/raid1/www/Hosts/bankrupt/TCRLA_Public/151203.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, December 3, 2015, Vol. 16, No. 239
Headlines
A R G E N T I N A
ARAUCO ARGENTINA: Moody's Affirms 'B2' CFR, Outlook Now Positive
ARCOR SAIC: Moody's Affirms 'B2' Global Bond Rating, Outlook Pos.
BANCO DE LA CIUDAD: Moody's Assigns Caa1 Rating on Debt Issuance
BUENOS AIRES: Moody's Affirms Issuer Rating at Caa2, Outlook Pos.
BUENOS AIRES: Moody's Affirms Caa2 FC Debt Ratings, Outlook Pos.
CAJA DE: Moody's Affirms GLC/NSR IFS at B2/Aa1.ar, Outlook Pos.
HIDROELECTRICA EL: Moody's Affirms 'Caa1/Baa2.ar' CFR, Outlook Pos
B R A Z I L
BRAZIL: GDP Slips for Third Consecutive Quarter
BRAZIL: Fitch Says Outlook for Banks Remains Negative
GENERAL SHOPPING: Fitch Cuts LC Issuer Default Ratings to 'CC'
HSBC BANK: S&P Retains 'BB+/B' ICRs Still on CreditWatch Negative
RIO OIL: Fitch Puts Note Issuances on Watch Negative
SAMARCO MINERACAO: Fitch Cuts Issuer Default Ratings to 'BB-'
C A Y M A N I S L A N D S
CLEARGATE GLOBAL: Commences Liquidation Proceedings
ETOILE INTERNATIONAL: Creditors' Proofs of Debt Due Dec. 7
LAURA ENTERPRISE: Creditors' Proofs of Debt Due Dec. 7
LAURA INVESTMENTS: Creditors' Proofs of Debt Due Dec. 7
MOMBASA INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
NORDISK INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
PELEO & TETI: Creditors' Proofs of Debt Due Dec. 7
PELLICANO INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
QUADRELLA INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
SCOTTDALE INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
TOGIU INTERNATIONAL: Creditors' Proofs of Debt Due Dec. 7
TREASURE COVE: Creditors' Proofs of Debt Due Dec. 7
VEFAR INVESTMENTS: Creditors' Proofs of Debt Due Dec. 7
C O S T A R I C A
AERIS HOLDINGS: Moody's Assigns Ba2 Rating on US$127MM Sr. Notes
BANCO DE COSTA: Fitch Affirms 'BB+' Issuer Default Rating
BANCO NACIONAL: Fitch Affirms 'BB+' LT Issuer Default Rating
BANCO POPULAR: Fitch Affirms 'BB+' LC LT Issuer Default Rating
D O M I N I C A N R E P U B L I C
AEROPUERTOS DOMINICANOS: S&P Affirms 'B' Rating on $500MM Notes
DOMINICAN REPUBLIC: Firms Says Keep Tax Breaks to Spur Investment
DOMINICAN REPUBLIC: Central Bank Keeps Benchmark Rate at 5.0%
DOMINICAN REPUBLIC: Fitch Affirms 'B+' Issuer Default Ratings
M E X I C O
AXTEL SAB: Moody's Puts B3 CFR on Review for Upgrade
CONSUBANCO SA: S&P Affirms 'BB' Counterparty Credit Ratings
ELEMENTIA SAB: S&P Affirms 'BB+' CCR; Outlook Stable
GRUPO IDESA: S&P Affirms 'BB-' CCR; Outlook Stable
* Mexico's Oil Revenues Plunge 38%
P A R A G U A Y
TELEFONICA CELULAR: Fitch Hikes FC Issuer Default Rating to 'BB+'
P U E R T O R I C O
PUERTO RICO: Avoids Second Default, but Future Payments Uncertain
V E N E Z U E L A
PETROLEOS DE VENEZUELA: S&P Affirms 'CCC' CCR; Outlook Negative
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A R G E N T I N A
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ARAUCO ARGENTINA: Moody's Affirms 'B2' CFR, Outlook Now Positive
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Moody's Investors Service has revised to positive from stable the
outlook for several companies operating in Argentina, while all
ratings were affirmed. The companies' outlook change follows the
revision of the Argentine government's Caa1 rating outlook to
positive from stable on Nov. 24, 2015.
ISSUERS AND RATINGS AFFIRMED -- OUTLOOK CHANGED TO POSITIVE
Arauco Argentina S.A.: the Corporate Family Rating (CFR) was
affirmed at B2 and the rating of the senior unsecured notes,
guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable),
was affirmed at Baa3. The outlook was changed to positive from
stable.
Arcor S.A.I.C.: the CFR and the rating of the senior unsecured
global bonds was affirmed at B2. The outlook was changed to
positive from stable.
Cablevision S.A.: the CFR and senior unsecured notes rating were
affirmed at Caa1. The outlook was changed to positive from
stable.
Pan American Energy LLC: the CFR was affirmed at B2. The outlook
was changed to positive from stable.
Pan American Energy LLC, (Argentine Branch): the rating of the
backed senior unsecured medium-term notes program was affirmed at
(P)B2, the rating of the global medium-term notes was affirmed at
B2, and the rating of the senior unsecured bank credit facility
was affirmed at B2. The outlook was changed to positive from
stable.
Petrobras Argentina S.A.: the CFR was affirmed at B2; the rating
of the backed senior unsecured notes, guaranteed by Petroleo
Brasileiro S.A. (Ba2 stable), was affirmed at Ba2; the rating of
the senior unsecured medium-term notes program was affirmed at
(P)B2; and the rating for the senior secured medium-term notes
program was affirmed at (P)B1. The outlook was changed to
positive from stable.
YPF Sociedad Anonima: the rating of the senior unsecured notes was
affirmed at Caa1 and the rating of the medium-term notes program
was affirmed at (P)Caa1. The outlook was changed to positive from
stable.
RATINGS RATIONALE
The rating outlook revisions for these companies were triggered by
the change to positive in the outlook for the Argentine
government's Caa1 rating, supported by Moody's view that
Argentina's policy stance will become more credit positive after
Mauricio Macri was elected Argentina's president, on Nov. 22, for
the 2015-2019 term, who will take office on Dec. 10.
President-elect Macri has consistently and increasingly made clear
his administration's policies will represent a major market-
friendly break from those observed during the last 12 years.
Moody's views that a prompt resolution of the holdout saga is a
key Macri pledge in this regard, and is required for the
government to borrow abroad. In addition, Moody's expects the new
administration to devote efforts to improving the economic and
institutional environment over the coming months, through a series
of reforms aimed at tackling persistently high levels of inflation
and lack of data accountability.
The positive outlook for the affected companies reflects Moody's
view that the creditworthiness of these companies cannot be
completely de-linked from the credit quality of the Argentine
government, and thus their ratings need to closely reflect the
risk that they share with the sovereign. Moody's believes that a
weaker sovereign has the potential to create a ratings drag on
companies operating within its borders, and therefore it is
appropriate to limit the extent to which these issuers can be
rated higher than the sovereign, in line with Moody's Rating
Implementation Guidance.
Going forward, future rating actions will be dependent on the
Argentine government rating; our assessment on each company's
credit quality on a standalone basis; and how the new
administration's policies will impact the different industries'
outlook.
The principal methodologies used in rating Pan American Energy
LLC, Argentine Branch, Pan American Energy LLC and Petrobras
Argentina S.A. were Global Independent Exploration and Production
Industry published in Dec. 2011, and Government-Related Issuers
published in Oct. 2014. The principal methodologies used in
rating YPF Sociedad Anonima were Global Integrated Oil & Gas
Industry published in April 2014, and Government-Related Issuers
published in October 2014. The principal methodology used in
rating Arcor S.A.I.C. was Global Packaged Goods published in June
2013. The principal methodology used in rating Arauco Argentina
S.A. was Global Paper and Forest Products Industry published in
Oct. 2013. The principal methodology used in rating CableVision
S.A. were Global Pay Television - Cable and Direct-to-Home
Satellite Operators published in April 2013.
ARCOR SAIC: Moody's Affirms 'B2' Global Bond Rating, Outlook Pos.
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Moody's Latin America Agente de Calificacion de Riesgo has revised
to positive from stable the outlook for several companies
operating in Argentina, while all ratings were affirmed. The
companies' outlook change follows the revision of the Argentine
government's Caa1 rating outlook to positive from stable on
Nov. 24, 2015.
ISSUERS AND RATINGS AFFIRMED -- OUTLOOK CHANGED TO POSITIVE
Arauco Argentina S.A: the ratings of the senior unsecured notes,
guaranteed by Celulosa Arauco y Constitucion S.A. (Baa3 stable),
were affirmed at Baa3 in the global scale and Aaa.ar in the
national scale. At the same time, Moody's Investors Service has
affirmed Arauco Argentina's corporate family rating (CFR) at B2 in
the global scale rating and the rating of the guaranteed senior
unsecured notes at Baa3 in the global scale. The outlook was
changed to positive from stable.
Arcor S.A.I.C: the ratings of the senior unsecured local bonds and
notes were affirmed at B2 in the global scale and Aa1.ar in the
national scale, and the ratings of the senior unsecured global
bonds were affirmed at B2 in the global scale and Aa1.ar in the
national scale. At the same time, Moody's Investors Service has
affirmed Arcor's CFR and the rating of the senior unsecured global
bonds at B2 in the global scale. The outlook was changed to
positive from stable.
Car Security S.A: the CFR was affirmed at Caa1 in the global scale
and Baa2.ar in the national scale. The outlook was changed to
positive from stable.
Longvie S.A: the CFR and the ratings of the senior unsecured notes
were affirmed at Caa1 in the global scale and Baa2.ar in the
national scale. The outlook was changed to positive from stable.
Newsan S.A: the CFR and the ratings of the senior unsecured notes
and the senior unsecured bank credit facility were affirmed at B3
in the global scale and A1.ar in the national scale. The outlook
was changed to positive from stable.
Mirgor S.A: the CFR was affirmed at Caa1 in the global scale and
Baa2.ar in the national scale. The outlook was changed to
positive from stable.
Holcim (Argentina) S.A: the CFR was affirmed at B3 in the global
scale and A2.ar in the national scale. The outlook was changed to
positive from stable.
Petrobras Argentina S.A: the rating of the senior unsecured notes,
guaranteed by Petroleo Brasileiro S.A. (Ba2 stable), was affirmed
at Ba2 in the global scale and Aaa.ar in the national scale. At
the same time, Moody's Investors Service has affirmed the CFR at
B2 in the global scale; the rating of the backed senior unsecured
notes at Ba2 in the global scale; the rating of the senior secured
medium-term note program at (P)B1 in the global scale; and the
rating of the senior unsecured medium-term note program at (P)B2
in the global scale. The outlook was changed to positive from
stable.
Raghsa S.A: the CFR and the senior unsecured notes ratings were
affirmed at Caa1 in the global scale and Baa3.ar in the national
scale. At the same time, Moody's Investors Service has affirmed
Raghsa's rating of the senior unsecured notes at Caa1 in the
global scale. The outlook was changed to positive from stable.
Sullair Argentina S.A: the CFR was affirmed at Caa1 in the global
scale and Baa2.ar in the national scale. The outlook was changed
to positive from stable.
Telecom Argentina S.A: the CFR was affirmed at Caa1 in the global
scale and Baa1.ar in the national scale. The outlook was changed
to positive from stable.
YPF Sociedad Anonima: the issuer rating was affirmed at Caa1 in
the global scale and Baa1.ar in the national scale. At the same
time, Moody's Investors Service has affirmed the rating of the
senior unsecured notes at Caa1 in the global scale, and the rating
of the medium-term note program at (P)Caa1 in the global scale.
The outlook was changed to positive from stable.
RATINGS RATIONALE
The rating outlook revisions for these companies were triggered by
the change to positive in the outlook for the Argentine
government's Caa1 rating, supported by Moody's view that
Argentina's policy stance will become more credit positive after
Mauricio Macri was elected Argentina's president, on Nov. 22, for
the 2015-2019 term, who will take office on Dec. 10.
President-elect Macri has consistently and increasingly made clear
his administration's policies will represent a major market-
friendly break from those observed during the last 12 years.
Moody's views that a prompt resolution of the holdout saga is a
key Macri pledge in this regard, and is required for the
government to borrow abroad. In addition, Moody's expects the new
administration to devote efforts to improving the economic and
institutional environment over the coming months, through a series
of reforms aimed at tackling persistently high levels of inflation
and lack of data accountability.
The positive outlook for the affected companies reflects Moody's
view that the creditworthiness of these companies cannot be
completely de-linked from the credit quality of the Argentine
government, and thus their ratings need to closely reflect the
risk that they share with the sovereign.
The principal methodology used in rating Car Security S.A. was
Business and Consumer Service Industry published in December 2014.
The principal methodology used in rating Longvie S.A., and Newsan
S.A.was Consumer Durables Industry published in Sept. 2014.
The principal methodology used in rating Holcim (Argentina) S.A.
was Building Materials Industry published in Sept. 2014.
The principal methodology used in rating Telecom Argentina S.A.
was Global Telecommunications Industry published in Dec. 2010.
The principal methodology used in rating Sullair Argentina S.A.
was Equipment and Transportation Rental Industry published in
Dec. 2014.
The principal methodology used in rating MIRGOR S.A. was Global
Automotive Supplier Industry published in May 2013. The principal
methodologies used in rating Petrobras Argentina S.A. were Global
Independent Exploration and Production Industry published in Dec.
2011, and Government-Related Issuers published in October 2014.
The principal methodologies used in rating YPF Sociedad Anonima
were Global Integrated Oil & Gas Industry published in April 2014,
and Government-Related Issuers published in October 2014. The
principal methodology used in rating Arcor S.A.I.C. was Global
Packaged Goods published in June 2013.
The principal methodology used in rating Arauco Argentina S.A. was
Global Paper and Forest Products Industry published in October
2013.
BANCO DE LA CIUDAD: Moody's Assigns Caa1 Rating on Debt Issuance
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Moody's Latin America Agente de Calificacion de Riesgo S.A. has
assigned a Caa1 global scale rating and a Baa1.ar national scale
rating to Banco de la Ciudad de Buenos Aires (Ciudad)'s fourth
takedown under its senior debt program of $500 million. The
issuance, for up to ARS 500 million, will be split into two
different classes due in 18 months (Class VII) and 36 months
(Class VIII). The outlook on all ratings is positive.
These ratings were assigned to Banco de la Ciudad de Buenos Aires:
ARS 500 million senior debt issuance:
Caa1 Global Local Currency Debt Rating
Baa1.ar Argentina National Scale Local Currency Debt Rating
RATINGS RATIONALE
The ratings consider the challenging operating environment in
Argentina, characterized by burdensome regulations and large
economic imbalances. Despite these challenges, Ciudad remains one
of the strongest domestically-owned credits in Argentina.
Ciudad's Baa1.ar national scale rating reflects its well-
established franchise given its role as the financial agent of
Buenos Aires City, its experienced management team, its healthy
capitalization and liquidity metrics as well as its recurrent
earnings generation capacity.
On Nov. 30, Moody's changed Cidudad's ratings outlook to positive
from stable to reflect Moody's expectation that Argentina's policy
stance will become more supporting of banks' creditworthiness in
the aftermath of the presidential elections. The new government
aims to install new central bank leadership, make inflation
reduction a key policy goal, and legally establish central bank
independence, and, most importantly, seek a resolution with
sovereign bondholders that would allow the country to tap
international markets again. These expected enhancements will
improve investor confidence and business environment for banks.
The ratings could face upward pressure if the operating
environment improves, which would positively affect the entity's
business prospects and/or if the sovereign is upgraded. A return
to a stable outlook, or other negative rating actions, could arise
from a business-as-usual policy scenario in which international
reserves continue to decline and government debt ratios continue
to increase, affecting the bank's business prospects.
Banco de la Ciudad de Buenos Aires is headquartered in Buenos
Aires, with assets of ARS 50.5 billion and equity of ARS 6.2
billion as of Sept. 2015.
BUENOS AIRES: Moody's Affirms Issuer Rating at Caa2, Outlook Pos.
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Moody's Latin America Agente de Calificacion de Riesgo has changed
the outlooks on all Argentine provinces and municipalities issuer
ratings --on both local and in foreign currencies- to positive
from stable while affirming all their current issuer and debt
ratings --on both Global/National scales and in local and in
foreign currency. This rating action follows Moody's Investors
Service outlook change to positive from stable on Argentina's Caa1
issuer rating announced Nov. 24, 2015.
RATINGS RATIONALE
The ratings affirmation coupled with the outlook change to
positive from stable on the rated provinces and municipalities in
Argentina follows the similar rating action on Argentina's
sovereign bonds and issuer ratings -- both in local and foreign
currency and in local and foreign legislation -- and reflects the
very close economic and financial linkages that exist between
Argentina's government and Argentine sub-sovereigns, as well as
the maintenance of their key credit strength and challenges.
ISSUERS AND RATINGS AFFECTED
The outlook of these issuers was changed to positive from stable
while affirming their current ratings:
-- Province of Buenos Aires: foreign currency issuer and debt
ratings affirmed at Caa2/B1.ar (on Global/Argentina's
national scales, respectively). Local currency issuer and
debt ratings affirmed at Caa1/Baa3.ar (on Global/Argentina's
national scales, respectively).
-- Province of Chubut: local currency issuer and debt ratings
affirmed at Caa1/Baa2.ar (on Global/Argentina's national
scales, respectively). The local currency debt ratings of
BODIC 1 and BODIC 2 Notes affirmed at Caa1/Baa1.ar (on
Global/Argentina's national scales, respectively).
-- Province of Cordoba: foreign currency issuer ratings
affirmed at Caa2/B1.ar (on Global/Argentina's national
scales, respectively). Local currency issuer and debt
ratings affirmed at Caa1/Baa3.ar (on Global/Argentina's
national scales, respectively).
-- Province of Mendoza: foreign currency issuer and debt
ratings affirmed at Caa2/B1.ar (on Global/Argentina's
national scales, respectively). Local currency issuer and
debt ratings affirmed at Caa1/Baa3.ar (on Global/Argentina's
national scales, respectively).
-- City of Buenos Aires: foreign currency debt ratings affirmed
at (P)Caa2/B1.ar (on Global/Argentina's national scales,
respectively). Local currency debt ratings affirmed at
Caa1/Baa1.ar (on Global/Argentina's national scales,
respectively).
-- Municipality of Cordoba: local currency issuer and debt
ratings affirmed at Caa1/Baa3.ar (on Global/Argentina's
national scales, respectively). The local currency debt
ratings of Series 1 and Series 2 Bonds affirmed at
Caa1/Baa2.ar (on Global/Argentina's national scales,
respectively).
-- Municipality of Rio Cuarto: local currency issuer and debt
ratings affirmed at Caa1/Ba1.ar (on Global/Argentina's
national scales, respectively).
-- Province of Chaco: local currency issuer and debt ratings
affirmed at Caa2/Ba3.ar (on Global/Argentina's national
scale, respectively).
-- Province of Formosa: local currency issuer and debt ratings
affirmed at Caa2/Ba3.ar (on Global/Argentina's national
scale, respectively).
WHAT COULD CHANGE THE RATING UP/DOWN
Given the strong macroeconomic and financial linkages between the
Government of Argentina's and Sub-sovereigns economic and
financial ratings, and upgrade of Argentina's sovereign bonds
ratings and/or the improvement of the country' operating
environment could lead to an upgrade of the sub-sovereigns
ratings. Regarding the Provinces of Chaco and Formosa, further
improvements in their economic fundamentals --mainly in the growth
of their own-source revenues-- could also exert upward pressure in
these two provinces in particular.
Conversely, a downgrade in Argentina's bond ratings and/or further
systemic deterioration or idiosyncratic risks arising in the rated
issuers could continue to exert downward pressure on most of the
ratings assigned and could translate in to a downgrade in the near
to medium term.
BUENOS AIRES: Moody's Affirms Caa2 FC Debt Ratings, Outlook Pos.
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Moody's Investors Service has changed the outlooks of three
Argentine provinces and one municipality issuer ratings --on both
local and in foreign currencies- to positive from stable while
affirming their current issuer and debt ratings --on both
Global/National scales and in local and in foreign currency. This
rating action follows Moody's Investors Service outlook change to
positive from stable on Argentina's Caa1 issuer rating announced
Nov. 24, 2015.
RATINGS RATIONALE
The ratings affirmation coupled with the outlook change to
Positive from Stable on three provinces and on one municipality in
Argentina follows the similar rating action on Argentina's
sovereign bonds and issuer ratings -both in local and foreign
currency and in local and foreign legislation -- and reflects the
very close economic and financial linkages that exist between
Argentina's government and Argentine sub-sovereigns, as well as
the maintenance of their key credit strength and challenges.
ISSUERS AND RATINGS AFFECTED
The outlook of these issuers was changed to positive from stable
while affirming their current ratings:
-- Province of Buenos Aires: foreign currency debt ratings
affirmed at Caa2 (on Global Scale).
-- Province of Cordoba: foreign currency debt ratings affirmed
at Caa2 (on Global Scale).
-- Province of Mendoza: foreign currency debt ratings affirmed
at Caa2 (on Global Scale).
-- City of Buenos Aires: foreign currency debt ratings affirmed
at Caa2 (on Global Scale).
WHAT COULD CHANGE THE RATING UP/DOWN
Given the strong macroeconomic and financial linkages between the
Government of Argentina's and Sub-sovereigns economic and
financial ratings, and upgrade of Argentina's sovereign bonds
ratings and/or the improvement of the country' operating
environment could lead to an upgrade of the sub-sovereigns
ratings.
Conversely, a downgrade in Argentina's bond ratings and/or further
systemic deterioration or idiosyncratic risks arising in the rated
issuers could continue to exert downward pressure on most of the
ratings assigned and could translate in to a downgrade in the near
to medium term.
CAJA DE: Moody's Affirms GLC/NSR IFS at B2/Aa1.ar, Outlook Pos.
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Moody's Latin America Agente de Calificacion de Riesgo affirmed
the global local currency (GLC) and national scale (NS) insurance
financial strength (IFS) ratings of 14 insurers and 7 reciprocal
guarantors in Argentina. The outlook of 6 insurers was changed to
positive from stable, while the outlook of the other 8 insurers
and all 7 reciprocal guarantors remains stable. In the same
rating action, Moody's placed on review for upgrade ACE Seguros'
ratings. See a complete list of companies and ratings/outlooks
below.
This portfolio-wide rating action on the Argentine insurers and
reciprocal guarantors follows Moody's Investors Service's recently
announced outlook change to positive, from stable, of Argentina's
local-currency and foreign-currency Caa1 sovereign bond ratings on
24 November 2015 (see press release titled "Moody's changes
outlook on Argentina's Caa1/(P)Caa2 ratings to positive from
stable; Caa1/(P)Caa2 ratings affirmed").
RATINGS RATIONALE
Moody's said the rating affirmation and change to a positive
outlook for the 6 insurers reflect the positive outlook on the
sovereign rating, given their relatively high sovereign investment
exposure and the close linkages between the credit profiles of the
insurers and the sovereign, meaning that an upgrade of the
country's sovereign bond's rating would benefit the companies'
financial fundamentals.
The rating agency said that the rating affirmation and stable
outlook for the remaining 8 insurers and all 7 of the reciprocal
guarantors reflects their overall stable recent and projected
credit profiles. Moreover, given that the sovereign investment
exposure of these entities is relatively low, an upgrade of
Argentina's sovereign bond rating would not necessarily translate
into meaningfully improved credit profiles for those entities.
Concerning ACE Seguros' ratings, Moody's said that the review for
upgrade will focus on the likely improvement in the credit
fundamentals and increased benefit of parental support from the
company's ultimate parent company - ACE Limited - through its
pending combination with The Chubb Corporation, a transaction that
is expected to close in Q1 2016. The rating agency went on to say
that ACE Seguros' credit profile is also sensitive to Argentina's
positive outlook, implying that the company's financial
fundamentals would benefit from an upgrade of the country's
sovereign bond's rating.
In addition to company-specific rating drivers, the GLC and NS
ratings of Argentina's rated insurers and reciprocal guarantors
could be upgraded if the Argentine sovereign rating is upgraded
and/or if the country's insurance operating environment improves.
Conversely, a deterioration in Argentina's sovereign rating and/or
insurance operating environment could result in a downgrade of the
companies' ratings.
1) These 6 insurers' GLC/NSR IFS ratings have been affirmed.
Their outlooks have been changed to positive from stable:
-- Caja de Seguros: B2/Aa1.ar;
-- La Segunda ART: B3/A1.ar;
-- La Segunda Compan¡a de Seguros de Personas: B3/A1.ar;
-- La Segunda Coop. Ltda. de Seguros Generales: B3/A1.ar;
-- Provincia Seguros: Caa1/Baa1.ar;
-- San Cristobal Sociedad Mutual de Seguros Generales:
B3/A1.ar.
2) These 8 insurers' and 7 reciprocal guarantors' GLC/NSR IFS
ratings have been affirmed with stable outlook:
-- Allianz Argentina Compan¡a de Seguros: B1/Aaa.ar;
-- BBVA Consolidar Seguros: B1/Aaa.ar;
-- Chubb Argentina de Seguros: B1/Aaa.ar;
-- Fianzas y Credito: B3/A2.ar;
-- Generali Argentina Compania de Seguros: B3/A3.ar;
-- HSBC - Seguros de Vida: B1/Aaa.ar;
-- QBE Seguros La Buenos Aires: B1/Aaa.ar;
-- Royal & Sun Alliance Seguros (Argentina): B1/Aaa.ar;
-- Acindar Pymes SGR: B2/Aa3.ar;
-- Affidavit SGR: B3/A3.ar;
-- Aval Federal SGR: B3/A2.ar;
-- Aval Rural SGR: B2/Aa3.ar;
-- Fondo de Garant¡as Buenos Aires (FOGABA): B3/A2.ar;
-- Garantia de Valores SGR: B2/Aa3.ar;
-- V¡nculos SGR: B3/A3.ar.
3) These insurer's GLC/NS IFS ratings were placed on review for
upgrade:
-- ACE Seguros: B2/Aa2.ar.
Moody's insurance financial strength ratings are opinions of the
ability of insurance companies to pay punctually senior
policyholder claims and obligations.
The principal methodology used in rating ACE Seguros S.A., Acindar
Pymes S.G.R., Allianz Argentina Compania de Seguros S.A.,
Affidavit S.G.R., Aval Federal SGR, Aval Rural S.G.R., BBVA
Consolidar Seguros, Caja de Seguros S.A., Chubb Argentina de
Seguros, Fianzas y Credito S.A. Cia. de Seguros, Fondo Garantias
De Buenos Aires, Garantia de Valores SGR, Generali Argentina
Compania de Seguros S.A., La Segunda ART, La Segunda Coop. Ltda
Seguros, Provincia Seguros, QBE Seguros La Buenos Aires S.A., San
Cristobal Seguros Generales, Royal & Sun Alliance Seguros
(Argentina), and Vinculos SGR was Global Property and Casualty
Insurers published in August 2014. The principal methodology used
in rating HSBC-Seguros de Vida (Argentina) S.A. and La Segunda
Compania de Personas S.A. was Global Life Insurers published in
August 2014.
Moody's National Scale Credit Ratings (NSRs) are intended as
relative measures of creditworthiness among debt issues and
issuers within a country, enabling market participants to better
differentiate relative risks. NSRs differ from Moody's global
scale credit ratings in that they are not globally comparable with
the full universe of Moody's rated entities, but only with NSRs
for other rated debt issues and issuers within the same country.
NSRs are designated by a ".nn" country modifier signifying the
relevant country, as in ".za" for South Africa.
HIDROELECTRICA EL: Moody's Affirms 'Caa1/Baa2.ar' CFR, Outlook Pos
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Moody's Latin America Agente de Calificacion de Riesgo S.A. has
changed to positive from stable the rating outlook on various
infrastructure companies operating in Argentina as a result of the
outlook change to positive taken on the Argentine sovereign rating
on Nov. 24.
RATINGS RATIONALE
Moodys changed the rating outlook to positive from stable and
affirmed the current ratings on various infrastructure companies
operating in Argentina. The outlook change for the affected
companies follows the outlook change of Argentine government's
Caa1 issuer rating outlook to positive from stable on November 24,
2015 and reflects the exposure and linkages that these companies
have to the Argentine government credit quality.
Issuers and ratings included in this action are:
1) Hidroelectrica El Chocon S.A.
Corporate Family rating: Caa1/Baa2.ar ratings affirmed;
outlook changed to positive.
2) Genneia S.A.
USD156 million Senior Secured Class 2 and 3 Notes,
USD60 million Senior Unsecured Class 11 and Class 13 Notes
and Corporate Family Rating: Caa1/Baa2.ar ratings affirmed;
outlook changed to positive.
3) Empresa Distribuidora de Electricidad de Salta S.A. (EDESA)
USD63.00 million Amortizing Notes: Caa1/Baa3.ar ratings
affirmed; outlook changed to positive.
4) Generacion Independencia S.A. (GISA)
ARS 110 million Senior Unsecured Class 2 and Class 3 Notes
and Corporate Family rating: Caa1/Baa2.ar ratings affirmed;
outlook changed to positive.
5) Empresa Provincial de Energia de Cordoba (EPEC):
USD565 million Senior Secured Notes and Corporate Family
rating: Caa1/Ba1.ar ratings affirmed; outlook changed to
positive.
6) Aeropuertos Argentina 2000 S.A. (AA2000)
Corporate Family Rating, USD 300 million 2020 Senior
Unsecured Notes and Class "A" and Class "C" Senior Unsecured
Local Notes: Caa1/Baa1.ar ratings affirmed; outlook changed
to positive.
7) Transportadora de Gas del Sur S.A. (TGS):
USD61.6 million Senior Unsecured Class 1 2017 1 Notes;
USD191 million Senior Unsecured Class 1 2020 Notes:
Caa1/Baa1.ar ratings affirmed; outlook changed to positive.
The principal methodology used in rating Empresa Distribuidora de
Electricidad Salta and Empresa Provincial de Energia de Cordoba
was Regulated Electric and Gas Utilities published in December
2013. The principal methodology used in rating Hidroelectrica El
Chocon S.A., Generacion Independencia S.A. and Genneia S.A. was
Unregulated Utilities and Unregulated Power Companies published in
Oct. 2014. The principal methodology used in rating
Transportadora de Gas del Sur S.A. was Natural Gas Pipelines
published in Nov. 2012. The principal methodology used in rating
Aeropuertos Argentina 2000 S.A. was Privately Managed Airports and
Related Issuers published in Dec. 2014.
===========
B R A Z I L
===========
BRAZIL: GDP Slips for Third Consecutive Quarter
-----------------------------------------------
Paulo Trevisani at Dow Jones Newswires reports that Brazil's
recession continued in the third quarter, killing jobs and
shutting down businesses amid political turbulence that is pushing
back forecasts of a recovery.
Gross domestic product contracted 1.7% in the third quarter from
the second, according to Brazilian statistics agency IBGE, the
third consecutive quarter-on-quarter contraction, according to Dow
Jones Newswires. GDP shrank 4.5% from the third quarter of 2014.
There is little relief in sight, as economists surveyed by
Brazil's central bank expect the economy to shrink by 3.19% this
year and contract by 2.04% in 2016, the report notes.
The report relays that the statistics agency revised its figures
for the second quarter, showing a contraction of 3.0% from a year
earlier, from the previously reported figure of 2.6%.
The agricultural sector shrank 2.4% in the third quarter from the
second, and 2.0% from the third quarter of 2014. Industry shrank
1.3% in the quarter and 6.7% from a year earlier, investment
contracted 4.0% from the second quarter and 15.0% from a year
earlier, and services shrank 1.0% in the quarter and 2.9% in the
year, the report discloses.
The third-quarter GDP performance showed that the vital-services
sector is shrinking more rapidly, after contracting a revised 1.8%
in the second quarter from a year earlier, the report notes.
Brazil's service sector, including beauty salons, banks and
realtors, employs more than any other sector in the country by a
wide margin, and represents about 60% of GDP, the report relays.
Dow Jones Newswires says that much of the slowdown can be pinned
on a political crisis that has stalled the passage of economic
reform proposals in Congress. President Dilma Rousseff has grown
increasingly unpopular, with approval ratings of about 10% in
recent polls, making it harder for her to convince lawmakers to
support austerity measures, the report notes.
The prolonged downturn, paired with 12-month inflation at 10% and
unemployment at 9%, has reduced consumers' buying power, making
shoppers cut back on everything from hairdressers to restaurants
to Christmas purchases as they see the economy unravel, the report
discloses.
"Presents for kids and grandkids are out of the question" this
Christmas, said Eni dos Santos Guirra, 57 years old, at her
coconut stand on a shopping street in Taguatinga, a working-class
suburb of Brasilia, the report relays.
Ms. Guirra said that until last year she used to sell 600 chilled
coconuts a week, their tops hacked off with a machete for
passersby to drink the water inside them, but is now down to less
than a hundred a week despite the recent sweltering heat.
"Honestly, my friend, business is a catastrophe, a total disaster
. . . If I don't sell, I can't buy" presents, she said, the report
adds.
BRAZIL: Fitch Says Outlook for Banks Remains Negative
-----------------------------------------------------
Brazil's challenging operating environment and economic recession
are driving Fitch Ratings' negative outlook on the country's
banking sector. Higher interest rates and inflation, combined with
further economic slowdown and rising unemployment will materially
pressure asset quality metrics, credit costs and, ultimately,
overall earnings. Local banks will likely further constrain risk
appetites in 2016. Together, these factors will increase credit
pressure across each of Brazil's bank segments.
Fitch's October downgrade of Brazil's sovereign rating (long-term
IDR BBB-/ Negative) is a driver of current downward rating
pressure on nearly four of five Fitch-rated Brazilian banks. The
sovereign's rating constrains 79% of the banks operating in the
country.
Asset quality in the Brazilian banking system remains stronger
than its last peak weakness in 2011; however, the deterioration of
Brazil's economy, especially during second-half 2015, is driving
up nonperforming loans (NPLs) in many portfolios. Lower corporate
cash flow generation and cautious retail borrowers will continue
the weakening trend in asset quality.
Among the three large federal government-owned banks (BNDES, Banco
do Brasil and Caixa), Caixa remains the most vulnerable bank as
its high credit growth during the last four years (averaging 35% a
year) will pose challenges as its loan book matures.
The large private bank segment will be affected by higher credit
expenses, likely equally across retail and corporate borrowers.
Among small and midtier banks, those that are highly dependent on
a single product line or client segment will likely suffer from
the challenging operating environment facing many of their small
and medium enterprise customers, as well as from increased
competition from larger banks.
On a positive note, the liquidity positioning and capitalization
levels of Brazil's banks are good. The weakening economic
conditions have slowed several years of very high loan growth,
which resulted in a buildup of liquidity at many banks. While
withdrawals of savings have begun to pick up, time deposits and
other deposit-like instruments, such as LCIs and LCAs (real-estate
and agricultural letters of credit, respectively), have
diversified funding sources. Finally, recent changes in banks'
retail loan mix, such as longer tenor payroll lending, and strong
provisioning by some banks in anticipation of weaker macro
conditions should help banks offset the downward effect on
earnings from rising NPLs. As of September 2015, total provisions
covered a healthy 68% of impaired loans across the Brazilian
banking system.
Brazilian bank ratings will remain very sensitive to further
sovereign rating pressure. Further economic deterioration could
also trigger downward rating actions. The weak operating
environment likely will improve with further resolution of
corporate investigations -- including Petrobras and recent
developments involving Banco BTG Pactual. Such investigations can
significantly lower expectations for loan growth and constrain
risk appetites across markets. Those banks that have established a
greater diversity of products and have boosted noncredit-related
revenues through more fee-based products should be better
positioned to withstand a continuation of the current economic
trajectory.
GENERAL SHOPPING: Fitch Cuts LC Issuer Default Ratings to 'CC'
--------------------------------------------------------------
Fitch Ratings has downgraded the ratings of General Shopping
Brasil S.A. (GSB) as well as those of its subsidiaries.
The rating downgrade reflects GSB's very high levels of credit
risk. Fitch views GSB's liquidity as unsustainable due to its high
financial leverage. Fitch's rating case estimates GSB's 2015
EBITDA, cash interest paid, and cash tax paid at BRL198 million;
BRL258 million; and BRL55 million, resulting in funds flow from
operations (FFO) of negative BRL116 million. The company's total
cash flow from operations for 2015 is estimated to be negative at
around BRL142 million. Without a material change in the company's
capital structure and/or Brazil's business environment - including
foreign exchange FX volatility - GSB's limited capacity to cover
interest expenses and taxes with its operational cash flow is
expected to result in a deterioration of its liquidity position
during 2016.
The ratings have been removed from Rating Watch Negative.
KEY RATING DRIVERS
High Leverage Driven by FX Exposure: GSB's capital structure is
viewed as untenable due to excessive financial leverage. The
company's high financial leverage is expected to remain under
pressure during the next quarters driven by GSB's FX exposure. All
of the company's cash flow, measured as EBITDA, is generated in
local currency, Brazilian reais, while approximately 55% to 60% of
its total debt is U.S. dollar-denominated. GSB's last 12-month
period ended Sept. 30, 2015 (LTM September 2015) saw EBITDA of
BRL178 million, and total adjusted debt of BRL2.2 billion. GSB had
net total debt-to-EBITDA of 11.3x as of Sept. 30, 2015.
Efforts to Reduce Leverage Incorporated: GSB executed several
transactions targeting toward reduce its consolidated U.S. dollar-
denominated debt during the second half of 2015 (2H15). These
transactions included a tender offer for a portion of its USD250
million perpetual notes, an equity injection, and some assets
sales. However, the final impact of these efforts on the company's
capital structure is being offset by the further devaluation of
the local currency against the U.S. dollar and increasing costs of
funding in the local market. Fitch's base case forecast considers
the company's financial net leverage to be around 9x during 2015-
2016.
Quality Assets and Subordination Incorporated in Debt Recovery: As
of LTM September 2015, GSB's total assets were valued at an
estimated BRL3 billion (approximately USD769 million considering
FX at 3.9x), with encumbered and unencumbered assets representing
approximately 80% and 20%, respectively, of the total assets
value. The Recovery Rating (RR) of 'RR2' for the senior perpetual
notes reflects the above-average recovery prospects in an event of
default. The 'RR5' for the subordinated perpetual notes reflects
poor recovery prospects in an event of default. Fitch recovery
analysis for the senior perpetual notes resulted in higher values
but it has been capped at 'RR2' considering that some
jurisdiction's issues could affect the recovery prospects.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for GSB's ratings
include:
-- Total net leverage consistently around 9x during 2015-2016;
-- Interest coverage (EBITDA/gross interest expenses)
consistently around 0.75x during 2015-2016;
-- Negative FCF generation during 2015-2016.
RATING SENSITIVITIES
The following factors may have a negative impact on GSB's ratings:
Future developments that may, individually or collectively, lead
to a negative rating action include further deterioration of GSB's
liquidity position, execution of a distressed debt exchange, and,
if the company defaults on its scheduled amortization/interest
payments and/or formally files for bankruptcy protection.
The following factors may have a positive impact on GSB's ratings:
Future developments that may, individually or collectively, lead
to a positive rating action include material improvement in the
company's liquidity and financial leverage through some
combination of the following actions: equity injection, asset
sales with limited impact on cash flow generation, and lower FX
exposure.
LIQUIDITY
Weakening Liquidity: GSB's FCF is expected to remain negative due
to excessive cash interest payments during 2015-2016. GSB's high
leverage has resulted in excessive cash interest payments and
declining interest coverage. GSB has a cash position and short-
term debt of BRL175 million and BRL171 million, respectively, and
approximately BRL589 million (USD151 million) in unencumbered
assets as of Sept. 30, 2015. On Sept. 8, 2015, the company
exercised its right to defer the payment of interest under its
USD150 million 10% perpetual subordinated notes. The interest
payment deferral does not constitute an event of default under the
indenture; however, it points to GSB's choice to preserve
liquidity in this stressful environment.
FULL LIST OF RATING ACTIONS
Fitch has downgraded GSB's ratings as follows:
-- Foreign currency Issuer Default Rating (IDR) to 'CC' from
'CCC';
-- Local currency IDR to 'CC' from 'CCC';
-- National Scale rating to 'CC(bra)' from 'CCC(bra)'.
General Shopping Finance Limited (GSF):
-- USD250 million perpetual notes to 'CCC/RR2' from 'B-/RR2'.
General Shopping Investment Limited (GSI):
-- USD150 million subordinated perpetual notes to 'C/RR5' from
'CCC-/RR5'.
The ratings were removed from Rating Watch Negative.
HSBC BANK: S&P Retains 'BB+/B' ICRs Still on CreditWatch Negative
-----------------------------------------------------------------
Standard & Poor's Ratings Services said that its 'BB+/B' issuer
credit ratings on HSBC Bank Brasil S.A. remain on CreditWatch,
where they had been placed with negative implications on Sept. 10,
2015.
The ratings on HSBC Brasil reflects its "adequate" business
position, "weak" capital and earnings, "adequate" risk position,
"average" funding, and "strong" liquidity. The stand-alone credit
profile (SACP) is 'bb'.
Following the announcement on Aug. 3, 2015, that HSBC Holdings PLC
had reached an agreement to sell its Brazilian subsidiary HSBC
Bank Brasil to Banco Bradesco S.A., S&P changed the group status
on HSBC Brasil to "nonstrategic" from "moderately strategic" to
HSBC Holdings. The group status change did not affect the ratings
on HSBC Brasil because S&P views the bank to be in a "positive
transition phase," as S&P's criteria define the term, as it awaits
regulatory approval from the Central Bank of Brazil to have its
ownership changed to Bradesco. S&P therefore applies one-notch
uplift from its SACP of 'bb' to reflect this transition period.
RIO OIL: Fitch Puts Note Issuances on Watch Negative
----------------------------------------------------
Fitch Ratings has placed the following Rio Oil Finance Trust
issuances on Rating Watch Negative:
-- USD2 billion series 2014-1 notes 'BB+';
-- BRL 2.4 billion series 2014-2 special indebtedness interests
to 'AAsf(bra)';
-- USD1.1 billion series 2014-3 notes 'BB+'.
The ratings address timely payment of interest and principal on a
quarterly basis.
The Negative Watch reflects the potential impact the waiver
conditions approved by bondholders might have on the transaction's
coverage levels in case some of the milestones are not met within
the waiver period. Milestone completion would subordinate other
obligations to the transaction debt service and partially decrease
the step-up coupon, lessening the impact of the initial waiver
conditions.
The issuances are backed by the royalty flows owed by oil
concessionaires, predominantly operated by Petroleo Brasileiro
S.A. (Petrobras), to the government of the state of Rio de Janeiro
(RJS), who assigned 100% of the flows to RioPrevidencia (RP), the
state's pension fund.
KEY RATING DRIVERS
Approval of Waiver Proposal: After the breach of the forward-
looking DSCR trigger, bondholders approved a waiver proposal which
consists, among other things, of a step-up coupon of 300 bps. This
step-up coupon might be decreased by 100 bps in case three
milestones are reached. The milestones intend to make
contributions to FECAM subordinate to the transaction, and to
restructure the amortization schedule of series 2014-2 and the
federal debt.
The initial waiver conditions increase transaction leverage, which
makes the transaction more dependent on production increases and
oil price recovery. However, if the milestones are met the impact
of this increase in leverage would be mitigated. If the milestones
are not met the reduction in coverage levels might lead to a
negative rating action.
Future Expected Production Increases at Risk: Impact of revised
Petrobras production plan on Rio de Janeiro fields is yet to be
assessed, but continued depressed oil prices may further impact
production expectations as Petrobras' investment plan released on
June 29, 2015 was based on an oil price of USD60, translating into
lower than expected DSCR levels. Nevertheless Fitch does not
expect this to have a large impact on the short-term production
levels.
Potential Increase in Political Risk: Retention of part of the
excess cash flows in combination with the State's weaker credit
profile and heavier debt service decrease the sponsor's incentive
to support the transaction and increase the exposure of the
transaction to political risk.
RATING SENSITIVITIES
Failure to meet the milestones contemplated in the waiver might
lead to a negative rating action on the transaction ratings.
Additionally, the ratings are capped by the credit quality of
Petrobras as the main obligor of the flows backing this
transaction and to Brazil's sovereign and country ceiling ratings.
The transaction is exposed to price and volume risk related to oil
production. Further declines in prices or production levels
significantly below expectations may trigger downgrades.
Although the transaction rating is not directly linked to the
originator's rating, in case of considerable downgrade of the
state's rating, the rating of the transaction may be impacted
negatively.
Additionally, the ratings are sensitive to the rating of Banco do
Brasil as a direct counterparty to the transaction.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation
to this rating action.
SAMARCO MINERACAO: Fitch Cuts Issuer Default Ratings to 'BB-'
-------------------------------------------------------------
Fitch Ratings has downgraded the long-term foreign currency (L-T
FC) and local currency Issuer Default Ratings (IDRs) and senior
unsecured debt ratings for Samarco Mineracao S.A. (Samarco) to
'BB-' from 'BBB', and National long-term ratings to 'A(bra)' from
'AAA(bra)'. The Rating Watch on Samarco's ratings has been revised
to Evolving from Negative. A full list of rating actions follows
at the end of this release.
The downgrade of Samarco's ratings reflects the likely
deterioration in the company's credit profile due to the lack of
operating cash flow generation. This is due to the stoppage of
pellet production of around 30 million tonnes annually, which is
likely to be for an extended period of time. The Rating Watch
Evolving reflects possible upside to the ratings should Samarco's
shareholders, Vale S.A. (Vale, L-T FC IDR 'BBB+'/Rating Watch
Negative) or BHP Billiton Plc/Ltd (BHPB, L-T IDR 'A+'/Negative
Outlook), or both, provide significant financial assistance to the
company to help maintain its financial profile following
resolution of all operational and environmental claims, etc.
Absent financial support from shareholders, the uncertainties
regarding the ultimate potential size of fines and final clean-up
and operational start-up costs, could possibly lead to Samarco
facing further rating downgrades.
KEY RATING DRIVERS
Extended Impact on Production
The ratings downgrade reflects Fitch's expectation that Samarco's
operations will not resume normally for an extended period of
time, most likely of around two years. The company publicly
announced a number of interim cash flow generation measures, such
as the sale of energy, that are expected to cover its operating
costs in the short term. Samarco is currently in compliance with
its net debt/EBITDA financial covenant of 4.0x related to USD1.6
billion of its pre-export loans. Due to the absence of cash flow
generation, this covenant may be breached during the first half of
2016. Fitch assumes that covenant waivers will be received from
the banks.
Additional Liquidity May be Required
Fitch considers Samarco's liquidity position as adequate to
service its debt and interest obligations over 2016 and 2017,
notwithstanding further large financial penalties in addition to
the BRL1 billion (USD263 million) emergency clean-up and social
responsibility fund created in November after discussions with the
governments of the affected states of Minas Gerais and Espirito
Santo. In the event that additional penalties are levied on the
company and with a USD1 billion debt repayment due in 2018,
additional liquidity may possibly be required from its
shareholders.
Shareholder Commitment to Date
Tangible support to date offered by Vale and BHPB include, but
were not limited to, personnel, operational, logistical,
materials, technical and medical support alongside the
cancellation of dividends to be paid to the shareholders. Vale and
BHPB also committed to supporting Samarco's BRL1 billion emergency
clean-up and social responsibility fund, although Fitch
anticipates the cost will be met directly by Samarco.
Fitch's Base Case:
Fitch continues to assume that Vale, BHPB or both, may provide
sufficient support to ensure Samarco returns to production. At
this stage, the potential total of fines and clean-up costs are
difficult to quantify. Previous precedents in Brazil for
environmental disasters involving oil companies with severe
environmental damage during the last few years have initially
begun with charges being filed in the billions, but finally
resulting in smaller settlements.
Business Interruption Insurance
Samarco reports significant insurance coverage for property
damage, business interruption and civil liabilities totaling over
USD1.1 billion combined based on declared value at risk. Business
interruption covers one full year of operations. Fitch has assumed
less than USD600 million of insurance proceeds being received
during 2016, significantly lower than the total coverage stated.
Fitch has assumed the business interruption insurance is not
contingent upon the findings of the investigation into the cause
of the dam accident.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Samarco
include:
-- Readily available cash balance of approximately USD700 million
at YE2015; USD235 million at YE2016 (excluding insurance
proceeds); USD430 million at YE2017;
-- Business interruption insurance proceeds of USD570 million in
2016;
-- Energy sale of 2,300 MWh in 2016 generating USD93 million in
revenues;
-- Assuming that covenant breaches are waived, pre export loan
repayment schedule met until USD1 billion due in 2018, at
which point the company is expected to resume operations
enabling successful refinancing;
-- Cost assumptions include salaries, some taxes (CFEM),
interest, fees, overheads, the announced environmental fund
and penalties.
RATING SENSITIVITIES
Punitive fines, penalties and clean-up/repair costs beyond
Samarco's financial ability to pay, absent shareholder support,
may lead to a downgrade. A slower than anticipated resumption of
operations that deteriorates Samarco's liquidity position in
relation to its short term debt commitments, and inability to
execute cash flow generation measures announced in the interim,
could also lead to a downgrade absent shareholder support.
Forms of shareholder support may lead to varying degrees of an
upgrade.
LIQUIDITY
Following the repayment of USD400 million in pre export loans due
at the end of November 2015, Samarco's total debt of USD3.9
billion comprised of USD1.6 billion in pre-export loans and USD2.3
billion of bonds. The USD1.6 billion of pre-export loans are
mainly held by six different banks. The pre-export loans have a
net debt/LTM EBITDA covenant of 4.0x with USD860 million of pre-
export loans being tested on a quarterly basis, and the remaining
USD740 million being tested semi-annually.
Samarco reports that complied with all covenants relating to its
debt as of November 25, 2015. Fitch projects that the net
debt/EBITDA covenant of 4.0x may be breached at the Jun. 30, 2016
test date and assumes that covenant waivers will be agreed with
the banks. Including assumed insurance receipts, the company has
stated it has the liquidity to meet all of its debt obligations in
a timely manner, up until the USD1 billion pre-export loan
repayments due in 2018 by which point it assumes a resumption of
operations. As of Jun. 30, 2015 Samarco had cash and marketable
securities of USD711 million.
FULL LIST OF RATING ACTIONS
Fitch downgrades the following:
Samarco Mineracao S.A. (Samarco)
-- Local currency long-term IDR to 'BB-' from 'BBB'; Rating Watch
revised to Evolving from Negative;
-- Foreign currency long-term IDR to 'BB-' from 'BBB'; Rating
Watch revised to Evolving from Negative;
-- National long-term rating to 'A(bra)' from 'AAA(bra)'; Rating
Watch revised to Evolving from Negative;
-- Senior unsecured debt rating to 'BB-' from 'BBB'; Rating Watch
revised to Evolving from Negative.
==========================
C A Y M A N I S L A N D S
==========================
CLEARGATE GLOBAL: Commences Liquidation Proceedings
---------------------------------------------------
On Oct. 21, 2015, the sole shareholder of Cleargate Global
Partners, Ltd. resolved to voluntarily liquidate the company's
business.
Only creditors who were able to file their proofs of debt by
Dec. 1, 2015, will be included in the company's dividend
distribution.
The company's liquidator is:
Mourant Ozannes Cayman Liquidators Limited
c/o Jo-Anne Maher
Telephone: (345) 814-9255
Facsimile: (345) 949-4647
94 Solaris Avenue, Camana Bay
P.O. Box 1348 Grand Cayman KY1-1108
Cayman Islands
ETOILE INTERNATIONAL: Creditors' Proofs of Debt Due Dec. 7
----------------------------------------------------------
The creditors of Etoile International Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
LAURA ENTERPRISE: Creditors' Proofs of Debt Due Dec. 7
------------------------------------------------------
The creditors of Laura Enterprise Ltd. are required to file their
proofs of debt by Dec. 7, 2015, to be included in the company's
dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
LAURA INVESTMENTS: Creditors' Proofs of Debt Due Dec. 7
-------------------------------------------------------
The creditors of Laura Investments Ltd. are required to file their
proofs of debt by Dec. 7, 2015, to be included in the company's
dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
MOMBASA INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
--------------------------------------------------------
The creditors of Mombasa Investment Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
NORDISK INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
--------------------------------------------------------
The creditors of Nordisk Investment Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
PELEO & TETI: Creditors' Proofs of Debt Due Dec. 7
--------------------------------------------------
The creditors of Peleo & Teti Trading Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
PELLICANO INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
----------------------------------------------------------
The creditors of Pellicano Investment Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
QUADRELLA INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
----------------------------------------------------------
The creditors of Quadrella Investment Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
SCOTTDALE INVESTMENT: Creditors' Proofs of Debt Due Dec. 7
----------------------------------------------------------
The creditors of Scottdale Investment Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
TOGIU INTERNATIONAL: Creditors' Proofs of Debt Due Dec. 7
---------------------------------------------------------
The creditors of Togiu International Ltd. are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
TREASURE COVE: Creditors' Proofs of Debt Due Dec. 7
---------------------------------------------------
The creditors of Treasure Cove Investment Ltd. are required to
file their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
VEFAR INVESTMENTS: Creditors' Proofs of Debt Due Dec. 7
-------------------------------------------------------
The creditors of Vefar Investments Holding are required to file
their proofs of debt by Dec. 7, 2015, to be included in the
company's dividend distribution.
The company commenced wind-up proceedings on Oct. 22, 2015.
The company's liquidator is:
Morval Bank & Trust Cayman Ltd.
Telephone: +1 (345) 949-9808
P.O. Box 30622 Grand Cayman KY1-1203
Cayman Islands
===================
C O S T A R I C A
===================
AERIS HOLDINGS: Moody's Assigns Ba2 Rating on US$127MM Sr. Notes
----------------------------------------------------------------
Moody's Investors Service has assigned a definitive rating of Ba2
to Aeris Holdings Costa Rica S.A. de C.V.'s senior notes issuance
of US$127 million. The outlook is stable.
On Sept. 18, 2015, Moody's assigned a provisional (P) Ba2 rating
based upon draft documentation. The definitive Ba2 rating is
based on our review of final documentation and our confirmation
that the final terms and conditions are not materially different
from the drafts reviewed in conjunction with the previously
assigned provisional rating.
RATINGS RATIONALE
The Ba2 rating is supported by the airport's strategic importance
to Costa Rica. Aeris has a market share of 80% of total air
travel in Costa Rica and handles more than 80% of the country's
tourists. A significant portion of Aeris revenues come from
international travelers, providing the company with a natural
hedge to the domestic economy and related risks. Recent passenger
trends have been positive, with a compound annual growth of 3.2%
since 2010. These are expected to continue given the improved
economic prospects for the United States of America, origin of 50%
of international travelers to Costa Rica.
These strengths are offset by the comparatively short time
remaining under the CGI contract (around 11 years), coupled with
the challenges of a large capital investment program for the first
five years of the life of the Notes. Under the CGI, these
investments will be recovered via tariffs, with a set Internal
Rate of Return, over the shorter of the next ten years or the time
left under the contract. As such, any material shortages and/or
delays on the capital program, might have a negative impact on
Aeris' revenues. While Moody's acknowledges the clear tariff-
setting and investment recovery provisions under the CGI,
including an economic equilibrium provision, the governing
contract is different from the concessions under which most other
airports operate outside of the United States.
Based on Moody's sensitivities, Funds From Operations to Debt are
expected to average 25.07% while Moody's Debt Service Coverage is
estimated to average 2.1x over the life of the Notes, in line with
the Ba range. Nevertheless, over the first few years of the
transaction these metrics are more consistent with a B category.
The rating also takes into account the subordination of the IBSA
Loan. Over the first five years of the life of the Notes, IBSA
Loan interest payments will be capitalized. If cash is available,
and if a historic and projected Debt Service Coverage Ratio of
1.4x is met, then interests payments may be made starting 2019.
No principal payments to the IBSA Loan are permitted until the
Notes, and any accrued interest, have been paid in full.
The rating is also supported by the project finance features under
the Notes, including: a trust managed cash waterfall, a 6-month
(one semiannual payment) debt service reserve account which will
increase to a 12-month debt service reserve during the last two
years, a forward looking 3-month Operation and Maintenance Reserve
Account, limitations on additional indebtedness, distribution
lock-up tests, and a Capital Expenditure Prefunding Account,
equivalent to around 20% of the total Capital Program.
The rating outlook is stable. The stable outlook reflects Moody's
expectation that Aeris will continue to show a positive trend of
passenger growth, execute the capital program to maintain its
infrastructure to support the demand growth, and sustain
manageable debt levels and strong liquidity leading to solid cash
interest coverage ratios.
WHAT COULD CHANGE THE RATING UP/DOWN
Upward pressure on the global scale issuer and debt ratings could
develop if Aeris' passenger growth exceeds projections on a
sustainable basis leading to consistent stronger credit metrics
with Moody's debt service coverage ratio above 1.8 times.
Downward pressure on the issuer and debt ratings could develop if
due to a sustained decrease in passenger traffic or to significant
capital expenditures overruns, actual leverage is higher than the
projected levels or Aeris' credit metrics weaken on a sustained
basis with cash interest coverage ratio consistently below 1.4
times or its FFO/Debt ratio was consistently below 6.0%.
BANCO DE COSTA: Fitch Affirms 'BB+' Issuer Default Rating
---------------------------------------------------------
Fitch Ratings has affirmed Banco de Costa Rica's (BCR) Issuer
Default Rating (IDR) at 'BB+'. Fitch also affirms BCR's Viability
Rating (VR) at 'bb+'. The Rating Outlook is Negative. A full list
of ratings follows at the end of this press release.
KEY RATING DRIVERS - IDRs, SENIOR DEBT, AND NATIONAL RATINGS
The bank's IDRs, senior debt ratings, and national ratings are
driven by the potential support of the Costa Rican government
('BB+'/Outlook Negative), as stated in the National Banking System
Law. According to this law, all state-owned banks have the
guarantee and full collaboration of the state. The explicit
guarantee allows BCR's long-term IDR, senior debt ratings and
Outlooks to be aligned with the sovereign rating.
KEY RATING DRIVERS - VR
The bank's VR reflects its strong franchise, ample and diversified
deposits, good capital position, manageable asset quality and
modest profitability. Also, the operating environment has a big
influence on BCR's performance and VR. Further deterioration of
the operating environment may result in pressures on the financial
profiles of Costa Rican banks.
BCR is one of the main competitors in the Costa Rican banking
system due to its strong franchise. The bank has a broad base of
deposits thanks to the sovereign explicit guarantee for the bank's
liabilities, high market share and extensive branch network.
Through its subsidiaries, the bank is able to further diversify
non-interest income and to extend its business outside of Costa
Rica.
BCR's Fitch Core Capital ratio is in line with its international
peers' average, close to 14%. However, BCR's internal capital
generation is usually lower than its loan portfolio's growth,
which together with declining operating profits relative to gross
loans ratio; the bank is reducing its ability to absorb losses in
the event of stress.
The loan portfolio's credit profile is accordance the bank's state
owned nature and important market position. The portfolio is high
diversified, and the exposure to U.S. dollar-denominated loans is
moderate. However, the level of non-performing loans continued
above the industry's average.
BCR benefits from diversified and stable base deposits. Funding is
complemented by subordinated debt and a longer-term international
issuance. In Fitch's view, this funding improved the bank's assets
and liabilities management and contributed to reducing mismatches
in foreign currency. At the same time, liquidity coverage is
adequate, and the investments portfolio is actively managed to
maintain adequate liquidity support for public deposits and to
comply with regulatory capital requirements.
Consistent with BCR's state-owned nature, profitability is modest
and below the Costa Rican banking system average. Operating
profits are constrained by a narrow margin, high operating
expenses and narrow income diversification. Profitability
prospects are sensitive to changes in market and economic
conditions.
KEY RATING DRIVERS -, SUPPORT RATING, SUPPORT RATING FLOOR
BCR's support rating (SR) of '3' reflects Fitch's opinion that
there is a moderate probability of support from the state. In
Fitch's opinion, the bank has a clear policy roll and the explicit
support of the state. Support probability is limited by the
sovereign rating. The bank's Support Rating Floor (SRF) is
equalized to the sovereign rating, given the explicit guarantee
from the government towards the bank and its systemic importance.
RATING SENSITIVITIES - IDRs, VR, NATIONAL RATINGS, SUPPORT RATING,
SUPPORT RATING FLOOR AND SENIOR DEBT
Changes in Costa Rica's sovereign rating may trigger similar
changes in BCR's IDRs, VR, SR, SRF, and senior debt ratings.
National ratings are less likely to be affected should Costa
Rica's IDRs be downgraded.
Fitch has affirmed BCR's ratings as follows:
-- Long-term foreign currency IDR at 'BB+'; Outlook Negative;
-- Short-term foreign currency IDR at 'B';
-- Long-term local currency IDR at 'BB+'; Outlook Negative;
-- Short-term local currency IDR at 'B';
-- Long-term senior unsecured bonds at 'BB+';
-- Viability Rating at 'bb+';
-- Support Rating at '3';
-- Support Rating Floor at 'BB+';
-- Long-term national rating at 'AA+(cri)'; Outlook Stable;
-- Short-term national rating at 'F1+(cri)';
-- Long-term senior unsecured bonds at 'AA+(cri)';
-- Commercial paper at 'F1+(cri)'.
BANCO NACIONAL: Fitch Affirms 'BB+' LT Issuer Default Rating
------------------------------------------------------------
Fitch Ratings affirmed Banco Nacional de Costa Rica's (BNCR) Long-
Term Issuer Default Rating (IDR) and Support Rating Floor (SRF) at
'BB+'. Fitch has affirmed BNCR's Viability Rating at 'bb+' and
affirmed its Support Rating at '3'. The Rating Outlook for BNCR's
IDRs remains Negative. A full list of rating actions follows at
the end of this press release.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings are aligned with
Costa Rica's Sovereign Ratings (Long-term Foreign and Local
Currency IDRs of 'BB+'/Negative Outlook). The alignment reflects
the Costa Rican government's explicit guarantee of the senior
obligations of state-owned banks, including BNCR. The Republic of
Costa Rica is the bank's sole shareholder.
BNCR's Negative Outlook is also aligned with the sovereign Rating
Outlook.
VR
The bank's VR reflects the bank's strong local franchise. BNCR is
the largest bank in the country with a dominant market position in
several business lines. The bank's stable and diversified deposit
base benefits from an explicit sovereign guarantee, as well as its
extensive geographic coverage. Bank funding also benefits from
regulation compelling private banks to make compulsory deposits at
state-owned banks.
BNCR's financial performance has historically been below the Costa
Rican banking system average, a trend that continued through the
first half of 2015. The bank's below-average margins are due in
part to below-market pricing on several products. In addition,
although the bank has reported significant improvements in
operating efficiency, it continues to incur levels of operating
expenses above those of domestic and international peers.
Like other state banks and enterprises, BNCR does not distribute
dividends but is obligated to allocate a significant percentage of
pre-tax earnings (23% at June 2015) to numerous government
programs. Such allocations are recorded as expenses on its income
statement and therefore distort profitability indicators based on
net income.
The bank's future earnings may be challenged by developments in
the regulatory and operating environment. These include a change
to the calculation of the benchmark Tasa Basica Pasiva rate to
which a majority of local currency loans are indexed. The bank may
also face a material tax assessment subsequent to audits finalized
in 2015. In addition, the government has exerted political
pressure on all state banks to lower its pricing in order to
stimulate the local economy.
BNCR's capital position is adequate, with a regulatory capital
ratio at 12.9% at June 2015, comfortably above the 10% regulatory
minimum. However BNCR's tangible common equity is under long-term
pressure due to asset growth. BNCR's Fitch Core Capital ratio,
which excludes USD 130 million in outstanding Tier II compliant
subordinated debt and its non-controlling equity interests, is
slightly below that of its direct peers.
BNCR's portfolio composition is well diversified by borrower,
geography and sector. Its loan quality indicators have registered
a minor deterioration in 2015, consistent with trends in the
banking system as a whole. Historically, BNCR's non-performing
loan ratios have tracked slightly higher than the banking system,
partly reflecting its relatively lower rate of charge offs. Fitch
expects that BNCR's loan quality indicators will deteriorate
moderately over the long term in response to the bank's strategy
to increase its market share in consumer loans and credit cards.
Loan loss reserve coverage has improved significantly due to
recent regulations on generic provisioning. Reserve coverage
improved from 70.1% of impaired loans at Dec 2014 to 83% at June
2015. Nevertheless, BNCR's reserves remain below those of domestic
and international peers.
Like other Costa Rican banks, BNCR tolerates an elevated exposure
to currency risk compared to other banks in the region. 37.8% of
BNCR's loan portfolio and 32.5% of its customer deposits were
denominated in USD at June 2015, maintaining a net short position
in USD equivalent to 2% of equity. Its unhedged open position for
all foreign currency exposures (excluding the inflation-adjusted
Unidad de Desarrollo) was also 2%, well below its internal 6%
limit.
SUPPORT RATING AND SUPPORT RATING FLOOR
BNCR's support rating (SR) of '3' reflects Fitch's opinion that
there is a moderate probability of support from the state. In
Fitch's opinion, the bank has a clear policy roll and the explicit
support of the state. Support probability is limited by the
sovereign rating. Given the explicit guarantee from the government
towards the bank and its systemic importance; the bank SRF is
equalized to the sovereign rating.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS, SENIOR DEBT, SUPPORT RATING AND SUPPORT
RATING FLOOR
The bank's IDRs, National ratings, senior debt ratings Support
Rating and Support Rating Floor are sensitive to a change in the
sovereign rating.
VR
The bank's VRs are sensitive to a change in Fitch's view of the
Costa Rican operating environment, which currently constrains the
rating. In addition, the VRs are sensitive to sustained
deterioration of BNCR's asset quality metrics or its financial
performance which would result in a material decrease in BNCR's
internal capital generation.
Fitch has affirmed the following ratings:
Banco Nacional de Costa Rica
-- Long-term foreign currency IDR at 'BB+'; Outlook Negative;
-- Short-term foreign currency IDR at 'B';
-- Long-term local currency IDR at 'BB+'; Outlook Negative;
-- Short-term local currency IDR at 'B';
-- Long-term senior unsecured bonds at 'BB+';
-- Viability Rating at 'bb+';
-- Support Rating at '3';
-- Support Rating Floor at 'BB+';
-- Long-term national rating at 'AA+(cri); Outlook Stable;
-- Short-term national rating at 'F1+(cri);
-- Long-term senior unsecured bonds national rating at
'AA+(cri)';
-- Commercial paper national rating at 'F1+(cri)'.
BANCO POPULAR: Fitch Affirms 'BB+' LC LT Issuer Default Rating
--------------------------------------------------------------
Fitch Ratings has affirmed Banco Popular y de Desarrollo Comunal's
(BPDC) long-term foreign currency Issuer Default Rating (IDR) and
local currency long-term IDR at 'BB+'. The Rating Outlook is
Negative. Fitch also affirmed the bank's short-term foreign
currency IDR and short-term local currency IDR at 'B', its
Viability Rating (VR) at 'bb+', its Support Rating (SR) at '3' and
Support Rating Floor (SRF) at 'BB'. A full list of rating actions
follows at the end of this press release.
The Negative Outlook reflects the sovereign's high level of
influence over the financial sector and the broader operating
environment. The bank's IDRs would be downgraded in the event of a
Costa Rican sovereign downgrade. Conversely, a revision of the
Outlook for the sovereign's IDR to Stable would likely prompt a
similar action on the Outlook for the bank's IDR.
KEY RATING DRIVERS
IDRs AND VR
BPDC's VR, which represents Fitch's view as to the intrinsic
creditworthiness of an issuer, drives its IDRs. The bank's ratings
are at the same level of the Sovereign Rating. As stated in
Fitch's rating criteria, banks are rarely rated above the
sovereign rating given the high influence of the operating
environment over banks' performance. Therefore, downgrade of Costa
Rica's sovereign rating will very likely trigger a downgrade of
the bank's VR.
BPDC's ratings reflect its company profile as the third largest
bank in Costa Rica by assets with a market share of 13.6%. It was
established as an autonomous nongovernmental public institution in
1969, is regulated by its own organic law and is the property of
the Costa Rican workforce. BPDC's main objective is to provide
economic protection and fulfill the financial needs of Costa Rican
workers, artisans and micro entrepreneurs.
In line with its origins and nature, BPDC is retail oriented and
maintains a strong franchise in retail consumer loans. In Fitch's
view, the bank's role in the pension regime as depositary of
mandatory savings from Costa Rican workers, and its franchise
evidence its systemic importance. The bank also benefits from tax
exemptions on investments issued by the government and makes
compulsory contributions of up to 15% of profits to different
development funds.
BPDC's ratings also consider its ample loss absorption capacity
and consistent profitability, adequate asset quality, ample
deposit based funding, and moderate tenure mismatches in its asset
and liability structure. BPDC's high capital metrics, supported by
good profitability as well as the mandatory capital contributions,
compare well with local and international peers. These provide an
ample buffer over regulatory minimums, sufficient to sustain asset
growth.
The bank's solid profitability is commensurate with the riskier
profile of its target segment. Profitability is underpinned by
sustained growth and ample margins. In Fitch's view, the
reductions in the reference interest rate in colones could
somewhat pressure the bank's year end profitability, as a moderate
proportion of the loan portfolio granted in local currency is
linked to the reference interest rate.
Asset quality metrics are adequate. In Fitch's view the relatively
higher risk of the bank's loan portfolio, oriented to consumer and
mortgage loans, is controlled by adequate collateral coverage,
effective collection mechanisms and sufficient reserves coverage
for non-performing loans (NPLs). As of June 2015, NPLs remained at
their five-year average (2.6%), while reserves covered 1.25 times
(x) NPLs. The security investment portfolio is managed in a
conservative manner to maintain adequate liquidity support for
public deposits. The bank's investment portfolio maintains a high
proportion of liquid assets, despite some concentration in
sovereign risk.
Funding and liquidity are generally stable. The bank's funding
relies on a low cost, deposits based funding structure. Deposits
have seen a drop in their relative share of total funding in favor
of other funding sources. Liquidity is in line with the bank's
liability structure and comprised of local deposits and
securities. While the bank has improved the diversification of its
investments, the concentration in sovereign instruments is still
high.
SUPPORT RATING AND SUPPORT RATING FLOOR
The bank's SR of '3' and SRF of 'BB' reflect the moderate
probability of support from the Costa Rican Government despite
having no explicit guarantee, given the nature of the bank and its
systemic importance.
RATING SENSITIVITIES
DRSs and VR
The upside potential of the bank's national ratings is expected to
be limited in the medium term. The Negative Outlook reflects the
sovereign's high level of influence over the financial sector and
the broader operating environment. The bank's IDR and VRs would be
downgraded in the event of a Costa Rican sovereign downgrade.
Conversely, a revision of the Outlook for the sovereign's IDR to
Stable would likely prompt a similar action on the Outlook for the
bank's IDR.
A downgrade of the bank's VR and IDRs could also be driven by a
significant deterioration in profitability and asset quality that
lead to a substantial drop in capital levels. However, the ratings
would not be downgraded to below its support rating floor of 'BB'.
Fitch's support rating of '3' indicates the agency's opinion there
is a moderate probability of support from the government
SUPPORT RATING AND SUPPORT RATING FLOOR
BPDC's support SR and SRF are sensitive to changes in the
sovereign rating. In case the Costa Rican Sovereign Rating is
downgraded, the SR and SRF of the bank would also be downgraded.
Fitch has affirmed BPDC's ratings as follows:
-- Long-term foreign currency IDR at 'BB+', Outlook Negative;
-- Short-term foreign currency IDR at 'B';
-- Long-term local currency IDR at 'BB+', Outlook Negative;
-- Short-term local currency IDR at 'B';
-- Viability Rating at 'bb+';
-- Support Rating at '3';
-- Support Rating Floor at 'BB'.
===================================
D O M I N I C A N R E P U B L I C
===================================
AEROPUERTOS DOMINICANOS: S&P Affirms 'B' Rating on $500MM Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Latin
American Airports Holdings Ltd. (LAAH) to negative from stable.
At the same time, Standard & Poor's affirmed its 'B' long-term
corporate credit rating on the company.
Standard & Poor's also affirmed its 'B' issue-level rating on
Aeropuertos Dominicanos Siglo XXI S.A.'s (Aerodom) $550 million
senior secured notes. LAAH owns Dominican Republic-based airport
operator Aerodom and guarantees its notes.
Following the termination of the Fumisa agreement, LAAH's
financial performance now fully depends on Aerodom's (its only
asset) financial performance. Throughout 2015, Aerodom's overall
operating and financial performance has remained in line with
S&P's expectations. Traffic levels showed a significant
improvement within the first nine months of 2015 when average
traffic increased 6.5% (compared with a decrease of 1.0% in the
previous year), mainly fueled by a recovery of international
passenger traffic particularly at Las Americas Airport (one of the
six airports the company operates in the Dominican Republic). In
addition, several airlines, including IBERIA and Copa Airlines,
opened new routes or increased the frequency of routes. Main
credit metrics remained highly leveraged as expected and in S&P's
view significant improvement in the upcoming years is not likely.
Since the last quarter of 2014, and as a consequence of the
termination and subsequent de-consolidation of Fumisa's results,
LAAH began reporting a negative net worth. S&P understands that a
company incorporated under Bermuda law (LAAH's country of
incorporation) won't automatically be insolvent or subject to
bankruptcy because its accounting statements indicate negative
retained earnings. Nevertheless, continuing negative net worth,
which is S&P's base case, raises concerns about the company's
ability to sustain its long-term capital structure and deepens
S&P's view of the refinancing risk in the medium term. S&P bases
its revised outlook on LAAH on this view.
LAAH's "weak" business risk profile continues to reflect the
volatility inherent in the volume of passenger traffic (which
depends on various factors that are exogenous to the company), a
relatively weak competitive position because its six airports
concentrates only 40% of the country's air traffic (they do not
operate the busiest airport in the country, Punta Cana), and its
exposure to the Dominican Republic's political and regulatory risk
that S&P views as weaker than other jurisdiction in the region.
The company's somewhat sound operating efficiency backed by EBITDA
margins that have surpassed the 60% level in the past five years
and no pending mandatory capital expenditures based on the
requirements of the concession contract partially counterbalance
these weaknesses.
S&P's assessment of LAAH's financial risk profile as "highly
leveraged" stems from S&P's view of the financial policy risks
associated with the company's ownership by a financial sponsor
(Advent International), and high debt leverage. Even considering
an increase in the passenger traffic level in future, S&P expects
main credit metrics to remain weak,
DOMINICAN REPUBLIC: Firms Says Keep Tax Breaks to Spur Investment
-----------------------------------------------------------------
Dominican Today reports that the National Business Council (Conep)
said it disagrees with and is concerned about the government's
decision to discontinue the tax breaks which encourage investment
in clean and renewable energies, in effect since 2012.
The government made its unfavorable position clear by discarding
the previous consensus to restore tax incentives of Law 57-07,
during the general assembly of the Pact for the Reform of the
Electricity Sector," the Conep said, noting that the measure would
waste the country's potential to generate clean, renewable and
sustainable energy, according to Dominican Today.
"It's important to remember that one of the main objectives of the
electricity pact is precisely to ensure reliable supply of
electricity at competitive prices and in conditions of financial
and environmental sustainability, to achieve this we must aim at
generating natural energy sources," the country's biggest business
group said, the report notes.
The CONEP said the country needs to move towards environmentally
friendly energy projects and conducive to reducing high
electricity prices gradually moving us toward proposals for
alternative energy generation, the report relates.
"It is remarkable that contrary to joining the global trend of
awareness and cooperation against climate change and greenhouse
effects, we remain rooted in the same conventional sources of
energy," CONEP said, the report discloses. "The CONEP invites the
government to reject this decision to restrict the country's
sustainable development and promote renewable resources potential
as well as spur the electricity sector's expansion."
DOMINICAN REPUBLIC: Central Bank Keeps Benchmark Rate at 5.0%
-------------------------------------------------------------
Dominican Today reports that Dominican Republic's Central Bank
announced its decision to continue its benchmark rate at 5.00%
annually, at its monetary policy meeting in November.
It said the decision on the interest rate was preceded by a
comprehensive analysis of the macroeconomic outlook, including the
balance of risks on inflation projections, market expectations and
relevant international environment for the Dominican economy,
according to Dominican Today.
"It was noted that in October, annual inflation rose to 1.23% and,
in cumulative terms, inflation rose to 2.08% that month" the
Central Bank said, the report notes.
It added that it took core inflation into account, "which reflects
the monetary conditions of the economy, which remained at 1.91%
annually," the report discloses.
DOMINICAN REPUBLIC: Fitch Affirms 'B+' Issuer Default Ratings
-------------------------------------------------------------
Fitch Ratings has affirmed the Dominican Republic's long-term
foreign and local currency Issuer Default Ratings (IDRs) at 'B+'.
The Rating Outlooks on the long-term IDRs are revised to Positive
from Stable. The issue ratings on the Dominican Republic's senior
unsecured foreign and local currency bonds are affirmed at 'B+'.
The Country Ceiling is affirmed at 'BB-' and the short-term
foreign currency IDR at 'B'.
KEY RATING DRIVERS
The Positive Outlook on the Dominican Republic's long-term IDRs
reflects the continued positive economic performance relative to
peers, the reduction of external vulnerabilities, and progress on
gradual fiscal consolidation.
The Dominican services-based economy has surpassed previous growth
expectations and is expected to remain robust at 5.1% for 2016-
2017. Diversification into tourism, higher value manufacturing,
and recently mining has supported the economy's resilience through
economic cycles. In 2015, Fitch expects robust 6.2% demand-led
growth. The wealth effect of the low oil price plus external
receipts stimulate private consumption, complemented by the
expansionary fiscal stance. Private housing and tourism investment
has spurred construction along with government investment in two
coal plants. This high growth is achieved without evidence of
macroeconomic imbalances.
Inflation has declined and is expected to average 2.4% and 3.2% in
2015 and 2016, respectively, driven by the low oil price. Relative
exchange rate stability supports the convergence of inflation
expectations toward the midpoint of central bank's 4%+/-1% target
band. Challenges to consolidating the inflation-targeting regime
introduced in 2012 include central bank operational losses, rapid
imported-price pass-through, and financial dollarization.
Fitch expects the current external deficit will narrow to 2.3% of
GDP on average for 2015-2017 and 1.1% of GDP average surplus after
net FDI. While the low oil price is expected to endure, external
accounts' sensitivity to international oil prices could decline
over the medium term as the electricity sector substitutes coal
and renewable power. CXR growth is supported by U.S. demand for
tourism and manufactured exports and remittance transfers. FDI
averaging 4% of GDP per year over 2015-2017 is expected into
tourism, telecoms, and manufacturing. External financing needs
have narrowed close to 80% of international reserves for 2015-
2017, down from over 100% in recent years.
The Dominican Republic's external balance sheet remains vulnerable
with limited buffers. The sovereign has a large net external
debtor position with 70% of public debt denominated in foreign
currency. The stable exchange regime has limited shock absorptive
capacity. External liquidity is weaker than 'BB' and 'B' peers, as
liquid external assets cover less than 100% of maturing external
liabilities and increased non-resident capital market
participation. These factors are balanced by the expected
favourable trends in the balance of payments and lower commodity
dependence than 'B' peers.
Fitch expects the general government will render a 2.6% of GDP
deficit in 2015. The government is using oil-price savings to
bring an estimated 0.4%-of-GDP of power plant investment on budget
in 2015 while meeting its primary surplus objective.
In addition to the government's 2016 deficit target, Fitch
incorporates 1.2% of GDP power plant investment in the 3.6% of GDP
overall general government deficit forecast for 2016, reflecting
half the remaining capital investment (for 2016-2017) for which
the legislature approved financing in 2015. Renewed international
capital market access since 2010, development of the domestic
yield curve since 2009--both supported with active debt
management--and multilateral credits provide the government
financing flexibility.
Public finance weaknesses place government debt on a sustained
upward trajectory. Although general government debt is currently
lower than peers, Fitch expects it will rise to 39% of GDP in
2017. Faster fiscal consolidation is hindered by the narrow tax
base, rigid wages and salaries, and rising non-discretionary
expenditure from electricity-sector transfers and interest bill--
20% of revenue in 2015--from financial losses of the central bank
and electricity generators.
The risk of material fiscal slippage repeating in the 2016
electoral cycle appears to have lessened, in Fitch's view. While
the proposed fiscal pact has not yet materialized, several factors
signal likely fiscal restraint, including the expected primary
fiscal surplus in 2015, limited pipeline of infrastructure
projects, and buoyant economy. President Danilo Medina (PLD) has
strong approval ratings but the long election cycle could turn
competitive in the months ahead. The governing PLD has struck an
alliance with the PRD forming a large election block for the May
15, 2016 polls and secured congressional passage of a
constitutional amendment restoring consecutive presidential terms.
Electricity sector reform is likely to remain atop the policy
agenda in 2016-2017.
The Dominican Republic's ratings are further underpinned by the
country's higher per capita income and social indicators than
peers, its service-based economy, and improving debt management.
These credit strengths are balanced by the weak structure of
public finances, large net sovereign external debtor position with
limited external buffers, and shallow albeit developing domestic
capital market.
RATING SENSITIVITIES
The main factors, individually or collectively, that could lead to
a positive rating action are:
-- Continued strong investment and growth performance relative to
peers without increasing macroeconomic imbalances;
-- Sustained fiscal discipline that enhances the credibility of
fiscal policy;
-- Reduction of external balance sheet vulnerabilities;
The rating Outlooks are Positive. The main factors that could see
the ratings revert to a Stable Outlook are:
-- Fiscal slippage or growth underperformance leading to a
material increase in government debt burden;
-- Deterioration of external liquidity or increased macroeconomic
imbalances;
-- Emergence of financing constraints.
KEY ASSUMPTIONS
The ratings and Outlooks are sensitive to a number of assumptions:
-- Fitch forecasts that average U.S. growth of 2.4% in 2015-2017
will support the Dominican Republic's economic growth and
external accounts, given the strong trade and financial
linkages between the two countries.
-- The Dominican Republic's fiscal and external forecasts assume
that annual gold production is sustained at 1 million ounces
and international prices average USD1075 per ounce in 2016-
2017, benefiting exports and mining royalties. Fitch's latest
projections also factor in adjustment of the average Brent oil
price to USD55 per barrel in 2015 and USD60 in 2016,
maintaining reductions of the country's fuel import bill and
electricity transfers.
-- Fitch assumes that the normalization of monetary policy rates
in the U.S. proceeds in an orderly manner and there are no
large capital outflows or external market financing
constraints for the Dominican Republic in 2015-2017.
===========
M E X I C O
===========
AXTEL SAB: Moody's Puts B3 CFR on Review for Upgrade
----------------------------------------------------
Moody's Investors Service placed Axtel's corporate family rating
of B3 and senior unsecured ratings of Caa1 on review for upgrade.
The review for upgrade reflects our assessment that the potential
merger between Axtel and Alestra (unrated), a subsidiary of Alfa
(Baa3, stable), could result in substantial improvements for the
combined entity's credit profile.
Issuer: Axtel, S.A.B. de C.V.
On Review for Upgrade:
Corporate Family Rating, Placed on Review for Upgrade, currently
B3
Senior Unsecured Regular Bond/Debenture 2019, Placed on Review
for Upgrade, currently Caa1
Senior Unsecured Regular Bond/Debenture 2017, Placed on Review
for Upgrade, currently Caa1
Outlook, Changed To Rating Under Review From Stable
RATINGS RATIONALE
Under the agreement, announced on Oct. 2015, Alfa would hold
approximately 51% of the combined subsidiary, under which Axtel
would fully consolidate Alestra. Axtel would continue to act as
an operating and publically traded company while being fully
consolidated by Alfa. If the merger is closed as planned, Axtel's
credit profile and capital structure will be enhanced by the
integration of Alestra. Also, the larger size of the newly formed
entity will increase both companies' competitive capacity in
Mexico's highly fragmented telecommunications industry, while
benefiting from economies of scale and operational synergies.
Furthermore, Axtel will benefit from implicit support from Alfa,
as do the other companies in the group, and be governed under the
group's solid financial policies.
The review will focus on the expected financial performance of the
combined entities and successful closure of the proposed merger,
which we anticipated will lead to stronger operational performance
and competitive positioning. Accordingly, the review could lead
to an upgrade of more than one notch. Moody's expects to close
the review following the completed transaction, estimated to occur
before the end of 1Q 2016.
Axtel's B3 corporate family rating reflects its small scale and
ongoing operating challenges resulting from the need to invest
heavily in order to grow revenues in an increasingly competitive
environment. The ratings reflect pressured credit metrics in
recent years as well as persistent negative free cash flow.
Somewhat mitigating the challenges faced, revenue growth has shown
positive trends compared to historical performance and important
network investments in recent years have improved the quality of
the operator's robust network. Axtel's adequate liquidity
position is also an important support to the ratings.
CONSUBANCO SA: S&P Affirms 'BB' Counterparty Credit Ratings
-----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB' global scale
counterparty credit ratings on Consubanco, S.A. Institucion de
Banca Multiple. At the same time, S&P affirmed its 'mxA/mxA-2'
Mexican national scale counterparty credit and its 'BB/mxA' issue-
level ratings on the bank. The outlook on both scales remains
stable.
S&P's ratings on Consubanco continue to reflect its "weak"
business position due to revenue concentration in payroll lending
to public employees and its small market share in the banking
system; "very strong" capital and earnings due to a projected RAC
ratio of about 16% for the next two years; "moderate" risk
position that reflects loan portfolio concentrations and
transactional risks embedded with the public sector; "below
average" funding due to reliance on wholesale funding sources; and
"moderate" liquidity. The bank's stand-alone credit profile
(SACP) remains at 'bb'.
ELEMENTIA SAB: S&P Affirms 'BB+' CCR; Outlook Stable
----------------------------------------------------
Standard & Poor's Ratings Services said it affirmed its 'BB+'
corporate credit rating on Elementia, S.A.B. de C.V. The outlook
remains stable.
At the same time, S&P affirmed its 'BB+' issue-level rating on
Elementia's $425 million senior unsecured notes due 2025. S&P
revised its recovery rating on these notes to '4H' from '3H',
indicating its expectation of average (30%-50%; higher band of the
range) recovery prospect in the event of a payment default.
During 2015, Elementia continued to post solid operating and
financial results, which in S&P's view, benefit from favorable
momentum in the markets where it operates. This in turn bolsters
volumes and prices in the company's cement and building system
divisions, amid focus on higher value-added products in the metal
division. Elementia has also strengthened its capital structure
and liquidity position over the past few months, and S&P believes
that it is now well capitalized to fund its growth strategy.
The stable outlook reflects Elementia's favorable revenue growth
prospects in the next two years and our expectation that the
company will maintain relatively stable EBITDA margin in 2016 and
2017. S&P continues to expect strong operating cash flow
generation, although it anticipates a loss in FOCF during 2016 due
to significant capex. It should then revert back positive in
2017. The outlook also incorporates S&P's view that Elementia's
debt to EBITDA will reach 2.3x in 2016 and 1.9x in 2017 and FOCF
to debt of -20% and 35%, respectively.
S&P could downgrade Elementia if it follows a more aggressive
growth strategy and incurs debt beyond our expectations to fund
its expansion projects or if operating margins suffer amid weaker
economic and construction market conditions. Such a scenario
would contract the company's volumes and pricing, which could
result in average debt to EBITDA consistently above 3.0x and FFO
to debt below 20%.
Although unlikely in the next 12 months, S&P could raise its
ratings if the company successfully completes its expansion capex
plan, which would increase its scale of operation and improve its
competitive position without weakening its credit metrics and
liquidity. Moreover, although unlikely in the next 12 months, if
Elementia posts a debt to EBITDA below 2.0x and FOCF to debt above
25% on a consistent basis as a result of higher-than-expected
operating performance and controlled capital expenditures, this
could also trigger a positive rating action.
GRUPO IDESA: S&P Affirms 'BB-' CCR; Outlook Stable
--------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'BB-' global scale
corporate credit rating on Grupo Idesa, S.A. de C.V. At the same
time, S&P affirmed its 'BB-' global scale issue-level rating on
its $300 million 144A/Reg. S senior unsecured notes due 2020 with
a recovery rating of '4L' (30%- 50%, in the lower band of the
range). The outlook remains stable.
IDESA's "fair" business risk profile continues to reflect the
company's leading market position in the Mexican chemical and
petrochemical markets. Idesa enjoys leading market shares in
ethylene glycols (about 36%), ethanol amines (about 54%), phtalic
anhydride (about 51%), alkyl amines (about 80%), and chemicals and
petrochemicals distribution (about 20%). The company has
distinguished itself from its competitors through the value-added
services that it provides to customers at its production sites.
Its long-term relationships with customers and suppliers and its
proven ability to complete joint ventures (JVs) and acquisitions
also underpin the ratings. However, its product portfolio is
concentrated in ethylene glycols and ethanol amines-- representing
about 31% and 9% of the company's total sales volumes,
respectively. Its end market concentration (with about 46% of
total sales volume in the petrochemical business segment -- for
the polyethylene terephtalate (PET) and polyester fiber industry)
and the concentration of its operations in Mexico, with exports
representing 10%-15% of sales also mitigate the strengths. The
commodity-like nature of its products and its exposure to price
volatility in feedstock and related products weaken its business
risk profile, alongside high supplier concentration, with PEMEX
accounting for a significant portion of total purchases of the
petrochemical business segment. Its client-base is also
concentrated. Its top five clients account for a significant
portion of the petrochemical business segment total sales. It is
small in scale relative to its local and global peers.
Despite adverse pricing market conditions due to lower oil prices,
the company has maintained its EBITDA margin in the 10%-13% range,
mainly due to its leading position in the market and the continued
implementation of operating efficiencies and cost reduction
initiatives.
Idesa's "aggressive" financial risk profile reflects S&P's view
that the company will maintain its key credit metrics commensurate
with its rating category for the next two years. In spite of
adverse market pricing conditions and foreign exchange volatility,
IDESA has been able to pass through price fluctuations to
customers. For the 12 months ended June 30, 2015, IDESA posted
debt to EBITDA of 3.4x, funds from operations (FFO) to debt of
21.1%, and EBITDA interest coverage of 2.6x, compared with 3.5x,
20.9%, and 2.9%, respectively, during the same period in 2014.
S&P's "aggressive" financial risk profile assessment now
incorporates 100% of the company's cash in its adjusted debt
because S&P believes all of it would be accessible for debt
repayment, if necessary.
The stable outlook reflects S&P's expectation that the company
will post key credit metrics commensurate with its "aggressive"
financial risk profile in 2015 and 2016.
S&P could lower the rating if additional leverage or weakness in
operating performance worsens its key credit metrics, leading to
debt to EBITDA above 5.0x and FFO to debt below 12% on a sustained
basis.
S&P could upgrade the company if financial performance exceeds
S&P's expectations, particularly if the issuer posts FFO to debt
higher than 20%.
* Mexico's Oil Revenues Plunge 38%
----------------------------------
EFE News reports that Mexico's oil revenues totaled MXN654 billion
(about $39.5 billion) in the January-October period, down 38
percent from the same period last year, the Finance Secretariat
said.
"These results are explained by the drop, with respect to the same
period in the prior year, in the average export price of the
Mexican petroleum blend of 49.3 percent, falling from 93.1 dollars
per barrel (dpb) in January-October 2014 to $47.2 dpb in 2015,"
the secretariat said in a statement obtained by EFE News.
Oil production also fell 7.6 percent and natural gas prices
dropped 33.6 percent during the period, the report relays.
"These effects were balanced out partially by the depreciation of
the exchange rate," the secretariat said.
Public sector revenues rose 2 percent in real terms during the
January-October period, compared to the same period in 2014,
"without including petroleum revenues that will be received in
December of this year," the secretariat said, the report notes.
EFE News discloses that non-petroleum revenues grew 28.1 percent,
thanks to a 241 percent increase in Special Tax on Production and
Services, or IEPS, receipts, a 27.6 percent rise in import duties,
a 23.8 percent increase in income tax revenues and a 3.7 percent
rise in VAT receipts.
The federal government's non-tax revenues totaled MXN210.3 billion
($12.69 billion) during the January-October period, a figure that
included funds received from "the operating surplus of the Bank of
Mexico of MXN31.4 billion ($1.89 billion)," the secretariat said,
the report adds.
===============
P A R A G U A Y
===============
TELEFONICA CELULAR: Fitch Hikes FC Issuer Default Rating to 'BB+'
-----------------------------------------------------------------
Fitch Ratings has upgraded Telefonica Celular del Paraguay S.A.'s
(Telecel) long-term foreign currency Issuer Default Rating (IDR)
and its USD300 million senior unsecured notes to 'BB+' from 'BB'.
The Rating Outlook is Stable.
The upgrade reflects Fitch's upgrade of Paraguay's sovereign
rating in 2015, which resulted in an upgrade of its country
ceiling to 'BB+' from 'BB'. Fitch also believes that the company's
credit profile is in line with a 'BB+' rating based on its solid
financial profile, market-leading position, and a strong linkage
with its parent, Millicom International Cellular S.A. (MIC, also
rated by Fitch at 'BB+'/Outlook Stable).
KEY RATING DRIVERS
Telecel's ratings reflect its leading market positions in
Paraguay, supported by its extensive network and distribution
coverage, diverse service offering, and the strong brand
recognition of Tigo. The company's competitive strengths have
enabled stable operational cash flow generation and high margins,
despite recent deterioration, resulting in the company's solid
financial profile, with leverage that is considered moderately low
for the rating category. Negatively, the company's ratings are
tempered by its continued EBITDA deterioration amid intense
competition, and persistent negative free cash flow (FCF)
generation.
Telecel's ratings also reflect a strong linkage between the
company and its parent, MIC. Fitch reflects the implicit support
from MIC despite weak legal linkage in Telecel's ratings given its
strategic and financial importance to the parent's operation in
Latin America. The company also benefits from synergies related to
MIC's larger scale and management expertise.
Leading Market Position:
Telecel is the largest telecom operator in Paraguay, with around
65% revenue market shares in mobile and fixed-line services. As
the first mobile operator in the country in 1992, the company has
established an entrenched position with the most extensive network
and distribution channel coverage under its strong 'Tigo' brand,
shared among MIC's group companies globally. Telecel strengthened
its competitive position by the acquisition of Cablevision in
2012, which helped expand its service portfolio into pay-TV and
fixed-broadband and achieve operational synergies. These
competitive advantages should allow the company to maintain its
market leadership over the medium term despite increasing
competitive pressures.
Positive Revenue Diversification:
Fitch expects Telecel's fixed-line segments to continue double-
digit revenue growth, as demand remains strong given low
penetration of these services, which would help mitigate
suppressed growth in the mobile business. The subscriber base for
these services continued to grow strongly during the first half of
2015 (1H15), with revenue generating units growing by 11% in six
months to 228,900 compared to 206,700 at the year-end 2014. Based
on this segment's growth, Fitch believes the company will be able
to achieve low-single-digit revenue growth in the short- to medium
-term. The penetration rates for broadband and pay-TV were 13% and
36%, respectively, as of the year-end 2014.
Margin Recovery:
Fitch projects the company's EBITDA margin will recover to close
to 45% from 2016 on due to the termination of the technical
service fees paid MIC during 2Q15, which used to be 10% of its
revenues. Telecel paid PYG321 billion of this fee during 2014,
compared to just PYG48 billion a year earlier, which led to a
material decline in its EBITDA margin to 38% from 51% during the
same period. Negatively, the company's profitability could resume
a downward trend toward 40% over the long term, given competitive
pressures and an increasing revenue contribution from lower-margin
pay-TV and broadband services.
Negative FCF:
Telecel's on-going negative free cash flow (FCF) generation is
unlikely to reverse in the medium term largely due to its high
capex plan and dividends. Fitch expects the company's annual capex
to be around PYG1,000 billion in 2016, which compares to just
PYG510 million in 2014. The investments will be mainly
concentrated on the expansion of network coverage and spectrum
acquisitions. This level of capex would consume most of the
company's CFFO generation, which is estimated to be around PYG1.0
trillion-PYG1.1 trillion during the period. Although the
shareholder distribution could be tapered from 2016 given the high
investment needs, this would still pressure the company's FCF
generation into negative territory.
Low Leverage:
Fitch forecasts Telecel's solid financial profile to remain intact
over the medium term backed by its stable operational cash flow
generation, which is, however, weakening. Despite the expected
continued negative FCF, the company's net leverage should remain
at around 1.7x-1.8x over the medium term, which is considered
moderately low for the rating category. The company's net leverage
ratio was 1.3x as of June 30, 2015, which compares unfavorably to
1.0x and 0.6x at end-2014 and end-2013, respectively. The company
has a high exposure to foreign exchange risk as its debt is
largely denominated in U.S. dollars, while its EBITDA generation
is mostly in local currency. Positively, the risk is manageable,
as the company does not face any U.S. dollar debt maturity until
2022 when its USD300 million senior unsecured notes become due.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Telecel
include:
-- Low-single-digit revenue growth from 2016 on, mainly driven by
continued strong growth in the fixed-line operation;
-- EBITDA margin to recover toward 45% in 2016 in the absence of
a technical service fee to MIC;
-- Capex-to-sales ratio to increase to close to 30% in 2016 due
to network coverage expansion and 4G spectrum acquisition, but
to fall to below 20% over the long term ;
-- Negative FCF generation to remain in the short- to medium
term;
-- Net leverage to increase to 1.7x-1.8x over the medium term.
RATING SENSITIVITIES
A negative rating action would be considered in case of:
-- Continued deterioration in the company's EBITDA generation
along with weak revenue growth due to competitive pressures,
including material loss in mobile market share, ARPU erosion,
and substantial increase in marketing expenses;
-- Persistent negative FCF generation due to aggressive
shareholder distributions and/or higher-than-expected capex;
-- Telecel's adjusted net leverage increasing to above 2.5x in
conjunction with a weak liquidity profile on a sustained
basis;
-- A negative rating action on Millicom's ratings could also
negatively affect Telecel's ratings.
Conversely, Fitch does not foresee any positive rating action as
the ratings are constrained by the Paraguayan country ceiling of
'BB+', and its close linkage to its parent, also rated 'BB+' by
Fitch.
LIQUIDITY
Telecel has a good liquidity position underpinned by its stable
cash flow generation, and its cash balance of PYG200 billion,
which fully covered its short-term debt of PYG101 billion as of
June 30, 2015. Fitch does not foresee any liquidity problem for
Telecel in the short- to medium-term as the company does not face
sizable debt maturities until 2022.
======================
P U E R T O R I C O
======================
PUERTO RICO: Avoids Second Default, but Future Payments Uncertain
-----------------------------------------------------------------
Megan Davies and Nick Brown at Reuters report that Puerto Rico
avoided a default on debt maturing on Dec. 1 but warned that its
deteriorating liquidity meant that future defaults loom.
There had been speculation that the U.S. territory would default
on all or part of the $355 million notes issued by its financing
arm, the Government Development Bank, according to Reuters.
While Puerto Rico first defaulted in August, failure to make the
payment would have been more significant because part of that debt
was protected by the commonwealth's constitution, the report
notes.
The report relates that another default could have triggered
lawsuits, further spooked investors and undermined the island's
efforts to climb out of $72 billion in debt.
Puerto Rico said in a statement that it made the payment despite
"extreme fiscal challenges," the report discloses. It warned of
problems ahead as it will have to "claw back revenues pledged to
certain bonds issued in order to maintain public services,"
Governor Alejandro Garcia Padilla told the U.S. Senate Judiciary
Committee, the report relays.
The commonwealth would use the clawbacks to fund payments on top-
priority debt carrying constitutional protections, Garcia Padilla
said in written testimony. However, in oral testimony, he said
clawbacks could also be used to maintain public services, notes
the report.
"The imminence of a default when presented with the alternative
between paying creditors and providing essential government
services looms large," the report quoted Mr. Garcia Padilla as
saying.
Mr. Garcia Padilla signed an order allowing Puerto Rico to begin
redirecting certain funds in light of recently revised revenue
estimates and its deteriorating liquidity situation, the island
said, the report relays.
In written testimony, Mr. Garcia Padilla said: "In simple terms,
we have begun to default on our debt in an effort to attempt to
repay bonds issued with the full faith and credit of the
commonwealth and secure sufficient resources to protect the life,
health, safety and welfare of the people of Puerto Rico," the
report notes.
Height Securities analyst Daniel Hanson said the comments meant
Puerto Rico was defaulting on "instrumentality debt, not debt with
a constitutional pledge." General obligation bonds, along with GDB
bonds that have constitutional guarantees, should be safe, he
said, but bonds from entities such as highway authority PRHTA and
infrastructure financing authority PRIFA are at risk, the report
relays.
Of the $355 million paid, $81.4 million was to service non-general
obligation-backed debt and $273.3 million was for notes backed by
the commonwealth's general obligation guarantee, says the report.
During the hearing, Senator Richard Blumenthal, a Democrat, said
Puerto Rico "narrowly averted a complete default" by unsustainable
financial gymnastics, the report discloses.
The payment on bonds issued by the GDB was crucial as Puerto Rico
tries to stretch its liquidity into 2016 to provide more time to
restructure debt, the report notes.
In August, Puerto Rico paid only $628,000 of a $58 million payment
due on its Public Finance Corp bonds, adds the report.
* * *
As reported in the Troubled Company Reporter-Latin America on
Sept. 14, 2015, Standard & Poor's Ratings Services lowered its
ratings on the Commonwealth of Puerto Rico's tax-backed debt to
'CC' from 'CCC-' and removed the ratings from CreditWatch, where
they had been placed with negative implications July 20. The
outlook is negative.
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: S&P Affirms 'CCC' CCR; Outlook Negative
---------------------------------------------------------------
Standard & Poor's Ratings Services said it affirmed its 'CCC'
long-term corporate credit and senior unsecured debt ratings on
Petroleos de Venezuela S.A. (PDVSA). The outlook remains
negative.
The 'CCC' corporate credit ratings on PDVSA, which is the same as
the sovereign rating on the Bolivarian Republic of Venezuela
(CCC/Negative/C), reflects our opinion that there is a "moderately
high" likelihood of extraordinary government support
The ratings on PDVSA also take into account its weak liquidity in
the context of its need to finance very high capital expenditures
(capex) to develop reserves and increase production. It would
also use the increased capex to fund the company's considerable
contributions to the government's social programs.
The negative outlook on PDVSA reflects that on Venezuela. S&P
don't expect PDVSA's relationship with the government to change
significantly in the next two to three years. S&P also believes
that the government won't significantly reduce its strong
involvement in the sector or in the company. Therefore, the
rating on PDVSA will likely follow the rating trajectory on the
sovereign.
S&P could lower the ratings on the company if it downgrades the
sovereign. Additionally, S&P would lower the ratings to 'D' if
the company completes a prospective debt refinancing that S&P
assess as a distressed exchange.
A positive rating action is unlikely at this point. Steps to
diffuse the heightened political tensions in Venezuela would
reduce the risk of eroding governability and greater volatility in
economic policies. That, along with a growing track record of
pragmatic economic policies aimed at containing economic
imbalances and strengthening external liquidity, could lead to a
stabilization of the ratings on Venezuela and PDVSA.
***********
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.
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Send announcements to conferences@bankrupt.com
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Valerie U. Pascual, Julie Anne L. Toledo, and Peter A.
Chapman, Editors.
Copyright 2015. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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The TCR Latin America subscription rate is US$775 per half-year,
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of the same firm for the term of the initial subscription or
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contact Peter A. Chapman at 215-945-7000 or Nina Novak at
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