/raid1/www/Hosts/bankrupt/TCRLA_Public/170710.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
Monday, July 10, 2017, Vol. 18, No. 135
Headlines
A R G E N T I N A
CABLEVISION SA: Merger w/ Telecom Argentina Credit Pos, Fitch Says
CABLEVISION SA: Moody's Puts B3 CFR Under Review for Upgrade
ENTRE RIOS: S&P Affirms 'B' Foreign and Local Currency Ratings
TELECOM ARGENTINA: Moody's Puts B3 CFR Under Review for Upgrade
B R A Z I L
ODEBRECHT SA: Argentina Hits Firm With 1-year Public Bid Ban
M E X I C O
NICOLAS ROMERO: Moody's Lowers Rating on MXN180MM Loan to Ba3
P A N A M A
ENA NORTE: Fitch Affirms BB+ Notes Rating; Outlook Stable
P U E R T O R I C O
PUERTO RICO: Assured Guaranty Files Suit v. Oversight Board
PUERTO RICO ELECTRIC: Fitch Lowers Issuer Default Rating to D
PUERTO RICO ELECTRIC: Moody's Cuts Rating on $8.0BB Bonds to Ca
ROJESIE INC: Hearing on Disclosure Statement Set for August 3
V E N E Z U E L A
VENEZUELA: Offers India ONGC Oil Stake
VENEZUELA: Economy to Shrink for Third Straight Year
X X X X X X X X X
* BOND PRICING: For the Week From July 3 to July 6, 2017
- - - - -
=================
A R G E N T I N A
=================
CABLEVISION SA: Merger w/ Telecom Argentina Credit Pos, Fitch Says
------------------------------------------------------------------
Fitch Ratings expects Cablevision S.A.'s merger with Telecom
Argentina S.A. to be credit positive, barring material regulatory
conditions, given increased operating scale, enhanced product
offerings via the bundling of the combined services, cost
reductions, and solid financial profile, all of which will support
the merged entity's enhanced market position and cash flow
generation. The rating impact will be limited as the merged
entity's ratings will be constrained by the Country Ceiling of
Argentina at 'B'.
On June 30, 2017, Cablevision announced that its Board of
Directors and Telecom Argentina's approved a preliminary merger
agreement based on share exchanges with the latter being the
surviving entity. The merger is subject to approval from both
entities' shareholders and the regulatory body. Upon the
completion of the merger, Cablevision Holdings (CVH),
Cablevision's controlling shareholder, will hold 33% of the merged
entity's stakes, while Fintech will have a 41% stake with the
remainder being free-float. Fitch expects the merger to be
concluded during 2018 once new regulation becomes effective that
will allow telecom operators to enter into the pay-TV segment.
The merger is positive for Cablevision given Telecom Argentina's
complimentary service offering and network infrastructure,
especially in mobile services, which would support the merged
entity's growth strategy based on convergent service offerings.
While Cablevision holds a solid market leading position in pay-TV
and broadband with 39% and 31% subscriber shares, respectively,
its nascent mobile operation held just 3% of the subscriber market
share as of March 31, 2017. Telecom Argentina's strong market
position in mobile, with a 32% subscriber market share, will
provide an effective foray into the segment for Cablevision.
Telecom Argentina also held a 25% market share in broadband, which
will result in a dominant 56% combined market share. The company's
material improvement in the market position could raise regulatory
and antitrust concerns. As a result, unfavourable conditions may
be imposed if the transaction is approved.
Both companies have maintained conservative credit profiles amid
solid operational track records. Fitch expects the combined
entity's credit profile to remain robust with net leverage
comfortably below 1.0x. As of the last 12 months (LTM) ended
March 31, 2017, Cablevision's net leverage, measured as total
adjusted net debt to EBTIDAR, remained low at 0.5x. Similarly,
Telecom Argentina's net leverage was also solid at 0.2x. The
combined entity's pro forma revenue and EBITDA will amount to
USD5.9 billion and USD1.8 billion, respectively. These figures
compare with Cablevision's stand-alone revenue of USD2.2 billion
and its EBITDA of USD0.8 billion. The company expects to achieve a
run-rate synergy of 1.5%-1.9% of LTM revenues, 2.5%-2.9% of LTM
operating expenses, and 1.1%-1.5% of LTM capex in the fifth year
of the effective merger.
Fitch currently rates Cablevision:
Cablevision S.A.
-- Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B';
Outlook Stable;
-- Long-Term Local Currency IDR at 'BB-'; Outlook Stable;
-- Senior unsecured notes due 2021 at 'B+/RR3'.
CABLEVISION SA: Moody's Puts B3 CFR Under Review for Upgrade
------------------------------------------------------------
Moody's Investors Service has placed Cablevision's B3 Corporate
Family Rating ("CFR") and the B3 rating of the long term senior
unsecured notes under review for upgrade. At the same time,
Moody's Latin America has placed Telecom Argentina's B3 Corporate
Family Rating ("CFR") on the global scale under review for
upgrade.
RATINGS RATIONALE
These rating actions follow the announcement of a potential merger
between the two companies through a non-cash share exchange
transaction that according to Moody's estimates will create the
largest and only integrated telecom operator in Argentina offering
a wide array of services, while maintaining good liquidity and
strong credit metrics. According to Moody's opinion, if the deal
is approved, the new firm will have leading market shares of
around 39% in Cable TV, 56% in Broadband, 47% in fixed telephony,
and 33% in Mobile.
According to preliminary Moody's pro-forma estimates for the last
twelve months ended March 2017 the merged entity would have
generated ARS88.4 billion (USD5.87 billion) in net revenues and
ARS28.97 billion in EBITDA (USD1.8 billion). The size of the new
company in terms of revenues would have been equivalent to 42% of
the entire telecom industry revenues in Argentina that amounted to
ARS198.8 billion in 2016 according to ENACOM. Accordingly, if the
transaction gets approved it will likely create pressure on
competitors for investments in infrastructure and could drive
additional M&A activity in the sector in Argentina.
According to Moody's preliminary calculations the aggregated pro-
forma EBITDA would have reached ARS28.97 billion in the LTM ended
March 2017, with a 58/42 contribution ratio between Telecom
Argentina and Cablevision, while the EBITDA margin would have been
32.8%, compared with 30.5% for Telecom Argentina alone, for a
total debt of ARS22.6 billion. With those figures according to
Moody's opinion the merged entity will keep the very low leverage
observed in the individual entities at around 0.78x total adjusted
debt to EBITDA. According to Moody's opinion liquidity would also
look adequate, with the combined cash position covering total
short term debt by 322%.
During the review process, Moody's will monitor the approval
process of the transaction that will include shareholders,
regulator and anti-trust authority, potential synergies, and to
what extent the combined company's rating could be decoupled from
Argentina's government bond rating currently at B3 positive.
Recent Events
On June 30, the board of directors of Telecom Argentina and
Cablevision S.A. have approved a Preliminary Merger Agreement in
which the combined company will be enabled, if approved by the
regulators and shareholders, to offer the so-called quadruple play
services, which include fixed line and cell services as well as
pay television and broadband internet access from January 2018.
The transaction follows Argentina national Government decree
1340/2016 issued in January 2017, which aimed to regulate the
convergence between the provision of 'audiovisual services' and
'information technology and communications services'. The
aforementioned convergence of services would basically allow
telephone companies to offer TV/cable services starting on January
2018.
If the transaction is successfully completed, Telecom Argentina
will issue 1.184 billion shares, leaving Cablevision shareholders
with 55% of the combined company. The exchange ratio approved by
the Companies' board of directors provides for 9,871 shares of
Telecom Argentina for each Cablevision share. Thus, CVH, the
controlling shareholder of Cablevision, and Fintech Media LLC,
Cablevision's minority shareholder, will receive a total direct
and indirect interest in Telecom Argentina equal to 55% after its
capital increase. The current shareholders of Telecom Argentina
will retain the remaining 45% of the share capital as a result of
the merger. In summary 40.5% will pertain to Fintech while 33.0%
will pertain to Clarin, the remaining amount will float in a stock
exchange.
Headquartered in Buenos Aires, Argentina, Cablevision is a leading
provider of Pay TV and Internet Services in Latin America based on
the amount of subscriptions. Mainly focused on the City of Buenos
Aires, cities in Greater Buenos Aires, 12 provinces, and Uruguay,
Cablevision is dedicated to the installation, operation and
broadcasting of data transmission through cable and video. Showing
an ongoing expansion, the company reports total revenues of
ARS32.9 billion (USD2.2 billion) for the twelve month period ended
on March 31st, 2017.
Telecom Argentina S.A. is one of three major telecom providers in
Argentina. The company offers mobile voice and broadband services,
which account for the majority of sales, as well as fixed voice,
broadband, data and IT products to residential, corporate and
government sectors. During the last twelve months ended on March,
2017, Telecom Argentina's revenues totaled ARS55.5 billion (USD3.7
billion), which 5% derives from Paraguay where the company is a
major mobile service provider.
The principal methodology used in rating CableVision S.A. was the
Global Pay Television - Cable and Direct-to-Home Satellite
Operators, published in January 2017. The principal methodology
used in rating Telecom Argentina S.A. was Telecommunications
Service Providers published in January 2017.
ENTRE RIOS: S&P Affirms 'B' Foreign and Local Currency Ratings
--------------------------------------------------------------
On July 6, 2017, S&P Global Ratings affirmed its 'B' foreign and
local currency ratings on the province of Entre Rios. The outlook
remains stable.
OUTLOOK
S&P said, "The stable outlook on Entre Rios reflects our view of
an increasing dialogue between the local and regional governments
(LRGs) and the federal government in Argentina to address various
fiscal and economic challenges. In addition, we consider that
Entre Rios' fiscal performance will gradually improve in the next
12 months, due to ongoing efforts to contain spending and to
tighten tax collection, although the province will continue to
post moderate deficits after capital expenditures (capex).
Downside scenario
"We could lower our ratings on Entre Rios within the next 12
months if we were to lower the sovereign ratings or if the
province is unable to improve its finances. Increasing pressures
to refinance short-term debt in foreign and local currency as well
as greater difficulties to comply with the provincial
borrowing plan could trigger a downgrade.
Upside scenario
"Given that S&P Global don't believe that the province meets the
conditions to have a higher rating than the sovereign, we could
only raise our ratings on Entre Rios within the next 12 months if
we were to raise the ratings on the sovereign amid the continued
strengthening in Argentina's institutional
framework for LRGs and in Entre Rios' credit profile. In
particular, such an upgrade would have to be complemented by a
stronger budgetary performance, in the form of solid operating
surpluses and manageable deficits after capex, as well as a more
formal debt and liquidity policy."
RATIONALE
The 'B' rating on Entre Rios reflects its individual credit
profile and the institutional framework in which it operates.
Entre Rios, like all LRGs in Argentina, operates under an
institutional framework that has recently strengthened but remains
very volatile and underfunded, in our view. At the same time,
macroeconomic recovery, cost-containment measures, and
improvements in tax collection are likely to only gradually
improve the province's currently weak budgetary performance. Entre
Rios will continue to grapple with budgetary constraints because
the provincial payroll will remain the main source of pressure on
the budget. On the other hand, S&P expects moderate debt burden
and contingent liabilities, with no significant increases for the
next three years.
Institutional framework is still volatile and underfunded,
although dialogue with the national government is increasing. GDP
per capita remains below sovereign level. Despite the
institutional framework's weakness, S&P considers the constructive
dialogue between the federal and subnational governments as a
positive credit development. Gustavo Eduardo Bordet won the
gubernatorial election in December 2015 for a four-year term, and
S&P expects his administration's policies to be similar to those
of preceding administration, which the Frente para la Victoria
party also held. This is the first time since Argentina returned
to democracy that Entre Rios' governing political party is
different from that of the president, though this hasn't been an
impediment to constructive dialogue and consensus, so far. For
example, in 2016, the province started to receive funds to finance
part of its social security deficit again, after a five-year
interruption. Also, at the beginning of the year, Entre Rios
received authorization from the federal government to issue its
first international bond.
Entre Rios' weak economy is still a key rating constraint. S&P
said, "We estimate that its GDP per capita had reached $11,163 in
2016, compared with the national level of $12,523. The provincial
economy represents about 3% of Argentina's economy and we consider
the former as relatively diverse." Despite ongoing measures to
broaden the province's economic base, one-fifth of the economy is
based in the primary sector and most of the manufacturing sector
is related to agriculture, which makes it vulnerable to global and
regional risks.
Finances to gradually improve with debt remaining moderate,
although exposure to exchange rate risk will increase Entre Rios'
finances deteriorated in 2016 due to recession and high inflation
amid Argentina's macroeconomic normalization. However, S&P expects
a gradual improvement in budgetary performance that will allow the
province to post operating surpluses and deficits after capex
below 5% of total revenue starting in 2018.
In 2016, the provincial payroll rose 41% following the agreement
to increase public-servant salaries. The payment on pending debt
with municipalities also pressured Entre Rios' finances. For 2017,
S&P said, "we expect the province to manage its operating
expenditures better, particularly through the moderate public-
servant salary increases. To our knowledge, there is no debt with
municipalities pending. We also expect Entre Rios' revenue to
increase following the macroeconomic recovery and improvements in
the provincial tax collection."
The latter, along with tax increases in 2014, raised the share of
the province's own-source revenue of total operating revenue to
49% in 2016 from 41% in 2011. S&P said, "We don't believe that
provincial operating revenue will rise significantly because the
tax burden is already high (and significantly higher than those of
subnational governments outside Argentina). In addition, to the
extent of our knowledge, Entre Rios isn't willing to increase
taxes. We expect this ratio to average 48.8% in the following
three years. The province faces expenditure constraints because
public-sector employee wages and interest payments represent
around 50% of operating expenditure. Despite the province's
commitment to contain wage increases and pension liabilities, they
will remain the main source of pressure on the budget. At the same
time, capex, as a share of total spending, decreased sharply in
2016. We expect it to gradually recover as the province starts
using the proceeds from its February 2017 issuance of the $350
million international bond. We believe that the province could cut
trim its capital spending if needed. However, our base-case
excludes such a scenario, given that most of the projected capital
spending is related either to earmarked capital transfers or to
one-third of the proceeds from the international bond issuances.
At the same time, Entre Rios' huge infrastructure needs would make
it even harder to cut capex. Provincial infrastructure priorities
are the construction of roadways and ports.
"We expect tax-supported debt to represent 36% of the province's
operating revenue in 2017-2019. Due to weak finances, Entre Rios'
debt rose to ARP21.4 billion in April 2017, or 35% of estimated
operating revenue for that year, from ARP12.6 billion (29%
operating revenue in 2015). The $350 million bond issuance allowed
Entre Rios to improve the debt maturity profile, given that the
province historically relied on very short-term instruments. We
expect Entre Rios to continue benefiting from a greater access to
international markets and reducing the use of short-term debt, but
its exposure to exchange rate risk will increase. We expect 46% of
debt to be denominated in foreign currency by the end of 2017. For
the following years, we assume that the province will obtain
borrowings according to its financing needs.
"In our opinion, Entre Rios' liquidity position remains weak. We
estimate that free cash and reserves will be insufficient to cover
the 2017 projected debt service. Nevertheless, we believe that the
province will be able to meet its debt service obligations through
internal and external cash flows. Access to external funding for
Argentine LRGs has increased following the May 2016 cure of the
sovereign default. However, we view overall access to external
liquidity as still uncertain given the country's weak banking
system, which our Banking Industry Country Risk Assessment scores
at group '9'. In addition, the Fiscal Responsibility Law doesn't
allow LRGs from using debt to finance operating expenditures and
requires the national government's authorization for LRGs to issue
new debt.
"In our view, Entre Rios' contingent liabilities are moderate.
Eleven public companies are not consolidated in the provincial
budget. We consider them as self-supporting entities because they
don't need financial support from the province and are unlikely to
receive support in the future. We estimate their creditworthiness
to be at the same level as of the province. The largest of these
entities are the electricity distribution company, ENERSA, the
insurance company, Instituto Autarquico Provincial del Seguro
Entre R°os, and Entre Interprovincial del Tunel Subfluvial, which
operates the tunnel that connects Entre Rios with Santa Fe. The
entities' outstanding liabilities are equivalent to 13% of the
province's operating revenue, about ARP7.3 billion."
TELECOM ARGENTINA: Moody's Puts B3 CFR Under Review for Upgrade
---------------------------------------------------------------
Moody's Latin America has placed Telecom Argentina's B3/Baa1.ar
Corporate Family Rating ("CFR") under review for upgrade. At the
same time, Moody's has placed Cablevision's global scale rating
and Cablevision's Baa1.ar national scale rating of the USD 500
million senior unsecured notes due 2021 rating under review for
upgrade.
RATINGS RATIONALE
These rating actions follow the announcement of a potential merger
between the two companies through a non-cash share exchange
transaction that according to Moody's estimates will create the
largest and only integrated telecom operator in Argentina offering
a wide array of services, while maintaining good liquidity and
strong credit metrics. According to Moody's opinion, if the deal
is approved, the new firm will have leading market shares of
around 39% in Cable TV, 56% in Broadband, 47% in fixed telephony,
and 33% in Mobile.
According to preliminary Moody's pro-forma estimates for the last
twelve months ended March 2017 the merged entity would have
generated ARS88.4 billion (USD5.87 billion) in net revenues and
ARS28.97 billion in EBITDA (USD1.8 billion). The size of the new
company in terms of revenues would have been equivalent to 42% of
the entire telecom industry revenues in Argentina that amounted to
ARS198.8 billion in 2016 according to ENACOM. Accordingly, if the
transaction gets approved it will likely create pressure on
competitors for investments in infrastructure and could drive
additional M&A activity in the sector in Argentina.
According to Moody's preliminary calculations the aggregated pro-
forma EBITDA would have reached ARS28.97 billion in the LTM ended
March 2017, with a 58/42 contribution ratio between Telecom
Argentina and Cablevision, while the EBITDA margin would have been
32.8%, compared with 30.5% for Telecom Argentina alone, for a
total debt of ARS22.6 billion. With those figures according to
Moody's opinion the merged entity will keep the very low leverage
observed in the individual entities at around 0.78x total adjusted
debt to EBITDA. According to Moody's opinion liquidity would also
look adequate, with the combined cash position covering total
short term debt by 322%.
During the review process, Moody's will monitor the approval
process of the transaction that will include shareholders,
regulator and anti-trust authority, potential synergies, and to
what extent the combined company's rating could be decoupled from
Argentina's government bond rating currently at B3 positive.
Recent Events
On June 30, the board of directors of Telecom Argentina and
Cablevision S.A. have approved a Preliminary Merger Agreement in
which the combined company will be enabled, if approved by the
regulators and shareholders, to offer the so-called quadruple play
services, which include fixed line and cell services as well as
pay television and broadband internet access from January 2018.
The transaction follows Argentina national Government decree
1340/2016 issued in January 2017, which aimed to regulate the
convergence between the provision of 'audiovisual services' and
'information technology and communications services'. The
aforementioned convergence of services would basically allow
telephone companies to offer TV/cable services starting on January
2018.
If the transaction is successfully completed, Telecom Argentina
will issue 1.184 billion shares, leaving Cablevision shareholders
with 55% of the combined company. The exchange ratio approved by
the Companies' board of directors provides for 9,871 shares of
Telecom Argentina for each Cablevision share. Thus, CVH, the
controlling shareholder of Cablevision, and Fintech Media LLC,
Cablevision's minority shareholder, will receive a total direct
and indirect interest in Telecom Argentina equal to 55% after its
capital increase. The current shareholders of Telecom Argentina
will retain the remaining 45% of the share capital as a result of
the merger. In summary 40.5% will pertain to Fintech while 33.0%
will pertain to Clarin, the remaining amount will float in a stock
exchange.
Headquartered in Buenos Aires, Argentina, Cablevision is a leading
provider of Pay TV and Internet Services in Latin America based on
the amount of subscriptions. Mainly focused on the City of Buenos
Aires, cities in Greater Buenos Aires, 12 provinces, and Uruguay,
Cablevision is dedicated to the installation, operation and
broadcasting of data transmission through cable and video. Showing
an ongoing expansion, the company reports total revenues of
ARS32.9 billion (USD2.2 billion) for the twelve month period ended
on March 31st, 2017.
Telecom Argentina S.A. is one of three major telecom providers in
Argentina. The company offers mobile voice and broadband services,
which account for the majority of sales, as well as fixed voice,
broadband, data and IT products to residential, corporate and
government sectors. During the last twelve months ended on March,
2017, Telecom Argentina's revenues totaled ARS55.5 billion (USD3.7
billion), which 5% derives from Paraguay where the company is a
major mobile service provider.
The principal methodology used in rating CableVision S.A. was the
Global Pay Television - Cable and Direct-to-Home Satellite
Operators, published in January 2017. The principal methodology
used in rating Telecom Argentina S.A. was Telecommunications
Service Providers published in January 2017.
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. For further
information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May
2016 entitled "Mapping National Scale Ratings from Global Scale
Ratings". While NSRs have no inherent absolute meaning in terms of
default risk or expected loss, a historical probability of default
consistent with a given NSR can be inferred from the GSR to which
it maps back at that particular point in time. For information on
the historical default rates associated with different global
scale rating categories over different investment horizons.
===========
B R A Z I L
===========
ODEBRECHT SA: Argentina Hits Firm With 1-year Public Bid Ban
------------------------------------------------------------
The Associated Press reports that Argentina on July 7 banned
embattled Brazilian construction conglomerate Odebrecht SA from
bidding on public works projects in the country for 12 months due
to investigations of bribes the company paid in Argentina and
elsewhere.
According to the AP, the announcement published in the
government's official bulletin also cites corruption and money
laundering cases in Brazil and other countries that have led to
prison sentences, admission of guilt and clemency pleas by company
executives.
The news agency relates that the company said it was evaluating
the decision and would make sure its rights are preserved.
"Odebrecht reiterates that it is committed to collaborating with
authorities and that it is already adopting the necessary measures
for an honest, ethical and transparent corporate behavior," a
company statement said, notes the report.
Odebrecht is a key focus of the "Operation Car Wash" investigation
into a mammoth kickback scheme at Brazil's state-run oil company -
the biggest corruption scandal in that country's history, the AP
notes. The initial investigation was launched in 2014 and has
mushroomed into related probes abroad because companies like
Odebrecht operated across Latin America.
According to the report, company executives acknowledged to U.S.
prosecutors earlier this year that they paid more than $700
million bribes to officials in 10 Latin American and two African
nations in exchange for multimillion-dollar contracts with local
governments. About $35 million in bribes were paid in Argentina
between 2007 and 2014.
Argentine Justice Minister German Garavano recently traveled to
Washington to meet with a prosecutor and share information that
can advance the Odebrecht case, the AP says. But Argentine
prosecutors said Argentina lacks a legal mechanism that would
allow companies to provide information in exchange for leniency
deals like those that have been signed in other nations, the
report notes.
As reporter in the Troubled Company Reporter-Latin America on
Dec. 2, 2016, The Wall Street Journal related that Marcelo
Odebrecht, the jailed former head of Brazilian construction giant
Odebrecht SA, agreed to sign a plea-bargain agreement in
connection with Brazil's largest corruption probe ever, according
to a person close to the negotiations. The move could roil the
nation's political class yet again. The testimony of the former
industrialist, which is part of the deal, has the potential to
implicate numerous politicians who allegedly took kickbacks from
contractors as part of a years-long graft ring centered on
Brazil's state-run oil company, Petroleo Brasileiro SA, known as
Petrobras, according to The Wall Street Journal.
===========
M E X I C O
===========
NICOLAS ROMERO: Moody's Lowers Rating on MXN180MM Loan to Ba3
-------------------------------------------------------------
Moody's de Mexico downgraded the ratings of the municipality of
Nicolas Romero's MXN180 million (original face value) enhanced
loan from Interacciones to Ba3/A3.mx from Ba2/A2.mx.
RATINGS RATIONALE
The downgrade reflects weakening debt service coverage (DSC)
ratios on the loan both in Moody's base case and stress scenarios.
DSC for this loan has deteriorated because of slow growth in
pledged revenues (federal participations) used to make principal
and interest payments on the loan and to higher market interest
rates, according to Moody's cash flow analysis. Pledged revenues
rose at a 2% annual pace during the past two years, down from a 6%
compound annual growth rate in the 2012-2016 period. This period
of slowing revenue growth has coincided with tightening monetary
conditions in Mexico in response to higher inflation, with the
central bank hiking its policy rate nine times since the start of
2016, lifting borrowing costs.
The loan is denominated in Mexican pesos and carries an interest
rate comprised of the 28-day Mexican Interbank Interest Rate
(TIlE), which has risen to 7.37% from 3.55% in January 2016, plus
a 3.8% spread. The loan is payable through a trust (Monex F/201),
to which the municipality has pledged the flows and rights of 20%
of its federal participation transfers.
Moody's projects DSC for the MXN 180 million loan fell to 1.8x in
the base case from 2.4x under the previous projection, and to 1.4x
in the stress case, from 1.8x. Moreover, the level of reserves
that can provide a cushion against payment delays remains modest,
equal to 1.5 months of debt service.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the links between the loan and the credit quality of the
obligor, an upgrade on the Municipality of Nicolas Romero's issuer
rating or a strengthening in the debt service coverage levels
would likely result in an upgrade of the enhanced loan ratings.
Conversely, a downgrade of the Municipality's issuer rating could
also exert downward pressure on the ratings of the loan. In
addition, the enhanced loan rating could face downward pressure if
debt service coverage levels fall materially below Moody's
expectations.
The methodologies used in these ratings were Rating Methodology
for Enhanced Municipal and State Loans in Mexico published in June
2014 and Regional and Local Governments published in January 2013.
The period of time covered in the financial information used to
determine the Municipality of Nicolas Romero's rating is between
01/01/2012 and 31/12/2016. (Source: Municipality of Nicolas
Romero)
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. For further
information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May
2016 entitled "Mapping National Scale Ratings from Global Scale
Ratings". While NSRs have no inherent absolute meaning in terms of
default risk or expected loss, a historical probability of default
consistent with a given NSR can be inferred from the GSR to which
it maps back at that particular point in time. For information on
the historical default rates associated with different global
scale rating categories over different investment horizons.
============
P A N A M A
============
ENA NORTE: Fitch Affirms BB+ Notes Rating; Outlook Stable
---------------------------------------------------------
Fitch Ratings has taken the following rating actions on ENA Sur,
ENA Norte and ENA Este Trusts' notes:
-- ENA Sur Trust (ENA Sur) affirmed at 'BBB' and 'AAA(pan)';
Outlook Revised to Stable from Negative;
-- ENA Este, S.A. (ENA Este) affirmed at 'BB-' and 'A(pan)';
Outlook Negative;
-- ENA Norte Trust (ENA Norte) affirmed at 'BB+' and 'AA-(pan)';
Outlook Stable.
ENA Sur's Outlook revision to Stable reflects the positive traffic
and revenue performance demonstrated by the asset in recent
months, which, coupled with a flow zero structure for Class B
notes, resulted in a faster-than-expected deleveraging of the
transaction, which now features improved financial ratios that are
fully consistent with its rating category.
KEY RATING DRIVERS
Summary: ENA Sur's rating reflects a stronger and mature asset
with significant track record. Despite the project's contractual
ability to adjust tolls according to inflation, tolls have not
been increased since the issuance of the notes and therefore,
Fitch continues to assume that tolls will remain unchanged over
the life of the notes. Debt structure is robust and has allowed
ENA Sur to benefit from past positive performance and to
deleverage to a point where it is no longer dependent on future
traffic growth. ENA Sur's Rating Case Loan Life Coverage Ratio
(LLCR) is 1.43x, in line with the rating category according to the
applicable criteria. The project maintains low leverage as
reflected in a debt to cash flow available for debt service
(CFADS) of 4.83x.
ENA Este's rating is driven by a lower-than-expected traffic
performance due to the delay in the project completion and ramp-
up, as well as ENA Este's significant dependence on distributions
from ENA Sur. Despite a significant traffic increase, ENA Este's
traffic still remains below Fitch's expectations. The latter,
coupled with the absence of tolls increases has resulted in lower-
than-expected revenue generation. Consequently, if the government
chooses not to adjust toll rates in the coming years, the
likelihood of a default over the longer term will remain. ENA
Este's Rating Case Loan Life Coverage Ratio (LLCR) is 0.79x and
leverage is significant, as reflected in a debt to cash flow
available for debt service (CFADS) of 20.4x.
The implementation of sufficient adjustments to toll rates or
continued improved traffic performance in the near future would
likely enhance credit protection measures to levels consistent
with the rating category, which could lead to a revision of the
Outlook to Stable.
ENA Norte's rating is driven by the project's improving traffic
performance, which has resulted in higher-than-expected
prepayments thanks to its flow zero debt structure. Although the
issuer has the ability to increase tolls according to inflation,
there are no expectations of toll increases in the near future.
Under Fitch's Rating Case, the LLCR is 1.16x and debt to cash flow
available for debt service is 8.21x, in line with the applicable
criteria for the assigned rating.
Limited Volume Risk (Revenue Risk-Volume: Stronger for ENA Sur and
ENA Norte; Midrange for ENA Este): The corridors represent a
critical link for commuters and commercial traffic in the city of
Panama. Given the recent infrastructure changes in the city, the
assets have limited but increasing competition from free
alternatives and other transportation modes. While the Sur and
Norte traffic corridors have a long track record, the corridor
Este has recently started operations and traffic is currently in
the ramp-up phase.
Fixed Toll Rates (Revenue Risk-Price: Weaker): Although the
concessionaire is entitled to annually adjust toll rates at
inflationary levels, toll rates have not been increased by
inflation and are not expected to be updated in the medium term.
Toll rates are structurally protected with a covenant that
prohibits toll rate reductions if debt service coverage ratio
(DSCR) does not meet a minimum threshold.
Suitable Infrastructure Plan (Infra Development & Renewal:
Midrange): Sound contractual requirements to fund capital
expenditure costs are in place for the three corridors. The roads
are maintained in adequate conditions, while a moderate and
inclusive maintenance plan is in place to maintain certain
sections of corridor Sur that require major investment. The
capital investment program (CIP) is mainly internally funded.
Given that corridor Este was recently built, it is not expected to
require large major maintenance in the medium term. Construction
of a bridge located in corridor Este has been reactivated.
Conservative Debt Structure (Debt Structure: Stronger for ENA Sur
and ENA Norte; Midrange for ENA Este): ENA Sur's debt carries
fixed interest rates and a fully amortizing profile. The Class A
notes have scheduled principal payments while the Class B notes
feature a pass-through amortization scheme (flow zero). While ENA
Norte Trust's debt structure is flow zero, ENA Este Trust's debt
is structurally subordinated to ENA Sur as debt repayment is
highly dependent on ENA Sur's distributions. There is a six-month
debt service reserve account for ENA Sur and ENA Norte, while ENA
Este maintains approximately USD30 million as debt reserve.
Metrics
ENA Sur's leverage has decreased over time and is now 4.8x under
Fitch's rating case. The project generates sufficient revenues to
maintain LLCR at 1.49x and 1.43x under the base and rating cases,
respectively.
ENA Este's leverage is significant during the first years and the
transaction requires a robust traffic growth to preserve financial
flexibility. Rating case LLCR at 0.79x is low for the rating
category. However, the transaction's debt structure (flow zero)
and the view that the road is a public asset provide a
considerable timeframe for actions to be taken by the Panamanian
government to address economic imbalance.
ENA Norte's level of indebtedness has decreased but is still
relevant, reflected by its debt to CFADS of 8.2x in Fitch's rating
case, and requires stable traffic growth to fully repay debt.
Mandatory interest payments are vastly covered and Fitch's base
case projections show full debt repayment with a cushion of almost
three years before maturity, while rating case shows debt fully
paid two years before maturity.
PEER GROUP
ENA Sur compares with Red de Carreteras de Occidente's (RCO) 2013
notes, rated 'BBB'/Outlook Stable. RCO's higher LLCR of 1.83x
compared to ENA Sur's 1.43x results from a longer debt term, which
is reflected in ENA Sur's lower debt to CFADS of 4.83x to 6.17x,
respectively.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action:
-- Positive actions taken by the government to support bond
holder's interests.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action in ENA Sur, Este and Norte:
-- Traffic underperformance that is not offset by toll
adjustments.
-- O&M expenses materially above expectations that cause
financial flexibility to be reduced and result in a materially
lower LLCR.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action in ENA Este:
-- Sustainable lag in amount and timing of ENA Sur excess cash
flow could pressure debt repayment at maturity.
CREDIT UPDATE
ENA Sur's traffic levels increased considerably in 2016, with
tolled traffic measured as Average Annual Daily Traffic (AADT)
increasing 7.9% and revenue increasing 6.9%. This compares
positively to the traffic increases of 4.5% and 3.0% expected by
Fitch in its base and rating cases, respectively. According to the
issuer, traffic increased due to expansion of the Panama Canal
while the competing Domingo Diaz Road remains heavily congested
due to construction associated with the second line of the subway.
This congestion on Domingo Diaz Road is expected to persist until
2019
As of the first four months of 2017, traffic in ENA Sur shows an
increase of 15.5%, while revenue shows an increase of 17.9%.
Following the same trend as in corridor Sur, traffic in corridor
Norte increased 10.8% in 2016, while revenue increased 11.2%,
driven by an increase in heavy vehicles. As of April 2017, traffic
and revenue continue to show a strong growth, increasing 12.6% and
13.0%, respectively when compared to the same period of last year.
Traffic in corridor Este reached 14,447 vehicles in 2016, while
Fitch expected 20,000 vehicles. Even though traffic was
significantly lower than expected, as of the first four months of
2017, traffic continues ramping-up, as it has reached 18,730
vehicles, increasing 81% with respect to the same period of 2016.
As of the first four months of 2017, all roads remain
predominantly commuting, as cars provide more than 90% of total
traffic, and more than 80% of revenue.
Total expenses for ENA Sur were in line with Fitch's expectations.
ENA Norte's total expenses were registered at USD15.9 million,
significantly lower than the USD20.1 million Fitch expected under
its base case. With respect to ENA Este, total expenses were
USD3.4 million, almost USD 1 million above Fitch's base case.
According to the issuer, an updated traffic report will be
provided in the next months. This will allow Fitch to better
assess future traffic behaviour given the recent infrastructure
changes in the city of Panama.
Fitch's base case for the three issuances assumed traffic CAGR for
ENA Sur, Norte and Este at 2.3%, 3.2% and 7.4%, respectively.
Operating expenses were increased yearly at inflation plus 5%,
while major maintenance was increased at inflation plus 5% above
its respective maintenance program. Tariffs were assumed fixed for
the rest of the term. Inflation was considered at 2.0% for 2017
and 2018 and then fixed at 3.0% for the rest of the term.
Fitch's rating case assumed traffic CAGR of 1.3%, 2.3% and 6.7%,
respectively for ENA Sur, Norte and Este, and 7.5% real increase
to operating expenses and major maintenance.
ENA Sur's base case LLCR was 1.49x with a debt to CFADS ratio at
4.8x, while rating case metrics were 1.43x and 4.8x for LLCR and
debt to CFADS, respectively.
ENA Norte's base case LLCR was 1.23x with a debt to CFADS ratio at
8.1x, while rating case metrics were 1.16x and 8.2x for LLCR and
debt to CFADS, respectively.
ENA Este's base case LLCR was 0.86x with a debt to CFADS ratio at
20.2x and 27% of debt is not paid. Under the rating case LLCR is
0.79x, debt to CFADS is 20.4x and 38% of debt is not paid.
The macroeconomic health of the country is supported by Fitch's
view of the Panamanian sovereign. The country's rating was
affirmed at 'BBB' with a Country Ceiling of 'A' in February 2017.
Corridor Sur extends over 19.8 kilometers (approximately 12.3
miles) connecting Panama City's international airport (in the
East) to the CBD (in the West). ENA Sur operates the toll road
concession of corridor Sur, and has no other significant
commercial activities. Empresa Nacional de Autopistas holds 100%
of ENA Sur's shares. The Panama-Madden Segment (corridor Norte) is
a 13.5-kilometer (8.4-mile) toll road that intersects Phase I on
the eastern end and runs northwest, connecting to the Interstate
Colon Highway. Phase IIB (corridor Este) is an extension of
corridor Norte and is part of Phase II, connecting the eastern end
of Phase IIA with the Pan-American highway in the Tocumen at the
international airport.
====================
P U E R T O R I C O
====================
PUERTO RICO: Assured Guaranty Files Suit v. Oversight Board
-----------------------------------------------------------
The Royal Gazette reports that Assured Guaranty is suing Puerto
Rico's federal oversight board over its decision to push The
Puerto Rico Electric Power Authority into bankruptcy.
The Royal Gazette relates that the Bermuda-based firm insures some
of the bonds issued by Prepa, as the utility is known, and the
bankruptcy comes after the rejection of a longstanding debt-
restructuring agreement with creditors.
It marks the end of nearly four years of negotiations between
Prepa, hedge funds, mutual funds and bond-insurance companies
including Assured to find an out-of-court solution to reduce the
agency's obligations and modernise its system, the report says.
According to the report, Dominic Frederico, chief executive
officer of Assured, said the decision "makes clear that the
oversight board is not seriously seeking the consensual
resolutions with creditors that Promesa was intended to encourage.
"The rejection of this consensual agreement will force Prepa into
years of litigation, costing millions of dollars and driving up
costs for customers," the report quotes Mr. Frederico as saying.
A statement from Assured Guaranty said the company would
"vigorously exercise its rights and remedies as guarantor of Prepa
Special Revenue bonds, which benefit from special protections
under bankruptcy law. Payments to holders of Prepa bonds insured
by Assured Guaranty will continue to be paid without interruption
for the life of the bonds," The Royal Gazette relates.
About PREPA
The Puerto Rico Electric Power Authority (PREPA) --
http://www.prepa.com/-- is a public corporation and government
instrumentality of Puerto Rico. PREPA 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. Founded in 1941, PREPA supplies electricity to 1.5
million consumers in Puerto Rico. PREPA is the largest public
utility in the U.S. based on number of clients and revenue.
About Puerto Rico
and Title III Cases
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. On July 2, 2017, a Title III case was commenced for the
Puerto Rico Electric Power Authority ("PREPA").
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, and management of other pretrial proceedings.
Joint administration of the Title III cases, under Lead Case No.
17-3283, was granted on June 29, 2017.
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
Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA,
and PREPA.
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 ELECTRIC: Fitch Lowers Issuer Default Rating to D
-------------------------------------------------------------
Fitch Ratings has downgraded the Puerto Rico Electric Power
Authority's (PREPA) Long-Term Issuer Default Rating and power
revenue bond ratings to 'D' from 'C'. The action follows the
authority's failure to pay principal and interest due on the
revenue bonds on July 3, 2017 and the commencement of insolvency
proceedings under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act (PROMESA) on July 2, 2017.
Both ratings have been removed from Rating Watch Negative.
PREPA had previously disclosed a restructuring plan and related
support agreement that anticipated the reduction of existing debt
by means of a proposed distressed debt exchange but could have
resulted in the continuing performance of certain securities.
However, the plan and support agreement were effectively
terminated following a vote on June 29, 2017 by the Financial
Oversight and Management Board appointed under PROMESA not to
certify the agreement as eligible for debt modification procedures
under Title VI of PROMESA. On June 30, 2017, the Board certified
PREPA to file a voluntary petition under Title III of PROMESA.
RATING SENSITIVITIES
The Puerto Rico Electric Power Authority's Issuer Default Rating
and power revenue bond ratings have reached the lowest level on
Fitch's rating scale. It is Fitch's intent to continue to monitor
PREPA's Issuer Default Rating and reexamine PREPA's credit profile
once debt restructuring plans become clear.
PUERTO RICO ELECTRIC: Moody's Cuts Rating on $8.0BB Bonds to Ca
---------------------------------------------------------------
Moody's Investors Service has downgraded the rating for Puerto
Rico Electric Power Authority's approximately $8.0 billion in
Power Revenue Bonds to Ca from Caa3. The outlook remains negative.
The downgrade to Ca from Caa3 reflects PREPA's decision on July
2nd to commence bankruptcy proceedings under Title III of the
Puerto Rico Oversight, Management, and Economic Stability Act
(PROMESA), the July 3rd payment default on PREPA's uninsured debt
instruments, and the uncertainty regarding a future debt
restructuring plan for PREPA, which has greatly increased and will
impact the ultimate recoveries for bondholders. The action affects
the ratings on PREPA's uninsured revenue bonds and the underlying
ratings on PREPA's insured revenue bonds, which benefit from
insurance from one of the monoline insurers.
The decision to file under Title III of PROMESA and to restructure
PREPA's debt in a municipal bankruptcy-like proceeding is
significant as PREPA had reached an agreement with more than two-
thirds of its creditors on a consensual restructuring known as the
Restructuring Support Agreement (RSA). Under PROMESA, parties
reaching consensual agreements can restructure their financial
obligations under Title VI of PROMESA, with the approval of the
Financial Oversight and Management Board of Puerto Rico (PROMESA
Board), a fiscal oversight board established to review PREPA's and
other entities' eventual debt restructuring plans. Notwithstanding
the fact that the RSA was specifically identified as a Pre-
existing Voluntary Agreement, the PROMESA Board rejected the RSA
on June 27, and a PREPA ultimately filed under Title III of
PROMESA on July 2, owing to the fact that the utility had a $447
million debt service payment due the following day. In Moody's
views, the PROMESA Board's rejection of the RSA, which followed
two years of negotiations, will result in larger losses for
bondholders and other financial creditors relative to those
suggested under the RSA.
The RSA contemplated bondholders being asked to exchange their
bonds for new securitization bonds to be offered at an exchange
ratio of 85%, and to defer the repayment of principal and
interest, and extend the tenor of the debt. PREPA's prior Caa3
rating, which suggests a recovery range of 65-80%, incorporated
these three aspects of the RSA. A key element of the RSA
contemplated a special purpose vehicle, separate from PREPA,
issuing securitization bonds which would be repaid by a 3.1
cents/kWh surcharge on ratepayers' bills that had been approved by
the Puerto Rico Energy Commission in June 2016. Deferring
principal and interest and extending the tenor of the debt were
other important elements of the RSA given PREPA's capital spending
needs over the next five years and the goal to minimize the rate
impact on customers. Since the PROMESA Board's rejection of the
RSA centered around the ability of the Commonwealth's struggling
economy to withstand higher electric rates over the long-term,
Moody's believes that any revised plan which includes a
securitization element will have some combination of a lower
securitization surcharge, the deferral of scheduled debt service
for a longer period, and further extensions of debt maturities.
Reducing the surcharge to bring down PREPA's rates will directly
affect the amount of debt that can be raised in a securitization,
which will lower the exchange ratio and potential recoveries for
creditors. Moreover, deferring further scheduled repayment of debt
service and the maturity date will also reduce recoveries for
creditors. While creditor recoveries will benefit from PREPA's
role as a provider of an essential service, Moody's do believes
that any future reorganization will focus more heavily on the
impact on customer's electric rates owing to the weak
macroeconomics within the Commonwealth. Based on Moody's analysis
which centered primarily on a range of possible discounts from the
current 3.1 cents/kWh surcharge, Moody's believes that recoveries
for creditors are more likely to fall in the 35-65% range,
consistent with the Ca rating.
OUTLOOK
While Moody's think it is unlikely that recoveries for creditors
will fall below those contemplated at the lower end of the Ca
rating category, the negative outlook reflects the likelihood that
PREPA's debt restructuring will be delayed given the number of
entities filing for protection under PROMESA, which is likely to
add more complexity to the process and that litigation, which has
already been filed, will persist. Moody's also note that the
filing will unfold in the untested legal framework of PROMESA and
may pose complex legal issues and challenges that may take time to
resolve. All of these factors will affect the ability of PREPA to
execute on a sorely needed long-term capital investment program
focused on converting oil-based power generation to natural gas,
particularly given the challenging economic environment within the
Commonwealth.
WHAT COULD CHANGE THE RATING - UP
In light of the negative outlook, the rating is not expected to
move upward over the near-to-medium term. The rating outlook could
stabilize if a restructuring is announced and the ensuing
prospects for recovery are consistent with the current rating
category.
WHAT COULD CHANGE THE RATING - DOWN
The rating could be pressured downward if the prospects for
recovery worsen.
RATING METHODOLOGY
The principal methodology used in this rating was U.S. Public
Power Electric Utilities with Generation Ownership Exposure
published in March 2016.
ROJESIE INC: Hearing on Disclosure Statement Set for August 3
-------------------------------------------------------------
Judge Edward A. Godoy of the U.S. Bankruptcy Court for the
District of Puerto Rico will convene a hearing on August 3, 2017,
at 9:30 a.m. to consider and rule upon the adequacy of the
disclosure statement filed by Rojesie, Inc.
Objections to the form and content of the disclosure statement
should be in writing and filed with the court and served upon
parties in interest not less than 14 days prior to the hearing.
About Rojesie Inc.
Adjuntas, P.R.-based Rojesie, Inc., d/b/a Parador Villas
Sotomayor, filed for Chapter 11 bankruptcy protection (Bankr.
D.P.R. Case No. 16-08296) on Oct. 17, 2016, estimating assets and
liabilities between $1 million and $10 million.
The petition was signed by Jesus R. Ramos Puente, president.
Judge Edward A. Godoy presides over the case. The Debtor is
represented by Justiniano Law Offices.
offers India's ONGC oil stake
Cash-hungry Venezuela has offered Indian oil
firm ONGC Videsh an increased stake in an oil field, according to
two sources close to the proposal, as the country seeks to shore
up its bruised energy industry and strengthen ties with New Delhi.
State oil firm Petroleos de Venezuela SA (PDVSA) has proposed
selling a 9 percent stake in the San Cristobal field to ONGC
Videsh (OVL), a subsidiary of India's state-owned top explorer Oil
and Natural Gas Corp, the sources said.
ONGC Videsh already holds a 40 percent stake in the field, which
produces around 22,000-23,000 barrels per day (bpd) of oil. While
the amount of the sale would be relatively modest, according to
analysts, any extra income would be welcome for PDVSA.
Venezuela, struggling under triple-digit inflation and Soviet-
style product shortages as its socialist economy unravels, has
been hit hard by the falling price of oil, its economic lifeline.
The OPEC nation's oil output has slipped and PDVSA is struggling
to maintain investment in its oilfields, which hold the world's
largest crude reserves.
The state company already offered Russian oil major Rosneft a
stake in a joint venture in an extra-heavy crude project in the
Orinoco Belt, sources told Reuters in March.
The sources, who asked to remain anonymous because they are not
authorized to speak about the negotiations, said PDVSA was still
negotiating with ONGC and no deal was certain.
Under Venezuela's hydrocarbon law, the state must maintain more
than 50 percent of all oil ventures, hence PDVSA can only offer up
to 9 percent to the Indian firm.
"ONGC is still evaluating the options," one of the sources said,
adding the purchase could be challenging given the Indian
company's revenues are suffering due to lower oil prices.
ONGC Videsh managing director N. K. Verma declined to comment.
PDVSA did not immediately respond to a request for comment.
=================
V E N E Z U E L A
=================
VENEZUELA: Offers India ONGC Oil Stake
--------------------------------------
Reuters reports that cash-hungry Venezuela has offered Indian oil
firm ONGC Videsh an increased stake in an oil field, according to
two sources close to the proposal, as the country seeks to shore
up its bruised energy industry and strengthen ties with New Delhi.
State oil firm Petroleos de Venezuela SA (PDVSA) has proposed
selling a 9 percent stake in the San Cristobal field to ONGC
Videsh (OVL), a subsidiary of India's state-owned top explorer Oil
and Natural Gas Corp, the sources said, Reuters notes.
According to the report, ONGC Videsh already holds a 40 percent
stake in the field, which produces around 22,000-23,000 barrels
per day (bpd) of oil. While the amount of the sale would be
relatively modest, according to analysts, any extra income would
be welcome for PDVSA.
Venezuela, struggling under triple-digit inflation and Soviet-
style product shortages as its socialist economy unravels, has
been hit hard by the falling price of oil, its economic lifeline,
Reuters recalls. The OPEC nation's oil output has slipped and
PDVSA is struggling to maintain investment in its oilfields, which
hold the world's largest crude reserves, it adds.
The state company already offered Russian oil major Rosneft a
stake in a joint venture in an extra-heavy crude project in the
Orinoco Belt, sources told Reuters in March.
The sources, who asked to remain anonymous because they are not
authorized to speak about the negotiations, said PDVSA was still
negotiating with ONGC and no deal was certain, Reuters relates.
Under Venezuela's hydrocarbon law, the state must maintain more
than 50 percent of all oil ventures, hence PDVSA can only offer up
to 9 percent to the Indian firm, notes the report.
"ONGC is still evaluating the options," one of the sources said,
adding the purchase could be challenging given the Indian
company's revenues are suffering due to lower oil prices, Reuters
relays.
ONGC Videsh managing director N. K. Verma declined to comment.
PDVSA did not immediately respond to a request for comment, notes
the report.
VENEZUELA: Economy to Shrink for Third Straight Year
----------------------------------------------------
Christopher Sabatini at foreignaffairs.com reports that since May
2016, the Union of South American Republics (UNASUR), an
intergovernmental organization comprising 12 South American states
has attempted to mediate between the government and the
opposition, in the hope of averting a meltdown. In October, after
the Venezuelan government-controlled electoral commission (CNE)
waved off a constitutional referendum and indefinitely suspended
local elections -- blocking an electoral resolution until the 2018
presidential elections -- the Vatican stepped in.
Those mediation efforts have predictably failed, thanks to an
inability on the part of the mediators and other outside parties
to impose real costs on the government, says the report. Since
March, the Maduro government has violently repressed street
demonstrations, resulting in over 70 deaths, and it continues to
imprison at least 120 of its political opponents, the report
relates. The government has resisted calls to hold elections
before 2018, refused to recognize the right to a constitutional
recall referendum, and, most recently, called for an illegal
constituent assembly to revise the constitution, it adds. However,
it has faced no consequences from the mediators.
Meanwhile, reports foreignaffairs.com, the economic and social
situation in what was once one of the region's richest countries
is collapsing. Some 11.4 percent of Venezuela's children are
malnourished and 10.5 percent of its workforce is unemployed. The
economy is on track to shrink for the third straight year, with
GDP set to drop 20.7 percent below its 2014 level, and inflation
expected to reach 1,700 percent, it further notes.
As the mediation efforts first floundered then stalled,
Venezuela's economic, humanitarian, and political crises continued
to deepen. The country is now on the brink of becoming a failed
state. To stop Venezuela's slide into chaos, Latin American states
and actors outside the region, such as the United States, need to
develop a coordinated policy that pressures the Venezuelan
government into respecting human rights and threatens it with real
consequences should it fail to do so, foreignaffairs.com relates.
=================
X X X X X X X X X
=================
* BOND PRICING: For the Week From July 3 to July 6, 2017
----------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
BA-CA Finance Cayman Lt 0.518 62.07 KY EUR
CSN Islands XII Corp 7 68 BR USD
CSN Islands XII Corp 7 67.75 BR USD
Decimo Primer Fideicomi 4.54 52.63 10/25/2041 PA USD
Decimo Primer Fideicomi 6 63.5 10/25/2041 PA USD
Dolomite Capital Ltd 13.26 67.2 12/20/2019 CN ZAR
Empresa de Telecomunica 7 73.14 1/17/2023 CO COP
Empresa de Telecomunica 7 73.14 1/17/2023 CO COP
ESFG International Ltd 5.75 0.66 KY EUR
General Shopping Financ 10 72.5 KY USD
General Shopping Financ 10 71.7 KY USD
Global A&T Electronics 10 74 2/1/2019 SG USD
Global A&T Electronics 10 74.5 2/1/2019 SG USD
Global A&T Electronics 10 65.5 2/1/2019 SG USD
Global A&T Electronics 10 65 2/1/2019 SG USD
Gol Finance 8.75 63 BR USD
Gol Finance 8.75 63.88 BR USD
Gol Linhas Aereas SA 10.75 34.63 2/12/2023 BR USD
Gol Linhas Aereas SA 10.75 34.63 2/12/2023 BR USD
Inversora Electrica de 6.5 55 9/26/2017 AR USD
Inversora Electrica de 6.5 55 9/26/2017 AR USD
MIE Holdings Corp 7.5 75.16 4/25/2019 HK USD
MIE Holdings Corp 7.5 75.26 4/25/2019 HK USD
NB Finance Ltd/Cayman I 3.88 58.01 2/7/2035 KY EUR
Newland International P 9.5 19.88 7/3/2017 PA USD
Newland International P 9.5 19.88 7/3/2017 PA USD
Noble Holding Internati 5.25 72.98 3/15/2042 KY USD
Ocean Rig UDW Inc 7.25 39 4/1/2019 CY USD
Ocean Rig UDW Inc 7.25 38 4/1/2019 CY USD
Odebrecht Drilling Norb 6.35 48.5 6/30/2021 KY USD
Odebrecht Drilling Norb 6.35 47.25 6/30/2021 KY USD
Odebrecht Finance Ltd 7.5 49 KY USD
Odebrecht Finance Ltd 4.3 48.29 4/25/2025 KY USD
Odebrecht Finance Ltd 7.12 48.2 6/26/2042 KY USD
Odebrecht Finance Ltd 5.25 46.15 6/27/2029 KY USD
Odebrecht Finance Ltd 7 57.02 4/21/2020 KY USD
Odebrecht Finance Ltd 5.12 53.51 6/26/2022 KY USD
Odebrecht Finance Ltd 8.25 70.88 4/25/2018 KY BRL
Odebrecht Finance Ltd 6 51.47 4/5/2023 KY USD
Odebrecht Finance Ltd 5.25 45.92 6/27/2029 KY USD
Odebrecht Finance Ltd 7.1 47.82 6/26/2042 KY USD
Odebrecht Finance Ltd 7.5 49.25 KY USD
Odebrecht Finance Ltd 4.3 48.39 4/25/2025 KY USD
Odebrecht Finance Ltd 6 51.77 4/5/2023 KY USD
Odebrecht Finance Ltd 8.2 70.88 4/25/2018 KY BRL
Odebrecht Finance Ltd 7 56.85 4/21/2020 KY USD
Odebrecht Finance Ltd 5.1 52.99 6/26/2022 KY USD
Odebrecht Offshore Dril 6.6 39.64 10/1/2022 KY USD
Odebrecht Offshore Dril 6.7 36.44 10/1/2022 KY USD
Odebrecht Offshore Dril 6.6 38.79 10/1/2022 KY USD
Odebrecht Offshore Dril 6.7 38.75 10/1/2022 KY USD
Petroleos de Venezuela 12.75 67.19 2/17/2022 VE USD
Petroleos de Venezuela 9 58.28 11/17/2021 VE USD
Petroleos de Venezuela 6 40.32 5/16/2024 VE USD
Petroleos de Venezuela 9.75 50.15 5/17/2035 VE USD
Petroleos de Venezuela 6 38.22 11/15/2026 VE USD
Petroleos de Venezuela 5.37 37.39 4/12/2027 VE USD
Petroleos de Venezuela 5.5 37.1 4/12/2037 VE USD
Petroleos de Venezuela 6 41.25 10/28/2022 VE USD
Petroleos de Venezuela 6 40.01 5/16/2024 VE USD
Petroleos de Venezuela 9 58.11 11/17/2021 VE USD
Petroleos de Venezuela 6 38.13 11/15/2026 VE USD
Petroleos de Venezuela 12.75 67.2 2/17/2022 VE USD
Petroleos de Venezuela 9.75 49.94 5/17/2035 VE USD
Polarcus Ltd 5.6 60 3/30/2022 AE USD
Siem Offshore Inc 5.8 49.75 1/30/2018 NO NOK
Siem Offshore Inc 5.59 50.25 3/28/2019 NO NOK
STB Finance Cayman Ltd 2.04 58.35 KY JPY
Sylph Ltd 2.36 50.93 9/25/2036 KY USD
Uruguay Notas del Tesor 5.25 68.02 12/29/2021 UY UYU
US Capital Funding IV L 1.25 51.35 12/1/2039 KY USD
US Capital Funding IV L 1.25 51.35 12/1/2039 KY USD
USJ Acucar e Alcool SA 9.87 67.5 11/9/2019 BR USD
USJ Acucar e Alcool SA 9.87 65.75 11/9/2019 BR USD
Venezuela Government In 9.25 48.75 5/7/2028 VE USD
Venezuela Government In 13.63 82.58 8/15/2018 VE USD
Venezuela Government In 9 51.75 5/7/2023 VE USD
Venezuela Government In 9.37 49 1/13/2034 VE USD
Venezuela Government In 7 71.88 12/1/2018 VE USD
Venezuela Government In 9.25 52 9/15/2027 VE USD
Venezuela Government In 7.65 46.38 4/21/2025 VE USD
Venezuela Government In 13.63 82.58 8/15/2018 VE USD
Venezuela Government In 7.75 61.75 10/13/2019 VE USD
Venezuela Government In 11.95 58.13 8/5/2031 VE USD
Venezuela Government In 6 53.75 12/9/2020 VE USD
Venezuela Government In 12.75 67 8/23/2022 VE USD
Venezuela Government In 7 44 3/31/2038 VE USD
Venezuela Government In 6.5 36.53 12/29/2036 VE USD
Venezuela Government In 8.25 47.75 10/13/2024 VE USD
Venezuela Government In 11.75 57.75 10/21/2026 VE USD
Venezuela Government TI 5.25 69.59 3/21/2019 VE USD
***********
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
***********
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.
* * * End of Transmission * * *