/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/180228.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 Wednesday, February 28, 2018, Vol. 19, No. 42 Headlines B R A Z I L AEGEA SANEAMENTO: Manaus Acquisition No Impact on Fitch BB Rating BRAZIL: Fitch Cuts Long-Term IDR to BB-; Alters Outlook to Stable BRAZIL: Central Bank President Touts Uptick in Nation's Economy ICBC DO BRAZIL: Moody's Assigns Ba2 Global LC Deposit Rating C O L O M B I A BANCO GNB: Fitch Affirms BB+ Long-Term IDR; Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REP: Peso Stable Against Dollar But RD$50 to US$1 Looms E L S A L V A D O R EL SALVADOR: Moody's Hikes LT Issuer Rating to B3; Outlook Stable M E X I C O BARCLAYS MEXICO: Moody's Affirms ba2 Baseline Credit Assessment GRUPO FAMSA: Fitch Affirms B- Long-Term IDR; Outlook Stable PETROLEOS MEXICANOS: Loss Climbs 74.4% to $16.8 Billion in 2017 T R I N I D A D & T O B A G O CARIBBEAN AIR: New Executive Hirings Raise Concerns for Nepotism V E N E Z U E L A VENEZUELA: Digital Currency Puts Country on Tech Vanguard - - - - - =========== B R A Z I L =========== AEGEA SANEAMENTO: Manaus Acquisition No Impact on Fitch BB Rating ----------------------------------------------------------------- The ratings for Aegea Saneamento e Participacoes S.A. (Aegea, BB/AA(bra)/Stable) are unchanged following its acquisition announcement earlier, according to Fitch Ratings. On Feb. 21, Aegea announced that it will acquire 100% of Companhia de Saneamento do Norte, the 100% owner of Manaus Ambiental S.A. (Manaus Ambiental). Manaus Ambiental is the concessionaire responsible for providing basic sanitation services in the city of Manaus, Brazil. Fitch believes Aegea can maintain its strong financial profile despite an expected important disbursement for the acquisition. This could reduce Aegea's liquidity and result in a moderate increase in net leverage of up to 3.8x on a pro forma basis from 2.9x in the 12-month period ended Sept. 30, 2017. The company may benefit from a potential minority shareholder capital injection to support the acquisition and maintain adequate liquidity. The deal is subject to the approval of Brazil's regulatory bodies, creditors and concession granting authority. It is expected to be completed within 120 days. The acquisition of Manaus Ambiental will help diversify Aegea's portfolio of operations, which benefits its business profile. The company should also benefit in the mid- to long term from operating efficiency improvements at Manaus Ambiental. Aegea's ratings are supported by the low business risk inherent to the water/wastewater utility sector in Brazil. Its operational subsidiaries benefit from an almost monopolistic position in their concession areas, highly predictable demand, and growth potential based on population and service coverage ratios increases. By the end of September 2017, Aegea's consolidated EBITDA was BRL593 million, and the EBITDA margin was 52%. In the same period, the company's consolidated cash totaled BRL404 million, not including net proceeds of BRL580 million related with its bond issuance concluded in 4Q2017. Fitch's ratings for Aegea incorporate its operating subsidiaries' exposure to a developing regulatory environment subject to political interference, particularly about tariff readjustments. These risks are mitigated by the positive track record of tariff increases at most of Aegea's subsidiaries in recent years, which has preserved the economic and financial balance of the concession contracts. The ratings also reflect the hydrological risk inherent in the company's operating sector, which has been manageable for its current subsidiaries. BRAZIL: Fitch Cuts Long-Term IDR to BB-; Alters Outlook to Stable ----------------------------------------------------------------- Fitch Ratings has downgraded Brazil's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'BB-' from 'BB' and revised the Rating Outlook to Stable from Negative. KEY RATING DRIVERS Brazil's downgrade reflects its persistent and large fiscal deficits, a high and growing government debt burden and the failure to legislate reforms that would improve the structural performance of public finances. The decision of the government not to put the social security reform to a congressional vote represents an important setback in the reform agenda that undermines confidence in the medium-term trajectory of public finances and the political commitment to address the issue. The October Presidential and Congressional elections mean that the social security reform will be delayed until after the elections and there is uncertainty whether the next administration will be able to secure its approval in a timely manner. Brazil's fiscal deficits remain large and are expected to decline only gradually. The government over-performed its primary deficit target for 2017. However, the general government deficit reached over 8% of GDP in 2017 (compared with 3% for the 'BB' median), and Fitch forecasts the deficit to average just over 7% of GDP during 2018-2019. The challenging political environment has hampered the ability of the government to secure congressional approval and enact revenue and spending measures intended to consolidate fiscal accounts in 2018. For example, the government was not able to secure approval for imposing a tax on certain investment funds and increase the civil servants' pension contributions, while a court injunction has suspended the postponement of salary adjustments for federal public sector workers. While a cyclical economic recovery and one- off revenue receipts can contribute towards meeting the 2018 primary deficit target, the inability to pass structural measures highlights the continuing political malaise and its adverse impact on fiscal policy. The increased social security deficit of private sector workers, which reached nearly 3% of GDP in 2017 and is above the total public sector primary deficit, highlights a structural issue confronting public finances. A social security reform and other spending adjustment measures appear to be integral components of any strategy to facilitate fiscal consolidation, bolster confidence in the medium-term public finances trajectory and make the spending cap (an important anchor for fiscal policy) viable and credible over the medium term. Despite several rounds of political negotiations and dilution of the proposal over time, the social security reform has been effectively shelved for now, highlighting the weakness of the political class to respond with corrective measures and potentially increasing fiscal challenges for the next administration. Moreover, the recent discussion on amending the 'golden rule' that limits government borrowing to fund capital spending just as it starts to bind, indicates that the commitment to meet self-imposed fiscal rules is weak. It also highlights continuing challenges to address the weak structure and trends in fiscal spending. The room to cut discretionary spending has narrowed significantly, public investment has fallen to new lows, and ongoing mandatory spending growth continues to put pressure on the fiscal position. The general government debt reached 74% of GDP in 2017, which is significantly above the 45% for the 'BB' median. Fitch forecasts the debt burden to reach 80% by 2019 and to continue to increase thereafter. The expected sizeable repayment (amounting to BRL130 billion or nearly 2% of GDP) of BNDES (the state development bank) loans to the Treasury in 2018 could ease the pace of debt accumulation this year. However, such one-off measures are insufficient to stabilize the debt burden over the medium term. The political backdrop continues to remain challenging, and the 2018 election cycle could introduce additional uncertainty. While still early in the election cycle, the lack of substantive support for a market-friendly candidate, the fragmented nature of the electoral landscape, reduced trust in institutions, and the ongoing Lava Jato investigations mean that risks related to the election cycle cannot be discounted. While Fitch does not anticipate a swing towards greater state interventionism and populism following the elections, policy uncertainty could continue, as the type and pace of economic and fiscal adjustment could differ depending on the winner and the strength of his/her congressional base. A strong political leadership and governability would be important to make progress on reforms to support confidence, enhance growth and reduce concerns about medium-term public debt sustainability. The 'BB-' rating and Stable Outlook also reflects Fitch's expectation that Brazil's external balance sheet will remain relatively strong during the forecast period and provide a cushion against external and/or domestic shocks. The high level of international reserves, a strong net sovereign external creditor positon and the significant reduction in the current account deficit provide the authorities room to manoeuvre in the face of a shock. Moreover, deep and developed domestic government debt markets continue to provide financing for the large fiscal deficit. Brazil's economic diversity, well entrenched civil institutions, and a higher than peer median per capita income are supportive of its credit profile. The Brazilian economy continues to recover from a prolonged and deep economic recession. Fitch forecasts growth averaging 2.6% in 2018-2019, up from an estimated 1% in 2017. Growth should be supported by the favourable external demand conditions as well as a recovery in domestic demand. However, the strength of the growth rebound could be constrained by political, fiscal, and reform uncertainties. The government has made some progress on its microeconomic reform agenda over the past year, for example, the labor reform and conversion of a subsidized long-term lending rate (TJLP) to a market-linked long-term lending rate (TLP), are positive measures for improving allocation of resources although their impact on the broader economy will likely take time to materialize. At the same time, inflation remains moderate (IPCA inflation reached 2.9% in January 2018) and inflation expectations remain well-anchored around the target, reflecting the gains in the central bank's monetary policy credibility. The current account deficit shrunk to 0.5% of GDP in 2017 and was more than fully funded by foreign direct investment. Fitch anticipates a gradual deterioration in the current account deficit, but it should remain below 2% of GDP during 2018-2019. SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Brazil a score equivalent to a rating of 'BBB-' on the Long-Term Foreign Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows: -- Public Finances: -1 notch, to reflect Brazil's rapidly worsened general government debt burden, which is expected to continue increasing during the forecast period. Fiscal flexibility is constrained by the highly rigid spending profile and a heavy tax burden that makes adjustment to shocks difficult. -- Structural Features: -2 notches, to reflect Brazil's continued challenging political environment and corruption-related issues that have hampered timely progress on reforms to improve confidence in the medium-term trajectory of public finances. In addition, the Ease of Doing Business indicators are weaker than the 'BB' median, reflecting structural constraints to growth. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within Fitch criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The Stable Outlook reflects Fitch's assessment that upside and downside risks to the ratings are balanced. The main factors that could, individually or collectively, result in positive rating action include: -- Improvement in the political environment that facilitates policy initiatives to address medium term public debt sustainability; -- Fiscal consolidation and improved prospects for debt stabilization; -- Improved growth outlook amid continued macroeconomic stability. The main risk factors that could, individually or collectively, result in negative rating action are: -- A sustained inertia related to fiscal reform and rapid growth in the government debt burden that threatens medium-term public debt sustainability; -- Deterioration in the sovereign's domestic and/or external market access conditions; -- Erosion of international reserves buffer and the broader external balance sheet. KEY ASSUMPTIONS -- Fitch assumes that China (an important trading partner for Brazil) will be able to manage a gradual slowdown and is forecast to grow at 6.4% in 2018 and 6.1% in 2019. Argentina's economic performance (key destination of manufacturing exports) is expected to remain supportive for Brazil during the forecast period. -- Fitch assumes that Brazil maintains international and domestic market access even if there is a return of higher international financial volatility and further domestic confidence shocks. Fitch has taken the following rating actions on Brazil: -- Long-Term Foreign Currency IDR downgraded to 'BB-' from 'BB'; Outlook revised to Stable from Negative; -- Long-Term Local Currency IDR downgraded to 'BB-'from 'BB'; Outlook revised to Stable from Negative; -- Short-Term Foreign Currency IDR affirmed at 'B'; -- Short-Term Local Currency IDR affirmed at 'B'; -- Country Ceiling downgraded to 'BB' from 'BB+'; -- Issue ratings on long-term senior unsecured foreign currency bonds downgraded to 'BB-' from 'BB'; -- Issue ratings on long-term senior unsecured local currency bonds downgraded to 'BB-' from 'BB'. BRAZIL: Central Bank President Touts Uptick in Nation's Economy --------------------------------------------------------------- EFE News reports that reduced inflation, a drop in interest rates and economic recovery in general were the key positive elements of the Brazilian economy last year, according to the president of Brazil's Central Bank. At the opening ceremony of the Spanish Chamber of Commerce in Sao Paulo, Ilan Goldfajn touted the economic policies carried out since late 2016, while noting the importance of maintaining "the reforms and economic adjustments in order to continue growing the Brazilian economy," according to EFE News. ICBC DO BRAZIL: Moody's Assigns Ba2 Global LC Deposit Rating ------------------------------------------------------------ Moody's Investors Service has assigned first-time global local currency deposit ratings of Ba2 and Not Prime, long- and short- term respectively, and foreign currency deposit ratings of Ba3 and Not Prime, long- and short-term respectively, to ICBC do Brasil Banco Multiplo S.A. (ICBC Brazil). Moody's also assigned Brazilian national scale deposit ratings of Aa3.br and BR-1, long- and short-term respectively, baseline credit assessment (BCA) of b1 and adjusted BCA of ba2, as well as counterparty risk assessments (CRA) of Ba1(cr) and Not Prime(cr), long- and short-term respectively. The outlook for all ratings is stable. The following ratings were assigned to ICBC do Brasil Banco Multiplo S.A.: -- Long-term global local currency deposit rating of Ba2, stable outlook -- Short-term global local currency deposit rating of Not Prime -- Long-term global foreign currency deposit rating of Ba3, stable outlook -- Short-term global foreign currency deposit rating of Not Prime -- Long-term Brazilian national scale deposit rating of Aa3.br -- Short-term Brazilian national scale deposit rating of BR-1 The following assessments were assigned to ICBC do Brasil Banco Multiplo S.A.: -- Baseline credit assessment of b1 -- Adjusted baseline credit assessment of ba2 -- Long-term counterparty risk assessment of Ba1(cr) -- Short-term counterparty risk assessment of Not Prime(cr) Assigned Outlook: Stable RATINGS RATIONALE ICBC Brazil's Ba2 long-term global local currency deposit rating incorporates the good health of the bank's loan portfolio, despite relevant concentrations, its strong capitalization and a balance sheet with ample liquidity. The deposit rating also incorporates a two-notch uplift from ICBC Brazil's baseline credit assessment (BCA) of b1, resulting from an assessment of very high affiliate support from China-based parent Industrial and Commercial Bank of China Limited (ICBC, A1 stable, baa2). On the other hand, the deposit rating is limited by ICBC Brazil's short track record of activity in the country, specifically through a period of strong economic recession, still evolving franchise and low business diversification. As a result, profitability has been modest reflecting the bank's limited operations and business volumes, and relatively high operating costs. Moreover, the rating incorporates the bank's reliance on short-term wholesale funding, including from related parties, indicating ICBC Brazil's still modest access to domestic investors. ICBC Brazil's good asset quality reflects management's conservative underwriting policies and the bank's focus on offering short-term trade financing to large domestic companies and to subsidiaries of Chinese companies in Brazil. Despite the absence of problem loans, ICBC Brazil's small loan portfolio has high concentration of borrowers and sectors relative to tangible common equity (TCE) and earnings, particularly to pre-provision income. Typically, high concentration increases credit risk, as one potential default of a single large borrower could hit capital through credit losses. As ICBC Brazil expands its loan book and its revenues, borrower concentration will likely decline; however, Moody's expect only moderate loan growth in view of the bank's relatively low legal lending limit. Regarding capital, in June 2017, ICBC Brazil's Moody's ratio of tangible common equity relative to risk-weighted assets was a comfortable 22.6%, and its tier 1 capital ratio was 29%, securely above the regulatory minimum of 6%. The ample capital base provides a strong buffer against potential loans losses and supports future loan growth. Notwithstanding the good asset quality and capital position, Moody's incorporate a negative qualitative adjustment to Business Diversification to reflect the evolving nature of ICBC's operations, and its modest earnings generation, derived from a small loan book and concentrated funding sources. However, management seeks actively to offset funding risks by maintaining an ample volume of liquid assets and diligent control of asset and liability term matching. As of June 2017, ICBC Brazil's ratio of liquid assets to tangible banking assets was a high 56.1%. RATINGS OUTLOOK The outlook on ICBC Brazil's deposit ratings is stable, reflecting Moody's view that the bank's standalone BCA is supported by good asset quality, an ample position of liquid assets and very strong capitalization, despite the bank's low earning and business diversification. In addition, the outlook also incorporates Moody's expectation that the level of affiliate support from the bank's parent will remain at very high levels. WHAT COULD CHANGE THE RATING -- DOWN/UP The standalone BCA of ICBC Brazil could be upgraded if the bank reports strong and steady origination of recurring revenues, backed by a larger number of products and services. Reduction in borrower concentration and enhanced access to domestic funding instruments, namely deposits, would also be positive for ratings. Conversely, ICBC Brazil's standalone BCA could be downgraded if the bank reports frequent and sizable deterioration of asset quality, which could deplete its capital base via credit losses. Difficulty in growing its main credit lines because of potential weakening of trade relations between Brazil and China could weaken profitability and lead to losses, which would also weigh negatively on the bank's BCA. Because of the very high affiliate support, the bank's global local-currency deposit rating would remain unchanged if its parent's BCA is downgraded by one notch; however, it would move down by one notch if its own standalone BCA is downgraded. METHODOLOGY USED The principal methodology used in these ratings was Banks published in September 2017. ICBC do Brasil Banco Multiplo S.A. is headquartered in Sao Paulo, Brazil, with assets of BRL902.7 million and shareholders' equity of BRL217.2 million as of June 30, 2017. =============== C O L O M B I A =============== BANCO GNB: Fitch Affirms BB+ Long-Term IDR; Outlook Stable ---------------------------------------------------------- Fitch Ratings has affirmed Banco GNB Sudameris S.A.'s (GNB) Long- Term Local and Foreign Currency Issuer Default Rating (IDR) at 'BB+'. The Rating Outlook is Stable. The IDRs are driven by its Viability Rating (VR) of 'bb+'. The bank's VR is highly influenced by its moderate franchise in Colombia, Peru and Paraguay and tight capitalization metrics. The bank's conservative risk policies reflect GNB's ability to manage risks and preserve strong asset quality ratios, while improving its liquidity profile and asset liability management during periods of economic deceleration in different operating environments. KEY RATING DRIVERS VR and IDRS GNB is a medium-sized universal bank whose size and geographical presence increased with the acquisitions from HSBC in 2013 in Colombia, Peru and Paraguay. GNB has a local market share in Colombia of approximately 3.8% of total assets, 1.9% of total loans and 4.4% of total deposits at November 2017. The bank has grown steadily since 2003, increased market share, and consolidated its business model, achieving consistent, albeit moderate, performance metrics while maintaining sound asset quality. The bank's capital adequacy is relatively tight, although gradually improving. Further partial comfort arises from its ample loan loss reserves, sound asset quality and risk management. Like other large Colombian banks, capitalization remains the bank's main credit weakness compared with similarly rated international peers (universal commercial banks in a 'bbb' operating environment). The bank's Fitch Core Capital (FCC) ratio was 9.33% at September 2017 and is supported by GNB's record of sound earnings generation and shareholder commitment to support the capitalization during 2018. Asset quality remains stable at sound levels, which is a strength considering the recent systemic asset quality deterioration in the Colombian market. The bank's conservative policies, relatively robust underwriting standards, and adequate risk controls, should contribute toward maintaining solid asset quality in the foreseeable future. The 90-day past due loan (PDL) ratio decreases to 1.34% at YE17 and was covered by loan loss reserves that amounted to about 1.5x PDLs. Asset quality metrics at its subsidiaries are stables and steadily improving. GNB's profitability is modest given its moderate business volumes and limited competitive advantages, which generally influences the interest margins and payrolls low risk nature. Sustainable earnings diversification and efficiency improvements on improving economies of scale support the bank's performance. Operating revenues over Risk Weighted Assets has recently ranged between 1.5% and 1.9%, a level below that of the bank's regional peers. GNB is amply funded by customer deposits. The moderate franchise gave a limited competitive advantage and generally influences the funding cost. Deposits come primarily from institutional and public investors, resulting in higher funding costs and higher concentrations by depositors, compared to banks with a wider retail deposit base. Over 40% of GNB's consolidated assets are in the form of cash and securities, as the bank is a market maker of government securities in Colombia. These holdings also contribute toward fulfilling the treasury services the bank provides to institutional customers, while further enhancing its overall funding and liquidity strategy. SUPPORT RATING AND SUPPORT RATING FLOOR The bank's support rating (SR) of '4' and Support Rating Floor (SRF) of 'B+' are driven by its moderate systemic importance and the growing share of retail deposits, although still modest as compared to local systemically important banks. Fitch believes there is a limited probability of receiving sovereign support if the bank were to need it, which underpins its SR and SRF. SRFs indicate the minimum level to which the entity's long-term IDRs could fall if Fitch does not change its view on potential sovereign support. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES GNB's subordinated debt is rated one notch below its VR to reflect lower expected recoveries in the event of liquidation. There is no notching applied due to non-performance risk, given the terms of the issuance, since this is a plain-vanilla subordinated debt issue without any material going concern loss-absorption features. Therefore, these securities are entirely considered liabilities by Fitch, rather than eligible loss-absorbing capital. RATING SENSITIVITIES VR and IDRS Upside potential for the international ratings is heavily contingent on a material improvement on capitalization levels, which is currently one of the weakest elements under Fitch's rating approach. An upgrade of the VR and IDRs could arise if the bank is able to reach and sustain a FCC ratio of at least 10%, while avoiding material deterioration of its other financial and qualitative credit fundamentals, with consistently better results, in the form of operating earnings over risk weighted assets greater than 2%. Downside pressure for the VR and IDRs would arise from further deterioration of its FCC ratio (consistently below 8%), especially if accompanied by negative trends in its profitability and/or asset quality metrics. SUPPORT RATING AND SUPPORT RATING FLOOR Upside potential for the SR and SRF is limited, as a significant growth of market share in Colombia is unlikely in the near and medium term. Should the bank's role as a market maker, or the market share of retail deposits decrease, the SR and SRF rating might eventually be revised downward. SUBORDINATED DEBT AND OTHER HYBRID SECURITIES Subordinated debt ratings will mirror any action on the banks VR, likely maintaining a one-notch difference under most circumstances. Fitch has affirmed Banco GNB Sudameris S.A.'s ratings as follows: -- Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) at 'BB+'; Outlook Stable; -- Short-term Foreign and Local Currency rating at 'B'; -- Viability Rating at 'bb+'; -- Support Rating at '4'; -- Support Floor at 'B+'; -- USD denominated subordinated notes at 'BB'. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REP: Peso Stable Against Dollar But RD$50 to US$1 Looms ----------------------------------------------------------------- Dominican Today reports that the Dominican peso continues to be stable against the dollar in the country's currency market as of Feb. 26, but a slow march that will take it to the RD$50.0 milestone within weeks likely inevitable. According to the Central Bank sellers get RD$48.91 per dollar, while buyers can expect to pay RD$48.98 per dollar, the report notes. The figures come amid the insistence of a dollar crunch by retail, industry, importers and other sectors, 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. ==================== E L S A L V A D O R ==================== EL SALVADOR: Moody's Hikes LT Issuer Rating to B3; Outlook Stable ----------------------------------------------------------------- Moody's Investors Service has upgraded the Government of El Salvador's long-term issuer and senior unsecured debt ratings to B3 from Caa1. The outlook remains stable. The key factors driving the rating upgrade are: 1. Significantly reduced government liquidity risks as political agreements have led to legislative assembly approval of long-term government financing and pension reform. 2. Materially diminished risk that political brinkmanship would lead to missed debt payments. The stable outlook on El Salvador's B3 rating reflects balanced risks. On the upside, now that liquidity risks have diminished, El Salvador's credit profile fundamentals will assume a greater significance. Moody's expects the debt-to-GDP ratio to stabilize this year as a result of improved fiscal dynamics following the approval of pension reform and economic growth above potential. On the downside, debt will stabilize at a higher level relative to the median of B-rated peers. Although high liquidity risks have materially subsided, medium-term rollover risks persist as an agreement in the legislative assembly to refinance an upcoming bond payment due in December 2019 is still pending. Moody's has also raised the long-term foreign-currency bond ceiling and the long-term foreign-currency deposit ceiling to B1 from B2. The short-term foreign currency bond and deposit ceilings remain unchanged at Not Prime. These ceilings act as a cap on ratings that can be assigned to the foreign-currency obligations of entities domiciled in the country. RATINGS RATIONALE RATIONALE FOR UPGRADE TO B3 SIGNIFICANTLY REDUCED GOVERNMENT LIQUIDITY RISKS Government liquidity risks are significantly lower because the legislative assembly approved $350.1 million in long-term financing to cover the government's needs in 2018, in tandem with approving the $5.5 billion budget in January. During 2016-17, failures to reach meaningful agreements between the two main political parties to issue long-term debt raised government liquidity risks -- a qualified (two-thirds) majority in the legislative assembly is required for long-term debt approval. As a result, the government was forced to prioritize debt-service payments over other spending, under-execute its budget and incur arrears with suppliers. Additionally, the government had to increasingly rely on short-term debt (LETES) to cover its financing needs (which does not require legislative approval), testing local banks' capacity to absorb additional amounts of government paper. After an agreement was reached on this year's budget and its financing, the government will no longer have to rely on these measures to meet its payment obligations. Moreover, contrary to what had been observed in the past, this year's budget does not underestimate expenditure or excludes revenue or expenditure accounts and incorporates realistic financing needs. In the past, budgets were artificially balanced to avoid the need to request approval for long-term debt issuance in the assembly. This year $350 million in long-term financing was approved to cover the 2018 deficit as part of the budget negotiations. The government is negotiating with a multilateral development bank a loan in budgetary support to cover this amount. The likelihood that banks will have to absorb additional amounts of short-term debt (LETES) has considerably diminished. The headquarters of many Salvadorian banks are no longer requesting that local banks reduce their LETES exposure and banks are willing to maintain their exposures. LETEs peaked at $1.07 billion in December 2016 but have come down standing at $745 million as of December 2017. The government is now exploring a solution to retire part of the outstanding LETES to reduce the interest expense. Moody's expects the government and the opposition will reach an agreement later this year or in early 2019 to approve long-term debt issuance to refinance the $800 million bond due in December 2019. MATERIALLY LOWER RISK THAT POLITICAL BRINKMANSHIP WILL LEAD TO A MISSED DEBT PAYMENT Political conditions that led to animosity between the main political parties and prevented agreements in the legislative assembly have taken a turn for the better. Despite being in the middle of legislative elections campaigning, El Salvador's political environment has become less confrontational and the views of the government and the opposition are much more aligned when it comes to fiscal and debt management. Political parties have been working together despite their differences, reaching agreements on pension reform (September 2017), long-term debt issuance (October 2017) and, more recently in January 2018, approval of this year's budget and its accompanying financing. Moody's believes this shift in political dynamics was prompted by the missed pension-related payment in April 2017, its market consequences, and the determination of the government and the opposition to avoid another similar episode. The passage of pension reform broke the long-standing political impasse and facilitated the subsequent legislative agreements, particularly because it reduced fiscal deficits and made budget negotiations less difficult. Lastly, the Constitutional Court played a role in forcing the parties to reach agreements in the legislative assembly. Two court rulings from July 2017 forced the government to fund pension- related obligations and blocked one of the avenues the government was pursuing to increase funding options without having to negotiate in the assembly. RATIONALE FOR THE STABLE OUTLOOK The stable outlook indicates risks to El Salvador's rating are balanced. On the upside, the pension reform will reduce pension- related government spending by around 0.9% of GDP annually, moving the fiscal deficit toward 2.5% of GDP in the coming years from 3.3% in 2015, according to Moody's estimates. Fiscal savings associated to pension reform will be lasting, as well as targeted cuts in energy subsidies implemented in 2016. Coupled with moderately stronger economic growth, this should contribute to improve the debt trend. As a result, the rating agency expects the debt-to-GDP ratio to stabilize around 62% of GDP in 2018. On the downside, debt will stabilize at a higher level relative to the median of B-rated peers (estimated at 57% of GDP) and even though liquidity risks have subsided, medium-term rollover risks remain as there is still an agreement pending in the assembly to refinance an upcoming bond payment due in December 2019. WHAT COULD CHANGE THE RATING UP Upward pressure on the B3 rating could come from continued fiscal restraint that could lead to a declining trend in debt metrics. Sustained economic growth, above El Salvador's potential rate of 2%, would also support an improvement in the sovereign's credit profile. A track record of political agreements in the legislative assembly that further eases liquidity risks would add positive pressure to the rating, particularly if related to approval of debt issuance to refinance upcoming debt payments. WHAT COULD CHANGE THE RATING DOWN Downward pressure on the B3 rating could come from a return of political confrontations as it would constrain government access to long-term financing, potentially compromising the refinancing of upcoming debt maturities. Signs that fiscal trends deteriorate and debt metrics continue to rise would also add negative pressure to the rating. GDP per capita (PPP basis, US$): $8,632 (also known as Per Capita Income) Real GDP growth (% change): 2.4% (2016 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): -0.9% (2016 Actual) Gen. Gov. Financial Balance/GDP: -2.8% (2016 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -2.0% (2016 Actual) (also known as External Balance) External debt/GDP: 60.7% (2016 Actual) Level of economic development: Moderate level of economic resilience Default history: No default events (on bonds or loans) have been recorded since 1983. On February 22, 2018, a rating committee was called to discuss the rating of the Government of El Salvador. The main points raised during the discussion were: The issuer's governance and/or management, have materially increased. The issuer has become less susceptible to event risks. The principal methodology used in these ratings was Sovereign Bond Ratings published in December 2016. The weighting of all rating factors is described in the methodology used in this credit rating action, if applicable. =========== M E X I C O =========== BARCLAYS MEXICO: Moody's Affirms ba2 Baseline Credit Assessment --------------------------------------------------------------- Moody's de Mexico S.A. de C.V. has placed on review for downgrade the Baa3 long-term global local and foreign currency deposit ratings of Barclays Bank Mexico, S.A. (Barclays Mexico). The rating agency has also placed on review for downgrade the bank's baa3 adjusted baseline credit assessment (BCA), its Prime-3 short- term global local and foreign currency deposit ratings, and its Aa3.mx long-term Mexican national scale deposit rating, as well as its long- and short-term Counterparty Risk (CR) assessments of Baa2(cr) and Prime-2(cr). In addition, Moody's placed on review for downgrade the Baa3 long- term global local currency issuer rating of Barclays Capital Casa de Bolsa, S.A. de C.V. (Barclays Capital CB). The brokerage house's short-term global local currency issuer rating of Prime-3 as well as its long-term Mexican National scale issuer ratings of Aa3.mx were also placed on review for downgrade. At the same time, Moody's affirmed Barclays Mexico's ba2 BCA, and its MX-1short-term Mexican national scale deposit rating, and affirmed Barclays Capital CB's MX-1 short-term Mexican National scale issuer rating. The rating action follows the announcement that Moody's had placed on review for downgrade on the ratings and BCA of Barclays Mexico's parent, Barclays Bank PLC (Barclays Bank) on February 22, 2018 due to ongoing credit challenges and ring-fencing implementation. The following ratings and assessments were affirmed: Barclays Bank Mexico, S.A. (815083902) -- Baseline credit assessment of ba2 -- Short-term Mexican National Scale deposit rating of MX-1 Barclays Capital Casa de Bolsa S.A. de C.V. (821609714) -- Short-term Mexican National Scale issuer rating of MX-1 The following ratings and assessments were placed on review for downgrade: Barclays Bank Mexico, S.A. (815083902) -- Adjusted baseline credit assessment of baa3 -- Long-term global local currency deposit rating of Baa3, Ratings under Review -- Short-term global local currency deposit rating of Prime-3 -- Long-term foreign currency deposit rating of Baa3, Ratings under Review -- Short-term foreign currency deposit rating of Prime-3 -- Long-term Mexican National Scale deposit rating of Aa3.mx -- Long-term Counterparty Risk Assessment of Baa2(cr) -- Short-term Counterparty Risk Assessment of Prime-2(cr) Barclays Capital Casa de Bolsa S.A. de C.V. (821609714) -- Long-term global local currency issuer rating of Baa3, Ratings under Review -- Short-term global local currency issuer rating of Prime-3 -- Long-term Mexican National Scale issuer rating of Aa3.mx Outlook actions: Barclays Bank Mexico, S.A. (815083902) - Outlook: Ratings under review Barclays Capital Casa de Bolsa S.A. de C.V. (821609714) - Outlook: Ratings under review RATINGS RATIONALE During the review of Barclays Bank, the rating agency will reassess the bank's overall credit profile given its ongoing credit challenges, particularly profitability, and evaluate the likely impact on the bank's existing creditors from the implementation of structural reforms ('ring-fencing') in the United Kingdom (Aa2 stable). Moody's expects to conclude the review of Barclays Bank over the next few weeks, when Barclays PLC plans to transfer the group's ring-fenced operations to Barclays Bank UK PLC (provisional deposit rating (P)A1) from Barclays Bank, well ahead of the legislation coming into force on January 1, 2019. The review of Barclays Bank has in turn triggered a review of Barclays Mexico as the Mexican operation's ratings currently benefit from two notches of ratings uplift from its standalone BCA due to the probability that it would receive financial support from its parent in an event of stress. At the same time, Moody's will also reconsider its assessment of Barclays Bank's willingness to provide support to its Mexican subsidiaries. Moody's has historically assessed Barclays Bank's willingness to support its Mexican operations as very high. However, the group's greater strategic focus in recent years on its two key markets, the UK and the US, has led to a reduction in the its international footprint, and could imply a lower willingness on its part to support the Mexican operations than was the case in the past, notwithstanding the continued management and financial interlinkages between these entities and their shared brand. If either the capacity of Barclays Bank to provide support to its Mexican subsidiaries, as reflected in its BCA, or Moody's assessment of its willingness to do so, were to decrease, Barclays Mexico's ratings would face downward pressure. The review for downgrade of the ratings of Barclays Capital CB considers that Moody's view of the brokerage house as highly integrated and harmonized (HIH) with Barclays Mexico due to the strong linkages between the two in terms of infrastructure, risk management practices and customer base. Consequently, Barclays Capital CB's ratings are aligned with those of the Mexican bank and are expected to remain so. Moody's expects to conclude the reviews of Barclays Mexico and Barclays Capital CB shortly after the conclusion of the review on Barclays Bank. The affirmation of Barclays Mexico's BCA captures the recent improvement in the bank's already strong core capitalization and its low risk profile, given that a significant portion of its risks from derivative operations are transferred to other companies of the Barclays group. The bank's reported total capital ratio increased to 29.6% as of year-end 2017, from 17.7% posted a year earlier, mainly as a result of a decrease in regulatory capital charges related to operational risk, as well as continued high earnings retention. However, Barclays Mexico's BCA is currently constrained by its niche wholesale and investment banking operations, with a narrow focus on derivative operations, foreign exchange trading and bond underwriting. This generates inherently volatile earnings that are more vulnerable than those of traditional retail and commercial banking, in addition to the currently elevated level of uncertainty in Mexico regarding the outcome of the North American Free Trade Agreement (NAFTA) negotiations and the upcoming presidential election. WHAT COULD MOVE THE RATINGS UP OR DOWN Barclays Mexico's and Barclays Capital CB's ratings would likely be downgraded following a downgrade of Barclays Bank's BCA, and/or a reduction in Moody's assessment of the probability of affiliate support. The ratings could be confirmed if Moody's were to confirm Barclays Bank's BCA or Moody's maintains its assessment of the parent's willingness to support the Mexican operation at very high. Barclays Mexico's standalone strength may face upward pressures if the NAFTA renegotiation results in a benign outcome for Mexico, and uncertainty related to the outcome of Mexican presidential elections subsides, as the bank's capital, asset quality, and earnings are vulnerable to the heightened market volatility these dynamics generate. However, this is unlikely to result in upward pressure on the supported ratings of the Mexican subsidiaries at this time given the review for downgrade. The principal methodology used in rating Barclays Bank Mexico, S.A. was Banks published in September 2017. The principal methodology used in rating Barclays Capital Casa de Bolsa, S.A. de C.V. was Securities Industry Market Makers published in September 2017. The period of time covered in the financial information used to determine Barclays Bank Mexico, S.A. and Barclays Capital Casa de Bolsa, S.A. de C.V. ratings is between January 1, 2013 and 31 December 2017 (source: Moody's, issuers' annual audited and quarterly unaudited financial statements, Comisi¢n Nacional Bancaria y de Valores). GRUPO FAMSA: Fitch Affirms B- Long-Term IDR; Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Grupo Famsa S.A.B. de C.V.'s (Famsa) Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) at 'B-', National Long Term Rating at 'BB (mex)' and National Short Term Rating at 'B(mex)'. The Rating Outlook is Stable. The rating action reflects Famsa's market position within the Mexican retail sector, geographic and product diversification, stable operating cash flow generation by the Mexican retail operation, and the expectation of a gradual improvement in leverage. Fitch expects Famsa to receive at least MXN0.8 billion payment from its main shareholder (Humberto Garza Gonzalez) guarantee in 2018 to reduce debt. Fitch also expects that Famsa's initiatives to refinance a part of its remaining short-term debt will be successful. The ratings incorporate Fitch's expectation that Famsa will receive additional significant payments from Mr. Garza during 2019 - 2020, which will be directed toward repaying debt. KEY RATING DRIVERS Good Performance in Mexican Retail Sales: During the LTM ended September 2017, Mexican sales performed in line with peers and showed a close to 10% increase compared to the same period last year. For 2018, Famsa's main challenge is to retain market share and profitability amid the potential slowdown in the economy during the second half of the year in a market where larger retail chains, such as Coppel and Elektra, also target the low-income segment of the population. Profitability and Liquidity Initiatives Showing Up: Famsa took actions to improve profitability and liquidity during the year, such as redesigning the personnel structure, reducing costs and expenses, executing maintenance-only capex and carrying out selective store closings. The company also reduced its short-term FX exposure by hedging its senior notes coupons for 2018. During 2017, Famsa changed to a more conservative origination policy. Salary compensation for certain positions was linked to portfolio quality, promoting new credits with higher quality standards. These initiatives could potentially affect 2018 results positively relative to Fitch's expectations. Banco Famsa Undergoing Operational Consolidation: Famsa's financial division, Banco Famsa (BAF), has good brand equity and a good competitive position in consumer finance, mainly in northeastern Mexico. BAF's profitability has been improving but its financial performance is constrained by its high funding costs and still high loan-impairment charges, which limit the bank's profitability and internal capital generation. Given BAF's ambitious growth strategy, the institution has required constant capital injections from Famsa. During the 2015 to 2017, Famsa made average annual capital increases of MXN400 million to BAF. One of BAF's main strengths is its diversified and relatively stable and resilient base of customer deposits. BAF also shows organic growth in its loan portfolio, although its customers' sensitivity to a weak economic environment continues to be a limiting factor. U.S. Operations Continue under Pressure: U.S. stores' same store sales decreased 10% to 25% during the last two years, beyond the company's expectations. For the LTM ended Sept. 30, 2017, revenues from U.S. operations were MXN1.9 billion, a decrease compared to MXN2.3 billion in 2016. Fitch believes 2018 will remain a challenging year for Famsa's U.S. operations, given the current migration policy that negatively affects Famsa's target market of U.S. Hispanic customers. The company is redirecting its commercial strategy for the U.S. by targeting second and third generations of Hispanics and improving its social media presence. Leverage to Recover: Weaker than expected results in Famsa's U.S. operations have led to sustained levels of high leverage. The company ended September 2017 with a lease adjusted debt (excluding banking deposits) to EBITDAR ratio of 6.5x. Fitch expects adjusted leverage to decrease to 6.0x by the end of 2017 and to be around 5.0x by the end of 2018. As of September 2017, Famsa's total debt was MXN8.9 billion, with 28.5% from the Bancomext facility and 28.1% from the senior unsecured notes due in 2020. DERIVATION SUMMARY Grupo Famsa's business risk profile is closer to the upper level of the 'B' category when compared to peers. Grupo Famsa is less geographically diversified than Elektra and Unicomer, but it is well positioned in its influence area of Northern Mexico. The company has a lower number of stores than Grupo Elektra (BB/Stable) and Grupo Unicomer (BB-/Stable). From a financial risk profile view, Grupo Famsa leans towards the lower level of the 'B' category when compared to peers. The company maintains a weaker financial position in terms of profitability, flexibility and financial structure than Elektra and Unicomer. Grupo Famsa's operating margins are lower but close to Unicomer's, while Elektra has the best operating margins of the three companies. Grupo Famsa ranks below Elektra and Unicomer in terms of credit metrics and liquidity position. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Consumption in Mexico decrease during second half of 2018; -- Consolidated revenues grow 5% on average annually during 2018 - 2020; -- Average EBITDA margin of 9.6% during 2018 - 2020; -- EBITDA from the U.S. division is negative in 2017 and neutral to positive in 2018 - 2020; -- Average funds from operations (FFO) of MXN5.5 billion per year for 2017 - 2020; -- Consolidated debt (excluding bank deposits) of around MXN7.8 billion in 2018 - 2019; -- Average capex of MXN205 million during 2017 - 2020; -- No dividends payment for 2017 - 2020; -- Famsa receives MXN0.8 billion per year from Mr. Garza's guarantee during 2018 - 2020; -- BAF requires capital increases of MXN450 million per year from Famsa during 2018 - 2020 to support its growth strategy. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Sustained consolidated gross debt to EBITDA (excluding deposits) of 5.0x or below; -- Better than expected progress in the cash collection of Mr. Garza's pending MXN4.0 billion guarantee; -- A recovery of the U.S. operations; -- A trend of decreasing capital injections from Famsa to BAF; -- Continued strengthening of the consolidated credit portfolio's quality. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- Failure to receive additional significant payments from Mr. Garza's guarantee; -- Additional / unexpected weaknesses in internal operating controls; -- Deterioration in BAF's creditworthiness beyond FAMSA's ability to lend support; -- Consolidated gross debt to EBITDA (excluding bank deposits) consistently above 6.5x; -- Lower than expected EBITDA generation by FAMSA USA; -- Deterioration in the quality of the consolidated loan portfolio. LIQUIDITY Liquidity Should Be Adequate: As of September 2017, Famsa's short- term debt (excluding banking deposits) was MXN3 billion, and it has cash holdings of about MXN1.8 billion (most of it at BAF). With the MXN0.3 billion Famsa received during the 4Q17 from Mr. Garza and the cash generated during holiday season, the company was able to improve its liquidity position and reduce short-term debt. Famsa's short-term debt is mostly made up of short-term Cebures issuances, which the company has been able to roll over, and bank loans with several institutions. Recovery Analysis For issuers with IDRs at 'B+' and below, Fitch performs a recovery analysis for each class of obligations of the issuer. The issue rating is derived from the IDR and the relevant Recovery Rating (RR) and notching, based on the going concern enterprise value of a distressed scenario or the company's liquidation value. Fitch's recovery analysis for Famsa places a going concern value under a distressed scenario of approximately MXN4.8 billion; based on a going-concern EBITDA of MXN864 million and a 5.5x multiple. The going concern value is higher than the liquidation value, which Fitch estimates at about MXN1.9 billion. The MXN864 million going-concern EBITDA assumption reflects a 36% discount from the current EBITDA generation for the LTM ended September 2017 due to further deterioration of the U.S. operations and -at the same time- an important consumer contraction in Mexico. The 5.5x multiple is the median multiple for retail going- concern reorganizations. The liquidation value considers no value for cash due to the assumption that cash dissipates during or before the bankruptcy. Fitch applied a 100% discount on the credit portfolio given that most of it is allocated within BAF, which is a regulated entity and has another liquidation process. Fitch has also applied a 50% discount on inventory and PPE as a proxy for the liquidation value of those assets. With these calculations, Famsa's senior unsecured notes are rated 'B-'/'RR4', indicating average recovery prospects (31% to 50%). FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Grupo Famsa S.A. de C.V. -- Long-Term Foreign and Local Currency IDR at 'B-', Stable Outlook; -- Long-term National rating at 'BB(mex)', Stable Outlook; -- Short-term National rating at 'B(mex); -- USD250 million senior unsecured notes due in 2020 at 'B- '/'RR4'; -- MXN0.5 billion short-term Certificados Bursatiles program at 'B(mex)'; -- MXN1.0 billion short-term Certificados Bursatiles program at 'B(mex)'. PETROLEOS MEXICANOS: Loss Climbs 74.4% to $16.8 Billion in 2017 --------------------------------------------------------------- The Latin American Herald reports that state-owned oil giant Petroleos Mexicanos reported a net loss of $16.84 billion for 2017, up 74.4 percent from the $9.66 billion loss posted the previous year. The loss was the result of deteriorating assets, higher taxes and the drop in the value of the peso against the dollar, among other factors, Pemex said, according to The Latin American Herald. Revenues totaled $71 billion, up 30.1 percent from 2016, Pemex said, the report notes. The report relays that production averaged 1.95 million barrels per day (bpd) of crude, down 9.8 percent from 2016. Natural gas output fell 13.6 percent last year to 4.2 billion cubic feet per day, Pemex said, the report says. Liabilities, including short- and long-term debt, and other items, rose 1.8 percent to $183.26 billion last year, the report says. Pemex said it finished 2017 with total debt of $102.99 billion, up 2.8 percent from the end of 2016, of which 92 percent is long-term debt, the report adds. About Petroleos Mexicanos Based in Colonia Veronica Anzures, Mexico, Mexican Petroleum, also known as Petroleos Mexicanos, engages in the exploration, exploitation, refining, transportation, storage, distribution, and sale of crude oil, natural gas, and derivatives of petroleum and natural gas in Mexico. It explores and produces crude oil and natural gas in the northeastern and southeastern regions of Mexico and offshore in the Gulf of Mexico; converts crude oil into gasoline, jet fuel, diesel, fuel oil, asphalts, and lubricants, as well as distributes and markets these products in Mexico; and processes wet natural gas to obtain dry natural gas, liquefied petroleum gas, and other natural gas liquids. * * * As reported in the Troubled Company Reporter on Oct. 05, 2016, Mexican Petroleum filed its report on form 6-K, disclosing a net loss of MXN145.47 billion on MXN480.70 billion of total sales for the six-month period ended June 30, 2016, compared to a net loss of MXN185.18 billion on MXN588.36 billion of total sales for the same period in the prior year. As of June 30, 2016, the Company had MXN2.05 trillion in total assets, MXN3.50 trillion in total liabilities and a total stockholders' deficit of MXN1.44 trillion. The Company has experienced recurring losses from its operations and have negative working capital and negative equity, which raises substantial doubt regarding its ability to continue as a going concern. ================================ T R I N I D A D & T O B A G O ================================ CARIBBEAN AIR: New Executive Hirings Raise Concerns for Nepotism ---------------------------------------------------------------- Trinidad Express reports that Caribbean Airlines (CAL) Limited is getting a slate of new executives, but the fact that some of the vacancies are being filled by former employees of the Irish-owned telecommunications company, Digicel, has raised concerns about nepotism in CAL's hiring practices. Sources within the company say that former Digicel executive Garvin Madera, who was recruited as CAL CEO last year, is on a hiring "spree" given that the company had initiated a hiring freeze and the jobs were advertised and filled after he assumed office, according to Trinidad Express. Mr. Moreso, they are concerned about the lack of aviation experience in the company's recent recruitments, the report notes. Mr. Madera who was CEO at Digicel Play with a Masters in electrical and computer engineering, had no aviation experience prior to his taking the post CAL's chief executive, the report adds. Caribbean Airlines Limited -- http://www.caribbean-airlines.com/ -- provides passenger airline services in the Caribbean, South America, and North America. The company also offers freighter services for perishables, fish and seafood, live animals, human remains, and dangerous goods. In addition, it operates a duty free store in Trinidad. Caribbean Airlines Limited was founded in 2006 and is based in Piarco, Trinidad and Tobago. As reported in the Troubled Company Reporter-Latin America on November 2, 2015, RJR News said that Michael DiLollo, Chief Executive Officer of Caribbean Airlines Limited has quit after just 17 months on the job. The 48-year-old Canadian national, citing personal reasons, resigned with immediate effect. His resignation was accepted by the airline's board of directors. Mr. DiLollo was appointed Caribbean Airlines CEO in May 2014, following the sudden resignation of Robert Corbie in September 2013. In early February 2015, Larry Howai, then Finance Minister, told Parliament that unaudited accounts for 2014 showed the airline made a loss of US$60 million, inclusive of its Air Jamaica operations, and the airline planned to break even by 2017. Mr. Howai told the Parliament that a five-year strategic plan had been completed and was in the process of being approved for implementation. In an interview with the Trinidad & Tobago Guardian in early November 2015, Mr. DiLollo said CAL did not need a bailout just yet. Mr. DiLollo said the airline had benefited from extremely patient shareholders for years and he believed the airline was strategically positioned to break even in three years. ================= V E N E Z U E L A ================= VENEZUELA: Digital Currency Puts Country on Tech Vanguard --------------------------------------------------------- Scott Smith and Christine Armario at The Associated Press report that cash-strapped Venezuela became the first country to launch its own version of bitcoin, a move President Nicolas Maduro celebrated as putting his country on the world's technological forefront. In its first hours on the market, the so-called petro racked in $735 million worth in purchases, President Maduro said without providing details, according to The Associated Press. The report notes that the petro is backed by Venezuela's crude oil reserves, the largest in the world, yet it hit the market as the socialist country sinks deeper into an economic crisis marked by soaring inflation and food shortages that put residents in lines for hours to buy common products. "We have taken a giant step into the 21st Century," President Maduro said in a nationally broadcast show, the report relays. "We are on the world's technological vanguard." The petro's unveiling played out before a live studio audience inside the presidential palace Miraflores, complete with red carpets and a splashy set prominently displaying a crafted marketing symbol "P," for petro, the report notes. The report relays that President Maduro received a brief demonstration on the sophisticated computer technology needed to support the digital currency, and he heard from a Russian executive of a company that will run the platform. The president also authorized payments in cryptocurrency for Venezuela's consulate services and fuel on the border, saying it is just the "kryptonite" Venezuela needs to take on Superman - code for the imperialist United States, the report notes. Venezuelan officials, however, have released few of the nitty- gritty details of how it will work, ensuring investors that it is safe, the report says. Venezuela watchers offered potential investors fair warning, the report adds. "My advice would be to tread very carefully with this - especially considering the track record of the Venezuelan government," said Federico Bond, co-founder of Signatura, a digital startup based in Argentina, the report discloses. President Maduro late last year disclosed he was creating the digital currency to outmaneuver U.S. sanctions preventing cash- strapped Venezuela from issuing new debt, the report recalls. The government said it will release 100 million digital petro coins during the first year, with the initial 38.4 million expected to go on sale at a value of $60 per token, the report notes. If all the initial coins offered for sale are grabbed by investors, it could potentially bring several billion dollars into a government mired by cash shortfalls and skyrocketing inflation, the report says. The government has promised that Venezuelans will be able to use the coins to pay taxes and public services. But with the Venezuelan minimum wage hovering around $3 a month, it's unlikely citizens will buy in large amounts, the report relays. The U.S. Treasury Department has warned U.S. citizens and companies that buying the petro would mean violating sanctions, putting another damper on the release, the report discloses. Cryptocurrency experts are looking at Venezuela's foray into digital currencies with a mix of intrigue and suspicion, excited by the prospect of a government willing to accept cryptocurrency for payments like taxes but also concerned about the potential lack of oversight, the report notes. President Maduro has touted the petro as fulfilling the late Hugo Chavez's dream of upending global capitalism away from the dominance of the U.S. dollar and Wall Street, the report notes. Raising further doubts, Maduro has said that the undeveloped Orinoco oilfield will back the digital currency, creating no tangible barrels of oil that investors can cash in, said Jean Paul Leidenz, a senior economist at Caracas-based EcoAnalitica, the report says. Bitcoin and other digital tokens are already widely used in Venezuela as a hedge against hyperinflation and an easy-to-use mechanism for paying for everything from doctor visits to honeymoons in a country where obtaining hard currency requires transactions in the illegal black market, the report notes. The use of computers for bitcoin mining has also taken off, spurred by some of the world's cheapest electricity rates and widespread desperation prompted by a recession deeper than the U.S. Great Depression, the report says. Cryptocurrencies by design are decentralized financial systems, so one created by a government runs contrary to that spirit and creates an opportunity for manipulation, said Mr. Leidenz, the report relays. And Venezuela's inflation rises faster in a day than it does in stable countries in a year, he said, adding that dreaming up a new currency alone isn't the answer, the report notes. "You cannot stop hyperinflation by creating a new currency and doing nothing else," Mr. Leidenz said, notes the report. "The government has no plans of undertaking structural reform." *********** 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 2018. 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. . * * * End of Transmission * * *