/raid1/www/Hosts/bankrupt/TCRLA_Public/160505.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, May 5, 2016, Vol. 17, No. 88
Headlines
A R G E N T I N A
ARGENTINA: Could Issue $30 Billion Debt This Year
CONTROL UNION: Moody's Withdraws Caa1 Corporate Family Rating
HSBC SEGUROS: Moody's Withdraws B1 Global Local Currency Rating
* Liquidity Risk Remains Elevated for Argentine Cos., Moody's Says
B R A Z I L
ODEBRECHT ENGENHARIA: S&P Lowers CCR to 'B+' & Puts on Watch Neg.
ODEBRECHT ENGENHARIA: Fitch Cuts Issuer Default Ratings to 'B+'
* Brazilian Cos. Face Increasing Challenging Liquidity Situation
C A Y M A N I S L A N D S
ALL SEASONS: Shareholder to Hear Wind-Up Report on May 27
ALL SEASONS CREDIT: Shareholder to Hear Wind-Up Report on May 27
CHEYNE MULTI-STRATEGY: Shareholders' Meeting Set for May 19
CHEYNE MULTI-STRATEGY II: Shareholders' Meeting Set for May 19
CP CAYMAN: Shareholder to Hear Wind-Up Report on June 3
CP CAYMAN FINANCE: Shareholder to Hear Wind-Up Report on June 3
HDX GROUP: Members' Final Meeting Set for April 25
HSBC ALPHA: Sole Member to Hear Wind-Up Report on June 6
INTERPENTA CORPORATION: Members' Final Meeting Set for May 26
MONUMENT PROPERTIES: Members' Final Meeting Set for May 25
SADAF LEASING: Shareholder to Hear Wind-Up Report on May 27
SCORPIO INVESTMENT: Shareholder to Hear Wind-Up Report on June 3
TANDEM GLOBAL: Shareholders' Final Meeting Set for May 23
C H I L E
LATAM AIRLINES: Moody's Lowers CFR to B1; Outlook Stable
CORPGROUP BANKING: Moody's Confirms B1 Ratings; Outlook Stable
C O L O M B I A
BANCO DE BOGOTA: Moody's Assigns Ba2 Rating to $1BB Sub. Debt
COLOMBIA: Peso Leads Latin America Currency Tumble as Oil Falls
C U B A
CUBA: Spain Agrees to Restructure Cuban Debts
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: US$38.3MM Agro Program Will Benefit Farmers
G U A T E M A L A
GUATEMALA: Moody's Assigns Ba1 Rating to $700MM Bond
M E X I C O
CREDITO REAL: Fitch Corrects Criteria From April 26 Publication
MERIDA: Moody's Cuts Global Scale Issuer Rating to 'Ba1'
MEXICO STATE: Moody's Raises Issuer Rating to Ba1; Outlook Neg.
QUALITAS CONTROLADORA: S&P Raises Credit Rating to 'BB+'
U R U G U A Y
BANCO PATAGONIA: Moody's Assigns Ba3 Rating; Outlook Negative
COMPANIA COOPERATIVA: Moody's Assigns Ba3 Global Scale Rating
EXPRINTER (URUGUAY): Moody's Assigns B3 Global Scale Rating
PORTO SEGURO: Moody's Assigns Ba1 Rating; Outlook Stable
ZURICH SANTANDER: Moody's Assigns Ba1 Rating; Outlook Stable
X X X X X X X X X
* LATAM Credit Conditions to Remain Pressured Through 2016 & 2017
- - - - -
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A R G E N T I N A
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ARGENTINA: Could Issue $30 Billion Debt This Year
-------------------------------------------------
globalinsolvency.com reports that Argentina could issue $30
billion in debt this year, as other issuers seek to mimic the
government's success in returning to international capital markets
with a blockbuster bond sale last month.
First out of the gates will be Argentina's provincial governments,
expected to issue at least $4bn this year, the Financial Times
reported, according to globalinsolvency.com.
They hope to take advantage of rekindled investor interest in a
country isolated from bond markets by a protracted creditor
dispute, which was triggered by a 2001 default on almost $100bn of
debt, the report notes.
"Argentine debt represents an extraordinary opportunity. These
yields don't exist anywhere else in the world in countries with
such low levels of debt," said Facundo Gomez Minujin, managing
director at JPMorgan's Argentina unit, the report relays.
Yields on Argentina's $16.5bn debt issue, finalized on April 19,
averaged 7.2 per cent, the report notes. Meanwhile, government
debt is 44 per cent of GDP, of which 17 per cent is debt with the
private sector, according to officials, the report says.
"It may be a complicated moment globally but the search for yield
will always continue to exist," said Mr Gomez Minujin, who
estimates that between the central and provincial governments and
the corporate sector, Argentina could issue about $30 billion in
debt this year, the report adds.
* * *
On April 19, 2016, the Troubled Company Reporter-Latin America
reported that Moody's Investors Service upgraded on April 15,
2016, Argentina's government bond rating to B3 from Caa1, with the
outlook changed to stable from positive. The key drivers for the
upgrade are (i) Moody's expectation that Argentina will settle
holdout creditor claims which will result in a lifting of court
injunctions and clear the way for Argentina to access
international capital markets, as well as the likelihood that
Argentina will make payments to restructured bondholders increased
significantly following an April 13, US circuit court ruling in
favor of Argentina, and (ii) the economic policy improvements
since Mauricio Macri's administration took office last December.
The new government lifted capital controls and allowed the peso to
float more freely, reduced energy and transportation subsidies and
has begun to address longstanding macroeconomic imbalances.
As previously reported by the TCR-LA, Argentina defaulted on some
of its debt late July 30, 2014, after expiration of a 30-day grace
period on a US$539 million interest payment. Earlier that day,
talks with a court-appointed mediator ended without resolving a
standoff between the country and a group of hedge funds seeking
full payment on bonds that the country had defaulted on in 2001.
A U.S. judge had ruled that the interest payment couldn't be made
unless the hedge funds led by Elliott Management Corp., got the
US$1.5 billion they claimed. The country hasn't been able to
access international credit markets since its US$95 billion
default 13 years ago.
On March 30, 2016, after more than 12 hours of debate in the
Senate, Argentina's Congress passed a bill that will allow the
government to repay holders of debt that the South American
country defaulted on in 2001, including a group of litigating
hedge funds that won judgments in a New York court. The bill
passed by a vote of 54-16.
On March 24, 2016, Fitch Ratings has upgraded Argentina's Long-
term local-currency Issuer Default Rating (LT LC IDR) to 'B' from
'CCC', with a Stable Outlook. Fitch has affirmed Argentina's Long-
term foreign-currency (FC) IDR at 'RD' and the short-term FC IDR
at 'RD'. In addition, Fitch has upgraded the Country Ceiling to
'B' from 'CCC'.
CONTROL UNION: Moody's Withdraws Caa1 Corporate Family Rating
-------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo (MLA)
announced that it has withdrawn all of its ratings for Control
Union Argentina S.A. for business reasons.
These ratings of Control Union Argentina S.A. were withdrawn:
Long-Term Corporate Family Rating: Caa1, stable outlook
NSR Long-Term Corporate Family Rating: Baa2.ar, On Watch UNC
Baseline Credit Assessment: caa1
Adjusted Baseline Credit Assessment: caa1
RATINGS RATIONALE
Moody's has withdrawn the rating for its own business reasons.
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.
Control Union Argentina S.A. is headquartered in Buenos Aires,
Argentina, and as of December 2015 it had ARS178.6 million in
assets and ARS107.9 million in equity.
HSBC SEGUROS: Moody's Withdraws B1 Global Local Currency Rating
---------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo, S.A. has
withdrawn the B1 (stable outlook) global local currency (GLC) and
Aaa.ar (under review for downgrade) Argentine national scale
insurance financial strength (IFS) ratings of HSBC Seguros de Vida
(Argentina) S.A. HSBC Seguros de Vida is a leading individual
life Argentine insurer offering insurance products for individuals
and corporates. The company is ultimately owned by the UK-based
HSBC Holdings plc (Hong Kong & Shanghai Banking Corporation).
RATINGS RATIONALE
Moody's has withdrawn the rating for its own business reasons.
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.
* Liquidity Risk Remains Elevated for Argentine Cos., Moody's Says
------------------------------------------------------------------
Liquidity risk for Argentine corporates remains elevated as
companies take on more debt to fund their operations amid high
levels of inflation, says Moody's Investor Service. The slump in
the Argentine peso also provides a challenge for companies with
dollar-denominated debt. However, the operating environment for
companies in Argentina has changed since President Mauricio Macri
took office in December 2015.
Of the 19 non-financial companies that Moody's rates, 13 had high
liquidity risk in 2015. This assessment reflects their
significant debt obligations coming due through 2017, limited cash
to repay maturing debt, sizable negative free cash flow and a lack
of access to committed bank credit facilities.
"The limited availability of long-term financing has forced
Argentine companies to pursue risky financing strategies and
increase their reliance on short-term debt," said Martina Gallardo
Barreyro, an Associate Vice President and Analyst at Moody's. "As
a result, Argentine companies depend heavily on their ability to
roll over short-term borrowings."
Moody's expects Argentina's real GDP to contract in 2016, as the
government pushes measures to reduce both inflation and the
country's fiscal deficit. Economic growth will likely then
rebound in 2017 amid increased investment, according to the report
"Corporate Liquidity -- Argentina; Liquidity Risk Remains High But
New Government Improves Credit Prospects."
Argentine corporates are also suffering from the weakness of the
nation's currency. The peso has slumped against the dollar and
more than two-thirds of total Argentine corporate debt is
denominated in foreign currency, with the oil and gas sector being
the most exposed to exchange risk.
The report is available to Moody's subscribers at:
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1
020931
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B R A Z I L
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ODEBRECHT ENGENHARIA: S&P Lowers CCR to 'B+' & Puts on Watch Neg.
-----------------------------------------------------------------
S&P Global Ratings lowered its global scale corporate credit
rating on Odebrecht Engenharia e Construcao S.A. (OEC) to 'B+'
from 'BB-' and its national scale long-term rating to 'brBBB-'
from 'brA-'. S&P also lowered its short-term corporate credit
rating on the company to 'brA-3' from 'brA-2'. S&P also placed
the corporate credit ratings on CreditWatch negative.
S&P also lowered its issue-level ratings on Odebrecht Finance Ltd.
(OFL) to 'B+' from 'BB-'. The recovery rating on this debt
remains at '4', indicating S&P's expectation that lenders would
receive average (30%-50%; the lower range of the band) recovery of
their principal in the event of a payment default.
The downgrade reflects S&P's view of the company's weaker
financial flexibility following the announcement that it will
delay the release of its annual audited financial statements for
the fiscal year ended Dec. 31, 2015, given the ongoing requests
from independent auditors concerning issues related to the
corruption investigations under the Lava-Jato operation.
In most of its bonds agreements, OEC is exposed to information
covenants related to the availability of audited financial
statements of up to 120 days after the end of the fiscal period.
This period has finished at the end of April, and in such a
scenario S&P understands the creditors have now the right to ask
for a notice of default. They could send such notice if they
account for more than 25% of each notes, and debt acceleration
could occur after 60-day cure period if the audited financial
statements are not released. Although S&P understands OEC is
working to release these financial statements as soon as possible,
and S&P is not incorporating acceleration events in its base-case
scenario (even though actual timing remains uncertain), S&P now
sees even lesser financial flexibility and further liquidity risks
to the company.
S&P also changed its management and governance assessment on the
company to weak from fair. Although OEC is trying to improve its
corporate governance and compliance, S&P views the corruption
investigations of the company as indicative of its weak risk
tolerances, with a direct impact on its reputation. S&P also
views the failure to release timely financial statements as
evidence of a deficient control that result in a weaker liquidity.
Even though OEC has no financial covenants under its debt
agreements, its standing in credit markets has weakened and the
company is exposed to the information covenants related to the
release of audited annual financial statements. In S&P's view,
the lack of timely financial statements is weighing on OEC's
ability to absorb low-probability adversities. A covenant breach
on any related credit facilities would likely have a significant
impact because the debt containing the covenants in question can't
be easily repaid. Even though S&P's base-case scenario excludes
debt acceleration, it don't view a company exposure to these types
of risks as consistent with an adequate liquidity. Therefore, S&P
is changing the liquidity score on OEC to less than adequate from
adequate, despite a projected sources-to-uses ratio above 1.5x in
the absence of any debt acceleration.
ODEBRECHT ENGENHARIA: Fitch Cuts Issuer Default Ratings to 'B+'
---------------------------------------------------------------
Fitch Ratings has downgraded Odebrecht Engenharia e Construcao's
(OEC) Long-Term Foreign- and Local-Currency Issuer Default Ratings
(IDR) to 'B+' from 'BB' and Long-Term National Scale Rating to 'A-
(bra)' from 'AA-(bra)'.
Concurrently, Fitch has downgraded to 'B+/RR4' from 'BB' the
approximately USD3.1 billion issuances of Odebrecht Finance Ltd.
(OFL), which OEC unconditionally and irrevocably guarantees. The
'B+/RR4' rating of OFL's unsecured public debt reflects average
recovery prospects in the event of a default, ranging between
31% - 50%.
All the ratings were placed on Ratings Watch Negative. A complete
list of ratings follows at the end of this press release.
KEY RATING DRIVERS
The downgrade reflects the increased risks and uncertainties
associated with the non-publication of OEC's 2015 financial
statements at the end of April 2016. OEC's independent auditor
requested additional information on the latest phases of the Lava-
Jato (Car-Wash) investigation and further checks have delayed the
publication of the company's financial statements.
The rating action also reflects the prolonged uncertainty of any
potential impact on OEC's credit profile stemming from the
investigations on the corruption scandal. This has led to low
visibility on the company's short- and medium-term future
operating performance and liquidity. Fitch believes these risks
are not commensurate with the 'BB' rating category.
The Negative Watch reflects OEC's challenges to mitigate
vulnerabilities due to the publishing delay of its 2015 financial
statements, with potential debt payment acceleration of USD2.7
billion. Investors of five out of the eight OFL bonds could
declare an event of default (EoD) if the bonds reach a low
threshold of 25% of the outstanding bond. This would trigger a 60-
day cure period for OEC to publish the accounts. Otherwise,
bondholders could notify the company of another EoD.
On a preliminary basis, OEC released to the market total debt of
BRL3.6 billion and cash of BRL2.5 billion at the end of 2015.
Fitch estimates that bondholders could request the anticipated
payment of approximately 80% of this debt.
RATING SENSITIVITIES
OEC's and OFL's ratings could be further downgraded should debt
acceleration materialize. If the company publishes audited
financial statements in a timely manner complying with covenants,
the Rating Watch Negative will likely be removed and a Negative
Rating Outlook would likely be assigned due to the remaining
uncertainties derived from the Lava-Jato investigation, the
Brazilian macroeconomic adverse scenario, and maintenance of low
oil prices impacting a significant percentage of OEC's clients.
FULL LIST OF RATING ACTIONS
Fitch has downgraded the following ratings:
Odebrecht Engenharia e Construcao S.A. (OEC)
-- Long-Term Foreign- and Local-Currency IDRs to 'B+' from 'BB';
-- National Scale Rating to 'A-(bra)' from 'AA-(bra)'.
Odebrecht Finance Limited (OFL)
-- BRL500 million senior unsecured notes due 2018 to 'B+/RR4'
from 'BB';
-- USD500 million senior unsecured notes due 2020 to 'B+/RR4'
from 'BB';
-- USD600 million senior unsecured noted due 2022 to 'B+/RR4'
from 'BB';
-- USD800 million senior unsecured notes due 2023 to 'B+/RR4'
from 'BB';
-- USD550 million senior unsecured notes due 2025 to 'B+/RR4'
from 'BB';
-- USD500 million senior unsecured notes due 2029 to 'B+/RR4'
from 'BB';
-- USD850 million senior unsecured notes due 2042 to 'B+/RR4'
from 'BB';
-- USD750 million perpetual bonds to 'B+/RR4' from 'BB'.
All of the ratings were placed on Rating Watch Negative.
* Brazilian Cos. Face Increasing Challenging Liquidity Situation
----------------------------------------------------------------
Sustaining liquidity will become increasingly challenging for
Brazilian corporates through next year as the country's economy
remains weak, says Moody's Investor Service.
The ongoing economic contraction in Brazil has made banks more
cautious about lending to Brazilian companies and political
concerns are also weighing on consumer and business confidence.
Moody's expects the economy to contract by around 3.5% in 2016,
after shrinking 4% last year.
Among Brazilian corporates, 33 percent had funding risk in 2015,
compared with 28% in 2014, according to the report "Corporate
Liquidity -- Brazil; Funding Becomes More Challenging and
Liquidity Risk Increases." Moody's defines exposure to funding
risk as high if a company's liquidity sources will cover less than
150% of debt maturities over the next 12 months.
"We expect that companies will remain conservative about spending
cash and controlling costs, but the domestic dynamics still point
to a challenging economic outlook," said Erick Rodrigues, a Vice
President and senior analyst at Moody's.
Moody's analysis show that the oil and gas and homebuilding
sectors have high liquidity risk, and the transportation,
media/telecom, and metals and mining industries have medium risk.
The report is available to Moody's subscribers at:
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1
021252
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C A Y M A N I S L A N D S
==========================
ALL SEASONS: Shareholder to Hear Wind-Up Report on May 27
---------------------------------------------------------
The shareholder of All Seasons Africa Opportunities Fund Ltd will
hear on May 27, 2016, at 10:00 a.m., the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidators are:
Neil Montgomery
Cathlin Rossiter
c/o Genesis Trust & Corporate Services Ltd.
Elgin Court, 2nd Floor
Elgin Avenue, George Town
Grand Cayman
Cayman Islands KY1-1106
Telephone: (345) 945 3466
Facsimile: (345) 945 3470
ALL SEASONS CREDIT: Shareholder to Hear Wind-Up Report on May 27
----------------------------------------------------------------
The shareholder of All Seasons Africa Credit Opportunities Fund
Ltd will hear on May 27, 2016, at 9:00 a.m., the liquidator's
report on the company's wind-up proceedings and property disposal.
The company's liquidators are:
Neil Montgomery
Cathlin Rossiter
c/o Genesis Trust & Corporate Services Ltd.
Elgin Court, 2nd Floor
Elgin Avenue, George Town
Grand Cayman
Cayman Islands KY1-1106
Telephone: (345) 945 3466
Facsimile: (345) 945 3470
CHEYNE MULTI-STRATEGY: Shareholders' Meeting Set for May 19
-----------------------------------------------------------
The shareholders of Cheyne Multi-Strategy Special Purpose Asset
Vehicle Inc. will hold their final meeting on May 19, 2016, at
10:00 a.m., to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
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
CHEYNE MULTI-STRATEGY II: Shareholders' Meeting Set for May 19
--------------------------------------------------------------
The shareholders of Cheyne Multi-Strategy Special Purpose Asset
Vehicle II Inc. will hold their final meeting on May 19, 2016, at
10:00 a.m., to receive the liquidator's report on the company's
wind-up proceedings and property disposal.
The company's liquidator is:
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
CP CAYMAN: Shareholder to Hear Wind-Up Report on June 3
-------------------------------------------------------
The shareholder of CP Cayman Subtopco will hear on June 3, 2016,
at 9:30 a.m., the liquidator's report on the company's wind-up
proceedings and property disposal.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Susan Craig
Telephone: (345) 943-3100
CP CAYMAN FINANCE: Shareholder to Hear Wind-Up Report on June 3
---------------------------------------------------------------
The shareholder of CP Cayman Finance Holdco will hear on June 3,
2016, at 9:15 a.m., the liquidator's report on the company's wind-
up proceedings and property disposal.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Susan Craig
Telephone: (345) 943-3100
HDX GROUP: Members' Final Meeting Set for April 25
--------------------------------------------------
The members of HDX Group (Cayman) Limited will hold their final
meeting on April 25, 2016, to receive the liquidator's report on
the company's wind-up proceedings and property disposal.
The company's liquidator is:
Cheng, Wu-Shui
c/o Michelle R. Bodden-Moxam
Telephone: (345)-946-6145
Facsimile: 345-946-6146
Portcullis TrustNet (Cayman) Ltd.
The Grand Pavilion Commercial Centre
Oleander Way, 802 West Bay Road
P.O. Box 32052 Grand Cayman KY1-1208
Cayman Islands
HSBC ALPHA: Sole Member to Hear Wind-Up Report on June 6
--------------------------------------------------------
The sole member of HSBC Alpha Funding (UK) Holdings will hear on
June 6, 2016, at 10:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Lion International Management Limited
Craigmuir Chambers
Road Town
Tortola VG1110
British Virgin Islands
INTERPENTA CORPORATION: Members' Final Meeting Set for May 26
-------------------------------------------------------------
The members of Interpenta Corporation will hold their final
meeting on May 26, 2016, to receive the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
CDL Company Ltd.
P.O. Box 31106 Grand Cayman KY1-1205
Cayman Islands
MONUMENT PROPERTIES: Members' Final Meeting Set for May 25
----------------------------------------------------------
The members of Monument Properties Limited will hold their final
meeting on May 25, 2016, to receive the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Zedra Holdings (Cayman) Limited
c/o Zedra Trust Company (Cayman) Limited
FirstCaribbean House, 4th Floor
P.O. Box 487 Grand Cayman KY1-1106
Cayman Islands
SADAF LEASING: Shareholder to Hear Wind-Up Report on May 27
-----------------------------------------------------------
The shareholder of Sadaf Leasing Company Limited will hear on
May 27, 2016, at 10:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman KY1-9005
Cayman Islands
c/o Susan Craig/Jennifer Chailler
Telephone: (345) 943-3100
SCORPIO INVESTMENT: Shareholder to Hear Wind-Up Report on June 3
----------------------------------------------------------------
The shareholder of Scorpio Investment (Cayman) Ltd. will hear on
June 3, 2016, at 9:00 a.m., the liquidator's report on the
company's wind-up proceedings and property disposal.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Susan Craig
Telephone: (345) 943-3100
TANDEM GLOBAL: Shareholders' Final Meeting Set for May 23
---------------------------------------------------------
The shareholders of Tandem Global Fund Ltd. will hold their final
meeting on May 23, 2016, at 10:00 a.m., to receive the
liquidator's report on the company's wind-up proceedings and
property disposal.
The company's liquidator is:
BW Gestao de Investimentos Ltda.
c/o Alfredo Althen Schiavo
Telephone: +11 3095 2855
Avenida Das Nacoes Unidas
12.901-Torre Oeste-24th Floor
Sao Paulo, SP 04578-910
Brazil
=========
C H I L E
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LATAM AIRLINES: Moody's Lowers CFR to B1; Outlook Stable
--------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of LATAM Airlines Group S.A to B1 from Ba2. At the same
time, Moody's downgraded to B2 from Ba3 the foreign currency
rating assigned to its USD500 million senior unsecured notes due
in 2020. Moody's also downgraded LATAM Pass Through Trust 2015-1A
to Baa1 from A2 and the 2015-1B tranche to and Ba1 from Baa2. The
rating outlook for all ratings is stable.
List of affected ratings:
Downgrades:
Issuer: Issuer: LATAM Airlines Group S.A (LATAM)
-- Corporate Family Rating: downgraded to B1 from Ba2
-- USD500 million senior unsecured notes due 2020: downgraded
to B2 from Ba3 foreign currency rating
Issuer: LATAM Pass Through Trust 2015-1A
Senior Secured Enhanced Equipment Trust due 2029, downgraded to
Baa1 from A2
Issuer: LATAM Pass Through Trust 2015-1B
Senior Secured Enhanced Equipment Trust due 2025, downgraded to
Ba1 from Baa2
The outlook for all ratings is stable.
RATINGS RATIONALE
The downgraded of LATAM Airlines corporate family ratings to B1
reflect a larger than anticipated slowdown of the airline industry
in Latin America, and particularly in Brazil, which materially
affected the company's revenues and cash generation in 2015. As a
result, LATAM Airlines' liquidity is strained, as the company
faces meaningful near term debt maturities and capital commitments
amid unfavorable market conditions. Despite the company's
significant effort to adjust the business for a more challenging
operating environment in 2016, Moody's believes that the company's
leverage metrics and liquidity will remain pressured until at
least 2018.
The respective two notch downgrades of the ratings on the
company's Series 2015-1 Class A and Class B Enhanced Equipment
Trust Certificates accompany the two notch downgrade of the
Corporate Family Rating. Eleven Airbus A321s, four Boeing B787-9s
and two Airbus A350-900s serve as collateral for the transaction.
These aircraft models will be mainstays in LATAM's fleet over the
remaining 11 year term of the EETC. The over-collateralization in
this transaction remains in line with Moody's expectations since
the ratings were assigned in May 2015. Moody's estimates current
loan-to-values at about 63% and 76%, respectively. The ratings
also reflect Moody's belief that LATAM would retain these aircraft
under a reorganization scenario because of the importance of the
relatively young, efficient aircraft to any potential reorganized
network.
The B2 rating assigned for the unsecured notes stand one notch
lower than LATAM Airlines' B1 CFR in order to reflect the
effective subordination of those unsecured creditors to the
company's other existing secured debt. LATAM Airlines'
consolidated debt is composed mainly of long-term secured bank
obligations and capital leases collateralized by aircrafts,
representing about 74% of its total debt as of fiscal year end
2015. As such, the proposed unsecured notes will rank below all
the company's existing and future secured claims.
The B1 CFR is supported by LATAM Airlines' leading market position
in Latin America with a well-diversified business portfolio of air
transportation services, superior network connectivity and
strategic alliances, along with an improving operating structure
that allows them to remain competitive going forward. The ratings
also incorporate the benefits from its diversified capital
structure, track record of financial support from local banks and
long term aircraft financing, and a relatively low debt cost.
LATAM Airlines reported net revenues of USD10.1 billion for full
year 2015, a reduction of 18.8% as compared to 2014, driven by the
slowdown of 1.3% in the regional Gross Domestic Product (GDP) and
by the depreciation of local currencies of about 14% in Peru and
Chile and about 33% in Brazil and Argentina. At the same time,
the company's operating cash generation, as measured by the Funds
from Operations (FFO), was 8% lower than in 2014. Despite the
revenue and cash losses, adjusted EBITDA margins improved to more
than 20%, from 17.7% in 2014, driven by a significant reduction in
fuel prices, and the company's ongoing cost savings initiatives,
along with the positive effect of local currency devaluations to
labor costs. As a result, the cost ex-fuel (per ASK equivalent)
decreased by 12% in 2015, as compared to 2014.
To adjust for today's difficult operating environment, LATAM
Airlines has announced an 8% to 10% passenger capacity reduction
in Brazil in 2016 and up to 2% reduction in consolidated cargo
capacity, which will likely be accompanied by a consistent
workforce reduction supporting further cost reduction. This
strategy has been followed by other LATAM competitors that may
contribute to higher yields and margin stability in 2016. LATAM
has also negotiated with suppliers a reduction of its fleet
commitments by USD2.9 billion to reduce its capital expenditures
in 2016-18.
Despite the positive developments in cost reduction initiatives
and the reduction in fleet commitments, LATAM's has a tight
liquidity. The company reported unrestricted cash and short term
investments in the amount of USD1.2 billion as of Dec. 31, 2015,
enough to cover 0.83x of its debt maturities during 2016. The
company targets minimum cash availability of 15% its LTM net
revenues, but this ratio fell to 13% 2015.
In March 2016, the company reached an agreement with several banks
for a 3-year senior secured revolving credit facility amounting
USD275 million, which partially mitigates the liquidity risk, the
company also managed to release some restricted cash, which
provided further liquidity relief for the short term.
Nevertheless, the company's FCF generation is expected to remain
negative due to high investment requirements in fleet renewal and
debt maturities through at least 2018.
LATAM's debt is composed mainly of long term secured bank
obligations and financial leases (74%). After the merger with
TAM, the company's adjusted gross leverage to EBITDA increased
significantly to 8.0x in 2012 from 4.2x in 2011. Since then,
LATAM has undertaken several leverage reduction initiatives
including the prepayment of approximately USD1.0 billion in debt
and renegotiation of more expensive debt to reduce interest
expenses. Still, gross leverage remained high at 6.0x EBITDA in
2015 (net leverage = 5.6x) and it will increase further in 2016,
as the company contends with the weak market dynamics.
The stable outlook reflects Moody's expectation that company will
continue to gradually increase its operating margins and expand
internal cash flow generation going forward, as it collects the
synergies of the integration between TAM and LAN. But most of the
anticipated cash generation will likely be reinvested in the
business, because of the company's replacement strategy, so FCF
will likely remain negative through 2019 and adjusted debt is not
likely to meaningfully decline. The stable outlook also assumes
that the management will be able to timely implement the financing
strategy to improve liquidity in anticipation of debt maturities
in 2017.
A rating upgrade could be considered if LATAM Airlines is able to
successfully execute its cost reduction strategy and strengthen
its financial and liquidity profile, such that adjusted debt-to-
EBITDA improves closer to 5.0 times on a sustained basis, along
with improvement to a stronger liquidity profile, as illustrated
by a cash-to-revenue position closer to or higher than 20%.
The rating could be downgraded if the company's liquidity is
strained due to a prolonged market downturn or continued revenue
frustration, which combined with its aircraft acquisition program
would lead to weaker free cash flow generation. Downward pressure
on the rating could occur if LATAM Airlines' adjusted EBITDA
margins deteriorates to below 10% (20.4% in 2015) or if its
adjusted leverage remains above 7.0 times (6.0 times in 2015) for
a sustained period.
Any combination of future changes in the underlying credit quality
or ratings of LATAM, unexpected material changes in the market
value of the aircraft and/or changes in LATAM's network strategy
that de-emphasize the subject aircraft models could cause Moody's
to change its ratings of the EETCs.
The principal methodology used in rating LATAM Airlines Group S.A
(LATAM) were Global Passenger Airlines published in May 2012. The
methodologies used in rating LATAM Pass Through Trust 2015-1A and
LATAM Pass Through Trust 2015-1B were Enhanced Equipment Trust and
Equipment Trust Certificates published in December 2015, and
Global Passenger Airlines published in May 2012.
LATAM Airlines Group S.A. is a Chilean-based airline holding
company formed by the business combination of LAN Airlines S.A. of
Chile and TAM S.A. of Brazil in June 2012, which remain operating
as two separate brands. LATAM Airlines is the larger airline
group in South America with local presence for domestic passenger
service in six countries (i.e. Brazil, Chile, Peru, Ecuador,
Argentina, Colombia). The company also provides intra-regional
and international passenger services and it also has a cargo
operation that is carried out through the use of belly space on
passenger flights and dedicated freighter service. In 2015, LATAM
Airlines generated around USD10.1 billion in net revenues and
carried over 67.8 million passengers and 1.0 million tons.
CORPGROUP BANKING: Moody's Confirms B1 Ratings; Outlook Stable
--------------------------------------------------------------
Moody's Investors Service confirmed CorpGroup Banking S.A.'s B1
long-term global local and foreign currency issuer ratings and
long-term foreign currency debt rating. The outlook on all
ratings is now stable.
These CorpGroup Banking ratings were confirmed with a stable
outlook:
-- Long-term global local currency issuer rating of B1
-- Long-term foreign currency issuer rating of B1
-- Long-term foreign currency debt rating of B1
RATINGS RATIONALE
Moody's confirmed CorpGroup Banking's ratings at B1 despite the
upgrade of the baseline credit assessment (BCA) of Itau CorpBanca
(A3, A3 stable, baa3) to baa3, from ba1, as a result of the
holding company's (i) loss of control over its primary source of
earnings and (ii) a more conservative dividend policy at Itau
Corpbanca that could result in lower cash flow being upstreamed to
the holding company. The ratings also consider the company's (i)
high indebtedness relative to its expected recurring earnings
going forward, (ii) single family ownership and unregulated
nature, which could expose it to corporate governance issues, and
(iii) relatively weak bond convenants, which have limited
restrictions on dividends and asset sales.
After the absorption of Banco Itau Chile into CorpBanca (Old),
CorpGroup Banking has a smaller 29.05% participation in the
combined bank, renamed Itau CorpBanca, down from its previous
43.73% stake, which had given it full control over the bank. Itau
Unibanco Holding S.A.'s (Itau Unibanco, Ba3 negative) 33.58% stake
in Itau CorpBanca now gives it the right to appoint five out of 11
board members in the new bank, and consequently effective control
over the combined bank. In addition to CorpGroup Banking's
participation in Itau CorpBanca, the holding company's ultimate
shareholder, the Saieh Family, has an additional shareholding
through another holding company called Compania Inmobiliaria y de
Inversiones Saga SpA (unrated) of 4.08%, for a total 33.13% which
will allow the family to appoint only four board members.
Consequently, it will have limited ability to influence the bank's
strategic direction, or its dividend policy, going forward.
Moreover, the shareholder agreement effectively prevents the
representatives of the Saieh Family from voting with the
independent board members against Itau Unibanco's representatives.
CorpGroup Banking has no operations of its own and therefore it
services its debt entirely through dividends from Itau CorpBanca,
and to a lesser extent from its minority 22.03% stake in life
insurer CorpGroup Vida Chile S.A. (unrated). Although the upgrade
of Itau CorpBanca's BCA reflects the bank's improved ability to
meet its own obligations, in large part because of an increase in
capitalization, a conservative new dividend policy that should
help ensure that the bank's still relatively low capital levels
improve further may restrict its ability to pay the dividends upon
which CorpGroup Banking depends. While the shareholder agreement
between the group of holding companies that represent the
interests of the Saieh Family and Itau Unibanco stipulates that
Itau CorpBanca pay a minimum USD120 million, this payment will be
contingent on Itau CorpBanca's ability to maintain regulatory
capital ratios that are in line with the average of the three
largest banks in Chile and 1.2-times the capitalization
requirements by the Chilean regulators. While these
capitalization requirements are not expected to have an immediate
impact on dividends, dividend income may be increasingly
restricted in the future if and when Chile begins to implement
more stringent minimum capitalization and capital quality
requirements in line with Basel III guidelines.
While Moody's projects that dividend income from Itau CorpBanca
will nevertheless be sufficient to service CorpGroup Banking's
debt obligations in our central scenario, debt service coverage
(dividends received from Itau CorpBanca/Interest Expense) will be
lower than it has been historically, at just above 1-times
dividend income from Itau CorpBanca, and net financial debt will
remain high at about 7-times dividend income from Itau CorpBanca,
according to Moody's estimates.
In a more stressed scenario, however, dividend payouts would be
insufficient to service CorpGroup Banking's debt, which would have
to rely on extraordinary sources of income. CorpGroup Banking
could benefit from the anticipated sale of its 12.4% stake in
Banco CorpBanca Colombia S.A. to Itau Unibanco in 2017, which both
parties have committed to per the shareholder agreement, and from
the sale of its remaining minority 22.03% stake in CorpGroup Vida.
However, given the absence of meaningful restrictions on dividends
and the application of the proceeds of sales of the minority
stakes in CorpBanca Colombia and CorpGroup Vida, there is no
assurance that the proceeds of these disposals would be used to
reduce CorpGroup Banking's debt burden instead of financing a
dividend to CorpGroup Banking's direct 99.99% holding, Inversiones
CorpGroup Interhold Limitada (Interhold, unrated), as happened
with the extraordinary dividend payment that CorpGroup Banking
received from CorpBanca in 2015.
Given the single family ownership and control of CorpGroup
Banking, it also continues to face potential risks related to
corporate governance. The Saieh Family has the ability to elect a
majority of directors and executive officers, set management
policies and determine the outcome of most or all actions
requiring shareholder approval at the holding company.
WHAT COULD CHANGE THE RATING UP/DOWN
CorpGroup Banking's ratings could experience upward ratings
pressure if it were to apply the proceeds of expected asset sales
to the reduction of its indebtedness, or if dividends from Itau
CorpBanca significantly exceed Moody's expectations.
Downward ratings pressure on CorpGroup Banking's ratings would
accumulate if dividend income from Itau CorpBanca falls below
Moody's expectations.
The principal methodology used in these ratings was Banks
published in January 2016.
===============
C O L O M B I A
===============
BANCO DE BOGOTA: Moody's Assigns Ba2 Rating to $1BB Sub. Debt
-------------------------------------------------------------
Moody's Investors Service assigned a Ba2 long term foreign
currency subordinated debt rating to Banco de Bogota S.A.'s
proposed ten-year subordinated debt for an amount of up to
USD1 billion. The proposed debt is expected to be eligible for
Tier 2 capital treatment under Colombian law. The rating is on
review for downgrade.
The following rating was assigned to Banco de Bogota's proposed
subordinated debt issued under 144A/RegS:
-- Long term foreign currency subordinated debt rating of Ba2;
on review for downgrade.
RATINGS RATIONALE
The Ba2 rating reflects a one notch differential with Banco de
Bogota's ba1 adjusted baseline credit assessment (adjusted BCA) to
reflect the subordination of the notes. The rating does not
incorporate any uplift for government support as Moody's does not
believe that any government support for the bank as a whole that
might be forthcoming in the event that the bank faces financial
stress would extend to the bank's subordinated bonds. The review
for downgrade on the subordinated bonds is in line with the review
for downgrade of the bank's adjusted BCA.
The ba1 BCA reflects a significant drop in the bank's already low
adjusted capital ratio driven by a 52% depreciation of the
Colombian peso during 2015. Given the bank's significant dollar-
denominated investments in Central America, the depreciation
contributed to a 20% and 30% increase in the peso value of Banco
de Bogota's risk weighted assets (RWA) and goodwill, respectively,
revealing in turn the susceptibility of the bank's capital
position to currency swings.
Moody's noted that Banco de Bogota's strong and consistent
earnings, supported by an efficient cost structure and stable core
deposit funding, have allowed it to operate with comparatively low
core capital levels for years. Moreover, the bank's conservative
management and credit policies have resulted in healthy asset
quality metrics, as reflected by a non-performing loan ratio
around 1.3% in 2015, and the portfolio benefits from a relatively
high degree of geographical diversification. At current levels,
however, Banco de Bogota's core capital provides limited capacity
to continue to support the bank's historically robust loan growth
or absorb losses in the event of stress, making the bank more
vulnerable to any deterioration in asset risk or earnings
performance. In addition, the bank's sizable single borrower and
sector concentrations relative to capital, and significant
presence in riskier countries in Central America, expose asset
quality to potentially greater volatility, particularly under
current uncertain market conditions.
Moody's notes that the bank's regulatory capital ratio remains
considerably higher than Moody's preferred measure of
capitalization, tangible capital equity to risk-weighted assets
(TCE/RWA), and continues to exhibit an adequate if declining
cushion relative to Colombia's regulatory minimum. However, the
regulatory ratio includes Tier 2 capital and grandfathers goodwill
accumulated before 2012, which currently represents a very high
63% of common equity. In Moody's view, neither Tier 2 capital nor
goodwill provide meaningful loss absorption prior to the point of
non-viability. Therefore, David Olivares, a Moody's Senior Credit
Officer, said that "while the proposed subordinated notes qualify
for Tier 2 by regulation, Moody's does not consider them to be
capital, and hence this issuance will not address the bank's weak
capitalization."
WHAT COULD CHANGE THE RATING -- DOWN
The review of Banco de Bogota's ratings will focus on the near-
term prospects for the bank's core capitalization. "Moody's could
lower the standalone BCA if management does not demonstrate within
the next five weeks a credible plan to improve the bank's capital
ratios", Olivares added. A downgrade of the bank's BCA will
translate directly into a downgrade of its subordinated debt
rating. In light of the bank's thinner capital position, the
review will also consider its plans for the management of large
loan exposures.
The principal methodology used in this rating was Banks published
in January 2016.
Banco de Bogota is headquartered in Bogota, Distrito Capital and
is the second largest bank in Colombia in terms of loans. As of
Dec. 31, 2015, Banco de Bogot†reported total assets of
USD51.1 billion and shareholders' equity of USD5.9 billion.
COLOMBIA: Peso Leads Latin America Currency Tumble as Oil Falls
---------------------------------------------------------------
Christine Jenkins at Bloomberg News reports that Colombia's peso
posted the biggest drop in emerging markets as Latin American
currencies tumbled amid a selloff in oil and riskier assets.
The peso weakened 2.7 percent to 2,913.73 per dollar on May 2 in
Bogota trading, its first drop in six days after gaining to the
highest since November, according to the report.
A Bloomberg index of Latin American currencies, which reached a
five-month high last week, sank the most since February as
Mexico's peso slid 2.1 percent and Brazil's real lost 1.8 percent.
Latin American currencies have rallied this year as oil surged 18
percent and sentiment toward emerging markets improved amid
optimism that global growth will accelerate, Bloomberg News
relays. Colombia's peso is closely correlated with prices for
crude, the country's biggest export, and even after May 2's drop
the currency is up 4.2 percent in the past month, the best
performance among developing nations after the Russian ruble.
"Valuations were getting really stretched," said Win Thin, the
head of emerging-market strategy at New York-based Brown Brothers
Harriman. Some of the region's currencies reached "really rich
levels," he said, Bloomberg News relays.
Oil dropped below $44 a barrel before weekly U.S. government data
forecast to show rising stockpiles kept crude supplies at the
highest level in more than eight decades, Bloomberg News
discloses. Futures fell as much as 3.2 percent in New York,
declining for a third day after reaching a five-month high,
Bloomberg News relays.
Analysts predict Colombia's peso has further to fall, Bloomberg
News notes. The currency will drop 8.9 percent by the end of the
year, according to the median forecast of strategists surveyed by
Bloomberg.
=======
C U B A
=======
CUBA: Spain Agrees to Restructure Cuban Debts
---------------------------------------------
EFE News reports that Spain and Cuba signed an agreement on May 4
to restructure Cuban debt for medium and long terms, according to
the Spanish ministry of economy.
The ministry noted that medium and long term debts owed by Cuba
has surged to EUR2.44 billion (US$2.81 billion) by the end of last
October, and none of these amounts have been repaid, according to
EFE News.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: US$38.3MM Agro Program Will Benefit Farmers
---------------------------------------------------------------
Dominican Today reports that President Danilo Medina launched the
Agricultural Transformation and Restructuring Program, which will
benefit 18,000 farmers in the region.
The Agriculture Ministry and producers will conduct the project at
a cost of US$38.3 million, with an Inter-American Development Bank
(IDB) loan together with Government matching funds, according to
Dominican Today.
Agriculture minister Angel Estevez said the project involves GPS
leveling of nearly 1,800 hectares in five years, many of which
have been already prepared, the report notes.
Mr. Estevez said the initiative includes construction of two
facilities to dry and store products in San Juan and Vallejuelo,
where Medina headed groundbreaking, the report relays.
Mr. Estevez said he also expects the Program will impact the
entire country, since it's conceived as a model to take it to
other provinces, the report notes.
Mr. Estevez said the project will raise agro production in the
area by more than 60%. "Producers will have a high-tech mechanism
at their disposal," the report discloses.
Mr. Estevez said the program includes an allocation of US$19
million for credits to introduce technologies, the report relays.
Mr. Estevez said it also includes repair and maintenance of 75
kilometers of country roads, 15-kilometer spans of irrigation
canals, 40 floodgates replaced and construction of 10 structures
to measure irrigation with a secondary and tertiary channel grid,
the report adds.
=================
G U A T E M A L A
=================
GUATEMALA: Moody's Assigns Ba1 Rating to $700MM Bond
----------------------------------------------------
Moody's has assigned a Ba1 rating to the Guatemalan government's
$700 million bond maturing on May 3, 2026. The government's
issuer rating is Ba1 with a negative outlook.
RATINGS RATIONALE
The foreign currency and local currency Ba1 ratings reflect, on
the one hand, moderate medium-term growth prospects and the
government's long-standing commitment to prudent fiscal and
monetary policies, while also considering the country's high
poverty levels and relatively weak institutional strength compared
with its Ba1 peers. Strict expenditure controls have led to
moderate budget deficits and low debt ratios, despite low
government revenues. A manageable debt burden and the prevalence
of multilateral funding, which contribute to low rollover risks,
are elements that support the rating. At the same time, poor
development indicators, low levels of education and the low
quality of infrastructure hinder the country's competitiveness,
limiting Guatemala's economic strength. On the external front,
the country typically posts a small current account deficit that
is mostly covered by foreign direct investment. International
reserves have grown over the past several years and the external
vulnerability indicator (EVI) - a measure of upcoming external
debt payments relative to foreign exchange reserves - has been
below 50% since 2004, indicating that reserves cover more than
twice the amount of upcoming payments.
ISSUER RATING OUTLOOK
Moody's assigned a negative outlook to Guatemala's Ba1 ratings on
May 26, 2015, because of escalating political risks that were
triggered by corruption scandals that implicated high-ranking
government officials and led to widespread street demonstrations.
Even though political and governability risks have diminished, the
new president who took office in January 2016 faces several
challenges that limit his ability to govern effectively, including
raising government revenues closer to historical levels, a highly
fragmented congress and the risk that corruption scandals could
re-emerge.
FACTORS THAT COULD MOVE THE RATING UP/DOWN
The outlook could be revised to stable if (i) macroeconomic
stability and commitment to conservative fiscal management are
preserved throughout the first months of the new administration in
office and (ii) there is evidence that revenue collection
structures are being rebuilt and government revenues are on track
to return to historical levels.
Sovereign ratings of Guatemala could experience downward pressure
if (i) political events evolve into significant deterioration in
governance, (ii) there is an erosion of the authorities'
longstanding commitment to conservative fiscal management, or
(iii) a material deterioration in economic performance that leads
to persistently higher debt ratios.
GDP per capita (PPP basis, US$): 7,550 (2014 Actual) (also known
as Per Capita Income)
Real GDP growth (% change): 4.1% (2015 Actual) (also known as
GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 3.1% (2015 Actual)
Gen. Gov. Financial Balance/GDP: -1.4% (2015 Actual) (also known
as Fiscal Balance)
Current Account Balance/GDP: -0.3% (2015 Actual) (also known as
External Balance)
External debt/GDP: 26.2% (2014 Actual)
Level of economic development: Low level of economic resilience
Default history: No default event (on bonds and/or loans) has
been recorded since 1983.
On May 22, 2015, a rating committee was called to discuss the
rating of the Guatemala, Government of. The main points raised
during the discussion were: The issuer's institutional strength/
framework, have materially decreased. The issuer has become
increasingly susceptible to event risks, as domestic political
risk has increased.
This credit rating and any associated review or outlook has been
assigned on an anticipated/subsequent basis.
The principal methodology used in these ratings was Sovereign Bond
Ratings published in December 2015.
The weighting of all rating factors is described in the
methodology used in this credit rating action, if applicable.
===========
M E X I C O
===========
CREDITO REAL: Fitch Corrects Criteria From April 26 Publication
---------------------------------------------------------------
Fitch Ratings has assigned foreign and local currency long-term
Issuer Default Ratings (IDRs) of 'BB+' and short-term IDRs of 'B'
to Credito Real S.A.B. de C.V. Sofom, E.R., (Credito Real). Fitch
also assigned national long- and short-term ratings at 'A+(mex)'
and 'F1(mex)', respectively. The long-term Rating Outlook is
Stable. A full list of rating actions follows at the end of this
press release.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Credito Real's IDRs, national and senior debt ratings reflect its
moderate franchise in Mexico's financial market, its well-proven
business model and gradual diversification of its loan portfolio
to segments different than payroll loans. The ratings also
consider the company's recurring and sustained profitability
ratios that underpin its adequate capitalization metrics, amid a
high growth strategy, and contained impaired loan ratios that
compare favorably against its closest peers. The ratings are
limited by the risk of entry into new businesses and countries, by
the wholesale nature of its funding base and the important
concentrations of its debt maturities, as well as by the political
and operational risks which are inherent to the payroll loans
segment in Mexico.
Credito Real is the market leader in the payroll loans segment and
has an adequate franchise in its other key business lines. Fitch
estimates it has more than 30% of market share in the payroll
segment, based on publicly available information.
Its business model differentiates from its competitors' in that it
centralizes the credit analysis, funding strategies and
administrative processes of its different business lines but
relies on subsidiaries and strategic partners for loan origination
(sales force), while keeping interests aligned through the sharing
of both income and risk. This business model has proven to work in
its different business lines and throughout the economic cycle.
Nevertheless, in Fitch's opinion, other than traditional credit
risks, Credito Real is exposed to operational, political, and
event risk. Failure to properly implement the agreements with
employers or unwillingness from public entities to timely and
fully disburse collections, changes in political leadership, and
other potential risk factors.
Payroll constitutes the company's core product; however, the
participation of other lines in its business mix has increased
gradually as a result of aggressive organic and inorganic growth.
As of December 2015, payroll loans represented 74% of gross loans,
down from 80% in 2012; Credito Real estimates its participation
will stabilize at around 50% of the loan portfolio in the long-
run, while used car loans, SME loans and other businesses will
experience high double digit growth. In Fitch's opinion, Credito
Real has effectively started to diversify its income sources, and
this compares positively with other participants in the niche.
Although Fitch considers there are some inherent risks from
entering new business and countries; the entity has proven to be
capable of maintaining economic links with previous owners in
order to ensure that their experience and track record continue
benefiting the performance of the acquired companies. The recent
acquisition of Instacredit with presence in Central American
countries (mainly Costa Rica) will represent approximately 14% of
the total loan portfolio, which Fitch deems relevant.
Credito Real has grown aggressively, both organically and
inorganically over the past few years. Fitch views the company's
aggressive growth strategy through acquisitions of local and
foreign subsidiaries as indicative of above average risk appetite.
Nevertheless, in Fitch's opinion, this is mitigated by its risk-
based pricing and the employment of adequate risk controls that
have proven to maintain contained asset quality metrics despite
significant growth and entry into new businesses.
Credito Real's financial performance is sound and one of its main
strengths. Operating ROA and ROE stood at 8% and 29.8%,
respectively in 2015 (2012-2014 average: 8.9% and 31.2%).
Profitability ratios have been consistent and stable during recent
years mainly due to a growing loan portfolio base, ample interest
margins and well managed credit and operational costs. Credito
Real's efficiency ratio (operating expenses/net revenue)
deteriorated moderately in 2015 with an increase to 35.5% from
26.6% in 2014 primarily because of the recent full consolidation
of a subsidiary. Nevertheless, Fitch views this level as adequate
and favorably comparable to other NBFIs as it benefits from a
large business scale.
Credito Real's asset quality metrics compare favourably to its
peers as it benefits from its concentration in federal level
government entities that centralize payments through the Tesoreria
de la Federacion (Tesofe) or that are more operationally efficient
than others and from its income/risk sharing agreement with its
distributors.
Non-Performing Loans represented 2.4% of gross loans, while the
impaired loans ratio adjusted by gross charge-offs stood at an
adequate 4.3% in 2015, in line with its 2012-2013 average of 4.5%,
and below that of its peers in the payroll segment in Mexico.
However, given that Credito Real owns an equity stake in its most
relevant distributors, it is exposed to this risk indirectly
through a lower contribution of its investment in associates
account in the income statement. For this reason, Fitch calculates
an impaired loan ratio adjusted for the amounts owed by
distributors. This adjusted ratio stood at 4.8% as of December
2015 and at 6.6% if last-12 month charge-offs are considered. In
Fitch's opinion, the fact that distributors are jointly liable for
the loan portfolio they originate has proven an effective
mechanism to contain the deterioration of the loan portfolio. In
addition, loan loss reserves remain strong.
The company's capitalization metrics are adequate considering its
concentration in low and middle income segments of the population
and its above average risk appetite reflected in its aggressive
growth strategy. As of December 2015, its tangible common equity
ratio stood at 17.3%, down from the 24.1% average registered
during 2012-2013. Credito Real targets to maintain a debt to
equity ratio below 4x. As of December 2015, it stood at 2.6x,
while its debt to tangible equity ratio stood at 4.3x. Leverage
will increase when the company consolidates the acquisition of
Instacredit but will remain at a level commensurate with its
rating.
Credito Real's legal figure does not enable it to take deposits
from the public; for this reason, its funding base is concentrated
in wholesale sources. Nevertheless, Fitch recognizes that the
company's funding profile compares favourably to other rated NBFIs
in terms of the number and diversity of funding providers that
include local and international commercial banks, local
development banks, as well as local and international bond
issuances. Asset encumbrance is low as only 10% of its funding mix
corresponds to collateralized credit lines.
The concentration of the maturities of its funding lines as of
December 2015 was high with 38% maturing in 2016; this, coupled
with the syndicated credit line used to acquire Instacredit,
concentrates debt maturities in the following two years. In
Fitch's opinion, refinancing risk is moderate considering the
concentration of Credito Real's maturity schedule in 2016 and 2019
and the current volatility in global markets. However, its
positive maturity gaps that benefit from a loan portfolio with an
average tenor of 1.7 years financed with debt with average
maturity of two years largely mitigates this risk. As of April
2016, the company had refinanced roughly half of the maturities
scheduled in 2016.
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Fitch could upgrade Credito Real's ratings in the medium term if
the company is able to diversify its loan portfolio and maintain
strong financial performance. This would be reflected in an
operating ROA consistently above 8% and an internal capital
generation that is sufficient to maintain its tangible common
equity ratio above 15% with loan loss reserves covering at least
100% of impaired loans. At the same time, Credito Real must
maintain adequate asset and liability management as reflected in
positive liquidity gaps.
A deterioration of asset quality metrics that decrease operating
ROA and tangible common equity ratio below 4% and 12%,
respectively, could adversely affect ratings. A negative rating
action could also result from pressure on tangible common equity
from goodwill derived of future acquisitions, increased unhedged
exposure to foreign currency debt and a deterioration of its
liquidity position.
Fitch has assigned the following ratings:
Credito Real S.A.B. de C.V. Sofom, E.R.
-- Long-term IDR 'BB+';
-- Short-term IDR 'B';
-- Long-term Local Currency IDR 'BB+';
-- Short-term Local Currency IDR 'B';
-- National long-term rating 'A+(mex)';
-- National short-term rating 'F1(mex)'.
-- National long-term rating for senior unsecured local notes
'A+(mex)'.
MERIDA: Moody's Cuts Global Scale Issuer Rating to 'Ba1'
--------------------------------------------------------
Moody's de Mexico downgraded the issuer ratings of the
Municipality of Merida to A1.mx from Aa3.mx (Mexico National
Scale) and to Ba1 from Baa3 (Global Scale, local currency). The
outlook remains negative.
At the same time, Moody's de Mexico downgraded debt ratings of the
MXN 150 million loan (original face value) with Banorte to Aa1.mx
from Aaa.mx (Mexico National Scale) and to Baa1 from A3 (Global
Scale, local currency).
RATINGS RATIONALE
The downgrade of the issuer ratings mainly reflects the structural
deterioration of its gross operating margins as a result of rising
levels of current expenditures relative to limited revenue growth.
The current ratings also reflect the risk that a lawsuit against
the municipality will cost approximately MXN 203 million or 9.3%
of its operating revenues.
Merida registered a gross operating margin equivalent to 0.5% of
operating revenues in 2015 compared to the 11.7% in 2013. The
deterioration reflects that the current expenditures' growth
outpaced the operating revenues growth. The compound annual
growth rate (CAGR) for the 2011-2015 period of operating
expenditures was equivalent to 10.8% compared to the operating
revenues CAGR of 6.6%. The main drivers of the deterioration were
increases in general services, supplies and materials costs.
Moody's do not expect an improvement in the near future on this
indicator which is now more in line with sub-investment grade
rating.
Moreover, a controversy between AB&C Leasing, the company
contracted for changing the public lights with more efficient LED
lamps, and Merida ended in a lawsuit. In August 2015, the State
Court's verdict imposed a MXN 203 million payment to the company.
As such, the municipality requested "constitutional protection"
and filed the case in the Federal Court. Moody's considers that
if the municipality has to cover such amount as a result of the
final verdict, its liquidity and/or debt metrics could face
pressure. The payment could cause debt levels to reach a still
moderate 14% of operating revenues or net working capital could
deteriorate to a 5% of total expenditures compared to a 14.5% of
2015.
The Ba1/A1.mx ratings also reflect Merida's still low net direct
and indirect debt levels and incorporate the potential increase in
debt and/or decrease in liquidity, both levels are strong compared
to national peers.
The negative outlook reflects that the negative outlook of
Mexico's sovereign bond ratings indicates heightened systemic risk
for sub-sovereign issuers, which have close operating and
financial linkages with the federal government. The elements
behind the sovereign action could exert pressure on the
municipality's financial metrics especially as federal transfers
represent 65.5% of Merida's total revenues.
The downgrade of debt ratings of the enhanced loan of MXN 150
million (original face value) with Banorte reflects that as per
our methodology, issuer ratings are the starting point to assign
debt ratings. As such, the downgrade of Merida's issuer ratings
triggered the downgrade of the enhanced loan's ratings.
WHAT COULD CHANGE THE RATING UP/DOWN
A rating upgrade for the Municipality of Merida in the medium-term
is unlikely as the ratings have a negative outlook. However, the
outlook could be stabilized if the sovereign rating is stabilized.
A downgrade of the sovereign could lead to a downgrade of Merida's
ratings. A further deterioration of the gross operating balance
leading to higher than expected liquidity and debt metrics could
result in a rating downgrade.
Given the links between the loan and the credit quality of the
obligor an upgrade/downgrade of the issuer ratings could exert
upward/downward pressure on debt ratings for the enhanced loan.
Also, if debt service coverage metrics improve/fall materially
below Moody's expectations, the ratings could face upward/downward
pressure.
The methodologies used in these ratings were Regional and Local
Governments published in January 2013, and Rating Methodology for
Enhanced Municipal and State Loans in Mexico published in June
2014.
The period of time covered in the financial information used to
determine Merida, Municipality of rating is between 01/01/2011 and
12/31/2015.
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.
MEXICO STATE: Moody's Raises Issuer Rating to Ba1; Outlook Neg.
---------------------------------------------------------------
Moody's de Mexico upgraded State of Mexico's issuer ratings to Ba1
(Global Scale, local currency) and A1.mx (Mexico National Scale)
from Ba2 and A2.mx, respectively. The outlook on issuer ratings
was changed to negative. This concludes the review that began on
April 1, 2016, when the rating was put under review with uncertain
direction.
At the same time, Moody's confirmed debt ratings at A3 and Aaa.mx
on these enhanced loans:
MXN5.546 billion (original face value) enhanced loan from BBVA
Bancomer
MXN 5.215 billion (original face value) enhanced loan from
Banamex
MXN 4.762 billion (original face value) enhanced loan from
Banorte
MXN 3.017 billion (original face value) enhanced loan from
Banobras (Profise)
MXN 3 billion (original face value) enhanced loan from Banorte
MXN 1.905 billion (original face value) enhanced loan form
Banorte
MXN 1.5 billion (original face value) enhanced loan from HSBC
MXN 1.37 billion (original face value) enhanced loan from
Santander
MXN 590 million (original face value) enhanced loan from
Interacciones
MXN 500 million (original face value) enhanced loan from Inbursa
MXN 454 million (original face value) enhanced loan from BBVA
Bancomer
Additionally, Moody's upgraded to A3 and Aaa.mx from Baa1 and
Aa1.mx these enhanced loans:
MXN 1.1 billion (original face value) enhanced loan from ISSEMyM
MXN 610 million (original face value) enhanced loan from Banorte
MXN 600 million (original face value) enhanced loan from Banco
del Bajio
MXN 500 million (original face value) enhanced loan from Banorte
MXN 500 million (original face value) enhanced loan form Foremex
MXN 250 million (original face value) enhanced loan from Banorte
MXN 3.7 billion (original face value) enhanced loan from BBVA
Bancomer
MXN 3.4 billion (original face value) enhanced loan from Banamex
MXN 3.4 billion (original face value) enhanced loan from
Banobras
Finally, Moody's also upgraded to (P)Ba1/A1.mx from (P)Ba2/A2.mx
the ratings on the 1.5 billion FEFOM Municipal Lending Program.
RATINGS RATIONALE
The upgrade of the State of Mexico's issuer ratings reflects the
solid improvement in the state's credit profile and its relatively
better position to face increased systemic risks as compared to
Ba2 rated peers. The state has recorded roughly balanced
financial results in 2013 and 2014, debt levels decreased and
liquidity is strong and higher than the median for Ba peers. Net
direct and indirect debt decreased to 19.9% of total revenues in
2014 from 23.6% in 2010. Liquidity measured by net working
capital was equivalent to 6% of total revenues in 2014. Going
forward, we expect the State of Mexico's strong financial
performance to continue, supported by further growth in own-source
revenues and a liquidity position sustained at levels higher than
its Ba1-rated peers.
The upgrade also reflects the state's strong governance and
management practices. A pension reform took place in 2013
reducing unfunded pension liabilities and in 2014 own-source
revenues increased by 50% as a result of the enlargement of its
tax base and an increase in the salary tax rate. Additionally,
the state has capacity to adjust expenditure to revenue growth to
ensure financial performance and debt levels remain in line with
recent performance.
The assignment of a negative outlook is consistent with all
Mexican states and almost all municipalities and reflects exposure
to increased systemic risk as reflected in the negative outlook on
the sovereign rating. The State of Mexico has a comparable
exposure to increased systemic risks as its Ba1 rated peers.
The confirmation of debt ratings of the aforementioned 11 enhanced
loans at A3/Aaa.mx reflects the fact that enhanced loans ratings
are capped at the rating of the Government of Mexico which
originates the transfers that pay debt service obligations.
The upgrade of debt ratings of the other enhanced loans follows
the upgrade of the State of Mexico's issuer ratings. The enhanced
loan ratings are directly linked to the credit quality of the
issuer, which ensures that underlying contract enforcement risks,
economic risks and credit culture risks (for which the issuer
rating acts as a proxy) are embedded in the enhanced loan ratings.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the negative outlook an upgrade of the issuer ratings is
unlikely. However, if the sovereign ratings stabilize and/or if
the state's idiosyncratic profile strengthens further, the outlook
could change to stable.
A downgrade of the sovereign bond ratings or a sudden change in
the state's fiscal discipline which in turn substantially increase
debt levels, could exert downward pressure on the ratings.
For the state's enhanced loans rated at the ceiling of A3, an
upgrade can only take place in the Global Scale Rating if the
sovereign rating is upgraded and if the state of Mexico's issuer
ratings and the credit enhancements of the loans are maintained or
strengthened. The ratings of the 1.5 billion FEFOM Municipal
Lending Program could face upward pressure if the state of
Mexico's ratings are upgraded.
Given the links between the loans and the credit quality of the
obligor, a downgrade of the state of Mexico's issuer ratings or if
debt service coverage levels fall materially below our
expectations would likely result in a downgrade of the ratings on
the loans.
The methodologies used in these ratings were Regional and Local
Governments published in January 2013, and Rating Methodology for
Enhanced Municipal and State Loans in Mexico published in June
2014.
The period of time covered in the financial information used to
determine Mexico, State of's rating is between 01/01/2011 and
12/31/2015.
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.
QUALITAS CONTROLADORA: S&P Raises Credit Rating to 'BB+'
--------------------------------------------------------
S&P Global Ratings said that it raised its national-scale long-
term counterparty credit and financial strength ratings on
Qualitas Compania de Seguros S.A. de C.V. y Subsidiarias
(Qualitas) to 'mxAA+' from 'mxAA' and affirmed the 'mxA-1+' short-
term rating. At the same time, S&P Global Ratings raised its
global-scale long-term counterparty credit rating on Qualitas
Controladora S.A.B. de C.V. (QualCon) to 'BB+' from 'BB'. In
addition, S&P raised its counterparty credit and financial
strength ratings on Qualitas Insurance Co. (Quic), Qualitas' U.S.-
based subsidiary, to 'BBB-' from 'BB+' based on S&P's view that
this is a 'Highly Strategic' subsidiary for the group. The
outlook on all of these companies is stable.
The rating action on Qualitas and related entities reflects S&P's
revised view of the importance of enterprise risk management to
Qualitas in light of complexity of risks it's exposed to and the
company's practices in this area. S&P revised its assessment of
the importance of ERM to Qualitas to 'low' from 'high' importance
because S&P believes the company is not exposed to complex risks
that could cause a significant loss of capital and earnings in a
short period of time or that are highly uncertain or long-term in
nature.
The ratings on Qualitas continue to be supported by its strong
brand recognition, leadership position in the Mexican auto
insurance market, and adequate operating performance. However,
its current risk-based capital is only slightly redundant in S&P's
'BBB' benchmark, and there are uncertainties regarding the
company's capitalization levels after the implementation of the
local regulator's Solvency II-type capital model, which are
limiting rating factors. The ratings reflect S&P's view of
Qualitas' "satisfactory" business risk profile and "lower
adequate" financial risk profile.
QualCon is a non-operating holding company and the parent of
Qualitas. S&P's rating on QualCon follows S&P's group rating
methodology and standard notching for non-U.S., non-operating
holding companies. As a result, the rating on QualCon is two
notches below the group credit profile (GCP), as the insurance
group has no banking or significant non-regulated businesses. The
rating differential incorporates the ongoing subordination of
QualCon's creditors to those of the policyholders of Qualitas.
Quic is an affiliate of Qualitas and operates in the U.S. by
offering mainly cross-border products to Qualitas' clients. S&P's
ratings on Quic follow our group rating methodology and standard
notching for "highly strategic" subsidiaries. As a result, the
ratings on Quic are one notch below Qualitas' GCP. S&P views Quic
as a "highly strategic" subsidiary due to the parent's strong
level of support and commitment and Quic's high level of
integration with respect to business strategy and enterprise risk
management (ERM). In addition, S&P believes there is a close link
between Quic and the group's reputation and that the subsidiary
will benefit from the ongoing business of its parent and affiliate
in Mexico.
Overall, Qualitas faces intermediate industry and country risks
because its activities and underwriting are based mostly in
Mexico. S&P's Insurance Industry Country Risk Assessment (IICRA)
for Mexico's property/casualty (P/C) insurance sector indicates an
intermediate risk. S&P's country risk score is based on Mexico's
economic, political, and financial system risks, which stem from
S&P's sovereign criteria for the first two risks and S&P's Banking
Industry Country Risk Assessment (BICRA) criteria for the last
one. S&P's P/C industry risk assessment considers overall
potential risks arising from catastrophes as relatively high as a
result of the country's propensity for natural disasters. Entry
barriers into Mexico's P/C segment are moderate, in S&P's view.
Still, there is plenty of room for growth because insurance
penetration is still very low in Mexico at about 2% of GDP. S&P
believes domestic regulatory oversight and its track record are
effective, and it has fostered satisfactory market performance
over the past several years. In addition, the regulator
adequately monitors the entire industry frequently.
S&P regards Qualitas' competitive position as adequate, supported
by its positive brand recognition, leadership position in the
motor segment, and adequate operating performance. Qualitas has
increased its market share in the motor segment to 25.3% in 2015
from 24.9% in 2014. In addition, the company has maintained
adequate operating performance over the past few years despite
strong competition in terms of pricing and service.
Qualitas' combined ratio continues to compare favorably with that
of its peers and the industry. The company reported a 99.8%
property/casualty combined ratio as of the end of 2015, slightly
better than the 101.4% average for its peers (AXA, ABA, GNP,
MAPFRE, ATLAS, HDI, and Zurich Santander). S&P expects that
Qualitas' operating performance will continue to be slightly
better than its industry peers' over the coming years given its
market leadership and focus in the motor segment. In S&P's base-
case scenario, it forecasts the combined ratio improving to 97%-
98% in the next 12-24 months.
S&P also takes into account that Qualitas' monoline business
profile is focused on the motor segment, which partially weakens
its credit profile compared with that of multiline insurers
operating in Mexico, as its business profile is less diversified.
S&P expects the company to continue to focus its efforts
developing the Mexican motor segment.
S&P considers the capital and earnings of Qualitas as 'upper
adequate,' reflecting capital adequacy that is slightly below
S&P's 'BBB' benchmark per our risk-based capital model. S&P
incorporates into its base-case scenario that the company's
capital management will still be somewhat aggressive with a
relatively low regulatory capital adequacy ratio. At the moment,
the company follows a dividend policy that considers paying out
capital in excess of 1.5x the minimum regulatory capital
requirement; it was 1.3x as of December 2015. S&P also expects
that the company will pay dividends if the regulatory capital
requirements decrease after the regulator's Solvency II-type
capital model is fully implemented and results are certain.
In terms of profitability, the company reported net income of 621
million Mexican pesos (MXN), reflecting an ROE of 15.22% for 2015
(a five-year average of 28.3%). For 2016-2017, S&P expects the
company to report an average ROE of 15.8% and an average ROR of
5.6%, supported by its pricing power, leadership in the motor
businesses, and tight cost-control strategy.
S&P regards Qualitas' risk position as moderate, limited by the
company's concentration in the motor segment, which, in S&P's
opinion makes it more vulnerable to adverse events than its peers
that operate in multiple segments. However, Qualitas has very low
exposure to exchange risk and doesn't have significant
concentrations in its investment portfolio.
In S&P's opinion, Qualitas' financial flexibility is adequate.
The company has access to diverse sources of capital and very low
reinsurance utilization, unlike many of its domestic peers.
QualCon is a publicly listed company, which could allow it to
issue capital in the public market, unlike others peers in Mexico.
The company could increase its reinsurance utilization if
necessary.
S&P views Qualitas' ERM as adequate. In S&P's opinion, ERM
controls are in place and cover most of the company's risks. S&P
revised its assessment of the importance of ERM to Qualitas to low
from high importance because S&P believes the company is not
exposed to complex risks that could cause a significant loss of
capital and earnings in a short period of time or that are highly
uncertain or long-term in nature. The company writes only auto
business and has a long, successful track record. S&P views its
risk-management culture, risk controls, emerging risk, and
strategic management as adequate. S&P believes the company's
strategy in the past few years has allowed it to deliver
satisfactory operating performance.
S&P regards Qualitas' management and governance as fair. In
general, S&P considers planning and strategy execution at Qualitas
to be effective, which has improved its operating performance.
The company has started a succession plan for the top executive
team and has broadened the management team. However, S&P still
considers the company to have a high risk tolerance, a track
record of aggressive capital management, and a relatively high
dividend payout ratio, though the company maintains capitalization
levels slightly below S&P's 'BBB' ratings benchmark.
In S&P's view, Qualitas' liquidity is strong because of its sound
credit quality, liquid investments, and regular premium and
investment income inflow. Currently, Qualitas has no debt
obligations covenants or other requirements that could compromise
its liquidity.
The outlook on Qualitas reflects S&P's expectation that the
company will maintain its leadership position in the Mexican auto
insurance market and that the rating fundamentals--including
operating performance and capital adequacy levels--will remain at
the current levels, considering a combined ratio in the 97%-98%
range and risk-based capital close to S&P's 'BBB' rating category
over the next two years. The stable outlook on both QualCon and
Quic parallels Qualitas' outlook.
S&P could downgrade Qualitas over the next two years if the
company's capital falls below our expectations, Qualitas
implements an aggressive dividend policy eroding capitalization
levels over time, or if the company's operating performance
weakens as a result of aggressive underwriting or adverse market
conditions. In addition, a significant contraction in the auto
insurance market may undermine Qualitas' financial or operating
performance.
Another upgrade is possible over the next two years if Qualitas
strengthens its capitalization ratios to levels consistently above
our benchmark for the 'BBB' levels and the company maintains sound
risk management practices with adequate operating performance.
=============
U R U G U A Y
=============
BANCO PATAGONIA: Moody's Assigns Ba3 Rating; Outlook Negative
-------------------------------------------------------------
Moody's Investors Service has assigned Ba3/Not Prime long and
short term global scale deposit ratings as well as a A2.uy
national scale deposit rating to Banco Patagonia (Uruguay)
S.A.I.F.E. (Patagonia Uruguay). All ratings carry a negative
outlook. Moody's has also assigned Ba2(cr)/Not Prime(cr) long-and
short-term global counterparty risk assessments.
These ratings and assessments were assigned to Banco Patagonia
(Uruguay) S.A.I.F.E:
Baseline Credit Assessment: b1
Adjusted Baseline Credit Assessment: ba3
Long-term global local and foreign currency deposit ratings: Ba3
Short-term global local and foreign currency deposit ratings:
Not Prime
National scale local and foreign currency deposit ratings: A2.uy
Long- and short-term global counterparty risk assessment:
Ba2(cr)/Not Prime(cr)
RATINGS RATIONALE
Patagonia's Ba3 global local and foreign currency deposit ratings
derive from the bank's b1 baseline credit assessment and a one
notch uplift derived from the high probability that Patagonia
Uruguay's indirect owner, Banco do Brasil (Ba2 NEG), would provide
support to the bank in the event it faces financial stress. Banco
do Brasil controls Patagonia Uruguay through its ownership of
Banco Patagonia S.A. (Patagonia Argentina, Ba3 NEG). The negative
outlook on Patagonia Uruguay is in line with the negative outlook
on Banco do Brasil S.A.
The ratings reflect Patagonia Uruguay's relatively close credit
linkages with its parent bank, specifically its exposure to
similar macroeconomic pressures as its parent given its dependence
on Argentine depositors, many of whom are likely customers of the
parent bank as well, a shared name, shared members of the Board of
Directors and the reliance on the parent for key business
functions. That said, Patagonia Uruguay does not depend on
intercompany funding, nor does it have a significance level of
wholesale funding, which could be vulnerable to a crisis of
confidence in the parent.
The ratings also capture Patagonia Uruguay's limited earnings
generation capacity as it simply reinvests deposits from Argentine
clients in highly liquid investments. The bank does not undertake
any lending activities. Consequently, net income has averaged
just 0.37% of tangible banking assets in the last three years.
While the bank is well capitalized, with a ratio of tangible
common equity to risk weighted assets of 21.6% as of December
2015, its rating is nevertheless constrained by its ties to its
immediate parent.
The bank's "Institucion Financiera Externa" license only allows it
to provide financial services to non-residents, mainly savings
accounts and term deposits as well as asset management activities
and securities custody. Consequently, Argentine citizens'
deposits represent 85% of the entity's total funding. However,
the banks' high levels of liquidity help to offset risks
associated with its high dependence on a single source of funding
that is vulnerable to economic and political developments in
Argentina.
Liquid banking assets represent 99% of the bank's tangible assets,
although a significant portion of these are speculative-grade, in
some cases deeply so. While approximately 35% of the bank's
assets are held in cash and deposits in investment grade financial
institutions, another 27% is invested in Argentine sovereign
bonds, 7% in corporate bonds of Brazilian companies, and 16% is
invested in term deposits in Banco do Brasil S.A.. The balance is
largely placed in highly-rated banks in United Stated.
Patagonia Uruguay's ratings will face downward pressure if its
parent's rating is downgraded.
If Moody's national scale ratings (NSRs) methodology is revised as
proposed in the Request for Comment (RFC) entitled "Mapping
National Scale Ratings from Global Scale Ratings" published on
January 20, the resulting new Uruguayan map could likely imply
that many Uruguayan issuers' global scale ratings, including that
of Patagonia Uruguay, could correspond to lower ratings on the
Uruguayan national scale than they do currently. The comment
period for this RFC closed on Feb. 22.
Banco Patagonia (Uruguay) S.A.I.F.E. is headquartered in
Montevideo, Uruguay, with assets of $43.5 million and
shareholders' equity of $11.9 million as of December 2015.
COMPANIA COOPERATIVA: Moody's Assigns Ba3 Global Scale Rating
-------------------------------------------------------------
Moody's Investors Service has assigned Ba3 global scale (local
currency) and A1.uy on Uruguay's national scale insurance
financial strength ratings to Compania Cooperativa de Seguros
Surco. The outlook for Surco Seguros's ratings is stable.
RATINGS RATIONALE
According to Moody's, Surco Seguros' ratings are primarily based
on its good business diversification in life and property &
casualty (P&C) segments, leading market position in the
agricultural line of business, and consistent positive net
results. The rating agency also noted the company's low product
risk profile, given its granular book of business in the
automobile segment, and its exposure to group life coverages,
which are short term products and only include protection
components. Among other positive credit considerations, Moody's
mentioned that despite the company's heavy concentration in
Uruguayan government bonds, those securities are currently
investment grad rated at Baa2.
These positive considerations are partly offset by several credit
challenges, including the company's overall weak market presence,
by reinvestment risk and currency mismatch associated to its run-
off annuity products, and by weak reserve adequacy, reflected by
volatile and adverse reserve development.
Commenting on the factors that could result in an upgrades of the
company's ratings, Moody's mentioned: 1) Sustained improvement in
the Surco Seguros' reserve adequacy; 2) improved underwriting
results with combined ratios for the P&C lines below 100%; and 3)
improvement in the company's profitability (i.e. return on capital
persistently above 15%). Conversely, the following factor could
lead to ratings downgrade: 1) sustained underwriting losses in
their P&C products (i.e.: combined ratios consistently above
105%); 2) impairment in company's capitalization, with a ratio of
shareholders equity to total assets persistently below 8%; and 3)
significant reduction in its market-share.
Founded in 1992, Surco Seguros is a mid-size Uruguayan cooperative
insurer that distributes P&C and life insurance coverages to
individuals and small and medium-size enterprises in the country.
Headquartered in Montevideo, Uruguay, Surco Seguros reported a net
income of UYU22 million, with gross premiums written of UYU597
million for the fiscal year ended on Dec. 31, 2015. As of that
date, the company reported total assets of almost UYU1.328 million
and shareholders' equity of UYU 177 million.
Moody's insurance financial strength ratings are opinions of the
ability of insurance companies to pay punctually senior
policyholder claims and obligations.
The methodologies used in this rating were Global Life Insurers
published in April 2016, and Global Property and Casualty Insurers
published in April 2016.
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.
EXPRINTER (URUGUAY): Moody's Assigns B3 Global Scale Rating
-----------------------------------------------------------
Moody's Investors Service has assigned B3/Not Prime long and short
term global scale deposit ratings as well as a Ba2.uy national
scale deposit rating to Exprinter (Uruguay) S.A. (Exprinter). All
ratings carry a stable outlook. Moody's has also assigned
B2(cr)/Not Prime(cr) long-and short-term global counterparty risk
assessments.
These ratings and assessments were assigned to Exprinter (Uruguay)
S.A.:
Baseline Credit Assessment: b3
Adjusted Baseline Credit Assessment: b3
Long-term global local and foreign currency deposit ratings: B3
Short-term global local and foreign currency deposit ratings:
Not Prime
National scale local and foreign currency deposit ratings:
Ba2.uy
Long- and short-term global counterparty risk assessments:
B2(cr)/Not Prime(cr)
RATINGS RATIONALE
The ratings consider Exprinter's weak asset quality and
capitalization metrics, and significant operating losses, as well
as its high dependence on costly deposits from non-residents,
though funding risks are partly offset by the entity's good
liquidity indicators.
Although 82% of Exprinter's loan book is composed of receivables
and working capital facilities to SMEs with tenors shorter than
180 days, the non-performing loan (NPL) ratio was nevertheless a
very high 11.2% as of December 2015, reflecting the weaker credit
profile of the bank's SME-focused client base. While NPLs were
fully covered by loan loss reserves, which rose to 107% of NPLs as
of December 2015 from 44.2% a year before. The sharp rise in
provisioning expenses, which represented 155% of the bank's pre-
provision income, negatively affected the bank's profitability.
Profits were also hit by a substantial decline in fees related to
asset management activities, following an order from the Central
Bank to exit that business, and significant one-time restructuring
charges related to the layoff of employees in that unit.
In addition, to compete for deposits against large commercial
banks, which have larger branch networks, Exprinter must offer
higher interest rates, resulting in funding costs that are
considerably higher than local banks. As a result, the bank
registered losses equal to almost 6% of tangible banking assets in
2015, which led to a sharp drop in the bank's ratio of tangible
common equity to risk weighted assets to just 6.6% from 11.7% a
year before. Although Moody's expect Exprinter's efficiency and
profitability ratios to improve somewhat as a result of its
reduced operating costs, the bank is likely to continue to record
losses this year, which will put further downward pressure on
capital.
In addition, as a "Casa Financiera", Exprinter is not allowed to
take deposits from residents of Uruguay. Consequently, Exprinter
is mainly funded by non-resident deposits, which represented 92%
of total liabilities as of December 2015, out of which 75% are due
to Argentine citizens. This leaves the institution vulnerable to
a change in sentiment among Argentine investors, the risks of
which are rising given Argentina's improving economic prospects
and more market-friendly government.
As a result of the bank's low market penetration and limited
ability to grow its loan portfolio, however, liquidity metrics are
strong, as shown in an average liquid asset ratio on tangible
banking assets of 45% in last three years. This high level of
liquidity should enable the entity to withstand a significant
reduction of its deposits base.
Exprinter's ratings could face upward pressure if the entity's
asset quality, capitalization, earnings generation capacity and
funding diversification demonstrate meaningful and sustainable
improvement, while further deterioration in any these factors
could put downward pressure on the ratings.
If Moody's national scale ratings (NSRs) methodology is revised as
proposed in the Request for Comment (RFC) entitled "Mapping
National Scale Ratings from Global Scale Ratings" published on
January 20, the resulting new Uruguayan map could likely imply
that many Uruguayan issuers' global scale ratings, including that
of Exprinter, would correspond to lower ratings on the Uruguayan
national scale than they do currently. The comment period for
this RFC closed on February 22.
Exprinter (Uruguay) S.A.is headquartered in Montevideo, Uruguay,
with assets of UYU 1.81 billion and shareholders' equity of UYU
232 million as of December 2015.
The principal methodology used in these ratings was Banks
published in January 2016.
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.
PORTO SEGURO: Moody's Assigns Ba1 Rating; Outlook Stable
--------------------------------------------------------
Moody's Investors Service has assigned Ba1 global scale (local
currency) and Aa3.uy on Uruguay's national scale insurance
financial strength ratings to Porto Seguro -- Seguros del Uruguay
S.A. The outlook for Porto Seguro's ratings is stable.
RATINGS RATIONALE
According to Moody's, Porto Seguro's ratings are primarily based
on the company's adequate market position as a niche player in the
automobile segment, its relatively low products risk profile, and
its adequate assets quality and capitalization. Porto Seguro
holds the fourth position in the overall Uruguayan market --with
6% market share based on gross premiums- and is the second largest
player in the automobile line of business with an important 17% of
market share. Commenting on other positive credit considerations,
Moody's mentioned Porto Seguro's very low level of high risk
assets --only 2% of its shareholders equity- and its adequate
capitalization, with a gross underwriting leverage of 4 times its
adjusted equity.
The above mentioned positive considerations are partially offset
by the company's weak product diversification --with only two main
lines of business-, net profits highly reliant on investments
returns, and concerns related to its reserves adequacy, which has
shown significant volatility over the past few years. Moreover,
Porto Seguro's profitability is challenged by the highly
competitive landscape of the Automobile insurance market in
Uruguay, which pressures the company's rates and margins.
According to Alejandro Pavlov, lead analyst for Porto Seguro, the
factors that could result in an upgrade for the company's ratings,
include: 1) a significant and sustained improvement in the
company's product diversification, with another line of business
representing 10% or more of its total premiums; 2) a sustained
improvement in the company's underwriting results; and 3) an
upgrade in Uruguay's sovereign rating. Conversely, Porto Seguro's
ratings could be downgraded for the following reasons: 1) a
significant deterioration in its investment credit quality; 2) a
significant decline in its capital adequacy, with its gross
underwriting leverage persistently above 6 times; 3) a sharp
reduction in its market-share or 4) a deterioration in Uruguay's
sovereign rating and/or insurance operating environment.
Porto Seguro is a medium size insurance company operating in the
Uruguayan market, and wholly-owned subsidiary of the Brazilian-
based insurer Porto Seguro Compania de Seguros Gerales, a leading
P&C company in that country.
Headquartered in Montevideo, Uruguay, Porto Seguro reported a net
income of UYU73 million, with gross premiums written of UYU1,929
million for the fiscal year ended on Dec. 31, 2015. As of that
date, the company reported total assets of almost UYU2,169 million
and shareholders' equity of almost UYU594 million.
Moody's insurance financial strength ratings are opinions of the
ability of insurance companies to pay punctually senior
policyholder claims and obligations.
ZURICH SANTANDER: Moody's Assigns Ba1 Rating; Outlook Stable
------------------------------------------------------------
Moody's Investors Service has assigned Ba1 global scale (local
currency) and Aa2.uy on Uruguay's national scale insurance
financial strength (IFS) ratings to Zurich Santander Seguros
Uruguay S.A. (Zurich Santander Uruguay). The outlook for Zurich
Santander Uruguay's ratings is stable.
RATINGS RATIONALE
According to Moody's, Zurich Santander Uruguay's primarily reflect
the implicit and explicit support provided by its ultimate
shareholder Zurich Santander Insurance America S.L., which is
owned by Zurich Financial Services Group (51%) and by Banco
Santander (49%). This support is evidenced by technical control
and oversight over this subsidiary, as well as by brand name
sharing and by the ultimate parent companies' significant
strategic interest in Latin America, as demonstrated by a solid
presence in the region. Other positive considerations include
Zurich Santander Uruguay's strong control over its distribution
channels, its adequate and sustained profitability, and good
capitalization.
These positive credit considerations are offset by the company's
small size and weak market position, lack of an ample product
diversification, high asset concentration in Uruguayan sovereign
bonds, and the asset/liability management risks associated the
company's long-term run-off annuity reserve.
According to Alejandro Pavlov, lead analyst for Zurich Santander
Uruguay, the factors that could result in an upgrade for the
company's ratings are the following: 1) a significant and
sustained improvement in the company's market share and product
diversification; 2) an upgrade in Uruguay's sovereign rating; and
3) a sustained improvement in the company's profitability ratios
(i.e.: return on capital ratios consistently above 15%).
Conversely, Zurich Santander Uruguay's rating could be downgraded
for the following reasons: 1) a reduction on the support provided
by the company's shareholder or a reduction on the parent's
strategic interest on the subsidiary; 2) a significant
deterioration in its investment credit quality; 3) a significant
decline in its profitability trend (i.e.: with return on capital
ratios consistently below 6%); 4) a significant deterioration of
the company's capitalization levels (i.e.: with capital to assets
ratios consistently under 15%); and 5) a downgrade of Uruguay's
sovereign rating.
Zurich Santander Uruguay is a small private life Uruguayan insurer
that primarily distributes credit-life coverage to the client base
of Banco Santander (Uruguay) (Baa3/Stable Outlook).
Headquartered in Montevideo, Uruguay, Zurich Santander Uruguay
reported a net loss of UYU 18 million, with gross premiums written
of UYU 222 million for the fiscal year ended on Dec. 31, 2015. As
of that date, the company reported total assets of UYU 865 million
and shareholders' equity of UYU 229 million.
Moody's insurance financial strength ratings are opinions of the
ability of insurance companies to pay punctually senior
policyholder claims and obligations.
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.
=================
X X X X X X X X X
=================
* LATAM Credit Conditions to Remain Pressured Through 2016 & 2017
-----------------------------------------------------------------
Latin American credit conditions will be pressured through 2016
and into 2017, says Moody's Investors Service, as ongoing
expectations for muted global economic growth sustain
macroeconomic headwinds. Adverse external macroeconomic factors
include China's gradual slowdown, US monetary policy tightening
and weak economic conditions in Europe which can add to volatility
and affect investor confidence.
"These adverse global macroeconomic influences pressure already
challenged local credit conditions," said Paloma San Valentin, a
Moody's Managing Director of Corporate Finance. "However, some
industry sectors are relatively well positioned because of
specific strengths, while others, primarily those in globally
traded commodities sectors, are struggling."
With the background of global headwinds and challenged credit
conditions, San Valentin indicated that the fundamentals or "the
unique stories of each sector and company" become more critical.
As outlined in Moody's presentation "Global Uncertainties, Local
Challenges: Latin American Corporate Credit Outlook", companies
that actively manage their financial flexibility, maintaining
strong liquidity and conservative capital structures, are best
positioned to weather the storm.
"For the most part, companies operating in Mexico, Chile and Peru
are better positioned to face global headwinds because general
economic activity will be relatively stronger. However, owing to
Brazil having to navigate poor economic performance and political
challenges, Brazilian companies face more difficult conditions,"
said San Valentin. "In Argentina, credit conditions remain tough,
but ongoing political changes and the expectation of a more
market-friendly environment are positively impacting a key driver,
business and investor confidence."
San Valentin also indicated that regaining business investor
confidence was the most efficient mechanism for improving credit
conditions. "The fragile confidence seen, enhances the weaknesses
and dependencies of the region."
Throughout the region, credit conditions are difficult for the Oil
& Gas and Mining & Metals companies -- in this regard, the Latin
American companies are not alone. Conditions improve as the
supply-demand dynamic moves from global to regional, or as Latin
American companies are able to derive meaningful benefits from
their cost advantages. Moody's sees Latin America's Pulp & Paper
and Protein Producers as being better positioned than the Oil &
Gas and Mining & Metals companies. Moody's also says that other
consumer-driven sectors, are more influenced by regional or local
factors.
***********
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.
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Nothing in the TCR-LA constitutes an offer or solicitation to buy
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issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
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than a balance sheet solvency test.
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***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
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 2016. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any comillionercial 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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