/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/140220.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 Thursday, February 20, 2014, Vol. 15, No. 36 Headlines A R G E N T I N A FIDEICOMISO FINANCIERO: Moody's Rates ARS3.6 MM Certs. 'Caa3' C A Y M A N I S L A N D S AGA INVESTMENT: Shareholders Receive Wind-Up Report AVIDOG: Shareholders Receive Wind-Up Report C.H. GUENTHER: Members Receive Wind-Up Report CAPITAL GREEN: Shareholders Receive Wind-Up Report CLASSICS FUND LTD: Shareholders Receive Wind-Up Report CLASSICS FUND SPC: Shareholders Receive Wind-Up Report CX-SHANNON: Members to Receive Wind-Up Report on Feb. 27 G-NET HOLDING: Shareholder Receives Wind-Up Report GREEN EAGLE MASTER: Members Receive Wind-Up Report GREEN EAGLE OFFSHORE: Members Receive Wind-Up Report LISPENARD LANE: Members to Hold Final Meeting on March 14 MACE PROPERTIES: Shareholders Receive Wind-Up Report MURSELAGO INVESTMENT: Shareholders Receive Wind-Up Report SELIGMAN SPECTRUM: Members Receive Wind-Up Report SELIGMAN SPECTRUM (MASTER): Members Receive Wind-Up Report TOP HAT: Members Receive Wind-Up Report VINIK OFFSHORE: Members Receive Wind-Up Report VIOLETTA HOLDING: Shareholders Receive Wind-Up Report YGOF GP: Shareholders Receive Wind-Up Report D O M I N I C A N R E P U B L I C DOMINICAN REP: Power Firms Rebuff Govt.'s Push to Produce Energy J A M A I C A DIGICEL GROUP: Acquires Cable TV Operation FINSAC: Jamaica Finance Minister to Update House on Enquiry Report FIRST QUANTUM: S&P Raises Rating on $350MM Sr. Unsec. Notes to B+ P U E R T O R I C O PUERTO RICO: Wants to Incur More Debt to Regain Financial Footing PUERTO RICO AQUEDUCT: Fitch Downgrades $3.4BB Bonds to 'BB+' PUERTO RICO ELECTRIC: Fitch Lowers Rating on $8.7BB Bonds to 'BB+' T R I N I D A D & T O B A G O RBC ROYAL BANK: No Plan to Shut Down Any Branches - - - - - ================= A R G E N T I N A ================= FIDEICOMISO FINANCIERO: Moody's Rates ARS3.6 MM Certs. 'Caa3' ------------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo rates the new structure of Fideicomiso Financiero Banco Piano Serie XXXIV, a transaction that will be issued by Banco Patagonia -- acting solely in its capacity as Issuer and Trustee. The securities for this transaction have not yet been placed in the market. If any assumption or factor Moody's considers when assigning the ratings change before closing, the ratings may also change. Moody's has withdrawn the ratings previously assigned to the Class C Debt Securities and the CP because the structure of the transaction has changed before issuance and as a result the rating of Class C Debt Securities and CP tranches will change. Moody's has assigned new ratings as follows. ARS 140,509,875 in Class A Floating Rate Debt Securities of " Fideicomiso Financiero Banco Piano Serie XXXIV, ", rated Aaa.ar (sf) (Argentine National Scale) and Ba3 (sf) (Global Scale, Local Currency) ARS 18,014,087 in Class B Floating Rate Debt Securities of " Fideicomiso Financiero Banco Piano Serie XXXIV, ", rated Aaa.ar (sf) (Argentine National Scale) and Ba3 (sf) (Global Scale, Local Currency) ARS 18,014,087 in Class C Fixed Rate Debt Securities of " Fideicomiso Financiero Banco Piano Serie XXXIV, ", rated Ba3.ar (sf) (Argentine National Scale) and Caa1 (sf) (Global Scale, Local Currency) ARS 3,602,817 in Certificates of "Fideicomiso Financiero Banco Piano Serie XXXIV, ", rated Caa2.ar (sf) (Argentine National Scale) and Caa3 (sf) (Global Scale, Local Currency) Ratings Rationale The rated securities are payable from the cash flow coming from the assets of the trust, which is an amortizing pool of approximately 22,743 eligible personal loans denominated in Argentine pesos, with a fixed interest rate, originated by Banco Piano, in an aggregate amount of ARS 180,140,865.86. These personal loans are granted mainly to pensioners that receive their monthly pensions from ANSES (Argentina's National Governmental Agency of Social Security - Administracion Nacional de la Seguridad Social). Banco Piano is the payment agent entity and automatically deducts the monthly loan installment directly from the pensioner's account. The pool also has a small percentage of loans granted to employees of the National Government, using a "discount code" ("Codigo de Descuento".) The "discount code" is an identifier granted by a government-related entity that allows to deduct a personal loan's installment directly from the borrowers' paycheck. Overall credit enhancement is comprised of 22% of subordination for the Class A Floating Rate Debt Securities, 12% for the Class B and 2% for the Class C. In addition the transaction has various reserve funds and excess spread. Factors that would lead to an upgrade or downgrade of the rating Factors that may lead to a downgrade of the ratings include an increase in delinquency levels beyond the level Moody's assumed when rating this transaction, and a disruption in the flow of payments from ANSES to pensioners. Factors that may lead to an upgrade of the ratings include the building of credit enhancement over time due to the turbo sequential payment structure, when compared with the level of projected losses in the securitized pool. Loss and Cash Flow Analysis Moody's considered the credit enhancement provided in this transaction through the initial subordination levels for each rated class, as well as the historical performance of Piano's portfolio. In addition, Moody's considered factors common to consumer loans securitizations such as delinquencies, prepayments and losses; as well as specific factors related to the Argentine market, such as the probability of an increase in losses if there are changes in the macroeconomic scenario in Argentina. These factors were incorporated in a cash flow model in order to determine the expected loss for the rated securities. In assigning the rating to this transaction, Moody's assumed a lognormal distribution for defaults on the main pool with a mean of 2.5% and a coefficient of variation of 50%. Also, Moody's assumed a lognormal distribution for prepayments with a mean of 30% and a coefficient of variation of 70%. These assumptions are derived from the historical performance to date of Piano's pools. Servicer default was modeled by simulating the default of Banco Piano as the servicer consistent with its current rating of B3/A2.ar. In the scenarios where the servicer defaults, Moody's assumed that the defaults on the pool would increase by 20 percentage points. The model results showed 0.00% expected loss for the Class A Floating Rate Debt Securities, 1.99% for the Class B Floating Rate Debt Securities, 12.24% for the Class C Fixed Rate Debt Securities and 28.84% for the Certificates. Finally, Moody's also evaluated the back-up servicing arrangements in the transaction. If Banco Piano is removed as servicer, Banco Patagonia will be appointed as the back-up servicer. Stress Scenarios Moody's ran several stress scenarios, including increases in the default rate assumptions. If default rates were increased 3% from the base case scenario for the pool (i.e., mean of 5.5% and a coefficient of variation of 50%), the ratings of the Class B Floating Rate Debt Securities, Class C Fixed Rate Debt Securities and the Certificates would likely be downgraded to B3 (sf), Caa2 (sf) and C (sf) respectively. The ratings of the Class A Floating Rate debt securities would be unchanged. ========================== C A Y M A N I S L A N D S ========================== AGA INVESTMENT: Shareholders Receive Wind-Up Report --------------------------------------------------- The shareholders of Aga Investment Ltd. received on Jan. 21, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: MBT Trustees Ltd. Telephone: 949-9808 Facsimile: 949-9793/4 P.O. Box 30622 Grand Cayman KY1-1203 Cayman Islands AVIDOG: Shareholders Receive Wind-Up Report ------------------------------------------- The shareholders of Avidog received on Feb. 12, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Trident Liquidators (Cayman) Limited c/o Eva Moore Telephone: (345) 949 0880 Facsimile: (345) 949 0881 e-mail: cayman@tridenttrust.com One Capital Place, 4th Floor P.O. Box 847, George Town Grand Cayman KY1-1103 Cayman Islands C.H. GUENTHER: Members Receive Wind-Up Report --------------------------------------------- The members of C.H. Guenther Europe Limited received on Feb. 10, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: C.H Guenther & Son, Incorporated Telephone: (210) 351-6252 e-mail tmcrae@chg.com CAPITAL GREEN: Shareholders Receive Wind-Up Report -------------------------------------------------- The shareholders of Capital Green Investments received on Feb. 12, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Jonathan Pierre 541 Prospect Drive P.O. Box 12422 Grand Cayman KY1-1011 Cayman Islands CLASSICS FUND LTD: Shareholders Receive Wind-Up Report ------------------------------------------------------ The shareholders of Classics Fund Ltd. received on Feb. 3, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Gene Dacosta c/o Craig Fulton Telephone: (345) 814 732 Facsimile: (345) 945 3902 P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands CLASSICS FUND SPC: Shareholders Receive Wind-Up Report ------------------------------------------------------ The shareholders of Classics Fund SPC received on Feb. 3, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Gene Dacosta c/o Craig Fulton Telephone: (345) 814 732 Facsimile: (345) 945 3902 P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands CX-SHANNON: Members to Receive Wind-Up Report on Feb. 27 -------------------------------------------------------- The members of CX - Shannon Limited will receive on Feb. 27, 2014, at 10:00 a.m., to receive the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Jagjit K. Comins c/o BNP Paribas Bank & Trust Cayman Limited P.O. Box 10632, Royal Bank House, 3rd Floor 24 Shedden Road, George Town Grand Cayman KY1-1006 Cayman Islands G-NET HOLDING: Shareholder Receives Wind-Up Report -------------------------------------------------- The shareholder of G-Net Holding, Inc. received on Feb. 11, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidators are: John Robert Lees Mat Ng Henley Building, 20th Floor 5 Queen's Road Central Hong Kong Telephone: +852 2842 5022 Facsimile: +852 2526 0771 GREEN EAGLE MASTER: Members Receive Wind-Up Report -------------------------------------------------- The members of Green Eagle Credit Master Fund, Ltd. received on Jan. 13, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands GREEN EAGLE OFFSHORE: Members Receive Wind-Up Report ---------------------------------------------------- The members of Green Eagle Credit Offshore Fund, Ltd. received on Feb. 10, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands LISPENARD LANE: Members to Hold Final Meeting on March 14 --------------------------------------------------------- The members of Lispenard Lane Credit Fund Ltd. will hold their final meeting on March 14, 2014, at 10:00 a.m., to receive the liquidators' report on the company's wind-up proceedings and property disposal. The company's liquidators are: Stuart Brankin Desmond Campbell Telephone: (345) 949 5586 c/o Aston Corporate Managers, Ltd. P.O. Box 1981 Grand Cayman, KY1-1104 Cayman Islands MACE PROPERTIES: Shareholders Receive Wind-Up Report ---------------------------------------------------- The shareholders of Mace Properties Ltd. received on Jan. 21, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: MBT Trustees Ltd. Telephone: 949-9808 Facsimile: 949-9793/4 P.O. Box 30622 Grand Cayman KY1-1203 Cayman Islands MURSELAGO INVESTMENT: Shareholders Receive Wind-Up Report --------------------------------------------------------- The shareholders of Murselago Investment Ltd. received on Jan. 21, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: MBT Trustees Ltd. Telephone: 949-9808 Facsimile: 949-9793/4 P.O. Box 30622 Grand Cayman KY1-1203 Cayman Islands SELIGMAN SPECTRUM: Members Receive Wind-Up Report ------------------------------------------------- The members of Seligman Spectrum Focus Fund received on Feb. 10, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands SELIGMAN SPECTRUM (MASTER): Members Receive Wind-Up Report ---------------------------------------------------------- The members of Seligman Spectrum Focus (Master) Fund received on Feb. 10, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands TOP HAT: Members Receive Wind-Up Report --------------------------------------- The members of Top Hat Yachts Ltd. received on Feb. 17, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Anthony McVeigh c/o 49 Bridge House, 18 St. Georges Wharf, London SW8 2LP U.K. Telephone: +44 203 737 7507 VINIK OFFSHORE: Members Receive Wind-Up Report ---------------------------------------------- The members of Vinik Offshore Fund, Ltd. received on Feb. 10, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: CDL Company Ltd. P.O. Box 31106 Grand Cayman KY1-1205 Cayman Islands VIOLETTA HOLDING: Shareholders Receive Wind-Up Report ----------------------------------------------------- The shareholders of Violetta Holding Ltd. received on Jan. 21, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: MBT Trustees Ltd. Telephone: 949-9808 Facsimile: 949-9793/4 P.O. Box 30622 Grand Cayman KY1-1203 Cayman Islands YGOF GP: Shareholders Receive Wind-Up Report -------------------------------------------- The shareholders of YGOF GP Ltd. received on Jan. 20, 2014, the liquidator's report on the company's wind-up proceedings and property disposal. The company's liquidator is: Robert P. Bermingham The Yucaipa Companies 9130 West Sunset Boulevard Los Angeles, CA 90069 USA =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REP: Power Firms Rebuff Govt.'s Push to Produce Energy ---------------------------------------------------------------- Dominican Today reports that Dominican Republic's power companies (ADIE) on Feb. 16 said the government's participation in electricity generation should've been submitted to the Economic and Social Council (CES) for discussion within the electricity Pact. ADIE Vice President Milton Morrison said the Government initiative contradicts the spirit of the General Electricity Law and criticized the adoption of short-term initiatives instead of complying with what the National Development Strategy Law stipulates, according to Dominican Today. "It would've had more sense to wait for the discussion to forge the power Pact so that any action is contemplated in the guidelines provided for this," the report quoted Mr. Morrison as saying. "It's not true that the Government has made efforts to channel private participation to install new generation, as the bill states," ADIE's spokesman said, adding that "the private sector's sense of smell" tells it that the new coal-fired plants will cost more than US$2.0 billion, or US$100 million than what's been announced, the report relays. ============= J A M A I C A ============= DIGICEL GROUP: Acquires Cable TV Operation ------------------------------------------ RJR News reports that Digicel Group Limited has acquired SAT Telecom in Dominica, marking its entry into the cable television market. Local media reported that the deal had been approved by the Eastern Caribbean Telecommunications Authority and the National Telecommunications Regulatory Commission, according to RJR News. The report notes that Digicel Group spokeswoman Antonia Graham said the company would make a statement on the acquisition at a later date and that Digicel would keep the business operational. SAT Telecom, owned by Dominican, Marlon Alexander, was established in July 1999 and awarded a licence in cable television and broadcasting. RJR News notes that SAT Telecom faced financial constraints and last year laid off four employees from its news department. About Digicel Group Headquartered in Jamaica, Digicel Group Limited provides mobile telecommunications services in the Caribbean and the Central American markets. The company's services include rollover minutes, GPRS data services, prepaid roaming, SMS to e-mail, and multimedia messaging, as well as broadband. As reported in the Troubled Company Reporter on Dec 13, 2013, Moody's Investors Service has affirmed Digicel Group Limited B2 Corporate Family Rating (CFR), B2-PD Probability of Default Rating and the existing debt instrument ratings at DGL and Digicel Limited ("DL") following the company's recent announcement that it plans to issue up to $500 million of add-on notes to DGL's existing $1.5 billion 8.25% senior unsecured notes due 2020. The rating outlook remains stable. FINSAC: Jamaica Finance Minister to Update House on Enquiry Report ------------------------------------------------------------------ RJR News reports that Jamaica is to get an update on the status of the report from the Commission of Enquiry into the Financial Sector Adjustment Company, FINSAC. It will come in the form of answers from Finance Minister Dr. Peter Phillips who will respond to questions regarding the report during a sitting of Parliament, according to RJR News. The report notes that the preparation of the report has been in limbo since the Government signaled that it would not allocate additional funds to the Commission. RJR News notes that Opposition Spokesman on Finance, Audley Shaw, has urged the government to find the J$10 to J$15 million needed to publish the FINSAC report. RJR News recalls that just over J$100 million was spent on the Commission which was set up in 2009 to look into the operations of FINSAC after it took control of failed financial institutions in the 1990s. =========== P A N A M A =========== FIRST QUANTUM: S&P Raises Rating on $350MM Sr. Unsec. Notes to B+ ----------------------------------------------------------------- Standard & Poor's Ratings Services said that it raised its rating on the $350 million senior unsecured notes issued by Canada-listed base metals group First Quantum Minerals Ltd. (FQM) to 'B+' from 'B' and removed it from CreditWatch, where it was placed with positive implications on Feb. 4, 2014. At the same time, S&P affirmed its 'B+' long-term corporate credit ratings on FQM. The outlook is stable. In addition, S&P assigned its 'B+' issue rating to the $2.2 billion senior unsecured notes issued by FQM. S&P withdrew its 'B+' long-term corporate credit rating on FQM's subsidiary, Toronto-based mining company FQM (Akubra) Inc. (Akubra; formerly Inmet Mining Corp.). S&P also withdrew the 'B+' rating on the $2.0 billion senior unsecured notes issued by Akubra, which have been exchanged for the new $2.2 billion notes. The rating actions follow FQM's recent changes to the group's capital structure, after which its debt sits at the parent company. In S&P's view, the new capital structure improves the standing of the various creditors, in particular the holders of the $350 million unsecured notes, which now rank pari passu with the other debt at the parent level. The overall amount of outstanding debt remains fairly similar. As this stage, the key rating factor for FQM remains its ambitious capital expenditure (capex) program and relatively low current copper prices. Specific changes to the capital structure include: -- Establishing a $2.5 billion five-year senior credit facility to replace the current revolving credit facility (RCF) at Akubra. S&P had previously assumed that the current RCF would be refinanced. -- Exchanging the previous senior unsecured notes at the Akubra level--$1.5 billion notes due 2020 and $500 million notes due 2021--with $2.2 billion long-term senior unsecured facilities at the FQM level. -- Cancelling the financing of the Kevitsa project in Finland and downsizing the $1 billion facility at FQM's Zambian subsidiary Kansanshi. -- Changing the covenant package and streamlining the security package across all senior unsecured notes at the FQM level. Under S&P's base-case credit scenario, it projects that FQM's EBITDA will improve to about $1.8 billion in 2014 and 2015, compared with its forecast of $1.6 billion in 2013. This scenario takes into account the following estimates and assumptions: -- Copper price of $3.1 per pound (/lb) in 2014. The average price in 2013 was $3.3/lb and the current price is $3.2/lb. -- Gold price of $1,250 per ounce (/oz) in 2014. The average price in 2013 was $1,400/oz and the current price is $1,270/oz. -- Copper production of 480,000-500,000 metric tons in 2014, slightly above production in 2013 (including Inmet Mining's production for the whole year). S&P expects production to increase materially in 2015, as FQM commissions the Sentinel project in Zambia in late 2014. However, S&P's projection of copper production in 2015 is lower than it previously assumed. This is because the company lacks enough smelting capacity in Zambia, which is causing some changes in the commissioning of some projects. S&P expects these estimates and assumptions to translate into funds from operations (FFO) of about $1.0 billion-$1.1 billion per year in 2014-2015. At the same time, S&P expects FQM's capex to peak, with investments of more than $4.0 billion until the end of 2015. S&P therefore forecasts significant negative free operating cash flow (FOCF) of about $2.5 billion after factoring in the dividends and a debt increase of about $2.7 billion by the end of 2015. At this stage, S&P considers a key risk in its rating to be execution risk related to the Cobre Panama mine in Panama, particularly the risk of cost overruns. FQM recently communicated the results of a review of the mine, which indicated higher capex and a longer period until commissioning than Inmet Mining had previously assumed. However, FQM's assumption for higher production should offset these extra costs. The Cobre Panama mine should improve FQM's portfolio and geographical diversification once it is commissioned in late 2017. S&P's view of FQM's "fair" business risk profile, as its criteria define the term, reflects the group's adequate geographic footprint and favorable position on the global unit cash cost curve. Although S&P views positively the significant growth potential from FQM's capex program, notably the greenfield copper project in Panama, S&P considers such sizable investments to have significant execution risk. S&P's assessment of the group's financial risk profile as "aggressive" is based on its forecast of sizable negative FOCF in the next years, with adjusted debt to EBITDA of about 3.0x and adjusted FFO to debt of about 20% by 2015. In S&P's view, FQM's credit metrics will remain very sensitive to changes in the capex programs and copper prices. In the near term, the negative FOCF is supported by the group's "adequate" liquidity. The stable outlook reflects the group's "adequate" liquidity, following the recently agreed $2.5 billion five-year senior credit facility. S&P also assumes that FQM will be able to execute its various ongoing expansion projects (including the expansion of the Kansanshi mine and ramp-up of the Sentinel mine) according to plan, bringing group copper production to about 600,000-620,000 metric tons in 2015. While FQM maintains negative FOCF, S&P considers adjusted FFO to debt of about 20% to be commensurate with the current rating. S&P might consider a negative rating action if FQM faced a more severe drop in copper prices or cost overruns on its key projects. In addition, pressure on the rating could be triggered by a revision of S&P's assessment of country risk in Zambia, which accounts for about 50% of FQM's EBITDA (although the 'B+' rating on Zambia does not constrain the rating on FQM). A positive rating action in the medium term would require the successful commissioning of FQM's key projects in Zambia. It would also hinge on FQM demonstrating sound management of the Cobre Panama mine development, including by maintaining "adequate" liquidity to mitigate FQM's significant negative free cash flow over the mine's growth phase. ==================== P U E R T O R I C O ==================== PUERTO RICO: Wants to Incur More Debt to Regain Financial Footing ----------------------------------------------------------------- Mary Williams Walsh and Michael Corkery at DealBook News report that Puerto Rico still has the capacity to issue more than US$3 billion in new debt, senior officials said, adding that they hoped to tap the credit markets in March despite concern about whether the commonwealth can sustain its current large debt load. In a conference call, officials said the Puerto Rican legislature had proposed raising the commonwealth's legal debt limit and proposed creating an independent authority, Cofim, which would issue secured debt on behalf of Puerto Rico's municipalities, according to DealBook News. Puerto Rico had already created one such debt-issuing authority, Cofina, to help it through a financial crisis in 2006. But Cofina has used up its entire capacity and was downgraded recently, the report relates. The report notes that officials said the borrowing in March would consist of general-obligation debt, which is given a special, top- priority status by Puerto Rico's Constitution. Much of the proceeds will be used to refinance existing debt, including US$330 million owed to Barclays, the report relates. The proceeds are also to be used to terminate interest-rate swaps, fill a US$245 million hole in the current fiscal year's budget and bolster the liquidity of Puerto Rico's Government Development Bank, which orchestrates the commonwealth's borrowing and tracks the complex payment schedules and cash flows of different branches of its government, the report discloses. The report notes that officials of the Government Development Bank said the March borrowing would be the territory's last during the current fiscal year, which ends on June 30. The bank also said this would be the last time the commonwealth would borrow to balance its budget, a practice that cannot be sustained in the long run, the report relays. Despite the risk, the report says, there is reportedly deep demand for fresh debt from Puerto Rico, especially among sophisticated investors seeking big returns. Hedge funds and other alternative asset managers believe they see ways of protecting themselves in the face of increasing risk that Puerto Rico's other debt will have to be restructured at some point, the report discloses. But holders of Puerto Rico's outstanding municipal bonds fear that special protections for the new lenders will push their own holdings back a place in line, the report relates. The report discloses that whether and how much Puerto Rico can borrow is of intense interest, in part because the commonwealth's high-risk profile means its new debt wills most likely pay unusually high returns-a big selling point in the current low-rate environment. Market participants said they expected the new debt to pay at least 10 percent, which could translate into an after- tax return of nearly 20 percent for high-income investors in high- tax jurisdictions, the report relates. Because of its legal status, Puerto Rico can issue bonds that pay interest that is tax-exempt in all 50 states, at the federal, state and local levels. The report notes that the rare tax provision has, in the past, generated tremendous demand for Puerto Rico's bonds and allowed the commonwealth to amass an eye-popping debt burden relative to the size of its economy. The report relates that by some measures it has US$70 billion in outstanding debt. Both its economy and its population have been shrinking in recent years, trends that will make the debt difficult to repay unless they are reversed, the report says. The report discloses that investors said they thought the new debt might contain "acceleration" provisions, which would commit Puerto Rico to repaying it much more quickly if certain events came to pass. That would bolster investor confidence that they would be repaid, even if Puerto Rico's severe financial problems led it to delay payment on other obligations, the report relays. In addition, the report says that they said the new debt could commit Puerto Rico to resolving any future debt-related legal disputes in United States District Court for the Southern District of New York, a venue considered friendlier to creditors than a court in Puerto Rico might be. Even though the constitution explicitly gives general-obligation bonds priority over all other expenditures, which provision has not been tested in court, the report discloses. Having a preselected court is an important detail to experienced investors in distressed sovereign debt, who cited the recent legal successes of investors in pressing Argentina to make good on its debt, the report notes. Those disputes were adjudicated in federal court in New York. The report notes that the possibility that the new debt would offer preference above the older debt troubled some market participants. The report relays that the conference call came in the wake of downgrades by the three main ratings agencies, which all cut Puerto Rico's general-obligation bonds to junk status. Officials said that they intended to follow through with existing plans to restore fiscal balance despite the downgrades, the report notes. In addition to explaining their plans to borrow, they offered signs of encouragement to bondholders who hope the commonwealth will be able to fuel economic growth enough to pay its debts without incident, the report discloses. They said Puerto Rico had been shrinking the size of its budget deficit and would have a balanced budget in the 2015 fiscal year, DealBook News relays. The report notes that Puerto Rico has had difficulty tapping the municipal market ever since last summer, when Detroit's huge bankruptcy case rattled small investors and raised concern about the overall credibility of the general-obligation pledge. The markets have long treated an issuer's "full faith and credit" pledge as unshakable, but Detroit stunned participants by putting general-obligation bonds into the same category-unsecured credit- as pensions and retiree health benefits for former city workers, the report relays. If Puerto Rico needs to restructure its debt at some point, it cannot use bankruptcy law as its legal framework because United States territories cannot declare bankruptcy, the report says. The framework for restructuring its debt would thus have to be the covenants written into the bonds themselves, the report adds. PUERTO RICO AQUEDUCT: Fitch Downgrades $3.4BB Bonds to 'BB+' ------------------------------------------------------------ Fitch Ratings downgrades the following ratings on Puerto Rico Aqueduct and Sewer Authority, Puerto Rico (PRASA, or the authority): -- Approximately $3.4 billion of outstanding revenue bonds, series A, B, 2012A and 2012B (senior lien), to 'BB+' from 'BBB-'. The Rating Outlook remains Negative. SECURITY The bonds are secured by a gross lien of all authority revenues related to PRASA's combined water and sewer system (the system), as defined in the amended master agreement of trust (MAT), senior to all other debt or expenses of PRASA. Authority revenues include operating revenues, as defined in the amended MAT (e.g. user charges and impact fees), as well as governmental funds available to pay current expenses; amounts from the Commonwealth of Puerto Rico (the commonwealth) for payment of commonwealth guaranteed indebtedness (CGI) or commonwealth supported obligations (CSO); and any amounts transferred from the budgetary reserve fund, as created in the amended and restated Fiscal Oversight Agreement between PRASA, the commonwealth and the Government Development Bank for Puerto Rico (GDB). The authority revenues received from the commonwealth for CGI and CSO are not subject to lien of the MAT and are not available to pay debt service on the bonds. KEY RATING DRIVERS COMMONWEALTH DETERIORATION DRIVES PRASA DOWNGRADE: The credit deterioration and recent downgrade of the commonwealth's general obligation (GO) rating to 'BB' Negative Outlook due to a weak economy and challenges to liquidity and capital markets access pose the same obstacles to PRASA warranting a downgrade to below investment grade. However, PRASA's improving financial and debt profiles currently keep the authority's rating from falling further. The Negative Outlook on the authority's bonds includes possible additional capital and service area pressures that could adversely affect the authority's financial profile over the long term, particularly in the event further deterioration of the commonwealth's GO occurs. SELF-SUFFICIENT OPERATIONS FROM RATE HIKE: PRASA enacted a 67% average rate increase for the current fiscal year which has allowed PRASA to become self-sufficient without assistance from the commonwealth and GDB, alleviating a major concern that had developed. Year to date collections are in line with PRASA's projections and annualized figures are expected to produce sound financial results for not only fiscal 2014 but the next several years as well without support of the commonwealth or GDB. FAVORABLE CAPITAL DEVELOPMENTS: The capital improvement program (CIP) continues to be substantial but negotiations with regulators are expected to lead to a cap in required annual spending by the end of the year. Also, the expected annual cap is expected to be meaningfully less than recent CIP projections. HIGH UTILITY RATES: The rate hike for fiscal 2014 has pushed residential charges well above Fitch's 2% of median household income (MHI) affordability measure and has increased bad debt levels. However, no additional increases to user charges are forecasted through at least fiscal 2018 and delinquency rates have been within PRASA's budget expectations. WEAK DEBT PROFILE: Debt levels are high both in terms of absolute dollars as well as the relative percentage of carrying costs to revenues. Costs will also continue to increase as the system pushes forward with its ongoing CIP funding but the rate of growth will slow from previous expectations. SOLID MANAGEMENT AND COMMONWEALTH/GDB SUPPORT: PRASA management is strong and the system also benefits from GDB advisory support. Unlike recent years where PRASA relied extensively on commonwealth and GDB financial funding, limited to no support is expected over the foreseeable future. WEAK BUT EXTENSIVE SERVICE AREA: The service territory is diverse, although weak economic conditions have been protracted and customer wealth levels are limited. ESSENTIAL UTILITY: The system provides an essential service to the residents of Puerto Rico. RATING SENSITIVITIES FURTHER COMMONWEALTH CREDIT DECLINE: Continued erosion in the commonwealth's credit quality could heighten concerns regarding PRASA's ongoing market access and long-term service territory fundamentals that are beyond the current rating level. WEAKENED FINANCIALS: Deterioration in financial results that threatens the authority's expected ongoing self-sufficiency would almost assuredly result in a downgrade given the weakened credit quality of the commonwealth and its constrained ability to provide ongoing support to PRASA. CREDIT SUMMARY PRASA provides water service to virtually the entire island, including the roughly 4 million residents and 5 million annual tourists; sewer service is limited to around 60% of the island. After a decade of privatization, operations were transitioned back to the public side in 2004 and the commonwealth reorganized PRASA's board and executive management with the goals of limiting political interference, improving the organizational structure, and returning the authority to financial viability without commonwealth subsidization. Since this change, operating, financial, and regulatory performance have improved overall although challenges persist. MARKET ACCESS ENVIRONMENT CHALLENGED The authority has meaningful market access risk exposure stemming from certain lines of credit (LOCs) with local banks that come due over the course of the next year and will need to be refinanced with long-term debt or renegotiated for an extended term. The LOCs total $350 million and are expected to be fully drawn for fiscal 2014 and 2015 capital projects leading up to the termination of the agreements in March 2015. The recent deterioration in the credit quality of both the commonwealth and PRASA is expected to lead to higher borrowing costs for the authority at a minimum when PRASA seeks to take out the LOCs, which may in turn reduce the authority's financial results from current expectations. There is also the possibility, albeit considered relatively unlikely by Fitch, that (a) PRASA would be unable to either access the capital markets to take out the LOCs or (b) that PRASA's current LOC bank consortium would be unwilling to extend the LOCs for a period of time until market access became feasible, either of which situation would lead to an event of default on the LOCs and consequently the senior lien bonds; the LOCs are senior lien obligations that are on parity with the bonds. The higher capital cost structure and the existence of market access risk are better reflected at the current 'BB+' level considering PRASA's other credit factors. RATE HIKE LEADS TO MODEST BUT SELF-SUFFICIENT OPERATIONS Apart from recent market access and rising cost structure concerns, the most pressing weakness for PRASA over the last few years has been a significant budget gap that had developed and was growing from lack of rate action. The gap had required commonwealth and GDB support as well as deficit financing. For fiscal 2013, a $145 million budget gap was met from 2012 bond proceeds. But starting with fiscal 2014, projections pointed to the budget gap widening to $342 million and escalating annually thereafter. PRASA had received both direct and indirect commonwealth support in prior years to balance operations, but the commonwealth determined not to provide an appropriation for PRASA for fiscal 2014, requiring PRASA's governing board to begin the process of revising its rate structure in accordance with the rate covenant under the MAT securing the bonds. The approved rate hike, which became effective at the beginning of fiscal 2014, resulted in an average increase in user charges of 67%. The adjustment as enacted was designed to provide self- sufficient operations not only for fiscal 2014 but also for each year through fiscal 2018. The anticipated positive financial performance helps to address the concern of self-sufficiency over an extended period of time. Also, there is some positive consideration from the rate adjustment being implemented at once as opposed to piecemeal over multiple years where future political interference could have derailed one or more annual rate hikes. On the negative side, residential charges which were already on the high side (2.2% of MHI) have now jumped to around 3.3% of MHI as a result of the rate increase. The escalation in user charges has correlated to a spike in bad debt expenses (to around 10% from roughly 3% in fiscal 2013) and reduced user flows somewhat. However, PRASA's budget estimates for bad debt and consumption are in line with actual results. Overall, the rate adjustment has improved PRASA's recurring revenue base to the point that total debt service coverage (DSC) for fiscal 2014 is expected at 1.12x without consideration of any possible transfers to the rate stabilization fund (RSF); any transfer to or from the RSF would result in an offsetting change in pledged revenues in the year of the transfer. Senior lien DSC for fiscal 2014 is expected at 4.47x in accordance with the MAT's calculation. Using the more traditional net revenue method that Fitch applies to all utility credits, senior lien DSC for the year is expected at 1.51x. Total DSC in almost all other years through the fiscal 2018 forecast is scheduled to be lower than fiscal 2014 results and be near sum-sufficient operations without taking into consideration any potential RSF transfers for the year. Senior lien DSC will also be lower but should remain favorable given around 30% of debt service costs are related to liens subordinate in payment to PRASA's senior lien bonds. The slimmer out-year DSC margins are the result of generally annual moderate increases to operating expenses and costs related to additional planned borrowings. Fitch believes PRASA's projections are reasonable and achievable given revenue collections for the first one-half of fiscal 2014 have largely mirrored budget expectations (less than a 1% difference overall) and PRASA has significant certainty with regards to its two largest operating costs for much if not all of the forecast period. In essence, PRASA has labor agreements with the majority of its workers that extend into fiscal 2016, with contractual salary adjustments programmed into the cash flows. Also, PRASA now receives a preferential power rate from Puerto Rico Electric Power Authority and this rate will drop in fiscal 2017, generating savings for the authority which are required by law to be used for the authority's capital needs. Consequently, PRASA's future borrowing demands will be reduced from prior estimates, helping to alleviate pressure on PRASA's already weak debt profile. ELEVATED DEBT BURDEN BUT FAVORABLE CAPITAL DEVELOPMENTS Central to PRASA's challenges has been the scope of needed capital investment to maintain regulatory compliance and renew system assets given the limited historical investment in the system's infrastructure and the resulting pressure this places on operations. The system traditionally has relied on borrowable resources to meet its capital demands and this has resulted in an elevated debt profile. For fiscal 2013, the authority's debt per customer of $2,555 was over 60% higher than Fitch's 'AAA'-'A' category medians. Similarly, PRASA debt to net plant for the same period was 1.6x greater than the same rating group median. For the five-year period covering fiscals 2014-2018, CIP costs remain elevated at $1.4 billion, which will lead to an additional weakening in PRASA's debt profile. However, forecasted capital expenditures are down around $100 million from last year's CIP. More importantly, PRASA is in the final stages of renegotiating its consent decree (CD) with regulators that should have a significant positive effect on PRASA's ongoing operations and its ability to plan and deploy capital assets. Unlike other traditional CDs that detail specific projects and set out strict milestones, PRASA's proposed CD will be groundbreaking in that it will institute a cap on PRASA's required annual spending based on the authority's overall financial capacity to support the capital program. This spending cap, while still a significant amount, is expected at around $200 million to $250 million annually or around a 10%-30% reduction in ongoing CIP levels. PRASA will work with regulators to identify and prioritize projects that address system regulatory issues within the annual spending cap. On the negative side, this will mean that there will be no definitive termination date of the proposed CD, providing regulators the ability to add or delete projects from the priority list indefinitely. However, because the proposed CD would be all-encompassing it would protect PRASA from infractions associated with current and future regulations and would also require that any projects to address future regulations would only be funded if it was within PRASA's approved annual spending level. PRASA expects the proposed CD to be filed with the court and become final before the end of the year. PUERTO RICO ELECTRIC: Fitch Lowers Rating on $8.7BB Bonds to 'BB+' ------------------------------------------------------------------ Fitch Ratings has downgraded the rating on $8.7 billion of Puerto Rico Electric Power Authority (PREPA) power revenue bonds to 'BB+' from 'BBB-'. The Rating Outlook is also revised to Negative from Stable. SECURITY The power revenue bonds are secured by a senior lien on net revenues of the electric system. KEY RATING DRIVERS COMMONWEALTH DETERIORATION DRIVES DOWNGRADE: The rating downgrade and Outlook revision reflect concerns prompted by Fitch's recent downgrade of the debt ratings of the Commonwealth of Puerto Rico (to 'BB' from 'BBB-' with a Negative Outlook) as a result of continuing challenges related to a weak economy, increasingly strained liquidity and deteriorating capital markets access. While PREPA's debt is not supported by the commonwealth, Fitch believes that these same challenges warrant a downgrade to below investment grade. WEAK FINANCIAL PERFORMANCE: PREPA's financial performance has significantly weakened in recent years and drove Fitch's two-notch downgrade of the utility to 'BBB-' from 'BBB+' in July 2013. PREPA remains challenged by slim margins, inadequate cash flow and minimal debt service coverage due to the effects of the economic recession, declining energy usage and growing account receivables. Leverage is high and has steadily risen since 2009, but is expected to stabilize through fiscal 2015. STRAINED LIQUIDITY AND CAPITAL MARKETS ACCESS: Fitch believes that the most recent challenges faced by the commonwealth and PREPA could strain the authority's liquidity, limit access to the broader capital markets, raise borrowing costs and deter improvement in outstanding government and municipal account receivables, further pressuring PREPA's weak financial position. Favorably, PREPA's anticipated capital needs are funded through fiscal 2015. RECEIVABLES REMAIN HIGH: Total receivables remain high at 28.8% of fiscal 2013 revenues, an ongoing negative credit factor. Despite efforts by the commonwealth along with the Government Development Bank of Puerto Rico (GDB) to reduce outstanding receivables in recent years, government and municipal receivables rose 44% to $618 million in fiscal 2013. Private customer receivables also rose in 2013. BROAD BUT WEAK SERVICE AREA: PREPA's retail customer base is diversified and not as dependent on tourism as other islands. However, the commonwealth remains economically weak, with a declining population base, limited wealth levels and high debt burden. Through the first six months of fiscal 2014, energy sales continued to fall by 2%. POWER SUPPLY DIVERSIFICATION: Management is focused on reducing dependency on costly oil-fired generation, primarily via the conversion of existing plants to dual fuel (oil and natural gas) generation, which Fitch views favorably. Oil generation dependency has declined from close to 100% pre-2000 to roughly 61% currently. If remaining plant conversions are completed, annual fuel costs could decline 40% ($1 billion) by 2018. However, PREPA will need to access the capital markets in fiscal 2016 to fully execute this capital plan. RATING SENSITIVITIES INABILITY TO MAINTAIN SUFFICIENT LIQUIDITY: Negative rating action would result from additional strain on PREPA's weak liquidity as evidenced by insufficient cash reserves, a failure to extend or replace existing bank lines, further growth in accounts receivable or the inability to finance its proposed capital plan. FURTHER COMMONWEALTH CREDIT DECLINE: Continued erosion in the commonwealth's credit quality could heighten concerns regarding PREPA's ongoing market access and long-term service territory fundamentals that are beyond the current rating level. IMPROVED FINANCIAL PERFORMANCE AND MARKET ACCESS: The current rating takes into account PREPA's weak balance sheet and marginal debt service coverage projected through fiscal 2015. Successful implementation of PREPA's plan to diversify fuel exposure, improvement in operating margins and stable access to capital would be required to stabilize the Outlook. CREDIT SUMMARY PREPA is one of the largest public power systems in the U.S. and the sole provider of power to the Commonwealth of Puerto Rico, an island of about 4 million people and about 1.49 million electric customers. The authority operates independent from the commonwealth. PREPA's concentration of power resources in oil generation exposes the authority to volatile fuel costs and environmental mandates. Fitch views the utility's efforts to diversify its energy mix positively, as the continued reduction in oil generation dependency should alleviate some of the pressure on future financial margins as well as meet required U.S. EPA mandates. EFFECT OF COMMONWEALTH RATING DOWNGRADE PREPA operates as a self-funded utility enterprise. As a result, Fitch does not strictly link the two ratings. However, PRPEA's financial strength is affected by the economic and financial viability of the commonwealth and its residents, as evidenced by PREPA's growing account receivables and declining energy sales. The authority has meaningful market access risk exposure stemming from short-term lines of credit (LOCs) that come due over the course of the year and will need to be refinanced with long-term debt or renegotiated for an extended term. The LOCs total $900 million and are heavily utilized ($812 million at Dec. 31, 2013). Longer-term debt issuance is not expected until after fiscal 2015 but will be necessary to fund planned capital investment and refinance maturing debt. At a minimum, the recent deterioration in the credit quality of both the commonwealth and PREPA are expected to lead to higher borrowing costs when the authority seeks to renew its LOCs or refinance maturities. Although failure to address the expiring LOCs would not lead to an event of default on the power revenue bonds, according to PREPA, it would further evidence the authority's strained financial profile. The higher capital cost structure and market access risk, however unlikely, are better reflected at the 'BB+' rating level. WEAKENED FINANCIAL PROFILE Fitch downgraded PREPA on July 1, 2013 due to its weakened financial performance resulting from the ongoing economic recession (2008-2013) coupled with high fuel costs that contributed to a significant decline in electricity sales and reductions in PREPA's operating and cash flow margins. Net account receivables have returned to historically high levels, after progress had been made in reducing municipal receivables in fiscal 2009 and 2010. Fitch-calculated debt service coverage for the past five years (fiscal 2009-2013), which includes CILTs as an operating expense, was close to 1.0x and declined to less than 1.0x in fiscal 2011 and 2013. Additional borrowings were periodically necessary to meet total obligations. A reluctance to raise base rates also persists, as base rates remain unchanged since 1989. REASONABLE OPERATING STRATEGY PREPA has previously developed a reasonable plan to restore prospective financial margins in concert with the GDB and with the support of legislative initiatives. PREPA is implementing measures to improve revenue collections and reduce operating costs (non-fuel) that were designed to improve operating margins by $120 million per year by 2014. However, realizing the savings may be more challenging given current strains. Operating cost reductions achieved through the first six months of 2014 were largely offset by declining energy sales. With PREPA's completed conversion of the Costa Sur generating facility to dual-fuel (25% of energy mix) fuel costs are also expected to decline in fiscal 2014, providing some rate relief due to the lower fuel cost component. NO MEANINGFUL IMPROVEMENT EXPECTED THROUGH 2016 Based on PREPA's last financial forecast and capital strategy reviewed by Fitch, debt service coverage, including CILTs as an operating expenses, was forecast at about 1.0x through fiscal 2016 reflecting cost cutting initiatives, a somewhat aggressive electric sales growth forecast (CAGR 0.9% per year 2014-2017), and annual debt service payments that are scheduled to increase over the same period. Additionally, PREPA's equity-to-total capitalization ratio is not likely to notably improve going forward (-9.8% as of fiscal year- end 2013) given the authority's $1.5 billion five-year capital expenditure program and plans for debt funding. =============================== T R I N I D A D & T O B A G O =============================== RBC ROYAL BANK: No Plan to Shut Down Any Branches ------------------------------------------------- Carla Bridglal at Trinidad Express reports that RBC Royal Bank does not "at this time" intend to close any branches, the company said in a full page ad published in the national press. The ad, which features a joint statement by RBC Royal Bank's Chief Executive Officer for Caribbean Banking Suresh Sookoo and Trinidad and Tobago Managing Director Darryl White, said because of a tough economic climate and challenging market conditions in many parts of the Caribbean, the bank had been restructuring its business in recent months to improve its performance, service and competitiveness, according to Trinidad Express. The report notes that the ad follows several media reports over the past month that highlighted the bank's staff downsizing and consolidation of certain divisions within others; its profit performances; and rumors of potential branch closings and a buy- out from global banking powerhouse HSBC. "Restructuring always involves difficult decisions, particularly when our employees are impacted, and we are not taking this action lightly. We are supporting our employees; we will provide career and financial support for those unable to find other roles at RBC," the bank said, the report notes. The report relates that the bank said Trinidad is a high potential market, and it is committed to building on the legacy of the RBTT brand. The Royal Bank of Canada, RBC Royal Bank or RBC Financial Group is a financial institution in Canada. It has operations in Trinidad and Tobago. *********** 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. 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, Julie Anne L. Toledo, and Peter A. Chapman, Editors. Copyright 2014. 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 * * *