/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/171030.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, October 30, 2017, Vol. 18, No. 215 Headlines B R A Z I L ELDORADO BRASIL: Funcef to Exercise Tag-Along Rights in Stake Sale ELDORADO BRASIL: S&P Affirms 'B-' CCR, Off CreditWatch Negative J&F INVESTIMENTOS: Calls Decision to Freeze Assets Legally Fragile J&F INVESTIMENTOS: S&P Affirms B- CCR, Off CreditWatch Developing OI SA: Government Intervention No Longer Imminent, Regulator Says SANTA CATARINA: Fitch Affirms BB Long-Term IDR; Outlook Negative SAO PAULO: Fitch Affirms BB Long-Term IDR; Outlook Negative P A R A G U A Y BANCO AMAMBAY: Moody's Revises Outlook to Pos.; Affirms Ba3 Rating P E R U INKIA ENERGY: S&P Rates New $450MM Sr. Unsecured Notes 'BB-' INKIA ENERGY: Moody's Assigns Ba3 Corporate Family Rating INKIA ENERGY: Fitch Rates Proposed US$450MM Debt 'BB' T R I N I D A D & T O B A G O CARIBBEAN CEMENT: Reports Profit After J$81MM Loss Last Year V E N E Z U E L A PDVSA: Oil Bonds Plunge With 24 Hrs to Go Until Payment Is Due X X X X X X X X X * BOND PRICING: For the Week From Oct. 23 to Oct. 27, 2017 - - - - - =========== B R A Z I L =========== ELDORADO BRASIL: Funcef to Exercise Tag-Along Rights in Stake Sale ------------------------------------------------------------------ Bruno Federowski at Reuters reports that Brazilian pension fund Funcef decided to exercise tag-along rights and sell its 8.53 percent stake in wood pulpmaker Eldorado Brasil Celulose SA to Netherlands-based Paper Excellence BV, according to a statement. Eldorado controlling shareholder J&F Investimentos SA agreed in September to sell the pulpmaker to Paper Excellence, controlled by the owners of Indonesia's Asia Pulp & Paper Co Ltd, for BRL15 billion (US$4.8 billion), according to Reuters. The stake held by Funcef, the pension fund representing employees at state bank Caixa Economica Federal, is valued at around BRL650 million, a person with knowledge of the transaction said, the report notes. Funcef owns the stake indirectly through investment vehicle FIP Florestal, which is also partly owned by Petros, the pension fund of oil workers at Petroleo Brasileiro SA, the report relays. Petros has yet to announce whether it will sell its own 8.53 percent stake in the investment vehicle, the report adds. ELDORADO BRASIL: S&P Affirms 'B-' CCR, Off CreditWatch Negative --------------------------------------------------------------- S&P Global Ratings affirmed its 'B-' global scale corporate credit rating on Eldorado Brasil Celulose S.A. (Eldorado) and its 'brB+' national scale rating. At the same time, S&P removed all ratings from CreditWatch. The outlook is negative. S&P said, "We also affirmed the 'B-' senior unsecured debt ratings on Eldorado's 2021 notes with a recovery rating of '4', indicating our expectation of an average recovery (35%) in case of default. The 2027 debentures rating reflects J&F Investimentos S.A.'s credit quality, since the latter fully guaranties the debentures. Its recovery rating is '3', reflecting meaningful (65%) recovery expectations as a result of J&F's guarantee. "The ratings affirmation reflects our view that the refinancing activities on trade finance lines over the last three months, coupled with higher pulp prices -- and consequently higher cash flow generation -- eases immediate liquidity pressures but does not entirely solve Eldorado's still high short-term debt commitments. In addition, we believe that incentives for refinancing trade finance lines are high, not only driven by the company's deleveraging trend, but also based on its likely change of control in the short-term. "The negative outlook indicates our view that Eldorado is still exposed to refinancing risk under an environment of ongoing reputational damage and negative news flow on the group. Additionally, any potential contingent liabilities or developments from the ongoing investigations could pose additional risks for company's access to capital and credit markets. "In terms of Eldorado's debt, we will also monitor how the guarantee provided by J&F to Eldorado's debentures will be affected by the eventual change in control. Under our base-case, this will likely be renegotiated and released once and if the new ownership structure materializes, meaning that the rating would no longer be tied to that on J&F. "We could lower the ratings over the next 6-12 months if we perceive refinancing problems, and if fluctuations in pulp price and exchange rates reduce Eldorado's cash flow generation, pressuring its cash position and financial flexibility to deal with its high short-term debt obligations. "The change of control could also pressure the rating if we perceive Paper Excellence has lower creditworthiness than Eldorado, potentially hurting its cash flows. Any debt acceleration following the change of control clauses, in the absence of a contingent cash plan to handle that event-risk, would also increase downside risks. "We could revise the outlook to stable over the next 12 months if Eldorado is able to advance its refinancing efforts by extending the debt maturity profile, while cash flow generation continues to benefit from high pulp prices. We would also need to have greater clarity on future contingent liabilities and how the potential new owner's credit quality could affect Eldorado's financial policies and cash flows." J&F INVESTIMENTOS: Calls Decision to Freeze Assets Legally Fragile ------------------------------------------------------------------ RJR News reports that a decision by a Brazilian federal judge to freeze the assets and companies of the billionaire Batista family is "legally fragile" because it is based on newspaper reports and not on prior judicial rulings, the lawyers representing the family's investment holding company J&F Investimentos SA said. In a statement, the lawyers said a decision by Federal Judge Ricardo Leite of the 10th District Court of Brasilia demanding the family deposits of BRL1.6 billion (US$506 million) to compensate state development bank BNDES is unjustified because J&F was to pay a slightly bigger fine as part of a May leniency accord, according to Reuters. Earlier in the day, Leite ordered the assets of the Batistas be frozen as part of an investigation, the report notes. J&F INVESTIMENTOS: S&P Affirms B- CCR, Off CreditWatch Developing ---------------------------------------------------------------- S&P Global Ratings affirmed its 'B-' global scale corporate credit rating on J&F Investimentos S.A. (J&F). S&P also affirmed the 'brB+' national scale rating on the company. At the same time, S&P removed all ratings from CreditWatch developing. The outlook is developing. S&P also affirmed its 'brB+' senior unsecured ratings on J&F's debentures due November 2017. The recovery rating of '3', indicating the expectation of a meaningful recovery (65%), remains unchanged. The ratings affirmation reflects that J&F's ongoing execution of its divestment plan has reduced liquidity pressures. In addition, the rating constraints stem from the weakening credit quality of J&F's main investees and the holding company's still high adjusted leverage (considering the fine payment related to the leniency agreement and the guarantee it provides to its investee Eldorado Brasil Celulose S.A.) OI SA: Government Intervention No Longer Imminent, Regulator Says ----------------------------------------------------------------- Reuters reports that the risk of a government intervention in bankrupt telephone group Oi SA has subsided after shareholders gave assurances they would not change its current managers, Brazil's telecoms regulator Anatel said. "Intervention is no longer imminent," Anatel chief Juarez Quadros told reporters, according to Reuters. He said shareholders had sent the company emails assuring its managers that "at no time" had they or the board of director considered replacing them, the report notes. Brazil's Solicitor General Grace Mendonca also said intervention of the debt-laden carrier was the last thing it had in mind, the report relays. The report discloses that she said authorities were working to avoid an intervention and a list of alternative restructuring proposals for saving the company is being drawn up by a government task force. Oi SA bondholders rejected the company's restructuring plan presented earlier this month and a judge overseeing the bankruptcy protection proceedings agreed to a request by creditors to reschedule an assembly for November, the report notes. The postponement allows time to reconcile competing restructuring proposals more than a year into Brazil's biggest ever in-court reorganization. Oi's liabilities include some BRL11 billion (US$3.5 million) in fines and interest owed to Anatel, and debts to public banks such as Banco do Brasil SA BBAS3.SA and development bank BNDES, who have a say in the restructuring of the carrier, the report adds. About Oi SA Headquartered in Rio de Janeiro, and operating almost exclusively within Brazil, the Oi Group provides services like fixed-line data transmission and network usage for phones, internet, and cable, Wi-Fi hot-spots in public areas, and mobile phone and data services, and employs approximately 142,000 direct and indirect employees. On June 20, 2016, pursuant to Brazilian Law No. 11.101/05 (the "Brazilian Bankruptcy Law"), Oi S.A. and certain of its subsidiaries filed for recuperao judicial (judicial reorganization) in Brazil. On June 21, 2016, OI SA and its affiliates Telemar Norte Leste S.A. and Oi Brasil Holdings Cooperatief U.A. commenced Chapter 15 proceedings (Bankr. S.D.N.Y. Lead Case No. 16-11791). Ojas N. Shah, as foreign representative, signed the petitions. Coop and PTIF are also subject to proceedings in the Netherlands. The Chapter 15 cases are assigned to Judge Sean H. Lane. In the Chapter 15 cases, the Debtors are represented by John K. Cunningham, Esq., and Mark P. Franke, Esq., at White & Case LLP, in New York; and Jason N. Zakia, Esq., Richard S. Kebrdle, Esq., and Laura L. Femino, Esq., at White & Case LLP, in Miami, Florida. On July 22, 2016, the New York Court recognized the Brazilian Proceedings as foreign main proceedings with respect to the Chapter 15 Debtors, and granted certain additional related relief. SANTA CATARINA: Fitch Affirms BB Long-Term IDR; Outlook Negative ---------------------------------------------------------------- Fitch Ratings has affirmed the State of Santa Catarina, Brazil's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB'. The Rating Outlook is Negative reflecting the Negative Outlook on the Sovereign. Fitch has also affirmed Santa Catarina's National long-term rating at 'AA-(bra)'/Stable Outlook. KEY RATING DRIVERS The affirmation of the ratings reflects Estado de Santa Catarina's fiscal performance, which aligns with Fitch Ratings' expectations. Operating margins remained fairly stable and reached 4.4% in 2016. The ratings are also based on the state's above average fiscal autonomy in which proprietary tax revenues accounted for around 70% of the state's operating revenues and the fact that the prevalent creditor is the Brazilian federal government. Fitch expects Santa Catarina's economy to perform better than the 0.5% growth projected for Brazil in 2017, with more robust recovery in 2018 in the national context. Santa Catarina's economy benefited from exports, given its infrastructure of five ports, in addition to the depreciated Brazilian real. The state's fiscal performance is dependent on the Imposto Sobre Circulacao de Mercadorias e Servicos tax, indirectly influenced by export- related activities. Despite its dependence on the federal government to implement much needed structural changes in the state pension system, such as a minimum retirement age and benefits to pensioners, the state has been able to implement some corrective measures. Among those, Fitch highlights the increase in pension contribution rates to 14% from 11% of active-employee payroll, which will lead to savings up to 10% of the annual pension insufficiency, which should reach BRL3.6 billion in 2017. This corresponds to around 25% of annual personnel payments. The federal government remains the state's most relevant creditor, responsible for 50% of the state's consolidated debt. In Fitch's opinion, this portion is subordinated to other financial obligations because the federal government provides states with benefits, such as a change in the index that calculates debt service related to federal debt. Financial debt represented 12.2 years of the current balance in 2016. The capex level should reach the equivalent of 5.8% of total expenditure in 2017, comparing poorly with 'BB' rated peers across the region. The state does not operate any Public Private Partnership programs. Santa Catarina presents adequate levels of infrastructure and relatively better social economic indicators than the Brazilian national average. Santa Catarina does not have relevant delays in salary payments. The amount of unpaid commercial short-term liabilities remained low at 2.5% of operating revenues in 2016. The short-term obligations are mainly composed of personnel payments and investments. Outstanding cash of BRL9.2 billion covered satisfactorily 113% of the state's obligations due in 2017. RATING SENSITIVITIES Upgrade Factors: Fitch does not expect to rate Santa Catarina above the Brazilian sovereign rating ('BB'/Negative Outlook). If the state's direct debt/current balance is lower than the equivalent of 10 years an upgrade in the national scale would be warranted. Downgrade Factors: Should operating margins consistently fall below 5%, a negative review of the ratings would follow. Moreover, any further negative action affecting Brazilian sovereign ratings could have a direct, corresponding effect on the state's ratings. KEY ASSUMPTIONS -- Fitch assumes a moderate level of sovereign support for Santa Catarina in comparison to the support received by other Brazilian states, even considering the weak institutional framework, and given that Santa Catarina's most relevant creditor and guarantor is the federal government; -- Fitch expects to see some progress on the government's legislative agenda especially the items affecting subnationals such as pension reform and additional federal debt relief. Fitch has affirmed the following: State of Santa Catarina: -- Long-Term Foreign Currency IDR at 'BB'; Negative Outlook; -- Short-Term Foreign Currency IDR at 'B'; -- Long-Term Local Currency IDR at 'BB'; Negative Outlook; -- Short-Term Local Currency IDR at 'B'; -- National Long-term rating at 'AA-(bra); Stable Outlook; -- National Short-term rating at 'F1+(bra)'. SAO PAULO: Fitch Affirms BB Long-Term IDR; Outlook Negative ----------------------------------------------------------- Fitch Ratings has affirmed the Municipality of Sao Paulo, Brazil's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB'. The Rating Outlook is Negative, following the Negative Outlook of the Sovereign. Fitch has also affirmed Sao Paulo's long-term National rating at 'AA(bra)'/Stable. KEY RATING DRIVERS The affirmation of the ratings reflects Fitch's belief that the Municipality of Sao Paulo (the city) is capable of generating operating margins compatible with peers. The affirmation also reflects the fact that Sao Paulo is Brazil's wealthiest city, generating roughly 10% of Brazilian GDP, and its moderate fiscal autonomy - proprietary revenues accounted for an average of 54% of operating revenues over the last five years. Sao Paulo presented a slightly negative operating margin in 2016 (minus 0.2%), mostly the result of higher than expected operating expenditures linked to the 2016 elections coupled with sluggish revenue growth. In response, the new administration implemented several measures to curb expenditures, and we expect operating margins to recover to levels close to 5% until 2019. In 2016, total net consolidated debt reached the equivalent of 70.8% of current revenue (versus 166.7% in 2015), now in line with local peers. The drastic reduction was due to a change in the index used in the past. The inflation index IPCA is now used with a 4% annual adjustment. Since 2017, Sao Paulo has been allowed to raise new financial debt, since the city is in compliance with the 1.2x debt-to-net revenues, as per the Local Fiscal Responsibility Law. In August 2017, this ratio reached 0.9x. The city's proprietary pension system, the Instituto de Previdencia do Municipio de Sao Paulo (IPREM), saw an actuarial deficit of BRL115.6 billion in 2016. This is equivalent to 2.6 years of the city's operating revenue and compatible with local peers rated 'BB'. Sao Paulo has not yet adopted corrective measures such as the creation of an actuarially balanced fund and a complementary pension scheme for employees whose compensation exceeds the ceiling of the Instituto de Seguridade Social. Fitch believes the city could regain investment capacity following new credit of BRL830 million until 2019. Investments in Sao Paulo declined the equivalent of only 3.9% of total expenditures in 2016, also explained by the local elections, when operating expenditures typically increase. The annual average of investments made during the last five years is 7.2% and compares poorly with the 'BB' peer average of 15%. Fitch considers Sao Paulo's liquidity adequate to serve its obligations. Unpaid commercial short-term liabilities declined to 3.9% of operating revenue in 2016 from 7.3% in 2015. Short-term obligations are mainly composed of personnel payments and investments. Outstanding cash of BR7.2 billion in August 2017 covered roughly 59% of the city's obligations due in 2017. RATING SENSITIVITIES Upgrade Factors: Fitch does not expect to rate Sao Paulo above the Brazilian sovereign rating (BB/Negative). The adoption of corrective measures to ensure the long-term sustainability of Sao Paulo's proprietary pension system could lead to a positive review of the national scale rating. Downgrade Factors: Any further negative action affecting Brazilian sovereign ratings could have a direct corresponding effect on the city's ratings. Additionally, operating margins repeatedly lower than 2% could also lead to a negative rating action. KEY ASSUMPTIONS -- Fitch assumes a high level of sovereign support for Sao Paulo in comparison to that apparently granted to other Brazilian local governments even considering the weak institutional framework, given the economic relevance of the city and the fact that its most relevant creditor and guarantor is the federal government; -- Fitch expects to see some progress on the government's legislative agenda especially the items affecting local governments such as pension reform. Fitch has affirmed the following ratings: -- Long-Term Foreign Currency IDR at 'BB'; Negative Outlook; -- Short-Term Foreign Currency IDR at 'B'; -- Long-Term Local Currency IDR at 'BB'; Negative Outlook; -- Short-Term Local Currency IDR at 'B'; -- Long-term National rating at 'AA(bra); Stable Outlook; -- Short-term National rating at 'F1+(bra)'. =============== P A R A G U A Y =============== BANCO AMAMBAY: Moody's Revises Outlook to Pos.; Affirms Ba3 Rating ------------------------------------------------------------------ Moody's Investors Service has revised the outlook of Banco Amambay S.A. to positive from stable. At the same time, Moody's affirmed all of the bank's ratings and assessments. The following ratings and assessments were affirmed: Banco Amambay S.A.: - Long and short term local currency deposit ratings of Ba3, positive outlook and Not-Prime - Long and short term foreign currency deposit rating of Ba3, positive outlook and Not-Prime - Adjusted baseline credit assessment of b1 - Baseline credit assessment of b1 - Long and short term counterparty risk assessments of Ba2 (cr) and Not-Prime (cr) RATINGS RATIONALE The positive outlook considers the resilience of the bank's asset risk metrics to its very high rate of growth in recent years and an expectation that the bank's historically volatile profitability will stabilize at or near to its current high level, which in turn will help it maintain its capital levels. The affirmation also considers the bank's limited reliance on market funding and ample liquidity and the moderate probability of government support. Formally a foreign exchange services house, Banco Amambay has grown significantly over the last three years in line with its strategy to become a universal banking operation, predominantly serving corporates and small to mid-sized enterprises. Following a very rapid rise in 2015 of 54%, the loan book has grown by 26% from December 2015 to June 2017 at a time when the Paraguayan banking system contracted by 2.5%, following 2015's twin shocks of currency depreciation and commodity price declines. In spite of this growth, as well as the bank's sizable loan exposures to Paraguay's volatile agricultural industry, the bank's 60 day problem loan ratio was less than 2.0% as of June 2017, having risen by just 65 basis points since December 2015 and it remained well below the system average of 3.2%. Although restructured and refinanced loans accounted for another 2.2% of the portfolio, this was are also lower than the system as a whole, and the bank's reserve coverage also remains adequate at nearly 140% of problem loans. While problem loan formation has ticked up since 2016, any rise in asset risk should be gradual. After falling sharply in 2014 and 2015, Amambay's adjusted capitalization ratio has since recovered modestly to a moderate 12.5%, although this remains lower than larger banks in the system. The improvement in capitalization was driven in large part by a strong rebound in profitability. In the first half of 2017, the bank's annualized net income rose to a very high 3.2% of tangible assets (unaudited), from 2.2% in calendar year 2016 and just 0.8% in 2015, driven largely by increased lending volumes, cost cutting initiatives and lower funding costs. In addition to strong net interest margins, which rose to 4.9% in the first half of 2017, the bank's bottom line also benefits from its foreign exchange fees, which have been growing significantly but are subject to volatility. While profitability will likely decline due to an expected increase in provisioning expenses driven by the seasoning of the bank's loan book growth, it should remain robust. The rating affirmation also considered Banco Amambay's strong funding profile, reflective of its proven access to stable and inexpensive deposit funding. This represented almost 90% of total funding as of June 2017, limiting the bank's exposure to more costly and less reliable market funds. At the same time, liquid assets represented nearly 30% of tangible banking assets, providing ample liquidity. Banco Amambay's ratings incorporate one notch of uplift as a result of Moody's assessment of a moderate probability of government support to the bank in an event of stress, reflective of the bank's moderate deposit market share of 4.0%. WHAT COULD CHANGE THE RATINGS UP/DOWN As reflected in the positive outlook, upward pressure on Amambay's rating could arise if the bank is able to sustain its current asset quality and capital indicators despite the continued increase in loan growth, and profitability metrics show less volatility than in the past. While downward pressure is unlikely given the positive outlook, the outlook could stabilize if asset quality continues to deteriorate modestly and the recent improvements in capital and earnings prove unsustainable. The principal methodology used in these ratings was Banks published in September 2017. ======= P E R U ======= INKIA ENERGY: S&P Rates New $450MM Sr. Unsecured Notes 'BB-' ------------------------------------------------------------ S&P Global Ratings assigned its 'BB-' debt rating to Bermuda-based power generation and electric distribution conglomerate Inkia Energy Ltd.'s (Inkia; BB/Developing/--) $450 million senior unsecured bullet notes due 2027. The company will use the proceeds from the notes to repurchase its callable $450 million outstanding notes that mature in 2021. The 'BB-' rating on the proposed notes incorporates the structural subordination of Inkia's senior unsecured debt in relation to its subsidiaries' financial and operating obligations. In turn, Inkia's 'BB' corporate credit rating reflects the company's adequate competitive position in Peru, where it's a leading energy producer. In addition, it incorporates the fact that Inkia's operating subsidiaries in Peru, Nicaragua, and Panama, which generate more than 60% of EBITDA as of December 2016, benefit from long-term power purchase agreements (PPAs) with creditworthy counterparties, with variable price formulas that allow the subsidiaries to pass on cost increases. From a credit perspective, S&P's view regulation in Peru as positive, given the transparent and predictable rules, and high barriers to entry. The factors mitigating the credit rating are Inkia's presence, although still small, in riskier jurisdictions such as Bolivia, El Salvador, and Jamaica; and the exposure to competition that's typical for unregulated power utilities. In addition, Inkia's leverage is relatively high considering we expect adjusted debt to EBITDA around 4x in the next two years, funds from operations (FFO) to debt of around 10%, and EBITDA interest coverage of approximately 3x. RATINGS LIST Inkia Energy Ltd. Corporate Credit Rating Global Scale BB/Developing/-- Ratings Assigned Inkia Energy Ltd. New Ratings Senior Unsecured BB- INKIA ENERGY: Moody's Assigns Ba3 Corporate Family Rating --------------------------------------------------------- Moody's Investors Service affirmed the Ba3 corporate family rating (CFR) and senior unsecured rating of Inkia Energy Ltd (Inkia). Moody's also assigned a Ba3 rating to Inkia's proposed 10-year senior unsecured notes for up to $450 million. The outlook is stable. Inkia plans to use the proceeds raised in connection with the proposed Notes issuance to fund the early repayment of its outstanding $450 million senior unsecured Notes due in 2021 after exercising the call option embedded in the Notes. RATINGS RATIONALE Moody's affirmation of the Ba3 rating reflects the structural subordination considerations of Inkia's holding company debt vis-a-vis the debt outstanding at its subsidiaries (currently around 20%) as well as its reliance on its subsidiaries' dividend distributions to service its debt. The Ba3 rating factors in Inkia's reliance on its key subsidiaries, namely the independent power producer (IPP) Kallpa Generacion S.A. (Kallpa, Baa3 stable; 1,608 MW total natural gas and hydroelectric capacity following its recent merger with its sister company Cerro del Aguila S.A.) as well as the Guatemalan regulated distribution companies Distribuidora de Electricidad de Occidente, S.A. (DEOCSA) and Distribuidora de Electricidad de Oriente, S.A. (DEORSA). DEOCSA and DEORSA guarantee the notes issued by Energuate Trust (Ba2 stable). Inkia has additional subsidiaries that provide for some modest geographic diversification benefits. Yet, most of those subsidiaries operate under less predictable market frameworks (including several non-investment grade Latin American and Caribbean countries) and they largely operate as either merchants or under short-term contracts. These factors limit Inkia's ability to rely on these cash flows to meet its capital requirements. The Ba3 rating acknowledges the progressive improvement in Inkia's consolidated and parent only credit metrics. Specifically, Moody's anticipate that Inkia will record at year-end 2017 consolidated Fund from Operations (FFO) to debt of around 12%, compared to 10.5% for the last twelve month period (LTM) period ended June 2017 and less than 8% over the last several years. Similarly, Moody's anticipate that Inkia's parent only cash flows (POCF) to holding company debt will exceed 20% at the end of 2017 compared to PCOF to holding debt averaging 12% during the 2014-2016 period. Factors contributing to the progressive improvement include the acquisition of the Guatemalan subsidiaries (2016) and the full year of operations of CdA (completed end of 2016) as well as the anticipated reduction of Kallpa's exposure to the depressed spot power prices in Peru after CdA's second power purchase agreement becomes effective in January 2018. These incremental cash flows along with the positive impact of some of the indexed contracted revenues and modest deleverage at some of the operating subsidiaries will likely contribute to an additional improvement in the metrics, particularly the consolidated metrics, such that they could become robust for the Ba3-rating category, barring any material changes in Inkia's key assets and/or capital structure. The Ba3 rating is tempered by the weak credit quality of Kenon, Inkia's indirect parent company via IC Power Ltd (unrated), as well as the uncertainties surrounding a possible change in Inkia's ownership. This considers Kenon's recent disclosure of advanced negotiations with a financial investor to agree to the terms of the sale of IC Power Ltd's assets in Latin America and the Caribbean. Moody's note that the bondholder protections embedded in Inkia's new proposed Notes are significantly weaker than the terms embedded in Inkia's existing Notes, particularly the Change of Control and Limitations on Merger, Consolidation and Sale of Assets clauses. The Limitations on Indebtedness are subject to certain covenants, including meeting an unconsolidated interest coverage of at least 2.0x while the clause also foresees material carve outs which also allow Inkia, for example, to incur $200 million incremental long-term indebtedness in addition to $200 million debt for working capital needs. Given Moody's expectation of an improvement in Inkia's metrics, including the parent only interest coverage to nearly 4.0x at year-end 2017 (year-end 2016: around 2.0x), Moody's calculate that these carve outs would allow Inkia to more than double its outstanding holding-company debt and still be able to meet the 2.0x threshold under the financial covenant. The stable outlook factors in Moody's expectation that the possible change in ownership will not result in a material change in the company's business risk profile and portfolio of assets, and in the company's track-record of prudent corporate financial policies. Therefore, the stable outlook assumes that Inkia's possible new shareholders will choose not to utilize a substantial portion of the financial flexibility embedded in the proposed Notes to materially increase the company's outstanding indebtedness. The stable outlook assumes that Inkia will be able to record an improvement in the credit metrics such that they remain adequate for the Ba-rating category despite any incremental indebtedness incurred to help fund the change in ownership. Specifically, that Inkia's parent only cash flows to debt and consolidated FFO to debt continues to approach 12%. WHAT COULD CHANGE THE RATING UP Limited prospects exist of an upgrade of Inkia's ratings over the short/medium-term given the uncertainties around Inkia's ownership, the impact on its financial policy, capital structure, business risk profile and/or asset portfolio composition going forward. However, positive momentum on the rating or outlook is possible if a company with a strong track-record of prudent financial policies become Inkia's ultimate controlling shareholder and the issuer is able to record consolidated FFO to debt and POCF to holding company debt that both exceed 16%, on a sustainable basis. WHAT COULD CHANGE THE RATING DOWN Negative Momentum on Inkia's rating and/or the outlook is possible following a deterioration in the operations of any of Inkia's key subsidiaries which diminish their ability to upstream visible cash flows; Downward pressure on the ratings of Inkia and/or its rated subsidiaries, Kallpa Generacion (Baa3 stable) and Energuate Trust (Ba2 stable), is likely following a material increase in their outstanding debt and/or Inkia's finance and/or dividend policy that Moody's deem too aggressive for the Ba3-rating category, for example, following a material utilization of the financial flexibility embedded in the proposed Notes Indentures in terms of incremental indebtedness and/or dividend distributions (current capacity limited to approximately $187 million). A material deterioration in the unconsolidated and/or consolidated metrics is also likely to result if Inkia fails to record consolidated FFO to debt and POCF to holding company debt of around 12%, on a sustainable basis. The principal methodology used in these ratings was Unregulated Utilities and Unregulated Power Companies published in May 2017. Headquartered in Lima, Peru, Inkia Energy Limited (Inkia) is an international holding company incorporated in Bermuda that holds ownership stakes in unregulated power generation companies domiciled in several Central and South American countries, as well as regulated electric distribution operations in Guatemala. INKIA ENERGY: Fitch Rates Proposed US$450MM Debt 'BB' ----------------------------------------------------- Fitch Ratings has assigned an expected rating of 'BB(EXP)' to Inkia Energy Ltd's proposed USD450 million debt issuance due 2027. The company expects to use the proceeds to refinance its existing bond due 2021 and for general corporate purposes. KEY RATING DRIVERS Credit Profile Linked to Peruvian Operations: Inkia's ratings are supported by the solid credit profile of its most important subsidiary, KallpaGeneracion S.A. (Kallpa). Kallpa's assets consist of a 545MW base-load hydroelectric plant, and two thermal generation plants with aggregate installed capacity of 1,063MW. Inkia has a 74.9% participation in Kallpa, which is expected to provide approximately half of Inkia's consolidated EBITDA as key power purchase agreements (PPAs) are activated over the next 12 months. Kallpa pursues a contractual strategy that minimizes exposure to the spot market. Its hydroelectric plant has signed PPAs for 483MW out of an installed capacity of 545MW. Of these contracts, 200MW are currently in effect, and by the beginning of 2018, nearly 75% of its firm capacity will be under active contracts with high credit-quality offtakers. As of 2016, approximately 96% of thermal energy sales were contracted under U.S.-dollar-denominated PPAs, with an average life of 5.9 years as of June 2017. These PPAs support the company's cash flow stability through USD-linked payments and pass-through clauses related to potential increases in fuel costs or other costs due to changes in the regulatory framework. The combination of these distinct asset types will serve to offset seasonal volatility in spot prices and increase contractual flexibility, strengthening cash flow stability and improving Kallpa's already-strong competitive position in Peru. Leverage to Improve: Inkia's stand-alone financial profile has historically been weak for the rating category, as the company adopting an aggressive growth strategy. Consolidated leverage peaked at 8.5x in 2015 as a result of increasing debt to fund expansion capex. Deleveraging in 2016 was slower than anticipated due to attrition from Peru's regulated system by smaller industrial users who instead negotiated bilateral PPAs directly with local generators. The resulting EBITDA contraction at Kallpa's thermal plant contributed to Inkia's continued high leverage of 7.4x at year-end (YE) 2016. Leverage is expected to decrease to around 5x in 2017 and around 4.5x in the medium term, as the staggered activation of Kallpa's major contracts initially linked to the completion of the hydroelectric plant will result in rapid EBTIDA growth over the next 18 months. Also in the medium term, Fitch expects Kallpa to see some benefit from increasing spot prices. Positive Reversal in FCF Trend: FCF has been negative in the last four years due to aggressive capex. Total investments for Inkia's two largest power generation projects in Peru accounted for USD1.3 billion. CdA's capex was USD975 million (61% debt-funded), and USD377 million (82% debt-funded) was invested in Samay I, Inkia's 632MW cold-reserve thermal plant. Although, Inkia has indicated its intention to increase investment in its Guatemalan DisCos, and improve their technological and operational efficiency, we expect a material reduction in consolidated capex for 2017, resulting in positive FCF. This should be further supported by the full-year operations of Kallpa's hydroelectric plant and Inkia's cold- reserve thermal plant, which will receive fixed capacity payments for 20 years. A moderate dividend policy is expected in order to preserve positive FCF and allow for leverage reduction. Debt Structurally Subordinated: Inkia's debt is structurally subordinated to debt at the operating companies. Total debt at the subsidiary level amounted to approximately USD2.1 billion, or 82.4% of total consolidated adjusted debt as of December 2016. The bulk of this debt was represented by bank debt to finance company projects and acquisitions. Although, Inkia's HoldCo debt remains structurally subordinated to OpCo debt, the refinancing of more than USD1 billion of project debt at the subsidiary level with international bonds in 2016 and 2017 has effectively eliminated onerous cash-trapping mechanisms that could have a negative impact on cash-flow predictability to the HoldCo. Inkia's cash flow depends on dividends received from subsidiaries and associated companies, and received USD147 million at YE2016. Geographic and Business Diversification: The company is focused on diversifying its energy asset base in Latin American markets where overall and per-capita energy consumption has a higher potential for growth compared to developed markets. Inkia adopted an aggressive plant expansion strategy during the last four years, while the Energuate acquisition provided further geographic and business diversification in Guatemala and in the electricity distribution sector. Energuate's EBITDA is expected to be USD107 million in 2017. Fitch expects that operations in Peru (BBB+/Stable), which include Kallpa and Samay, should account for 57% of 2016 consolidated EBITDA, followed by Guatemala with 24% (BB). The remaining EBITDA (19%) should arise from assets located mainly in Panama (BBB/Stable), Bolivia (BB-/Stable), Chile (A/Stable), the Dominican Republic (BB-/Stable), El Salvador (CCC) and Nicaragua (B+/Stable). DERIVATION SUMMARY Locally, Inkia has limited peers, given its overall size and asset diversification. In Peru, Fitch also rates Orazul Energy Egenor S. en C. por A (BB/Stable). Orazul is expected to maintain gross leverage above 5.0x through the rating horizon. Although lacking Inkia's geographical diversification, Orazul benefits from local asset mix similar to Inkia's subsidiary Kallpa Generacion S.A. (BBB-/Stable), with both thermal and hydroelectric generation, albeit on a smaller scale. Inkia presents a generally weaker capital structure relative to its large, multi-asset energy peers in the region. Its nearest peer in this group is the Chilean generator, AES Gener (BBB- /Negative Watch), which is also in the midst of a deleveraging period. Prior to an announcement regarding delays and difficulties surrounding the construction of AES Gener's Alto Maipo plant, Fitch forecast deleveraging from around 5x to below 4x over the next three years, which put the company at the upper limits of its rating category. Following the announcement, Fitch placed AES Gener on Negative Watch. Colbun S.A. (BBB/Stable) and Engie Energia Chile S.A. (BBB/Stable) compare favorably to Inkia, with leverage consistently at or below 3.0x, comfortably within the investment-grade rating category. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: - Kallpa (thermal): Southern Copper PPA fully recognized in 2018, GDP-linked demand growth; - Kallpa (hydro): around 400MW of contracted capacity beginning in 2018; around 1,000 GWh of spot sales annually; - Samay (cold-reserve): no Southern Gas pipeline through rating horizon; load factor below 5%, fully passed through; - Capacity payments annually adjusted by PPI; - Peru: average energy spot price of $12/MWh until 2021; - Energuate: demand growth generally in line with GDP forecast (approximately 3.5%); - Approximately USD460 million dividends over next five years; - Approximately USD440 million in capex over next five years. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - A positive rating action could be considered as a result of leverage reduction below 4x on a sustainable basis and/or consistently conservative cash flow management. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - A negative rating action could be triggered by a combination of the following: consolidated gross leverage remains above 4.5x over the medium term following additional investment opportunities undertaken without an adequate amount of additional equity; reduction in cash flow generation due to adverse regulatory issues and deterioration of Inkia's contractual position; aggressive dividend policy; and/or Inkia's asset portfolio becomes more concentrated in countries with high political and economic risk. LIQUIDITY Inkia's liquidity relies primarily on its cash on hand and readily monetizable assets of USD173 million as of YE2016. The company has historically benefitted from access to local capital markets to finance investment projects at the subsidiary level. This year, two of its subsidiaries have replaced nearly USD1 billion in aggregate of syndicated loans with international bonds. In April, Energuate Trust (BB/Stable) issued USD330 million to replace existing debt as well as a bridge loan of USD120 million used to fund Inkia's 2016 acquisition of the Guatemalan DisCos. In August, Kallpa replaced the syndicated bank facility used during its hydroelectric plant's construction phase with a USD650 million international bond. Fitch estimates that over 90% of Inkia's consolidated debt is scheduled to mature after 2020, including its 2021 USD450 million bond. FULL LIST OF RATING ACTIONS Fitch currently rates Inkia as follows: -- Long-Term Foreign Currency IDR at 'BB'; -- Long-Term Local Currency IDR at 'BB'; -- Senior unsecured notes due 2021 at 'BB'. The Rating Outlook is Stable. ================================ T R I N I D A D & T O B A G O ================================ CARIBBEAN CEMENT: Reports Profit After J$81MM Loss Last Year ----------------------------------------------------------- RJR News reports that Caribbean Cement Limited is reporting improved profits for the three months ending September. For the quarter, the company earned J$747.8 million compared with a loss of J$81 million for the corresponding period last year, according to RJR News. It did so based on revenues of J$4.1 billion, an improvement from the J$3.6 billion in the prior year, the report notes. * * * As reported in the Troubled Company Reporter-Latin America on Aug. 18, 2014, RJR News disclosed that Caribbean Cement said it racked up a loss of $89 million in the three months to the end of June, compared to a $359 million profit in the corresponding period a year ago. The report noted that Caribbean Cement said the loss was due to the shutdown of a clinker line to facilitate maintenance work. According to a TCR-LA report on Aug. 7, 2013, RJR News related that Caribbean Cement Company Limited suffered a consolidated loss of J$137 million for the first six months of 2013 down from J$1.2 billion during the corresponding period last year, according to RJR News. The report related that the loss resulted from J$701 million of non-cash foreign exchange losses compared to J$136 million in 2012. ================= V E N E Z U E L A ================= PDVSA: Oil Bonds Plunge With 24 Hrs to Go Until Payment Is Due -------------------------------------------------------------- Christine Jenkins and Ben Bartenstein at Bloomberg News report that Venezuela's state oil company has a hefty payment due Oct. 27 and the lack of any signs or comments about the funds being transferred has the market in a late stage of panic. Petroleos de Venezuela S.A.'s dollar bonds tumbled more than four cents with yields on notes due 2020 jumping more than 2 percentage points to 17.3 percent on Oct. 26, according to Bloomberg News. The probability of PDVSA defaulting on its debt over the next year has jumped to 79 percent with the odds over the next five years at 99 percent, according to credit default swap trading, Bloomberg News notes. Venezuela is already two weeks late on coupons for a slew of other bonds. Those payments had a grace period -- a buffer of sorts that gives the country an additional 30 days to work out the technical glitches and deliver the cash, Bloomberg News says. The principal portions of the payments owed over the next week contain no such language, Bloomberg News discloses. Miss the due date and bondholders can cry default. "Fear is higher now because the deadline is approaching quickly," said Lutz Roehmeyer, who helps oversee about $14 billion at Landesbank Berlin Investment GmbH. "I am still confident that they find a creative way to pay," Bloomberg News relays. If the money isn't in accounts by creditors may opt to wait until early this week to see if the funds arrive late since there are few incentives to accelerate the debt and spark a potential cross default on the rest of the issuer's debt, Bloomberg News says. Credit agencies will also be watching closely on whether to downgrade the oil giant deeper into junk, Bloomberg News adds. As reported in the Troubled Company Reporter-Latin America on Oct. 24, 2017, S&P Global Ratings placed its ratings on Petroleos de Venezuela S.A. (PDVSA) on CreditWatch with negative implications, including its 'CCC-' corporate credit ratings. ================= X X X X X X X X X ================= * BOND PRICING: For the Week From Oct. 23 to Oct. 27, 2017 --------------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- BA-CA Finance Cayman Lt 0.518 62.07 KY EUR AES Tiete Energia SA 6.7842 1.109 4/15/2024 BR BRL Argentina Bogar Bonds 2 39.36 2/4/2018 AR ARS Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD Automotores Gildemeister 6.75 67 1/15/2023 CL USD Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD Automotores Gildemeister 6.75 65.5 1/15/2023 CL USD CA La Electricidad 8.5 63.664 4/10/2018 VE USD Caixa Geral De Depositos 1.439 63.167 KY EUR Caixa Geral De Depositos 1.469 KY EUR CSN Islands XII Corp 7 68 BR USD CSN Islands XII Corp 7 66.266 BR USD Decimo Primer Fideicomiso 6 53.225 10/25/2041 PA USD Decimo Primer 4.54 43.127 10/25/2041 PA USD Dolomite Capital 13.217 73.108 12/20/2019 CN ZAR Enel Americas SA 5.75 56.172 6/15/2022 CL CLP Gol Linhas Aereas SA 10.75 35.861 2/12/2023 BR USD Gol Linhas Aereas SA 10.75 35.601 2/12/2023 BR USD Inversora Electrica 6.5 67.625 9/26/2017 AR USD Inversora Electrica 6.5 67.625 9/26/2017 AR USD MIE Holdings Corp 7.5 64.78 4/25/2019 HK USD MIE Holdings Corp 7.5 64.982 4/25/2019 HK USD NB Finance Ltd 3.88 61.816 2/7/2035 KY EUR Noble Holding 7.7 74.433 4/1/2025 KY USD Noble Holding 5.25 56.279 3/15/2042 KY USD Noble Holding 8.7 71.881 4/1/2045 KY USD Noble Holding 6.2 60.129 8/1/2040 KY USD Noble Holding 6.05 58.38 3/1/2041 KY USD Odebrecht Finance Ltd 7.5 42.5 KY USD Odebrecht Finance Ltd 5.125 56.938 6/26/2022 KY USD Odebrecht Finance Ltd 7 68.053 4/21/2020 KY USD Odebrecht Finance Ltd 7.125 41.366 6/26/2042 KY USD Odebrecht Finance Ltd 4.375 40.002 4/25/2025 KY USD Odebrecht Finance Ltd 5.25 39.211 6/27/2029 KY USD Odebrecht Finance Ltd 6 44.75 4/5/2023 KY USD Odebrecht Finance Ltd 5.25 39.018 6/27/2029 KY USD Odebrecht Finance Ltd 7.5 42.95 KY USD Odebrecht Finance Ltd 4.375 40.363 4/25/2025 KY USD Odebrecht Finance Ltd 7.125 41.635 6/26/2042 KY USD Odebrecht Finance Ltd 6 52.625 4/5/2023 KY USD Odebrecht Finance Ltd 5.125 55.873 6/26/2022 KY USD Odebrecht Finance Ltd 7 67.368 4/21/2020 KY USD Petroleos de Venezuela 8.5 74.5 10/27/2020 VE USD Petroleos de Venezuela 6 30.458 5/16/2024 VE USD Petroleos de Venezuela 6 30.517 11/15/2026 VE USD Petroleos de Venezuela 9.75 35.677 5/17/2035 VE USD Petroleos de Venezuela 9 39.279 11/17/2021 VE USD Petroleos de Venezuela 5.375 30.267 4/12/2027 VE USD Petroleos de Venezuela 8.5 72.5 10/27/2020 VE USD Petroleos de Venezuela 12.75 45.278 2/17/2022 VE USD Petroleos de Venezuela 6 30.367 5/16/2024 VE USD Petroleos de Venezuela 6 30.387 11/15/2026 VE USD Petroleos de Venezuela 9 39.316 11/17/2021 VE USD Petroleos de Venezuela 9.75 35.893 5/17/2035 VE USD Petroleos de Venezuela 6 28.346 10/28/2022 VE USD Petroleos de Venezuela 5.5 30.123 4/12/2037 VE USD Petroleos de Venezuela 12.75 45.23 2/17/2022 VE USD Polarcus Ltd 5.6 75 3/30/2022 AE USD Provincia del Chubut 4 10/21/2019 AR USD Siem Offshore Inc 4.04527 69.5 10/30/2020 NO NOK Siem Offshore 3.75176 65.75 12/28/2021 NO NOK STB Finance 2.05771 56.243 KY JPY Sylph Ltd 2.367 64.438 9/25/2036 KY USD US Capital 1.63611 54.774 12/1/2039 KY USD US Capital 1.63611 54.774 12/1/2039 KY USD USJ Acucar 9.875 67 11/9/2019 BR USD USJ Acucar 9.875 67 11/9/2019 BR USD Venezuela 13.625 68.25 8/15/2018 VE USD Venezuela 7.75 44.065 10/13/2019 VE USD Venezuela 11.95 40.785 8/5/2031 VE USD Venezuela 12.75 45.19 8/23/2022 VE USD Venezuela 9.25 39.645 9/15/2027 VE USD Venezuela 11.75 40.005 10/21/2026 VE USD Venezuela 9 36.285 5/7/2023 VE USD Venezuela 9.375 37.69 1/13/2034 VE USD Venezuela 13.625 72.25 8/15/2018 VE USD Venezuela 7 34.23 3/31/2038 VE USD Venezuela 7 59.19 12/1/2018 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, 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 * * *