including the creation of ISA University and Pontifical
Catholic Mother and Teacher University (PUCMM), the report
discloses. Over two million students have benefited from its
educational programs, the report says. If funding is cut, progress
in these sectors could be at risk, affecting the country’s
development and governance, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic was raised
to 'BB' in December 2022 with stable outlook. Moody's credit
rating for Dominican Republic was last set at Ba3 in August 2023
with the outlook changed to positive. Fitch, in December 2023,
affirmed the Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the outlook to positive.
=============
J A M A I C A
=============
JAMAICA: BOJ Floating $46BB Certificate of Deposit
--------------------------------------------------
RJR News reports that the Bank of Jamaica (BOJ) will be floating
another 30-day 6.25% per annum fixed rate 28-day Certificate of
Deposit.
The aim is to mop up $46 billion in liquidity in order to contain
inflation as well as to stabilize the dollar, according to RJR
News.
Some $43.7 billion of this amount will be subject to competitive
bidding, while $2.3 billion will be subject to non-competitive
bidding, the report notes.
The instrument matures on March 7 and is taxable at a rate of 25%.
The minimum subscription is $100,000, 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: Could be Affected by Trade War Between US and Canada
-------------------------------------------------------------
RJR News reports that Economist Keenan Falconer believes Jamaica
could be indirectly affected by the trade war between the United
States and Canada, arising from "heightened geopolitical tensions."
US President Donald Trump signed an Executive Order putting a 25%
tariff - or tax on imports - on all goods coming from Canada and
Mexico, to get both countries to crack down on illegal immigration
and drug trafficking, according to RJR News.
Goods coming from China will also be hit with a 10% tariff "above
any additional tariffs" until it cuts fentanyl smuggling, the
report notes.
Canada and Mexico have moved to retaliate with Canadian Prime
Minister Justin Trudeau announcing a 25 percent tariff against the
US, the report relays.
Mr. Falconer told Radio Jamaica News that the tariffs could result
in general consumer price increases across the board, which could
reduce production, "tariffs don't incentivise countries to maximise
on production"
"Jamaica would get caught in all of that, as a small, highly
import-dependent open economy, where we don't control prices; we're
not price makers; we necessarily have to be price-takers," he
noted, the report says.
He conceded as well that there is little that Jamaica can do to
mitigate the effects that tariffs could have on the country,
particularly the prices of "foods and other commodities," the
report notes.
"If you have a world-wide trade war; a fully-blown all-out trade
war, that will necessarily have some sort of impact on Jamaica that
we have very little ability to influence or mitigate," he
concluded, 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
===========
MEXICO: JPMorgan Says Peso Could Drop 12% if Trump Tariffs Hit
--------------------------------------------------------------
Juan Martinez at Rio Times Online reports that JPMorgan analysts
predict a potential 12% drop in the Mexican peso if President Trump
imposes a 25% tariff on Mexican imports. The bank's report,
released, suggests the peso could plummet from 20.72 to 23.19
against the U.S. dollar, according to Rio Times Online.
However, JPMorgan expects a delay in the tariff implementation.
Trump's proposed tariffs target both Mexico and Canada, aiming to
pressure them on immigration and drug trafficking issues, the
report notes.
The move threatens to disrupt $1.6 trillion in annual trade across
North America. Businesses, consumers, and farmers brace for impact
as the February 1 deadline approaches, the report relays.
The peso and Canadian dollar have already fallen 1.5% following
Trump's announcement, the report notes. Economic forecasts paint a
grim picture for Mexico and Canada, the report discloses. The
Peterson Institute predicts GDP declines of 1.7% and 1.2%
respectively over five years, the report says.
Inflation could rise by 2.3% in Mexico and 1.7% in Canada. U.S.
industries face significant challenges too, the report relays. The
automotive sector relies heavily on Mexican and Canadian imports,
the report discloses.
These countries supply 52% of U.S. auto parts. Canada alone
provides 60% of U.S. crude oil imports. Trump's consideration of
oil tariffs highlights concerns about rising gasoline prices, the
report says.
North America's Trade Tensions and Economic Outlook
Mexico and Canada have not stood idle. Mexico recently imposed 19%
tariffs on imports from several countries, including China, the
report relays. It also launched "Plan Mexico" to boost investment
and nearshoring, the report says.
Canada pledged $1 billion to hire more border agents, the report
discloses. Ontario's Premier Doug Ford threatened to remove
American alcohol from store shelves in retaliation, the report
relays. Despite the turmoil, some analysts remain optimistic about
the peso's future, the report notes.
UBS Global Wealth Management predicts a 4% gain against the dollar
in 2025, the report relays. However, projections vary widely among
financial institutions, the report says. Mexico's central bank
foresees the peso at 20.53 to the dollar by year-end, the report
notes.
The proposed tariffs reflect Trump's broader trade strategy, the
report relays. He aims to negotiate from a position of strength,
the report notes. However, the approach risks economic disruption
across North America, the report adds.
Businesses and investors now watch closely, hoping for a resolution
that preserves regional trade stability, the report relays. As the
situation unfolds, the true cost of these tariffs remains
uncertain, the report discloses.
The potential for economic harm looms large, the report says. Yet,
the possibility of last-minute negotiations offers a glimmer of
hope, the report notes. North American economies hang in the
balance as the deadline approaches, the report adds.
=====================
P U E R T O R I C O
=====================
BMF INC: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------
Debtor: BMF, Inc.
Road 798, Km. 0.6
Rio Canas Ward
Caguas, PR 00725
Business Description: The Debtor is primarily involved in
the manufacturing of beverages.
Chapter 11 Petition Date: January 30, 2025
Court: United States Bankruptcy Court
District of Puerto Rico
Case No.: 25-00356
Judge: Hon. Edward A Godoy
Debtor's Counsel: Hector Eduardo Pedrosa Luna, Esq.
THE LAW OFFICES OF HECTOR EDUARDO PEDROSA LUNA
P.O. Box 9023963
San Juan PR 00902-3963
Tel: 787-920-7983
Email: hectorpedrosa@gmail.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Andrew Bert Foti-Tallenger as CEO.
A full-text copy of the petition, which includes a list of the
Debtor's 20 largest unsecured creditors, is available for free on
PacerMonitor at:
https://www.pacermonitor.com/view/VMZGS4Y/BMF_INC__prbke-25-00356__0001.0.pdf?mcid=tGE4TAMA
*********
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 2025. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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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.
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