/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/130121.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 Monday, January 21, 2013, Vol. 14, No. 14 Headlines A N T I G U A & B A R B U D A LIAT: Signs Deal With French Aviation Company B E R M U D A AC TRADING: Members to Receive Wind-Up Report on Jan. 25 AERCO BERMUDA: Members to Receive Wind-Up Report on Jan. 25 BAUDELAIRE LIMITED: Members to Receive Wind-Up Report on Jan. 25 BERMUDA HOTELS (4): Member to Receive Wind-Up Report on Jan. 25 CA CABLE: Member to Receive Wind-Up Report on Jan. 25 LIDERTYL (BERMUDA): Members to Receive Wind-Up Report on Jan. 25 MUTUAL INDEMNITY: Declares First and Final Dividend B R A Z I L CORPORACION PESQUERA: S&P Retains 'B+' CCR Despite $75MM Add-On C A Y M A N I S L A N D S BABSON CLO: Commences Liquidation Proceedings BARCLAYS WEALTH: Placed Under Voluntary Wind-Up BATTLEGROUND CAPITAL: Commences Liquidation Proceedings BRIKASA INVESTMENTS: Placed Under Voluntary Wind-Up COURTNEY FYNN: Commences Liquidation Proceedings DESTINATION EME: Placed Under Voluntary Wind-Up LANGFOSS CAPITAL: Commences Liquidation Proceedings LANGFOSS LIMITED: Commences Liquidation Proceedings MAURITIUS INTERNATIONAL: Placed Under Voluntary Wind-Up MPC HOLDCO: Commences Liquidation Proceedings MPC HOLD CO CAYMAN: Commences Liquidation Proceedings MPC INVESTORS: Commences Liquidation Proceedings NORTHERN WALLEYE: Placed Under Voluntary Wind-Up PACIFIC LEASING: Commences Liquidation Proceedings RAMIUS HEDGED: Commences Liquidation Proceedings SAHARA INVESTMENTS: Placed Under Voluntary Wind-Up SHINOSAKA HOLDINGS: Commences Liquidation Proceedings TAPESTRY POOLED I: Commences Liquidation Proceedings TAPESTRY POOLED II: Commences Liquidation Proceedings TAPESTRY POOLED VI: Commences Liquidation Proceedings C H I L E CORP GROUP: Moody's Assigns Ba3 Foreign Curr. Senior Debt Rating M E X I C O PESQUERA EXALMAR: Moody's Assigns 'B2' CFR; Rates Sr. Notes 'B2' P A R A G U A Y * PARAGUAY: Moody's Publishes Annual Credit Analysis * PARAGUAY: S&P Assigns 'BB-' Rating to Proposed US$500MM Bonds P U E R T O R I C O POPULAR INC: Fitch Hikes Longterm Issuer Default Rating to 'BB-' FIRST BANCORP: Fitch Affirms LT Issuer Default Rating at 'B-' DORAL FINANCIAL: Fitch Affirms 'B-' LT Issuer Default Rating LAUSELL INC: Can Access Bank's Cash Collateral Until March 31 MIRAMAR REAL ESTATE: Confirms Plan, Transfers Assets to Putman S U R I N A M E * SURINAME: Partnership With IDB Grows Stronger in 2012 T R I N I D A D & T O B A G O CL FINANCIAL: New CLICO Fund Continues to Trend Downward X X X X X X X X * BOND PRICING: For the Week Jan. 14 to Jan. 18, 2013 - - - - - =============================== A N T I G U A & B A R B U D A =============================== LIAT: Signs Deal With French Aviation Company --------------------------------------------- RJR News reports that French aviation company ATR and regional airline LIAT have signed an agreement for the purchase of three 48-seater aircraft by Leeward Islands Air Transport, known as LIAT. The deal also includes options for two 68-seater planes, and is valued at more than US$100 million, according to the report. The report relates that LIAT will take delivery of its very first ATR 42-600 in June. RJR News notes that with the arrival of these aircraft from ATR, plus additional ATR-600s under discussion from leasing companies, LIAT will progressively replace its current fleet of former turboprop aircraft. The airline currently operates a fleet of 14 aircraft over its Caribbean network, which includes main hubs at Antigua-Barbuda, Barbados and Trinidad & Tobago, RJR News says. As reported in the Troubled Company Reporter-Latin America on Jan. 3, 2012, Antigua Caribarena related that former Antigua Aviation Minister Robin Yearwood wants to see a merger between Leeward Islands Air Transport (LIAT) and the Trinidad and Tobago- owned Caribbean Airlines Limited, as he believes this is the only way the Antigua-based regional carrier can survive. Mr. Yearwood's call came against the background of media reports out of Port of Spain that suggested CAL's management may be eyeing expansion into the OECS territories, according to Antigua Caribarena. About LIAT Headquartered in V. C. Bird International Airport in Saint George Parish, Antigua, Leeward Islands Air Transport, known as LIAT, operates high-frequency interisland scheduled services serving 22 destinations in the Caribbean. The airline's main base is VC Bird International Airport, Antigua and Barbuda, with bases at Grantley Adams International Airport, Barbados and Piarco International Airport, Trinidad and Tobago. ============= B E R M U D A ============= AC TRADING: Members to Receive Wind-Up Report on Jan. 25 -------------------------------------------------------- The members of AC Trading Management Limited will receive on Jan. 25, 2013, at 10:45 a.m.., the liquidator's report on the company's wind-up proceedings and property disposal. The company commenced wind-up proceedings on Dec. 19, 2012. The company's liquidator is: Robin J. Mayor Clarendon House 2 Church Street, Hamilton HM 11 Bermuda AERCO BERMUDA: Members to Receive Wind-Up Report on Jan. 25 ----------------------------------------------------------- The members of Aerco Bermuda Leasing Limited will receive on Jan. 25, 2013, at 11:00 a.m.., the liquidator's report on the company's wind-up proceedings and property disposal. The company commenced wind-up proceedings on Dec. 19, 2012. The company's liquidator is: Robin J. Mayor Clarendon House 2 Church Street, Hamilton HM 11 Bermuda BAUDELAIRE LIMITED: Members to Receive Wind-Up Report on Jan. 25 ---------------------------------------------------------------- The members of Baudelaire Limited will receive on Jan. 25, 2013, at 10:30 a.m., the liquidator's report on the company's wind-up proceedings and property disposal. The company commenced wind-up proceedings on Dec. 19, 2012. The company's liquidator is: Robin J. Mayor Clarendon House 2 Church Street, Hamilton HM 11 Bermuda BERMUDA HOTELS (4): Member to Receive Wind-Up Report on Jan. 25 --------------------------------------------------------------- The member of Bermuda Hotels (4) Limited will receive on Jan. 25, 2013, at 9:30 a.m.., the liquidator's report on the company's wind-up proceedings and property disposal. The company commenced wind-up proceedings on Dec. 19, 2012. The company's liquidator is: Robin J. Mayor Clarendon House 2 Church Street, Hamilton HM 11 Bermuda CA CABLE: Member to Receive Wind-Up Report on Jan. 25 ----------------------------------------------------- The member of CA Cable Investment Group Limited will receive on Jan. 25, 2013, at 10:00 a.m.., the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Christopher C. Morris c/o Century House 16 Par-la-Ville Road Hamilton HM08, Bermuda LIDERTYL (BERMUDA): Members to Receive Wind-Up Report on Jan. 25 ---------------------------------------------------------------- The members of Lidertyl (Bermuda) Limited will receive on Jan. 25, 2013, at 10:00 a.m.., the liquidator's report on the company's wind-up proceedings and property disposal. The company commenced wind-up proceedings on Dec. 18, 2012. The company's liquidator is: Robin J. Mayor Clarendon House 2 Church Street, Hamilton HM 11 Bermuda MUTUAL INDEMNITY: Declares First and Final Dividend --------------------------------------------------- Mutual Indemnity (U.S.) Ltd., which is in liquidation declared its first and final distribution to creditors of 100 cents on the dollar. Mike Morrison is the company's liquidator. =========== B R A Z I L =========== CORPORACION PESQUERA: S&P Retains 'B+' CCR Despite $75MM Add-On --------------------------------------------------------------- Standard & Poor's Ratings Services said that its 'B+' corporate credit and issue-level ratings on Corporacion Pesquera Inca S.A.C. are not affected following the proposed $75 million add-on to its $175 million bond due 2017. The add-on is under the same terms and conditions as the bond. The company will use the proceeds to pay down operating leasing agreements, for capital expenditures, and improve liquidity. ========================== C A Y M A N I S L A N D S ========================== BABSON CLO: Commences Liquidation Proceedings --------------------------------------------- On Nov. 8, 2012, the sole shareholder of Babson CLO Ltd. 2003-I resolved to voluntarily liquidate the company's business. Only creditors who were able to file their proofs of debt by Dec. 19, 2012, will be included in the company's dividend distribution. The company's liquidator is: Intertrust SPV (Cayman) Limited 87 Mary Street, George Town Grand Cayman KY1-9005 Cayman Islands c/o Jennifer Chailler Telephone: (345) 814 6847 BARCLAYS WEALTH: Placed Under Voluntary Wind-Up ----------------------------------------------- On Nov. 8, 2012, the sole shareholder of Barclays Wealth Advisor Series-International Core Equity Ltd. resolved to voluntarily wind up the company's operations. The company's liquidator is: Avalon Management Limited Telephone: (+1) 345 769 4422 Facsimile: (+1) 345 769 9351 Landmark Square, 1st Floor 64 Earth Close West Bay Beach PO Box 715, George Town Grand Cayman KY1-1107 Cayman Islands BATTLEGROUND CAPITAL: Commences Liquidation Proceedings ------------------------------------------------------- On Nov. 9, 2012, the shareholder of Battleground Capital Master Fund, Ltd resolved to voluntarily liquidate the company's business. The company's liquidator is: William Connors c/o Fiona MacAdam Walkers Walker House, 87 Mary Street, George Town Grand Cayman KY1-9001 Cayman Islands Telephone: +1 345 914 4273 e-mail: Fiona.MacAdam@walkersglobal.com BRIKASA INVESTMENTS: Placed Under Voluntary Wind-Up --------------------------------------------------- On Nov. 8, 2012, the shareholder of Brikasa Investments Inc resolved to voluntarily wind up the company's operations. The company's liquidator is: Commerce Corporate Services Limited P.O. Box 694 Grand Cayman Cayman Islands Telephone: 949 8666 Facsimile: 949 0626 COURTNEY FYNN: Commences Liquidation Proceedings ------------------------------------------------ On Oct. 31, 2012, the shareholders of Courtney Fynn Capital Limited resolved to voluntarily liquidate the company's business. Only creditors who were able to file their proofs of debt by Dec. 19, 2012, will be included in the company's dividend distribution. The company's liquidator is: K.D. Blake PO Box 493 Grand Cayman KY1-1106 Cayman Islands c/o Grant Cellier Telephone: +1 345-815-2632/ +1 345-949-4800 Facsimile: +1 345-949-7164/ +1 345-949-7164 DESTINATION EME: Placed Under Voluntary Wind-Up ----------------------------------------------- On Nov. 8, 2012, the sole shareholder of Destination EME Fund resolved to voluntarily wind up the company's operations. The company's liquidator is: Avalon Management Limited Reference: GL Telephone: (+1) 345 769 4422 Facsimile: (+1) 345 769 9351 Landmark Square 1st Floor, 64 Earth Close West Bay Beach PO Box 715, George Town Grand Cayman KY1-1107 Cayman Islands LANGFOSS CAPITAL: Commences Liquidation Proceedings --------------------------------------------------- On Oct. 31, 2012, the sole shareholder of Langfoss Capital Management Limited resolved to voluntarily liquidate the company's business. The company's liquidators are: Edel Andersen Alexander Bullmore Telephone: (345) 945 3466 Facsimile: (345) 945 3470 c/o Genesis Trust & Corporate Services Ltd. P.O. Box 448 Midtown Plaza, Elgin Avenue George Town Grand Cayman KY1-1106 Cayman Islands LANGFOSS LIMITED: Commences Liquidation Proceedings --------------------------------------------------- On Oct. 31, 2012, the sole shareholder of Langfoss Limited resolved to voluntarily liquidate the company's business. The company's liquidators are: Edel Andersen Alexander Bullmore Telephone: (345) 945 3466 Facsimile: (345) 945 3470 c/o Genesis Trust & Corporate Services Ltd. P.O. Box 448 Midtown Plaza, Elgin Avenue George Town Grand Cayman KY1-1106 Cayman Islands MAURITIUS INTERNATIONAL: Placed Under Voluntary Wind-Up ------------------------------------------------------- On Nov. 6, 2012, the sole shareholder of Mauritius International Corp. resolved to voluntarily wind up the company's operations. Only creditors who were able to file their proofs of debt by Dec. 14, 2012, will be included in the company's dividend distribution. The company's liquidator is: MBT Trustees Ltd. Telephone: 945-8859 Facsimile: 949-9793/4 P.O. Box 30622 Grand Cayman KY1-1203 Cayman Islands MPC HOLDCO: Commences Liquidation Proceedings --------------------------------------------- On Nov. 1, 2012, the shareholders of MPC Holdco Limited resolved to voluntarily liquidate the company's business. The company's liquidator is: KPH Holdings Ltd c/o Intertrust Corporate Services (Cayman) Limited 87 Mary Street, George Town Grand Cayman KY1-9005 Cayman Islands MPC HOLD CO CAYMAN: Commences Liquidation Proceedings ----------------------------------------------------- On Nov. 1, 2012, the shareholders of MPC Hold Co Cayman resolved to voluntarily liquidate the company's business. The company's liquidator is: KPH Holdings Ltd c/o Intertrust Corporate Services (Cayman) Limited 87 Mary Street, George Town Grand Cayman KY1-9005 Cayman Islands MPC INVESTORS: Commences Liquidation Proceedings ------------------------------------------------ On Nov. 1, 2012, the shareholders of MPC Investors Limited resolved to voluntarily liquidate the company's business. The company's liquidator is: KPH Holdings Ltd c/o Intertrust Corporate Services (Cayman) Limited 87 Mary Street, George Town Grand Cayman KY1-9005 Cayman Islands NORTHERN WALLEYE: Placed Under Voluntary Wind-Up ------------------------------------------------ On Nov. 7, 2012, the shareholder of Northern Walleye Ltd resolved to voluntarily wind up the company's operations. The company's liquidator is: Commerce Corporate Services Limited P.O. Box 694 Grand Cayman Cayman Islands Telephone: 949 8666 Facsimile: 949 0626 PACIFIC LEASING: Commences Liquidation Proceedings -------------------------------------------------- On Nov. 8, 2012, the sole shareholder of Pacific Leasing Limited resolved to voluntarily liquidate the company's business. The company's liquidators are: Edel Andersen Alexander Bullmore Telephone: (345) 945 3466 Facsimile: (345) 945 3470 c/o Genesis Trust & Corporate Services Ltd. P.O. Box 448 Midtown Plaza, Elgin Avenue, George Town Grand Cayman KY1-1106 Cayman Islands RAMIUS HEDGED: Commences Liquidation Proceedings ------------------------------------------------ On Nov. 6, 2012, the sole shareholder of Ramius Hedged Equity FOF Ltd. resolved to voluntarily liquidate the company's business. The company's liquidator is: Ramius Alternative Solutions LLC c/o Sharon Gnessin 599 Lexington Avenue, 19th Floor New York, New York 10022 United States of America Telephone: + 1 646 562 1702 SAHARA INVESTMENTS: Placed Under Voluntary Wind-Up -------------------------------------------------- On Nov. 9, 2012, the shareholders of Sahara Investments Limited resolved to voluntarily wind up the company's operations. Only creditors who were able to file their proofs of debt by Dec. 18, 2012, will be included in the company's dividend distribution. The company's liquidator is: Buchanan Limited c/o Allison Kelly Telephone: (345) 949-0355 Facsimile: (345)949-0360 P.O. Box 1170 George Town, Grand Cayman Cayman Islands KY1-1102 SHINOSAKA HOLDINGS: Commences Liquidation Proceedings ----------------------------------------------------- On Nov. 7, 2012, the sole shareholder of Shinosaka Holdings Inc resolved to voluntarily liquidate the company's business. Only creditors who were able to file their proofs of debt by Dec. 19, 2012, will be included in the company's dividend distribution. The company's liquidator is: Intertrust SPV (Cayman) Limited 87 Mary Street, George Town Grand Cayman KY1-9005 Cayman Islands c/o Jennifer Chailler Telephone: (345) 814 6847 TAPESTRY POOLED I: Commences Liquidation Proceedings ---------------------------------------------------- On Nov. 6, 2012, the sole shareholder of Tapestry Pooled Account I, Ltd. resolved to voluntarily liquidate the company's business. The company's liquidator is: Ramius Alternative Solutions LLC c/o Sharon Gnessin 599 Lexington Avenue, 19th Floor New York, New York 10022 United States of America Telephone: + 1 646 562 1702 TAPESTRY POOLED II: Commences Liquidation Proceedings ----------------------------------------------------- On Nov. 6, 2012, the sole shareholder of Tapestry Pooled Account II, Ltd. resolved to voluntarily liquidate the company's business. The company's liquidator is: Ramius Alternative Solutions LLC c/o Sharon Gnessin 599 Lexington Avenue, 19th Floor New York, New York 10022 United States of America Telephone: + 1 646 562 1702 TAPESTRY POOLED VI: Commences Liquidation Proceedings ----------------------------------------------------- On Nov. 6, 2012, the sole shareholder of Tapestry Pooled Account VI, Ltd. resolved to voluntarily liquidate the company's business. The company's liquidator is: Ramius Alternative Solutions LLC c/o Sharon Gnessin 599 Lexington Avenue, 19th Floor New York, New York 10022 United States of America Telephone: + 1 646 562 1702 ========= C H I L E ========= CORP GROUP: Moody's Assigns Ba3 Foreign Curr. Senior Debt Rating ---------------------------------------------------------------- Moody's Investors Service has assigned a Ba3 long term foreign currency senior debt rating to Corp Group Banking S.A. (CG Banking)'s proposed issuance of up to US$ 500 million in unsecured senior notes for up to 10 years. Moody's also assigned Ba3 long term local and foreign currency issuer ratings to CG Banking. The outlook on the ratings is negative, in line with the outlook for the ratings of its parent holding, Inversiones CorpGroup Interhold (Interhold) (Ba3, negative) that in turn reflects the negative outlook on the group's main operating subsidiary, CorpBanca ((D+/baa3/Baa1, negative). The negative outlook was assigned on October 11, 2012, pending completion of the bank's acquisition and financing of Helm Bank S.A. (Colombia) expected in first quarter of 2013. The following ratings were assigned to Corp Group Banking S.A.: Foreign currency senior unsecured debt rating: Ba3, negative outlook Long term local currency issuer rating: Ba3, negative outlook Long term foreign currency issuer rating: Ba3, negative outlook Rating Rationale The Ba3 debt and issuer ratings assigned to CG Banking are in line with the Ba3 debt and issuer ratings Moody's assigns to its 99.9% parent, Inversiones Corp Group Interhold (Interhold), as they share similar risk profiles. They are based on the following considerations: 1) steady and growing dividend contributions from its main operating subsidiaries, particularly CorpBanca, under both expected and adverse earnings scenarios; 2) the holding's high reliance on dividends from its operating subsidiaries to meet its obligations; and 3) the present and potential cash needs of both the holding and the group's expanding operations. The ratings take into account the refinancing risks inherent in the group's strategy of increasingly financing its acquisitions with debt alongside ongoing capital support from its controlling and other shareholders. The group's high growth profile and cross border acquisition strategy, as demonstrated by the purchase of two banks in Colombia, add a level of uncertainty to the company's future cash flows that is also incorporated in the Ba3 rating. The Ba3 ratings for CG Banking are anchored on the baa3 stand alone credit assessment of CorpBanca, its largest and most profitable operating subsidiary. However, CorpBanca, as well as the holding's insurance subsidiaries Corp Group Vida Chile S.A. and Corpseguros S.A. are regulated by the Chilean Superintendency of Financial Institutions and Superintendency of Securities and Insurance, respectively, and are therefore subject to minimum capital requirements that could affect the upstreaming of dividends to CG Banking and therefore its ability to meet its debt obligations. The three-notch differential between the Ba3 ratings of CG Banking and CorpBanca's baa3 standalone credit assessment reflects the structural subordination of the holding company's debt holders to all liability holders of the regulated operating companies, particularly bank depositors and insurance policy holders, and to all other creditors of the operating companies, given that the debt is not guaranteed by the operating companies. The Ba3 rating for CG Banking also takes into account the lack of restrictions on holding company dividends. Moody's said that this risk is not significantly mitigated by the transaction modest financial covenants or by restrictions on additional debt, payments, or liens. The negative outlook on CG Banking's ratings reflects the negative outlook on the ratings of its main operating subsidiary, CorpBanca. Moody's assigned a negative outlook on CorpBanca's ratings to reflect the potential for negative pressures on its capitalization after the bank announced its second large cross border bank acquisition in Colombia in less than a year and that hinged on the bank's ability to raise a large amount of capital. The negative outlook also reflects the execution risks related to the financing plan particularly in light of current market uncertainties, although Moody's acknowledges the bank's success in raising capital to finance the Santander Colombia acquisition in first half of 2012. A major deviation from the planned capital structure supporting the acquisition could therefore result in further negative rating actions. The main challenge for CG Banking lies in its increasing indebtedness related to the group's expansion strategy, particularly the proposed issuance, which is expected to be used to refinance its own debts as well as those of the group. While the issuance will not affect the group's overall indebtedness, it will significantly raise CG Banking's standalone leverage, and therefore its refinancing risk, as well as reduce its standalone debt servicing capacity. CG Banking's acquisition strategy also adds a level of unpredictability to the cash flows that are required to service its increasing debt load. Moody's noted that CG Banking's ratings could come under pressure in the event of additional acquisitions financed by debt. Established in 1998 and incorporated in Chile, CG Banking S.A. (CG Banking) is an intermediate holding company 99.99% owned by Inversiones Corp Group Interhold, that is in turn 75.6% owned and controlled by the Saieh family. CG Banking's main operating subsidiary is CorpBanca, Chile's fifth largest bank, in which it holds a 50.4% stake. CG Banking also holds a 40% stake in the group's insurance company, Corp Group Vida Chile, the country's second largest provider of annuities. The Saieh family controls 61% of CorpBanca via CG Banking, CorpGroup Inversiones Bancarias and other entities related to the Saieh group. As of September 30, 2012, CG Banking reported unconsolidated assets of US$1.6 billion (CLP 757 billion) and shareholders' equity of US$1.5 billion. On a consolidated basis as of September 30, 2012, CG Banking and its subsidiaries reported total assets of US$28 billion and total net equity of US$2.6 billion. The principal methodology used in this rating was Moody's Consolidated Global Bank Rating Methodology published in June 2012. =========== M E X I C O =========== PESQUERA EXALMAR: Moody's Assigns 'B2' CFR; Rates Sr. Notes 'B2' ---------------------------------------------------------------- Moody's Investors Service assigned a B2 rating to Pesquera Exalmar, S.A.A.'s senior unsecured global notes due 2022 for an amount up to US$200 million. At the same time, Moody's assigned a B2 corporate family rating to Exalmar. The rating outlook is stable. This is the first time that Moody's has rated Exalmar. Issuance proceeds will be used to refinance an existing US$140 million syndicated loan and to purchase approximately 0.5% of additional fishing quota. Exalmar's B2 rating reflects the company's limited operating scale and modest business diversification compared to regional peers as well as other seafood and protein-industry companies; its exposure to potentially volatile volume and price trends of the commoditized global fishmeal and fish oil market; the sensitivity of cash flows to climatic conditions and regulation; a pronounced cash flow seasonality; and its strategy to increase its market share through debt-financed quota acquisitions. These credit negatives are to some extent offset by Exalmar's position as the fourth largest fishmeal producer in Peru, the world's leading fishmeal nation; a successful operating history in its current business configuration; the favorable earnings prospects resulting from improved efficiency potential under Peru's ITQ system; and the potential for revenue diversification that could come from its growing direct human consumption business. Exalmar's credit metrics are currently strong for the B2 rating category and compare favorably with other rated industry peers. Moody's adjusted debt/EBITDA was 3.7x as of September 30, 2012 and interest coverage (adjusted EBITA/Interest expense) was 3.7x over the last twelve months ended September 30, 2012. Pro-forma for this transaction Moody's anticipates leverage (debt/EBITDA) to increase to 4.4x in 2012 reflecting the additional debt from the proposed US$200 million global notes. Longer term Moody's expects leverage to decline, to close to 3.5x in 2013, and to continue improving to below 2.5x by 2015 as the company generates additional EBITDA. Similarly, interest coverage is estimated to continue recovering every year from 3.2x just after the transaction to above 5x by 2015. In 2011 Exalmar's cash flow generation was affected by high capital expenditures and dividend payments resulting in negative free cash flow. Exalmar's projects that it will spend US$86 million in 2013 both to acquire sufficient additional fishing quota in the north-center region to bring its' total quota up to 7% and to continue investing in its plants and vessels. As a result, free cash flow (defined as cash flow from operations minus capital expenditures and dividend payments) is expected to remain negative in 2012 and 2013. The company will finance the acquisition of additional quota with the proceeds of the proposed notes. From 2014 and beyond free cash flow is expected be positive as the company plans to reduce capex to US$15-US$17 million per year while keeping dividend payment in the US$17-US$20 million range In 2010, the company began developing its direct human consumption (DHC) business and started a US$40 million investment plan to build two new plants (Tambo de Mora and Paita) for frozen fish processing and to provide six of its vessels with refrigeration systems. As of Jan. 17, the company essentially finished this investment program and expects the Tambo de Mora plant to start operations in 2013 with a 575 MT/day capacity. This will increase the company's installed capacity of its DHC business from 108 MT/day to 683 MT/day. Exalmar plans to benefit from the increasing importance of fish for direct human consumption as according to the Food and Agriculture Organization over 75% of the global fish production is used for DHC. Exalmar's DHC business could provide the company with some revenue diversification as it is planned to grow to represent up to 25% of total revenues by 2017. In addition it will allow the company to strengthen its competitive position against other Peruvian fishing companies which also have a DHC business. The senior unsecured global notes are effectively subordinated to the company's secured debt. However after the issuance of the notes, secured debt will amount to approximately US$4 million or less than 2% of total debt. Given that secured debt after the issuance of the notes will represent a very small amount of the company's total debt Moody's will not notch down the rating of the senior unsecured global notes. The stable ratings outlook reflects Moody's expectation that Exalmar will continue to operate successfully under the ITQ system while improving earnings trends and that any debt-financed quota acquisition should not be done in detriment of the company's credit profile. The outlook also incorporates Moody's expectation that the company's cash position should improve by generating positive free cash flow in the medium term as capital expenditures are expected to decline with moderate dividend payments. In the longer term, upward ratings pressure could emerge if the company is able to maintain positive cash flow generation while maintaining robust credit metrics and strong liquidity on a sustainable basis with debt/EBITDA below 2.5x A prolonged period of negative free cash flow generation with material additional external funding needs, for example because of an abrupt deterioration of global fishmeal demand or anchovy supply or because a debt financed quota acquisition, could cause downward pressure on the ratings. Large dividend payouts materially affecting free cash flow or operating margin deterioration below double digit can also pressure the rating. The principal methodology used in rating Exalmar was the Global Food - Protein and Agriculture Industry Methodology published in September 2009. Founded in 1992, Pesquera Exalmar, S.A.A. is a Peruvian fishing company which produces fishmeal and fish oil used for indirect human consumption. In addition, Exalmar also sells fresh and frozen fish (mackerel, horse mackerel, giant squid, and mahi-mahi) for direct human consumption. The company has a 6.45% assigned quota in the north-center of Peru and has the ability to process 3rd party catch which increases its overall participation in the market to 10.76%. For the last twelve months ended September 30, 2012, the company reported revenues of USD208 million. =============== P A R A G U A Y =============== * PARAGUAY: Moody's Publishes Annual Credit Analysis ---------------------------------------------------- Moody's Investors Service has published its annual credit analysis of Paraguay, providing an in-depth analysis of key credit strengths and challenges, as well as the rationale behind its upgrade of Paraguay's government bond rating to Ba3 from B1, with a stable outlook. The key drivers supporting the upgrade were government finances that align well with peers in the 'Ba' rating category (despite volatile growth), a sustained build-up in international reserves, and improved medium-term growth prospects supported by government plans to increase investment in infrastructure. Government finances in Paraguay have remained strong despite the country's volatile growth because the large agricultural sector, the main source of this volatility, is not a significant contributor to government revenues. Consecutive budget surpluses during 2004-11 led to improved government debt metrics, says Moody's. The government posted a deficit in 2012 and Moody's expects it to do so again in 2013. On the order of 1% of GDP, both of these deficits should be easily financed, says Moody's. * PARAGUAY: S&P Assigns 'BB-' Rating to Proposed US$500MM Bonds --------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'BB-' issue rating and '3' recovery rating to Paraguay's proposed debut issuance of US$500 million bonds due in 2023. At the same time, S&P affirmed the 'BB-/B' sovereign credit ratings on Paraguay. The outlook remains stable. "The ratings on Paraguay reflect its solid fiscal position, low debt, and improved external indicators," said Standard & Poor's credit analyst Richard Francis. Although the central government likely had a fiscal deficit of nearly 1% of GDP in 2012 after running surpluses since 2004, we expect the central government to return to a balanced budget in 2013, partly because of the introduction of an income tax and higher value-added-tax receipts as a result of the rebounding economy. The fiscal position has resulted in a steadily declining general government debt burden, likely reaching 14% of GDP (or 4% in net terms) in 2012. At the same time, the country's external indicators have continued to strengthen as a result of solid export growth (except in 2009 and 2012) and rising international reserves, which now cover more than five months of current account payments. "Paraguay's weak political institutions, less developed economy, and limited monetary flexibility constrain the ratings," said Mr. Francis. Despite the improvements in the country's economic fundamentals, a difficult political environment and weak, albeit improving, institutional capacity--especially in areas such as debt management and financial supervision--remain rating constraints. In addition, Transparency International's 2012 Corruption Perceptions Index, which measures perceptions of public-sector corruption, indicates significant corruption in the country. The index ranked Paraguay 150 out of the 176 countries it surveys (with 1 being the best and 176 the worst). Monetary flexibility is constrained because of the high level of dollarization (albeit declining) in the economy and persistent central bank deficits, which reflect nonperforming loans to government-owned entities and financial institutions that were largely incurred prior to the 1995 charter prohibiting such practices. The Paraguayan Congress passed a bill allowing for the recapitalization of the central bank in 2010, and S&P expects it to begin implementing the recapitalization in 2013. The stable outlook balances the country's narrow economy and substantial infrastructure needs against the government's improving fiscal underpinnings and low debt. The ratings could improve if Paraguay undertakes important investment projects, which would further boost growth prospects and external indicators. Additional reform measures in the areas of debt management, financial supervision, and successful recapitalization of the central bank--a precursor to inflation targeting--would also improve rating prospects. On the other hand, rapid credit growth that impairs external and fiscal flexibility or leads to financial-sector problems could lead to a downgrade. S&P could also downgrade Paraguay if the political and economic isolation is more severe or lasts longer than S&P's current expectation. ===================== P U E R T O R I C O ===================== POPULAR INC: Fitch Hikes Longterm Issuer Default Rating to 'BB-' ---------------------------------------------------------------- Fitch Ratings has completed a peer review of four rated Puerto Rican banks. Fitch has affirmed the Long-term Issuer Default Ratings (IDR) of Doral Financial Corp. and First BanCorp at 'B-'. Fitch has upgraded the Long-term IDR of Popular Inc. to 'BB-' from 'B+', which is now equalized with its bank subsidiaries ratings. The Outlook for BPOP and FBP is Stable. For Santander Bancorp, Fitch has affirmed its Viability Rating at 'bb+'. Fitch notes that SBP's IDRs and Rating Outlook are linked with that of its ultimate parent, Banco Santander (based in Spain), and changes in the parent company's ratings result in changes to SBP's. Currently, SBP's Long-term IDRs is 'BBB' with a Negative Outlook. (For additional details, please see 'Fitch Downgrades Santander & BBVA to 'BBB+'/Negative Outlook on Sovereign Action', dated Feb. 13, 2012, and available at www.fitchratings.com.. RATING ACTION RATIONALE AND RATING DRIVERS AND SENSITIVITIES - VRs and IDRs (applicable to all banks in the peer group) Fitch-rated Puerto Rican bank Viability Ratings (VRs) and IDRs incorporate limiting rating factors. These VRs and IDRs are significantly more sensitive to the economic conditions within their respective footprints. Given the peer group's concentration in Puerto Rico and the pressures on the local economy, Fitch believes prospects for earnings growth is difficult in the near term. Additionally, this group's funding profiles have generally been weaker compared to its U.S. bank peers. It includes a reliance on non-core deposits, such as brokered certificates of deposit (CDs) time deposits, and wholesale borrowings with a higher cost of funds. Further, non-performing loans (NPLs) are stubbornly high and are reflected in current ratings levels. In Fitch's view, the banks will likely continue to operate with elevated levels of non-performing assets (NPAs), absent loan sales, given pressures in the real estate sector, which has a glut of housing inventory that will likely take a few years to balance out. Fitch believes current rating levels are indicative of the significant challenges facing Puerto Rican banks. For 3Q'12, Fitch-rated Puerto Rico banks' NPA ratio (which includes TDRs) was 13.19% compared to an average of 3.5% for Fitch-rated Mid-Tier and Community bank peer groups combined. For the group, average net charge-offs (NCOs) totaled 1.90% for 3Q'12, despite the elevated levels of non-performers. Fitch believes NCOs may begin to increase from residential mortgages given the rising delinquency rates in this loan catergory and the increase in foreclosures. In Fitch's view, credit trends reflect the continued stress from the real estate market, particularly commercial real estate (CRE), construction and residential mortgage loans. Fitch notes that Puerto Rican banks' (including those not rated by Fitch) loan mix is heavily weighted towards real estate lending, mainly CRE & construction and residential mortgages, with an average of 32% and 38%, respectively. Puerto Rican bank funding profiles are considered weaker when compared to those on the U.S. mainland given the higher reliance on noncore funding sources. This characteristic, considered a rating constraint, has been a historical trend as the local market does not have sufficient core deposits to support funding needs. Of note, the peer group's average net interest margin (NIM) was 4.23% for 3Q'12, which is higher than most U.S. banks. This is mainly due to the liability sensitive nature of the balance sheet for most Puerto Rican banks. In a rising rate environment, the NIM would likely be pressured. Current rating levels incorporate the weak state of the economy in Puerto Rico, which is expected to pressure credit and financial performance over the longer term. The island has been in a recession for seven years with unemployment at 13.6% for 3Q'12 and GNP for 2011 of negative 3.8%. Recent economic trends reflect modest improvements year-over-year. However, much uncertainty remains as to future strategies to address the fiscal and structural issues hurting the local economy. The Stable Outlook reflects the view that any impact from future negative economic weakness would be manageable given the increased capital position across most of the banks, deleveraging of the balance sheet, and modest improvements to liquidity profiles. Given the challenges noted above, in Fitch's opinion, future consolidation in Puerto Rico may take place as management teams may have more of an incentive to consider M&A as a way to strengthen franchises, improve product diversity, and enhance funding profile to help offset the challenging operating environment. RATING DRIVERS AND SENSITIVITIES FOR THE IDRS AND VRS OF EACH BANK ARE SUMMARIZED BELOW: DRL (Long-term IDR/VR 'CCC/ccc') DRL's ratings affirmation reflects the company's ongoing challenges such as longer-term strategic plans, geographic and product concentration with a limited franchise, and high levels of non-performers. Additionally, DRL's funding profile is much more reliant on wholesale borrowings versus its peers at 35% of total liabilities versus an average of 17% for the peer group. Further, the company's capital position is considered weak and not sufficient to support future losses should NCOs begin to rise from current levels. For 3Q'12, DRL's Fitch Core Capital ratio was 2.17% and Tangible Common Equity (TCE) was 5.43%. During 2012, DRL's capital position trended down. During 3Q'12, the company reported a net loss as it doubled loan loss provisions compared to the full-year of 2011. Further, Fitch expects credit and capital pressures to persist throughout 2013 that may result in the company needing additional capital as it works through its problem assets. DRL has managed to maintain regulatory capital ratios at well-capitalized as balance sheet shrinkage continues to support capital ratios. However, DRL's Texas ratio defined as NPAs/(TCE + Reserves) is on the high end of most Fitch-rated institutions at above 200% as of Sept. 30, 2012. The company has the worst rank in terms of NPA at 20.7% for 3Q12 (which includes Troubled Debt Restructurings or TDRs), although reporting a relatively modest NCO ratio of 2.5%. Non-performers are split about 58% related to residential mortgages) and 42% related to CRE & construction loans. On a positive note, on an absolute basis, non-performers are down for 3Q12 to $1.31 billion compared to $1.86 billion the same quarter a year ago. Fitch believes NCOs will likely increase as the real estate sector in Puerto Rico continues to face pressures with high levels of unsold housing inventories and weak economic conditions. NCOs remain manageable up to this point, but well above normalized levels. Should credit losses and provision expenses trend to levels similar to 2011, Fitch believes DRL could fall below 'well capitalized' status in 2014. DRL's ratings could move lower if regulatory capital ratios are expected to fall into to 'undercapitalized' status. Additionally, deteriorating liquidity or inability to access to funding markets could also place negative rating pressure on the institution. FBP (Long-term IDR/VR 'B-/b-', Outlook Stable) FBP's ratings affirmation incorporates the company's geographic concentration in Puerto Rico. Despite some improvements in credit trends compared to 2011, the company is operating with a high level of NPLs and some volatility is expected in NCOS given that 61% of its loan book is tied to real estate in the local market. Further, the loss content in the CRE and construction loan portfolios tends to be higher, which still accounts for about 42% of NPLs. Nonetheless, Fitch does not expect credit losses to return to the peak level experienced in 2010. Fitch expects profitability to be sustainable at current modest levels, as FBP returned to profitability 2Q'12. The company is focused on improving its franchise by growing its consumer book as it tries to diversify its loan book and customer base. FBP currently ranks 2 in terms of loans with 18.4% in September 2012. During 2012, FBP has seen a steady increase to its pre-provision net revenue, although it is still relatively low. The NIM also improved by 116bps to 3.98% in 3Q12 versus same period a year ago, as the company has benefited from reduced funding costs. Following a recapitalization in 4Q11, FBP capital is considered solid, as it provides a buffer for potential losses in its loan portfolio and improves its financial flexibility. The company's (TCE) and Tier 1 Common equity ratios improved to 10.39% and 13.33% during 3Q12, respectively, compared to 3.80% and 5.01% for 3Q'11. Ratings could be positively affected should the improvement in earnings and capital position remain sustainable and/or if nonperforming assets were to materially decline. However, if credit problems continue trending toward peak levels while eroding capital, FBP's ratings would face downward pressure. Popular Inc. (Long-term IDR/VR upgraded to 'BB-/bb-' from 'B+/b+', Outlook Revised to Stable from Positive) Popular Inc. and Popular North America's (the holding companies) VRs and IDRs have been upgraded and equalized with the bank subsidiary ratings given the improved liquidity position and manageable near-term obligations. Incorporated in the equalization is also the view that the bank subsidiaries will not require capital injections from the parent company. Prudent liquidity management is important for BPOP given the sizeable amount of total debt outstanding - roughly $1.2 billion of which $935 million is trust preferred securities, including securities issued under the U.S. Treasury's Troubled Assets Relief Program (TARP). The company is currently operating with 2x coverage of its total debt interest expense, which Fitch considers sufficient given manageable near-term debt obligations (about $42 million total maturing in 4Q'12). Fitch believes the bank's recent operating performance is sustainable despite the difficult operating environment. The company's strong franchise in Puerto Rico is also viewed positively as it holds the number one market share position for loans and deposits by a wide margin at 38% and 40%, respectively. However, current and expected challenges in Puerto Rico's operating environment could limit improvements in the company's financial performance over the near term. BPOP has been profitable since 2011 and capital continues to build. Fitch views BPOP's capital position as adequate (given a still high level of risks) with a TCE of 9.26% and Tier 1 Common of 12.72%. The solid capital base provides a cushion should net losses start to increase. The company continues to operate with elevated levels of NPAs and NCOs, which totaled 11.6% and 1.80% for 3Q'12, respectively. Fitch notes credit metrics reflect an improvement year-over-year. NPL inflows have slowed compared to the previous year, excluding purchased impaired loans. Nonetheless, BPOP's loan book remains exposed to the pressured real estate conditions as CRE and construction and residential lending account for 55% of total loans. Positive rating action could ensue should BPOP experience a reduction in level of problem loans while maintaining good earnings trend and build its capital position. Further, the possible removal of regulatory orders with regulators at the holding company and continued liquidity management that is appropriate relative to its debt service could lead to an equalization of the holding company and bank ratings. Offsetting that, the Outlook could be revised to Negative if BPOP's capital position reflected a declining trend and/or a decrease in reserve coverage absent improvement in the level of NPAs. Santander Bancorp (Long-term IDR/VR 'BBB/bb+', Outlook Negative) Fitch affirmed SBP's standalone rating, the VR, at 'bb+'. The affirmation is supported by the company's sound operating performance and solid capital position while operating in the challenging Puerto Rican market. Similar to local peers, asset quality remains a challenge. Although Fitch is concerned with SBP's elevated levels of NPAs at 7.41%, it compares well to local peers with an average NPA of 13.19% at 3Q'12. SBP's loan portfolio exhibits better credit performance due to more conservative underwriting and overall risk management practices (including a relatively low concentration in construction lending). Additionally, given good profitability the company's capital position has remained solid with a TCE ratio at 8.88% for 3Q'12. Fitch believes there is limited upside to SBP's VR given the concentration in its loan book by product and geography and relatively small franchise. The VR could be negatively affected if loan portfolio quality deteriorates, particularly if significant operating losses emerge and the company's capital position is eroded. RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT FLOOR RATING DRL, FBP and BPOP have Support Ratings of '5' and Support Floor Ratings of 'NF'. In Fitch's view, the Puerto Rico banks are not systemically important and therefore, Fitch believes the probability of support is unlikely. IDRs and VRs do not incorporate any support. SBP's Support Rating is '2' reflecting Fitch's view that there is a high probability of support from its parent, Banco Santander. Since this support is based on institutional support, as opposed to sovereign support, there is no Support Floor Rating assigned. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and hybrid capital instruments issued by the banks are notched down from the issuers' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. The ratings of subordinated debt and hybrid securities are sensitive to any change in the banks' VRs or to changes in the banks' propensity to make coupon payments that are permitted but not compulsory under the instruments' documentation. HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review Group have a bank holding company (BHC) structure with the bank as the main subsidiary. All subsidiaries are considered core to the parent holding company, supporting equalized ratings between bank subsidiaries and bank holding companies. IDRs and VRs are equalized with those of its operating companies and banks, reflecting its role as the bank holding company which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is below 120% for all the parent companies reviewed in this peer group. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review factor in a high probability of support from parent institutions to its subsidiaries. This reflects the fact that performing parent banks have very rarely allowed subsidiaries to default. It also considers the high level of integration, brand, management, financial and reputational incentives to avoid subsidiary defaults. Fitch has affirmed these ratings. Doral Financial Corporation --Long-term Issuer Default Rating (IDR) at 'CCC'; --Viability rating at 'ccc'; --Senior debt at 'CCC/RR6'; --Preferred stock at 'C/RR6'; --Short-term Issuer Default Rating (IDR) at 'C'; --Support '5'; --Support Floor 'NF'; Doral Bank --Long-term IDR at 'CCC'; --Viability rating at 'ccc'; --Long-term deposits at 'CCC/RR4'; --Short-term IDR at 'C'; --Short-term deposit at 'C'. --Support at '5'; --Support Floor at 'NF'; Fitch has affirmed these ratings. The Outlook is Stable: First BanCorp --Long-term IDR at 'B-'; --Viability rating at 'b-' --Short-term IDR at 'B'; --Support at '5'. --Support floor at 'NF'. FirstBank Puerto Rico --Long-term IDR at 'B-'; --Long-term deposit at 'B-/RR3'; --Viability rating at 'b-'. --Short-term IDR at 'B'; --Short-term Deposits at 'B'. --Market Linked deposit securities at 'B-emr/RR3'; --Support at '5'. --Support floor at 'NF'. Banco Popular North America --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'. --Viability rating at 'bb-' --Support at '5' --Support floor at 'NF'. Banco Popular de Puerto Rico --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'; --Viability rating at 'bb-'; --Support at '5' --Support floor at 'NF'. Popular,Inc. --Short-term IDR at 'B'; --Short-term Debt at 'B'. --Support at '5' --Support floor at 'NF'. Popular North America, Inc --Short-term IDR at 'B'; --Short-term Debt at B --Support at '5' --Support floor at 'NF'. Fitch has upgraded these ratings. The Outlook is revised to Stable from Positive. Popular,Inc. --Long-term IDR to 'BB-' from 'B+'; --Senior unsecured to 'BB-' from 'B+/RR4''; --Viability rating to 'bb-' from 'b+' --Preferred stock to 'B-' from 'CCC/RR6'. Popular North America, Inc. --Long-term IDR to 'BB-' from 'B+'; --Viability rating to 'bb-' from 'b+' BanPonce Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust II --Trust preferred to 'B-' from 'CCC/RR6'. Popular North America Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust III --Trust preferred to 'B-' from 'CCC/RR6' Fitch has affirmed the following ratings: Santander Bancorp --Viability Rating affirmed at 'bb+'; --Support rating at '2'. Banco Santander Puerto Rico --Viability rating at 'bb+'. Santander PR Capital Trust I --Trust preferred at 'BB'. FIRST BANCORP: Fitch Affirms LT Issuer Default Rating at 'B-' --------------------------------------------------------------- Fitch Ratings has completed a peer review of four rated Puerto Rican banks. Fitch has affirmed the Long-term Issuer Default Ratings (IDR) of Doral Financial Corp. and First BanCorp at 'B-'. Fitch has upgraded the Long-term IDR of Popular Inc. to 'BB-' from 'B+', which is now equalized with its bank subsidiaries ratings. The Outlook for BPOP and FBP is Stable. For Santander Bancorp, Fitch has affirmed its Viability Rating at 'bb+'. Fitch notes that SBP's IDRs and Rating Outlook are linked with that of its ultimate parent, Banco Santander (based in Spain), and changes in the parent company's ratings result in changes to SBP's. Currently, SBP's Long-term IDRs is 'BBB' with a Negative Outlook. (For additional details, please see 'Fitch Downgrades Santander & BBVA to 'BBB+'/Negative Outlook on Sovereign Action', dated Feb. 13, 2012, and available at www.fitchratings.com.. RATING ACTION RATIONALE AND RATING DRIVERS AND SENSITIVITIES - VRs and IDRs (applicable to all banks in the peer group) Fitch-rated Puerto Rican bank Viability Ratings (VRs) and IDRs incorporate limiting rating factors. These VRs and IDRs are significantly more sensitive to the economic conditions within their respective footprints. Given the peer group's concentration in Puerto Rico and the pressures on the local economy, Fitch believes prospects for earnings growth is difficult in the near term. Additionally, this group's funding profiles have generally been weaker compared to its U.S. bank peers. It includes a reliance on non-core deposits, such as brokered certificates of deposit (CDs) time deposits, and wholesale borrowings with a higher cost of funds. Further, non-performing loans (NPLs) are stubbornly high and are reflected in current ratings levels. In Fitch's view, the banks will likely continue to operate with elevated levels of non-performing assets (NPAs), absent loan sales, given pressures in the real estate sector, which has a glut of housing inventory that will likely take a few years to balance out. Fitch believes current rating levels are indicative of the significant challenges facing Puerto Rican banks. For 3Q'12, Fitch-rated Puerto Rico banks' NPA ratio (which includes TDRs) was 13.19% compared to an average of 3.5% for Fitch-rated Mid-Tier and Community bank peer groups combined. For the group, average net charge-offs (NCOs) totaled 1.90% for 3Q'12, despite the elevated levels of non-performers. Fitch believes NCOs may begin to increase from residential mortgages given the rising delinquency rates in this loan catergory and the increase in foreclosures. In Fitch's view, credit trends reflect the continued stress from the real estate market, particularly commercial real estate (CRE), construction and residential mortgage loans. Fitch notes that Puerto Rican banks' (including those not rated by Fitch) loan mix is heavily weighted towards real estate lending, mainly CRE & construction and residential mortgages, with an average of 32% and 38%, respectively. Puerto Rican bank funding profiles are considered weaker when compared to those on the U.S. mainland given the higher reliance on noncore funding sources. This characteristic, considered a rating constraint, has been a historical trend as the local market does not have sufficient core deposits to support funding needs. Of note, the peer group's average net interest margin (NIM) was 4.23% for 3Q'12, which is higher than most U.S. banks. This is mainly due to the liability sensitive nature of the balance sheet for most Puerto Rican banks. In a rising rate environment, the NIM would likely be pressured. Current rating levels incorporate the weak state of the economy in Puerto Rico, which is expected to pressure credit and financial performance over the longer term. The island has been in a recession for seven years with unemployment at 13.6% for 3Q'12 and GNP for 2011 of negative 3.8%. Recent economic trends reflect modest improvements year-over-year. However, much uncertainty remains as to future strategies to address the fiscal and structural issues hurting the local economy. The Stable Outlook reflects the view that any impact from future negative economic weakness would be manageable given the increased capital position across most of the banks, deleveraging of the balance sheet, and modest improvements to liquidity profiles. Given the challenges noted above, in Fitch's opinion, future consolidation in Puerto Rico may take place as management teams may have more of an incentive to consider M&A as a way to strengthen franchises, improve product diversity, and enhance funding profile to help offset the challenging operating environment. RATING DRIVERS AND SENSITIVITIES FOR THE IDRS AND VRS OF EACH BANK ARE SUMMARIZED BELOW: DRL (Long-term IDR/VR 'CCC/ccc') DRL's ratings affirmation reflects the company's ongoing challenges such as longer-term strategic plans, geographic and product concentration with a limited franchise, and high levels of non-performers. Additionally, DRL's funding profile is much more reliant on wholesale borrowings versus its peers at 35% of total liabilities versus an average of 17% for the peer group. Further, the company's capital position is considered weak and not sufficient to support future losses should NCOs begin to rise from current levels. For 3Q'12, DRL's Fitch Core Capital ratio was 2.17% and Tangible Common Equity (TCE) was 5.43%. During 2012, DRL's capital position trended down. During 3Q'12, the company reported a net loss as it doubled loan loss provisions compared to the full-year of 2011. Further, Fitch expects credit and capital pressures to persist throughout 2013 that may result in the company needing additional capital as it works through its problem assets. DRL has managed to maintain regulatory capital ratios at well-capitalized as balance sheet shrinkage continues to support capital ratios. However, DRL's Texas ratio defined as NPAs/(TCE + Reserves) is on the high end of most Fitch-rated institutions at above 200% as of Sept. 30, 2012. The company has the worst rank in terms of NPA at 20.7% for 3Q12 (which includes Troubled Debt Restructurings or TDRs), although reporting a relatively modest NCO ratio of 2.5%. Non-performers are split about 58% related to residential mortgages) and 42% related to CRE & construction loans. On a positive note, on an absolute basis, non-performers are down for 3Q12 to $1.31 billion compared to $1.86 billion the same quarter a year ago. Fitch believes NCOs will likely increase as the real estate sector in Puerto Rico continues to face pressures with high levels of unsold housing inventories and weak economic conditions. NCOs remain manageable up to this point, but well above normalized levels. Should credit losses and provision expenses trend to levels similar to 2011, Fitch believes DRL could fall below 'well capitalized' status in 2014. DRL's ratings could move lower if regulatory capital ratios are expected to fall into to 'undercapitalized' status. Additionally, deteriorating liquidity or inability to access to funding markets could also place negative rating pressure on the institution. FBP (Long-term IDR/VR 'B-/b-', Outlook Stable) FBP's ratings affirmation incorporates the company's geographic concentration in Puerto Rico. Despite some improvements in credit trends compared to 2011, the company is operating with a high level of NPLs and some volatility is expected in NCOS given that 61% of its loan book is tied to real estate in the local market. Further, the loss content in the CRE and construction loan portfolios tends to be higher, which still accounts for about 42% of NPLs. Nonetheless, Fitch does not expect credit losses to return to the peak level experienced in 2010. Fitch expects profitability to be sustainable at current modest levels, as FBP returned to profitability 2Q'12. The company is focused on improving its franchise by growing its consumer book as it tries to diversify its loan book and customer base. FBP currently ranks 2 in terms of loans with 18.4% in September 2012. During 2012, FBP has seen a steady increase to its pre-provision net revenue, although it is still relatively low. The NIM also improved by 116bps to 3.98% in 3Q12 versus same period a year ago, as the company has benefited from reduced funding costs. Following a recapitalization in 4Q11, FBP capital is considered solid, as it provides a buffer for potential losses in its loan portfolio and improves its financial flexibility. The company's (TCE) and Tier 1 Common equity ratios improved to 10.39% and 13.33% during 3Q12, respectively, compared to 3.80% and 5.01% for 3Q'11. Ratings could be positively affected should the improvement in earnings and capital position remain sustainable and/or if nonperforming assets were to materially decline. However, if credit problems continue trending toward peak levels while eroding capital, FBP's ratings would face downward pressure. Popular Inc. (Long-term IDR/VR upgraded to 'BB-/bb-' from 'B+/b+', Outlook Revised to Stable from Positive) Popular Inc. and Popular North America's (the holding companies) VRs and IDRs have been upgraded and equalized with the bank subsidiary ratings given the improved liquidity position and manageable near-term obligations. Incorporated in the equalization is also the view that the bank subsidiaries will not require capital injections from the parent company. Prudent liquidity management is important for BPOP given the sizeable amount of total debt outstanding - roughly $1.2 billion of which $935 million is trust preferred securities, including securities issued under the U.S. Treasury's Troubled Assets Relief Program (TARP). The company is currently operating with 2x coverage of its total debt interest expense, which Fitch considers sufficient given manageable near-term debt obligations (about $42 million total maturing in 4Q'12). Fitch believes the bank's recent operating performance is sustainable despite the difficult operating environment. The company's strong franchise in Puerto Rico is also viewed positively as it holds the number one market share position for loans and deposits by a wide margin at 38% and 40%, respectively. However, current and expected challenges in Puerto Rico's operating environment could limit improvements in the company's financial performance over the near term. BPOP has been profitable since 2011 and capital continues to build. Fitch views BPOP's capital position as adequate (given a still high level of risks) with a TCE of 9.26% and Tier 1 Common of 12.72%. The solid capital base provides a cushion should net losses start to increase. The company continues to operate with elevated levels of NPAs and NCOs, which totaled 11.6% and 1.80% for 3Q'12, respectively. Fitch notes credit metrics reflect an improvement year-over-year. NPL inflows have slowed compared to the previous year, excluding purchased impaired loans. Nonetheless, BPOP's loan book remains exposed to the pressured real estate conditions as CRE and construction and residential lending account for 55% of total loans. Positive rating action could ensue should BPOP experience a reduction in level of problem loans while maintaining good earnings trend and build its capital position. Further, the possible removal of regulatory orders with regulators at the holding company and continued liquidity management that is appropriate relative to its debt service could lead to an equalization of the holding company and bank ratings. Offsetting that, the Outlook could be revised to Negative if BPOP's capital position reflected a declining trend and/or a decrease in reserve coverage absent improvement in the level of NPAs. Santander Bancorp (Long-term IDR/VR 'BBB/bb+', Outlook Negative) Fitch affirmed SBP's standalone rating, the VR, at 'bb+'. The affirmation is supported by the company's sound operating performance and solid capital position while operating in the challenging Puerto Rican market. Similar to local peers, asset quality remains a challenge. Although Fitch is concerned with SBP's elevated levels of NPAs at 7.41%, it compares well to local peers with an average NPA of 13.19% at 3Q'12. SBP's loan portfolio exhibits better credit performance due to more conservative underwriting and overall risk management practices (including a relatively low concentration in construction lending). Additionally, given good profitability the company's capital position has remained solid with a TCE ratio at 8.88% for 3Q'12. Fitch believes there is limited upside to SBP's VR given the concentration in its loan book by product and geography and relatively small franchise. The VR could be negatively affected if loan portfolio quality deteriorates, particularly if significant operating losses emerge and the company's capital position is eroded. RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT FLOOR RATING DRL, FBP and BPOP have Support Ratings of '5' and Support Floor Ratings of 'NF'. In Fitch's view, the Puerto Rico banks are not systemically important and therefore, Fitch believes the probability of support is unlikely. IDRs and VRs do not incorporate any support. SBP's Support Rating is '2' reflecting Fitch's view that there is a high probability of support from its parent, Banco Santander. Since this support is based on institutional support, as opposed to sovereign support, there is no Support Floor Rating assigned. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and hybrid capital instruments issued by the banks are notched down from the issuers' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. The ratings of subordinated debt and hybrid securities are sensitive to any change in the banks' VRs or to changes in the banks' propensity to make coupon payments that are permitted but not compulsory under the instruments' documentation. HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review Group have a bank holding company (BHC) structure with the bank as the main subsidiary. All subsidiaries are considered core to the parent holding company, supporting equalized ratings between bank subsidiaries and bank holding companies. IDRs and VRs are equalized with those of its operating companies and banks, reflecting its role as the bank holding company which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is below 120% for all the parent companies reviewed in this peer group. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review factor in a high probability of support from parent institutions to its subsidiaries. This reflects the fact that performing parent banks have very rarely allowed subsidiaries to default. It also considers the high level of integration, brand, management, financial and reputational incentives to avoid subsidiary defaults. Fitch has affirmed these ratings. Doral Financial Corporation --Long-term Issuer Default Rating (IDR) at 'CCC'; --Viability rating at 'ccc'; --Senior debt at 'CCC/RR6'; --Preferred stock at 'C/RR6'; --Short-term Issuer Default Rating (IDR) at 'C'; --Support '5'; --Support Floor 'NF'; Doral Bank --Long-term IDR at 'CCC'; --Viability rating at 'ccc'; --Long-term deposits at 'CCC/RR4'; --Short-term IDR at 'C'; --Short-term deposit at 'C'. --Support at '5'; --Support Floor at 'NF'; Fitch has affirmed these ratings. The Outlook is Stable: First BanCorp --Long-term IDR at 'B-'; --Viability rating at 'b-' --Short-term IDR at 'B'; --Support at '5'. --Support floor at 'NF'. FirstBank Puerto Rico --Long-term IDR at 'B-'; --Long-term deposit at 'B-/RR3'; --Viability rating at 'b-'. --Short-term IDR at 'B'; --Short-term Deposits at 'B'. --Market Linked deposit securities at 'B-emr/RR3'; --Support at '5'. --Support floor at 'NF'. Banco Popular North America --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'. --Viability rating at 'bb-' --Support at '5' --Support floor at 'NF'. Banco Popular de Puerto Rico --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'; --Viability rating at 'bb-'; --Support at '5' --Support floor at 'NF'. Popular,Inc. --Short-term IDR at 'B'; --Short-term Debt at 'B'. --Support at '5' --Support floor at 'NF'. Popular North America, Inc --Short-term IDR at 'B'; --Short-term Debt at B --Support at '5' --Support floor at 'NF'. Fitch has upgraded these ratings. The Outlook is revised to Stable from Positive. Popular,Inc. --Long-term IDR to 'BB-' from 'B+'; --Senior unsecured to 'BB-' from 'B+/RR4''; --Viability rating to 'bb-' from 'b+' --Preferred stock to 'B-' from 'CCC/RR6'. Popular North America, Inc. --Long-term IDR to 'BB-' from 'B+'; --Viability rating to 'bb-' from 'b+' BanPonce Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust II --Trust preferred to 'B-' from 'CCC/RR6'. Popular North America Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust III --Trust preferred to 'B-' from 'CCC/RR6' Fitch has affirmed the following ratings: Santander Bancorp --Viability Rating affirmed at 'bb+'; --Support rating at '2'. Banco Santander Puerto Rico --Viability rating at 'bb+'. Santander PR Capital Trust I --Trust preferred at 'BB'. DORAL FINANCIAL: Fitch Affirms 'B-' LT Issuer Default Rating ------------------------------------------------------------ Fitch Ratings has completed a peer review of four rated Puerto Rican banks. Fitch has affirmed the Long-term Issuer Default Ratings (IDR) of Doral Financial Corp. and First BanCorp at 'B-'. Fitch has upgraded the Long-term IDR of Popular Inc. to 'BB-' from 'B+', which is now equalized with its bank subsidiaries ratings. The Outlook for BPOP and FBP is Stable. For Santander Bancorp, Fitch has affirmed its Viability Rating at 'bb+'. Fitch notes that SBP's IDRs and Rating Outlook are linked with that of its ultimate parent, Banco Santander (based in Spain), and changes in the parent company's ratings result in changes to SBP's. Currently, SBP's Long-term IDRs is 'BBB' with a Negative Outlook. (For additional details, please see 'Fitch Downgrades Santander & BBVA to 'BBB+'/Negative Outlook on Sovereign Action', dated Feb. 13, 2012, and available at www.fitchratings.com.. RATING ACTION RATIONALE AND RATING DRIVERS AND SENSITIVITIES - VRs and IDRs (applicable to all banks in the peer group) Fitch-rated Puerto Rican bank Viability Ratings (VRs) and IDRs incorporate limiting rating factors. These VRs and IDRs are significantly more sensitive to the economic conditions within their respective footprints. Given the peer group's concentration in Puerto Rico and the pressures on the local economy, Fitch believes prospects for earnings growth is difficult in the near term. Additionally, this group's funding profiles have generally been weaker compared to its U.S. bank peers. It includes a reliance on non-core deposits, such as brokered certificates of deposit (CDs) time deposits, and wholesale borrowings with a higher cost of funds. Further, non-performing loans (NPLs) are stubbornly high and are reflected in current ratings levels. In Fitch's view, the banks will likely continue to operate with elevated levels of non-performing assets (NPAs), absent loan sales, given pressures in the real estate sector, which has a glut of housing inventory that will likely take a few years to balance out. Fitch believes current rating levels are indicative of the significant challenges facing Puerto Rican banks. For 3Q'12, Fitch-rated Puerto Rico banks' NPA ratio (which includes TDRs) was 13.19% compared to an average of 3.5% for Fitch-rated Mid-Tier and Community bank peer groups combined. For the group, average net charge-offs (NCOs) totaled 1.90% for 3Q'12, despite the elevated levels of non-performers. Fitch believes NCOs may begin to increase from residential mortgages given the rising delinquency rates in this loan catergory and the increase in foreclosures. In Fitch's view, credit trends reflect the continued stress from the real estate market, particularly commercial real estate (CRE), construction and residential mortgage loans. Fitch notes that Puerto Rican banks' (including those not rated by Fitch) loan mix is heavily weighted towards real estate lending, mainly CRE & construction and residential mortgages, with an average of 32% and 38%, respectively. Puerto Rican bank funding profiles are considered weaker when compared to those on the U.S. mainland given the higher reliance on noncore funding sources. This characteristic, considered a rating constraint, has been a historical trend as the local market does not have sufficient core deposits to support funding needs. Of note, the peer group's average net interest margin (NIM) was 4.23% for 3Q'12, which is higher than most U.S. banks. This is mainly due to the liability sensitive nature of the balance sheet for most Puerto Rican banks. In a rising rate environment, the NIM would likely be pressured. Current rating levels incorporate the weak state of the economy in Puerto Rico, which is expected to pressure credit and financial performance over the longer term. The island has been in a recession for seven years with unemployment at 13.6% for 3Q'12 and GNP for 2011 of negative 3.8%. Recent economic trends reflect modest improvements year-over-year. However, much uncertainty remains as to future strategies to address the fiscal and structural issues hurting the local economy. The Stable Outlook reflects the view that any impact from future negative economic weakness would be manageable given the increased capital position across most of the banks, deleveraging of the balance sheet, and modest improvements to liquidity profiles. Given the challenges noted above, in Fitch's opinion, future consolidation in Puerto Rico may take place as management teams may have more of an incentive to consider M&A as a way to strengthen franchises, improve product diversity, and enhance funding profile to help offset the challenging operating environment. RATING DRIVERS AND SENSITIVITIES FOR THE IDRS AND VRS OF EACH BANK ARE SUMMARIZED BELOW: DRL (Long-term IDR/VR 'CCC/ccc') DRL's ratings affirmation reflects the company's ongoing challenges such as longer-term strategic plans, geographic and product concentration with a limited franchise, and high levels of non-performers. Additionally, DRL's funding profile is much more reliant on wholesale borrowings versus its peers at 35% of total liabilities versus an average of 17% for the peer group. Further, the company's capital position is considered weak and not sufficient to support future losses should NCOs begin to rise from current levels. For 3Q'12, DRL's Fitch Core Capital ratio was 2.17% and Tangible Common Equity (TCE) was 5.43%. During 2012, DRL's capital position trended down. During 3Q'12, the company reported a net loss as it doubled loan loss provisions compared to the full-year of 2011. Further, Fitch expects credit and capital pressures to persist throughout 2013 that may result in the company needing additional capital as it works through its problem assets. DRL has managed to maintain regulatory capital ratios at well-capitalized as balance sheet shrinkage continues to support capital ratios. However, DRL's Texas ratio defined as NPAs/(TCE + Reserves) is on the high end of most Fitch-rated institutions at above 200% as of Sept. 30, 2012. The company has the worst rank in terms of NPA at 20.7% for 3Q12 (which includes Troubled Debt Restructurings or TDRs), although reporting a relatively modest NCO ratio of 2.5%. Non-performers are split about 58% related to residential mortgages) and 42% related to CRE & construction loans. On a positive note, on an absolute basis, non-performers are down for 3Q12 to $1.31 billion compared to $1.86 billion the same quarter a year ago. Fitch believes NCOs will likely increase as the real estate sector in Puerto Rico continues to face pressures with high levels of unsold housing inventories and weak economic conditions. NCOs remain manageable up to this point, but well above normalized levels. Should credit losses and provision expenses trend to levels similar to 2011, Fitch believes DRL could fall below 'well capitalized' status in 2014. DRL's ratings could move lower if regulatory capital ratios are expected to fall into to 'undercapitalized' status. Additionally, deteriorating liquidity or inability to access to funding markets could also place negative rating pressure on the institution. FBP (Long-term IDR/VR 'B-/b-', Outlook Stable) FBP's ratings affirmation incorporates the company's geographic concentration in Puerto Rico. Despite some improvements in credit trends compared to 2011, the company is operating with a high level of NPLs and some volatility is expected in NCOS given that 61% of its loan book is tied to real estate in the local market. Further, the loss content in the CRE and construction loan portfolios tends to be higher, which still accounts for about 42% of NPLs. Nonetheless, Fitch does not expect credit losses to return to the peak level experienced in 2010. Fitch expects profitability to be sustainable at current modest levels, as FBP returned to profitability 2Q'12. The company is focused on improving its franchise by growing its consumer book as it tries to diversify its loan book and customer base. FBP currently ranks 2 in terms of loans with 18.4% in September 2012. During 2012, FBP has seen a steady increase to its pre-provision net revenue, although it is still relatively low. The NIM also improved by 116bps to 3.98% in 3Q12 versus same period a year ago, as the company has benefited from reduced funding costs. Following a recapitalization in 4Q11, FBP capital is considered solid, as it provides a buffer for potential losses in its loan portfolio and improves its financial flexibility. The company's (TCE) and Tier 1 Common equity ratios improved to 10.39% and 13.33% during 3Q12, respectively, compared to 3.80% and 5.01% for 3Q'11. Ratings could be positively affected should the improvement in earnings and capital position remain sustainable and/or if nonperforming assets were to materially decline. However, if credit problems continue trending toward peak levels while eroding capital, FBP's ratings would face downward pressure. Popular Inc. (Long-term IDR/VR upgraded to 'BB-/bb-' from 'B+/b+', Outlook Revised to Stable from Positive) Popular Inc. and Popular North America's (the holding companies) VRs and IDRs have been upgraded and equalized with the bank subsidiary ratings given the improved liquidity position and manageable near-term obligations. Incorporated in the equalization is also the view that the bank subsidiaries will not require capital injections from the parent company. Prudent liquidity management is important for BPOP given the sizeable amount of total debt outstanding - roughly $1.2 billion of which $935 million is trust preferred securities, including securities issued under the U.S. Treasury's Troubled Assets Relief Program (TARP). The company is currently operating with 2x coverage of its total debt interest expense, which Fitch considers sufficient given manageable near-term debt obligations (about $42 million total maturing in 4Q'12). Fitch believes the bank's recent operating performance is sustainable despite the difficult operating environment. The company's strong franchise in Puerto Rico is also viewed positively as it holds the number one market share position for loans and deposits by a wide margin at 38% and 40%, respectively. However, current and expected challenges in Puerto Rico's operating environment could limit improvements in the company's financial performance over the near term. BPOP has been profitable since 2011 and capital continues to build. Fitch views BPOP's capital position as adequate (given a still high level of risks) with a TCE of 9.26% and Tier 1 Common of 12.72%. The solid capital base provides a cushion should net losses start to increase. The company continues to operate with elevated levels of NPAs and NCOs, which totaled 11.6% and 1.80% for 3Q'12, respectively. Fitch notes credit metrics reflect an improvement year-over-year. NPL inflows have slowed compared to the previous year, excluding purchased impaired loans. Nonetheless, BPOP's loan book remains exposed to the pressured real estate conditions as CRE and construction and residential lending account for 55% of total loans. Positive rating action could ensue should BPOP experience a reduction in level of problem loans while maintaining good earnings trend and build its capital position. Further, the possible removal of regulatory orders with regulators at the holding company and continued liquidity management that is appropriate relative to its debt service could lead to an equalization of the holding company and bank ratings. Offsetting that, the Outlook could be revised to Negative if BPOP's capital position reflected a declining trend and/or a decrease in reserve coverage absent improvement in the level of NPAs. Santander Bancorp (Long-term IDR/VR 'BBB/bb+', Outlook Negative) Fitch affirmed SBP's standalone rating, the VR, at 'bb+'. The affirmation is supported by the company's sound operating performance and solid capital position while operating in the challenging Puerto Rican market. Similar to local peers, asset quality remains a challenge. Although Fitch is concerned with SBP's elevated levels of NPAs at 7.41%, it compares well to local peers with an average NPA of 13.19% at 3Q'12. SBP's loan portfolio exhibits better credit performance due to more conservative underwriting and overall risk management practices (including a relatively low concentration in construction lending). Additionally, given good profitability the company's capital position has remained solid with a TCE ratio at 8.88% for 3Q'12. Fitch believes there is limited upside to SBP's VR given the concentration in its loan book by product and geography and relatively small franchise. The VR could be negatively affected if loan portfolio quality deteriorates, particularly if significant operating losses emerge and the company's capital position is eroded. RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT FLOOR RATING DRL, FBP and BPOP have Support Ratings of '5' and Support Floor Ratings of 'NF'. In Fitch's view, the Puerto Rico banks are not systemically important and therefore, Fitch believes the probability of support is unlikely. IDRs and VRs do not incorporate any support. SBP's Support Rating is '2' reflecting Fitch's view that there is a high probability of support from its parent, Banco Santander. Since this support is based on institutional support, as opposed to sovereign support, there is no Support Floor Rating assigned. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt and hybrid capital instruments issued by the banks are notched down from the issuers' VRs in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles, which vary considerably. The ratings of subordinated debt and hybrid securities are sensitive to any change in the banks' VRs or to changes in the banks' propensity to make coupon payments that are permitted but not compulsory under the instruments' documentation. HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review Group have a bank holding company (BHC) structure with the bank as the main subsidiary. All subsidiaries are considered core to the parent holding company, supporting equalized ratings between bank subsidiaries and bank holding companies. IDRs and VRs are equalized with those of its operating companies and banks, reflecting its role as the bank holding company which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. Double leverage is below 120% for all the parent companies reviewed in this peer group. SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES All of the entities reviewed in the Puerto Rican Banks Peer Review factor in a high probability of support from parent institutions to its subsidiaries. This reflects the fact that performing parent banks have very rarely allowed subsidiaries to default. It also considers the high level of integration, brand, management, financial and reputational incentives to avoid subsidiary defaults. Fitch has affirmed these ratings. Doral Financial Corporation --Long-term Issuer Default Rating (IDR) at 'CCC'; --Viability rating at 'ccc'; --Senior debt at 'CCC/RR6'; --Preferred stock at 'C/RR6'; --Short-term Issuer Default Rating (IDR) at 'C'; --Support '5'; --Support Floor 'NF'; Doral Bank --Long-term IDR at 'CCC'; --Viability rating at 'ccc'; --Long-term deposits at 'CCC/RR4'; --Short-term IDR at 'C'; --Short-term deposit at 'C'. --Support at '5'; --Support Floor at 'NF'; Fitch has affirmed these ratings. The Outlook is Stable: First BanCorp --Long-term IDR at 'B-'; --Viability rating at 'b-' --Short-term IDR at 'B'; --Support at '5'. --Support floor at 'NF'. FirstBank Puerto Rico --Long-term IDR at 'B-'; --Long-term deposit at 'B-/RR3'; --Viability rating at 'b-'. --Short-term IDR at 'B'; --Short-term Deposits at 'B'. --Market Linked deposit securities at 'B-emr/RR3'; --Support at '5'. --Support floor at 'NF'. Banco Popular North America --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'. --Viability rating at 'bb-' --Support at '5' --Support floor at 'NF'. Banco Popular de Puerto Rico --Long-term IDR at 'BB-'; --Long-term deposits at 'BB'; --Short-term IDR at 'B'; --Short-term deposits at 'B'; --Viability rating at 'bb-'; --Support at '5' --Support floor at 'NF'. Popular,Inc. --Short-term IDR at 'B'; --Short-term Debt at 'B'. --Support at '5' --Support floor at 'NF'. Popular North America, Inc --Short-term IDR at 'B'; --Short-term Debt at B --Support at '5' --Support floor at 'NF'. Fitch has upgraded these ratings. The Outlook is revised to Stable from Positive. Popular,Inc. --Long-term IDR to 'BB-' from 'B+'; --Senior unsecured to 'BB-' from 'B+/RR4''; --Viability rating to 'bb-' from 'b+' --Preferred stock to 'B-' from 'CCC/RR6'. Popular North America, Inc. --Long-term IDR to 'BB-' from 'B+'; --Viability rating to 'bb-' from 'b+' BanPonce Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust II --Trust preferred to 'B-' from 'CCC/RR6'. Popular North America Capital Trust I --Trust preferred to 'B-' from 'CCC/RR6'. Popular Capital Trust III --Trust preferred to 'B-' from 'CCC/RR6' Fitch has affirmed the following ratings: Santander Bancorp --Viability Rating affirmed at 'bb+'; --Support rating at '2'. Banco Santander Puerto Rico --Viability rating at 'bb+'. Santander PR Capital Trust I --Trust preferred at 'BB'. LAUSELL INC: Can Access Bank's Cash Collateral Until March 31 ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Puerto Rico authorized Lausell, Inc., to use Firstbank Puerto Rico and Citibank N.A.'s cash collateral and to pay critical vendor Alcan Primary Products Company, LLC, in addition to the full amount of Alcan's post-petition invoices, 10% thereof to be credited by Alcan to its pre-petition claim. The Banks have agreed to the extension of Debtor's authority to use their cash collateral to allow the Debtor the time require to finalize its application for a postpetition financing from the Economic Development Bank for Puerto Rico in order to pay off the loans with the banks, in a discounted pay off transaction ("DPO") for a reduced amount of $6,300,000. The total authorized use of cash collateral is $5,267,000 and will be for the period of the week commencing on Dec. 13, 2012, and ending on the earlier of (i) March 31, 2012, or (ii) 30 days after the rejection or denial by the EDB of the financing being requested by the Debtor. As adequate protection, the Banks are granted replacement liens and a postpetition security interest on all of the assets and after acquired collateral of the Debtor. As additional adequate protection, the Debtor will make a payment to the Banks equivalent to the daily rate of $1,035 to cover interest becoming due during the term of the stipulation. The Debtor will also make monthly payments to the Banks of $5,000, for a total of $20,000 during the period of this stipulation to cover accrued interest. As additional adequate protection, the Banks are also granted a superpriority claim, having priority over all administrative expenses specified in Sections 503(b) and 507 of the Bankruptcy Code. About Lausell Inc. Lausell, Inc., filed a bare-bones Chapter 11 petition (Bankr. D.P.R. Case No. 12-02918) on April 17, 2012, in Old San Juan, Puerto Rico. Lausell, also known as Aluminio Del Caribe, is a manufacturer of windows and doors. Bankruptcy Judge Mildred Caban Flores oversees the case. Charles Alfred Cuprill, Esq., at Charles A. Curpill, PSC, serves as counsel to the Debtor. The Bayamon, Puerto Rico-based company disclosed $34,059,950 in assets and liabilities of $24,489,414 in its amended schedules. MIRAMAR REAL ESTATE: Confirms Plan, Transfers Assets to Putman -------------------------------------------------------------- Miramar Real Estate Management Inc. has confirmed a Plan of Reorganization dated Aug. 13, 2012, that transfers the assets to Banco Popular de Puerto Rico or its assignee on account of its secured claim. Together with the Disclosure Statement and Plan, the Debtor requested approval of a settlement among the Debtor, its direct subsidiary La Ciudadela de Santurce Inc., Banco Popular de Puerto Rico as agent and lender and Banco Popular de Puerto Rico's co- lenders. As per the settlement, all of the assets of La Ciudadela de Santurce, Inc. will be transferred to the Debtor, and the Debtor will in turn sell, free and clear of liens, the aforesaid assets to Putman Bridge Funding III, LLC's PBF-TEP Acquisitions, Inc. In consideration, the purchaser will pay BPPR the amount of $60,000,000, subject to certain adjustments, to reduce the existing claim of Banco Popular. The purchaser will also make an additional payment of $150,000 to the Debtor, which funds, as a result of the agreement by BPPR to forebear from distributions on its unsecured claim, will be distributed in accordance with the confirmed Plan or further order of the Court. The Plan also provides for the funding of certain carve-out accounts. A copy of the Disclosure Statement is available for free at: http://bankrupt.com/misc/MIRAMAR_REAL_ds.pdf About Miramar Real Estate San Juan, Puerto Rico-based Miramar Real Estate Management Inc. is a private corporation organized under the laws of the Commonwealth of Puerto Rico. Incorporated in 1990, Miramar began its business providing administration services to the private sector and government agencies. The Company filed for Chapter 11 bankruptcy protection (Bankr. D. P.R. Case No. 11-01786) on March 2, 2011. Fausto D. Godreau Zayas, Esq., at Latimer, Biaggi, Rachid & Godreau, LLP, serves as the Debtor's bankruptcy counsel. FPV & Galindez, CPAs, PSC, and its principal, Marcos A. Claudio Agosto, serve as its external auditors and restructuring advisors. The Debtor estimated its assets and debts at US$100 million to US$500 million. =============== S U R I N A M E =============== * SURINAME: Partnership With IDB Grows Stronger in 2012 ------------------------------------------------------- In 2011, the Inter-American Development Bank's (IDB) Board of Directors endorsed the organization's re-engagement with the Government of Suriname by approving the 2011-2015 Country Strategy with Suriname. During 2011, the IDB's Board approved the unprecedented allocation of US$300 million to Suriname, and specifically committed US$80 million of its medium-term lending envelope to Suriname for projects that would modernize the country's financial sector, strengthen its public finances, and promote its social protection mechanisms. The Government of Suriname continued to partner with the IDB in 2012 to deliver on the objectives of the Development Plan and the 2011-2015 Country Strategy. For example, the IDB's sovereign lending program with Suriname delivered two programmatic policy- based loans, totaling US$35 million, which supported structural reforms in the energy sector and public capital expenditure management. A complementary investment program of US$53.7 million financed capital works in education and transport. In addition, the Bank provided US$1.7 million in grants and technical assistance in agriculture, energy, and social protection. With respect to the private sector windows of the IDB, the Multilateral Investment Fund (MIF) recorded high approvals with US$2.7 million in technical assistance for small-scale farming, micro franchising, and rural electrification. The Bank's Trade Finance Facilitation Program formalized a line of credit of up to US$5 million with to promote economic growth through trade promotion. Suriname also received US$500,000 through the Compete Caribbean regional initiative to support its home-grown competitiveness enhancing initiatives for fostering private sector development. Knowledge generation and dissemination were also a prominent feature of the partnership in 2012. The IDB facilitated the training of more than 100 public officials, executing agencies staff, and prospective project members in project management for results, procurement and financial management. The Bank's analytical efforts concentrated around understanding the role of productivity, private sector constraints, and the effects of global price movements on the domestic economy. Going into the third year of the strategy implementation, IDB officials are optimistic about the partnership with Suriname. "We continue to see the fruits of our close collaboration with Suriname and are excited to work with such a committed partner. We are strengthening our dialogue and expanding our support to key economic sectors. Keeping up, while paying attention to development objectives is important. We have a challenging year and look forward to working with the authorities and the people of Suriname," said Marco Nicola, the IDB Representative in Paramaribo. =============================== T R I N I D A D & T O B A G O =============================== CL FINANCIAL: New CLICO Fund Continues to Trend Downward -------------------------------------------------------- Caribbean360.com reports that the CLICO Investment Fund (CIF) listed on the Trinidad and Tobago Stock Exchange (TTSE) on January 7 at TT$25 per share, but ended the day at $24.90. This trend has continued for the past 10 days and now stock in the CIF, which was created as part of measures announced by Finance and the Economy Minister, Larry Howai in his national budget presentation on October 1, to compensate CLICO and British American Trinidad investors and policyholders, is valued at TT$23 per share, with some bids coming in on the TTSE as low as $22, according to the report. The report relates that the CIF, which is being traded on the TTSE's Mutual Fund Market, had an estimated market capitalization of TT$5.25 billion when it started trading with 204 million units on January 7. Caribbean360.com discloses that the declining value has been a cause of some concern for investors and policyholder who had been able to convert the 11- to 20-year bonds in the compensation package that they received from government into units in the CIF. However, the report notes, spokesperson for the largest representative body for policy owners and investors Peter Permell appears to be taking a circumspect approach to the situation. "Because it's a new security, people are adopting a wait-and-see approach both by the sellers and the buyers. . . . The first distribution is going to take place on February [21]. Therefore what you would find is that most people are going to want to ensure that they get that payment," Mr. Permell recently told the Trinidad Guardian, the report discloses. The report relays that Mr. Permell predicted that not too many people will offer their units. Jerry Hospedales, chairman of the Clico Trust Corporation Ltd, which is the trustee of the CIF, reported recently that 6582 bondholders exchanged their bonds for units during the initial offer period of November 1 to Dec. 14, 2012, the report says. The report notes that Mr. Hospedales said the remaining bondholders who did not, can still do so through any broker registered with the Trinidad and Tobago Securities and Exchange Commission, for which there was no deadline. TTSE Chief Executive Officer Wain Iton said the dividend payment schedule for the fund will be semi-annual, the report discloses. Mr. Hospedales also said the 7,983 holders of Short-Term Investment Products (STIPS) from Clico and its sister company British American who have not yet converted their bonds to units have just over two weeks left to do so, if they want to be included in Republic Bank's first dividend payment to CIF unitholders on Feb. 21, 2013, the report adds. About CL Financial CL Financial Group Limited is a privately held conglomerate in Trinidad and Tobago. Founded as an insurance company by Cyril Duprey, Colonial Life Insurance Company was expanded into a diversified company by his nephew, Lawrence Duprey. CL Financial is now one of the largest local conglomerates in the region, encompassing over 65 companies in 32 countries worldwide with total assets standing at roughly US$100 billion. * * * As reported in the Troubled Company Reporter-Latin America on August 10, 2009, A.M. Best Co. downgraded the financial strength rating to C (Weak) from B (Fair) and issuer credit rating to "ccc" from "bb" of Colonial Life Insurance Company (Trinidad) Limited (CLICO) (Trinidad & Tobago). The ratings remain under review with negative implications. CLICO is an insurance member company of CL Financial Limited (CL Financial), a diversified holding company based in Trinidad & Tobago. According to a TCR-LA report on Feb. 20, 2009, citing Trinidad and Tobago Express, Tobago President George Maxwell Richards signed bailout bills for CL Financial, giving the government the authority to control the company's unit, Colonial Life Insurance Company, and giving the central bank extensive powers to treat with CL Financial's collapse and the consequent systemic crisis. =============== X X X X X X X X =============== * BOND PRICING: For the Week Jan. 14 to Jan. 18, 2013 ----------------------------------------------------- Issuer Coupon Maturity Currency Price ------ ------ -------- -------- ----- ARGENTINA --------- ARGENT-$DIS 8.28 12/31/2033 USD 63.6 ARGENT-$DIS 8.28 12/31/2033 USD 69.63 ARGENT-$DIS 8.28 12/31/2033 USD 69.63 ARGENT-$DIS 8.28 12/31/2033 USD 70.75 ARGENT-$DIS 8.28 12/31/2033 USD 73.5 ARGENT-PAR 1.18 12/31/2038 ARS 44.91 ARGENT- DIS 7.82 12/31/2033 EUR 45 ARGENT- DIS 7.82 12/31/2033 EUR 59.25 ARGENT- DIS 7.82 12/31/2033 EUR 60 ARGENT- DIS 4.33 12/31/2033 JPY 36 ARGENT- DIS 4.33 12/31/2033 JPY 36 ARGENT- PAR 0.45 12/31/2038 JPY 15 ARGENT- PAR&GDP 0.45 12/31/2038 JPY 8 ARGNT-BOCON PRE9 2 3/15/2014 ARS 51.5 BANCO MACRO SA 9.75 12/18/2036 USD 75.48 BANCO MACRO SA 9.75 12/18/2036 USD 71.88 BANCO MACRO SA 9.75 12/18/2036 USD 71.88 CAPEX SA 10 3/10/2018 USD 71 CAPEX SA 10 3/10/2018 USD 67.88 CIA LATINO AMER 9.5 12/15/2016 USD 65.3 EMP DISTRIB NORT 10.5 10/9/2017 USD 36.85 EMP DISTRIB NORT 9.75 10/25/2022 USD 47.5 EMP DISTRIB NORT 9.75 10/25/2022 USD 44.63 PROV BUENOS AIRE 9.625 4/18/2028 USD 67.04 PROV BUENOS AIRE 9.625 4/18/2028 USD 66.88 PROV BUENOS AIRE 9.375 9/14/2018 USD 73.86 PROV BUENOS AIRE 9.375 9/14/2018 USD 73.75 PROV BUENOS AIRE 10.875 1/26/2021 USD 75.74 PROV DE FORMOSA 5 2/27/2022 USD 65.5 PROV DE MENDOZA 5.5 9/4/2018 USD 70.38 PROV DEL CHACO 4 12/4/2026 USD 30.88 PROV DEL CHACO 4 11/4/2023 USD 57.75 TRANSENER 9.75 8/15/2021 USD 37.75 TRANSENER 9.75 8/15/2021 USD 41 TRANSENER 8.875 12/15/2016 USD 40.5 CAYMAN ISLAND ------------- BANCO BPI (CI) 4.15 11/14/2035 EUR 59.5 BCP FINANCE CO 4.239 EUR 41.06 BCP FINANCE CO 5.5 EUR 39.67 BES FINANCE LTD 4.5 EUR 63.17 BES FINANCE LTD 5.58 EUR 64.33 CHINA FORESTRY 10.25 11/17/2015 USD 53.88 CHINA FORESTRY 10.25 11/17/2015 USD 54.1 CHINA SUNERGY 4.75 6/15/2013 USD 53.46 EFG HELLAS CAYMA 9 3/8/2019 EUR 70.5 ESFG INTERNATION 5.753 EUR 50.67 GOL FINANCE 8.75 USD 65.75 GOL FINANCE 8.75 USD 65 JINKOSOLAR HOLD 4 5/15/2016 USD 50.19 LDK SOLAR CO LTD 4.75 4/15/2013 USD 63 LDK SOLAR CO LTD 10 2/28/2014 CNY 67.82 LUPATECH FINANCE 9.875 USD 37.75 LUPATECH FINANCE 9.875 USD 42 PUBMASTER FIN 6.962 6/30/2028 GBP 62.36 RENHE COMMERCIAL 13 3/10/2016 USD 76.13 SUNTECH POWER 3 3/15/2013 USD 54.38 SUNTECH POWER 3 3/15/2013 USD 53.5 CHILE ----- ALMENDRAL TEL 3.5 12/15/2014 CLP 42.34 CHILE 3 1/1/2042 CLP 65.9 CHILE 3 1/1/2042 CLP 65.9 CHILE 3 1/1/2040 CLP 67.41 CHILE 3 1/1/2040 CLP 67.41 COLBUN SA 3.2 5/1/2013 CLP 24.86 PUERTO RICO ----------- PUERTO RICO CONS 6.5 4/1/2016 USD 67.5 VENEZUELA --------- PETROLEOS DE VEN 5.5 4/12/2037 USD 72 PETROLEOS DE VEN 5.375 4/12/2027 USD 76.7 *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Thursday's edition of the TCR-LA. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com *********** 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, Valerie U. Pascual, Ivy B. Magdadaro, Frauline S. Abangan, and Peter A. Chapman, Editors. Copyright 2013. 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 or Nina Novak at 202-241-8200. * * * End of Transmission * * *