/raid1/www/Hosts/bankrupt/TCRLA_Public/170629.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 29, 2017, Vol. 18, No. 128
Headlines
A R G E N T I N A
CORDOBA PROVINCE: Moody's Rates USD450MM Senior Unsecured Notes B3
CORDOBA PROVINCE: Fitch to Rate Proposed Unsec. Bonds B
B R A Z I L
BANCO SANTANDER: Fitch Affirms and Withdraws BB+ Long-Term IDR
BRAZIL: US Bans Fresh Beef Imports Over Safety Concerns
BRAZIL: President Michel Temer Vows to Fight Charges
KLABIN SA: S&P Affirms 'BB+' CCR on Expected Deleveraging
C A Y M A N I S L A N D S
CAMAC INTERNATIONAL: Court Enters Wind-Up Order
ELEVA CAPITAL: Creditors' Proofs of Debt Due July 11
EQUITY STRATEGIES: Placed Under Voluntary Wind-Up
FLOBY HOLDINGS: Creditors' Proofs of Debt Due July 17
JAMES CAIRD: Commences Liquidation Proceedings
LONGVIEW HOLDINGS: Commences Liquidation Proceedings
METROPOLITAN LIGHT: Creditors' Proofs of Debt Due July 11
NORRBY HOLDINGS: Creditors' Proofs of Debt Due July 17
ORSA HOLDINGS: Creditors' Proofs of Debt Due July 17
SILVER OAK: Creditors' Proofs of Debt Due July 20
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Embattled Power Plant Will Also Burn Trash
P U E R T O R I C O
PUERTO RICO ELECTRIC: Fitch Keeps Neg. Watch on C-Rated Rev Bonds
PUERTO RICO: Creditors Committee Retains Paul Hastings, O'Neill
PUERTO RICO: Oversight Board Rejects PREPA Title VI Restructuring
V E N E Z U E L A
VENEZUELA: President's Claims of Helicopter Attack Contested
V I R G I N I S L A N D S
VIRGIN ISLANDS: Debt Crisis Shift to Country
- - - - -
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A R G E N T I N A
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CORDOBA PROVINCE: Moody's Rates USD450MM Senior Unsecured Notes B3
------------------------------------------------------------------
Moody's Investors Service has assigned a B3 (Global Scale foreign
currency) rating to the Senior Unsecured Notes to be issued by the
Province of Cordoba for up to USD450 million. The rating is in
line with the Province's long term foreign currency issuer rating,
which carries a positive outlook.
RATINGS RATIONALE
The proposed Notes issuance have been authorized by the
Provincial's Laws Nß10.339 and 10.449 whereas Governor's Decrees
Nß645 and 720/2017 created and approved the documentation related
to the Notes issuance respectively. The Province of Cordoba will
use the net proceeds of the Notes to complete the financing of the
development of its several gas pipelines, currently under
construction in its territory.
These Notes will constitute direct, general, unconditional and
unsubordinated obligations of the Province. They will be
denominated and payable in US dollars with an expected maximum
maturity of 10 years and fixed interest rate on a semi-annual
basis. The Notes will be subject to the State of New York Law.
After the issuance of these Notes and coupled with planned new
debts with other funding sources for this fiscal year,
amortizations and exchange rate evolution; Moody's anticipates
that the ratio of total outstanding debt relative to total
revenues will grow up to 31% approximately -from the 29% at the
end of 2016 fiscal year. The assigned debt rating is in line with
the Province's long term foreign currency issuer rating because
these Notes do not present any credit enhancements that
differentiate them from the general solvency of the province
already reflected in its current issuer rating level.
The assigned ratings are based on preliminary documentation
received by Moody's as of the rating assignment date. Moody's does
not expect changes to the documentation reviewed over this period
nor anticipates changes in the main conditions that the Notes will
carry. Should issuance conditions and/or final documentation of
these Notes deviate from the original ones submitted and reviewed
by the rating agency, Moody's will assess the impact that these
differences may have on the ratings and act accordingly.
WHAT COULD CHANGE THE RATING UP/DOWN
Given the strong macroeconomic and financial linkages between the
Government of Argentina's and Sub-sovereigns an upgrade in the
Argentine sovereigns ratings and/or a systemic improvement coupled
with lower idiosyncratic risks arising from this Province -for
instance with a sustained record of cash financing and operating
surpluses in the two digits range- could exert an upward pressure
in Cordoba's current ratings.
Conversely, a downgrade in Argentina's bond ratings and/or further
systemic deterioration or idiosyncratic risks arising in this
issuer -i.e. a debt to total revenues ratio rising above 50%-
could exert downward pressure on the ratings assigned and could
translate into a downgrade in the near to medium term.
The principal methodology used in this rating was Regional and
Local Governments published in June 2017.
CORDOBA PROVINCE: Fitch to Rate Proposed Unsec. Bonds B
-------------------------------------------------------
Fitch Ratings expects to rate the Province of Cordoba, Argentina's
upcoming senior unsecured bond issuance 'B(EXP)'.
KEY RATING DRIVERS
The bond is rated at the same level as the Province of Cordoba's
(PC) Issuer Default Rating (IDR).
The notes will be issued in USD for up to USD450.0 million, to
accrue a fixed interest to be determined at issuance and
potentially be payable on a semi-annual basis. The bond's
estimated maturity is for 10 years with a bullet capital payment.
The notes will be a senior unsecured obligation of PC governed by
the laws of the State of New York. The issuance is authorized
under laws No. 10,339 and No. 10,449, and by Decrees No. 645/17
and No. 720/17. The proceeds will be used to finance the execution
of four trunk gas pipelines of the province's Integral Trunk Gas
Infrastructure Program.
Considering the province's total authorized debt and proposed new
bond, PC's debt stock will remain low and around 37% of budgeted
operating revenues for 2017 and debt servicing would represent a
moderate 51% of the budgeted operating margin, calculated by
Fitch. Similar to other argentine peers, Fitch acknowledges the
province's currency & refinancing risk, given that the proposed
bond does not have a currency hedge or a sinking fund.
RATING SENSITIVITIES
The final rating on PC's new bond is contingent upon the receipt
of final documents conforming to information already received by
Fitch. Any change in Province of Cordoba's Issuer Default Rating
as well as the development of the bond's structure could trigger a
rating action.
===========
B R A Z I L
===========
BANCO SANTANDER: Fitch Affirms and Withdraws BB+ Long-Term IDR
--------------------------------------------------------------
Fitch Ratings has affirmed and withdrawn its ratings for Banco
Santander (Brasil) S.A. (Santander Brasil) and Santander Leasing
S.A. Arrendamento Mercantil (Santander Leasing).
KEY RATING DRIVERS
Fitch is withdrawing these ratings as Santander Brasil and
Santander Leasing have chosen to stop participating in the rating
process for commercial reasons. Fitch will no longer have
sufficient information to maintain the ratings and, accordingly,
will no longer provide ratings of analytical coverage for
Santander Brasil and Santander Leasing.
RATING SENSITIVITIES
Rating Sensitivities are not applicable as the ratings gave been
withdrawn.
Fitch has affirmed and withdrawn the following ratings:
Santander Brasil
-- Long-term Foreign Currency IDR at 'BB+'; Outlook Negative;
-- Long-term Local Currency IDR at 'BBB-'; Outlook Negative;
-- Short-term Foreign Currency IDR at 'B';
-- Short-term Local Currency IDR at 'F3';
-- Viability Rating at 'bb';
-- Support Rating at '3';
-- National Long-term Rating at 'AAA(bra)'; Outlook Stable;
-- National Short-term Rating at 'F1+(bra)'.
Santander Leasing
-- National Long-term Rating at 'AAA(bra)'; Outlook Stable;
-- National Short-term Rating at 'F1+(bra)'.
Santander Leasing 4th and 5th Subordinated Debentures
-- National Long-term Rating at 'AA+(bra)'.
BRAZIL: US Bans Fresh Beef Imports Over Safety Concerns
-------------------------------------------------------
EFE News reports that the government of the United States stopped
all imports of fresh beef from Brazil, one of the world's largest
red meat exporters, due to concerns about the safety of the
products intended for the American market.
The US Department of Agriculture (USDA) said in a statement that
the ban "will remain in place until the Brazilian Ministry of
Agriculture takes corrective action which the USDA finds
satisfactory," according to EFE News.
"Although international trade is an important part of what we do
at USDA, and Brazil has long been one of our partners, my first
priority is to protect American consumers. That's what we've done
by halting the import of Brazilian fresh beef," US Agriculture
Secretary Sonny Perdue said in the statement obtained by the news
agency.
The decision came after a series of controls that the Department
of Agriculture began to impose on these imports in March, when it
was revealed that some Brazilian meat packers bribed health
inspectors to approve their rotten substandard products, the
report relays.
According to the Brazilian police, some producers, including giant
exporters' plants like JBS and BRF, had conspired with corrupt
health inspectors to use chemical ingredients to cover the
physical aspects of rotten meat products, the report notes.
The scandal, also known as "weak meat," led major buyer countries
like China, Hong Kong and the European Union (EU) to temporarily
curtail meat imports from Brazil, the report says.
The US decision to restrict Brazilian meat imports is based on
controls initiated since March by the US Food Safety and
Inspection Service (FSIS), which has been scrutinizing "100
percent of all meat products arriving in the United States from
Brazil ", according to the statement, the report notes.
"FSIS has refused entry to 11 percent of Brazilian fresh beef
products. That figure is substantially higher than the rejection
rate of one percent of shipments from the rest of the world," said
the statement, the report notes.
"Since implementation of the increased inspection, FSIS has
refused entry to 106 lots of Brazilian beef products due to public
health concerns, sanitary conditions, and animal health issues,"
added the note.
USDA underscored that "none of the rejected lots made it into the
US market," the statement added.
JBS, one of the world's largest fresh meat exporters implicated in
the meat scandal, is facing another corruption case in which
Brazilian President Michel Temer is also involved, the report
relays.
The investigation into the corruption scandal commenced after
several JBS executives who, in addition to accusing Temer of
allegedly accepting bribes since 2010 and unveiling an explosive
audio recording which caught the president in action, confessed to
having paid bribes to 1,829 politicians of 28 parties, the report
adds.
As reported in the Troubled Company Reporter-Latin America on
May 24, 2017, S&P Global Ratings placed its 'BB' long-term foreign
and local currency sovereign credit ratings on the Federative
Republic of Brazil on CreditWatch with negative implications. S&P
also affirmed the short-term foreign and local currency ratings at
'B'. The transfer and convertibility assessment is unchanged at
'BBB-'. In addition, S&P placed the 'brAA-' national scale rating
on CreditWatch with negative implications.
BRAZIL: President Michel Temer Vows to Fight Charges
----------------------------------------------------
Paul Kiernan and Paulo Trevisani at The Wall Street Journal report
that Brazilian President Michel Temer vowed to stay in power and
fight the bribery charges filed against him, inflaming a bitter
political divide in a country battered by successive corruption
scandals.
Mr. Temer, who was charged by the country's attorney general with
accepting about $150,000 in bribes and agreeing to take about
$11.5 million more, maintained his innocence and rejected the
accusations as "fictitious," according to The Wall Street Journal.
He also disparaged the evidence -- contained in a plea bargain by
Joesley Batista, the former chairman of meatpacking giant JBS SA
-- saying it came from a "confessed bandit," the report notes.
"They want to stop the country, stop the government, in a
political act, with fragile and precarious charges," Mr. Temer
said in a televised address, apparently referring to Attorney
General Rodrigo Janot and his team of prosecutors, the report
relays. "It isn't a thing to be taken lightly. When you're going
to attack the institution of the presidency, it's necessary to
have the utmost caution and have robust evidence, proof. The
charges can't be an insinuation," he added.
The charges and the president's defiant response escalated a
conflict that has raged in Brazil's capital since Mr. Batista's
allegations became public in May, the report relays. On one side
are Mr. Temer and the mostly conservative career politicians who
make up his main support base, the report notes. On the other are
prosecutors leading the most significant corruption purge in the
country's history, allied, at the moment, with opposition
legislators seeking to force a Brazilian president from office for
the second time in little more than a year, the report discloses.
The two sides will face off over the coming weeks in Congress,
where two-thirds of legislators must vote to allow Mr. Temer to be
put on trial before the Supreme Court for the case to go forward,
the report says. If that happens, the president would be
suspended from office for up to 180 days, the report notes.
Many analysts believe Mr. Temer currently has the political
support he needs to stave off prosecution, the report relays.
"But new facts could emerge and change the scenario," said Thiago
Vidal, a political scientist at Bras°lia's Prospectiva consulting
firm, the report notes.
Mr. Janot is expected to file additional charges in coming days
for obstruction of justice and criminal conspiracy, a move that
would force legislators to vote multiple times to save the
president from prosecution, the report notes. In the document
released, he requested permission from the Supreme Court to
investigate Mr. Temer for money laundering as well, the report
says.
Some of Mr. Temer's supporters cast the charges as an
antidemocratic push by the attorney general and prosecutors, says
the report. "It's not those who have voted who are calling the
shots anymore," Sen. Jarder Barbalho said, WSJ notes.
Opposition politicians seized on the charges, ridiculing Mr. Temer
for becoming the first Brazilian president ever charged with a
criminal offense while in office, the report relays.
The distinction may be a fine one, however, notes WSJ. President
Dilma Rousseff was impeached last year and ousted from office on
charges of manipulating the budget-a move she criticized as
politically motivated, the report discloses.
"Result of the 2016 coup: the country is left in the hands of the
only [sitting] president charged with corruption," she said in a
tweet, the report relays, notes WSJ.
Other former presidents, including Luiz Inacio Lula da Silva and
Fernando Henrique Cardoso, have encouraged Mr. Temer to call early
elections and step down before his term concludes at the end of
next year, the report notes.
But the president and his staunchest allies say such a scenario
would derail economic reforms, including an overhaul to the
pension system, at a time when Brazil is emerging from its deepest
recession on record, WSJ says.
"In the year I've been in office, we've worked to lower inflation,
to reduce interest rates, to create jobs . . . and for the end of
the recession," WSJ quoted Mr. Temer as saying. "I don't know how
God put me here, you know, facing such a difficult task, but
surely it was for me to finish it," he added.
Opposition politicians, and many analysts, argue that a successful
pension reform is increasingly unlikely in light of Mr. Temer's
legal troubles and 7% approval rating, the report relays.
"The country won't stabilize without elections. There's no way,"
said Jose Guimaraes, a Workers' Party congressman, notes WSJ.
"You will see when the charges land here, no lawmaker will stand
up and make passionate speeches to defend Temer," he added.
The charges against Mr. Temer are based largely on a taped
conversation at the president's house in March with Mr. Batista,
the report discloses. In it, the businessman is heard telling Mr.
Temer of his various attempts to hamper investigations into his
company, including by paying hush money to a jailed witness, the
report relays. Prosecutors say the president encouraged Mr.
Batista continue the measures, WSJ notes.
Federal police subsequently videotaped a close aide of Mr. Temer
running out of a Sao Paulo restaurant with a bag containing about
$150,000 from Mr. Batista's company, the report relays.
Prosecutors say the aide was an intermediary and that the money
was intended for the president, the report notes.
Mr. Temer denied ever receiving illicit money, a defense his
supporters echoed, WSJ says.
"This was a trap from Joesley Batista," the report quoted Alfredo
Kaefer, a congressman from a small party aligned with Mr. Temer,
as saying. "What type of man records a chat with another man?"
For many ordinary Brazilians, though, the meeting -- which took
place after 10 p.m. and wasn't recorded on Mr. Temer's agenda --
was incriminating enough, the report relays.
As reported in the Troubled Company Reporter-Latin America on
May 24, 2017, S&P Global Ratings placed its 'BB' long-term foreign
and local currency sovereign credit ratings on the Federative
Republic of Brazil on CreditWatch with negative implications. S&P
also affirmed the short-term foreign and local currency ratings at
'B'. The transfer and convertibility assessment is unchanged at
'BBB-'. In addition, S&P placed the 'brAA-' national scale rating
on CreditWatch with negative implications.
KLABIN SA: S&P Affirms 'BB+' CCR on Expected Deleveraging
---------------------------------------------------------
S&P Global Ratings said that it affirmed its 'BB+' global- and
'brAA' national-scale corporate credit ratings on Klabin S.A. The
outlook remains stable.
At the same time, S&P affirmed its 'BB+' issue-level rating on
financing vehicle Klabin Finance S.A.'s $500 million senior
unsecured notes, which Klabin guarantees. The recovery rating on
these notes remains '3', indicating S&P's expectation for
meaningful (65%) recovery in a hypothetical default scenario.
The affirmation reflects the combination of reduced capex needs,
favorable market conditions, and the successful ramp-up of a new
pulp facility--the Puma project--in the next 12-18 months. The
new mill resulted in adjusted debt-to-EBITDA spiking to 7x in
December 2015, but the increased volumes and cost controls are
helping Klabin gradually deleverage; adjusted debt-to-EBITDA was
5.6x for the 12 months ended March 2017. S&P expects this ratio
to continue to decrease--to slightly above 4.0x in 2017 and to
3.5x-3.8x in 2018.
Although demand for paper products remains fairly weak in Brazil
this year, stronger pulp prices should contribute to higher
revenues and profits. Also, S&P now expects the company to reduce
its capital investments considerably after the Puma ramp-up and to
concentrate on efficiency and maximizing production. S&P believes
there could be M&A opportunities in 2017 and 2018, as the
Brazilian paper and packaging market is very fragmented, but S&P
believes any potential transaction would be small and
opportunistic.
S&P continues to consider Klabin well-positioned in the paper and
packaging segments. It has longstanding relationships with many
of its clients, and the characteristics of its products allow it
to change its sales mix or even increase exports based on demand.
In addition, the vertical integration of its production facilities
is providing operational efficiencies that have finally translated
into better margins.
The stable outlook reflects S&P's view that the company will
continue to deleverage in 2017 and 2018, considering the higher
cash flow generation from the Puma project and favorable price
momentum for pulp.
S&P could take a negative rating action over the coming 12 months
if the deleverage pace slows, leaving adjusted debt to EBITDA
higher than 4.0x and FFO to debt below 12% in 2018. This could,
for example, follow a scenario of pulp prices at (or below)
$650 per ton for 2018, accompanied by an appreciation of the real.
S&P could also downgrade the company if its share of domestic
business increases, limiting our view of the maximum
differentiation between the Klabin and sovereign ratings in the
event of a sovereign downgrade.
A higher rating is currently constrained not only by the company's
high leverage but also by its risk tolerance to leverage peaks,
which, in S&P's view, is greater than that of its investment-grade
peers. In particular, for an upgrade, S&P would expect Klabin's
financial risk profile to strengthen sustainably. S&P would also
look for the company to have clear and sustainable financial
policies, supporting conservative leverage (net debt to EBITDA
below 3x and FFO to debt above 30%) through the cycle in the
medium to long term.
==========================
C A Y M A N I S L A N D S
==========================
CAMAC INTERNATIONAL: Court Enters Wind-Up Order
-----------------------------------------------
The Grand Court of Cayman Islands, on June 7, 2017, entered an
order to wind up the operations of Camac International Limited.
The company's liquidators are:
Tammy Fu
Eleanor Fisher
Kalo (Cayman) Limited
38 Market Street, Suite 4208
Canella Court, Camana Bay
Grand Cayman, KY1-9006
Cayman Islands
ELEVA CAPITAL: Creditors' Proofs of Debt Due July 11
----------------------------------------------------
The creditors of Eleva Capital Partners Limited are required to
file their proofs of debt by July 11, 2017, to be included in the
company's dividend distribution.
The company commenced liquidation proceedings on June 6, 2017.
The company's liquidator is:
Mourant Ozannes
c/o Corey Stokes
94 Solaris Avenue, Camana Bay
P.O. Box 1348 Grand Cayman KY1-1108
Cayman Islands
Telephone: (345) 814-9277
Facsimile: (345) 949-4647
EQUITY STRATEGIES: Placed Under Voluntary Wind-Up
-------------------------------------------------
The sole shareholder of Equity Strategies SPC, on June 9, 2017,
passed a resolution 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:
EFG Capital Advisors, Inc.
c/o Tim Cone
Ogier
89 Nexus Way, Camana Bay
Grand Cayman KY1-9009
Cayman Islands
Telephone: +1 (345) 949 9876
Facsimile: +1 (345) 949-9877
FLOBY HOLDINGS: Creditors' Proofs of Debt Due July 17
-----------------------------------------------------
The creditors of Floby Holdings Limited are required to file their
proofs of debt by July 17, 2017, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 30, 2017.
The company's liquidator is:
Matthew Wright
c/o Omar Grant
P.O. Box 897 Windward 1
Regatta Office Park
Grand Cayman KY1-1103
Cayman Islands
Telephone: (345) 949 7576
Facsimile: (345) 949 8295
JAMES CAIRD: Commences Liquidation Proceedings
----------------------------------------------
The shareholders of James Caird Asset Management Limited, on
June 2, 2017, passed a resolution 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:
Trudy-Ann Scott
FFP Limited, Harbour Centre, 2nd Floor
42 North Church Street, George Town
Grand Cayman
10 Market Street, #769, Camana Bay
Grand Cayman KY1-9006
Cayman Islands
Telephone: +1 (345) 947 5854
LONGVIEW HOLDINGS: Commences Liquidation Proceedings
----------------------------------------------------
The shareholders of Longview Holdings, on May 31, 2017, passed a
resolution 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:
Andrew Morrison
FTI Consulting (Cayman) Limited
Suite 3212, 53 Market Street, Camana Bay
P.O. Box 30613 Grand Cayman KY1-1203
Cayman Islands
c/o Tammea Ebanks
Telephone: +1 (345) 743 6830
METROPOLITAN LIGHT: Creditors' Proofs of Debt Due July 11
---------------------------------------------------------
The creditors of Metropolitan Light Group Holdings Limited are
required to file their proofs of debt by July 11, 2017, to be
included in the company's dividend distribution.
The company commenced liquidation proceedings on June 7, 2017.
The company's liquidator is:
Mourant Ozannes Cayman Liquidators Limited
c/o Corey Stokes
94 Solaris Avenue, Camana Bay
P.O. Box 1348 Grand Cayman KY1-1108
Cayman Islands
Telephone: (345) 814-9277
Facsimile: (345) 949-4647
NORRBY HOLDINGS: Creditors' Proofs of Debt Due July 17
------------------------------------------------------
The creditors of Norrby Holdings Limited are required to file
their proofs of debt by July 17, 2017, to be included in the
company's dividend distribution.
The company commenced liquidation proceedings on May 30, 2017.
The company's liquidator is:
Matthew Wright
c/o Omar Grant
P.O. Box 897 Windward 1, Regatta Office Park
Grand Cayman KY1-1103
Cayman Islands
Telephone: (345) 949 7576
Facsimile: (345) 949 8295
ORSA HOLDINGS: Creditors' Proofs of Debt Due July 17
----------------------------------------------------
The creditors of Orsa Holdings Limited are required to file their
proofs of debt by July 17, 2017, to be included in the company's
dividend distribution.
The company commenced liquidation proceedings on May 30, 2017.
The company's liquidator is:
Matthew Wright
c/o Omar Grant
P.O. Box 897 Windward 1, Regatta Office Park
Grand Cayman KY1-1103
Cayman Islands
Telephone: (345) 949 7576
Facsimile: (345) 949 8295
SILVER OAK: Creditors' Proofs of Debt Due July 20
-------------------------------------------------
The creditors of Silver Oak Investments Ltd. are required to file
their proofs of debt by July 20, 2017, to be included in the
company's dividend distribution.
The company commenced liquidation proceedings on June 7, 2017.
The company's liquidator is:
CDL Company Ltd.
P.O. Box 31106 Grand Cayman KY1-1205
Cayman Islands
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Embattled Power Plant Will Also Burn Trash
--------------------------------------------------------------
Dominican Today reports that once completed the embattled Punta
Catalina coal-burning power plant would consume 2,600 tons of
trash to generate electricity daily, some 600 tons more than the
National District's daily output.
President Danilo Medina made the statement to unveil the far-
reaching Clean Dominicana Plan for all towns, whose waste would
supply the power plant near Bani (south), according to Dominican
Today.
President Danilo Medina said the plants would use that amount of
trash, equivalent to 10% of the coal they consume, the report
notes. "That is, when consumed in briquettes, the equivalent of
2,600 tons per day that could be sold to Punta Catalina, once a
plant to process the fuel briquettes is installed," the report
quoted Mr. Medina as saying.
Punta Catalina has become part of the Odebrecht bribe case, whose
cost was allegedly ballooned from US$900.0 million, to US$2.1
billion, the report adds.
As reported in the Troubled Company Reporter-Latin America on
May 1, 2017, S&P Global Ratings affirmed its 'BB-/B' long- and
short-term sovereign credit ratings on the Dominican Republic.
The outlook remains stable. The transfer and convertibility (T&C)
assessment is unchanged at 'BB+'.
======================
P U E R T O R I C O
======================
PUERTO RICO ELECTRIC: Fitch Keeps Neg. Watch on C-Rated Rev Bonds
-----------------------------------------------------------------
Fitch Ratings maintains its Negative Rating Watch on the Puerto
Rico Electric Power Authority's power revenue bonds currently
rated 'C' and PREPA's Issuer Default Rating (IDR) of 'C'.
SECURITY
The power revenue bonds are secured by a senior lien on net
revenues of the electric system.
KEY RATING DRIVERS
RESTRUCTURING OR DEFAULT APPEARS INEVITABLE: The maintenance of
the Negative Watch reflect Fitch's view that a payment default or
restructuring of PREPA's debt obligations is inevitable. A key
component of PREPA's restructuring plan is the reduction of
existing debt by means of a proposed distressed debt exchange.
CASH FLOW CONCERNS REMAIN: PREPA's net cash receipts and existing
funds on hand remain insufficient to meet long-term working
capital, debt service and other funding requirements. Although
debt service payments due July 1, 2017 may be paid, funding for
such payments is likely to come from existing bond purchase
agreements with existing creditors and new re-lending agreements.
FINANCIAL PERFORMANCE REMAINS WEAK: PREPA reported unaudited
earnings before interest and depreciation of $672 million fiscal
year-to-date through April 30, 2017, but a change in net position
of ($207 million). The net loss compares unfavorably to PREPA's
budgeted income of $94 million. Total debt at April 30, 2017
remained largely unchanged from June 30, 2016 at $9.2 billion.
Total net position at April 30, 2017 was ($4.15 billion).
RATING SENSITIVITIES
NONPAYMENT OR DISTRESSED DEBT EXCHANGE: The Puerto Rico Electric
Power Authority's failure to meet debt service obligations as
scheduled or the execution of a distressed debt exchange, where
creditors are offered securities with diminished structural or
economic terms compared with the existing power revenue bonds to
avoid a probable payment default, would result in a downgrade of
the Issuer Default Rating to 'RD' and any affected securities to
'D'. Securities that continue to perform will have ratings
maintained at 'C'.
PUERTO RICO: Creditors Committee Retains Paul Hastings, O'Neill
---------------------------------------------------------------
The Official Committee of Unsecured Creditors in the Commonwealth
of Puerto Rico's PROMESA Title III case has tapped Paul Hastings
LLP and O'Neill & Gilmore LLC as counsel:
Luc A. Despins, Esq.
Andrew V. Tenzer, Esq.
Leslie A. Plaskon, Esq.
Michael E. Comerford, Esq.
G. Alexander Bongartz, Esq.
PAUL HASTINGS LLP
200 Park Avenue
New York, NY 10166
Tel: (212) 318-6000
Fax: (212) 319-4090
E-mail: lucdespins@paulhastings.com
andrewtenzer@paulhastings.com
leslieplaskon@paulhastings.com
michaelcomerford@paulhastings.com
alexbongartz@paulhastings.com
- and -
Patrick D. O'Neill, Esq.
O'NEILL & GILMORE LLC
City Towers, Suite 1701
252 Ponce de Leon Avenue San Juan, Puerto Rico 00918
Tel: (787) 620-0670
Fax: (787) 620-0671
E-mail: pdo@golaw.com
The Creditors Committee was appointed on June 15, 2017. The
members of the Committee are the American Federation of Teachers,
Doral Financial Corporation, Genesis Security Services, Inc.,
Puerto Rico Hospital Supply, Service Employees International
Union, Total Petroleum Puerto Rico Corp., and Unitech Engineering
Group, S.E.
Unlike in cases commenced under the Bankruptcy Code, professionals
retained by the Debtors and the Oversight Board do not require
court authorization for retention. However, by virtue of
PROMESA's incorporation of Section 1103 of the Bankruptcy Code,
the retention of any professionals for any official committees
will require court approval. As of June 27, 2017, the Creditors
Committee has not submitted applications to retain Paul Hastings
and O'Neill as its attorneys.
Committee Can Raise Objections
Meanwhile, the Creditors Committee sought and obtained approval to
be heard on all matters scheduled for the hearings on June 28 and
29, 2017, notwithstanding that all applicable filing deadlines to
file responsive pleadings have passed and without the need to file
written responses.
Judge Laura Taylor Swain ruled that the Committee will be
permitted to raise, even for the first time, any objections at the
June 28 and 29 hearings.
The Committee noted that while the Title III Cases were commenced
on May 3 and May 5, 2017, the seven-member Committee was only
appointed on June 15, and the Committee did not select its
proposed counsel until June 26.
The Committee and Paul Hastings are in the process of rapidly
getting up to speed on the Title III Cases in a very abbreviated
timeframe -- a herculean task in light of their unprecedented
scope and complexity. For example, the Committee is evaluating
the COFINAGO dispute, including both the Oversight Board's motion
for an order approving the Oversight Board's proposed procedure to
resolve the dispute as well as all of the pleadings filed in the
Bank of New York Mellon adversary proceeding, the numerous and
various lift stay motions that have been filed in the Title III
Cases, the Oversight Board's motion to confirm the application of
the automatic stay, and the joint administration motion.
The objection deadlines for the filing of responsive pleadings for
the upcoming hearings on June 28 and June 29 have already passed.
Additionally, pursuant to various scheduling orders issued by the
Court in the Title III Cases (including related adversary
proceedings), numerous other filing deadlines have either already
passed or will expire in the near future. For example:
* The deadline to file objections to the motion for entry of
order approving procedures to resolve Commonwealth-COFINA dispute
was June 16, 2017.
* The deadline to file objections to the Motion for Stay Relief
filed by the mutual fund group was June 20, 2017.
* The deadline to file objections to the motion to intervene in
the adversary proceeding commenced by Peaje Investments is on June
29, 2017.
* The deadline to file objections to the Motion for Relief from
Stay filed by Emmanuel Aponte-Colon is on June 30, 2017.
* The deadline to file objections to the Motion for Relief from
Stay filed by Javier Parez-Rivera is on July 3, 2017.
In order to ensure that the Committee (which represents all
general unsecured creditors) is able to participate in these cases
in a meaningful way and fulfill its fiduciary obligations to all
general unsecured creditors, the Committee asserted that it should
be allowed to be heard on these matters, and the Committee should
be given a meaningful opportunity to analyze the numerous complex
issues which need to be analyzed.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70
billion, a 68% debt-to-GDP ratio and negative economic growth in
nine of the last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III
of 2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ("PROMESA").
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21.
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that
may be referred to her by Judge Swain, including discovery
disputes, management of other pretrial proceedings.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq.,
at O'Neill & Borges are onboard as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets
Inc. is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
Bondholders' Attorneys
Toro, Colon, Mullet, Rivera & Sifre, P.S.C. and Kramer Levin
Naftalis & Frankel LLP serve as counsel to the Mutual Fund Group,
comprised of mutual funds managed by Oppenheimer Funds, Inc.,
Franklin Advisers, Inc., and the First Puerto Rico Family of
Funds, which collectively hold over $3.5 billion in COFINA Bonds
and over $2.9 billion in other bonds issued by Puerto Rico and
other instrumentalities, including over $1.8 billion of Puerto
Rico general obligation bonds ("GO Bonds").
White & Case LLP and Lopez Sanchez & Pirillo LLC represent the UBS
Family of Funds and the Puerto Rico Family of Funds, which hold
$613.3 million in COFINA bonds.
Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robbins, Russell,
Englert, Orseck, Untereiner & Sauber LLP, and Jimenez, Graffam &
Lausell are co-counsel to the ad hoc group of General Obligation
Bondholders, comprised of Aurelius Capital Management, LP,
Autonomy Capital (Jersey) LP, FCO Advisors LP, Franklin Mutual
Advisers LLC, Monarch Alternative Capital LP, Senator Investment
Group LP, and Stone Lion Capital Partners L.P.
Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera are
co-counsel to the ad hoc coalition of holders of senior bonds
issued by COFINA, comprised of at least 30 institutional holders,
including Canyon Capital Advisors LLC and Varde Investment
Partners, L.P.
Correa Acevedo & Abesada Law Offices, P.S.C., is counsel to Canyon
Capital Advisors, LLC, River Canyon Fund Management, LLC, Davidson
Kempner Capital Management LP, OZ Management, LP, and OZ
Management II LP (the QTCB Noteholder Group).
Committees
The U.S. Trustee formed a nine-member Official Committee of
Retirees and a seven-member Official Committee of Unsecured
Creditors of the Commonwealth. The Retiree Committee tapped
Jenner & Block LLP and Bennazar, Garcia & Milian, C.S.P., as its
attorneys. The Creditors Committee tapped Paul Hastings LLP and
O'Neill & Gilmore LLC as counsel.
PUERTO RICO: Oversight Board Rejects PREPA Title VI Restructuring
-----------------------------------------------------------------
The Financial Oversight and Management Board for Puerto Rico
created by Congress under the bipartisan Puerto Rico Oversight,
Management and Economic Stability Act ("PROMESA") said that in an
executive session held June 27, 2017, the Board did not approve
the proposed Puerto Rico Electric Power Authority Restructuring
Support Agreement.
The determination closes the door on this request for debt
restructuring under Title VI of PROMESA. The most likely course
of action under the circumstances would be a debt restructuring
process under Title III instead.
The Board noted that it gave serious, professional and deliberate
consideration to the proposed RSA but, in the end, decided that
the proposed agreement was not in Puerto Rico's best interests
because, ultimately, it did not support the structural and
operational reforms required to attract additional capital to
PREPA that will enable its much-needed transformation.
"Affordable and reliable electricity is central to Puerto Rico's
economic turnaround, without which customers will seek alternative
measures to satisfy their needs resulting in increased pressure to
increase the rates to the remaining customer base, thereby
inhibiting growth and long-term viability," the Board noted.
The Puerto Rico Electric Power Authority (PREPA), a public
corporation, supplies substantially all the electricity consumed
in the Commonwealth and owns all transmission and distribution
facilities and most of the generating facilities that constitute
Puerto Rico's electric power system. PREPA has approximately $9
billion of debt.
Contact:
Jose Luis Cedeno
787-400-9245
jcedeno@forculuspr.com
info@forculuspr.com
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70
billion, a 68% debt-to-GDP ratio and negative economic growth in
nine of the last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III
of 2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ("PROMESA").
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21.
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that
may be referred to her by Judge Swain, including discovery
disputes, management of other pretrial proceedings.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq.,
at O'Neill & Borges are onboard as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets
Inc. is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at:
https://cases.primeclerk.com/puertorico
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
Bondholders' Attorneys
Toro, Colon, Mullet, Rivera & Sifre, P.S.C. and Kramer Levin
Naftalis & Frankel LLP serve as counsel to the Mutual Fund Group,
comprised of mutual funds managed by Oppenheimer Funds, Inc.,
Franklin Advisers, Inc., and the First Puerto Rico Family of
Funds, which collectively hold over $3.5 billion in COFINA Bonds
and over $2.9 billion in other bonds issued by Puerto Rico and
other instrumentalities, including over $1.8 billion of Puerto
Rico general obligation bonds ("GO Bonds").
White & Case LLP and Lopez Sanchez & Pirillo LLC represent the UBS
Family of Funds and the Puerto Rico Family of Funds, which hold
$613.3 million in COFINA bonds.
Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robbins, Russell,
Englert, Orseck, Untereiner & Sauber LLP, and Jimenez, Graffam &
Lausell are co-counsel to the ad hoc group of General Obligation
Bondholders, comprised of Aurelius Capital Management, LP,
Autonomy Capital (Jersey) LP, FCO Advisors LP, Franklin Mutual
Advisers LLC, Monarch Alternative Capital LP, Senator Investment
Group LP, and Stone Lion Capital Partners L.P.
Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera are
co-counsel to the ad hoc coalition of holders of senior bonds
issued by COFINA, comprised of at least 30 institutional holders,
including Canyon Capital Advisors LLC and Varde Investment
Partners, L.P.
Correa Acevedo & Abesada Law Offices, P.S.C., is counsel to Canyon
Capital Advisors, LLC, River Canyon Fund Management, LLC, Davidson
Kempner Capital Management LP, OZ Management, LP, and OZ
Management II LP (the QTCB Noteholder Group).
Committees
The U.S. Trustee formed a nine-member Official Committee of
Retirees and a seven-member Official Committee of Unsecured
Creditors of the Commonwealth. The Retiree Committee tapped
Jenner & Block LLP and Bennazar, Garcia & Milian, C.S.P., as its
attorneys. The Creditors Committee tapped Paul Hastings LLP and
O'Neill & Gilmore LLC as counsel.
=================
V E N E Z U E L A
=================
VENEZUELA: President's Claims of Helicopter Attack Contested
------------------------------------------------------------
Anatoly Kurmanaev and Juan Forero at The Wall Street Journal
report that President Nicolas Maduro said a helicopter dropped
grenades on the Supreme Court in a terror attack, though
opposition figures called his claims a diversion orchestrated to
deflect from the government's attempts to neuter state
institutions outside its control.
Mr. Maduro said he had activated "the entire armed forces," after
announcing on state television that four grenades were dropped
from a small blue helicopter that officials said was piloted by a
rogue policeman, according to The Wall Street Journal.
No one was injured and there were no signs of damage, the report
relays.
The announcement came as soldiers surrounded the opposition-
controlled congress, clashing with lawmakers, the report
discloses. The soldiers carried in boxes of equipment, which
opposition congressmen said was a prelude to a government takeover
of the building ahead of next month's plans to rewrite the
constitution, the report notes.
Opposition lawmakers tried to remain defiant, with Julio Borges,
among the more prominent of Mr. Maduro's foes, telling reporters,
"Neither bullets, threats or attacks will throw us out of here,"
the report relays.
Meanwhile, the government-controlled court published a decision
that gave investigative powers to the human-rights ombudsman, a
close ally of the president, the report notes. That potentially
allows officials to usurp the powers of Attorney General Luisa
Ortega, who had in recent weeks grown critical of the government
and pledged to investigate corruption, the report relays.
Mr. Maduro focused on the helicopter incident when he spoke before
a group of pro-government journalists in an event carried live on
national television, the report discloses.
"It could have caused a tragedy with several dozen dead and
injured," the report quoted Mr. Maduro as saying.
Another senior government official, Information Minister Ernesto
Villegas, accused a retired general who had once been loyal to the
government, Miguel Rodriguez Torres, of helping to plan the
attack, the report relays.
Mr. Villegas didn't provide evidence, and Mr. Rodriguez Torres
couldn't be reached to comment, notes the report. Mr. Rodriguez
Torres criticized the government in a press conference.
The president's many opponents believed the helicopter incident
could have been government-orchestrated to deflect from Mr.
Maduro's plans to rewrite the constitution next month and his
attempt to weaken the attorney general, the report notes.
"The helicopter is a diversion that takes attention away from the
Supreme Court decision, and allows the court to go after the
attorney general and eliminate her," said Cliver Alcala, a retired
general and fierce critic of Mr. Maduro's government, the report
relays.
The plan for a new constitution, which has helped fuel deepening
unrest, is highly unpopular as it would usurp what few legal
avenues of dissent are left to the country's beleaguered
opposition, says the report.
About 80 people have died in three months of constant protests
against the embattled president, who has been unable to stop an
economic free fall that has seen the economy nearly collapse, with
inflation rising to 700% while food and medicine have become
scarce, the report recalls.
Earlier in the day, Mr. Maduro threatened civil war if the
opposition were to attempt to remove the government, suggesting
violence even if the change came through elections, the report
notes.
"We would never give up, and what couldn't be done with votes, we
would do with weapons," he said at a rally, the report relays.
The president has called a July 30 vote for a special assembly
with powers to redraft the constitution, which opponents say with
do away with last vestiges of Venezuelan democracy, the report
notes. The opposition and ruling party dissidents such as Ms.
Ortega, the attorney general, have vowed to boycott and fight the
elections, which they say are unlawful, the report adds.
As reported by The Troubled Company Reporter-Latin America,
S&P Global Ratings, on Feb. 28, 2017, affirmed its 'CCC' long-term
foreign and local currency sovereign credit ratings on the
Bolivarian Republic of Venezuela. The outlook on both long-term
ratings remains negative. S&P also affirmed its 'C' short-term
foreign and local currency sovereign ratings. In addition, S&P
affirmed its 'CCC' transfer and convertibility assessment on the
sovereign.
===========================
V I R G I N I S L A N D S
===========================
VIRGIN ISLANDS: Debt Crisis Shift to Country
--------------------------------------------
Mary Williams Walsh at The New York Times reports that the United
States Virgin Islands is best known for its powdery beaches and
turquoise bays, a constant draw for the tourists who frequent this
tiny American territory.
Yet away from the beaches, the mood is ominous, as government
officials scramble to stave off the same kind of fiscal collapse
that has already engulfed its neighbor Puerto Rico, according to
The New York Times.
The public debts of the Virgin Islands are much smaller than those
of Puerto Rico, which effectively declared bankruptcy in May, the
report notes. But so is its population, and therefore its ability
to pay, the report relays. This tropical territory of roughly
100,000 people owes some $6.5 billion to pensioners and creditors,
the report discloses.
Now, a combination of factors --insufficient tax revenue, a weak
pension system, the loss of a major employer and a new reluctance
in the markets to lend the Virgin Islands any more money -- has
made it almost impossible for the government to meet its
obligations, the report says. In January, the Virgin Islands
found itself unable to borrow and nearly out of funds for basic
government operations, the report notes.
The sudden cash crunch was a warning sign that the financial
troubles that brought Puerto Rico to its knees could soon spread,
the report relays. All of America's far-flung territories, among
them American Samoa, Guam and the Northern Mariana Islands, appear
vulnerable, the report relays.
"I don't think you can say it's a crisis, but they have challenges
-- high debt, weak economies and unfunded pensions," said Jim
Millstein, whose firm, Millstein & Company, advised Puerto Rico on
its economic affairs and debt restructuring until this year and
has reviewed the situation in Guam and the Virgin Islands, the
report relays. He called the combination of challenges in the
territories "a recipe for trouble in the future," the report
notes.
For decades, these distant clusters of islands in the Caribbean
and the Pacific have played critical roles as American listening
posts, wartime staging grounds, practice bombing ranges and even
re-entry points for astronauts splashing down in the Pacific, the
report relays.
The military presence buoyed their small economies, and a federal
tax subsidy made it relatively easy for them to issue bonds, the
report discloses. Over the years, they have collectively borrowed
billions of dollars to build roads, run schools, treat drinking
water and fund hospitals, the report discloses.
Congress has generally relied on the Government Accountability
Office to monitor the financial health of the territories, but it
did not intervene over the years when the auditors brought back
reports of "formidable fiscal challenges" or "serious internal
control weaknesses" on the islands, the report relays. Not, at
least, until Puerto Rico went over the edge, the report says.
Now the G.A.O. auditors are back, re-examining the debt and
repayment ability of each territory, amid concerns that other
crushing debt burdens may have escaped notice, the report relays.
An agency spokesman, Fuller O. Griffith, said it would report by
the end of the year on "federal options to avert the future
indebtedness of territories," the report says. It is not clear
what those options will be.
"Washington can't appropriately manage its relationship with the
states, much less the territories," the report quoted Matt Fabian,
a partner at Municipal Market Analytics, as saying.
Even the states are not immune, despite their legal status as
sovereigns, the report relays. Illinois, stuck in political
gridlock, is just days from entering its new fiscal year without a
balanced budget, in violation of its own constitution, the report
notes. The ratings agencies warn that Illinois's bond rating is
in peril of being downgraded to junk, the report discloses. Once
that happens, as the territories show, hedge funds move in and
economic management becomes a series of unpleasant choices, the
report relays.
American Samoa, one of the smallest territories, lost one of the
biggest engines of its economy in December when a big tuna cannery
closed after being required to pay the federal minimum wage, the
report says. Moody's Investors Service then put the territory's
debt under negative outlook, citing its fragile economy.
In the Northern Mariana Islands, the depleted public pension fund
was wreaking such fiscal havoc in 2012 that the territory declared
it bankrupt, but the case was thrown out, the report notes. The
government then tried cutting all retirees' pensions 25 percent,
but the retirees have been fighting the cuts, and the fund is
nearly exhausted anyway, the report relays.
Even Guam, which enjoys the economic benefit of several large
American military installations, has been having qualms about its
debt after Puerto Rico's default, the report discloses.
"Puerto Rico's troubles provide a teachable moment for Guam," said
Benjamin Cruz, the speaker of the legislature, who recently helped
defeat a proposal to borrow $75 million to pay tax refunds, the
report relays. "Spending borrowed money is too easy," Mr. Cruz
added.
But the debt dilemma is now most acute in the Virgin Islands --
the three main islands are St. Thomas, St. Croix and St. John --
where the government has been struggling ever since a giant
refinery closed in 2012, wiping out the territory's biggest
nongovernment employer and a mainstay of its tax base, the report
relays.
Its troubles began to snowball last July, when Puerto Rico
defaulted on most of its debts, the report notes.
In August, Fitch downgraded the Virgin Islands' debt to junk,
citing the territory's chronic budget deficits and habit of
borrowing to plug the holes, like Puerto Rico, the report says.
More downgrades followed, and in December, Standard & Poor's dealt
the territory a rare "superdowngrade" -- seven notches in one fell
swoop -- leaving it squarely in the junk-bond realm. That scared
away investors and forced it to cancel a planned bond offering in
January, the report recalls.
The failed bond deal meant there was not enough cash to pay for
basic government operations in February or March, the report
relays. As a stopgap, the territory diverted its workers' pension
contributions, the report notes.
The Virgin Islands' governor, Kenneth E. Mapp, said he had no
intention of defaulting on any bonds, the report relays.
"I didn't ask anybody for debt relief, so don't put me in the
debt-relief boat," Mr. Mapp said in an interview at Government
House, the ornate seat of the territorial government, perched on a
hillside overlooking the lush palms and bougainvillea of the
capital, Charlotte Amalie, on St. Thomas, the report notes.
Still, Mr. Mapp is contending with many of the same problems that
proved too much for Puerto Rico, driving it in May to seek
bankruptcylike protection under a new law for insolvent
territories, known as Promesa, the report relays. Puerto Rico is
now embroiled in heated negotiations over how to reduce its
roughly $123 billion in debts and unfunded pensions, the report
discloses.
When Congress drafted the Promesa law last year, it made it
possible for the other American territories to seek the same kind
of help, the report says.
Now, even though the Virgin Islands maintains it has no intention
of defaulting on its debts -- and has even given creditors new
protections -- the mere prospect of bankruptcy has spooked the
markets, putting borrowed money beyond the territory's reach and
greatly limiting its options, notes the report. In something of a
self-fulfilling prophecy, by giving territories the option to
declare bankruptcy, Congress seems to have made such an outcome
more likely.
"That innocuous provision, when sent to the bond market, said,
'Here's an escape valve for your debt obligations,'" the report
quoted Mr. Mapp as saying. "That changed the whole paradigm," he
added.
The problem is that in Puerto Rico, Promesa is turning out to
shred the many legal mechanisms that governmental borrowers use to
make their debts secure, the report notes. These include liens
and allowing creditors access to the courts, the report discloses.
"Under Promesa, all the security structures are dissolving," Mr.
Fabian said, the report relays.
Investors who thought they were secured creditors before now find
themselves holding moral obligation pledges, which are not
enforceable, the report notes.
After the Virgin Islands' bond offer fell through in January, the
fuel supplier to its electric authority stopped shipments, saying
it had not been paid; the authority was already in court with its
previous fuel supplier, which had not been paid either, the report
relays.
Then came the House of Representatives' plan to repeal and replace
the Affordable Care Act, notes the report. Mr. Mapp saw the
federal money that the Virgin Islands relies on for its public
hospitals going up in smoke. Mr. Mapp scrambled. He reactivated a
five-year economic plan that had been languishing and pushed
higher taxes on alcohol, cigarettes and soft drinks through the
legislature. He fought for a permanent electric rate increase. He
got $18 million in new federal funds for health care, the report
relays. He struck a deal to tax Airbnb rentals. He hired
collection agents to go after delinquent property and income
taxes, the report discloses. He scheduled auctions for delinquent
properties, the report notes. He hired a team to work on the
pension system, which is in severe distress, with only about six
years' worth of assets left, the report relays.
Until recently, the pension system was chasing high returns by
investing in high-risk assets, like a $50 million placement in
life viaticals -- an insurance play that is, in effect, a bet that
a selected group of elderly people will die soon, the report
discloses. It also made loans to an insolvent inter-island
airline, a resort that went bankrupt, and a major franchisee of
KFC restaurants, the report relays. The territory's inspector
general has declared the loans illegal, the report relays.
According to the report, Mr. Mapp said he hoped to start
restructuring the pension system in the fall. Already, he said,
the government had stopped diverting the workers' pension
contributions, as residents began filing their tax returns and
payments in April. The tax payments eased the immediate liquidity
crisis, the report notes.
Recently, he met with the Treasury secretary, Steven Mnuchin, to
discuss possible incentives to attract tech business to the Virgin
Islands. And he hopes to return to the capital markets, the report
says.
"The fact that we didn't complete the sale in January gives the
impression that our market access is constrained," said Valdamier
O. Collens, the territorial finance commissioner, the report
notes.
Investors have nothing to worry about, the governor said, the
report relays. For decades, the Virgin Islands has used a lockbox
arrangement that makes default all but impossible, the report
notes.
Merchants collect sales taxes and send the money to a trustee for
the bondholders, the report discloses. Not a cent goes to the
territorial government, including the pension fund, until the bond
trustee gets enough to make all scheduled bond payments for the
coming year, the report says.
"We have no access to the moneys before the bondholders are paid,"
Mr. Mapp said, notes the report. "These moneys are taken out of
the pie before the pie is even in the oven. Our debt has never
been in jeopardy," Mr. Mapp added.
But in Puerto Rico, such lockbox arrangements have turned out to
be one of the thorniest disputes of the bankruptcy proceedings,
the report relays. And Mr. Collens, the finance commissioner, is
all too aware that the same dynamic could upend the Virgin
Islands, too, the report notes.
"We know that there has been a contagion effect with Puerto Rico,"
the report quoted Mr. Collens as saying. "The market saw that by
the stroke of a pen, Congress could create a Promesa for the rest
of the territories," he added.
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
Submissions about insolvency-related conferences are encouraged.
Send announcements to conferences@bankrupt.com
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S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Valerie U. Pascual, Julie Anne L. Toledo, Ivy B.
Magdadaro, and Peter A. Chapman, Editors.
Copyright 2017. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000 or Joseph Cardillo at
856-381-8268.
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