/raid1/www/Hosts/bankrupt/TCRLA_Public/160602.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, June 2, 2016, Vol. 17, No. 108
Headlines
A R G E N T I N A
ARGENTINA: Brazil Crisis Will Chip 1.5% off Argentina's GDP
B R A Z I L
AGENCIA DE FOMENTO: Fitch Places 'B' ST IDRs on Rating Watch Neg.
BRAZIL: Recovery Will Require "Sacrifices," Interim President Says
CEAGRO AGRICOLA: Fitch Withdraws 'RD' LT Issuer Default Ratings
ELDORADO BRASIL: Fitch Publishes 'B+' Issuer Default Ratings
PETROLEO BRASILEIRO: Probe Likely to Expand to Other Suppliers
C A Y M A N I S L A N D S
A VOCE TB I: Creditors' Proofs of Debt Due June 15
ATLANTIC BLUE: Creditors' Proofs of Debt Due June 23
BLUE HILL: Creditors' Proofs of Debt Due June 15
COMMINGLED ASSET: Creditors' Proofs of Debt Due June 22
COMMINGLED ASSET MASTER: Creditors' Proofs of Debt Due June 22
COMPASS LATIN: Placed Under Voluntary Wind-Up
DCP TB IV: Creditors' Proofs of Debt Due June 15
KAZIMIR CAPITAL: Commences Liquidation Proceedings
KAZIMIR TOTAL: Commences Liquidation Proceedings
LIMEROCK II: Creditors' Proofs of Debt Due June 15
G U A T E M A L A
GUATEMALA: IMF Says Economy Withstood 2015 Political Crisis
J A M A I C A
JAMAICA: BOJ Reduces Bench Mark Interest Rate
M E X I C O
GUASAVE MUNICIPALITY: Moody's Cuts Issuer Rating to B1/Baa3.mx
GRUPO FAMSA: Fitch Cuts Long-Term Issuer Default Rating to 'B'
ZAPOTLAN EL GRANDE: Moody's Ups Rating to B1/Baa2.mx; Outlook Neg.
S U R I N A M E
SURINAME: Fitch Says IMF Loan Ups Liquidity, Challenges Remain
T R I N I D A D & T O B A G O
TRINIDAD & TOBAGO: Central Bank Lowers 2016 Economic Forecast
U R U G U A Y
* URUGUAY: Looks to Africa to Make Up Fall in Exports
- - - - -
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A R G E N T I N A
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ARGENTINA: Brazil Crisis Will Chip 1.5% off Argentina's GDP
-----------------------------------------------------------
The Latin American Herald reports that the crisis in Brazil, where
an interim government is dealing with a recession, will take 1.5
percentage points from Argentina's gross domestic product (GDP),
Argentine Finance Minister Alfonso Prat-Gay said.
"Brazil might determine whether we grow or not," the Argentine
official said at an EFE-Casa de America forum in Madrid, where he
was introduced by Spanish Economy Minister Luis de Guindos,
according to The Latin American Herald.
"The world nowadays is very uncertain" and dialogue is required,
said Prat-Gay, who has held his post since December, the report
notes.
"Argentina wants to be part of the dialogue, not part of the
problem, like it has been until now," Mr. Prat-Gay addedd,
referring to the previous administration of President Cristina
Fernandez, says the report.
During his visit to Spain, Minister Prat-Gay has emphasized the
opportunities for Spanish investors in his country, saying that
President Mauricio Macri sent him to Spain with a message: "Tell
them to get going and invest in Argentina," the report relays.
Minister Prat-Gay said the government's goal was to end 2019 with
an inflation rate of 5 percent, compared to the 25 percent
expected 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'.
===========
B R A Z I L
===========
AGENCIA DE FOMENTO: Fitch Places 'B' ST IDRs on Rating Watch Neg.
-----------------------------------------------------------------
Fitch Ratings placed Agencia de Fomento do Estado do Rio de
Janeiro S.A.'s (AgeRio) ratings on Rating Watch Negative. A full
list of rating actions follows at the end of the release.
KEY RATING DRIVERS - IDRS, NATIONAL RATINGS, SUPPORT RATINGS
The rating action mirrors the recent action on Agerio's parent,
the State of Rio de Janeiro (ERio, Long-Term Foreign Currency and
Local Currency IDRs 'B+'/Rating Watch Negative), which was taken
following a missed debt service payment by ERio. It reflects the
downside risks with respect to ERio's capacity to support AgeRio,
should the need arise. (For more details see 'Fitch Places State
of Rio de Janeiro on Rating Watch Negative', dated May 25, 2016 at
'www.fitchratings.com'.)
AgeRio's ratings are driven by expected support from ERio and are
aligned with those of its parent. Fitch views AgeRio as
strategically important to ERio, as it acts as the state's
development arm and implements its economic development policies.
A track record of frequent capital injections by ERio, most
recently in the second half of 2015, reinforces Fitch's view. ERio
controls 99.99% of AgeRio. Furthermore, by state law ERio's stake
in AgeRio's voting shares cannot fall below 51%, and it is the
financial agent or administrator of three state funds. Fitch does
not assign a Viability Rating to AgeRio, as it is a development
agency.
As of December 2015, AgeRio remained highly capitalized with a
total regulatory capital ratio of 75.30% (70.95% in December
2014). The development agency's overall profitability fell but
remained adequate, as a solid increase in fee income broadly
offset a large increase in loan impairment charges. Average ROA
stood at 1.07% (1.49% in December 2014). In the same period,
AgeRio's impaired loans classified in the D-H range of the central
bank's risk scale rose to 6.54% of total loans (5.37% in December
2014), while impaired loan coverage by reserves rose significantly
to 223.9% (89.67% in December 2014).
RATING SENSITIVITIES
IDRS, NATIONAL RATINGS, SUPPORT RATINGS
Changes in Parental Support: AgeRio's ratings are linked to those
of ERio. In case of an additional negative rating action on ERio,
AgeRio's ratings would be subject to a review to assess this
rating action's impact on the overall creditworthiness of AgeRio.
This, in turn, could lead to a negative rating action on the
development agency.
Fitch has placed the following ratings for AgeRio on Rating Watch
Negative:
-- Foreign and Local Currency Long-Term IDRs 'B+';
-- Foreign and Local Currency Short-Term IDRs 'B';
-- Long-term National Rating 'A-(bra)';
-- Short-term National Rating 'F1(bra)';
-- Support Rating '4'.
BRAZIL: Recovery Will Require "Sacrifices," Interim President Says
------------------------------------------------------------------
EFE News reports that Interim President Michel Temer again called
on Brazilians to have confidence in the steps he has taken to end
the economic recession, adding that the "effort" would require
"sacrifices."
Temer presided over the swearing in of the new top executives at
state-controlled oil giant Petrobras, the largest public
development bank and the Institute of Applied Economic Research,
or IPEA, an agency of the Office of the President, according to
EFE News.
The interim president said he took office amid "a huge combination
of problems caused by mistakes that put governance and the quality
of life of our people at risk," a reference to the administration
of President Dilma Rousseff, who has been suspended to face
impeachment, the report notes.
"We now have 11 million people unemployed, inflation that bears
watching, an actual deficit of BRL170 billion ($42.2 billion), and
this is the situation in which we assumed the government," Mr.
Temer said, the report notes.
Economist Pedro Parente is the new CEO of Petrobras, which is at
the center of a huge corruption scandal, the report says.
Investigators allege that a cartel of construction and engineering
companies overcharged the oil giant for contracts, splitting the
extra money with corrupt Petrobras executives, as well as with
politicians who provided cover for the graft, the report relays.
A score of large companies and around 50 politicians, including
the leaders of Brazil's Chamber of Deputies and Senate, Eduardo
Cunha and Renan Calheiros, respectively, have been implicated in
the graft scheme, the report discloses.
The scandal forced Petrobras to write off some BRL6.2 billion
(around $1.67 billion at the current exchange rate) in graft-
related losses from the period between 2004 and 2014.
Maria Silvia Bastos Marques, another economist, took over as head
of the BNDES, Brazil's largest development bank, while economist
Ernesto Lozardo was sworn in as president of the IPEA, the report
relates.
Paulo Rogerio Caffarelli was sworn in as Banco do Brasil's new
president, while economist Gilberto Occhi took over the top post
at the Caixa Economica Federal, a bank, the report adds.
As reported in the Troubled Company Reporter-Latin America on
March 29, 2016, severe contraction that was preceded by several
years of below-trend growth has impaired Brazil's (Ba2 negative)
underlying economic strength, despite the country's large and
diversified economy, says Moody's Investors Service. The
country's credit rating is also coming under pressure from the
government's high level of mandatory spending.
CEAGRO AGRICOLA: Fitch Withdraws 'RD' LT Issuer Default Ratings
---------------------------------------------------------------
Fitch Ratings has withdrawn Ceagro Agricola Ltda's (Ceagro) Long-
Term Foreign and Local Currency Long-Term Issuer Default Ratings
(IDRs) at 'RD', the Long-term National Scale rating at 'RD (bra)'.
Fitch said, "We are withdrawing the ratings as Ceagro has chosen
to stop participating in the rating process. Therefore, we will no
longer have sufficient information to maintain the ratings.
Accordingly, Fitch will no longer provide ratings or analytical
coverage for Ceagro."
FULL LIST OF RATING ACTIONS
The following ratings have been withdrawn without affirmation:
-- Long-term Foreign and local currency IDRs of 'RD';
-- Long-Term National scale rating of 'RD (bra)'.
ELDORADO BRASIL: Fitch Publishes 'B+' Issuer Default Ratings
------------------------------------------------------------
Fitch Ratings has published Eldorado Brasil Celulose S.A.'s
(Eldorado) ratings as follows:
-- Long-Term Foreign Currency Issuer Default Ratings (IDRs) 'B+';
-- Long-Term Local Currency IDR 'B+';
-- Long-Term National Scale Rating 'BBB+(bra)'.
The Rating Outlook for the corporate ratings is Stable.
The ratings reflect Eldorado's stronger cash flow due to the
depreciation of the Brazilian real during 2015, which accelerated
the deleveraging of the company's balance sheet. The ratings
incorporate that Eldorado will likely enter into a new investment
cycle and leverage will temporarily increase during 2017 and 2018.
After 2019, a fast deleveraging is expected due to stronger cash
flow generation capacity from the second pulp mill. Eldorado has a
manageable liquidity, and Fitch expects an improvement in the
company's liquidity and lower refinancing risk. Eldorado's limited
financial flexibility from its forest base was also incorporated
in the analysis.
KEY RATING DRIVERS
Operational Cash Flow Improved
Eldorado's EBITDA generation benefited from the depreciation of
the Brazilian real against the U.S. dollar, and to lesser extent
higher pulp prices. In the LTM ended March 2016, Eldorado
generated BRL1.7 billion of EBITDA, compared to BRL592 million
reported in 2014. Fitch expects EBITDA to be stable at BRL1.7
billion in 2016, considering net pulp prices of $US550/ton. The
company's cash flow generation is still strongly affected by high
financial expenses due to high indebtedness with cash flow from
operations (CFO) at BRL845 million in the LTM ended March 2016.
Investments of about BRL10 billion for the construction of its new
pulp mill will pressure free cash flow (FCF) generation, which is
expected to be negative until 2019. In the LTM ended March 2016,
FCF was positive at BRL319 million, after investments of BRL526
million. Expected funding for the expansion project should consist
of BRL7 billion of debt from the Brazilian Development Bank
(BNDES), Midwest Development Fund (FDCO), foreign export credit
agency and FGTS, and BRL3 billion of equity. Fitch's base case
projections considered that Eldorado will not proceed with the
expansion project without the equity contribution.
Leverage to Increase Due to New Pulp Project
Eldorado's leverage reduced faster than expected due to stronger
operational cash flow. In the LTM ended March 2016, net
debt/EBITDA was 4.9x, a reduction compared with 5.2x in 2015 and
12.6x in 2014, as per Fitch's methodology. As of March 31, 2016,
Eldorado reported total debt of BRL8.9 billion, with strong
participation of BNDES (44% of total debt). Fitch's base case
projections considered that Eldorado will build a second pulp
production line, with a production capacity of 2.3 million tons,
preventing the company from deleveraging in the medium term. With
investments of BRL10 billion, including an equity portion of BRL3
billion with the remainder comprised of new debt, Fitch expects
net leverage to peak at 7.7x in 2018. A quick deleveraging is
expected once the new mill becomes operational.
Dependence on Third Party Wood Still High
Eldorado exhibits state of art technology and high productivity at
its mill, with an annual production capacity of 1.7 million tons
of hardwood pulp. Eldorado's cash cost is in line with its peers
in Brazil, although the company has high dependence of wood from
third parties and longer average distance from the forest to the
mill. Eldorado also has some financial flexibility from its forest
base, with the accounting value of the biological assets of its
forest plantations of BRL1.8 billion as of March 31, 2016. The
nearly ideal conditions for growing trees in Brazil make these
plantations extremely efficient by global standards and give the
company a sustainable advantage in terms of cost of fiber.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Net pulp prices between $US550 and $US575 per ton during 2016-
2019;
-- Pulp sales volume of 1.65 million tons in 2016 and 1.7 million
tons in 2017;
-- Startup of the new pulp mill in 2019, with an additional pulp
sales volume of 1.4 million tons in 2019, reaching full
capacity in 2020;
-- Investments of BRL1.3 billion in 2016, BRL5.4 billion in 2017
and BRL4 billion in 2018;
-- Equity increase of BRL3 billion during 2016-2018.
RATING SENSITIVITIES
Future developments that may individually or collectively lead to
a negative rating action include:
-- Expectation that leverage will not quickly reduce after the
startup of the new pulp mill;
-- Liquidity falling to levels that considerably weaken short-
term debt coverage.
Future developments that may individually or collectively lead to
a positive rating action include:
-- Rating upgrades are not expected until the company concludes
its new investment cycle;
-- Faster than expected deleveraging if Eldorado decides not to
proceed with the investments for the construction of the
second pulp production line, resulting in higher than expected
free cash flow generation.
LIQUIDITY
Liquidity is manageable. As of March 31, 2016, cash and marketable
securities was BRL727 million and short term debt was BRL2.7
billion, including about BRL1.2 billion of pre-export financing.
Eldorado has BRL833 million of debt maturing from April to
December 2017 and BRL1.2 billion in 2018. The reduction in the
company's cash reserves, compared to a cash position of BRL1.4
billion at the end of 2015, was due a loss from derivatives
transactions of BRL746 million during the first quarter of 2016.
In 2015, Eldorado reported gains from derivatives transactions of
BRL1.7 billion. In Fitch's opinion, Eldorado's hedging strategy is
aggressive and speculative. Fitch expects the company to refinance
part of debt maturities and new intercompany loans are not
expected, but will depend on Eldorado's access to the market to
extend debt amortization profile.
FULL LIST OF RATING ACTIONS
Fitch has published the following ratings for Eldorado Brasil
Celulose S.A.:
-- Long-Term Foreign Currency IDR 'B+';
-- Long-Term Local Currency IDR 'B+';
-- Long-Term National Scale 'BBB+(bra)'.
PETROLEO BRASILEIRO: Probe Likely to Expand to Other Suppliers
--------------------------------------------------------------
Luciana Magalhaes at The Wall Street Journal reports that
Brazilian authorities are expanding their sweeping investigation
into corruption at Petroleo Brasileiro SA to include more of the
state oil company's suppliers, according to a person involved, a
move likely to extend the probe into next year.
Investigators in the so-called Car Wash probe have until recently
been focused mainly on a bribery-and-bid-rigging scheme centered
on construction companies that work with Petrobras, as the state
oil company is known, according to The Wall Street Journal.
Judge Sergio Moro, who oversees the far-reaching investigation,
said in April that it could be completed this year, the report
notes. But with other suppliers now on the radar, the
investigation is likely to continue into 2017, the person said,
the report relays.
The report notes that prosecutors recently targeted suppliers of
pipes for Petrobras, alleging that they charged an extra BRL40
million ($11.1 million) via fraudulent contracts in 2009 to 2013.
Similar providers are also likely to be targeted, the person said
without providing other details, the report discloses.
Prosecutors say construction firms worked together to overcharge
Petrobras by billions of reais. Part of the money raised from
inflated contracts was used to finance politicians and certain
political parties, and some was paid out as bribes, according to
prosecutors, the report relays.
Federal police have arrested dozens of executives and politicians
since 2014 related to the corruption scheme, the report says.
Some of those accused have entered plea bargains, while others
have maintained their innocence. Petrobras has said it was a
victim of the corruption and is collaborating with prosecutors,
the report notes.
The report discloses that the possible expansion of the probe
comes as interim President Michel Temer's government, in office
less than three weeks, is being rocked by leaked recordings that
appear to show newly appointed cabinet members working to subvert
the probe.
Planning Minister Romero Juca said he was taking a leave of
absence and Transparency Minister Fabiano Silveira handed in his
resignation after recorded conversations surfaced in which they
appeared to suggest they wanted to weaken the probe, the report
notes.
The two confirmed they took part in the conversations, but denied
that they had sought to interfere with or hinder the
investigation, the report relays.
President Dilma Rousseff was replaced by her former vice
president, Mr. Temer, earlier in May to face an impeachment trial
in Brazil's Senate, the report says. Neither Ms. Rousseff nor Mr.
Temer has been implicated in the probe, the report notes.
Mr. Temer said not long after moving into the presidential palace
that the investigation is a "benchmark" in the fight against
corruption and that the government would fight attempts to weaken
it, the report adds.
As reported in the Troubled Company Reporter-Latin America on Feb.
26, 2016, Moody's Investors Service downgraded all ratings for
Petroleo Brasileiro S.A. - PETROBRAS ("Petrobras")'s and ratings
based on Petrobras' guarantee, including the company's senior
unsecured debt and Corporate Family Rating to B3 from Ba3. The
company's baseline credit assessment (BCA) was lowered to caa2
from b3. At the same time, Moody's downgraded Petrobras Argentina
S.A. ("PESA")'s ratings, including its senior unsecured medium
term note program and Corporate Family Rating to B3 from B2, in
line with the senior unsecured rating of Petrobras.
==========================
C A Y M A N I S L A N D S
==========================
A VOCE TB I: Creditors' Proofs of Debt Due June 15
--------------------------------------------------
The creditors of A Voce TB I, Ltd. are required to file their
proofs of debt by June 15, 2016, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 12, 2016.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
ATLANTIC BLUE: Creditors' Proofs of Debt Due June 23
----------------------------------------------------
The creditors of Atlantic Blue Ltd. are required to file their
proofs of debt by June 23, 2016, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 12, 2016.
The company's liquidator is:
CDL Company Ltd.
P.O. Box 31106 Grand Cayman KY1-1205
Cayman Islands
BLUE HILL: Creditors' Proofs of Debt Due June 15
------------------------------------------------
The creditors of Blue Hill TB I, Ltd. are required to file their
proofs of debt by June 15, 2016, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 12, 2016.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
COMMINGLED ASSET: Creditors' Proofs of Debt Due June 22
-------------------------------------------------------
The creditors of Commingled Asset Short Term Fund (Cast), Ltd. are
required to file their proofs of debt by June 22, 2016, to be
included in the company's dividend distribution.
The company commenced liquidation proceedings on May 4, 2016.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Kim Charaman
Telephone: (345) 943-3100
COMMINGLED ASSET MASTER: Creditors' Proofs of Debt Due June 22
--------------------------------------------------------------
The creditors of Commingled Asset Short Term Fund (Cast) Master
SPC, Ltd. are required to file their proofs of debt by June 22,
2016, to be included in the company's dividend distribution.
The company commenced liquidation proceedings on May 4, 2016.
The company's liquidator is:
Intertrust SPV (Cayman) Limited
190 Elgin Avenue, George Town
Grand Cayman, KY1-9005
Cayman Islands
c/o Kim Charaman
Telephone: (345) 943-3100
COMPASS LATIN: Placed Under Voluntary Wind-Up
---------------------------------------------
On May 12, 2016, the sole shareholder of Compass Latin American
Credit - BRL Hedged resolved to voluntarily wind up the company's
operations.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Matias Rodriguez
c/o Jody Powery-Gilbert
Ogier
89 Nexus Way, Camana Bay
Grand Cayman KY1-9009
Cayman Islands
Telephone: +1 (345) 949 9876
Facsimile: +1 (345) 949-9877
DCP TB IV: Creditors' Proofs of Debt Due June 15
------------------------------------------------
The creditors of DCP TB IV, Ltd. are required to file their proofs
of debt by June 15, 2016, to be included in the company's dividend
distribution.
The company commenced liquidation proceedings on May 12, 2016.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
KAZIMIR CAPITAL: Commences Liquidation Proceedings
--------------------------------------------------
On May 11, 2016, the sole shareholder of Kazimir Capital Partners
Limited resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Frances Holiday
Cate Babour Walkers
6 Gracechurch Street
London EC3V 0AT
Telephone: +44 2072204970
KAZIMIR TOTAL: Commences Liquidation Proceedings
------------------------------------------------
On May 11, 2016, the sole shareholder of Kazimir Total Return Fund
Ltd resolved to voluntarily liquidate the company's business.
Creditors are required to file their proofs of debt to be included
in the company's dividend distribution.
The company's liquidator is:
Kazimir Asset Management Limited
c/o Cate Babour Walkers
6 Gracechurch Street
London EC3V 0AT
Telephone: +44 2072204970
LIMEROCK II: Creditors' Proofs of Debt Due June 15
--------------------------------------------------
The creditors of Limerock II TB I, Ltd. are required to file their
proofs of debt by June 15, 2016, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 12, 2016.
The company's liquidator is:
Andre Slabbert
Estera Trust (Cayman) Limited
75 Fort Street
P.O. Box 1350 Grand Cayman KY1-1108
Cayman Islands
Telephone: +1 (345) 949 4900
=================
G U A T E M A L A
=================
GUATEMALA: IMF Says Economy Withstood 2015 Political Crisis
-----------------------------------------------------------
This note summarizes preliminary findings and recommendations of
the mission that visited Guatemala during May 18-31 to conduct the
2016 Article IV consultation. The mission thanks the Guatemalan
authorities for their outstanding cooperation and open dialogue.
Context and Focus of the consultation
1. The 2016 Article IV consultation took place against the
background of an ongoing unprecedented fight against corruption
and impunity in Guatemala. The efforts of the new administration
and the legislature are focused on increasing governance,
transparency, and accountability in the aftermath of the 2015
political crisis. The authorities have recently adopted important
legislative changes, including the procurement law, organic laws
of Congress and of the public prosecutor, and the electoral and
political parties law. The legislative reforms currently under
way, including the Tax and Customs Administration (SAT) law, the
constitutional changes to strengthen the judiciary, and the civil
service laws will further propel this effort, as will stricter
application of the rule of law. In the area of economic
governance, IMF technical assistance on tax administration and
fiscal transparency is helping shape the next steps in the reform.
In this context, the consultation focused on the discussion of
policies needed to preserve macroeconomic stability while pursuing
institutional reforms and supporting higher long-term inclusive
growth.
Recent developments, Outlook, and Risks
2. Economic developments since the 2014 Article IV consultation
have been positive.
-- The Guatemalan economy withstood the 2015 political crisis
well. Growth remained robust; the external position improved;
the exchange rate and financial indicators remained stable
and confidence recovered quickly. Fiscal revenues, however,
fell prompting a cut in government spending. Guatemala's
solid track record of fiscal and monetary policy contributed
to this remarkable macro-economic stability.
-- Growth has remained robust. The Guatemalan economy has been
growing slightly above potential and the output gap is
closed. Growth remained at 4.1 percent in 2015 despite the
slowdown in public consumption and investment during the
political crisis. Private consumption was lifted by lower
oil prices and strong remittances, while the unemployment
rate remained at a low 3 percent.
-- Inflation is close to the center of the target range.
Inflation was below the 4Ò1 percent target range during most
of 2015, driven by lower oil prices, but moved above the
center of the range in early 2016 due to an increase in food
price inflation, in particular in rural areas. Food prices
were driven by both demand pressures, including from strong
remittances inflows, and by weather-related supply shocks.
Core inflation declined further below the target range,
likely reflecting second-round effects from lower oil prices
as well as the impact of the exchange rate appreciation.
-- The balance of payments improved substantially in 2015,
resulting in an external position moderately stronger than
implied by fundamentals and desirable policies. The current
account deficit shrank from 2 to ¨ percent of GDP on the back
of low international oil prices and robust remittances. The
deficit was over-financed by FDI and public sector borrowing,
l leading to foreign reserve accumulation with net
international reserves standing at 4.2 months of imports at
end-2015. The external position is moderately stronger than
the level consistent with fundamentals and desirable
policies-in part due to the relatively low fiscal deficit-
suggesting that Guatemala does not face serious price
competitiveness problems. However, signs of structural
competitiveness weaknesses, such as low human and physical
capital as well as high crime and corruption, highlight the
need for addressing structural rigidities to help accelerate
the economy's response to shocks and restore external
equilibrium.
-- The fiscal deficit fell below the budget target of 2 percent
of GDP in 2015 and public debt remains low. The shortfall in
revenues of 1 1/4 percent of GDP was offset by even larger
cuts in spending, driven in part by delays in multilateral
loan disbursements. As a result, the 2015 fiscal deficit
turned out 1/2 percent of GDP lower than the budget target.
At 24 percent of GDP, public debt is among the lowest in the
region though it is moderately high in relation to fiscal
revenues.
-- The monetary policy rate has been reduced and the exchange
rate has remained stable. The central bank has reduced the
policy rate in 2014-15 by a cumulative 200 basis points amid
declining inflation. The exchange rate has remained broadly
stable vis-Ö-vis the U.S. dollar, with some central bank
participation to stem volatility. The exchange rate
fluctuation margin under the participation rule was widened
slightly in 2015 as part of the gradual process to allow for
more exchange rate flexibility.
-- The financial system appears sound, though vulnerabilities
remain. Credit expanded rapidly in 2015, slanted towards
foreign-currency loans. The growth of the latter, however,
has now slowed as large electricity projects financed by
loans in foreign currency have been completed. Banks meet
regulatory capital norms although capital is low by regional
standards. They also have sufficient liquidity cushions but
reliance on foreign funding has continued to rise, with bank
foreign liabilities standing at a decade high and among the
highest in the region. Relatively large government bond
holdings are another source of vulnerability. Private sector
balance sheets appear healthy, with foreign currency loans
concentrated in the corporate sector.
-- Progress towards social objectives has been limited. Only one
fourth of the Millennium Development Goals quantitative
targets for 2015 were met, with none of the goals met for the
rural and indigenous population. Moreover, there have been
reversals of trends in extreme poverty and school enrollment.
Low fiscal revenues and the need for a comprehensive strategy
to address social challenges remain key hurdles to
progressing towards the new Sustainable Development Goals.
3. The macroeconomic outlook remains benign. Growth is set to
return to its trend rate of 33/4 percent in 2016 and gradually
rise to 4 percent in the medium term as a result of the measures
to increase transparency and efficiency of public spending.
Inflation is expected to remain within the central bank's target
range. The external current account deficit is projected to widen
to 1´ percent of GDP by 2021, driven by gradual reversal of the
oil price decline and strong domestic demand, while remaining more
than fully financed by FDI. Reserves are projected to remain
adequate. The fiscal deficit is expected to remain stable at 1´
percent of GDP in 2016 and hover around this level in the medium
term.
4. However, risks are tilted to the downside. Growth could be
negatively affected by an unexpected slowdown in global growth or
by U.S. monetary policy normalization if accompanied by extreme
bouts of financial volatility. The latter could also raise bank
rollover risks and credit risk from unhedged borrowers if
accompanied by a substantial currency depreciation vis-Ö-vis the
U.S. dollar. Conversely, continued multilateral appreciation in
line with the dollar could negatively affect competitiveness.
There are also downside risks from potential reductions in
provision of financial services by global banks as part of their
de-risking strategies. On the domestic side, failure to credibly
address the crisis in the SAT and other institutional weaknesses,
to increase investment in physical and human capital or to raise
spending on security and social programs, could continue to impede
inclusive growth.
Near-term Policy Mix
Preserving macroeconomic stability and room to deal with shocks
while starting to address pressing structural needs, including low
security, lack of physical and human capital, as well as high
malnutrition, poverty and inequality, will be key in the short
term.
5. A broadly neutral fiscal stance is appropriate from a cyclical
perspective but structural needs could justify a temporarily
higher deficit, if revenue shortfalls were to persist. The primary
balance is expected to remain near zero in 2016 with the output
gap closed. While the first-best option is to arrest the revenue
decline and mobilize resources to cover planned budget spending, a
slightly higher-than-budgeted fiscal deficit could be justified to
prevent cuts in priority spending in the event of revenue
shortfalls. This would not jeopardize fiscal sustainability but
would allow the government to maintain its announced social and
anti-corruption reform agenda.
6. SAT reform is a priority, both to raise revenue and to
contribute to the fight against corruption. In this regard,
measures to address governance, management and operational
difficulties in line with IMF recommendations are crucial. These
include: (i) adopting the new SAT law; (ii) strengthening
management and broadening the implementation of pro-integrity
measures internally; (iii) strengthening customs by ensuring more
effective control of goods, more accurate valuation of imports,
and stricter control of special trade regimes; (iv) more effective
control of large and medium-size taxpayers' compliance; (v) taking
measures to improve VAT administration, including the enforcement
of issuance of VAT invoices; and (vi) improving taxpayer services,
including by broadening e-services. However, the impact of these
measures is likely to take some time.
7. Monetary policy is broadly appropriate but the authorities
should remain vigilant if price pressures intensify. Lower real
lending rates, stronger credit growth, and higher housing prices
contributed to a small loosening of financial conditions in 2015
despite an appreciation of the real effective exchange rate. The
estimates of the neutral policy rate point to an accommodative
monetary stance. However, core inflation is below the target range
and inflation expectations have been firmly within the range since
2012. Hence, the mission does not recommend an immediate monetary
tightening, but the central bank should stand ready to increase
the policy rate if inflationary pressures intensify.
8. Sound financial sector policies have contributed to the
stability of the financial system but continued vigilance is
warranted. In light of the ongoing global regulatory changes and
increased risks for banking systems which have limitations in
their AML/CFT frameworks, the authorities are taking steps to
fortify the financial system. In particular, they are developing a
comprehensive macro-prudential program, strengthening control of
customer identification, performing national risk assessments,
increasing the frequency of on-site inspections, taking steps to
increase protection of supervisors and exploring the experience of
other countries with bank resolution and deposit insurance
frameworks. So far Guatemala has not been materially affected by
de-risking. The mission encourages the authorities to continue
effectively implementing risk-based AML/CFT supervision, continue
bringing the framework in line with the 2012 FATF standards and
2014 FSAP update recommendations to help enhance financial
integrity and improve financial system's preparedness to possible
shocks.
Medium and Long Term Policy Challenges
Strengthening fiscal, monetary and financial sector policy
frameworks as well as fostering institutional changes will support
economic policy-making and improve resilience to shocks in the
longer term.
Reorienting fiscal policy while maintaining debt sustainability
9. Staff recommends focusing fiscal policy on structural
objectives in the longer term while guarding sustainability. The
mission believes that raising fiscal revenues to at least 15
percent of GDP would be essential in the longer term, to
accommodate higher social and infrastructure spending and to
support efforts to durably reduce crime and corruption. For
example, staff analysis suggests that eradicating extreme poverty
would require at least 1 percent of GDP in fiscal spending.
Continued strengthening of the SAT will be needed to reverse the
trend of falling tax compliance levels and to garner additional
revenue, including taking strategic measures such as: (i)
strengthening the SAT's legal framework; (ii) encouraging staff
responsibility by strengthening the performance evaluation system
and actively and consistently addressing integrity issues; and
(iii) broadening and improving the quality of the SAT's digital
services. To complement these efforts, the authorities should
consider a comprehensive review of the tax policy framework with
the goal of broadening the tax base and possibly raising tax
rates-while taking distributional and macro-economic
considerations into account (personal income tax rates are
particularly low by international comparison). In this regard, the
IMF stands ready to provide technical assistance. Lowering the
currently high degree of revenue earmarking could also help make
resources more fungible.
10. Improving fiscal transparency and efficiency could help
increase government credibility. In this regard, the mission
encourages the authorities to implement the IMF's recent technical
assistance recommendations on fiscal transparency, including: (i)
improving fiscal accounting, consolidation, and reporting; (ii)
protecting tax administration from political interference; (iii)
improving control and audit of fiscal spending, including
strengthening of units in charge of planning government purchases
and internal auditing; and (iv) regulating and making government's
direct purchases more transparent. The mission welcomes the
measures already taken by the authorities in this direction,
including those aimed at improving transparency in the procurement
of goods and services. Transparency efforts should be supplemented
with measures to raise spending efficiency.
Strengthening monetary and financial frameworks
11. The mission advises completing transition to full-fledged
inflation targeting. To this end, recent improvements in monetary
transmission to credit and repo interest rates are encouraging.
However, additional efforts are needed to further strengthen the
monetary transmission mechanism. In this regard, the mission
recommends: (i) continuing to gradually increase exchange rate
flexibility to credibly convey to the public the primacy of the
inflation objective; (ii) consider taking additional measures to
discourage credit dollarization; (iii) developing the private debt
and securities market; (iv) further refining the framework for
monetary operations, including liquidity management; and (v)
authorizing and honoring government obligation to cover past and
current operational losses of the Central Bank that are eroding
its capital base and impeding the conduct of monetary policy.
12. The mission encourages the authorities to use the current
period of stability to further fortify the financial system. While
the financial system can withstand a range of sizable shocks and
interbank links are limited, large dollarization of loans, fast
growing bank foreign liabilities and exposure to the government
represent vulnerabilities. The mission recommends implementing
2014 FSAP update recommendations, as well as recommendations of
the IMF Cluster Surveillance Report on Financial Integration in
CAPDR. In particular, staff sees merit in further strengthening of
capital buffers, including through a gradual move towards Basel
III standards and an introduction of a capital surcharge for D-
SIFIs. In this regard, we welcome ongoing efforts to introduce
corporate governance and market risk regulations. While supporting
the authorities' recent efforts to reduce credit dollarization
through differential risk weights and gradual elimination of
exemptions on mortgage loans and loans to the electricity sector,
the mission encourages the adoption of additional macro-prudential
measures in case the degree of dollarization persists and credit
quality deteriorates. The mission supports the ongoing effort to
introduce a liquidity coverage ratio in aggregate and by currency.
Staff emphasizes the importance of strengthening the supervision
of conglomerates, including through adjustment of the legal
framework in line with international standards, appointment of
national lead supervisors and creation of a regional council for
financial stability.
Achieving Higher Long-Term Inclusive Growth
13. The mission encourages the authorities to better articulate
their long-term strategy for raising growth and making it more
inclusive. Actions will be required on several fronts. Higher
spending on security, the judicial system, infrastructure,
education, health, and social assistance will be needed to spur
growth and alleviate currently high poverty, malnutrition, and
inequality. This, in turn, will require higher government
revenues. Improving efficiency and targeting of social assistance
programs will also be important. The mission welcomes the recent
initiative to reform a food support program, to improve control of
beneficiaries of social support, and to strengthen coordination
among various ministries providing social assistance. Continued
progress on regional and international integration, stronger
competition policies, including through the adoption of the
pending competition law, as well as measures to stimulate rural
development will also help boost growth.
14. Further financial deepening will help support growth in the
longer term. Guatemala's financial development exceeds the level
implied by its macroeconomic fundamentals. At the same time,
financial development, in particular market development, is still
low by regional standards and there are no indications of a
significant risk buildup. The mission recommends fostering legal
and institutional frameworks to facilitate growth of the financial
system as the country reaches higher income and education levels
while maintaining adequate regulatory oversight. Specifically, the
adoption of the securities market law, continued progress on
dematerialization of government securities market, including by
strengthening the payment system oversight function of the central
bank and creating a working group to coordinate market
development, would be beneficial. Standardization of government
securities and stronger protection of minority shareholders could
also facilitate the development of the securities market. Finally,
the development of strong property and ownership rights and
improvements in the legal system would be needed to facilitate
financial deepening in the longer term.
15. The mission is encouraged by the recent progress in financial
inclusion and recommends following through on the government
initiatives in this regard. While Guatemala lags other emerging
markets on financial inclusion, its relatively low income and
education levels, high levels of informality and weak rule of law
impose constraints on further inclusion. The time is ripe,
however, for laying the legal and regulatory foundation for
raising financial inclusion as the country continues to grow. In
this regard, the mission strongly supports government efforts to
develop a national financial inclusion strategy and reduce entry
costs by introducing simplified bank accounts for low-income
customers. The mission recommends strengthening the regulatory
framework for financial inclusion further, in particular, by
facilitating the development of the credit reporting systems,
strengthening market conduct rules, improving regulation of
electronic payments, lowering entry costs, and improving financial
education. The recently adopted regulation of mobile financial
services and the microfinance law are important steps in this
direction. As entry barriers are lowered, it would be also
beneficial to examine financial institutions' lending practices
and credit concentration limits.
=============
J A M A I C A
=============
JAMAICA: BOJ Reduces Bench Mark Interest Rate
---------------------------------------------
RJR News reports that the Bank of Jamaica has reduced its bench
mark interest rate by 25 basis points as of May 31.
In the first rate cut since August of last year, the reduction
brings the rate on its Certificate of Deposit down to 5 per cent,
according to RJR News.
The central bank says the reduction reflects its assessment that
the inflation outlook in the island will continue to be favorable
and is expected to be within the lower half of the 4.5 per cent to
6.5 per cent target range for this fiscal year, the report notes.
It says although growth has been weaker than expected, macro-
economic indicators are showing positive trends, the report
relays.
Meanwhile the BOJ says its policy stance over the next four
quarters will be geared toward maintaining relatively low
inflation and creating the conditions for higher economic growth,
the report notes.
BOJ Governor Brian Wynter, writing in the recent Quarterly
Monetary Policy Report, said the economy should continue to
benefit from the gains made in external competitiveness, the
report says.
It, however, says risks are emerging based on uncertainties in the
global economy in particular developments in China and the spill
over to other economies, the report adds.
* * *
As reported in the Troubled Company Reporter-Latin America on Feb.
15, 2016, Fitch Ratings has upgraded Jamaica's Long-term foreign
and local currency IDRs to 'B' from 'B-' and revised the Rating
Outlooks to Stable from Positive. In addition, Fitch upgraded
Jamaica's senior unsecured Foreign- and Local-Currency bonds to
'B' from 'B-'. The Country Ceiling has been affirmed at 'B' and
the Short- Term Foreign-Currency IDR affirmed at 'B'.
===========
M E X I C O
===========
GUASAVE MUNICIPALITY: Moody's Cuts Issuer Rating to B1/Baa3.mx
---------------------------------------------------------------
Moody's de Mexico downgraded the issuer ratings of the
Municipality of Guasave to B1/Baa3.mx from Ba3/Baa1.mx. The
outlook remains negative.
RATINGS RATIONALE
The rating downgrade was prompted by the deterioration and
expectation of continued weakness of Guasave's fiscal performance,
debt profile and liquidity. Between 2011 and 2015, operating
expenditures increased 11.1%, reflecting pressures related to
pension payments and the water company transfers, outpacing the
8.1% growth of operating revenues. As a result, Guasave's
operating margins averaged --10.6% of operating revenues in 2014
and 2015 from 0.7% in 2011. The negative operating balance and
sustained capital expenditures have led to unbalanced financial
results. Cash financing requirements averaged -5.2% of total
revenues between 2011 and 2015 leading to higher debt levels and a
decrease in liquidity.
At the end of 2015, Guasave contracted a MXN 120 million financial
lease, increasing net direct and indirect debt to operating
revenues to 52.6% from 38.8% in 2014. Debt service requirements
(excluding short term debt) are expected to rise to 12.2% of
operating revenues in 2016 from 5.6% in 2015. Liquidity measured
by net working capital to total expenditures registered a
historical low -17.8% in 2015, basically explained by the 38.7%
increase of current liabilities.
The municipality is implementing measures to improve its own
revenues and cut personnel expenditures. In March 2016, these
measures have been reflected in a contraction of -6.7% in
operating expenditures. Given this trend, Moody's estimates that
the operating balance could improve to around -8.0% of the
operating income at the end of 2016 and that cash financing
requirements could also decrease. Despite the expected
improvement, the negative results will continue to put downward
pressure on the financial health of the municipality, either
through higher debt or lower liquidity.
The negative outlook reflects: a) Guasave's ongoing challenges to
improve consistently its operating balances, which if unsuccessful
will lead to further debt increases and weakening of liquidity,
and b) heightened systemic risk as reflected by the negative
outlook of Mexico's sovereign bond ratings.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the negative outlook a rating upgrade is unlikely. However,
Guasave's outlook could stabilize if the outlook for Mexico was
revised to stable and if Guasave's measures are successful leading
to an improvement and stabilization of gross operating balances
followed by a strengthening of its liquidity and debt metrics.
A downgrade of the sovereign could lead to a downgrade of
Guasave's ratings. Also a further deterioration of the gross
operating balances beyond current projections, persistent
unbalanced financial results leading to more reliance on short-
term debt and higher debt metrics or further deterioration in
liquidity, could generate additional downward pressure on ratings.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2013.
The period of time covered in the financial information used to
determine the Municipality of Guasave's rating is between 1/1/2011
and 31/12/2015 (source: issuer).
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.
GRUPO FAMSA: Fitch Cuts Long-Term Issuer Default Rating to 'B'
--------------------------------------------------------------
Fitch Ratings has downgraded Grupo Famsa S.A.B. de C.V.'s (Famsa)
Local and Foreign Currency Long-Term Issuer Default Rating (IDR)
to 'B' from 'B+' as well as the long-term National Scale Rating to
'BBB-(mex)' from 'BBB(mex)'. The Rating Outlook has been revised
to Negative from Stable. In addition, Fitch has affirmed Famsa's
national short-term rating at 'F3(mex)'. A full list of rating
actions follows at the end of this press release.
The downgrade follows the company's announcement that it has
provisioned an additional MXN5.09 billion to cover overdue
receivables and wrote off MXN6.78 billion of bad credits due to
Famsa's unawareness of its account receivables real aging.
The downgrade also reflects Famsa's weaknesses in appropriate
internal controlling procedures within the company's operations
and Fitch's reduced confidence in Famsa's receivables credit
quality. Famsa's credit metrics have also been affected after the
new provision registration, as of December 2015 the gross leverage
ratio (debt/EBITDA) excluding banking deposits went to 5.5x from
the previous 5.1x and the net leverage ratio excluding deposits
was 4.1x from the previous 3.9x.
Although the company's main shareholder, Humberto Garza Gonzalez
personally and together with some of its companies, provided a
guarantee to cover those pending accounts up to MXN5.091 billion
in the next 18 months, Fitch is uncertain about to what extent
Famsa's performance may affect shareholder support over the longer
term.
The Negative Outlook considers Fitch's view on the company's
effectiveness of establishing new internal controlling actions
which impacts corporate governance and heightens higher
operational risks, as well as on Famsa's success on the
materialization of the collection of those accounts or the
execution of the guarantee to cover those payments.
Restated financial statements as of March 2016 including the
auditor's recent adjustments have not been published yet, so this
press release only contains financial figures as of December 2015.
KEY RATING DRIVERS
The rating continues to reflect positive aspects of Famsa,
including its market position within the Mexican retail sector,
its geographic and product diversification, broadly stable
operating cash flow generation by the retail operation, as well as
an expectation of a gradual improvement in leverage.
Good Performance in Mexican Retail Sales:
Following the consumption recovery in the country for 2015, Famsa
presented a consolidated revenues increase of 14.1% compared to
2014. Famsa's main challenge is to retain and increase market
share in a market where larger retail chains such as Coppel and
Elektra, also target the low-income segment of the population.
Banco Famsa Undergoing Operational Consolidation:
Famsa's financial division, Banco Famsa (BAF), has good brand
equity and competitive position in consumer finance, mainly in
northeastern Mexico. Its financial performance is constrained by
its high credit costs which limited the bank's ability to be more
profitable and still high loan-impairment charges. However, BAF is
addressing it and still shows a reasonable capital adequacy.
During 2014 and 2015, Famsa made a total of MXN400 million capital
increase in BAF.
BAF continues to operate with a diversified and growing base of
customer deposits. BAF also shows organic growth of its loan
portfolio, although customers' sensitivity to a weak economic
environment continues to be a limiting factor.
U.S. Operations EBITDA-Positive:
The last two years have been positive for Famsa's U.S. operations.
Fiscal year end (FYE) 2015 EBITDA for the U.S. operations was
MXN93 million, an increase compared to MXN88 million in 2014. Most
of that increase is related to the peso devaluation and to a
lesser extent to increases in personal loans and Famsa to Famsa
revenues. Same store sales for the U.S. operations kept growing
for 2015 and the company expects to continue this trend in the
near future.
RATING SENSITIVITIES
Future developments that may individually or collectively lead to
a negative rating action include: failing in the execution of the
guarantee to cover the written off credits, continuing deficient
internal operating controls, deterioration in BAF's
creditworthiness beyond FAMSA's ability to lend support,
consolidated gross leverage (excluding bank deposits) consistently
above 5.5x, lower EBITDA generation by FAMSA USA as well as by
further deterioration in the quality of the loan portfolio.
No positive rating actions are currently contemplated over the
near term. A revision of the Rating Outlook to Stable can be
contemplated if Famsa is successful in establishing internal
controls to avoid future similar events in conjunction with the
successful completion of the collection of receivables or the
materialization of the controlling shareholder guarantee.
LIQUIDITY
Liquidity Should Be Adequate: For year-end 2015, Famsa's short-
term debt (excluding banking deposits) was MXN4.2 billion, with
non-restricted cash holdings of about MXN2.2 billion, so some
refinancing risk could persist. However, the company's short-term
receivables portfolio of MXN20.9 billion should also support the
company's liquidity.
Short-term debt for Famsa is mostly made up of short-term Cebures
programs and bank loans with several institutions, reducing
refinancing risk within the near term.
Famsa is exposed to currency variations. As of Dec. 31, 2015,
Famsa's retail division debt was 57% dollar-denominated and it
didn't have hedging instruments. After the payment of the dollar
denominated commercial paper in January 2016, that percentage
decreased to 52% of total debt. Nevertheless, currency exposure is
partially mitigated by cash flows from the U.S. operations.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Consolidated revenues grow in average 5% annually during 2016-
2019;
-- EBITDA margin of 10.6% during 2016-2019;
-- EBITDA from the U.S. division continues to be positive;
-- Average funds from operations (FFO) of MXN2.9 billion per year
for 2016-2019;
-- Consolidated debt (excluding bank deposits) to be around MXN7
billion in 2016-2019.
-- Average capex of MXN325 million during 2016-2019.
-- No Dividends payment for 2016-2019.
FULL LIST OF RATING ACTIONS
Fitch has downgraded the following ratings:
-- Foreign Currency Long-Term IDR to 'B' from 'B+';
-- Local Currency Long-Term IDR to 'B' from 'B+';
-- Long-term national scale rating to 'BBB-(mex) from 'BBB(mex)';
-- $US250 million senior unsecured notes due in 2020 to 'B/RR4'
from 'B+/RR4';
-- MXN1 billion Certificados Bursatiles issuance due 2017 to
'BBB-(mex)' from 'BBB(mex)'.
The Rating Outlook is Negative.
The 'RR4' rating reflects average recovery prospects in case of
default between 30% and 50% of principal.
Fitch has affirmed the following ratings:
-- Short-term national scale rating at 'F3(mex)';
-- MXN500 million short-term Certificados Bursatiles program at
'F3(mex)'.
-- MXN500 million short-term Certificados Bursatiles program at
'F3(mex)'.
ZAPOTLAN EL GRANDE: Moody's Ups Rating to B1/Baa2.mx; Outlook Neg.
------------------------------------------------------------------
Moody's de Mexico upgraded the municipality of Zapotlan el Grande
to B1/Baa2.mx from B2/Baa3.mx. The outlook is negative.
RATINGS RATIONALE
The upgrade of Zapotlan's issuer ratings is prompted by the
structural strengthening of its gross operating balances,
reduction of cash financing requirements and a decrease in debt
levels, which bring it in line with B1 rated entities.
Zapotlan el Grande has exhibited gross operating surpluses for the
last 4 years. Over the 2011-15 period, Zapotlan's gross operating
balance (GOB) averaged 5.7% of operating revenues, higher than the
level exhibited by municipalities rated as B2. Although these
results were positively affected by one off measures in 2013 and
2014, without them, Zapotlan's GOB would have averaged -0.2%, a
level in line with the B1 category. Moreover, the positive GOB
presented in 2015 was driven by a continued trend of moderate
operating expenditures growth, which we expect to continue in 2016
and 2017. Zapotlan's own-source revenues (averaging 37.6% of
operating revenues between 2011 and 2015) should remain at high
levels in relative terms, cushioning an anticipated slowing down
of federal transfers. As a result, Moody's expects Zapotlan to
continue exhibiting positive gross operating balances in 2016 and
2017.
Considering Zapotlan's consolidated results, the municipality has
reduced its historical volatility over the last two years, when
consolidated cash financing surpluses averaged 1.4%, compared to
the -7% average for the period 2011-14. Moody's expects Zapotlan
to show less volatile accounts in the medium-term, which should
result in a more contained debt increase. Debt levels decreased
to a moderate 44% of operating revenues in 2015 from a high 61% in
2011. Given Moody's expectations of moderate cash financing
requirements in the next few years, it expects Zapotlan debt
levels to remain below 50% of operating revenues.
In 2015, Zapotlan also improved its net working capital (measured
as liquid assets minus liquid liabilities Moody's divided by total
expenditures), which passed to -10.5% from -13%. Moody's expects
Zapotlan liquidity levels to remain tight in the foreseeable
future, in line with other municipalities rated in the B1
category.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook is driven by the negative outlook in Mexico's
sovereign bond rating. Moody's considers that the change in the
sovereign outlook indicates heightened systemic risk for sub-
sovereign issuers, which have close operating and financial
linkages with the federal government.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the negative outlook, a rating upgrade is unlikely.
However, the outlook could be stabilized if the outlook on
Mexico's sovereign bond rating is stabilized and if Zapotlan
improves its net working capital metric. Conversely, a sharp
deterioration in debt levels or net working capital, joined by a
deterioration in the gross operating balance, could exert downward
pressure on Zapotlan issuer ratings.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2013.
The period of time covered in the financial information used to
determine the Municipality of Zapotlan el Grande's rating is
between 1/1/2011 and 31/12/2015.
===============
S U R I N A M E
===============
SURINAME: Fitch Says IMF Loan Ups Liquidity, Challenges Remain
--------------------------------------------------------------
The IMF's two-year stand-by arrangement with Suriname will help
improve the sovereign's external liquidity and stabilize its
exchange rate in the short run by providing an up to $US478
million liquidity credit line (including a $US81 million immediate
disbursement) to the central bank. Strengthening fiscal policy and
reducing external vulnerabilities are key to improving Suriname's
resilience to commodity price shocks and stabilize its ratings,
Fitch Ratings says.
The IMF stand-by arrangement is included in Fitch's baseline
scenario and will have no impact on Suriname's 'B+' sovereign
rating in the near term. The Negative Outlook reflects risks to
the program implementation. Negative rating triggers include
further deterioration of external liquidity and/or sovereign
external debt service capacity, continued macroeconomic
instability, and failure to consolidate public finances. The
reform program is front-loaded and the government has already
implemented a number of actions to secure IMF support. However,
the credit profile will likely stabilize only if Suriname builds a
track record of compliance with the program over time.
The IMF program benchmarks are designed to strengthen fiscal
policy -- a key positive, medium-term rating sensitivity -- and
provide Suriname greater exchange rate and fiscal flexibility in
the event of commodity price shocks. Updating the budgeting
framework and reporting aims to improve public financial
management and accountability. A proposed value-added tax could
diversify the government's revenues away from volatile oil and
gold prices. The reduction of electricity subsidies, begun in
October 2015, is the most important part of the fiscal
consolidation in the short run. While electricity tariff increases
are politically unpopular (sparking street demonstrations earlier
this month), they could save the government and taxpayers between
1.5% and 5% of GDP annually. Treasury bill auctions begun this
month will provide the government short-term financing in local
currency but come at a high 23% annualized cost.
In 2016, imports will shrink, alleviating pressure on external
finances due to tighter fiscal policy, weak household demand, and
completing construction work on the Merian gold mine and a new oil
refinery. Rising gold production from the mine will could lift
gold exports and produce a small current account surplus in 2017.
However, more than $US285 million in principal repayments due to
public-sector external debt for the refinery, and the government's
25% stake in the gold mine, will hamper a quick accumulation of
international reserves.
Implementation of public-financial management measures is key to
restoring Suriname's macroeconomic stability and reducing
inflation. Suriname has reached cabinet-level agreement on a 2016
budget that Fitch forecasts will reduce the overall deficit to 4%
of GDP in 2016 (in line with the IMF target), dependent on revenue
performance, the timing of electricity tariff increases, and
capital spending. A revised supplementary budget could be
introduced later in 2016. Rising inflation and unemployment in the
private sector are downside political risks to Suriname's first
IMF program. Labor union agreement on wages during 2016 is central
to the government's ability to contain public wage growth.
In March the central bank adopted a floating exchange rate. The
increasingly frequent FX auctions have increased flexibility of
the exchange rate as an automatic stabilizer. As of May 27, the
Suriname dollar has depreciated 68% year to date, easing pressure
from real appreciation in recent years. However, SRD depreciation
and an electricity tariff hike raised inflation to 36.6% yoy in
March.
Suriname's external liquidity deteriorated in 2014 and 2015 as the
country's current account deficit widened to 17% of GDP last year
and the central bank intervened in the FX market supporting the
former currency peg. Falling oil and gold prices further reduced
export revenues. This was accompanied by above-average government
spending during the 2015 election year.
================================
T R I N I D A D & T O B A G O
================================
TRINIDAD & TOBAGO: Central Bank Lowers 2016 Economic Forecast
-------------------------------------------------------------
Aleem Khan at Trinidad Express reports that the Trinidad and
Tobago economy will contract even more than the -2.3 per cent the
Central Bank of Trinidad and Tobago forecast just over a month
ago.
Trinidad Express notes that the Central Bank of Trinidad and
Tobago (CBTT) said in its May 27, 2016 Monetary Policy Report
(MPR): "Early available information on domestic energy production,
as well as the revised fiscal outlook announced in April 2016,
support the Bank's initial projections in March 2016 of a
contraction in the order of 2.5 per cent for the whole of 2016 and
lower foreign exchange earnings. A gradual revival in growth is
anticipated in 2017 and beyond as energy production and global
energy prices pick up, although it may take some time for the
output losses in 2015 and 2016 to be reclaimed."
=============
U R U G U A Y
=============
* URUGUAY: Looks to Africa to Make Up Fall in Exports
-----------------------------------------------------
Latin American Herald Tribune reports that Vice President Raul
Sendic said that Uruguay should seek opportunities in Africa to
make up for declining exports to traditional trading partners such
as Venezuela and Russia.
"Africa is a huge continent with more than 1.2 billion people that
are very much in need of food and we should look there for
opportunities to replace some of the markets that have reduce
their purchases due to their difficulties, as in the case of
Venezuela or Russia," Mr. Sendic told reporters in Montevideo,
according to Latin American Herald Tribune.
The vice president made the remarks following a speech by Foreign
Minister Rodolfo Nin Novoa at an event organized by the South
African Embassy in Montevideo and the Uruguay-Africa Chamber of
Commerce, the report notes.
Mr. Sendic said Uruguay has already established trade relations
with oil-producing African countries such as Angola and Congo and
is exploring the opportunities of exchanging food for petroleum,
the report notes.
Uruguay can offer Africa rice, beef, dairy products and soy, he
said, the report adds.
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
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Send announcements to conferences@bankrupt.com
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Valerie U. Pascual, Julie Anne L. Toledo, and Peter A.
Chapman, Editors.
Copyright 2016. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any comillionercial use, resale
or
publication in any form (including e-mail forwarding, electronic
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Information contained herein is obtained from sources believed to
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of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000 or Nina Novak at
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* * * End of Transmission * * *