/raid1/www/Hosts/bankrupt/TCRLA_Public/171128.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
Tuesday, November 28, 2017, Vol. 18, No. 235
Headlines
A R G E N T I N A
ELECTROINGENIERIA: Moody's Lowers CFR & Sr. Notes Rating to Ca
RIO NEGRO: Moody's Assigns B3 Foreign Currency Issuer Rating
B R A Z I L
OI SA: CEO Resigns as Restructuring Vote Nears, Shareholder Says
OI SA: Seeks to Woo Public Banks, Export Credit Agencies
SEARA INDUSTRIA: Court Upholds Bankruptcy Protection for Firm
TELEFONICA BRASIL: Moody's Rates BRL1BB Sr. Unsecured Debt Ba1
D O M I N I C A N R E P U B L I C
DOMINICAN REP: Dealers Hail Import Ban on Flood-Damaged Vehicles
V E N E Z U E L A
PETROLEOS DE VENEZUELA: Maduro Names General to Head Firm
PETROLEOS DE VENEZUELA: Tells Staff to Cut Costs by 50%
VENEZUELA: Agree to Settle $1.2BB Mine Dispute With Crystallex
VENEZUELA: Could Lose a Lot More Oil Production
VENEZUELA: Hyperinflation Reaches New Record of 4,000 Percent
- - - - -
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A R G E N T I N A
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ELECTROINGENIERIA: Moody's Lowers CFR & Sr. Notes Rating to Ca
--------------------------------------------------------------
Moody's Latin America Agente de Calificacion de Riesgo has
downgraded Electroingenieria's (EISA) corporate family rating and
senior unsecured notes' rating to Ca from Caa2 in the global scale
and to Ca.ar from B3.ar in the Argentine national scale. The
outlook on the ratings was changed to stable from negative.
Approximately ARS400 million ($23 million) in rated debt
instruments affected.
RATINGS RATIONALE
The downgrade to Ca/Ca.ar follows EISA's decision of not making
the payment for its November 21, 2017 scheduled partial
amortization of principal (ARS60 million) and interest on its
ARS400 million senior unsecured notes due 2018. Accordingly, on
November 17, 2017 EISA announced that it would use the 30-day
grace period under the existing notes indenture, but it remains
uncertain whether it will be able to cure the default within this
period. Moody's expect liquidity profile to remain tight in the
coming months, with the company relying heavily on payments
deriving from its core project, the two hydroelectric dams in the
province of Santa Cruz.
The stable outlook reflects Moody's expectation that expected
losses for senior unsecured creditors will not be greater than
those associated with a Ca rating.
The ratings or the outlook could experience upward pressure if
EISA's liquidity profile were to improve in the next few quarters,
with a higher likelihood of timely service of its future debt
maturities.
A rating downgrade could be prompted in case the company fails to
show improvements in liquidity metrics, indicating inability to
meet debt obligations and higher losses for creditors.
Founded in 1977 and based in the city of Cordoba in Argentina,
EISA operates in the engineering, construction, operation and
maintenance of large electromechanical, civil, architectural,
road, sanitation and water works and services. It also engages in
the engineering and construction of power systems, transformer
stations, interconnections and nuclear power plants. As of the
last twelve months ended June 2017, total revenues amounted to ARS
2,0 billion (approximately $170 million).
RIO NEGRO: Moody's Assigns B3 Foreign Currency Issuer Rating
------------------------------------------------------------
Moody's Investors Service assigned a first time foreign currency
issuer rating of B3 (Global Scale) to the Province of Rio Negro
("Rio Negro"). In the same action Moody's also assigned a B3
Global Scale foreign currency debt rating to the province's
proposed notes for up to USD300 million. The outlook on Rio
Negro's global scale issuer rating is positive (m).
RATINGS RATIONALE
The assigned rating is in line with the province's B3 Global Scale
long term local currency issuer rating, and the bonds constitute
direct, unsecured, unconditional and unsubordinated obligations of
the province. The notes will have a maturity of between 6 and 12
years, will be denominated and payable in US dollars and will be
subject to the New York state law. According to the decree
authorizing the issuance, the bonds could amortize over
installments or with a bullet payment. The province will use the
net proceeds from the bonds to finance several infrastructure
projects.
The issuance will result in a significant increase in the
province's level of indebtedness, with its ratio of total debt to
total revenue rising to 51% at the end of 2017 from 27% a year
earlier. In addition, the bond placement will raise Rio Negro's
exposure to foreign currency risks, since most of the province's
revenue is denominated in Argentine pesos. However, this level of
indebtedness and exposure remains in line with other B3 rated
provinces in Argentina, and while Rio Negro may issue additional
cross-border debt over the coming year, Moody's do not expect its
level of indebtedness will continue to rise at the same pace.
The assigned rating is based on preliminary documentation received
by Moody's as of the rating assignment date. Moody's does not
expect changes to the documentation or to the main conditions of
the bond issuance. Should issuance conditions and/or the final
documentation of these notes deviate from the original ones
submitted and reviewed by the rating agency, Moody's will assess
the impact that these differences may have on the ratings and act
accordingly.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Given the strong macroeconomic and financial linkages between the
Government of Argentina and the economic and financial profiles
and ratings of Argentina regional governments, an upgrade of
Argentina's sovereign bonds ratings and/or the improvement of the
country's operating environment could lead to an upgrade of the
Province of Rio Negro's issuer and debts ratings. Conversely, a
downgrade of Argentina's sovereign bond ratings and/or a
deterioration in Rio Negro's operating performance that led to
higher than expected cash financing deficits and a rise in its
level of total debt to between 60% and 65% could exert downward
pressure on the ratings assigned.
The principal methodology used in these ratings was Regional and
Local Goverments published in June 2017.
===========
B R A Z I L
===========
OI SA: CEO Resigns as Restructuring Vote Nears, Shareholder Says
----------------------------------------------------------------
Tatiana Bautzer, Gram Slattery, and Daniel Alvarenga at Reuters
report that the chief executive of Oi SA has resigned, its largest
shareholder said, as the Brazilian telecommunications firm enters
a crucial phase in Latin America's biggest-ever bankruptcy
proceedings.
A spokeswoman for Portugal's Pharol SGPS SA, which owns about 27.5
percent of Oi SA's voting shares and is part of a controlling
shareholder bloc, said it had been informed of Marco Schroeder's
resignation, according to Reuters.
The move reflects deepening fissures between Oi's management and
board, run by shareholders aligned with distressed debt tycoon
Nelson Tanure, the report notes. The report relays that Mr.
Schroeder has called in recent months for both shareholders and
creditors to make concessions, while the board has stuck to a
restructuring proposal rejected by major bondholder groups.
An Oi spokeswoman declined to comment. Three sources with
knowledge of the situation told Reuters earlier on Nov. 24 that
Schroeder had offered to resign.
Common shares in Oi extended losses after the Reuters report,
closing 4 percent lower.
Oi SA is two weeks away from a crucial creditor vote on a proposal
to restructure BRL65 billion ($20 billion) of debt, with the fate
of the nation's largest fixed-line phone operator at stake and
more than 100,000 jobs on the line, the report relays.
In October, telecoms regulator Anatel had threatened to intervene
in the carrier if it changed management, the report notes.
However, a government source said Schroeder's departure on Nov. 24
did not make intervention more likely, the report says. The
person, who requested anonymity due to the sensitivity of the
issue, said that talks to bring the debt-laden carrier out of
bankruptcy protection will continue under new management, the
report notes.
Any restructuring plan approved by management must still be
approved by the regulator before being presented in bankruptcy
court, the person added, 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.
As reported in the Troubled Company Reporter-Latin America on
Nov. 9, 2017, Gram Slattery and Leonardo Goy at Reuters report
that the head of Brazil's telecommunications watchdog, Anatel,
demanded that debt-laden carrier Oi SA submit its latest
restructuring proposal to the regulator before officially filing
it with a bankruptcy court.
Anatel head Juarez Quadros told reporters in Brasilia that the
regulator, an Oi creditor due to billions of dollars in unpaid
regulatory fines, would wait for the country's solicitor-general
to give an opinion on the company's proposal before deciding
whether or not to vote for it, according to Reuters.
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.
OI SA: Seeks to Woo Public Banks, Export Credit Agencies
--------------------------------------------------------
Gram Slattery at Reuters reports that the board of Brazilian
telecoms company Oi SA is trying to assemble a coalition dependent
on public sector creditors to pass its restructuring plan in the
face of serious opposition from private bondholders, according to
three sources with knowledge of the board's strategy.
At the behest of shareholder Nelson Tanure, the board is offering
deals to state banks Caixa Economica Federal and Banco do Brasil
SA in which their debts would be repaid at their full nominal
value but over a longer period of time, said the sources, who
requested anonymity due to the sensitivity of the issue, according
to Reuters.
Under the proposal from the board of Oi SA, which began an in-
court restructuring 17 months ago, the company would be given a
six-year grace period before making most payments and then would
have an additional 10 years to pay off the bank debts in full, the
report notes.
In order to sweeten the deal, the board recently agreed to pay a
fraction of the interest annually during the initial six-year
period, a source added, the report relays.
The board is offering similar deals to the investment banking unit
of Brazil's largest private lender, Itau Unibanco Holding SA, as
well as Finnish, Belgian, and Chinese export credit agencies, the
report discloses.
Together, those creditors held about BRL11 billion ($3.4 billion)
in debt as of a May court filing, from a total of roughly BRL65
billion in debt under bankruptcy protection -- the largest such
proceedings ever in Latin America, the report relays.
The board's strategy of targeting specific creditors shows how it
hopes to win the support needed to restructure Oi's debts despite
a frosty relationship with major investors holding billions of
dollars of bonds, the report says.
The sources said that in addition to getting support of those
specific creditors, the board believes it needs the support of 20
percent to 25 percent of major private bondholders to pass its
plan, the report notes.
The report discloses that Oi SA's two biggest bondholder groups,
which include distressed debt titans Aurelius and Goldentree, have
publicly opposed the board's plan. Press representatives for the
groups declined to comment.
After a year and a half of legal wrangling, creditors are set to
vote on Dec. 7 in Rio de Janeiro on a final plan to take the
carrier out of bankruptcy protection, the report notes. Under
most scenarios, Oi's proposal needs the approval of roughly a
majority of creditors by value to take effect, the report relays.
Beyond the billions of dollars at stake, the creditors' meeting
could decide the fate of the telephone operator, which employs
more than 100,000 people and provides the only fixed-line service
to about a third of Brazil's 5,500 municipalities, the report
notes.
Coalition Building
Negotiations ahead of the vote have split into three tracks in
recent months, the report discloses.
The two largest groups of private bondholders, which own about
BRL22 billion in debt, have put forth a proposal in which
creditors would trade their debt for 85 percent of Oi's equity,
the report relays.
The government, which is exposed to billions of dollars of Oi debt
through state banks and unpaid regulatory fines, has formed a
working group of its own, with the implicit threat of state
intervention if talks fail, the report relates.
The board, meanwhile, has allied with a small group of private
creditors known as the G6, who have a fraction of the debt held by
the main private bondholder groups, the report relays. Under the
board's plan, bondholders would take a much smaller share of Oi's
equity, the report says.
In addition to wooing public institutions, Itau and some opposing
bondholders, the board sees it as important to win the support of
relatively small suppliers unaffiliated with any major bondholder
group that hold about BRL2 billion in debt, the sources added, the
report notes.
The board also considers it unlikely that state development bank
BNDES, which holds BRL3.33 billion in debt, will stand in the way
of any plan, given that the bank is expected to be paid back in
full due to its special status under law, the report relays.
BNDES declined to comment.
If creditors do not agree to a restructuring plan at the Dec. 7
meeting, the talks may continue on Dec. 8, the report notes.
Failing that, they will continue on Feb. 1 and 2.
If creditors vote down the company's restructuring plan, Oi SA
could be liquidated, a situation all parties want to avoid, the
sources said, as lenders and shareholders stand to lose more under
liquidation than under any proposed restructuring, 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.
As reported in the Troubled Company Reporter-Latin America on
Nov. 9, 2017, Gram Slattery and Leonardo Goy at Reuters report
that the head of Brazil's telecommunications watchdog, Anatel,
demanded that debt-laden carrier Oi SA submit its latest
restructuring proposal to the regulator before officially filing
it with a bankruptcy court.
Anatel head Juarez Quadros told reporters in Brasilia that the
regulator, an Oi creditor due to billions of dollars in unpaid
regulatory fines, would wait for the country's solicitor-general
to give an opinion on the company's proposal before deciding
whether or not to vote for it, according to Reuters.
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.
SEARA INDUSTRIA: Court Upholds Bankruptcy Protection for Firm
-------------------------------------------------------------
Marcelo Teixeira at Reuters reports that a Brazilian judge has
decided to uphold bankruptcy protection for Seara Industria &
Comercio de Produtos Agropecuarios Ltda, a soy and corn trader
whose largest creditor is U.S. agriculture cooperative CHS Inc,
Seara said on Nov. 23.
In July, an appeals judge had granted a motion to halt the case
while forensic accountants investigated creditors' allegations
that the company had falsified financial statements, according to
Reuters.
Seara Industria was among the 10 biggest commodities traders in
Brazil when it filed for bankruptcy protection in April to
restructure BRL2.1 billion ($652.17 million) in debt, the report
relays.
The firm owes $218 million to CHS, the report notes. The local
unit of Dutch lender Rabobank, Switzerland's Credit Suisse Group
AG and commodities trader Bunge Ltd's Brazilian subsidiary Bunge
Alimentos SA are also among its creditors, the report discloses.
The troubled trader said in a statement that it will soon present
a recovery plan to the court overseeing the case, the report
relays.
In September, Reuters exclusively reported that Seara had offered
logistics assets to creditors in a bid to settle the debts, the
report notes.
The distressed company, which is based in the southern Parana
state, owns a soy processing plant, warehouses, three logistics
terminals and a port terminal in Paranagua, Brazil's second
largest grain exporting port, the report says.
The terminals are considered valuable because they allow for grain
shipments by rail from Mato Grosso to Paranagua, the report
relays. Creditors would take stakes in the assets and have rights
to move commodities through the system, the report notes.
A source who is closely following the case told Reuters that
negotiations to that end continue, but there is no clear sign yet
of a likely outcome.
TELEFONICA BRASIL: Moody's Rates BRL1BB Sr. Unsecured Debt Ba1
-------------------------------------------------------------
Moody's America Latina assigned a Ba1 global scale rating and
Aaa.br rating on the Brazilian national scale to the proposed
BRL1.0 billion unsecured debentures to be issued by Telefonica
Brasil S.A. ("Telefonica Brasil") with maturity in November 2020.
Telefonica Brasil's existing Corporate Family Ratings ("CFR") of
Ba1 in the global scale and Aaa.br on the Brazilian national scale
remain unchanged. The ratings outlook is negative.
The issuance is part of Telefonica Brasil's liability management
with the objective of extending the company's debt maturity
profile. The new issuance will not affect the company's leverage
metrics since it will replace existing debentures with maturity in
the short term.
The ratings of the proposed debentures assumes that the issuance
will be successfully completed as planned and will replace
existing debt, and that the final transaction documents will not
be materially different from draft legal documentation reviewed by
Moody's to date and assume that these agreements are legally
valid, binding and enforceable.
Rating assigned:
Issuer: Telefonica Brasil S.A.
- BRL1.0 billion non-convertible senior unsecured debentures due
in November 2020: Ba1 (global scale); Aaa.br (national scale).
The company's existing ratings are unchanged:
Issuer: Telefonica Brasil S.A.
- Corporate Family Rating: Ba1 (global scale); Aaa.br (national
scale).
The outlook for all ratings is Negative
RATINGS RATIONALE
Telefonica Brasil's Ba1 ratings reflect the company's position as
the largest integrated telecom company in Brazil in terms of
revenue and number of wireless subscribers as well as a strong
brand name and service quality in the wireless segment. In
addition, Telefonica Brasil has a conservative financial profile,
robust credit metrics, solid liquidity position, strong brand and
good geographic presence in the country.
Telefonica Brasil's Ba1 rating ranks one-notch above Brazil's
government bond rating of Ba2, which is granted only on
exceptional basis for issuers with fundamentals that are much
stronger than the sovereign.
On the other hand, the ratings are constrained by Brazil's
government bond rating of Ba2, and by Telefonica Brasil's still
meaningful exposure to the wireline business, which accounted for
almost 40% of net service revenues in the last twelve months as of
September 2017. Moody's expect revenue and profitability in this
segment to continue to decline due to disconnections, tougher
competition in the broadband segment, and expensive TV content as
the telco companies enhance their triple and four play packages
offerings. Additional credit negatives are the company's large
CAPEX and high dividend payout, which is likely to be maintained
during the next several years, which is mitigated by Telefonica
Brasil's low leverage.
The Ba1/Aaa.br ratings on Telefonica Brasil's proposed non-
convertible unsecured debentures reflects its pari-passu status
compared to the company's existing indebtedness that is mostly
represented by unsecured debt.
The negative outlook mirrors the negative outlook on Brazil's
government bond rating.
An upgrade on Telefonica Brasil's rating would depend on an
upgrade of Brazil's government bond rating. In addition,
Telefonica Brasil's ratings are constrained by the highly
competitive operating environment in Brazil in all segments and
the still-high revenue contribution of the mature and declining
wireline business.
Telefonica Brasil's ratings could come under downward pressure if
its credit profile and liquidity position deteriorate, if Brazil's
government bond rating should be downgraded or if competitive
threats adversely affect Telefonica Brasil's operating performance
more than expected, causing a meaningful decline on revenues and
margins. Ratings would also be negatively affected in the event
that the company pursues a material debt financed return on
capital strategy or M&A activity.
The principal methodology used in these ratings was
Telecommunications Service Providers published in January 2017.
Telefonica Brasil is the largest integrated telecom operator in
Brazil with net revenues of BRL43 billion (~USD13.4 billion) in
the last twelve months as of September 2017. Revenues from mobile
and fixed services represented 61% and 39% of the total,
respectively. The acquisition of GVT in May 2015, a non-cash
equity financed transaction, has enhanced its broadband capacity
and presence in the pay-TV market. Spain based Telefonica S.A.
(Baa3 stable) is the largest shareholder, holding, directly and
indirectly, 94.5% of voting shares and 73.6% of total shares.
==================================
D O M I N I C A N R E P U B L I C
==================================
DOMINICAN REP: Dealers Hail Import Ban on Flood-Damaged Vehicles
----------------------------------------------------------------
Dominican Today reports that the country's authorized auto dealers
grouped in Acofave hailed Customs' warning to used vehicle
importers on the ban on cars declared salvage, or total loss in
other countries.
To stress the ban's importance, Acofave president Enrique
Fernandez said the numerous hurricanes which made landfall in
Texas, Louisiana, Florida and Puerto Rico put an estimated 100,000
vehicle, according to Dominican Today.
As reported in the Troubled Company Reporter-Latin America on
Nov. 20, 2017, Fitch Ratings has affirmed Dominican Republic's
Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook.
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: Maduro Names General to Head Firm
---------------------------------------------------------
BBC News reports that Venezuelan President Nicolas Maduro has
named a general to head the state oil company, PDVSA, and the
country's energy ministry.
Mr. Maduro said the appointment of Major General Manuel Quevedo
was "a new oil revolution" to tackle corruption, according to BBC
News.
Executives of Citgo, the oil company's US refining subsidiary,
were arrested over corruption allegations, the report relays.
Venezuela is in a deep economic crisis the government blames on
"enemies in the US", the report notes. Opponents cite
mismanagement.
BBC News discloses that the move comes days after PDVSA and
Venezuela were declared in selective default for failing to meet
payments on bonds.
The company's bonds represent 30% of Venezuela's external debt,
BBC News says.
Analysts say the Venezuelan oil industry has been damaged by
underinvestment, chronic corruption, the departure of many of its
most experienced people with expertise and training, and a
shortage of spare parts, BBC News relays.
PDVSA accounts for about 95% of the country's export earnings but
output has been in steep decline for years, BBC News notes.
President Maduro said that increased productivity was a top
priority, BBC News relates.
It is unclear how Gen Quevedo will increase oil production and
what role he will have in restructuring Venezuela's debt, but Mr.
Maduro has urged him to purge PDVSA of corruption, the report
notes.
Correspondents say that as oil production flags, Mr. Maduro's
administration appears to be switching blame for the country's
spiraling economic crisis from the opposition to officials in the
oil industry, BBC News relays.
About 50 managers at PDVSA have been arrested since August.
Gen Quevedo is an officer in the National Guard, which played a
key role in subduing violent anti-Maduro protests in 2014, the
report recalls.
At least a third of President Maduro's cabinet is made up of
active or retired officers, and the military has become a major
pillar of his support, the report notes.
Gen Quevedo was formerly a minister of housing, and has no known
significant experience in the energy sector, the report adds.
As reported in the Troubled Company Reporter-Latin America on
Nov. 17, 2017, S&P Global Ratings lowered its corporate credit
rating on Petroleos de Venezuela S.A. (PDVSA) to 'SD' from 'CC'.
At the same time, S&P lowered its issue-level ratings on the
company's senior unsecured notes due 2027 and 2037 to 'D' from
'CC'.
Oct. 27, 2017, Bloomberg News said the former chief executive
officer of Venezuela's state run-oil company said it will make
debt payments this year and next, even as he acknowledged the
crude producer is struggling with cash-flow and operational
issues. The company has "all the resources to honor its
liabilities," Rafael Ramirez, who is now Venezuela's ambassador to
the United Nations, said in an interview in New York.
TCRLA, on Oct 23, 2017, RJR News said that one week before
Venezuela faces a critical debt payment, the distressed petro-
state is already late on a series of smaller bills. PDVSA, has two
major bond payments totaling about $2 billion due in the next
weeks, according to RJR News. While the market expects the
company to avoid default, the missed payments have rattled
investors and raised fresh questions about how long embattled
President Nicolas Maduro's regime might last, the report noted.
PETROLEOS DE VENEZUELA: Tells Staff to Cut Costs by 50%
-------------------------------------------------------
Fabiola Zerpa and Patricia Laya at Bloomberg News report that
already in default and struggling with sinking oil production,
Venezuela's state-run energy firm told its employees to cut costs
and expenses by 50 percent in an austerity drive to reflect the
broader economic crisis hitting the OPEC nation of 30 million
people.
Petroleos De Venezuela, as the oil producer is known, called on
different business units, subsidiaries, joint ventures and staff
to adhere to a long list of cost-cutting reforms amid the
"national economic emergency" without affecting daily crude
output, according to a memo sent to employees that was seen by
Bloomberg. PDVSA and the country's Oil Ministry confirmed the
contents of the memo.
Joint venture partners must submit financing plans, projects with
no financing will be halted, training outside of Venezuela will
only be conducted when strictly necessary and international
transportation, including the use of PDVSA aircrafts, should be
reduced to a minimum, the memo said, according to Bloomberg News.
Credit card use must be in line with company policy and the use of
video conferences will be promoted to cut costs of bringing
employees face-to-face, Bloomberg News notes.
The call to tighten belts at the country's biggest company adds to
other attempts by President Nicolas Maduro's government to head
off a crisis sparked by low oil prices, a refusal to enact
economic measures to correct imbalances and a political impasse
that has further split society, Bloomberg News relays. Last week,
the Foreign Ministry sent an email to diplomats worldwide to
renegotiate rents of embassies and consulates or look for cheaper
locations, Bloomberg News says. With international reserves near
a 15-year-low, the socialist nation has been plagued with
shortages of everything from antibiotics and food, Bloomberg News
notes.
In its latest financial report for full year 2016 that was
released in August, profit at Petroleos de Venezuela sank almost
90 percent year-on-year while contributions to key social programs
dried up, Bloomberg News relays. The Caracas-based company's
refineries are operating at significantly reduced rates with some
"completely paralyzed," according to Ivan Freites, the head of an
oil workers union, Bloomberg News notes.
Output is expected to slump to 1.84 million barrels a day next
year, the lowest compared with official government data since
1989, according to a survey with four analysts compiled by
Bloomberg.
Other policy changes unveiled in the memo include rules around
assigning company vehicles, the practice of booking hotel rooms on
a continuous basis and improving the screening of employees based
on merits and education, Bloomberg News relays. PDVSA called on
reductions in the use of electricity, water, mobile telephones,
aircards for Internet, computing gear and expenses for publicity
and propaganda, Bloomberg News discloses.
Even after paying billions of dollars in the past month to make
debt payments, PDVSA is behind on other bond interest payments,
prompting credit rating companies to cut the firm's credit to
selective default, Bloomberg News says. The price on its bonds
due 2022 stands at 30 cents on the dollar from as high as 67 cents
in March, Bloomberg News adds.
As reported in the Troubled Company Reporter-Latin America on
Nov. 17, 2017, S&P Global Ratings lowered its corporate credit
rating on Petroleos de Venezuela S.A. (PDVSA) to 'SD' from 'CC'.
At the same time, S&P lowered its issue-level ratings on the
company's senior unsecured notes due 2027 and 2037 to 'D' from
'CC'.
Oct. 27, 2017, Bloomberg News said the former chief executive
officer of Venezuela's state run-oil company said it will make
debt payments this year and next, even as he acknowledged the
crude producer is struggling with cash-flow and operational
issues. The company has "all the resources to honor its
liabilities," Rafael Ramirez, who is now Venezuela's ambassador to
the United Nations, said in an interview in New York.
TCRLA, on Oct 23, 2017, RJR News said that one week before
Venezuela faces a critical debt payment, the distressed petro-
state is already late on a series of smaller bills. PDVSA, has two
major bond payments totaling about $2 billion due in the next
weeks, according to RJR News. While the market expects the
company to avoid default, the missed payments have rattled
investors and raised fresh questions about how long embattled
President Nicolas Maduro's regime might last, the report noted.
VENEZUELA: Agree to Settle $1.2BB Mine Dispute With Crystallex
--------------------------------------------------------------
Katia Dmitrieva, Katia Porzecanski, and Bob Van Voris at Bloomberg
News report that Crystallex International Corp. and Venezuela
agreed to settle a $1.2 billion dispute over the 2011
nationalization of a gold deposit in the South American nation.
Ontario Superior Court Justice Glenn Hainey in Toronto approved
the settlement after it was announced two days earlier through
filings in Canada, according to Bloomberg News. Parts of the
agreement remain sealed, including the amount to be paid,
Bloomberg News notes.
The Canadian mining company, which was forced into bankruptcy in
2011 after the seizure of the Las Cristinas deposit, had asked the
judge to approve the deal, saying it "may be the largest
settlement that Venezuela has ever agreed to" relating to an
arbitration award, Bloomberg News relays. That would put the deal
at more than $1 billion, based on Venezuela's prior settlements,
Bloomberg News says.
Keeping the details of the agreement under wraps prompted
opposition from some bondholders and shareholders at the hearing
who demanded access to the key terms of the deal, Bloomberg News
notes. Crystallex's shareholders, creditors and litigation
financiers -- a New York-based hedge fund firm, Tenor Capital
Management -- argued over the terms of the settlement, including
the release of some information, Bloomberg News notes. The
country insisted on keeping details secret because it's still
dealing with hundreds of billions of dollars of other creditor
claims, according to a sworn statement submitted to the Canadian
court by Harry Near, a Crystallex director, Bloomberg News says.
Canadian Miner Targets Citgo for Award in Venezuela Dispute
As of 2014, Tenor had lent about $62.5 million to Crystallex in
return for net arbitration proceeds that totaled 70.5 percent of
the company's award, after taxes and payment to creditors,
according to documents posted on the website of Ernst and Young,
the company's court-appointed monitor, Bloomberg News relays.
Since 2015, Crystallex has redacted the terms of further financing
from Tenor, Bloomberg News notes. That means shareholders are in
the dark about the share of the award that's currently left for
them, Bloomberg News relays.
The settlement was intended to end Crystallex's efforts to seize
Venezuelan assets and collect on a $1.2 billion arbitration award,
Bloomberg News notes. The company sued in the U.S., Canada and
elsewhere. Crystallex targeted U.S. assets of Venezuela's state
oil producer, Petroleos de Venezuela, Bloomberg News notes.
The Crystallex case has been closely watched by Venezuela's
creditors as the nation teetered on default of its international
obligations, Bloomberg News relays. The company's efforts to
convince courts to view PDVSA and its units as alter-egos of the
state have provided some guidance on how a restructuring of the
nation's more than $100 billion debt may unfold, the report notes.
In recent weeks, ratings companies have declared the nation and
its state oil company in default on its international bonds
because of significant payment delays, Bloomberg News notes.
While the government said that it will seek to restructure its
debt with global investors, officials have also insisted that the
nation will keep paying its obligations while it sorts out a plan
to do so, Bloomberg News says. Coming up with a solution will be
particularly challenging because of U.S. sanctions that restrict
investors from engaging with some top officials and purchasing new
debt, Bloomberg News notes.
The payment delays put in question how Crystallex will get paid,
once a settlement is finally agreed upon, Bloomberg News relays.
Gold Reserve, another Canadian company that also came to an accord
with Venezuela over expropriated assets, said that the sanctions
have held up its payments due from Venezuela, Bloomberg News
notes. Since the sanctions were imposed in August, intermediary
banks have grown unwilling to pass along the cash from Venezuela
to Gold Reserve's U.S. bank accounts, the company said in a
statement, the report discloses.
Near said Venezuela had agreed to make a series of payments in
installments, Bloomberg News relays. The total payments would
more than cover claims by Crystallex's creditors, Mr. Near added,
Bloomberg News notes. Senior creditors are owed about $120
million, plus interest.
Crystallex filed for protection from its creditors in December
2011, Bloomberg News recalls. Then in 2016, after five years of
arbitration, the company won an award of $1.2 billion from the
World Bank's International Centre for the Settlement of Investment
Disputes in April 2016, Bloomberg News notes. Judges in Canada
and the U.S. have recognized the award with interest, granting the
company a $1.4 billion judgment, Bloomberg News relays.
The company launched a slew of legal efforts to try to collect,
including an attempt to seize shares of PDVSA's Delaware-based
subsidiary, PDV Holding, Bloomberg News says. Separately,
Crystallex began negotiations with Venezuela that then stalled
with the nation's economic decline, as well as multiple personnel
changes among the government's top officials, according to Near,
Bloomberg News relays. Recently, as the nation moved towards
defaulting on its international obligations, Crystallex revived
efforts to come to a settlement, Bloomberg News adds.
* * *
As reported in the Troubled Company Reporter-Latin America, Robin
Wigglesworth at The Financial Times related that Venezuela
appeared to have made a crucial bond repayment in late October.
The Latin American country and its state oil company PDVSA have
failed to make several debt payments in recent weeks, the report
noted. But the most important one was an $842 million instalment
due Oct. 29 on a PDVSA bond maturing in 2020, which, unlike most
of the other overdue debts, had no 'grace period' that allowed for
30 days to clean up any arrears without triggering a default, the
report notes.
As reported in the Troubled Company Reporter-Latin America on
Nov. 16, 2017, On Nov. 13, 2017, S&P Global Ratings lowered its
long- and short-term foreign currency sovereign credit ratings on
the Bolivarian Republic of Venezuela to 'SD/D' from 'CC/C'. The
long- and short-term local currency sovereign credit ratings
remain at 'CCC-/C' and are still on CreditWatch with negative
implications. S&P said, "At the same time, we lowered our issue
ratings on Venezuela's global bonds due 2019 and 2024 to 'D' from
'CC'. Our issue ratings on the remainder of Venezuela's foreign
currency senior unsecured debt remain at 'CC'. Finally, we
affirmed our transfer and convertibility assessment on the
sovereign at 'CC'."
VENEZUELA: Could Lose a Lot More Oil Production
-----------------------------------------------
Nick Cunningham at Oilprice.com reports that after defaulting on
debt, Venezuela's crisis continues to unfold, threatening to
worsen the state-owned oil company's production.
Petroleos De Venezuela reportedly told employees that they needed
to carry out an austerity campaign, looking for ways to cut costs
by 50 percent, according to Oilprice.com. The internal memo said
that savings needed to be found amid the "national economic
emergency" while avoiding any hit to the company's oil production,
Oilprice.com notes. Profits at PDVSA fell by 90 percent in 2016
compared to the year before, Oilprice.com relays.
But it is hard to see how the company can prevent a deeper slide
in output after slashing spending to such a degree, Oilprice.com
notes. Oilprice.com, citing Bloomberg News, says that PDVSA is
demanding financing plans from its joint venture partners, and
that any projects will be halted if they do not receive financing.
Venezuela's oil production has been sliding for years, but the
descent accelerated in 2015 amid low oil prices and a
deteriorating cash position for PDVSA and the government,
Oilprice.com says. Production dipped below 1.9 million barrels in
recent weeks, the lowest level in more than three decades,
Oilprice.com relays.
The problems will only grow worse, especially because they tend to
snowball, according to Oilprice.com. Without cash, PDVSA will
struggle to import diluent to blend with its heavy oil -- the
result could be steeper production losses, the report relays.
Again, without cash, existing facilities cannot be maintained,
likely leading to an accelerating pace of decline, the report
notes. An array of refineries are "completely paralyzed," the
head of an oil workers union told Bloomberg, Oilprice.com notes.
Defaults on more debt payments could spark retaliation from
creditors, which could eventually put oil exports in jeopardy,
Oilprice.com says.
In short, the woes in Venezuela's oil industry contributed to the
crisis, but the dire economic situation will accelerate the
decline of oil production, Oilprice.com discloses.
A group of analysts told Bloomberg that they expect Venezuela's
output to average 1.84 mb/d in 2018, a level that seems
surprisingly optimistic given the pace of decline underway,
Oilprice.com notes. Other analysts predict output will plunge
much lower, Oilprice.com says.
The austerity drive is not limited to PDVSA. Venezuela is
ordering its embassies around the world to renegotiate rents at
their diplomatic missions, hoping to squeeze some pennies out of
every corner of the government, Oilprice.com ralates. Some
diplomatic personnel, according to Bloomberg, are owed several
months' worth of wages, the report discloses. Caracas is even
considering shutting down some embassies for good.
Meanwhile, PDVSA is soliciting its joint venture partners to put
up more financing for oil projects, the report relays. "We are
speaking to our allies, with our strategic partners, which are
Rosneft, Eni, Repsol, Statoil, and they are willing to continue
working with us, to continue financing our projects to boost crude
and gas output in the short-term," Cesar Triana, PDVSA's vice
president for gas, told Reuters, Oilprice.com says.
PDVSA's Cesar Triana said the company hopes to add 500,000 bpd in
2018 -- a statement that seems pretty detached from reality,
Oilprice.com notes. Most analysts see Venezuela's production
continuing to fall for the foreseeable future, the report relays.
Without cash, and without access to the international bond
markets, PDVSA is trying to find some arrangement to prevent oil
producers and oilfield services companies from completely
abandoning the country, a situation that would definitely lead to
sharper production losses, Oilprice.com discloses. Last year,
PDVSA gave oilfield services companies like Halliburton and
Schlumberger promissory notes in lieu of payment, an offer that
the firms had little choice in accepting, Oilprice.com notes.
PDVSA will likely try to double down on such strategies, the
report notes. "They remain in the country, working with us,"
Triana said in an interview with Reuters.
Despite his confidence, the relationship between PDVSA and its
partners is almost certainly deteriorating, Oilprice.com notes.
In a separate report, Reuters said that the oil company is
siphoning oil from its joint venture projects in order to supply
its domestic refineries, the report notes.
PDVSA ordered the Petropiar joint venture to turn over 45 percent
of its oil output, a volume of oil that was supposed to be
exported, Oilprice.com says. PDVSA runs the project in
conjunction with Chevron, and according to Reuters, did not offer
Chevron any repayment, the report notes. Reuters said that PDVSA
has also diverted oil from joint ventures with Statoil and Total
SA, the report notes. PDVSA seems to be growing more desperate --
the volume of oil diverted from the Petropiar project picked up in
recent weeks, doubling from 1 million barrels in October to 2
million barrels in November, Reuters reported, Oilprice.com
relays.
In a sign of how bad things are getting, President Nicolas Maduro
ordered a purge at Citgo, PDVSA's U.S.-based refining subsidiary,
ostensibly to root out corruption, but likely because Maduro is
looking for someone to blame, Oilprice.com notes. The government
arrested 50 people, including Citgo's president, the report says.
"Money is running out, the economy is about to collapse and the
government is looking for a scapegoat -- corruption -- ahead of
what appears to be one the most difficult years in the Chavez
era," Diego Moya-Ocampos, a political risk analyst at IHS Markit,
told Bloomberg, Oilprice.com adds.
* * *
As reported in the Troubled Company Reporter-Latin America, Robin
Wigglesworth at The Financial Times related that Venezuela
appeared to have made a crucial bond repayment in late October.
The Latin American country and its state oil company PDVSA have
failed to make several debt payments in recent weeks, the report
noted. But the most important one was an $842 million instalment
due Oct. 29 on a PDVSA bond maturing in 2020, which, unlike most
of the other overdue debts, had no 'grace period' that allowed for
30 days to clean up any arrears without triggering a default, the
report notes.
As reported in the Troubled Company Reporter-Latin America on
Nov. 16, 2017, On Nov. 13, 2017, S&P Global Ratings lowered its
long- and short-term foreign currency sovereign credit ratings on
the Bolivarian Republic of Venezuela to 'SD/D' from 'CC/C'. The
long- and short-term local currency sovereign credit ratings
remain at 'CCC-/C' and are still on CreditWatch with negative
implications. S&P said, "At the same time, we lowered our issue
ratings on Venezuela's global bonds due 2019 and 2024 to 'D' from
'CC'. Our issue ratings on the remainder of Venezuela's foreign
currency senior unsecured debt remain at 'CC'. Finally, we
affirmed our transfer and convertibility assessment on the
sovereign at 'CC'."
VENEZUELA: Hyperinflation Reaches New Record of 4,000 Percent
-------------------------------------------------------------
Ben Jackson at Panam Post reports that Venezuela has become nearly
impossible, as hyperinflation continues to climb to unprecedented
levels of nearly 4,000 percent.
In one year, the price of basic products has increased almost
4,000 percent, forcing many Venezuelans to survive on the lowest
wages in the region, according to Panam Post. People rummage
through the garbage, and the weakest and smallest die from
malnutrition, the report notes.
The country has fallen into humanitarian disaster due to the
economic policies of the socialist regime that has caused the only
legal currency -- the bolivar -- to collapse, the report relays.
Meanwhile, the value of the dollar rises or remains strong despite
only being available on the black market, the report notes. Until
November 23, Venezuelans paid VEB81,759.98 for every dollar, the
report relays.
Earlier this month, a US dollar was worth VEB41,000, whereas
earlier this year, only VEB3,100 were needed to buy a dollar,
according to DolarToday, the report says.
The economic policies of both Hugo Chavez and Nicolas Maduro were
based around price and exchange controls that have created
unprecedented shortages and strengthened a black market, the
report relays.
The "bachaqueros" of the black market, as they are called in
Venezuela, stand beside long lines of people waiting to obtain
regulated products at subsidized prices, and then resell them at
exorbitant prices that forces citizens to buy them at increased
prices without competition, the report notes.
According to a report by Cendas, an NGO that measures the economic
and social status of Venezuela, a spike in prices on the black
market reached VEB5,594,119 (US$66) -- a figure beyond the reach
of most Venezuelans, because the minimum wage is VEB136,554, or
US$1.6, the report relays.
Hyperinflation is due to the absence of actual income, a sharp
fall in the production of the state oil company PDVSA below two
million barrels and the use of black market currencies, the report
notes.
Economist Jose Toro Hardy has also referred to the critical
situation faced by Venezuelans, shedding light on the gravity of
the situation, and how things are likely to get worse in the near
future:
"Venezuela produces only 30 percent of the food it needs,"
Economist Jose Toro Hardy said, "It has no dollars to pay its
debts. It can't afford to import food and medicine. It has the
highest inflation in the world. It is isolated and the regime has
no strategy for dealing with any of these problems," Mr. Hardy
says.
The crisis in Venezuela has even caused supporters of the regime
to raise their voices, the report notes. Former Vice President
Jose Vicente Rangel admitted that the economic crisis is about to
explode, and called the cost of living "unbearable," the report
discloses.
In December, Venezuelans will need more than 20 minimum wage
salaries to purchase all basic resources, the report says.
According to the Hanke-Krus Inflation Table, the situation in
Venezuela is among the worst cases of inflation in world history,
the report discloses. Hungary, between August 1945 and July 1946,
saw its currency lose value so fast that prices doubled every 15
hours and daily inflation was 207 percent, the report notes.
Zimbabwe had a serious case, with a daily inflation of 98 percent
between March 2007 and November 2008, the report says.
* * *
As reported in the Troubled Company Reporter-Latin America, Robin
Wigglesworth at The Financial Times related that Venezuela
appeared to have made a crucial bond repayment in late October.
The Latin American country and its state oil company PDVSA have
failed to make several debt payments in recent weeks, the report
noted. But the most important one was an $842 million instalment
due Oct. 29 on a PDVSA bond maturing in 2020, which, unlike most
of the other overdue debts, had no 'grace period' that allowed for
30 days to clean up any arrears without triggering a default, the
report notes.
As reported in the Troubled Company Reporter-Latin America on
Nov. 16, 2017, On Nov. 13, 2017, S&P Global Ratings lowered its
long- and short-term foreign currency sovereign credit ratings on
the Bolivarian Republic of Venezuela to 'SD/D' from 'CC/C'. The
long- and short-term local currency sovereign credit ratings
remain at 'CCC-/C' and are still on CreditWatch with negative
implications. S&P said, "At the same time, we lowered our issue
ratings on Venezuela's global bonds due 2019 and 2024 to 'D' from
'CC'. Our issue ratings on the remainder of Venezuela's foreign
currency senior unsecured debt remain at 'CC'. Finally, we
affirmed our transfer and convertibility assessment on the
sovereign at 'CC'."
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
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Send announcements to conferences@bankrupt.com
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, 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
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