/raid1/www/Hosts/bankrupt/TCRLA_Public/140731.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 31, 2014, Vol. 15, No. 150
Headlines
A R G E N T I N A
ARGENTINA: Fails to Reach Deal With Creditors
ARGENTINA: Bondholder Group Seeks to Waive Deal-Killer Clause
B R A Z I L
BANCO BMG: S&P Affirms 'B/B' ICR & Removes from Watch Developing
MRS LOGISTICA: S&P Affirms 'BB+' CCR; Outlook Stable
* BRAZIL: State to Buy Solar Power After Failing to Lure Buyer
C A Y M A N I S L A N D S
ARMADALE LIMITED: Shareholder to Hear Wind-Up Report on Aug. 13
HANSON OPPORTUNITIES: Shareholders' Final Meeting Set for Sept. 17
PUMICE LIMITED: Members' Final Meeting Set for Aug. 13
SKYPE MANAGEMENT: Members' Final Meeting Set for Aug. 5
SUREVIEW MASTER: Shareholder to Hear Wind-Up Report on Aug. 6
VINCI GAS: Shareholder to Hear Wind-Up Report on Aug. 7
VINCI GAS DISCOVERY: Shareholder to Hear Wind-Up Report on Aug. 7
VINCI GAS MASTER: Shareholder to Hear Wind-Up Report on Aug. 7
VITAN CAPITAL: Shareholder to Hear Wind-Up Report on Aug. 12
XENOLITH LIMITED: Members' Final Meeting Set for Aug. 13
C H I L E
AES GENER: S&P Affirms 'BB' Rating on $450MM Hybrid Notes
C O L O M B I A
BANCO DAVIVIENDA: S&P Affirms 'BB-' LT ICR; Outlook Negative
D O M I N I C A N R E P U B L I C
XSTRATA PLC: Evangelicals Ask Society to Talk Over Loma Miranda
E L S A L V A D O R
BANCO AGRICOLA: S&P Affirms 'BB-' LT ICR; Outlook Negative
M E X I C O
CEMEX: Fitch Affirms 'B+' Issuer Default Ratings; Outlook Stable
P U E R T O R I C O
PUERTO RICO: Debt Crisis Headed for US-Style Bankruptcy Resolution
S T. V I N C E N T & G R E N A D I N E S
ST. VINCENT COCOA COMPANY: Farmers Receive Compensation
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A R G E N T I N A
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ARGENTINA: Fails to Reach Deal With Creditors
---------------------------------------------
Nicole Hong, Taos Turner and Matt Day, writing for The Wall Street
Journal reported that talks aimed at a last-minute settlement
between Argentina and holdout creditors collapsed, and a court-
appointed mediator said the country would "imminently" be in
default.
According to the Journal, Argentine Economy Minister Axel
Kicillof, who had led the country's delegation to New York, said
they won't sign an agreement "that would compromise Argentina's
future." July 30 marked the end of a 30-day grace period for
Argentina to make a $539 million interest payment to the holders
of the country's restructured bonds.
ARGENTINA: Bondholder Group Seeks to Waive Deal-Killer Clause
-------------------------------------------------------------
Katia Porzecanski at Bloomberg News reports that a group of
creditors holding about 28 percent of Argentina's euro-denominated
debt said it would be willing to waive a clause that's hampering a
deal between the nation and holders of its defaulted bonds from
2001.
The group, which holds EUR5.2 billion (US$7 billion) of Argentine
bonds issued in the nation's debt restructurings in 2005 and 2010,
notified Argentina's attorneys and a court-appointed mediator in a
letter dated July 26 that was obtained by Bloomberg News. The
group's securities will be in default if the South American
country doesn't reach a deal with a group of investors who didn't
enter those debt swaps, which imposed losses of 70 percent,
reports Bloomberg News.
Argentina called on New York courts to create a safeguard against
the risks related to a Rights Upon Future Offers clause in the
restructured bonds, which until Dec. 31 prohibits the nation from
voluntarily offering a better deal to the holdouts without also
extending it to the exchange bondholders, Bloomberg News
discloses. Violating the clause may trigger claims of more than
$120 billion, the country has said.
"Based on our informal efforts so far, we have identified a
substantial number of bondholders who would be willing to waive
the RUFO clause," Bloomberg News quoted Christopher Clark, the
group's attorney, as saying in the letter. "In order for that to
happen, however, the Republic must not be in default and must be
given a reasonable period to conduct a consent solicitation
complying with the securities laws of the U.S., U.K., Japan, and
Argentina," Mr. Clark said, Bloomberg News relays.
Meeting Mediator
Bloomberg News notes that Argentine officials are slated to meet
Daniel Pollack, the court-appointed mediator. The meeting would
be the fifth since a U.S. judge blocked a $539 million coupon
payment on June 27 because the government failed to comply with an
order to pay defaulted bondholders at the same time. The
government has refused to meet face-to-face with the holdouts,
including hedge fund Elliott Management Corp, Bloomberg News
discloses.
Argentina has about 18 billion euros of euro-denominated
securities outstanding, according to data compiled by Bloomberg.
The letter said the nation also has "meaningful holdings" of
dollar-denominated bonds "and would be amenable to an identical
RUFO waiver concerning those securities," notes the report.
Changing the terms of the restructured notes to eliminate the RUFO
clause would require approval of holders of 75 percent of each
series of bonds, according to the securities' prospectuses,
Bloomberg News discloses. Modifying multiple contracts would
require approval by owners of at least 85 percent of all affected
bonds and holders of at least two-thirds of each individual
series, Bloomberg News relays.
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B R A Z I L
===========
BANCO BMG: S&P Affirms 'B/B' ICR & Removes from Watch Developing
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'B/B' global scale
'brBBB-' national scale issuer credit ratings on Banco BMG S.A.
(BMG). At the same time, S&P removed the ratings from CreditWatch
developing. Outlook is stable.
The rating actions follow the regulatory approval for BMG to
complete the sale of 100% of its payroll discounted loans
portfolio to its JV with Itau Unibanco and to proceed with the
capital injection into the JV to increase its stake to 40%. These
changes have sharply reduced BMG's forecasted balance sheet for
2014, which impacted the bank's capital and earnings and risk
positions.
"We revised BMG's capital and earnings to "moderate" from "weak,"
following the large reduction in the bank's risk weighted assets,
improving its risk-adjusted capital (RAC) ratio. This ratio
strengthened following the bank's sale of its payroll loan
portfolio to the JV totaling R$16 billion. Consequently, we
forecast BMG's RAC to improve. Our forecast's main assumptions
include an 80% drop in loan portfolio in 2014 and a 50% increase
in 2015 as the bank expands its loan portfolio for SMEs, autos,
and payroll credit cards. We also forecast material reduction in
expenses in 2014 and 2015, stable nonperforming loans (NPLs) for
2014 and lower NPLs in 2015. Proceeds from the portfolio sale to
the JV should help boost the bank's profits in 2014. BMG's
investment in the JV will weaken the bank's forecasted capital
levels, as we apply large risk weights for banks that hold
investments in subsidiaries," S&P said.
"We revised BMG's risk position to "moderate" from "adequate."
BMG's balance sheet exposure materially changed following the sale
of its payroll portfolio. We expect its lending exposures to have
a higher share of riskier segments such as SMEs and autos,
although payroll credit cards, which have better asset quality,
should help offset them. In addition, we also expect its overall
asset quality to deteriorate," S&P noted.
MRS LOGISTICA: S&P Affirms 'BB+' CCR; Outlook Stable
----------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB+' global scale
corporate credit rating and 'brAA+' Brazilian national scale
corporate credit and debt ratings on MRS Logistica S.A (MRS). The
outlook remains stable.
The ratings on MRS reflect its "satisfactory" business risk
profile and "significant" financial risk profile.
S&P expects MRS to continue benefitting from the railroad
concession framework in Brazil, which allows for strong and
predictable operating cash flows due to its favorable tariff
model, the company's strong contracted position with captive
clients, with favorable contract terms such as take-or-pay clauses
even under an adverse market conditions for clients, and the
railroad's strategic importance to MRS's shareholders, which are
also its main clients and mitigate exposure risk to the volatile
iron ore seaborne trade. However, MRS will experience substantial
growth in the next three years, as its main clients (and
shareholders) are expanding their mining operations, which would
result in a shortfall in MRS's free cash flow generation through
2017.
* BRAZIL: State to Buy Solar Power After Failing to Lure Buyer
--------------------------------------------------------------
Vanessa Dezem at Bloomberg News reports that Brazil's Pernambuco
state, which held the nation's first solar-energy auction last
year, said it is on the hook to buy the power after it was unable
to find other bidders.
Pernambuco's government agreed this month to buy the electricity
from solar projects with the capacity to produce 96 megawatts of
power, said state Secretary of Infrastructure Joao Bosco de
Almeida, according to Bloomberg News. Contracts to build the
projects were awarded in December to developers including Italy's
Enel Green Power SpA, who agreed to sell the power at an average
price of BRL228.63 a megawatt-hour (US$102.53) for 20 years,
Bloomberg News notes.
The contracts were only to build the projects and didn't include
buyers.
Although getting cheaper, solar power prices are still about 75
percent higher than those offered in the last wind-energy auction
in June because the technology is still expensive and all of the
equipment has to be imported, reports Bloomberg News. In addition
to the high price, the duration of the contracts that Pernambuco
was offering also deterred buyers, said Helena Chung, a Sao Paulo-
based analyst for Bloomberg New Energy Finance. Buyers in
Brazil's wholesale market usually sign contracts for no longer
than 10 years.
"Traders did not present themselves to buy the energy, so we made
the decision that the state will buy it," Mr. Almeida said in a
July 25 telephone interview with Bloomberg. "Our intention was to
introduce solar energy into Pernambuco's energy mix, and we did
it. The state already had a Plan B," Bloomberg News quoted Mr.
Almeida as saying.
Drought
Bloomberg News says Brazil, which is seeking to diversify it's
energy matrix as a drought pares hydroelectric output, gets less
than 1 percent of its power from solar systems and efforts to spur
wider use have been hindered by high prices for the equipment.
The federal government is planning an auction for solar projects
on Oct. 31, notes the report. Bloomberg News says that the
country previously included solar farms in national auctions for
power contracts, though photovoltaic proposals had to compete
directly with lower-priced wind power and won no contracts. The
October event will be the first that has a category reserved only
for solar projects, Bloomberg News relays. In the auction, the
government will set a ceiling price and developers will bid down
the prices for which they are willing to sell power, Bloomberg
News notes.
According to Bloomberg News, Pernambuco is well suited for solar-
power production because it has high solar irradiation rates,
primarily in the semiarid region. One of the developers that
participated in the Pernambuco auction has since abandoned its
efforts to build two proposed solar farms, Mr. Almeida said,
Bloomberg News reports.
The four remaining projects are set to start operating in July
2015.
==========================
C A Y M A N I S L A N D S
==========================
ARMADALE LIMITED: Shareholder to Hear Wind-Up Report on Aug. 13
---------------------------------------------------------------
The shareholder of Armadale Limited will hear on Aug. 13, 2014,
the liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Carl Gosselin
c/o Wilmington Trust Corporate Services (Cayman) Limited
P.O. Box 32322 Grand Cayman KY1-1209
Cayman Islands
Telephone: (345) 640-6712
HANSON OPPORTUNITIES: Shareholders' Final Meeting Set for Sept. 17
------------------------------------------------------------------
The shareholders of The Hanson Opportunities Fund will hold their
final meeting on Sept. 17, 2014, at 10:30 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
Summit Management Limited
c/o David Egglishaw
Telephone: (345) 945 7676
Suite # 4-210, Governors Square
P.O. Box 32311 Grand Cayman KY1-1209
Cayman Islands
PUMICE LIMITED: Members' Final Meeting Set for Aug. 13
------------------------------------------------------
The members of Pumice Limited will hold their final meeting on
Aug. 13, 2014, at 11:00 a.m., to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Christopher Tushingham
Wardour Management Services Limited
Telephone: (345) 945-3301
Facsimile: (345) 945-3302
P.O. Box 10147 Grand Cayman KY1-1002
Cayman Islands
SKYPE MANAGEMENT: Members' Final Meeting Set for Aug. 5
-------------------------------------------------------
The members of Skype Management GP, Ltd. will hold their final
meeting on Aug. 5, 2014, to receive the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Benjamin Orndorff
c/o Maples and Calder, Attorneys-at-law
P.O. Box 309, Ugland House
Grand Cayman KY1-1104
Cayman Islands
SUREVIEW MASTER: Shareholder to Hear Wind-Up Report on Aug. 6
-------------------------------------------------------------
The shareholder of Sureview Master Fund, Ltd. will hear on Aug. 6,
2014, at 10:10 a.m., the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
VINCI GAS: Shareholder to Hear Wind-Up Report on Aug. 7
-------------------------------------------------------
The shareholder of Vinci Gas Discovery Offshore Fund will hear on
Aug. 7, 2014, at 9:20 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
VINCI GAS DISCOVERY: Shareholder to Hear Wind-Up Report on Aug. 7
-----------------------------------------------------------------
The shareholder of Vinci Gas Discovery Fund will hear on Aug. 7,
2014, at 9:00 a.m., the liquidator's report on the company's wind-
up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
VINCI GAS MASTER: Shareholder to Hear Wind-Up Report on Aug. 7
--------------------------------------------------------------
The shareholder of Vinci Gas Discovery Master Fund will hear on
Aug. 7, 2014, at 9:20 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Jonathan Turnham
Telephone: (345) 815 1839
Facsimile: (345) 949-9877
VITAN CAPITAL: Shareholder to Hear Wind-Up Report on Aug. 12
------------------------------------------------------------
The shareholder of Vitan Capital Corporation will hear on Aug. 12,
2014, at 9:30 a.m., the liquidator's report on the company's wind-
up proceedings and property disposal.
The company's liquidator is:
Ogier
c/o Nicosia Lawson
Telephone: (345) 815 1787
Facsimile: (345) 949-9877
XENOLITH LIMITED: Members' Final Meeting Set for Aug. 13
--------------------------------------------------------
The members of Xenolith Limited will hold their final meeting on
Aug. 13, 2014, at 10:30 a.m., to receive the liquidator's report
on the company's wind-up proceedings and property disposal.
The company's liquidator is:
Christopher Tushingham
Wardour Management Services Limited
Telephone: (345) 945-3301
Facsimile: (345) 945-3302
P.O. Box 10147 Grand Cayman KY1-1002
Cayman Islands
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C H I L E
=========
AES GENER: S&P Affirms 'BB' Rating on $450MM Hybrid Notes
---------------------------------------------------------
Standards & Poor's Ratings Services affirmed its 'BBB-' corporate
credit and senior unsecured ratings on AES Gener. S&P also
affirmed its 'BB' rating on the company's outstanding $450 million
hybrid notes. The outlook remains stable.
AES Gener's business risk profile reflects its "satisfactory"
competitive position mainly due to its "adequate" competitive
advantage, "adequate" to "strong" diversification, mainly based on
its operations in Chile and Colombia and to lesser extent in
Argentina. Its "adequate" operating efficiency and "average"
profitability also support S&P's assessment.
AES Gener is the second-largest power generator in the Chilean
market with an about 20% market share per installed capacity. AES
Gener benefits from its relatively large and competitive coal-
fired units, highly experienced management, and long-term power
sale contracts with solid offtakers such as electric distribution
companies and large copper mines. Additionally, contracted sale
prices are indexed to coal prices and the U.S. consumer price
index (CPI), which largely mirrors the company's operating costs.
This results in relatively stable EBITDA generation in its Chilean
operations, which represent 50%-55% of the company's consolidated
EBITDA.
AES Gener is the sixth-largest generator in Colombia through its
almost 100%-owned subsidiary, AES Chivor, with an about 7% market
share in terms of installed capacity. It also benefits from its
good competitive position in the growing Colombian electricity
market. The company operates a 1,000 MW hydro plant there, and
enjoys very low operating costs. However, its power sale
contracts, which represent about 80% of its output, average only
two to three years. As a result, AES Gener's EBITDA generation in
Colombia is significant, but more volatile, and represents 35%-40%
of its total consolidated EBITDA annually.
S&P assess AES Gener's financial risk profile as "intermediate"
mainly based on its relatively strong and stable cash flow
generation, which S&P expects to finance the company's capital
expenditures and capital contributions to its nonrecourse power
projects in Chile and maintain a dividend payout of about 100%.
===============
C O L O M B I A
===============
BANCO DAVIVIENDA: S&P Affirms 'BB-' LT ICR; Outlook Negative
------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB-' long-term
and 'B' short-term issuer credit ratings (ICRs) on Banco
Davivienda Salvadoreno S.A. The outlook remains negative.
The ratings on Banco Davivienda Salvadoreno reflect S&P's view of
its "adequate" business position, "adequate" capital and earnings,
adequate" risk position, and its "average" funding and "adequate"
liquidity (as S&P's criteria define these terms). The bank's
stand-alone credit profile (SACP) is 'bb'.
===================================
D O M I N I C A N R E P U B L I C
===================================
XSTRATA PLC: Evangelicals Ask Society to Talk Over Loma Miranda
---------------------------------------------------------------
Dominican Today reports that Dominican Evangelical Unity Council
(CODUE) President Fidel Lorenzo Meran urged society's various
sectors to start a dialogue on Loma Miranda and contribute to
social peace and to find a solution satisfactory for all parties.
"In recent months CODUE has noted with concern how the issue to
establish a national park in Loma Miranda or its mining by
Falconbridge Dominicana, has polarized national public opinion and
occasionally has resorted to violence," the reverend said in a
statement read in a press conference, according to Dominican
Today.
The report notes that Mr. Meran said CODUE wants to contribute to
social peace and the respect for everyone's rights. "Now is the
time for all sectors of society and the State, politicians,
entrepreneurs and the churches come to a dialogue to find a
harmonious solution to a topic that has roiled Dominicans in
recent months," the report quoted Mr. Meran as saying.
The report discloses that Mr. Meran said the dialogue would lead
to a proposal to put an end to the conflict, "always observing the
national interest and rights acquired by each of the parties."
Mr. Meran said peace and brotherhood are the values he affirms
have characterised the Dominicans since the Republic was founded,
adding that there are no winners or losers in dialogues, the
report adds.
As reported in the Troubled Company Reporter-Latin America on
Jan. 22, 2014, Dominican Today said that Chief Executive Officer
of Xstrata PLC's Falcondo reiterated that the company's presence
in the country depends on a long term mining, with cheap
electricity available, to produce and compete in world markets.
David Soares said they pin their hopes of extracting nickel at the
controversial site of Loma Miranda, between La Vega and Bonao
(central), for which they expect to get the mining permit,
according to Dominican Today. But environmental and civil society
groups could keep them from carrying out the project, after the
Chamber of Deputies agreed with the protesters and passed a bill
which declares Loma Miranda a protected area, arguing that much of
the Cibao region's (north) water depends on it, the report
related.
Xstrata PLC is the operator of Falconbridge Dominicana, C. por A.
("Falcondo") with an 85.26% ownership. Falcondo is a ferronickel
surface mining operation located in the Dominican Republic with
operations dating since 1971.
Headquartered in Zug, Switzerland, Xstrata PLC is a major producer
of coal, copper, nickel, primary vanadium and zinc and the largest
producer of ferrochrome.
=====================
E L S A L V A D O R
=====================
BANCO AGRICOLA: S&P Affirms 'BB-' LT ICR; Outlook Negative
----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB-' long-term
and 'B' short-term issuer credit ratings (ICR) on Banco Agricola
S.A. The outlook remains negative.
The ratings on Banco Agricola reflect S&P's view of its "strong"
(as S&P's criteria define the term) business position, "adequate"
capital and earnings, "adequate" risk position, and its "average"
funding and "adequate" liquidity. The bank's stand-alone credit
profile (SACP) is at 'bb+'.
===========
M E X I C O
===========
CEMEX: Fitch Affirms 'B+' Issuer Default Ratings; Outlook Stable
----------------------------------------------------------------
Fitch Ratings affirmed the foreign and local currency Issuer
Default Ratings (IDRs) of CEMEX, S.A.B. de C.V. (CEMEX) at 'B+',
as well as it senior secured notes at 'BB- /RR3'. Concurrently,
Fitch has upgraded the national scale rating, as well as the
Mexican peso-denominated notes due in 2017, to 'BBB(mex)' from
'BBB-(mex)'.
The Rating Outlook for CEMEX remains Stable.
KEY RATING DRIVERS
Strong Business Position:
CEMEX's 'B+' IDRs continue to reflect its strong and diversified
business position. The company is one of the largest producers of
cement, ready-mix, and aggregates in the world. Key markets
include the U.S., Mexico, Colombia, Panama, Spain, Egypt, Germany,
France, Poland and the U.K. The company's product and geographic
diversification offset some of the volatility associated with the
cyclical cement industry.
High Leverage Constrains Ratings:
The ratings of CEMEX remain constrained by the company's high
leverage. CEMEX had USD15.8 billion of net debt as of June 30,
2014. This figure compares unfavorably with USD2.7 billion of
EBITDA and USD500 million of funds from operation during the LTM
ended June 30, 2014, and results in a net debt/EBITDA ratio of
5.9x and a funds from operations (FFO) adjusted leverage ratio of
8.5x. These ratios improved only modestly from 6.3x and 9.4x,
respectively, during 2012. Net leverage has been slow to decline
during the past couple of years due to sluggishness in the
company's operations in Mexico, the Mediterranean, and Northern
Europe.
Modest Credit Improvements Projected:
Fitch expects CEMEX's leverage to remain above 4.0x through the
end of 2015, and that it will generate about USD2.8 billion of
EBITDA in 2014, USD3.1 billion in 2015, and USD3.3 billion in
2016. Improved cement demand in the U.S. and Mexico are the key
drivers of Fitch's projected improvement in CEMEX's operating
performance. CEMEX's net debt is not projected to change
materially in the next two years, despite the projected upturn in
EBITDA, due to rising working capital needs associated with
growth, increasing capex, and higher taxes. Absent asset sales in
excess of USD100 million per year, Fitch estimates CEMEX's net
leverage ratio will be 5.3x in 2014 and 4.2x in 2015. The
conversion of USD320 million of subordinated debt into equity
during 2015 is built into these projections. Net leverage would
likely be more than 4.5x in 2015 if the company's stock price
deteriorates and the company needs to refinance these notes with
another convertible debt instrument.
Manageable Maturity Schedule:
CEMEX has a manageable amortization schedule as a result of its
aggressive refinancing efforts during the past few years. The
company had USD737 million of cash and marketable securities as of
June 30, 2013. Most of the company's marketable securities are
held in U.S. and Mexican government bonds. CEMEX faces USD171
million of debt amortizations through the end of 2014 and USD1.1
billion in 2015. The company issued EUR400 million notes due in
2021 and USD1 billion notes due in 2024 during March, 2014, and
used the proceeds to repurchase EUR245 million of notes due in
2017, USD597 million of notes due in 2020 and USD603 million of
notes due in 2018. These refinancings lowered its cost of debt,
since the new coupons were below 6% and those on the repurchased
notes were in excess of 9%. The decreased cost of debt, in
addition to growing operating cash flow, should lead to an
improvement in the company's FFO fixed-charge coverage to around
1.7x in 2015 from 1.3x in 2013. This incremental improvement in
the company's financing expenses is what led to the upgrade of its
national scale rating to 'BBB(mex)' from 'BBB-(mex)'.
U.S. Market Key to Recovery:
CEMEX's main markets during 2013 in terms of EBITDA were Mexico
(35%), Central and South America (28%), the Mediterranean (11%),
Northern Europe (12%, the U.S. (9%), and Asia (5%). CEMEX's U.S.
operations continue to improve slowly, as EBITDA grew to USD255
million in 2013 from USD43 million in 2012. The company's U.S.
operations, however, continue to operate at well below their
potential capacity. On a pro forma basis Fitch estimates that the
company's U.S. operations generated around USD2.3 billion of
EBITDA in 2006. While U.S. cement demand has recovered to 80
million metric tons in 2013 from a low of 71 million tons in 2009,
it remains well short of 127 million tons of demand in 2006.
Above-Average Recovery Prospects:
CEMEX and its subsidiaries have issued debt instruments from
Mexico, the U.S., the British Virgin Islands, the Netherlands, and
Spain. The guarantors of these instruments are also domiciled in
various countries. As a result of the complexity of the company's
capital structure and the various legal jurisdictions, Fitch does
not envision a scenario in which CEMEX's creditors would want it
to enter bankruptcy (quiebra) or an insolvency (concurso
mercantil) process in Mexico in the event of additional financial
distress, as there would be a high degree of uncertainty regarding
the outcome.
In deriving a distressed enterprise valuation to determine the
recovery under this scenario, Fitch discounted the company's
EBITDA to USD2.1 billion, which is a level that would just cover
operating leases, interest expenses, and maintenance capital
expenditures, and applied a conservative EBITDA multiple of 6x.
This calculation resulted in an anticipated recovery level of 76%
for the company's senior secured debt, which would be consistent
with a Recovery Rating of 'RR2'. The recovery prospects of senior
creditors are bolstered by USD2.1 billion of convertible
subordinated notes, which can only be replaced by equity or
similar quasi-equity instruments, according to the Facilities
Agreement. Fitch typically caps RRs of Mexican corporate at 'RR3'
to account for concerns about various aspects of the bankruptcy
framework from a creditor's perspective even when its bespoke
analysis indicates it could be higher. CEMEX's rating has also
been capped at 'RR3', which is consistent with recovery prospects
anticipated to be in the range of 50% to 70% in the event of
default.
RATING SENSITIVITIES
Positive: Future developments that may, individually or
collectively, lead to a positive rating action include:
-- Fitch is projecting that CEMEX's EBITDA in its U.S.
operations will grow to USD650 million by 2015 from USD233
million in 2013. This projection incorporates an
expectation that single-family and multi-family housing
starts in the U.S. will total 1 million in 2014 and 1.2
million in 2015. Growth beyond these figures would be
positive for the company's U.S. business and would
accelerate the company's deleveraging process.
Cement demand in Mexico has underperformed Fitch's expectations
since 2013. This has offset improvements in operating cash flow
in Central and South America, as well as in the U.S. The EBITDA
generated by CEMEX in Mexico fell to USD1 billion in 2013 from
USD1.2 billion in 2012 as its cement sales volumes declined by 8%.
Fitch currently projects that the company's EBITDA in this market
will rebound to USD1.1 billion by 2015. Growth faster than this
could also accelerate debt reduction.
CEMEX's stock currently trades at more than USD12.50 per ADS. The
company has issued subordinated convertible notes that mature in
2015 (USD320 million), 2016 (USD 978 million) and 2018 (USD690
million). The conversion prices for these notes are USD11.18/ADS,
USD9.65/ADS and USD9.65/ADS, respectively. If successful in
converting the 2015 and 2016 notes, Fitch projects that the
company's net debt/EBITDA ratio would be below 3.5x by the end of
2016, which could result in upgrades of one or more notches for
the company's IDRs.
Negative: Future developments that may, individually or
collectively, lead to a negative rating action include:
-- Ratings downgrades are not likely during 2014 as CEMEX's
credit protection measures are strong for the existing
ratings, given the company's strong global business position
and the sluggishness of the U.S. market relative to its
long-term potential.
-- CEMEX received an unfavorable ruling by the Spanish tax
authorities during 2014 that could result in a payment of
Euro455 million. If the company is unsuccessful in its
appeal, this fine would hinder its ability to deleverage and
could lead to a negative rating action if the payment
coincides with continued sluggishness in other key markets.
-- A loss of the positive momentum in the U.S. market would
have a material impact upon the company's ability to
deleverage to less than 4.5x by 2015. Fitch would consider
a change in rating or Outlook if CEMEX's leverage trends
reversed and net leverage exceeded 6.5x.
RELATED RATING ACTIONS
In addition to affirming the foreign currency and local currency
IDRs and issuance ratings of CEMEX, Fitch has affirmed the
following debt issues:
CEMEX Espana S.A. (CEMEX Espana)
-- Senior Secured Notes due 2017, and 2020 at 'BB-/RR3';
-- National short-term rating at 'F3 (mex)';
CEMEX Materials Corporation, a limited liability company
incorporated in the U.S.
-- Senior secured notes due 2025 at 'BB-/RR3';
CEMEX Finance LLC, a limited liability company incorporated in the
U.S.
-- Senior secured notes due 2021, 2022, and 2024 at 'BB-/RR3';
C5 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes at 'BB-/RR3';
C8 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes at 'BB-/RR3';
C10 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Senior secured perpetual notes at 'BB-/RR3';
C-10 EUR Capital (SPV) Limited, a British Virgin Island
restricted purpose company
-- Senior secured perpetual notes at 'BB-/RR3'.
In addition, Fitch has affirmed and withdrawn the following
ratings:
Cemex Espana S.A. (Cemex Espana)
-- Foreign currency IDR at 'B+'.
CEMEX Materials Corporation, a limited liability company
incorporated in the U.S.
-- FC IDR at 'B+'.
CEMEX Finance LLC, a limited liability company incorporated in the
U.S
-- Foreign currency IDR at 'B+'.
CEMEX Finance Europe B.V., which is incorporated in The
Netherlands
-- Foreign currency IDR at 'B+'.
C5 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Foreign currency IDR at 'B+';
C8 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Foreign currency IDR at 'B+'.
C10 Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Foreign currency IDR at 'B+';
C-10 EUR Capital (SPV) Limited, a British Virgin Island restricted
purpose company
-- Foreign currency IDR at 'B+'.
These ratings were withdrawn as these entities are not considered
analytically meaningful for the credit quality of the notes that
have been issued out of them. During 2014, the note of CEMEX
Finance Europe matured. The notes of Cemex Espana and Cemex
Finance are fully guaranteed by CEMEX and various other
subsidiaries. CEMEX is also the guarantor of the dual-currency
notes that accompany the perpetual debentures of the special
purpose vehicles entities C5, C8, C10 and C-10. CEMEX Material
has a $149 million bond due in 2025 that is guaranteed by CEMEX
Corp.
=====================
P U E R T O R I C O
=====================
PUERTO RICO: Debt Crisis Headed for US-Style Bankruptcy Resolution
------------------------------------------------------------------
Nick Brown and Tom Hals at Reuters report that momentum is
building toward a deal that would make painful losses inevitable
for investors holding about $20 billion in bonds issued by Puerto
Rico's highway, water and electricity authorities even as some big
US mutual funds launch a legal battle to squelch a new law that
authorizes a restructuring.
The Puerto Rican government and most of its creditors have hired
US-based bankruptcy experts to advise them through the Caribbean
island's efforts to solve its debt problem, and the resolution
figures to look a lot like a US-style bankruptcy, according to
Reuters.
The report notes that the crisis came to a head late last month
when Governor Alejandro Garcia Padilla pushed through the Public
Corporations Debt Enforcement and Recovery Act to create a
bankruptcy-like process for restructuring the debt of
commonwealth-run corporations. That's caused prices on some of
the bonds of the electric utility, known as PREPA, to fall to 40
cents on the dollar or below, reports Reuters. PREPA is widely
viewed to be in the weakest condition of the agencies.
Municipal bond mutual funds including Oppenheimer & Co. and
Franklin Templeton sued to block the law. Reuters notes that some
of their funds have suffered negative returns since the Recovery
Act triggered the decline in Puerto Rico bonds, a long-time
favorite among fund managers thanks to their triple tax-free
status and fat yields. Supporting the law is a group of
distressed debt investors who bought more than $3 billion of
Puerto Rico's general obligation (GO) and governmental development
bank (GDB) bonds, which can't be restructured under the law,
Reuters discloses.
Mr. Padilla is trying to protect the commonwealth's ability to
make payments on about $52 billion of bonds not subject to the law
by restructuring the debt of agencies like PREPA and the sewer and
water authority known as PRASA, said Suzzanne Uhland, a lawyer and
municipal insolvency expert at O'Melveny & Myers in San Francisco,
the report relays.
"What the commonwealth is trying to signal is that they are going
to let PREPA and PRASA go under but they will stand behind the GO
and GDB bonds," Reuters quoted Ms. Uhland as saying.
Two weeks ago, the distressed debt investors who bought the GO and
GDB bonds said they had formed a committee in support of the new
law, Reuters notes. The formation of such groups, which are a
staple in big bankruptcy cases that involve disparate creditor
factions, is an indication of a restructuring in its infancy,
restructuring specialists said, the report discloses.
The report says that one key role for the committee in Puerto
Rico, which includes Fir Tree Partners and Aurelius Capital
Management, among others, could be to finance a restructuring for
PREPA through a so-called debtor-in-possession, or DIP, loan.
Early projections peg a DIP for PREPA in the $1.5 billion to $2
billion range, people close to the matter have told Reuters.
With prospects that the situation will unfold like a US-style
bankruptcy, top turnaround experts have jumped into the fray.
Reuters notes that Puerto Rico's government development bank has
hired Jim Millstein, who oversaw the US rescue of American
International Group. Lawyers at Cleary Gottlieb Steen & Hamilton,
which has advised Greece and Argentina, teamed with Proskauer
Rose's Martin Bienenstock, the bankruptcy expert who helped
structure the auto bankruptcies of 2009, to write the bulk of the
new bankruptcy law, the report relates.
MBIA Inc and Assured Guaranty Ltd, bond insurers with more than
$10 billion in combined exposure to Puerto Rico, are being
represented by financial advisers with workout expertise at The
Blackstone Group and Houlihan Lokey, respectively, the report
relays. The three have a combined exposure of $2.4 billion to
PREPA, according to Moody's Investors Service.
Others involved include law firms Weil, Gotshal & Manges, which
took Lehman Brothers through bankruptcy, Debevoise & Plimpton,
which was involved with American Airlines' Chapter 11, and
Cadwalader, Wickersham & Taft, which has been involved in
Detroit's bankruptcy, the report adds.
Chronic Deficits
Reuters notes that the restructuring efforts follow a decade
during which an index of the island's economic activity has fallen
by 18 percent and the number of employed people has fallen by 11
percent. The government runs chronic budget deficits and has a
weak track record for collecting everything from sales and
corporate income taxes to power and water bills, Reuters relates.
To plug the gap, the government and its agencies have turned
repeatedly to the $3.7 trillion U.S. municipal bond market,
eventually amassing a collective debt of $72.6 billion, the report
relays.
Mr. Padilla, who took office in January 2013, has been aggressive
in addressing the island's fiscal crisis, raising taxes, reforming
public pensions and slashing spending. But his move to push
through the restructuring law last month shocked investors, the
report says. Prices on PREPA bonds and those issued by its sister
corporations plunged, with some PREPA debt falling by nearly 50
percent in a matter of days, reports Reuters.
Credit ratings agencies, which had already cut most Puerto Rico
bonds to below-investment grade earlier in the year, slashed them
deeper into junk territory, saying the law raised questions about
the administration's commitment to honoring its debts, the report
notes.
Reuters says the upshot has been a shift in ownership of Puerto
Rico bonds away from risk-averse investors to hedge funds who are
accustomed to uncovering ways to profit from bonds trading at
deeply discounted levels.
"There's no way any traditional investor is buying at 40 cents on
the dollar," said David Tawil of Maglan Capital, a distressed debt
hedge fund, Reuters notes.
Hedge funds buying the distressed PREPA debt may open the way to a
debt-cutting deal, given that they specialize in finding
"collaborative solutions that will assist in any restructuring,"
said Laurence Gottlieb, the chairman and chief executive officer
of Fundamental Advisors, which focuses on municipal markets, the
report discloses.
Many hedge funds are accustomed to plowing more money into a
situation if it offers a chance of boosting their returns, and due
to the current dearth of big corporate bankruptcies, funds are
scrambling for investment opportunities, reports Reuters.
Avoiding Bailouts
That could be a boon for PREPA as it needs to convert to natural
gas-fueled plants but is unlikely to get financing from
traditional muni investors who may now shun all things Puerto
Rico, the report notes. The island commonwealth also must borrow
to pay for the oil it uses to fire its generators.
The power company already has had to arrange a deferral of
payments on expired bank lines of credit, reports Reuters. The
grace period expires on July 31, and $696 million is owed its
banks in August, unless it can negotiate new credit terms or
forbearance agreements. PREPA said it would use the grace period
to "evaluate various alternatives to improve its financial
position," the report relays.
Indeed, a restructuring of PREPA's debt could provide relief for
the bonds owed directly by the island's government. Puerto Rico
has committed to repaying its general obligation bonds, a promise
it never made for PREPA and the other public corporations, the
report says. Treating those corporations as if they were private
businesses assures investors the commonwealth government won't tie
up its limited funds with bailouts, the report notes.
Reuters says that Puerto Rico's debt becomes more manageable once
it cuts the debt associated with its three biggest public
corporations. Recent market activity suggests some investors
believe that could well be the case.
While many long-term PREPA bonds remain at prices in the mid-40s
or below, the commonwealth's general obligation bonds have
rallied, the report notes.
Battle Ahead
Still, it's clear that some investors aren't ready to simply
accept the inevitability of a restructuring, the report discloses.
Oppenheimer and Franklin allege in their lawsuit that the Recovery
Act violates the US Constitution on multiple fronts, including by
allowing the commonwealth to impair contracts over the objections
of certain bondholders, Reuters adds.
===========================================
S T. V I N C E N T & G R E N A D I N E S
===========================================
ST. VINCENT COCOA COMPANY: Farmers Receive Compensation
-------------------------------------------------------
Caribbean360.com reports that the St. Vincent Cocoa Company, which
abruptly announced that it is ending its operations in August,
will compensate farmers in lieu of the two years' notice
stipulated in the agreement with the government.
"By virtue of the fact that notice is not given, they are writing
off all the money that [farmers] borrowed, against the need to
give notice," Caribbean360.com quoted Minister of Agriculture
Saboto Caesar, as saying.
Ten farmers had received loans totaling EC$34,800 from the
company's micro finance program, and this amount will be written
off, Caribbean360.com notes.
The report discloses that famers who did not receive loans from
the SVCC will each receive EC$1,000 (One EC dollar = US$0.37
cents).
"But coming out of the discussion, it was decided that farmers who
have over 3,000 plants will get between $1,500 to $2,000," Mr.
Caesar said, adding that not many famers had more than 3,000
plants, reports Caribbean360.com.
The report recalls that the St. Vincent Cocoa Company came into
existence after Armajaro Trading Ltd. signed a 50-year agreement
with the government in August 2011, granting the firm exclusivity
in the overseas marketing of wet and dry cocoa beans produced
here.
Fifty-four farmers went into cocoa cultivation with the company
after the 2011 agreement was signed, while a further 10 to 20
entered the sector, outside of the Armajaro agreement,
Caribbean360.com notes.
The report notes that the company has invested more than $5
million in SVG, but Mr. Caesar said it decided to cease operations
at the end of August because it no longer sees local production as
"a viable one".
The company had a target of cultivating 5,000 acres of cocoa,
where only 18,000 acres of agricultural land remains, the report
relays.
"That was a big number and over the last four years, they were
only able to rehabilitate 50 acres and to plant 200 new acres,"
Mr. Caesar said, the report notes.
The minister said farmers were disappointed by the development.
"Quite naturally, if you are in a relationship and the
relationship did not work out quite as you had planned it, quite
natural, there were some sad feeling, persons felt a bit sad, but
I must state, no one was angry," the report quoted Mr. Caesar as
saying.
"It was very interesting. Persons expressed sadness that they no
longer had an opportunity to work with what they considered, in
their estimation, an internationally renown cocoa distributor.
They thanked the company for coming to St. Vincent and working
with them and for transferring the knowledge," Mr. Caesar said
after a meeting with farmers, the report adds.
***********
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
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than a balance sheet solvency test.
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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
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USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
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Chapman, Editors.
Copyright 2014. All rights reserved. ISSN 1529-2746.
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