/raid1/www/Hosts/bankrupt/TCRLA_Public/140703.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, July 3, 2014, Vol. 15, No. 130
Headlines
A R G E N T I N A
ARGENTINA: S&P Puts 'CCC-' Sovereign Credit Rating on Watch Neg.
ARGENTINA: Missed Payments Ups Possibility of Default, Fitch Says
B R A Z I L
BANCO FIBRA: S&P Affirms 'B' ICR; Outlook Stable
COSAN S.A.: Fitch Affirms 'BB+' IDR; Outlook Stable
INTERCEMENT PARTICIPACOES: Fitch Publishes IDR at 'BB'
LUPATECH SA: Brazilian Judge Clears $300M Bankruptcy Plan
MENDES JUNIOR: Moody's Downgrades Corporate Family Rating to B2
C A Y M A N I S L A N D S
AVONDALE LTD: Shareholders' Final Meeting Set for July 18
FAIRLOP INVESTMENTS: Shareholders' Final Meeting Set for July 18
GRACE LIMITED: Shareholders' Final Meeting Set for July 18
JUBILEE INVESTMENTS: Shareholders' Final Meeting Set for July 18
LR LIMITED: Shareholders' Final Meeting Set for July 9
MIA AIR: Shareholders' Final Meeting Set for July 28
NAC CREDIT: Shareholders' Final Meeting Set for Aug. 1
ORMIEY LTD: Shareholders' Final Meeting Set for July 18
SHALOM INVESTMENTS: Shareholders' Final Meeting Set for July 18
T & T HOLDINGS: Shareholders' Final Meeting Set for July 18
C H I L E
CODELCO: Chile Begins Investment Funding With $200 Million
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Power Grid Needs US$1 Billion Fix
J A M A I C A
JAMAICA: Said to Sell $800 Million in First Bond Sale Since 2011
M E X I C O
UNIFIN FINANCIERA: Fitch Assigns 'BB-' IDR; Outlook Stable
P U E R T O R I C O
PUERTO RICO: Indebted Power Utility Adds to Island's Problems
T R I N I D A D & T O B A G O
CARIBBEAN AIRLINES: Schedule Flights as Pilots Return to Skies
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A R G E N T I N A
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ARGENTINA: S&P Puts 'CCC-' Sovereign Credit Rating on Watch Neg.
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Standard & Poor's Ratings Services placed its 'CCC-/C' unsolicited
long-and short-term foreign currency sovereign credit ratings on
the Republic of Argentina on CreditWatch with negative
implications. At the same time, S&P affirmed its 'CCC+/C' long-
and short-term local currency sovereign credit ratings and 'raBB+'
national scale rating on Argentina. The outlook on the long-term
local currency rating remains negative. In addition, the transfer
and convertibility (T&C) assessment remains 'CCC-'.
RATIONALE
"The CreditWatch placement reflects our view of at least a one-in-
two probability that Argentina will not pay the outstanding US$539
million interest payment on the discount bonds within the 30-day
grace period allowed thereunder. According to our criteria, we
may wait until the end of a grace period following a payment
default if such grace period is 30 days or less and if we believe
that the missed payment may be cured. In Argentina's case,
although we believe that there is a greater than one-in-two chance
that the delinquent payment will not be made during the grace
period--or the payment will be made as a "distressed exchange"
under our criteria--we have nevertheless decided to wait until the
expiry of the grace period before resolving the CreditWatch
because we see a sufficient chance that negotiations between
Argentina and the holdout bondholders will conclude without
Argentina defaulting under our criteria," S&P said.
In 2005 and 2010, Argentina restructured several hundred of its
defaulted sovereign obligations (original obligations) through a
"debt exchange". The bonds issued in exchange for the original
obligations had, on average, a par value of less than half of the
par value of the original obligations and included par bonds,
quasi-par bonds, GDP-linked securities, and discount bonds due in
December 2033 (discount bonds). During these two offers, 92.4% of
the eligible debt was exchanged. Argentina indicated that on
completion of the debt exchange, it would no longer honor
untendered original obligations.
Some of the original obligations were governed by New York law.
Certain distressed debt funds and other investors acquiring
sizable positions in the original obligations did not participate
in the debt exchange and sued Argentina in the U.S. District Court
in Manhattan, demanding payment under the terms of the original
obligations. In 2013, the District Court agreed with these
holders and ordered Argentina to pay all amounts due under the
terms of the unexchanged original obligations. Argentina then
offered similar terms to the ones provided in 2005 and 2010, but
the holders of the defaulted debt rejected that offer.
On June 26, 2014, Argentina paid the Bank of New York Mellon
(BoNY), as trustee for the discount bonds, $539 million in respect
of an interest payment due thereon on June 30, 2014. On June 27,
holders of unexchanged original obligations asked the District
Court to enforce a previous court decision to block the interest
payment to holders of the discount bonds until the holders of the
unexchanged original obligations received the amounts due to them.
Instead, the District Court ordered BoNY to return the funds to
Argentina. S&P understands that Argentina and original obligation
bondholders may be in negotiation.
The affirmation of the 'CCC+/C' local currency ratings reflects
S&P's view that the potential disruptions to payments on
Argentina's external debt are not likely to further erode its
ability to service debt issued in local currency under local law.
S&P also maintained its 'CCC-' T&C assessment for Argentina as S&P
believes it already reflects the risk that the government could
further tighten its exchange control laws and policies to the
extent that they impair the ability of the private sector to gain
access to foreign currency to service its debt.
S&P also thinks that Argentina will maintain timely payment to its
multilateral creditors, as it has done in the past.
CREDITWATCH
If Argentina can reach an agreement with its holdout creditors and
service its external debt within the grace period, S&P could
remove the ratings from CreditWatch.
Absent a payment cure, S&P would likely lower its foreign currency
sovereign credit ratings on Argentina to selective default ('SD').
If and when Argentina resolves its issues with the holdout
creditors and holders of the discount bonds--either before or
after S&P assigns a 'SD' rating for the June 30 missed payments--
it could raise its ratings on Argentina, potentially to the high
'CCC' or low 'B' categories. This future assessment would depend
on S&P's appraisal of residual litigation risk, Argentina's access
to international debt markets, and, more broadly, its credit
profile at that time.
In accordance with our relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the
methodology applicable. At the onset of the committee, the chair
confirmed that the information provided to the Rating Committee by
the primary analyst had been distributed in a timely manner and
was sufficient for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts. The chair
ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision.
The views and the decision of the rating committee are summarized
in the above rationale and outlook.
RATINGS LIST
Ratings Affirmed; CreditWatch Action
To From
Argentina (Republic of) (Unsolicited Ratings)
Sovereign Credit Rating
Foreign Currency CCC-/Watch Neg/C CCC-
/Negative/C
Ratings Affirmed
Argentina (Republic of) (Unsolicited Ratings)
Sovereign Credit Rating
Local Currency CCC+/Negative/C
Argentina National Scale raBB+/Negative/--
Transfer & Convertibility Assessment CCC-
ARGENTINA: Missed Payments Ups Possibility of Default, Fitch Says
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Argentina's entry into the grace period related to its coupon
payments on foreign law exchanged securities, due on June 30,
raises the specter of a possible default, according to Fitch
Ratings.
The grace period for these securities ends on July 30, 2014.
Fitch currently rates Argentina's Foreign Currency IDR 'CC', which
already incorporates a very high default risk. In addition, Fitch
understands that coupon payments of exchanged bonds issued under
local law that were also due on June 30 (Discount bonds
denominated in USD and ARS) were made in a timely manner and
without interruption. Fitch currently rates Argentina's local law
bonds 'B-'.
The legal process related to the dispute between Argentina and
certain holdout creditors that did not participate in the 2005 and
2010 exchange offers culminated with the denial of Argentina's
cert petition to the U.S. Supreme Court. As such, the U.S. Lower
Court ruling holds, and prohibits Argentina from making payments
to exchanged bond holders unless payments are also made to
plaintiffs in the case.
Fitch recognizes that negotiations could occur between the
government of Argentina and holdout creditors, although the
success and timing of such a process is difficult to predict.
Fitch will continue to monitor developments in the coming weeks.
Absent a negotiated settlement with the holdouts or a
reinstatement of a stay order allowing Argentina to continue
servicing its exchanged bond debt, there is a high risk that
Argentina will not make the overdue coupon payment at the end of
the grace period. In such a scenario, Fitch would downgrade
Argentina's FC IDR to 'RD' (Restricted Default) and the bond
ratings of the affected securities to 'D' (Default). Moreover,
Argentina's Local Currency rating of 'B-' with a Negative Outlook
could also face downward pressure in this scenario.
On the other hand, a successful agreement with holdout creditors
that settles this case definitively and reduces the risk of
interruption in payments to exchanged bond holders would be credit
positive.
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B R A Z I L
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BANCO FIBRA: S&P Affirms 'B' ICR; Outlook Stable
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Standard & Poor's Ratings Services affirmed its global scale 'B/B'
and national scale 'brBB+/brB' issuer credit ratings on Banco
Fibra S.A. (Fibra). Both the global scale and national scale
outlooks are stable. At the same time, S&P affirmed the bank's
'b' stand-alone credit profile (SACP).
The ratings on the Brazil-based commercial bank Fibra are based on
the bank's business position as "weak" (as defined in S&P's
criteria), its capital and earnings as "moderate," its risk
position as "moderate," its funding as "below average," and its
liquidity as "adequate."
"Under our bank criteria, we use our BICRA's economic and industry
risk scores to determine a bank's anchor, the starting point in
assigning an issuer credit rating. Our anchor for a commercial
bank operating only in Brazil is 'bbb-', based on the banking
sector's economic risk score of '6' and industry risk score of
'5'. The economic risk reflects Brazil's low GDP per capita
levels and only modest growth prospects that limit household
credit capacity and the country's ability to withstand economic
downturns. It also considers our view that economic imbalances
have increased as a result of rapid credit expansion amid a slowly
growing economy, which is not likely to pick up for the next two
years, further increasing the household debt burden. In addition,
we expect Brazil's external vulnerability to rise somewhat over
the next several years, which also contributes to our "high risk"
assessment for economic imbalances. However, the Brazilian
corporate sector's moderate leverage and the absence of high-risk
loans somewhat mitigate the higher risk factors in our economic
risk assessment," S&P said.
"Our industry risk score of '5' reflects our belief that the
industry risks in Brazil's banking sector continued to intensify.
In our view, there are growing market distortions due to an
increasing market share of loans from publicly owned banks during
the past two years and a widening spread differential between
public and private banks, which have reduced the sector's
profitability. Extensive coverage, effective supervision of the
financial system, and an adequate and stable deposit base support
our industry risk assessment," S&P added.
"We view Fibra's business position as "weak" given its small share
in the Brazilian market, the recent performance of its lending
activities, and its concentration on the small and medium size
(SME) segment, following its exit from the retail segment. With
nearly Brazilian real (R$) 9.3 billion in assets and R$6 billion
in loans as of December 2013, Fibra is the fortieth largest
financial institution in Brazil with less than 1% of the system's
assets. It currently provides SME financing and retail lending,
which account for 67.5% and 32.5% of its credit portfolio,
respectively. This proportion was 56% and 44% in 2012. The
decrease in the retail operations reflects the shift in the bank's
strategy, which has led to Fibra exiting the retail segment after
severe credit losses from this activity. As a result, the bank
has been running off its retail portfolio, which now comprises
mostly vehicle financing. It also used to have payroll-deductible
lending, which it expects to be almost zero at the end of 2016.
At the same time, the bank has completely reworked its SME client
base and is also now focusing on corporate clients, in search of
more stable revenue streams, less loan loss provisioning, and more
cross-selling opportunities," S&P noted.
S&P considers this new strategy to be more conservative and
sustainable and could result in longer-term improvements in the
bank's business prospects. However, S&P believes the challenges
the bank is facing will continue to hurt its operating performance
over the short-to-medium term.
Also important for its sustainability is Fibra's review of several
internal processes, structures, and contracts to reduce its costs,
resulting in lower non-interest expenses in 2013. S&P expects
this trend to continue throughout 2014. This reorganization also
includes a new credit management model, remuneration models of
origination teams, a more conservative risk appetite, and a client
focus. All in, S&P views these changes as positive in preparing
the bank for a much more stable business in the long-run, but will
cause volatility in its bottom-line results in the short-to-medium
term.
The assessment of capital and earnings as "moderate" considers
Fibra's moderate capital levels, lower profitability than peers,
but shareholders' commitment to the bank's operations. S&P
forecasts its risk-adjusted capital framework (RACF) ratio for the
bank will average about 6% in the next two years, considering the
ongoing retail portfolio run-off, still negative bottom-line
results in 2014, and a conservative pace of growth of its SME and
corporate portfolios, which S&P views as moderate. Also, when
compared to peers, Fibra's profitability has been historically
weaker, reflecting accounting adjustments in 2010, the acquisition
of Banco Sofisa's and Banco Paulista's retail credit portfolios,
the increase in nonperforming loans (NPL) since 2011, and the
amortization of the goodwill generated when these portfolios were
acquired. Profits also fell because of other costs associated
with exiting the retail segment such as 'provisoes trabalhistas',
which severely reduced the bank's internal capital generation. As
of December 2013, the bank's return on assets was -2.6%. On the
other hand, the shareholders have shown direct support to ensure
that the bank is capitalized above the minimum regulatory
requirement, as shown in the R$330 million injected in 2011, R$178
million in 2012, and R$550 million in 2013.
S&P's "moderate" risk position score for Fibra reflects the bank's
losses over the past three years, most of them due to the severe
asset quality deterioration of its retail portfolio, as well as
the costs of exiting this business. Fibra's gross loan portfolio
has performed poorly in the past three years due to a spike in
nonperforming (measured by the balance of above 90 days past-due
contracts) auto loans. These poor results will affect its bottom-
line results until these operations are fully ran-off. As of
December 2013, NPLs reached 7.6% and net charge-offs reached 4.4%,
a high level in S&P's opinion. In addition, higher loan loss
provisions have led to capital injections in 2011, 2012, and 2013,
to ensure the bank remain compliant with minimum capital
requirements. S&P considers the bank's venture into retail could
have brought diversification, but was a risk that has turned out
to be a bad strategic movement in the current economic scenario.
S&P will monitor the bank's performance as it takes a step back
and focuses on SMEs and corporate lending.
S&P considers Fibra's funding to be "below average" and has
revised its liquidity to "adequate." Like many small banks in the
country with no branch network, Fibra relies on time deposits and
institutional investors to fund its activities, which, in general,
tend to be more expensive and volatile than retail deposits. As
of December 2013, 76% of the bank's funding base was local and 24%
foreign. The local base comprises mainly time deposits and
issuances (financial bills and rural bonds), 47% and 21%,
respectively, and the foreign base consisted largely of bonds and
loans at 78%. On the local funding base, Fibra has reduced its
dependence on time deposits by the issuance of Letras Financeiras
and rural bonds, which S&P views as positive, first to diversify
its funding base, but also to help lengthen its maturities.
Funding by investor type consists of 44% asset managers and
pension funds, while the largest ones showed significant
concentration by single-name.
To partially offset the risks derived from this concentrated
profile, the bank maintains a comfortable asset liability
management structure. It has a positive gap between liabilities
and assets of more than four months, where 81% of credit matured
in 12 months, while 59% of the liabilities had this maturity.
Additionally, the bank maintains a policy of having a low volume
of deposits with liquidity conditions, which represented 5.5% of
time deposits at the end of December 2013, comparing favorably to
peers. The bank's funding ratio was stable, at 102% as of
Dec. 31, 2013, improving from previous years when it was less than
95%. But given the concentration of its funding profile and the
inherent lack of a loyal retail depositor base, S&P views the
bank's funding as "below average".
Liquidity levels have been improving, in S&P's opinion, as the
bank deleverages its loan portfolio and prioritizes acquiring
liquid assets to cover retail losses. Broad liquid assets to
short-term wholesale funding reached 1.5x, improving from previous
years when it stood at less than 0.9x, and S&P currently views it
as "adequate".
The stable outlook reflects S&P's view that Fibra will finalize
its exit of the retail segment without further deterioration in
credit fundamentals, while its strategy shift prepares the bank
for future growth in a more stable business segment. S&P could
raise the ratings if its forecast for the bank's risk-adjusted
capital (RAC) ratio rises to 7% in the next 24 months, mostly due
to a capital injection. On the other hand, if the bank incurs
unexpected losses in the next 24 months, leading to a RAC ratio of
less than 5%, or if management is unable to improve the asset
quality of its new loan portfolio, S&P could lower the ratings.
COSAN S.A.: Fitch Affirms 'BB+' IDR; Outlook Stable
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Fitch Ratings has affirmed Cosan S.A. Industria e Comercio's
(Cosan) foreign and local currency Issuer Default Rating (IDR) at
'BB+' as well as its National long-term rating at 'AA(bra)'. The
corporate Rating Outlook is Stable.
Cosan's ratings reflect its sound business platform and the
continuing contribution from a diversified asset portfolio and
predictable cash flow businesses on a consolidated basis, which
softens the inherent volatilities of the sugar and ethanol
industry. Such cash flow predictability partially mitigates the
relatively moderate leverage on a consolidated basis of net
adjusted debt to EBITDAR at 3.5x.
Cosan's high leverage at the holding level (BRL5.5 billion)
remains as a concern, even though liquidity and refinancing risks
should show some improvements following the announcement of a
corporate reorganization on June 27, 2014. The impact on Cosan's
rating following the acquisition of America Latina Logistica (ALL)
will largely depend on the growth strategy to be pursued under the
new logistic segment and on the final configuration of the group.
Fitch will monitor the developments of this transaction and take
the appropriate rating action once the process is deemed
concluded.
KEY RATING DRIVERS
Lower Exposure to Sugar and Ethanol and Robust Cash Flows
Cosan's ratings are strongly supported by the increasing
contribution of a more diversified asset portfolio and more
predictable cash flow. Currently, under the new accounting
practices the majority of Cosan's consolidated EBITDA comes from
relatively steady operations such as distribution of natural gas,
lubricants and logistics. The sugar and ethanol business as well
as downstream activities are accounted for through the equity
method and therefore they affect Cosan's performance through the
dividends flow. Given this accounting change and the change of
fiscal year-end to Dec. 31 from March 31, Cosan's historical
consolidated performance is not comparable.
During the last 12 months (LTM) ended March, 31 2014, the majority
of Cosan's businesses have reported increasing operating
performance with Raizen Energia being the only exception. Raizen
Combustiveis and Comgas have reported increased revenues and
volumes as well as higher EBITDA margins, which have had a
positive effect on operating cash flow generation. Rumo Logistica
has been reporting revenue growth and stable EBITDA margins. The
performance of Raizen Energia reflects the pricing challenges
faced in the sugar and ethanol industry, and has resulted in a 20%
drop in the company's cash flow from operations (CFFO).
For the LTM through March 31 2014, Cosan's cash flow performance
was robust with funds from operations (FFO) of BRL2.5 billion and
cash flow from operations (CFFO) at BRL2.0 billion. Cash flow was
sufficient to result in positive free cash flow of BRL520 million
after capex and dividends totaling BRL1.5 billion.
Leverage is a Concern
Leverage is moderate on a consolidated basis and high on a
standalone basis. Consolidated figures reported net adjusted debt
to EBITDAR at 3.5x for the LTM ended March 31, 2014. At the
holding company level, net adjusted debt to EBITDA plus dividends
was 10.0x as of March 31, 2014. Fitch incorporates the dividends
received from Raizen into the calculations as well as tax
financing and inter-company loans. As of March 31, 2014, Cosan
S.A. at the holding company level had total debt of BRL5.5
billion, including mostly BRL2.8 billion of bond issuances, BRL1.4
billion of debentures and tax financing of BRL760 million. On a
consolidated basis, total debt was BRL10.1 billion as of March, 31
2014.
Corporate Reorganization is Moderately Positive
On June 27, 2014, Cosan announced a corporate restructuring that
should lengthen the company's debt maturity profile and reduce
financial costs at the holding company level. Per the
announcement, Cosan will transfer all common shares issued by
Raizen Energia and Raizen Combustiveis plus net debt of BRL1.8
billion to its wholly-owned subsidiary Cosan Investimentos and
Participacoes. At the same time, two investment funds sponsored
by two large Brazilian Banks will subscribe BRL2 billion of non-
voting preferred shares issued by Cosan Investimentos, which will
use the proceeds to pay off the outstanding debt, comprising
mostly debentures and working capital loans.
Cosan's leverage should not change, as the preferred shares should
be treated as a liability on the balance sheets of Cosan
Investimentos and Participacoes given certain put/call provisions
on the preferred shares. Nevertheless, the transaction will allow
Cosan to lengthen its debt profile. There will also be gains in
terms of financial costs as the preferred shares will be
remunerated at a lower interest rate compared to the existing
debt.
Liquidity at Holding Level is Weak
As of March 31, 2014, at the holding company level, Cosan had only
BRL17 million of cash versus short-term debt of BRL640 million.
This is partially mitigated by a committed Stand-by Facility of
BRL750 million provided by three Brazilian Banks. With the
corporate reorganization, Cosan should show manageable debt
service coverage at the holding level, with debt amortizations
mostly falling due five years from now. The company is expected
to receive over BRL1.5 billion of dividends from Raizen during the
next three years (over BRL500 million per year).
Cosan reports comfortable liquidity ratios on a consolidated
basis. As of March 31, 2014, its BRL 1.5 billion cash exceeded
short-term debt by 44%. The debt is well-laddered and no relevant
concentration is anticipated in the short- and medium-terms.
Ongoing Acquisition of ALL; Higher Expected Capex May Pressure
Credit
Cosan is proceeding with the acquisition of America Latina
Logistica S.A.S., which is still pending approval by regulators.
Assuming the full consolidation of ALL into Cosan (Cosan will have
the majority of the Board's seats), Cosan's consolidated net debt-
to-adjusted EBITDA would increase to an average of 3.2x from the
2.4x that would be achieved without the acquisition. A high
expected capex plan to be implemented by ALL may lead Cosan to
consistently report negative free cash flow in the next three
years and thus avoid a deleveraging process. This impact can,
however, be avoided at the consolidated level depending on the
final configuration of the group.
RATING SENSITIVITIES
Fitch will be monitoring the conclusion of the ALL acquisition and
a negative rating action could arise depending on the final
configuration of the group and under a potential sizeable capex
program at ALL. A downgrade could be triggered if Cosan fails to
deleverage to below 3.0x in the medium term.
An upgrade is unlikely in the short- to medium-term as Cosan's
growth strategy should continue to avoid a relevant deleveraging
process, primarily at the holding level.
Fitch affirms the following ratings:
Cosan:
-- Foreign and local currency IDRs at 'BB+';
-- National scale rating at 'AA(bra)'.
Cosan Overseas LTD:
-- Perpetual notes at 'BB+'.
Cosan Luxembourg S.A:
-- Senior Unsecured Notes due in 2018 and 2023 at 'BB+'.
In addition, Fitch has withdrawn the following rating:
Cosan Overseas LTD:
-- Foreign currency IDR at 'BB+'.
INTERCEMENT PARTICIPACOES: Fitch Publishes IDR at 'BB'
------------------------------------------------------
Fitch Ratings publishes ratings to InterCement Participacoes
S.A.'s (InterCement) as follows:
-- Local currency Issuer Default Rating (IDR) 'BB';
-- Foreign currency IDR 'BB';
-- National long-term rating 'AA-'.
-- Expected senior unsecured note issuance 'BB' to be issued by
Cimpor Financial Operations B.V.
Fitch also publishes foreign currency long-term IDRs to
InterCement's wholly owned subsidiaries InterCement Brasil and
Cimpor Financial Operations of 'BB'. In addition, Fitch publishes
local currency IDR of 'BB' and a national long-term rating of 'AA-
' for InterCement Brasil.
The Rating Outlooks are Stable.
The notes will be issued by the company's wholly owned subsidiary,
Cimpor Financial Operations B.V. and will be guaranteed by
InterCement Participacoes S.A. and InterCement Brasil S.A.
Proceeds from the notes are part of InterCement's liability
management to refinance existing debt and extend its maturity
ladder.
KEY RATING DRIVERS
Solid Business Position With A Diversified Portfolio:
The ratings reflect InterCement's position as a leading cement
producer globally with solid market positions in South America
(Brazil, Argentina and Paraguay), Europe (Portugal) and Africa
(Egypt, Mozambique, South Africa and Cape Verde). Fitch views the
company's business position as sustainable over the medium term
based on its strong presence in markets that present high-growth
profiles, strong brand recognition, scale of operations and
continued synergies realized following the 2012 Cimpor
acquisition, and the strategic location of its cement facilities
and quarries.
InterCement ranks as one of the ten largest cement companies in
the world with total consolidated cement sales of 28 million tons
during 2013, and is the second biggest player in the Brazilian
market with a market share of 18%, as measured by cement sales.
The large scale of operations provides InterCement with
competitive advantages, principally meaningful cost-efficiencies
and integrated logistics. The company maintains a diversified
portfolio of operations with cash flow generation, measured by
EBITDA, from Brazil, Argentina and Paraguay, Portugal and Egypt
representing 53%, 19%, 7%, and 7%, respectively, of its total
EBITDA in 2013.
High Margins and Solid Operating Cash Flow:
InterCement's margins are among the highest within its industry
globally and higher than many of its large peers. Keys to the
company's strong margins include a favorable sales mix, fully
integrated operations, and its large presence in the southeast
region of Brazil. InterCement has a favorable product mix of
approximately 70% bagged cement versus 30% bulk cement, as bagged
cement is a higher volume product which contributes to its strong
margins and robust cash flow generation. InterCement's EBITDA as
of Dec. 31, 2013 was EUR742 million, which resulted in margins of
28%. Fitch projects EBITDA margins to be around 27%-28% during
2014 which are above industry average.
InterCement's net cash flow from operations was EUR260 million for
2013 which compared unfavorably to EUR373 million for 2012 due to
higher interest and taxes paid during 2013. Growth capex has been
high due to the aforementioned projects in Brazil, leading to
negative FCF. InterCement paid total dividends to Camargo of
BRL300 million during 2013 which was an increase compared to
dividends of BRL75 million during 2012. Going forward, Fitch
projects dividend levels to remain similar to 2014 over the near
term as InterCement focuses on deleveraging, maintaining a solid
capital structure, and investing in its Brazilian operations.
Strategic Capex Plan Incorporated, Business Deleverage Expected:
The company is executing a strategic capex plan to increase its
annual production capacity from its existing 36 million tons of
capacity by 2016. The capex plan will require a total investment
of EUR300 million during the 2014-2016 period, with expansion
capex levels of approximately EUR100 million in 2014 oriented
primarily to the Brazilian operations. As a result, InterCement
is expected to remain negative free cash flow (FCF) during 2014
and become positive FCF during 2015 and 2016.
The ratings incorporate InterCement's moderate financial leverage
due to its recent Cimpor acquisition. InterCement had EUR3.7
billion of total debt and EUR1.3 billion of cash and marketable
securities as of Dec. 31, 2013. The company generated EUR742
million of EBITDA, resulting in gross leverage and net leverage
ratios of 5.0x and 3.3x. Fitch expects the company's financial
leverage to continue to decline in 2014 driven primarily by
increasing cash flow generation as the macro economic scenario in
Brazil is expected to improve boosting cement sales, as well as
lower net debt levels due to FCF generation.
Solid Liquidity:
Fitch views the company's debt amortization schedule as manageable
and its cash position as adequate. As of Dec. 31, 2013,
InterCement had EUR1.3 billion of cash and marketable securities.
The company's debt repayment schedule is manageable with EUR51
million of debt amortization through 2014. InterCement is
planning to refinance approximately USD500 million of debt through
the issuance of a 10-year unsecured bond. The company's cash
position post issuance is expected to remain stable at around EUR1
billion during 2014.
Credit Linkage With Corporate Group Incorporated:
The ratings positively factor in InterCement's strong credit
linkage with its holding company, Camargo Correa, one of the
largest Brazilian privately owned conglomerated, rated 'BB/OS' by
Fitch. The cement business is viewed as a key component for
Camargo's credit profile as this division accounts for 33% of
Camargo's consolidated revenues and 45% of its EBITDA. It is less
leveraged that the sum of the other businesses within the Camargo
Correa group.
Camargo's credit ratings reflect the company's diversified
portfolio of operations, solid market position in the industries
in which it participates, the medium-term outlook and different
degrees of cyclicality related to its core businesses, and
adequate liquidity. The Stable Outlook incorporates the view that
Camargo's credit profile will remain stable in the medium term.
It considers the expectation that Camargo will manage its
consolidated net leverage in the range of 3.5x to 4.0x during the
short-to-medium term, while maintaining adequate liquidity.
Fitch believes that InterCement's parent company, Camargo,
maintains adequate liquidity with BRL7.1 billion of consolidated
cash and marketable securities as of Dec. 31, 2013. The companies
directly controlled by Camargo face debt amortizations of BRL3
billion during 2014, which is comfortably covered by BRL6.6
billion of cash at these subsidiaries; most of this cash is held
within the company's cement division. On a stand-alone basis,
Camargo faces debt amortizations of BRL575 million and BRL687
million during 2014 and 2015, which will be covered by the
company's received dividends levels, which are expected to remain
stable at around BRL1 billion per year. Camargo's liquidity is
further supported by the company's access to credit, as well as by
its capacity to execute non-core assets sales if required.
Camargo's credit ratings also incorporate the structural
subordination of the parent company debt to the debt at its
operating companies; the company relies on dividends and interest
and principal payments from operating subsidiaries to service its
debt. The ratings also factor in the company's growth strategy
which includes inorganic growth as an important component, as well
as its good track record in executing acquisitions while keeping
its capital structure and liquidity relatively stable over the
medium term.
RATING SENSITIVITIES
Fitch would view a combination of the following as negative to
credit quality: InterCement's lack of capacity or willingness to
maintain its net financial leverage at less than 3.5x; adverse
macroeconomic trends leading to weaker outlook for cement demand
in Brazil during the medium term; and/ or debt-funded
acquisitions.
InterCement's ratings could be affected positively by significant
improvement in its cash flow generation, net leverage and
liquidity metrics. A decline in total debt levels and sustained
level of Net Debt / EBITDA of 3.0x could warrant an upgrade. A
decline in the leverage of other subsidiaries of Camargo would
also be viewed positively and could lead to positive rating
actions.
LUPATECH SA: Brazilian Judge Clears $300M Bankruptcy Plan
---------------------------------------------------------
Law360 reported that a Brazilian judge has approved a
reorganization plan aimed at restructuring about $300 million
worth of debt for bankrupt industrial valve manufacturer Lupatech
SA, spokespersons for Jones Day -- which advised the plan's legal
administration services provider -- said.
According to the report, the Judge of the Second Court of Law of
the Nova Odessa Judicial District, S. Paulo State in Nova Odessa
-- where Lupatech is headquartered -- approved the extrajudicial
reorganization plan submitted to the holders of Perpetual Bonds on
June 6, the company told its shareholders that same day.
About Lupatech SA
Lupatech Group is a Brazilian provider of highly technical
components and related specialized services principally within the
oil, gas, and foundry industries in Latin America and throughout
the world. Lupatech's operations began in 1980 in Brazil and
currently consist of 32 separate business units organized into two
main business segments, divided into three countries in Latin
America -- Brazil, Colombia and Argentina.
Lupatech S.A. and its affiliates filed Chapter 15 bankruptcy
petitions (Bankr. S.D.N.Y. Lead Case No. 14-11559) in Manhattan,
New York on May 23, 2014, so the U.S. court can enforce a debt-
reduction plan nearing approval in Brazil.
Based in Nova Odessa in the State of Sao Paulo, Lupatech owes
US$302.5 million on unsecured bonds and US$179.1 million on
unsecured debentures that are 92.5 percent-held by Brazilian
Development Bank.
Lupatech's total indebtedness at the end of the fourth quarter of
2013 was US$851.1 million. As of Dec. 31, 2013, the Lupatech
Group reported current assets of US$161.2 million and current
liabilities of US$754.4 million. For 2013, Lupatech reported
total revenue of US$241.3 million.
Lupatech and its affiliates are seeking joint administration of
their Chapter 15 cases. Ricardo Doebeli is the CEO and Lupatech
serves as the foreign representative in the U.S. Lupatech's
counsel in the Chapter 15 case is Douglas P. Bartner, Esq., at
Shearman & Sterling LLP, in New York. The Garden City Group,
Inc., is the agent under the proposed plan.
MENDES JUNIOR: Moody's Downgrades Corporate Family Rating to B2
---------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
ratings assigned to Mendes Junior Trading e Engenharia S.A.
(Mendes Junior) to B2 from B1. The outlook remains stable.
Ratings downgraded:
Corporate Family Rating: to B2 from B1 (global scale)
The outlook for the rating is stable.
Ratings Rationale
The downgrade on Mendes Junior's rating to B2 was prompted by
Moody's perception of increased liquidity risk and prospectively
weaker credit metrics for the company in the next couple of years.
This change in scenario reflects Brazil's weaker macroeconomic
forecast and an anticipated challenging fiscal environment for the
country, pressured by higher inflation and interest rates.
On a positive side, Mendes Junior's B2 rating remains supported by
the company's solid track record in the Brazilian construction
market, its strong technical expertise, and longstanding
relationship with public sector entities in Brazil. These
strengths partially mitigate the company's small size compared to
its local and global peers, concentrated market base with public
counterparties in Brazil (85% backlog), and still evolving
corporate governance practices.
Mendes Junior's relatively low leverage ratio (1.8x total adjusted
debt to EBITDA in 2013) also supports the rating. Nevertheless,
the company has a high liquidity risk because its debt
amortization profile is largely represented by working capital
lines maturing in the short-term (82% of the company's total
reported debt at fiscal yearend 2013 was due in 2014). Although
some working capital improvements contributed to a higher cash
position at fiscal yearend 2013 (of approximately BRL103 million),
its cash availability covered only half of the near term debt
maturities and there were no committed backup facilities.
To finance its operations, Mendes Junior relies on access to
medium-size banks, especially local banks in the state of Minas
Gerais, which have been providing financial support for the
company even during periods of financial distress.
The management is currently contemplating a number of refinancing
alternatives that could potentially improve its debt maturity
profile for the near term.
The stable outlook is based on Moody's expectations that Mendes
Junior will be able to refinance its short term debt maturities
and maintain its market share in the construction business in
Brazil, gradually expanding to the PPP (public private
partnership) segment and the international markets in the coming
years.
The rating or outlook could improve if the company consistently
grows revenues and improves operating performance, while
diversifying its backlog with other clients, countries and regions
to reduce the revenue concentration risk. An upgrade of the rating
would also require a substantial improvement in the company's
liquidity position, particularly with lower exposure to short term
debt, along with enhanced corporate governance practices.
Conversely, Mendes Junior' ratings could be further downgraded if
liquidity deteriorates, most likely due to difficulties in rolling
over short-term debt or from deterioration in the operating
environment stemming from economic slowdown and/or increased
competition. Further negative pressure would arise if its credit
metrics significantly deteriorate, for example it adjusted gross
debt to EBITDA increases above 4.2 times (1.8 times as of December
31, 2013) and EBITA interest coverage falls below 1.0 times (3.0
times as of December 31, 2013).
The principal methodology used in this rating was Global
Construction Methodology published in November 2010.
Headquartered in Belo Horizonte, Brazil, Mendes Junior Trading e
Engenharia S.A. (Mendes Junior) is a major engineering and
construction company in Brazil, with net consolidated revenues of
about BRL1.8 billion (USD818 million converted by the average
exchange rate) in 2013. Mendes Junior construction projects
include highways, railways, bridges, power plants, tunnels,
subways, airports, ports, commercial and residential buildings,
mining and industrial facilities.
==========================
C A Y M A N I S L A N D S
==========================
AVONDALE LTD: Shareholders' Final Meeting Set for July 18
---------------------------------------------------------
The shareholders of Avondale Ltd. will hold their final meeting on
July 18, 2014, to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
FAIRLOP INVESTMENTS: Shareholders' Final Meeting Set for July 18
----------------------------------------------------------------
The shareholders of Fairlop Investments Limited will hold their
final meeting on July 18, 2014, to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
GRACE LIMITED: Shareholders' Final Meeting Set for July 18
----------------------------------------------------------
The shareholders of Grace Limited will hold their final meeting on
July 18, 2014, to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
JUBILEE INVESTMENTS: Shareholders' Final Meeting Set for July 18
----------------------------------------------------------------
The shareholders of Jubilee Investments Limited will hold their
final meeting on July 18, 2014, to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
LR LIMITED: Shareholders' Final Meeting Set for July 9
------------------------------------------------------
The shareholders of LR Limited will hold their final meeting on
July 9, 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:
Delta FS Limited
c/o J.Aljadir
Telephone: (345) 743 6626
103 South Church St., 4th Floor, Harbour Place
P.O. Box 11820, George Town
Grand Cayman KY1-1009
Cayman Islands
MIA AIR: Shareholders' Final Meeting Set for July 28
----------------------------------------------------
The shareholders of Mia Air Ltd. will hold their final meeting on
July 28, 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:
Paget-Brown Trust Company Ltd.
c/o Jewel Studenhofft
Telephone: (345)-949-5122
Facsimile: (345)-949-7920
P.O. Box 1111 Grand Cayman KY1-1102
Cayman Islands
NAC CREDIT: Shareholders' Final Meeting Set for Aug. 1
------------------------------------------------------
The shareholders of NAC Credit Value Master Fund will hold their
final meeting on Aug. 1, 2014, at 4:00 p.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
DMS Corporate Services Ltd
c/o Nicola Cowan
Telephone: (345) 946 7665
Facsimile: (345) 949 2877
dms House, 2nd Floor
P.O. Box 1344 Grand Cayman KY1-1108 Tu
Cayman Islands
ORMIEY LTD: Shareholders' Final Meeting Set for July 18
-------------------------------------------------------
The shareholders of Ormiey Ltd will hold their final meeting on
July 18, 2014, to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
SHALOM INVESTMENTS: Shareholders' Final Meeting Set for July 18
---------------------------------------------------------------
The shareholders of Shalom Investments Limited will hold their
final meeting on July 18, 2014, to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
T & T HOLDINGS: Shareholders' Final Meeting Set for July 18
-----------------------------------------------------------
The shareholders of T & T Holdings Limited will hold their final
meeting on July 18, 2014, to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Citron 2004 Limited
Telephone: + 44 1534 282276
Facsimile: + 44 1534 282400
c/o Clifton House, 75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 814 2059
=========
C H I L E
=========
CODELCO: Chile Begins Investment Funding With $200 Million
----------------------------------------------------------
Matt Craze at Bloomberg News reports that Corporacion Nacional del
Cobre (Codelco) will be allowed to retain $200 million of last
year's profit as the first part of Chilean government funding for
investments to revamp aging copper mines.
The finance ministry made the announcement in an e-mailed
statement responding to the state-owned company's rolling three-
year investment proposal, according to Bloomberg News. The funds
fall short of the $1.2 billion in capital urgently needed for this
year, the Federation of Copper Workers said by e-mail, notes the
report.
The capital injection is a stopgap measure as President Michelle
Bachelet prepares a bill that she says will ensure the company's
long-term financing, Bloomberg News discloses. Codelco is seeking
funds for $25 billion of investments to maintain its status as the
world's biggest copper miner, Bloomberg News relays. Without the
spending, output would slump, the report adds.
Bloomberg News says this is the sixth time in 15 years that
Codelco has received government funding. Last year, Bloomberg
News recalls, under Bachelet's predecessor Sebastian Pinera, it
was allocated profit booked on an asset purchase rather than fresh
funds. Typically, the company uses a mixture of retained profit,
bonds and bank debt to finance its investments, says the report.
Codelco chose units of Deutsche Bank AG, HSBC Holdings Plc and
Banco Santander SA for a series of fixed-income investor calls in
Europe that may lead to a 10-year euro-denominated bond, according
to a person familiar with the matter, who isn't authorized to
speak on the prospective transaction, Bloomberg News relays.
The extra yield investors demand to own Codelco's $1.25 billion of
bonds due in 2022 rather than U.S. Treasuries was little changed
at 122 basis points at 10:52 a.m., July 2, in New York, the report
relays.
Better Way
Under a 2010 law that establishes new rules for government
involvement in Codelco, the state must respond to the company's
investment program by June 30 every year, notes Bloomberg News.
The mining ministry, in consultation with the copper commission,
recommended $1 billion in Codelco funding this year compared with
the $1.2 billion sought by the company, newspaper Diario
Financiero reported, without saying where it got the information,
Bloomberg News relays.
Former Chief Executive Officer Thomas Keller, who was removed last
month because of disagreements with some board members on how to
run the company, urged the government to find a better way of
securing finance, Bloomberg News says. Mr. Bachelet plans to send
the bill to Congress next quarter, Bloomberg News adds.
About Codelco
Corporacion Nacional del Cobre -- Codelco -- explores, develops,
mines and processes copper in Chile. The principal product of the
company is Grade A copper cathodes. The company, which is owned
by Chilean government, exports most of its production to companies
in Europe and Asia.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Power Grid Needs US$1 Billion Fix
-----------------------------------------------------
Dominican Today reports that US$1 billion is needed to rebuild the
deteriorated power grids, Dominican Republic's State-owned
Electric Utility (CDEEE) Chief Executive Officer Ruben Jimenez
Bichara affirmed June 30.
Mr. Bichara said despite the CDEEE's spending millions in projects
to repair grids, much of the funds will be allocated to the
subsidy, which he affirms exceeds Haiti's entire energy budget,
according to Dominican Today.
Mr. Bichara acknowledged the many overdue investments in the
distribution companies (Edes), but noted a slight improvement in
income, customer acquisition and meters, Dominican Today notes.
"There are improvements that have been achieved thanks to the
support of the Inter-American Development Bank, the World Bank and
other international entities, but lots of money is still needed,"
Dominican Today quoted Mr. Bichara as saying.
Mr. Jimenez, interviewed on Despertador Color Vision, said 10
years ago in 2004 the grid required US$500 million and "to this
day with more deterioration, without investment and with that
delay to revamp the entire country requires from 800 to one
billion dollars for the grids across the country," the report
notes.
=============
J A M A I C A
=============
JAMAICA: Said to Sell $800 Million in First Bond Sale Since 2011
----------------------------------------------------------------
Katia Porzecanski at Bloomberg News reports that Jamaica sold $800
million of dollar bonds in its first overseas sale since 2011,
according to a person familiar with the offering.
The Caribbean island sold amortizing dollar bonds due in 2025 to
yield 7.625 percent, said the person, who asked not to be
identified because he isn't authorized to speak publicly,
according to Bloomberg News. BNP Paribas SA and Citigroup Inc.
managed the offering. The securities will have an average life of
10 years, with three equal principal payments in 2023, 2024 and
2025.
Jamaica, the second-most-indebted country in emerging markets, has
defaulted twice since 2010 and restructured $9 billion of local
bonds last year, Bloomberg News relates. Prime Minister Portia
Simpson-Miller's government has cut tax deductions, limited
public-sector wage growth and generated the first budget surplus
since 1995, notes the report.
The International Monetary Fund said June 5 that Jamaica is
undertaking the policies needed to tackle a debt burden equal to
140 percent of gross domestic product, relays Bloomberg News.
"Its fiscal adjustment has been huge," Carl Ross, a Boston-based
money manager at Grantham Mayo Van Otterloo & Co., which manages
$12 billion in fixed-income assets, said in an e-mail to
Bloomberg. "Their fiscal accounts will be near balance this year,
which is an impressive achievement," Mr. Ross said, Bloomberg News
discloses.
According to Bloomberg News, the average yield on the nation's
debt has plunged to 7.3 percent, the lowest level since 2011, as
the country received pledges of $2 billion in support from the
IMF, the World Bank and the Inter-American Development Bank.
Proceeds from the debt sale will be used to help pay 150 million
euros ($205.2 million) of bonds due this year and for general
government purposes, said the person, Bloomberg News notes. The
country's B-rating is six levels below investment grade at
Standard & Poor's, matching Venezuela, Pakistan and Lebanon.
The country, known for its beach resorts and reggae music, saw its
$15 billion economy expand for a third consecutive quarter in the
first three months of the year following six consecutive quarters
of contraction, Bloomberg News relates.
Moody's Investors Service, which rates the country nine steps
below investment grade at Caa3, raised its outlook on the
country's debt to positive from stable in February.
===========
M E X I C O
===========
UNIFIN FINANCIERA: Fitch Assigns 'BB-' IDR; Outlook Stable
----------------------------------------------------------
Fitch Ratings has assigned 'BB-' and 'B' long- and short-term
Issuer Default Ratings (IDRs), respectively, to Unifin Financiera
S.A.P.I. de C.V. Sofom (Unifin) E.N.R. The Rating Outlook is
Stable.
Fitch also expects to rate 'BB-(exp)' a proposed issue of five-
year senior unsecured bullet notes for up to USD300 million.
Unifin intends to use the net proceeds from the issuance to repay
certain indebtedness and, to the extent any proceeds remain, for
general corporate purposes.
Key Rating Drivers
The IDRs and issue ratings are driven by Unifin's growing business
franchise, sustained and sound financial performance, and improved
funding structure and maturity matching. The ratings also
consider the entity's elevated concentrations per borrower, recent
pressures on asset quality due to the impairment of a housing
developer in Mexico, and a low loan loss reserve coverage.
The ratings are also constrained by Unifin's tight capitalization
that is challenged by the entity's rapid growth, despite its sound
internal capital generation and a recent capital injection.
However, the agency does not expect further deterioration of
capital adequacy, given the recent capital injection for MXN200
million, completed on June 25, 2014 and the long term plans of the
company to run with a capital level similar to their current
position.
Rating Sensitivities
Ratings could be downgraded in the event of a consistent weakening
of the capital to assets ratio below 9.5% that could arise from
accelerated growth and/or weaker profitability. Downside
potential could also arise from a material deterioration of the
asset quality metrics or risk concentrations (top 20
concentrations above 4x equity).
A scenario of ratings upgrades has a low probability of occurrence
over the foreseeable future, given the risks and challenges from
Unifin's aggressive projected growth and its current business
model, however ratings could be upgraded if tangible equity ratios
are sustained over double digits, while the entity significantly
reduces its top 20 concentrations (below 2x equity).
Given that these are senior unsecured indebtedness, the issue
rating of the proposed notes will remain aligned to Unifin's IDRs
and would mirror any change on the latter.
Credit Profile
Unifin's ratings reflect its growing franchise in the operational
leases business, aided by the sector consolidation in recent
years. Unifin has focused on growing its core business, rapidly
increasing its portfolio base and progressively expanding its
regional presence.
The entity has shown a good execution ability to successfully
implement its strategy.
The risk of elevated concentrations per borrower (top 20: 2.9
times equity) is highlighted by the recent troubles in the housing
sector in Mexico, which increased Unifin's impairment ratio (+90
days accrued balance) to 6.4% as of March 2014. Impairment
reserve coverage is weak (19% at 1Q'14), while the low coverage
was further affected by Unifin's decision to just partially
provision the factoring related to the defaulted homebuilder
(based on its internal expected recoveries), while it also
continues to depreciate the leased assets as originally scheduled.
Unifin has historically shown a resilient financial performance
under macroeconomic stress, driven by its growing business volume,
good spread management and an efficient operational cost base.
Fitch considers profits are somewhat overestimated by the low
reserve coverage of the entity, relative to other financial
institutions.
However, if 2013 earnings were adjusted for the insufficiency of
loan loss reserves related to the factoring and leased assets in
the case of Urbi, overall profitability is still considered good
relative to its peers (adjusted ROA 2.1% and adjusted ROE 23.5% at
YE13).
Over the past three years, Unifin has focused on reducing its
funding concentrations. The entity was able to establish new
funding relationships. Unifin has traditionally been largely
funded in the debt market; however, it has increased the
contribution of bank facilities (representing 43% of its interest
bearing liabilities as of March 2014 compared to 20.3% at YE12).
The entity is expected to tap the global market and to reduce its
reliance to the Mexican capital market. However, Fitch does not
anticipate further relevant improvements in funding, given that
Unifin's funding model is highly reliant on market
securitizations.
Unifin's portfolio growth has progressively stressed leverage
indicators that reached 5.6x at 1Q'14 (total liabilities excluding
securitizations to total equity). While the equity/assets ratio
declined to 9.1% as of the same date. After the recent
capitalization, Unifin projects to sustain capital indicators
above 11% and a leverage ratio around 8 times (including all
liabilities).
After 2008, Unifin improved the matching between assets and
liabilities maturities. However, Fitch considers that refinancing
risk is yet material, due to the aggressive asset growth plans,
the relatively low portion of liquid assets held, and the bullet
nature of most of its market-driven funding. The latter is only
partially offset by the flexibility provided by the current
portfolio securitizations.
Fitch has assigned the following ratings to Unifin:
-- Long-term foreign currency IDR 'BB-'; Outlook Stable;
-- Short-term foreign and local currency IDRs 'B';
-- USD300 million senior unsecured notes 'BB-(exp)'.
Fitch has published the following rating:
-- Long-term local currency IDR 'BB-'; Outlook Stable.
Fitch has affirmed Unifin's existing ratings as follows:
-- National-scale long-term rating at 'A-(mex)'; Outlook
Stable;
-- National-scale short-term rating at 'F2(mex)';
-- National-scale long-term rating for local issues of senior
unsecured debt (UNIFIN 12, UNIFIN 13 & UNIFIN 13-2) at 'A-(mex)';
-- National-scale short-term rating senior unsecured debt
program
not placed at 'F2(mex)'.
=====================
P U E R T O R I C O
=====================
PUERTO RICO: Indebted Power Utility Adds to Island's Problems
-------------------------------------------------------------
Michael Corkery, writing for The New York Times' DealBook,
reported that Puerto Rico's electrical utility is running out of
money and time to negotiate a deal with its lenders, part of a
broad reckoning for an island that relies on Wall Street to
finance some of its most basic functions.
According to the report, the Puerto Rico Electric Power Authority
must repay $146 million to Citigroup over the next two months for
a credit line used to buy oil to generate electricity. It is also
uncertain whether the authority will be able to renew a $550
million credit line from Scotiabank for fuel purchases, the
DealBook said, citing people briefed on the matter.
With the power authority's lenders growing increasingly skittish,
analysts and investors expect the utility will be forced to
restructure its debts to avoid crippling power shortages for
Puerto Rico's 3.6 million residents, the DealBook said. The
likelihood of a restructuring increased after Gov. Alejandro
Garcia Padilla hurriedly signed a new law into effect over the
weekend allowing public corporations like the power authority to
seek protection similar to what bankruptcy provides, the DealBook
added.
===============================
T R I N I D A D & T O B A G O
===============================
CARIBBEAN AIRLINES: Schedule Flights as Pilots Return to Skies
--------------------------------------------------------------
RJR News reports that Caribbean Airlines Limited has kept flights
on July 2 on schedule as its management tries to resolve issues
that led to pilots in Trinidad and Tobago going on sick out.
A check of the airline's website shows all flights are still on
schedule even though CAL indicated that delays should be expected,
according to RJR News.
Several flights were cancelled due to the sick out but starting
Tuesday night flights returned to the sky, the report notes.
Caribbean Airlines Limited -- http://www.caribbean-airlines.com/
-- provides passenger airline services in the Caribbean, South
America, and North America. The company also offers freighter
services for perishables, fish and seafood, live animals, human
remains, and dangerous goods. In addition, it operates a duty
free store in Trinidad. Caribbean Airlines Limited was founded in
2006 and is based in Piarco, Trinidad and Tobago.
As reported in the Troubled Company Reporter-Latin America on May
20, 2013, Caribbean360.com said Trinidad and Tobago Finance
Minister Larry Howai said Caribbean Airlines Limited recorded
losses estimated at US$70 million in 2012. In 2011, CAL had
recorded losses of US43.7 million.
***********
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
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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.
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