/raid1/www/Hosts/bankrupt/TCRLA_Public/180618.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Monday, June 18, 2018, Vol. 19, No. 119
Headlines
A R G E N T I N A
ARGENTINA: Merges Ministries After Resignation of Bank Chief
ARGENTINA: DBRS Confirms B LT Issuer Ratings, Trend Stable
B O L I V I A
CREDINFORM INTERNATIONAL: Moody's Withdraws B2/Baa1.bo IFS Ratings
B R A Z I L
AEGEA SANEAMENTO: Fitch Affirms BB IDRs & Revises Outlook to Neg.
CENTRAIS ELETRICAS: Fitch Hikes IDRs to 'BB-', Outlook Stable
C U B A
CUBA: Spanish Companies to Expand Operations in Country
M E X I C O
BANCO INTERACCIONES: Fitch Maintains 'BB+'/'B' IDRs on RWP
P U E R T O R I C O
COMERCIAL CELTA: Disclosures OK'd; August 25 Plan Hearing
MMM HEALTHCARE: Moody's Withdraws Ba3 IFS Rating
TOYS R US: Taps Cushman & Wakefield as Real Estate Advisor
TOYS R US: Propco II Debtors File Chapter 11 Liquidation Plan
V E N E Z U E L A
VENEZUELA: Protest Before PAHO to Denounce Health Crisis
VENEZUELA: Maduro Names Delcy Rodriguez as Vice President
X X X X X X X X X
* BOND PRICING: For the Week From June 11 to June 15, 2018
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A R G E N T I N A
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ARGENTINA: Merges Ministries After Resignation of Bank Chief
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EFE News reports that the Argentine government disclosed that it
will merge the Treasury and Finance Ministries after the
resignation of Central Bank (BCRA) president Federico
Sturzenegger, who will be replaced by the former head of Finance,
Luis Caputo.
In a communique, the government said that both portfolios will be
placed under the control of Nicolas Dujovne, who to date has been
serving as the Treasury minister, adding that he has also been
handed the role of coordinating the country's economic policy
after Buenos Aires asked for a loan from the International
Monetary Fund, according to EFE News.
The report notes that Mr. Sturzenegger presented his resignation
to president Mauricio Macri at a meeting at which the latter
thanked him for "the work performed during your tenure at the head
of the BCRA."
ARGENTINA: DBRS Confirms B LT Issuer Ratings, Trend Stable
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DBRS, Inc. confirmed the Long-Term Foreign Currency -- Issuer
Rating of the Republic of Argentina at B and the Long-Term Local
Currency -- Issuer Rating at B (high). The Short-term Foreign and
Local Currency -- Issuer Ratings were confirmed at R-4. The trends
on all ratings remain Stable.
KEY RATING CONSIDERATIONS
Argentina's ratings reflect the progress made in reducing
macroeconomic imbalances. Argentine authorities have begun to
lower the fiscal deficit, reduce medium-term inflation
expectations, and improve the business environment. These policy
adjustments, if sustained, should better position Argentina to
take advantage of its considerable growth potential over the
medium term. Nonetheless, Argentina's ratings suffer from its
record of poor economic management as well as the scale of the
near-term macroeconomic challenges. Inflation remains stubbornly
high, reflecting wage rigidities, rising utility prices, and
transitory shocks. The economy remains heavily reliant on external
financing. Furthermore, tighter monetary and fiscal policies will
likely dampen the near-term growth outlook and could ultimately
jeopardize the political sustainability of the adjustment effort.
RATING DRIVERS
In spite of the near-term challenges stemming from recent interest
rate and exchange rate volatility, DBRS views the administration's
policy response positively and sees potential for upward pressure
on the rating within the next 18 months. The ratings could be
upgraded if there is (1) continued progress on disinflation and
fiscal consolidation, particularly if in combination with (2)
increased evidence that reforms are bearing fruit in generating
rising employment and productivity, which should in turn help to
make reforms politically sustainable; or (3) continued progress in
improving the quality of public expenditure and public
institutions generally. Downside risks to the ratings include (1)
increased political opposition that effectively halts progress on
the macroeconomic adjustment program, or (2) additional external
shocks that undermine prospects for a successful adjustment.
RATING RATIONALE
Multi-year Fiscal Consolidation on Track, but Increased Restraint
on Current Expenditure Needed to Stabilize Debt
Argentina's fiscal position leaves the country vulnerable to
shocks, given the country's low levels of domestic savings and
heavy reliance on external borrowing. Nonetheless, the Macri
administration has delivered thus far on its fiscal consolidation
targets. The primary fiscal deficit (for the federal public
sector) declined to 3.8% of GDP in 2017. Current expenditure
declined slightly in real terms. While social benefits expanded at
a strong pace, cuts in subsidies and public investment more than
compensated. These trends continued in the first four months of
2018. This focus on capital expenditure cuts reflects a reduction
in energy and transport subsidies in favor of better targeted
income support programs.
Fiscal consolidation is expected to accelerate in 2018 and 2019,
with the government seeking to reduce the primary deficit by over
1% of GDP each year. However, with elections 15 months away and
the economy expected to slow, the credibility of the fiscal
consolidation effort will likely be put to the test. Meeting
fiscal targets will require a stronger effort in controlling
current spending. Social spending continues to rise at a rate well
above inflation, while public capital expenditure has declined
significantly in real terms. In addition, interest costs borne by
the government have increased. The IMF projects that interest
costs at a general government level will rise from just under 2%
of GDP in 2017 to nearly 4% of GDP in 2023. DBRS sees considerable
uncertainty around these estimates, but the trend of rising
interest costs only heightens the importance of a durable
reduction in current expenditure.
Public debt levels are relatively low in comparison to many
advanced economies, but high interest costs and Argentina's
reliance on foreign currency borrowing significantly increase the
risks associated with Argentina's public debt. Roughly two-thirds
of Argentina's public debt is denominated in foreign currency.
Real market-determined yields are high and have risen
significantly in the past month. With the exchange rate down
nearly 25% year-to-date, the debt/GDP ratio is expected to rise in
2018. Although the debt ratio is expected to remain broadly stable
after 2018, this depends on successfully implementing the fiscal
consolidation plan.
The Central Bank is Aggressively Tightening to Strengthen Policy
Credibility
Monetary policy has been similarly focused on restoring
credibility. An increasing reliance on central bank financing
under the previous administration was rapidly undermining the
value of the peso. While the new Central Bank (BCRA) Governor has
made progress in lowering inflation, this has proven a challenge
amid cuts to subsidies, a volatile exchange rate, and negotiated
wage hikes, all of which can contribute to inflationary pressures
with a lag and thus create substantial inertia in price dynamics.
In December 2017, the government modified the BCRA's 2018
inflation target to 15% and subsequently negotiated 15% wage
increases for most sectors. Nonetheless, YTD inflation (Jan-Apr)
was 9.5% and inflation appears likely to end the year well above
the target. Given the anticipated effects of recent peso
depreciation, pressures are rising for a renegotiation of the 2018
salary agreements. The BCRA has increased interest rates by nearly
1300 basis points since April in an effort to fight back against
rising inflation expectations.
The BCRA's ability to slow inflation and gradually lower inflation
expectations is critical to restoring confidence in the peso. In
DBRS's view, the primary risks to monetary policy objectives come
from political pressures to renegotiate wage agreements and
overall voter fatigue with fiscal and monetary tightening. In this
context, efforts to negotiate an IMF arrangement should support
the stabilization effort, but the domestic political landscape
leading into 2019 elections will ultimately determine whether
recent policy improvements will endure (see recent commentary, IMF
Support a Potential Positive, But Not Without Risks).
Bank credit has played a limited role in Argentina's economy since
the 1990s. At 17% of GDP, credit remains at a level well below
that of regional peers. The 2001 crisis undermined confidence in
the banking system, and the previous administration's misreporting
of inflation statistics only reinforced residents' tendency to
save in foreign banks and in U.S. dollars. Credit growth has
recently picked up, increasing 56% on a y/y basis as of March.
Although U.S. dollar borrowing has also picked up as restrictions
have eased (now 18% of total bank credit to the private sector),
most of the growth in bank credit is peso-denominated. Increased
confidence in the currency and banking system would help support
continued financial deepening. However, risks associated with
rapid credit growth will need to be monitored closely,
particularly if foreign currency loans continue to grow as a share
of the total.
Economic Performance Improving, in Spite of Expected Cyclical
Slowdown
The economy returned to growth in 2017 driven by capital
investment and private consumption growth. The repatriation of
foreign assets combined with an easing of trade restrictions has
helped fuel a sharp rise in construction and other investment. In
value-added terms, the retail and wholesale trade sectors along
with financial and business services have led the recovery. First
quarter 2018 performance appears to have been similarly strong,
but some sectors are showing signs of a slowdown and tighter
macroeconomic policies are expected to cause a further
deceleration in growth. Moreover, the agricultural sector has
faced drought conditions. Soybean production in 2018 will likely
generate the lowest crop yields in a decade.
DBRS remains of the view that Argentina has solid medium-term
growth prospects. The economy should be in a strong position to
rebound in 2019 and 2020. In the near term, however, weak growth
could undermine support for the Macri administration and generate
uncertainty regarding the future path of economic policy. Current
projections show the economy slowing late in 2018 and in the first
half of 2019. If this slowdown is deeper than expected or
accompanied by higher unemployment and labor unrest, this could
test the administration's resolve in pursuing its agenda or simply
lend greater popularity to opposition candidates.
External Vulnerabilities Elevated, but IMF Support Likely to Aid
Rebalancing
Argentina's current account has deteriorated in recent years and
reached 4.8% of GDP in 2017. This reflects increased imports of
machinery and other capital goods, as well as higher income
payments to foreign holders of Argentine debt. Exports have also
stagnated, reflecting competitiveness challenges and (more
recently) a weak harvest. Financing has largely been provided in
the form of portfolio inflows. FDI remains very low compared to
regional peers, in spite of recent reforms to improve the business
climate. The recent depreciation of the peso (down 23% YTD) should
facilitate an external rebalancing, provided the authorities
undertake a sustained effort to limit inflationary pressures. IMF
support should ultimately bolster the government's efforts to
rebalance the economy.
Institutional Metrics Show Some Improvement, but Political
Sustainability Remains in Doubt
World Bank indicators suggest that the Macri Administration is
perceived to have made significant strides in improving the rule
of law, government effectiveness, and other key areas of
governance. 2017 survey results are not yet available, yet in the
area of regulatory quality; Argentina has improved over 20 points
in the percentile rankings (to a still low 34%) in just two years.
Similar indicators compiled by other international organizations
also show considerable strides in 2016 and 2017. At the same time,
polls show the President's popularity slipping, and some other
indicators (such as the World Bank's Doing Business Indicators)
show limited or no progress. Macri appears to retain considerable
support among the business community, but the losses in real
disposable income felt by much of the population have weighed on
his popularity.
There is little clarity at this stage regarding the most likely
opposition candidates for the 2019 Presidential election. Some
opposition politicians (particularly the FPV) have seized on the
ongoing negotiations with the IMF as a rallying point for
protests. Unions continue to agitate for higher wages as
compensation for inflation, while the opposition in Congress seeks
to roll back utility tariff hikes. At this point, it seems
unlikely that the fragmented opposition will succeed in rolling
back recent reforms or in coalescing around a single candidate,
particularly one that would advocate a rapid return to monetized
fiscal deficits and the reimposition of controls on trade and
capital flows. However, there is ample time for candidates to come
forward, and there is a possibility of a runoff election between
two individuals with dramatically different economic agendas.
RATING COMMITTEE SUMMARY
The DBRS Sovereign Scorecard generates a result in the BB (low) -
B range. The main points of the Rating Committee discussion
included: negotiations with the IMF, recent financial market
volatility, fiscal and monetary policy, external imbalances,
reserve adequacy, political institutions, and the outlook for 2019
elections.
KEY INDICATORS
Fiscal Balance (% GDP): -6.5 (2017); -5.5 (2018F); -4.9 (2019F)
Gross Debt (% GDP): 52.6 (2017); 54.1 (2018F); 52.7 (2019F)
Nominal GDP (USD billions): 637.7 (2017); 542.2 (2018F); 561.0
(2019F)
GDP per capita (USD thousands): 14.5 (2017); 12.7 (2018F); 12.8
(2019F)
Real GDP growth (%): 2.9 (2017); 2.0 (2018F); 3.2 (2019F)
Consumer Price Inflation (%, eop): 24.8 (2017); 23.0 (2018F); 17.0
(2019F)
Domestic credit (% GDP): 24.5 (2017); 25.8 (Mar-2018)
Current Account (% GDP): -4.8 (2017); -5.1 (2018F); -5.5 (2019F)
International Investment Position (% GDP): 3.5 (2017)
Gross External Debt (% GDP): 35.2 (2017)
Foreign Exchange Reserves (% short-term external debt + current
account deficit): 64.9 (2017)
Governance Indicator (percentile rank): 55.3 (2016)
Human Development Index: 0.83 (2015)
Notes: All figures are in USD unless otherwise noted. Public
finance statistics reported on a general government basis unless
specified. Fiscal and debt statistics drawn from IMF WEO (general
government basis); Government fiscal performance and targets
referred to in text pertain to the Federal public sector.
Projections shown above are provisional and likely to be revised
pending negotiation of IMF arrangement. Governance indicator
represents an average percentile rank (0-100) from Rule of Law,
Voice and Accountability and Government Effectiveness indicators
(all World Bank). Human Development Index (UNDP) ranges from 0-1,
with 1 representing a very high level of human development.
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B O L I V I A
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CREDINFORM INTERNATIONAL: Moody's Withdraws B2/Baa1.bo IFS Ratings
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Moody's Latin America Agente de Calificacion de Riesgo S.A. (MLA)
has withdrawn the B2 global local currency and Baa1.bo Bolivia
national scale insurance financial strength (IFS) ratings of
Seguros y Reaseguros Credinform International (Credinform).
Withdrawals:
Issuer: Seguros y Reaseguros Credinform International
Global Scale Insurance Financial Strength Rating, Withdrawn ,
previously rated B2
Bolivia National Scale Insurance Financial Strength Rating,
Withdrawn , previously rated Baa1.bo
Outlook, Changed To Rating Withdrawn From Stable
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
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B R A Z I L
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AEGEA SANEAMENTO: Fitch Affirms BB IDRs & Revises Outlook to Neg.
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Fitch Ratings has affirmed Aegea Saneamento e Participacoes S.A.'s
(Aegea) long-term, foreign- and local-currency Issuer Default
Ratings (IDRs) at 'BB' and its long-term, National Scale Rating at
'AA(bra)'. The corporate rating Outlook was revised to Negative,
from Stable.
Fitch has also affirmed the long-term National Scale Ratings at
'AA(bra)' of Aegea's subsidiaries Aguas Guariroba S.A.
(Guariroba), Prolagos S.A. - Concessionaria de Servicos de Agua e
Esgoto (Prolagos), Nascentes do Xingu Participacoes e
Administracao S.A. (Xingu) and Aguas de Teresina Saneamento SPE
S.A. (Aguas de Teresina). The subsidiaries' ratings Outlooks are
Stable.
The Negative Outlook of Aegea reflects the estimated higher
indebtedness at the holding level from 2018 onwards above Fitch's
initial expectation, due to relevant support to developing
subsidiaries, dividends distribution and relevant acquisition
payments. This scenario should result in pressured leverage on a
standalone basis during the next three years and enhances the
subordination condition of the debt at the holding level to the
debt allocated to subsidiaries. The company's deleveraging
capacity and debt service payment will depend on the recently
acquired subsidiaries to provide upstream dividends and repay
intercompany loans, which are uncertain given no history of
performance. Aegea's favorable track record of enhancing
efficiency of its operating subsidiaries partially mitigates
concerns over its ability to increase upstream dividends.
Aegea's and its subsidiaries' ratings are supported by the low
business risk inherent to the water/wastewater utility sector in
Brazil, with its operational subsidiaries benefiting from their
almost monopolistic position in their concession areas and highly
predictable demand. Fitch's base case also considers that Aegea
will be able to manage its consolidated net financial leverage
limited to 3.5x sustainably, as well as an extended debt maturity
profile and adequate financial flexibility. Fitch rates Aegea
based on its consolidated credit profile given holding guarantees
on most of subsidiaries' debt with cross acceleration clauses in
the event of default at the Aegea level, but considers that the
holding high debt level may create a differentiation in terms of
credit profile. The company's consolidated strong credit profile
continues to be supported by the operational and financial
performance of its two main subsidiaries, Prolagos and Guariroba.
KEY RATING DRIVERS
Pressured Holding Leverage: Fitch estimates net debt/dividends
received at the holding level above 6.5x on average during 2018-
2020 given expected additional debt to the acquisition of Manaus
subsidiary, to develop operating subsidiaries and to distribute
dividends, which should pressure its standalone capital structure.
The company has the challenge to generate the estimated upstream
dividends from recently incorporated and matured operations to
create a deleveraging trend during the next three years. The
estimated indebtedness growth at the holding level also increases
the company's exposure to a weaker debt service coverage ratio in
the event of higher interest rates. On a consolidated basis, Fitch
believes Aegea will be able to maintain its net leverage
sustainably below 3.5x during the next three years with a 4.0x
peak in 2018 mainly due to the Manaus acquisition, according to
Fitch's methodology. In the last twelve months (LTM) ended March
31, 2018, consolidated net leverage was 3.2x.
Aggressive Growth Strategy: Fitch's assessment of Aegea
incorporates the group's aggressive growth strategy through
acquisitions and successful concession bids, which require
improvements of recently incorporated operations, as well as
financial support to subsidiaries under development. The group has
been successful in reducing operational bottlenecks and in
capturing efficiencies of newly incorporated subsidiaries. Fitch's
expectation is that Aegea should benefit from the gains of scale
through organic growth and diversifying its portfolio of
operations.
Reduced Business and Industry Risks: Aegea's business profile
benefits from the resilient water/wastewater demand with a gradual
increase in volume billed supported by the quasi monopoly position
on its subsidiaries operating in areas under long-term concession
agreements and with a track record of adequate tariff increases.
These characteristics allow the group and its peers in this
industry in Brazil to have greater predictability in terms of
operational cash generation and a higher EBITDA margin than most
companies in other sectors. The Aegea group's credit profile is
also strengthened by its diversified concessions in the country,
which dilute operational and regulatory risks. The assessment also
includes the sector's inherent hydrologic risk, which has been
manageable for Aegea group.
High Operating Margins: Aegea's consolidated financial profile,
per Fitch's projections, will continue to benefit from high
operating margins at its main subsidiaries, Prolagos and
Guariroba, and will have consolidated EBITDA margins of 55% on
average during the next three years. The company benefits from its
low cost structure as compared with its peers. During the LTM
ending March 31, 2018, consolidated EBITDA of BRL695 million
represented a margin of 54%, as compared with 54% in 2017 and 47%
in 2016, which are above industry average.
Capex Pressures Cash Flow: Fitch's expects Aegea's consolidated
FCF to remain negative in the range of BRL550 million-BRL700
million in 2018-2020, pressured by estimated relevant capex and
dividends distribution. The agency expects the increase in the
volume of water and sewage billed, in addition to tariff
increases, to continue supporting Aegea's consolidated cash flow
from operations (CFFO) expansion and mitigating FCF pressure.
During the LTM ended March 31, 2018, CFFO totalled BRL137 million,
which resulted in a negative FCF of BRL568 million, after BRL570
million in capex and dividend payments of BRL136 million. In 2018,
investments are likely to reach approximately BRL550 million.
Political Risk Inherent to Business: Aegea's water/wastewater
operations are supported by concession contracts that provide a
regulatory framework for the group's activities. Despite the
diversified concession-granting powers of its subsidiaries, there
is no ring-fence against political interference by municipal
governments that could jeopardize the operational and financial
performance of one or more concessionaries. Positively, Aegea's
operations are subject to different regulatory agencies, which
imply risk dilution. The favorable track record of concession
agreement enforceability for its two main subsidiaries during
recent years and the satisfactory capacity of the group to
interact with various public agents and regulators are an
important consideration for the analysis.
DERIVATION SUMMARY
Aegea's credit profile benefits from its diversified concessions
within Brazil, while Companhia de Saneamento Basico do Estado de
Sao Paulo (Sabesp; BB/Stable) operates exclusively in the State of
Sao Paulo, which brings higher operational and regulatory risks.
Sabesp also carries higher political risk due to its state-owned
condition and high FX debt exposure. On the other hand, Sabesp is
the country's largest water/wastewater utility, which benefits the
company in terms of economy of scale, and presents lower leverage.
Aegea group and Sabesp have similar and strong EBITDA margins,
although Aegea's Negative Outlook reflects the estimated high
indebtedness at the holding level.
In comparison with Transmissora Alianca de Energia Eletrica S.A.
(Taesa: long-term, foreign-currency IDR BB/Stable and local-
currency IDR BBB-/Stable), the transmission company presents a
better credit profile than Aegea due to its even more predictable
CFFO, strong financial profile and lower regulatory risk.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within the Rating Case for the Issuer
-- Average consolidated water and sewage annual volume billed
increase of approximately 3% for Prolagos and Guariroba and around
8% for the other subsidiaries during the next two years supported
by estimated population and infrastructure network growth;
-- Tariff increase in line with inflation estimates. Exceptions
include tariff reductions in Guariroba in 2018 (given unfavourable
legal decision on minimum volume consumption tariff, with
rebalancing in 2019) and Prolagos, that count on real annual
tariff growth of 5.5% until 2020.
-- New debt of around BRL450 million and BRL500 million at the
holding level in 2018 and 2019, respectively.
-- Average annual capex of BRL767million from 2018 to 2020.
-- Average annual dividends distribution of BRL203 million from
2018 to 2020.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
An upgrade is unlikely in the short-to-medium term. The Negative
Outlook may be removed from Aegea's ratings in case Fitch's
initial expectation in terms of debt increase at the holding level
does not materialize, the performance of new subsidiaries improve
resulting in more robust flow of resources to the holding company,
and Aegea's shareholders effectively support the company through
capital injections, benefitting the company's leverage and debt
service coverage ratio.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
-- Consolidated net financial leverage consistently above 3.5x;
-- Cash/short-term debt below 0.8x on a consolidated basis;
-- Expectation that the coverage ratio of the holding company,
measured by net debt/received dividends, will not move toward
3.0x;
-- Relevant debt-financed acquisitions.
LIQUIDITY
Satisfactory Financial Flexibility: Fitch expects Aegea group to
sustain satisfactory financial flexibility during the next years
to support relevant disbursement for payment of the Manaus
acquisition. Fitch has considered the company's flexible dividends
distribution policy, potential additional capital injection if
needed and its proven access to local and international credit
markets as favorable for its financial profile. The company's
expected CFFO increase based on existing and recently acquired
concessions and lengthened debt maturity profile should also
benefit liquidity ratios.
Aegea's consolidated cash balance of BRL980 million by the end of
March 2018 was improved by the bond issuance at the end of 2017
and represented strong coverage of short-term debt of BRL120
million in the same period with a ratio of 8.2x. In the same
period, total debt was BRL3.3 billion on a consolidated basis and
BRL1.3 billion at the holding level on a proforma basis, which
includes bond issued by Aegea Finance S.a.r.l. Fitch estimates
Aegea to have an adequate consolidated cash balance of BRL613
million on average during the next three years against an average
short-term debt of BRL442 million. The company's strategy is to
concentrate liquidity at the holding level that carries debt
maturity only in 2024, which mitigates refinancing risks.
Nevertheless, the potential increase in the amount of debt at the
holding level associated with a higher interest rate than the
current level in Brazil and frustration in the receipt of
dividends and return of intercompany loans from subsidiaries may
put pressure on Aegea's debt service coverage ratio, which is
estimated at approximately 1.1x in 2018 and 1.6x in 2019.
FULL LIST OF RATING ACTIONS
Aegea Saneamento e Participacoes S.A.(Aegea)
-- Long-term, foreign-currency IDR affirmed at 'BB'; Outlook
revised to Negative from Stable;
-- Long-term, local-currency IDR 'BB'; Outlook revised to
Negative from Stable;
-- Long-term National Scale Rating 'AA(bra)'; Outlook revised to
Negative from Stable.
Aegea Finance S.a.r.l.
-- USD400 million senior unsecured bonds guaranteed by Aegea
affirmed at 'BB'.
Aguas Guariroba S.A.
-- Long-term National Scale Rating affirmed at 'AA(bra)';
Outlook Stable;
-- BRL400 million senior unsecured 3rd debenture issuance
affirmed at 'AA(bra)';
-- BRL200 million senior unsecured 2nd debenture issuance
affirmed at 'AA(bra)'.
Prolagos S.A. - Concessionaria de Servicos de Agua e Esgoto
-- Long-term National Scale Rating affirmed at 'AA(bra)';
Outlook Stable;
-- BRL100 million senior unsecured 3rd debenture issuance
affirmed at 'AA(bra)';
-- BRL100 million senior unsecured 2nd debenture issuance
affirmed at 'AA(bra)'.
Nascentes do Xingu Participacoes e Administracao S.A.
-- Long-term National Scale Rating affirmed at 'AA(bra)';
Outlook Stable;
-- BRL155 million senior unsecured 3rd debenture issuance
affirmed at 'AA(bra)'.
Aguas de Teresina Saneamento SPE S.A.
-- Long-term National Scale Rating affirmed at 'AA(bra)';
Outlook Stable;
-- BRL200 million senior unsecured 1st debenture issuance
affirmed at 'AA(bra)'.
CENTRAIS ELETRICAS: Fitch Hikes IDRs to 'BB-', Outlook Stable
-------------------------------------------------------------
Fitch Ratings has upgraded the Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) of Centrais Eletricas
Brasileiras S.A. (Eletrobras) and its wholly owned subsidiary,
Furnas Centrais Eletricas S.A., to 'BB-' from 'B+'. Fitch has also
upgraded the companies' Long-Term National Scale Ratings to
'AA(bra)' from 'AA- (bra)'. The Rating Outlook is Stable.
The upgrade reflects Fitch's view of the Federative Republic of
Brazil's (IDR BB-/Stable) continuing support of Eletrobras through
existing debt guarantees, with a relevant portion of the loans
coming from federal banks, and the gradual strengthening on
Eletrobras' standalone credit profile after some cost saving
measures, which may be reinforced in case of the relevant asset
sales program conclusion. Fitch considers Eletrobras' standalone
credit profile (SCP) commensurate to a 'B-' IDR, which based on
the Government Related Entities methodology and the three notches
distance to Brazil's IDR, leads to the equalization of the
ratings.
Eletrobras has a strong linkage with Brazil due to its strategic
importance as the largest power company in the country and the
sovereign's direct control of the company, as owner of 51% of the
voting shares. The sovereign also guarantees around 30%
Eletrobras's consolidated on-balance-sheet debt.
Eletrobras's SCP at 'B-' reflects its still weak operational cash
flow generation and high leverage. Management's initiatives to
reduce costs and capex, as well as sell assets to improve the
group's capital structure, are positive, but may take time to
improve the overall credit profile. Fitch believes Eletrobras'
divestment strategy and the privatization of the six energy
distribution companies currently managed by Eletrobras are
potentially positive for the company. The Government's intention
to privatize Eletrobras was not considered in this analysis as it
is uncertain.
KEY RATING DRIVERS
Strong Linkage to the Sovereign: Eletrobras' ratings reflect the
Brazilian government's strong incentive to support the company due
to its strategic importance as the largest electricity generation
and transmission company in the country, with 31% of installed
generation capacity and 49% of transmission lines as of March
2018. Its size and active presence in several relevant energy
operational assets and projects under construction in Brazil makes
it strategically important to the country's economy and
development.
Supportive Government: The Brazilian government has shown
increasing commitment to Eletrobras' turnaround, supporting
management's decision to cut costs and reduce investments, as well
as through the National Treasury as guarantor of loans to 30% of
total consolidated on-balance-sheet debt and equity injections of
BRL2.9 billion in 2016. Federal banks are the counterparty of
almost 50% of the group's debt, when excluding a sectorial fund
managed by Eletrobras in the past. The government's intention to
privatize the company through capital increase and dilute its
participation along with the asset divestment plan are viewed as
potentially positive but were not incorporated in the base case
scenario, as there are many uncertainties in a Presidential
election year.
Cash Generation to Improve: EBITDA generation should achieve an
annual average of BRL5.0 billion in 2018-2020, according to
Fitch's projections, considering the cash inflow from compensation
revenues of the transmission concessions renewed early in 2013. In
the last-12-months (LTM) ended March 31, 2018, adjusted EBITDA
amounted to BRL5.1 billion, having been positively affected by the
booking of these compensation revenues since July 2017.
Eletrobras no longer holds the concessions of the distribution
companies but is negatively impacted by the booking of these
assets on its balance sheet, receiving the reimbursement of the
operational losses from sectorial funds. Considering that the
operational losses from these companies will continue to be
reimbursed, cash flow from operations (CFFO) is expected to be
around BRL3.5 billion in the next three years. The strong
reduction in the investment level in the Strategic Plan for 2018-
2022 to BRL19.7 billion from BRL35.8 billion for 2017-2021 should
reduce pressure on the FCF from 2019 on, when it's expected to be
in the positive side. In the LTM ending March 31, 2018, the
consolidated CFFO of BRL2.4 billion was not enough to support
capex of BRL3.0 billion and return of dividends payment of BRL 380
million, generating negative FCF of almost BRL 1.0 billion.
High Leverage: Fitch expects Eletrobras' adjusted leverage ratios
to remain high, with net adjusted debt/adjusted EBITDA around
7.5x. As a mitigating factor, Eletrobras' consolidated risk
profile benefits from an extended debt maturity schedule. For the
LTM ended March 31, 2018, total adjusted debt/adjusted EBITDA and
net adjusted debt/adjusted EBITDA were 14.5x and 13.1x,
respectively. Total adjusted debt of BRL74 billion includes the
sectorial fund Reserva Global de Reversao (RGR) of BRL7.2 billion
and off-balance-sheet debt of BRL29.3 billion related to
guarantees provided to non-consolidated subsidiaries. Excluding
these debts, net leverage would remain high at 7.3x.
DERIVATION SUMMARY
Eletrobras' IDRs at 'BB-' derives from the Brazilian sovereign
rating of 'BB-', given the company's strong linkage with the
government and high importance to the country. Its SCP would be
three notches below at 'B-'.
Compared to other state-owned electric utility companies in Latin
America, Eletrobras' IDRs is lower than the Mexican company:
Comission Federal de Electricidad (CFE) 'BBB+'/Stable, and the
Colombian group: Interconexion Electrica S.A. E.S.P 'BBB+'/Stable.
CFE's ratings are fully supported by the Mexican sovereign rating
of 'BBB+'/Stable due to its monopoly position in the country.
ISA's ratings are higher than the Colombian sovereign
'BBB'/Stable, but capped by the sovereign ceiling at 'BBB+',
reflecting its asset base diversification in terms of segments and
geographic operation, resulting in adequate credit metrics.
Conversely, Eletrobras' IDRs are better compared to Corporacion
Electrica Nacional S.A.'s (Corpoelec) 'RD' rating, which reflects
the very low sovereign rating for Venezuela 'RD' and Corpoelec's
dependence on current public transferences to carry out its day-
to-day operations and to meet financial obligations.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- The six energy distribution companies remain as assets to be
sold in Eletrobras' balance sheet. On the other side, losses
from these companies will be reimbursed by sectorial funds;
-- Receipt of BRL 27.8 billion from compensation value for the
transmission concession renewal over eight years, starting
from July 2017;
-- Average Annual Capex (including equity contributions) of
BRL3.9 billion from 2018 to 2020;
-- Dividends of 25% of net profit in the coming years;
-- No further impairments and investigations findings and no
revenues from asset disposal.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead
to Positive Rating Action
-- Positive rating action on the sovereign along with an
improvement on Eletrobras' SCP.
Future Developments That May, Individually or Collectively, Lead
to Negative Rating Action
-- Negative rating action on the sovereign;
-- Perception of a weakening on the Brazilian government
support;
-- Significant deterioration on the company's SCP.
LIQUIDITY
Strong Liquidity to Continue: Despite the reduction in the cash
position in the first quarter of 2018, Eletrobras has historically
maintained a strong liquidity position and a manageable debt
amortization schedule. As of March 31, 2018, the company's
consolidated cash and marketable securities of BRL6.9 billion
reduced compared with BRL7.7 billion in December 2017,
representing 1.3 x of its short-term debt of BRL5.4 billion. This
high liquidity position is important to finance expected negative
FCF until 2019. The group's cash position should slightly benefit
from the recent agreement signed with Eletropaulo, which will
represent a cash inflow of BRL1.45 billion to be received in five
annual instalments. Fitch also considers that Eletrobras counts
with the potential financial flexibility provided by the
sovereign.
Fitch has upgraded the following ratings:
Eletrobras
-- Long-Term Foreign Currency IDR to 'BB-' from 'B+';
-- Long-Term Local Currency IDR to 'BB-' from 'B+';
-- Long-Term National Scale Rating to 'AA(bra)' from 'AA-(bra)';
-- USD1 billion senior unsecured notes due 2019 to 'BB-' from
'B+'/'RR4';
-- USD1.75 billion senior unsecured noted due 2021 to 'BB-' from
'B+'/'RR4'.
Furnas
-- Long-Term Foreign Currency IDR to 'BB-' from 'B+';
-- Long-Term Local Currency IDR to 'BB-' from 'B+';
-- Long-Term National Scale Rating to 'AA(bra)' from 'AA-(bra)'.
The Rating Outlook on the corporate ratings is Stable.
=======
C U B A
=======
CUBA: Spanish Companies to Expand Operations in Country
-------------------------------------------------------
EFE News reports that executives of the roughly 250 Spanish
companies operating in Cuba said that they intend to overcome the
financial difficulties they face in the Caribbean country to
maintain their privileged position on the communist island.
"Cuba is an up-and-coming country and market," Spanish Chamber of
Commerce international director Alfredo Bonet told EFE on the
sidelines of the 22nd Spanish-Cuban Business Committee conference.
"When it finally integrates into the global market, Spanish
companies have to be first in line."
Participants explored various ways to overcome "the financial
difficulties faced over the past two years," specifically the debt
owed to these private companies by Cuba's public sector, bilateral
committee co-chair Jaime Garcia-Legaz said, according to EFE News.
"The Cuban government is doing everything it can to make the
payments," said Ms. Garcia-Legaz, adding that Cuba's recent crisis
stemming from the turmoil shaking Venezuela - the island's main
partner in the region - over the past few years "does not help,"
the report notes.
In an effort to right the situation, Spain has developed an
assortment of financial instruments over the past two years,
including credit lines -- which aim to internationalize small and
mid-sized firms -- and a parity fund created with the $400 million
of Cuban debt that Spain forgave in 2015, the report relays.
The fund "has made it possible to co-finance investments by
Spanish companies to help them underwrite all they can in the
local currency," Mr. Bonet added, the report notes.
The meetings held by the bilateral committee are the main
connecting link between Spanish businessmen and Cuban authorities,
the report relays.
Spain is the island's third commercial partner, after China and
Venezuela, the report adds.
===========
M E X I C O
===========
BANCO INTERACCIONES: Fitch Maintains 'BB+'/'B' IDRs on Watch Pos.
-----------------------------------------------------------------
Fitch Ratings maintains Banco Interacciones S.A.'s Long- and
Short-Term Foreign- and Local-Currency Issuer Default Ratings
(IDRs) of 'BB+'/'B' and its Viability Rating (VR) of 'bb+' on
Rating Watch Positive.
Fitch also maintains the national scale ratings of 'A+(mex)' and
'F1(mex)', for the long- and short-term ratings, respectively of
Interacciones Casa de Bolsa, S.A. de C.V. Grupo Financiero
Interacciones (Interacciones CB) on Rating Watch Positive.
The maintenance of the Positive Watch on Interacciones and
Interacciones CB's ratings is due to Fitch's expectation of the
completion of a merger announced on October 2017 of Grupo
Financiero Banorte, S.A.B. de C.V. (GFNorte) and Grupo Financiero
Interacciones, S.A.B. de C.V. (GFInteracciones). Once completed,
Interacciones' ratings will likely be upgraded to the level of
GFNorte's or those of its main operating subsidiary, Banco
Mercantil del Norte, S.A. (Banorte) resulting of the merger and
simultaneously will be withdrawn. Fitch expects to resolve the
Watch as soon as possible after the transaction has been approved
by the regulator.
KEY RATING DRIVERS
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
Interacciones's IDRs, national and senior debt ratings are driven
by its stand-alone profile as reflected by its VR of 'bb+'. The
bank's VR is highly influenced by its company profile, which
reflects a strong competitive position and market recognition in
the public sector lending, its moderate franchise in the Mexican
financial system and concentrated business model. The ratings also
factor in its consistent financial performance underpinned by
recurrent earnings that supports its solid capitalization metrics.
The moderate asset quality that drives low credit costs but high
risk concentration and its acceptable funding and liquidity
profile is also considered in its ratings.
Interacciones is the ninth largest bank in Mexico with a market
share by loans and customer deposits of 2.2% and 1.8%,
respectively, and stands as the second largest provider of
financing to states and municipalities. The bank's strong
competitive position is underpinned by its expertise and tailor-
made financial solutions for subnational clients and
infrastructure products. Its focus on public sector financing
resulted in low impairment loans ratio given the low risk nature
of its clients and the fact that federal funds are de main source
of payment. However, asset quality also factors in Interacciones'
high concentration by product and client, albeit gradually
declining. As of March 2018, the top 20 exposure accounted for
5.3x the bank's Fitch Core Capital (FCC) while impaired loans
ratios remain below 0.1%.
Profitability ratios have remained consistent over the past four
years. Operating profit to risk-weighted assets (RWAs) ratio was
3.3% at 1Q18, compared to the four-year average of 3.2%, supported
by recurrent interest income, low credit costs and reasonable
operational efficiency. These metrics compare better than those
shown by entities with the same rating and main competitors.
Interacciones' FCC ratios are good despite de recurrent dividend
payment and have slightly improved; it stood at 16.8% as of March
2018 higher than the four-year average of 13.3% as a result of
lower loan growth and the full retention of revenues. The bank's
loss absorption capacity is aided by an ample loan loss reserve,
but borrower concentrations could constrain its solid capital
ratios.
Customer deposits have grown steadily in past years and accounted
for 72.9% of the bank's total funding excluding derivatives and
repurchase agreements at 1Q18. Customer deposits are mainly
federal state and local governments' accounts, but positively the
bank has incorporated gradually corporate clients that reached 40%
of these deposits. Given the profile of its depositors
concentrations are present. The top 20 depositors represent close
to 50% of total deposits. Interacciones' loans to deposits ratio
improved to 119.8% at 1Q18, driven by higher deposit growth
compared to loan growth. Liquidity for Interacciones continues to
be challenged by maturities mismatches, but this is mitigated by
the relative stability of deposits and the access to credit lines
of Development Banks. The bank's liquidity profile is also aided
by a reasonable proportion of highly liquid assets.
SUPPORT RATING AND SUPPORT RATING FLOOR
Interacciones' Support Rating and Support Rating Floor were
affirmed at '5' and 'NF', respectively, in view of the bank's low
systemic importance. In Fitch's view, external support cannot be
relied upon.
INTERACCIONES CB
The Interacciones CB's ratings reflect the support it could
receive, if needed, from its ultimate parent, GFInteracciones
whose credit quality profile is aligned with its main subsidiary,
Interacciones. The support is based on the local regulatory
framework regarding the legal obligation of financial groups with
its subsidiaries, if needed. Interacciones CB's activities are
core for the group's strategy and business model, especially given
its position as funding mechanism for the bank.
RATING SENSITIVITIES
INTERACCIONES AND INTERACCIONES CB
The Rating Watch Positive on Interacciones and Interacciones CB's
ratings will be resolved once the transaction is confirmed. The
ratings of Interacciones and Interacciones CB are likely to be
upgraded and aligned to those of GFNorte and Banorte.
If these entities are to be merged into other of GFNorte's current
subsidiaries, the ratings of Interacciones and Interacciones CB
are likely to be eventually withdrawn, but only after such
potential mergers have been completed.
The bank's senior debt ratings would mirror any change in the
bank's national scale ratings.
Fitch maintains the following ratings on Rating Watch Positive:
Banco Interacciones, S.A.
-- Long-term foreign and local currency IDRs 'BB+';
-- Short-term foreign and local currency IDRs 'B';
-- Viability rating 'bb+';
-- National scale long-term rating 'A+(mex)';
-- National scale short-term rating 'F1(mex)';
-- National scale long-term rating for local senior unsecured
debt at 'A+(mex)'.
Interacciones Casa de Bolsa, S.A. de C.V.:
-- National scale long-term rating 'A+(mex)';
-- National scale short-term rating 'F1(mex)'.
Fitch affirms the following ratings:
Banco Interacciones, S.A.
-- Support rating at '5';
-- Support rating floor at 'NF'.
======================
P U E R T O R I C O
======================
COMERCIAL CELTA: Disclosures OK'd; August 25 Plan Hearing
---------------------------------------------------------
Judge Enrique S. Lamoutte Inclan of the U.S. Bankruptcy Court for
the District of Puerto Rico approved Comercial Celta Inc.'s
disclosure statement referring to a chapter 11 plan dated Jan. 8,
2018.
Acceptances or rejections of the Plan may be filed in writing by
the holders of all claims on/or before 14 days prior to the date
of the hearing on confirmation of the Plan.
Any objection to confirmation of the plan must be filed on/or
before 21 days prior to the date of the hearing on confirmation of
the Plan.
A hearing for the consideration of confirmation of the Plan and of
such objections as may be made to the confirmation of the Plan
will be held on August 25, 2018 at 10:00 A.M. at Jose V. Toledo
Fed. Bldg. & U.S. Courthouse, Courtroom 2, 300 Recinto Sur Street,
Old San Juan, Puerto Rico.
As previously reported by the Troubled Company Reporter, the
Debtor contests any amounts due to claimant Russian Roulette,
Inc., and the amounts and nature of the claim is still pending
before the Puerto Rico Court of Appeals. Class 2 general unsecured
creditors will not receive any payments or dividends until final
adjudication by the State Court of this pending appeal.
A full-text copy of the Disclosure Statement is available at:
http://bankrupt.com/misc/prb17-00080-73.pdf
About Comercial Celta
Comercial Celta Inc.'s principal asset is a commercial building
located at Cupey Alto, Puerto Rico, which for the past several
years has been leased to unrelated tenants.
Comercial Celta filed a Chapter 11 bankruptcy petition (Bankr.
D.P.R. Case No. 17-00080) on Jan. 10, 2017, disclosing under $1
million in both assets and liabilities. The Debtor is represented
by Wigberto Lugo Mender, Esq.
Prompting the Chapter 11 filing was a state court proceeding being
litigated at State Court with a former tenant named Russian
Roulette Inc. under Civil Case No.KAC2013-0919). The state court
case ended up with a judgment in favor of the tenant, now
creditor, awarding damages on a breach of contract.
Notwithstanding an appeal process, a foreclosure sale of this real
property was scheduled for January 2017. The Debtor sought
bankruptcy protection to stop the foreclosure.
MMM HOLDINGS: Moody's Withdraws B3 Corp. Family Rating
------------------------------------------------------
Moody's Investors Service has withdrawn the B3 corporate family
rating of Puerto Rico-based MMM Holdings, LLC, and the Ba3
insurance financial strength rating of its US-based subsidiary,
MMM Healthcare LLC. Both ratings carried positive outlooks at the
time of withdrawal.
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
The following ratings have been withdrawn:
MMM Holdings, LLC -- corporate family rating at B3, outlook at
positive;
MMM Healthcare, LLC -- insurance financial strength rating at Ba3,
outlook at positive.
TOYS R US: Taps Cushman & Wakefield as Real Estate Advisor
----------------------------------------------------------
Toys "R" Us, Inc. seeks approval from the U.S. Bankruptcy Court
for the Eastern District of Virginia to hire Cushman & Wakefield
U.S., Inc.
Cushman will serve as co-real estate advisor with A&G Realty
Partners, LLC, the firm tapped by Toys "R" Us and its affiliates
to provide real estate consultancy and advisory services during
their Chapter 11 cases.
For the sale of assets owned by the Debtors, the Debtors will pay
C&W 2% of the total sales price for each transaction of retail
owned property, and 1.25% for each sale of a distribution center
or industrial owned property, to be increased to 1.5% if the
transaction rate is equal or higher than the appraised value of a
property.
For each lease sale, modification or termination between a
landlord or third party investor and the Debtors obtained by C&W,
the firm will be paid 3%) of the (i) occupancy cost savings for
each lease modification or early termination, or (ii) gross
proceeds for each lease sale.
In connection with their employment as co-real estate advisors,
C&W and A&G have agreed to share the sale commission for owned
assets:
Retail Assets DC/ Industrial Owned
------------- --------------------
C&W 50% 90%
A&G 50% 10%
C&W and A&G have also agreed to share the commission for leased
and ground leased assets:
Disposition of Disposition of
retail lease ground lease
-------------- --------------
C&W 10% 50%
A&G 90% 50%
Adam Spies, Chairman-Capital Markets of C&W, disclosed in a court
filing that his firm is a "disinterested person" as defined in
section 101(14) of the Bankruptcy Code.
C&W can be reached through:
Adam Spies
Cushman & Wakefield U.S., Inc.
1290 Avenue of the Americas
New York, NY 10104-6178
Phone: 1-212-841-7500
About Toys R Us, Inc.
Toys "R" Us, Inc., was an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise was sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions. Merchandise was also sold at e-commerce sites
including Toysrus.com and Babiesrus.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts, and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.
Toys "R" Us is a privately owned entity but still files with the
Securities and Exchange Commission as required by its debt
agreements.
The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders' deficit
of $1.319 billion as of April 29, 2017.
Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017. In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice. The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, were not part of the Chapter 11 filing and CCAA
proceedings.
Grant Thornton is the monitor appointed in the CCAA case.
Judge Keith L. Phillips presides over the Chapter 11 cases.
The Debtors tapped Kirkland & Ellis LLP and Kirkland & Ellis as
their legal counsel; Kutak Rock LLP as co-counsel; Alvarez &
Marsal North America, LLC as restructuring advisor; Lazard Freres
& Co. LLC as investment banker; Prime Clerk LLC as claims and
noticing agent; Consensus Advisory Services LLC and Consensus
Securities LLC as sale process investment banker; and A&G Realty
Partners, LLC as real estate advisor.
On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors. The Committee retained
Kramer Levin Naftalis & Frankel LLP as its legal counsel; Wolcott
Rivers, P.C. as local counsel; FTI Consulting, Inc. as financial
advisor; and Moelis & Company LLC as investment banker.
On May 29, 2018, the Office of the U.S. Trustee appointed Elise S.
Frejka, Esq., as the consumer privacy ombudsman.
Toys "R" Us UK
Toys "R" Us Limited, Toys "R" Us, Inc.'s UK arm with 105 stores
and 3,000 employees, was sent into administration in the United
Kingdom in February 2018.
Arron Kendall and Simon Thomas of Moorfields Advisory Limited, 88
Wood Street, London, EC2V 7QF were appointed Joint Administrators
on Feb. 28, 2018. The Administrators now manage the affairs,
business and property of the Company. The Administrators act as
agents only and without personal liability.
The Administrators said they will make every effort to secure a
buyer for all or part of the business.
Liquidation of U.S. Stores
Toys "R" Us, Inc., on March 15, 2018, filed with the U.S.
Bankruptcy Court a motion seeking Bankruptcy Court approval to
start the process of conducting an orderly wind-down of its U.S.
business and liquidation of inventory in all 735 of the Company's
U.S. stores, including stores in Puerto Rico.
Propco I Debtors
Toys "R" Us Property Company I, LLC and its subsidiaries own fee
and leasehold interests in more than 300 properties in the United
States. The Debtors lease the properties on a triple-net basis
under a master lease to Toys-Delaware, the operating entity for
all of TRU's North American businesses, which operates the
majority of the properties as Toys "R" Us stores, Babies "R" Us
stores or side-by-side stores, or subleases them to alternative
retailers.
Toys "R" Us Property was founded in 2005 and is headquartered in
Wayne, New Jersey. Toys 'R' Us Property operates as a subsidiary
of Toys "R" Us Inc.
Company LLC, MAP Real Estate LLC, TRU 2005 RE I LLC, TRU 2005 RE
II Trust, and Wayne Real Estate Company LLC (collectively, "Propco
I Debtors") sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. E.D. Va. Lead Case No. 18-31429) on March 20, 2018.
The Propco I Debtors sought and obtained procedural consolidation
and joint administration of their Chapter 11 cases, separate from
the Toys "R" Us Debtors' Chapter 11 cases.
The Propco I Debtors estimated assets of $500 million to $1
billion and liabilities of $500 million to $1 billion.
Judge Keith L. Phillips presides over the Propco I Debtors' cases.
The Propco I Debtors hired Klehr Harrison Harvey Branzburg, LLP;
and Crowley, Liberatore, Ryan & Brogan, P.C., as co-counsel. The
Debtors also tapped Kutak Rock LLP. They hired Goldin Associates,
LLC, as financial advisors.
An official committee of unsecured creditors has been appointed in
the Propco I Debtors' cases.
TOYS R US: Propco II Debtors File Chapter 11 Liquidation Plan
-------------------------------------------------------------
Toys "R" Us Property Company II, LLC ("Propco II" or the "Propco
II Debtor") and Giraffe Junior Holdings, LLC, filed a Chapter 11
Plan that, if consummated, will facilitate a wind-down and
liquidation of the Propco II Plan Debtors' remaining operations
and assets.
Giraffe Junior, an indirect wholly-owned subsidiary of Toys "R"
Us, Inc., is the direct owner of all of Propco II's limited
liability company interests. Propco II is a single purpose entity
and is a separate entity from the rest of the Company. The assets
and credit of Propco II and Giraffe Junior are not available to
satisfy the debts or other obligations of Toys "R" Us, Inc. or any
of its other affiliates.
Propco II owns fee and ground leasehold interests in properties in
various retail markets throughout the United States. The
Properties are leased on a triple-net basis pursuant to a Second
Amended and Restated Master Lease Agreement, dated as of November
3, 2016, by and between Propco II, as landlord, and Toys "R" Us -
Delaware, Inc., as tenant. As the operating entity for all of
Toys "R" Us, Inc.'s North American businesses, Toys Delaware
operates the Properties as Toys "R" Us stores, Babies "R" Us
stores, or side-by-side stores, or subleases them to alternative
retailers. Substantially all of Propco II's revenues and cash
flows are derived from the master rent payments from Toys Delaware
paid in accordance with the Master Lease.
Following worse than expected 2017 fiscal year earnings, a series
of reactions and covenant defaults frustrated prospects for
reorganizing the domestic enterprise as a going-concern. In March
2018, the Debtors filed a motion seeking authority to begin an
orderly liquidation of their U.S. business and to commence store
closing sales across the country. On March 22, 2018, the Court
entered an order authorizing the wind down and the store closings,
which are expected to conclude no later than June 30, 2018. Once
the U.S. wind down and store closing process is complete, the
Properties will effectively "go dark."
Toys Delaware will reject the Master Lease as of June 30, 2018,
and thus the Propco II Debtor's liquidity will be severely
constrained. As a result, the Propco II Plan Debtors have filed a
motion seeking the approval of bid procedures to commence an
expeditious sale and marketing process for all or substantially
all of the Propco II Debtor's assets. The Propco II Debtor intends
to complete a sale of its assets pursuant to the Plan, but may
also complete the sale pursuant to section 363 and 365 of the
Bankruptcy Code, if necessary.
Estimated of general unsecured creditors under the Plan remains
unknown. Each Allowed General Unsecured Claim against the Propco
II Debtor and Giraffe will receive its Pro Rata share of the Sale
Proceeds, if any, after payment of all senior Claims against the
Propco II Debtor and Giraffe.
A full-text copy of the Disclosure Statement is available at:
http://bankrupt.com/misc/vaeb17-34665-3383.pdf
About Toys R Us, Inc.
Toys "R" Us, Inc., was an American toy and juvenile-products
retailer founded in 1948 and headquartered in Wayne, New Jersey,
in the New York City metropolitan area. Merchandise was sold in
880 Toys "R" Us and Babies "R" Us stores in the United States,
Puerto Rico and Guam, and in more than 780 international stores
and more than 245 licensed stores in 37 countries and
jurisdictions. Merchandise was also sold at e-commerce sites
including Toysrus.com and Babiesrus.com.
On July 21, 2005, a consortium of Bain Capital Partners LLC,
Kohlberg Kravis Roberts, and Vornado Realty Trust invested $1.3
billion to complete a $6.6 billion leveraged buyout of the
company.
Toys "R" Us is a privately owned entity but still files with the
Securities and Exchange Commission as required by its debt
agreements.
The Company's consolidated balance sheet showed $6.572 billion in
assets, $7.891 billion in liabilities, and a stockholders' deficit
of $1.319 billion as of April 29, 2017.
Toys "R" Us, Inc., and certain of its U.S. subsidiaries and its
Canadian subsidiary voluntarily filed for relief under Chapter 11
of the Bankruptcy Code (Bankr. E.D. Va. Lead Case No. Case No.
17-34665) on Sept. 19, 2017. In addition, the Company's Canadian
subsidiary voluntarily commenced parallel proceedings under the
Companies' Creditors Arrangement Act ("CCAA") in Canada in the
Ontario Superior Court of Justice. The Company's operations
outside of the U.S. and Canada, including its 255 licensed stores
and joint venture partnership in Asia, which are separate
entities, were not part of the Chapter 11 filing and CCAA
proceedings.
Grant Thornton is the monitor appointed in the CCAA case.
Judge Keith L. Phillips presides over the Chapter 11 cases.
The Debtors tapped Kirkland & Ellis LLP and Kirkland & Ellis as
their legal counsel; Kutak Rock LLP as co-counsel; Alvarez &
Marsal North America, LLC as restructuring advisor; Lazard Freres
& Co. LLC as investment banker; Prime Clerk LLC as claims and
noticing agent; Consensus Advisory Services LLC and Consensus
Securities LLC as sale process investment banker; and A&G Realty
Partners, LLC as real estate advisor.
On Sept. 26, 2017, the U.S. Trustee for Region 4 appointed an
official committee of unsecured creditors. The Committee retained
Kramer Levin Naftalis & Frankel LLP as its legal counsel; Wolcott
Rivers, P.C. as local counsel; FTI Consulting, Inc. as financial
advisor; and Moelis & Company LLC as investment banker.
On May 29, 2018, the Office of the U.S. Trustee appointed Elise S.
Frejka, Esq., as the consumer privacy ombudsman.
Toys "R" Us UK
Toys "R" Us Limited, Toys "R" Us, Inc.'s UK arm with 105 stores
and 3,000 employees, was sent into administration in the United
Kingdom in February 2018.
Arron Kendall and Simon Thomas of Moorfields Advisory Limited, 88
Wood Street, London, EC2V 7QF were appointed Joint Administrators
on Feb. 28, 2018. The Administrators now manage the affairs,
business and property of the Company. The Administrators act as
agents only and without personal liability.
The Administrators said they will make every effort to secure a
buyer for all or part of the business.
Liquidation of U.S. Stores
Toys "R" Us, Inc., on March 15, 2018, filed with the U.S.
Bankruptcy Court a motion seeking Bankruptcy Court approval to
start the process of conducting an orderly wind-down of its U.S.
business and liquidation of inventory in all 735 of the Company's
U.S. stores, including stores in Puerto Rico.
Propco I Debtors
Toys "R" Us Property Company I, LLC and its subsidiaries own fee
and leasehold interests in more than 300 properties in the United
States. The Debtors lease the properties on a triple-net basis
under a master lease to Toys-Delaware, the operating entity for
all of TRU's North American businesses, which operates the
majority of the properties as Toys "R" Us stores, Babies "R" Us
stores or side-by-side stores, or subleases them to alternative
retailers.
Toys "R" Us Property was founded in 2005 and is headquartered in
Wayne, New Jersey. Toys 'R' Us Property operates as a subsidiary
of Toys "R" Us Inc.
Company LLC, MAP Real Estate LLC, TRU 2005 RE I LLC, TRU 2005 RE
II Trust, and Wayne Real Estate Company LLC (collectively, "Propco
I Debtors") sought protection under Chapter 11 of the Bankruptcy
Code (Bankr. E.D. Va. Lead Case No. 18-31429) on March 20, 2018.
The Propco I Debtors sought and obtained procedural consolidation
and joint administration of their Chapter 11 cases, separate from
the Toys "R" Us Debtors' Chapter 11 cases.
The Propco I Debtors estimated assets of $500 million to $1
billion and liabilities of $500 million to $1 billion.
Judge Keith L. Phillips presides over the Propco I Debtors' cases.
The Propco I Debtors hired Klehr Harrison Harvey Branzburg, LLP;
and Crowley, Liberatore, Ryan & Brogan, P.C., as co-counsel. The
Debtors also tapped Kutak Rock LLP. They hired Goldin Associates,
LLC, as financial advisors.
An official committee of unsecured creditors has been appointed in
the Propco I Debtors' cases.
=================
V E N E Z U E L A
=================
VENEZUELA: Protest Before PAHO to Denounce Health Crisis
--------------------------------------------------------
EFE News reports that dozens of Venezuelans suffering from HIV and
Parkinson's gathered in front of the Pan American Health
Organization (PAHO) headquarters in Caracas to denounce the
country's health crisis as PAHO director Carissa Etienne visits
Venezuela.
The protesters want "them to listen to the reality of the
Venezuelan people and the affected people . . . . they are people
who are trying to survive in Venezuela, . . . . but neither the
Health Ministry nor any other public authority is paying
attention" said Eduardo Franco, the representative of the
Venezuelan Network of (HIV-)Positive People, according to EFE
News.
In the presence of reporters, the protesters -- most of whom are
HIV carriers -- demonstrated in various ways to the PAHO the
"humanitarian emergency" the country is experiencing, the report
relays.
The patients, who were accompanied by doctors and relatives,
placed on the walls of the PAHO building some of the names of
people who, they said, had died from lack of anti-retroviral
medications, and they demanded -- via signs and slogans -- "no
more deaths," the report notes.
"That's enough deaths in Venezuela. That's enough of the
government acting crazy and being complicit . . . . in all this
genocide that's happening (here) with so many people dying each
day," continued Franco, who also said that the Ombudsman's Office
had received "many complaints" about these cases and the
institution "has said absolutely nothing," the report discloses.
"The medications are effective in the stomachs of the patients,
not in planning," he said, calling on Health Minister Luis Lopez
to "stop being a coward" and "show his face," the report relays.
The report discloses that Mr. Franco said that among the
demonstrators were people from the states of Lara, Portuguesa,
Yaracuy, Amazonas, Bolivar and Caracas, Carabobo and Aragua.
Meanwhile, seamstress Sarai Sebrian, who is HIV-infected, told EFE
that it's been 12 months since she was able to take the
medications she needs because, even if she manages to find some,
she cannot buy them because they're too expensive.
The PAHO director is in Venezuela is scheduled to meet with
Foreign Minister Jorge Arreaza, the report relays.
The Venezuelan government signed an agreement with the PAHO to
guarantee the availability of medications and medical supplies,
the report discloses.
After the meeting, Etienne told state-run television channel VTV
that the PAHO is committed to improving the situation for the
Venezuelan people, the report adds.
As reported in the Troubled Company Reporter-Latin America on
June 1, 2018, S&P Global Ratings, on May 29, 2018, removed its
long- and short-term local currency sovereign credit ratings on
Venezuela from CreditWatch with negative implications and affirmed
them at 'CCC- /C'. The outlook on the long-term local currency
rating is negative. At the same time, S&P affirmed its 'SD/D'
long- and short-term foreign currency sovereign credit ratings on
Venezuela. Our transfer and convertibility assessment remains at
'CC'.
VENEZUELA: Maduro Names Delcy Rodriguez as Vice President
---------------------------------------------------------
Venezuela President Nicolas Maduro named Delcy Rodriguez, the head
of the constituent assembly, as vice president as he reshuffled
his cabinet after his widely-condemned re-election in May.
Rodriguez, 49, was president of the pro-government legislative
super body known as the constituent assembly, which critics say
Maduro set up last year to override an opposition-controlled
national assembly. She was also previously foreign minister.
"I have named as executive vice president a young woman, brave,
seasoned, daughter of a martyr, revolutionary and tested in a
thousand battles," Maduro said on Twitter.
Rodriguez replaces Tareck El Aissami, who will become industry and
national production minister, Maduro said.
The United States has sanctioned El Aissami for alleged links to
drug trafficking, along with numerous other high-ranking officials
in Venezuela. Canada sanctioned Rodriguez, along with 39 other
officials, last September for "anti-democratic behavior.
Maduro's re-election on May 20 has been condemned by the United
States and other Latin American nations as an undemocratic farce.
In response, the United States imposed new sanctions on
Venezuela's all-important oil industry.
Critics say Maduro has resorted to increasingly authoritarian
tactics as Venezuela's economy has spiraled deeper into recession,
fueling discontent with Maduro's Socialist agenda. Maduro accuses
the United States of an "economic war" against Venezuela and
trying to delegitimize a democratic victory.
President Maduro announced 10 other minister changes, but did not
mention changes in the key ministries of oil, economy and defense.
"From my heart, I am grateful to my brothers and sisters who
accompanied me during the darkest times our Republic has
experienced in decades," he said.
As reported in the Troubled Company Reporter-Latin America on
June 1, 2018, S&P Global Ratings, on May 29, 2018, removed its
long- and short-term local currency sovereign credit ratings on
Venezuela from CreditWatch with negative implications and affirmed
them at 'CCC- /C'. The outlook on the long-term local currency
rating is negative. At the same time, S&P affirmed its 'SD/D'
long- and short-term foreign currency sovereign credit ratings on
Venezuela. Our transfer and convertibility assessment remains at
'CC'.
=================
X X X X X X X X X
=================
* BOND PRICING: For the Week From June 11 to June 15, 2018
----------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
BA-CA Finance Cayman Lt 0.518 62.07 KY EUR
AES Tiete Energia SA 6.7842 1.109 4/15/2024 BR BRL
Argentina Bogar Bonds 2 39.36 2/4/2018 AR ARS
Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD
Automotores Gildemeister 6.75 67 1/15/2023 CL USD
Automotores Gildemeister 8.25 73.25 5/24/2021 CL USD
Automotores Gildemeister 6.75 65.5 1/15/2023 CL USD
CA La Electricidad 8.5 63.664 4/10/2018 VE USD
Caixa Geral De Depositos 1.439 63.167 KY EUR
Caixa Geral De Depositos 1.469 KY EUR
CSN Islands XII Corp 7 68 BR USD
CSN Islands XII Corp 7 66.266 BR USD
Decimo Primer Fideicomiso 6 53.225 10/25/2041 PA USD
Decimo Primer 4.54 43.127 10/25/2041 PA USD
Dolomite Capital 13.217 73.108 12/20/2019 CN ZAR
Enel Americas SA 5.75 56.172 6/15/2022 CL CLP
Gol Linhas Aereas SA 10.75 35.861 2/12/2023 BR USD
Gol Linhas Aereas SA 10.75 35.601 2/12/2023 BR USD
Inversora Electrica 6.5 67.625 9/26/2017 AR USD
Inversora Electrica 6.5 67.625 9/26/2017 AR USD
MIE Holdings Corp 7.5 64.78 4/25/2019 HK USD
MIE Holdings Corp 7.5 64.982 4/25/2019 HK USD
NB Finance Ltd 3.88 61.816 2/7/2035 KY EUR
Noble Holding 7.7 74.433 4/1/2025 KY USD
Noble Holding 5.25 56.279 3/15/2042 KY USD
Noble Holding 8.7 71.881 4/1/2045 KY USD
Noble Holding 6.2 60.129 8/1/2040 KY USD
Noble Holding 6.05 58.38 3/1/2041 KY USD
Odebrecht Finance Ltd 7.5 42.5 KY USD
Odebrecht Finance Ltd 5.125 56.938 6/26/2022 KY USD
Odebrecht Finance Ltd 7 68.053 4/21/2020 KY USD
Odebrecht Finance Ltd 7.125 41.366 6/26/2042 KY USD
Odebrecht Finance Ltd 4.375 40.002 4/25/2025 KY USD
Odebrecht Finance Ltd 5.25 39.211 6/27/2029 KY USD
Odebrecht Finance Ltd 6 44.75 4/5/2023 KY USD
Odebrecht Finance Ltd 5.25 39.018 6/27/2029 KY USD
Odebrecht Finance Ltd 7.5 42.95 KY USD
Odebrecht Finance Ltd 4.375 40.363 4/25/2025 KY USD
Odebrecht Finance Ltd 7.125 41.635 6/26/2042 KY USD
Odebrecht Finance Ltd 6 52.625 4/5/2023 KY USD
Odebrecht Finance Ltd 5.125 55.873 6/26/2022 KY USD
Odebrecht Finance Ltd 7 67.368 4/21/2020 KY USD
Petroleos de Venezuela 8.5 74.5 10/27/2020 VE USD
Petroleos de Venezuela 6 30.458 5/16/2024 VE USD
Petroleos de Venezuela 6 30.517 11/15/2026 VE USD
Petroleos de Venezuela 9.75 35.677 5/17/2035 VE USD
Petroleos de Venezuela 9 39.279 11/17/2021 VE USD
Petroleos de Venezuela 5.375 30.267 4/12/2027 VE USD
Petroleos de Venezuela 8.5 72.5 10/27/2020 VE USD
Petroleos de Venezuela 12.75 45.278 2/17/2022 VE USD
Petroleos de Venezuela 6 30.367 5/16/2024 VE USD
Petroleos de Venezuela 6 30.387 11/15/2026 VE USD
Petroleos de Venezuela 9 39.316 11/17/2021 VE USD
Petroleos de Venezuela 9.75 35.893 5/17/2035 VE USD
Petroleos de Venezuela 6 28.346 10/28/2022 VE USD
Petroleos de Venezuela 5.5 30.123 4/12/2037 VE USD
Petroleos de Venezuela 12.75 45.23 2/17/2022 VE USD
Polarcus Ltd 5.6 75 3/30/2022 AE USD
Provincia del Chubut 4 10/21/2019 AR USD
Siem Offshore Inc 4.04527 69.5 10/30/2020 NO NOK
Siem Offshore 3.75176 65.75 12/28/2021 NO NOK
STB Finance 2.05771 56.243 KY JPY
Sylph Ltd 2.367 64.438 9/25/2036 KY USD
US Capital 1.63611 54.774 12/1/2039 KY USD
US Capital 1.63611 54.774 12/1/2039 KY USD
USJ Acucar 9.875 67 11/9/2019 BR USD
USJ Acucar 9.875 67 11/9/2019 BR USD
Venezuela 13.625 68.25 8/15/2018 VE USD
Venezuela 7.75 44.065 10/13/2019 VE USD
Venezuela 11.95 40.785 8/5/2031 VE USD
Venezuela 12.75 45.19 8/23/2022 VE USD
Venezuela 9.25 39.645 9/15/2027 VE USD
Venezuela 11.75 40.005 10/21/2026 VE USD
Venezuela 9 36.285 5/7/2023 VE USD
Venezuela 9.375 37.69 1/13/2034 VE USD
Venezuela 13.625 72.25 8/15/2018 VE USD
Venezuela 7 34.23 3/31/2038 VE USD
Venezuela 7 59.19 12/1/2018 VE USD
***********
Monday's edition of the TCR-LA delivers a list of indicative
prices for bond issues that reportedly trade well below par.
Prices are obtained by TCR-LA editors from a variety of outside
sources during the prior week we think are reliable. Those
sources may not, however, be complete or accurate. The Monday
Bond Pricing table is compiled on the Friday prior to publication.
Prices reported are not intended to reflect actual trades. Prices
for actual trades are probably different. Our objective is to
share information, not make markets in publicly traded securities.
Nothing in the TCR-LA constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR-LA editor holds some position in the
issuers' public debt and equity securities about which we report.
Tuesday's edition of the TCR-LA features a list of companies with
insolvent balance sheets obtained by our editors based on the
latest balance sheets publicly available a day prior to
publication. At first glance, this list may look like the
definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
Submissions about insolvency-related conferences are encouraged.
Send announcements to conferences@bankrupt.com
***********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 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 * * *