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/raid1/www/Hosts/bankrupt/TCRLA_Public/180622.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 Friday, June 22, 2018, Vol. 19, No. 123 Headlines B A R B A D O S BARBADOS: Another IMF Team to Visit as Government Negotiates Loan B R A Z I L AEGEA SANEAMENTO: Moody's Affirms Ba1 CFR, Outlook Stable BRAZIL: Debt Capital Markets Deal Value Contracts in May BRAZIL: Debt Taps Total US$7 Billion in April COSAN LIMITED: Fitch Affirms BB LongTerm IDRs, Outlook Stable ODEBRECHT ENGENHARIA: S&P Raises CCR to 'CCC', Outlook Developing RUMO SA: Fitch Hikes Issuer Default Ratings to BB, Outlook Pos. J A M A I C A MELIA BRACO: General Manager Quits N I C A R A G U A NICARAGUA: Invites International Entities to Probe Unrest Deaths P U E R T O R I C O KONA GRILL: BDO USA Replaces Ernst & Young as Auditors STONEMOR PARTNERS: Austin So Remains as GP's Chief Legal Officer STONEMOR PARTNERS: Successfully Amends Credit Facility - - - - - =============== B A R B A D O S =============== BARBADOS: Another IMF Team to Visit as Government Negotiates Loan ----------------------------------------------------------------- Caribbean360.com reports that following a visit of one team from the International Monetary Fund (IMF) and Prime Minister Mia Mottley going up to Washington to speak with officials of the financial institution, has come news that another team from the IMF will be in Barbados next month to begin negotiations with Government. Prime Minister Mottley made the disclosure over the weekend, as she gave an update following the latest talks with IMF Managing Director Christine Lagarde, which she said went well, according to Caribbean360.com. The report notes that Prime Minister Mottley said she was happy the engagement with Lagarde recognized the country's situation was urgent, and reported that the IMF was prepared to support Barbados' Economic Recovery and Transformation Plan. "The initial team was just a fact-finding team. This team that comes now, from July 2 to 12, will actually be a negotiating team with the Barbados Government, to be able to settle on what would be the terms and conditions of the contract that underpins how much money they will supply to us, and what conditions there will be, if any, to that money," she explained, the report relays. "We had an excellent meeting. We were able to articulate clearer why we need to be able to have a baseline that takes into account fixing our broken infrastructure and protecting the most vulnerable in our society. [We also spoke about] why we will continue to do the things that we have to do in order to be able to make the structural adjustment. That is critical-to make Barbados' Government more fiscally responsible and to be able to see growth come back to our economy in a way that it has not over the course of the last decade," she added, the report notes. The Prime Minister indicated that the IMF had shown a willingness to cooperate with Barbados and responded with alacrity when she and her team engaged with the IMF officials, the report says. "Anyone who knows anything about these processes [talks with the IMF] will tell you that they are amazed at how . . . . fast we are moving forward . . . . We recognize that uncertainty cannot serve the interest of anyone in this country . . . . It is in our interest to be able to get to the point where we can put the framework for what is our programme behind us, such that all Barbadians can play their part," she said, the report notes. Prime Minister Motley explained that the support Barbados would be seeking from the institution would be a loan at "very, very negligible" interest rates -- around one per cent, the report discloses. She added that it would allow the country to boost its international reserves, the report relays. "But the importance of going to the International Monetary Fund is that it unlocks other international concessional funding. So, for example, the Inter-American Development Bank will now be in a position to start lending us serious amounts of capital once we have an agreement with the IMF, the report notes. "Indeed, upon signing with the IMF, there is an immediate unlocking of significant amounts of capital and then we go into other discussions with them on policy based loans and investment sector loans; and similarly, with the Caribbean Development Bank and others," the Prime Minister stated, the report relays. She gave the assurance that Government was engaging with the IMF to bring back growth to the country to preserve the Barbadian quality of life and the value of the dollar, and not "to go on a spending spree," the report says. The Prime Minister noted that even though the meetings in Washington went much better than she and her team could have contemplated, in terms of the timelines, the work now lay ahead of them, the report notes. She said the Government is preparing a strong negotiating team for the discussions with the IMF, the report adds. =========== B R A Z I L =========== AEGEA SANEAMENTO: Moody's Affirms Ba1 CFR, Outlook Stable --------------------------------------------------------- Moody's America Latina Ltda. affirmed AEGEA Saneamento e Participacoes S.A.'s Corporate Family Ratings (CFR) of Ba1 in the global scale, and at the same time assigned a Aaa.br CFR rating in Brazil's national scale. The outlook is stable. The ratings incorporate Moody's view of AEGEA's overall stable business profile and solid positioning as a result of diverse operations that lower its exposure to water scarcity risks. AEGEA's operations show lower volume fluctuations compared to local peers and stable cash flow, as well as an overall transparent and predictable tariff mechanism and regulatory framework. Moreover, the Aaa.br national scale rating reflects the standing of the company's credit quality relative to its domestic peers. RATINGS RATIONALE AEGEA's corporate family ratings reflect its stable business profile, the company's solid positioning and relatively strong pricing power. The company benefits from very limited competition. Very diverse operations result in lower exposure to water scarcity problems shown by overall lower volume fluctuations and stable cash flows. AEGEA's tariff mechanism and regulatory framework are overall transparent and predictable with annual tariff adjustments to pass through inflation. Expansion targets, quality standards and capital investments are all pre-settled under the company's concession contracts. AEGEA's management team is experienced and the company's shareholders show sound corporate governance practices in Moody's view, further supporting the ratings. Moody's understands that shareholders will continue to actively support the company's credit quality and liquidity. Moody's also expects that AEGEA will continue to have sound access to the banking and capital markets and will prudently manage its leverage, maintaining discipline on its financial policy and mitigating cross-currency exposure risks from the Note's issuance. Another consideration for the ratings is the fact that AEGEA operates in various jurisdictions with different granting authorities. Moody's notes that Brazil's water/sanitation regulatory framework is relatively new and under development. The ratings are tempered by AEGEA's relative small scale and significant expansion plan. New investments and acquisitions together with a track record of high dividend payments will continue to pressure leverage. The stable outlook follows the outlook on Brazil, given the domestic nature of the company's operations and, consequently, its links to the local economic/regulatory environment, and ultimate credit quality. What Could Change the Rating - Up /Down Moody's does not expect a rating upgrade in the short to medium term given the stable outlook albeit an upgrade of Brazil's rating could trigger upward pressure on the company's ratings given the intrinsic linkages of AEGEA and the Brazilian sovereign. Also, better than anticipated financial performance such that FFO interest coverage stays above 2.5x and Debt to Capitalization below 55% on a sustained basis could also trigger upward rating pressure, however such upward pressure is somewhat limited to the sovereign credit quality. On the other hand, deterioration in the sovereign's credit quality could exert downward pressure on AEGEA ratings as well as Moody's assessment of weaker shareholders support. The ratings could also be downgraded if there is a significant and sustained deterioration in the company's credit metrics and liquidity or if there is a deterioration in its subsidiaries performance or ability to upstream dividends. AEGEA has cross-default clauses within the group and operates through a centralized cash management system. The ratings could be revised downwards if there are material delays or costs overruns on the capital investment program that negatively impact revenues or lead to non-compliance with the contractual targets. Moody's perception of deteriorated stability and transparency of the regulatory regime would also add pressure to the ratings as if volumes stay consistently below Moody's forecast. AEGEA is a holding company with 42 subsidiaries operating long term water and sewage contracts and 3 PPP sewage contracts in various municipalities across ten Brazilian States. In the LTM ended March 2018, AEGEA posted net revenues of BRL1.3 billion and EBITDA of BRL780 million, while the FFO interest coverage was 2.7x and Debt to Capitalization 72%, as per Moody's standard adjustments. AEGEA started operations in 2010 and is one of the largest private water utilities in Brazil, with around 37% of Brazil's market share. AEGEA's shareholders are Equipav (not rated, 71.0% stake), the Government of Singapore's Investment Corporation "GIC" (not rated, 18.7% stake) and the International Finance Corporation - IFC (Aaa, 10.3% stake). BRAZIL: Debt Capital Markets Deal Value Contracts in May -------------------------------------------------------- Fredrik Karlsson at Latin Lawyer reports that on recent debt capital markets activity in the region, the value of transactions in Brazil shrank by 37% between April and May. Latin Lawyer's research into debt capital markets activity in Brazil reveals 15 Brazilian and five international firms worked on 25 debt capital markets deals in May. This is consistent with the volume of deals that took place in April, but overall deal value decreased by US$2.6 billion, going from US$7 billion in April to US$4.4 billion in May, according to Latin Lawyer. As reported in the Troubled Company Reporter-Latin America in February 2018, Fitch Ratings downgraded Brazil's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'BB-' from 'BB' and revised the Rating Outlook to Stable from Negative. BRAZIL: Debt Taps Total US$7 Billion in April --------------------------------------------- Fredrik Karlsson at Latin Lawyer reports that twenty-six local and four international firms reported working on 26 debt issuances by Brazilian companies worth a combined US$7 billion in April. As reported in the Troubled Company Reporter-Latin America in February 2018, Fitch Ratings downgraded Brazil's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'BB-' from 'BB' and revised the Rating Outlook to Stable from Negative. COSAN LIMITED: Fitch Affirms BB LongTerm IDRs, Outlook Stable ------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Cosan Limited at 'BB'. The Rating Outlook is Stable. Cosan Limited's ratings reflect its low leverage and robust liquidity position on a stand-alone basis, as well as the expected comfortable debt service coverage through dividends coming from its main subsidiary, Cosan S.A Industria e Comercio (Cosan; Foreign and Local Currency IDRs of 'BB' and 'BB+', respectively, and Long-Term National Scale Rating 'AA+(bra)'). Cosan and its subsidiaries accounted for around 90% of Cosan Limited's consolidated pro-forma revenues, 75% of pro-forma EBITDAR and 100% of dividends received in the latest-12-months (LTM) ended March 31, 2018. The one-notch difference between Cosan's LC IDR reflects the structural subordination of Cosan Limited's debt to dividends received from Cosan. Cosan Limited's credit profile is supported by the business strength and product diversification of its subsidiaries. The company's investments include operations in energy generation from biomass, distribution of natural gas, fuel and lubricants. These businesses enjoy predictable cash flow that partly softens the inherent volatilities of its sugar and ethanol business. The company also operates in the logistic industry, which presents strong growth potential and is expected to become a source of dividends to Cosan Limited starting in 2020. KEY RATING DRIVERS Robust Asset Portfolio: Cosan Limited is a non-operating holding company that carries a robust and diversified asset portfolio that reduces sector concentration risks. The company holds a 60.3% interest in Cosan, the holding company engaged in sugar, ethanol and energy production, as well as distribution of natural gas, lubricants and fuel. Raizen Combustiveis S.A. (Raizen Combustiveis; FC and LC IDRs 'BBB'/Outlook Stable, National Scale rating 'AAA(bra)'/Outlook Stable) is the second largest fuel distributor in Brazil, with predictable operational cash generation. Despite its more volatile results, Raizen Energia S.A. (Raizen Energia; rated the same as Raizen Combustiveis) is the largest S&E company in Brazil and, as such, it benefits from large business scale, which somewhat mitigates the current challenging scenario for the sector. Companhia de Gas de Sao Paulo (Comgas; FC IDR 'BB'/Outlook Stable, LC IDR 'BBB-'/Outlook Stable, National Scale rating 'AAA(bra)'/Outlook Stable) is the largest natural gas distributor in Brazil, with high growth potential. Cosan Limited also holds 72.5% interest in Cosan Logistica S.A (Cosan Logistica), which owns 28% of Rumo S.A. (Rumo; Foreign and Local Currency IDRs 'BB', National Scale Rating 'AA(bra)'; ROS on the Foreign Currency IDR). Rumo has a conservative capital structure and Fitch expects Rumo to present positive FCF from 2019 onwards. The presence of Rumo contributes to broader business diversification and helps the group to further lessen the cash flow volatility derived from the sugar and ethanol business. Rumo's main assets are four rail concessions to operate railway lines that extend over approximately 12 thousand kilometers within Brazil, with access to three main Brazilian ports. Adequate Interest Coverage Expected to Remain: Fitch expects Cosan Limited to receive sufficient dividends from Cosan to cover coupon payments on the USD500 million notes and adequate dividends to its shareholders. Dividends received amounted to BRL234 million in the LTM ended March 31, 2018. Fitch expects Cosan Limited's EBITDA plus dividends to interest coverage to be above 2.0x on a sustainable basis and allow the company to gradually reduce its net debt position. In 2017, the ratio of EBITDA and dividends received/interest expense was 1.80x. Higher Leverage Is not a Concern: The higher leverage posted by Cosan Limited on a stand-alone basis for the 12 months through March 31, 2018 is not a concern due to its comfortable debt maturity profile and adequate financial flexibility besides the fast deleveraging expected onward from 2018. At the holding company level, Cosan Limited's leverage measured as net debt-to- dividends received was 5.1x as per Fitch's calculations as of March 31, 2018, comparing unfavorably with 4.8x in 2017 and 0.8x in 2016. Fitch projects this ratio to decline to 4.0x in 2018 and 2.6x in 2019. The leverage increase in 2017 was due to taking on USD500 million seven-year notes combined with disbursements made into a shares repurchase program and capital increase at Cosan Logistica of BRL689 million and BRL545 million, respectively. On a consolidated basis, Cosan Limited's leverage is adequate for the rating category. The net adjusted debt-to-EBITDAR was at 2.3x as of the LTM through March 31, 2018 when dividends received from nonconsolidated subsidiaries are factored into EBITDAR figures. This compares favorably with 2.6x reported 2017. The group's deleveraging process has been mostly accelerated by Rumo's faster- than-anticipated deleveraging. DERIVATION SUMMARY Cosan Limited's credit profile is supported by a diversified asset portfolio. The company's investments include operations in energy generation from biomass, distribution of natural gas, fuel and lubricants as well as logistics. These businesses enjoy predictable cash flow that partly softens the inherent volatilities of its sugar and ethanol business. Fitch expects Raizen and Comgas to pay robust dividends over the next four years while strong growth potential in logistics is expected to lead Rumo to keep reporting scale gains and improving operating profitability. The one-notch difference between its LT LC IDR and Cosan's continues to reflect the inherent structural subordination of Cosan Limited's debt to dividends received from Cosan, whereas their LT FC IDR are the same due to the cap imposed by Brazil's country ceiling on Cosan's rating. Cosan Limited's ratings compare unfavorably with Votorantim S.A's. (VSA's, LT FC/LC IDR at 'BBB-' and National Scale rating at 'AAA(bra)'; Outlook Stable), one of Latin America's largest industrial conglomerates. VSA has larger revenues and higher geographic diversification with strong operations in the Americas (U.S., Brazil and Peru), whereas Cosan Limited's assets are mostly located in Brazil. VSA presents higher liquidity on a consolidated basis with cash and near-cash items of BRL8.9 billion compared to the short-term BRL2.8 billion debt position of, whereas Cosan Limited reported BRL8.4 billion and BRL4.2 billion, respectively, as of Dec. 31, 2017. VSA also presents lower leverage following the IPO of Nexa and sale of noncore assets. Fitch calculates VSA's pro forma 2017 net leverage at 0.8x incorporating the transactions, whereas Cosan posted 2.6x on a consolidated basis. In terms of leverage and cash flow generation, Cosan Limited performs better than Grupo KUO, S.A.B. de C.V.'s (KUO, LT FC/LC IDR at BB; Outlook Stable), a Mexican Group with diversified business portfolio in the consumer, automotive and chemical industrie. KUO reported net adjusted leverage of 2.9x and negative FCF in 2017. Cosan Limited reported positive FCF for both 2017 and LTM ended March 31, 2018. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Increased flow of dividends coming from Comgas, Raizen Combustiveis and Raizen Energia to Cosan over the next two years, reaching over BRL2.0 billion per year. -- Cosan Logistica not to pay dividends until 2019 -- No additional investments coming from Cosan Limited. -- Flexibility of Cosan Limited to reduce payouts to its shareholders, if necessary. RATING SENSITIVITIES Developments that May, Individually or Collectively, Lead to Positive Rating Action -- Improvement in either Cosan's or Cosan Logistica's credit profile; and -- Expectation of stronger-than-anticipated debt service coverage ratio at Cosan Limited based on more robust dividends received. Developments that May, Individually or Collectively, Lead to Negative Rating Action -- Expectation of debt service coverage ratio at Cosan Limited level below 0.5x based on reduced dividends to be received; -- Cosan Limited entrance in new investments financed by debt; and -- Deterioration of the credit profile of either Cosan or Cosan Logistica. LIQUIDITY Strong Liquidity: Cosan Limited's debt maturity profile is evenly spread out and is not expected to pressure the company's cash flows until 2024 when the USD500 million seven-year notes are due. Fitch expects Cosan Limited to report a cash position of BRL550 million in 2018 and no short-term debt assuming BRL70 million dividends. As of March 31, 2018, the holding company had BRL449 million of cash versus short-term debt of only BRL3 million. The group's strong financial flexibility relative to its access to the debt and capital markets, in combination with dividends received from Cosan ensures strong refinancing capacity for Cosan Limited. Fitch expects Cosan Limited to receive a sufficient inflow of dividends that should provide adequate repayment capacity for upcoming interest and payout to its shareholders. Dividends received amounted to BRL234 million in the LTM ended March 31, 2018. Fitch believes Cosan Limited has the flexibility to reduce the payouts to its shareholders if necessary. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Cosan Limited -- Long-Term Local Currency IDR at 'BB'; Outlook Stable; -- Long-Term Foreign Currency IDR at 'BB'; Outlook Stable; -- Senior unsecured notes due 2024 at 'BB'. ODEBRECHT ENGENHARIA: S&P Raises CCR to 'CCC', Outlook Developing ----------------------------------------------------------------- S&P Global Ratings raised its global scale corporate credit rating on Odebrecht Engenharia e Construcao S.A. (OEC) to 'CCC' from 'CCC-'. S&P said, "At the same time, we raised our long-term national scale corporate credit rating on the company to 'brCCC+' from 'brCCC-' and affirmed the short-term national scale rating at 'brC'. We also raised our issue-level ratings on OEC's sister company, Odebrecht Finance Ltd. (OFL), to 'CCC' from 'CCC-'. The '4' recovery rating on this debt, indicating our expectation that lenders would receive average (30%) recovery of their principal in the event of a payment default, remains unchanged. We revised the outlook on the corporate credit ratings to developing from negative. "We base the upgrade on the lower immediate risks of OEC's debt restructure or de facto default after its holding company, Odebrecht S.A. (not rated), committed to inject R$1.32 billion into OEC until the end of 2018. The holding company gained the capacity to support its E&C business after it raised additional debt, pledged by its equity stake in Braskem S.A. (BBB-/Stable/--). After this event, S&P believes that the risk of OEC restructuring its debt in the next six months is now lower, given that the company has additional liquidity not only to meet its short-term financial obligations, but also to start rebuilding a path to finance the completion of works and increasing its cash flow generation. The small principal maturities level over the next few years, with more signficant payments due by 2025, result in a less pressured short-term scenario for the company. RUMO SA: Fitch Hikes Issuer Default Ratings to BB, Outlook Pos. --------------------------------------------------------------- Fitch Ratings has upgraded Rumo S.A's Long-Term (LT) Foreign Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs) to 'BB', from 'BB-'. Fitch has also upgraded its unsecured bonds due in 2024 and 2025, which were issued by Rumo Luxembourg S.a.r.l., to 'BB'. At the same time, Fitch upgraded Rumo, its subsidiaries and the respective unsecured debentures' National Scale Long-Term ratings to 'AA(bra)', from 'A(bra)'. The Rating Outlook for the LC IDR and the National Scale ratings remains Positive. The outlook of the FC IDR was revised to Stable from Positive, as Fitch expects the FC IDR to be constrained by Brazil's 'BB' Country Ceiling in the event of an upgrade of the LC IDR. The rating action is supported by the consistent increase on Rumo's scale due to its ongoing capex program, which has resulted in solid operating margins expansion and boosted operating cash flow generation. These factors, combined with the cash provided by a BRL2.6 billion capital injection during 2017, have significantly strengthened Rumo's capital structure. The positive FCF trend from 2019 onwards and the expectation of continued robust liquid position were key considerations in maintaining the Positive Outlook for the national scale and LC IDR. The ratings are supported by the high predictability of Rumo's cash flow generation due to its solid business position as one of the largest operators of railroads in Brazil. Fitch sees as credit positive Rumo's affiliation with the Cosan Group (Cosan Limited; FC LT IDR 'BB'/Stable Outlook), which provides reasonable financial flexibility to the company, illustrated by its capital injections. KEY RATING DRIVERS Operating Performance Improvements: Rumo grew load volumes and raise its operating profitability significantly over the past few years. As of March 2018, the company transported 51 million of Revenue Ton Kilometer (RTK), which compares favorably versus 50 million in 2017 and 41 million, in 2016. During this time period expanded to 47.4% from 46.3% in 2017 and a proforma 40.5% in 2016. Fitch expects margins to remain above 47% in 2018 and then to reach around 50% in 2019. Combined with these factors, the reduction in interest expenses should push FFO margin to more than 25% in 2018. Conservative Credit Metrics: Fitch expects Rumo's capital structure to continue improving, supported by the consistent operating cash flow expansion. The BRL2.6 billion capital injection received in April 2017 accelerated the capital structure improvement as it helped Rumo reduce net debt/EBITDA to 2.5x in 2017 from 4.5x in 2016 and 5.2x in 2015. Through cash flow improvement, Rumo's net leverage metric is expected to reach levels close to 2.0x by 2019. The ability of the company to continue to lengthen its debt amortization schedule and finance its capex by issuing long-term and low-cost debt has also enhanced the company's financial profile. FCF Turns Positive in 2019: Fitch projects that Rumo's EBITDA and FFO will reach BRL2.9 billion and BRL1.8 billion, respectively, in 2018, increases from BRL2.8 billion and BRL1.1 billion in 2017. FCF is expected to be negative by BRL450 million in 2018 due to BRL2.0 billion of capex. After this growth capex tapers off, FCF should turn positive in 2019, reaching an estimated BRL500 million. Robust FCF levels of above BRL1.0 billion is likely if Rumo continues to grow volumes by 10% per year. The early renewal of Rumo Malha Paulista S.A.'s concession contract, which will mature in 2028, does not have rating implications as it does not result in material capex increases. Business Profile Remains Strong: Rumo enjoys a solid business position as the sole railroad transportation operator in the south and mid-western regions of Brazil, areas with high growth potential due to stable demand for grains worldwide. Rumo's businesses rely on four rail concessions to operate railway lines that extend over approximately 12,000 kilometers within Brazil, with access to three main Brazilian ports. Due to its cost structure, Rumo's businesses enjoy solid competitive advantages over the truck services. This factor enhances its consistent demand and limits volume volatilities over the cycles. The company will continue to expand its businesses within the industry by concluding the aggressive capex plan to add capacity to its operations over the next two years. Credit Linkage Incorporated: The ratings of Rumo and its subsidiaries are equalized due to strong operational, financial and legal ties among them. The strong operating synergies, the centralized cash management, the cross guarantees between the main debt permit the credit profile to be analyzed in a consolidated basis and the ratings to be the same. DERIVATION SUMMARY Rumo ratings derive from its strong business profile in the logistics infrastructure industry in Brazil, which enjoys positive perspectives. The railroad low-cost structure and Rumo's position as the sole railroad provider in its cover region provides important competitive advantages to the company, allowing it to report consistent volume improvements and increasing operating cash flow generation while its capacity expands. A ratings constraint is its business exposure to Brazil's operating environment as its operations rely on agribusiness and industrial logistics only in that region, like most of its Brazilian peers, but different from other railroads worldwide, which enjoys a more diversified covered region. The past financial efforts to reduce the company's leverage and increase its liquidity are considered sustainable over the medium term and are important credit factors that support Rumo's ratings. Rumo's ratings are positioned below Brazil's MRS S.A., rated 'AAA(bra)'/'BBB-'/Stable, which is the best positioned railroad in the country, because of its consistent operating cash flow generation, flat operating margins, positive FCF, low leverage and sound liquidity. Rumo's rating is constrained by its still- negative FCF, derived from its large investment programs. Rumo's and MRS's ratings are below those of other mature, more geographically diversified and less leveraged rail companies in Mexico, the U.S. and Canada, which are generally rated in the mid 'BBB' to low 'A' range. Rumo's operating margins are in line with Brazilian peers but are below levels achieved by railroads in the Northern hemisphere. Rumo's 'BB' rating is in line with that of Hidrovias do Brasil S.A. (HdB, 'BB'/Stable Outlook), due to the negative FCF both companies are generating due to investments. Although HdB's net leverage is higher than Rumo's, the long-term contracts of HdB supports its consistent and predictable cash flow generation. This factor is expected to result in fast deleverage of HdB's balance sheet in the next two to three years. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- 8% to 10% of volume increases per year from 2018 and 2019. -- Tariff increase by inflation in 2018 and 2019. -- EBITDA of BRL2.9 billion in 2018 and BRL3.5 billion in 2019. -- BRL2.0 billion capex in 2018 and BRL5.0 billion capex from 2019 to 2021. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Net adjusted leverage trends below 2.0x, on a sustainable basis; -- Maintenance of strong liquidity and positive debt refinancing schedule -- Consistent Positive FCF trends. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action Fitch may revise Rumo's rating outlook to Stable, from Positive, in case: -- Delaying on reporting positive FCF -- EBITDA margins trend below 50% -- Inability of Rumo's net debt/EBITDA to reach levels below 2.5x in sustainable basis LIQUIDITY Sound Liquidity: The capital injection of BRL2.6 billion and the extension of medium-term debt maturity during 2017 and 1Q18 strengthened Rumo's liquidity significantly. As of March 31, 2018, the company reported cash position of BRL3.6 billion, which covered short-term debt of BRL1.1 billion by 2.1x. Fitch understands Rumo's liquidity is adequate and sustainable in the long-term, considering the financial flexibility the company has presented to finance part of its capex plan. The company is expected to use part of its current cash to repay high-cost and middle-term debt and operating cash flow generation to finance part of the ongoing investments, while new long-term debt are sought. The loan to be provided by Banco Nacional de Desenvolvimento Economico e Social (BNDES), to reimburse the last investment projects, is likely to rebuild the cash. FULL LIST OF RATING ACTIONS Rumo S.A. -- Foreign Currency Issuer Default Rating (IDR) upgraded to 'BB', from 'BB-'; -- Local Currency Issuer Default Rating (IDR) upgraded to 'BB', from 'BB-'; -- National Scale Long-Term Rating upgraded to 'AA(bra)', from 'A(bra)'. Rumo Luxembourg S.a.r.l.: -- Senior unsecured notes due 2024 and 2025 upgraded to 'BB, from 'BB-'. Rumo Malha Norte S.A. -- National Scale Rating upgraded to 'AA(bra)', from 'A(bra)'; -- BRL166.67 million 6th debentures issuance maturing in 2018 upgraded to 'AA(bra)' from 'A(bra)'; -- BRL160 million 8th debentures issuance maturing in 2020 upgraded to 'AA(bra)' from 'A(bra)'. Rumo Malha Sul S.A. -- National Scale Rating upgraded to 'AA(bra)', from 'A(bra)'. Rumo Malha Paulista S.A. -- National Scale Rating upgraded to 'AA(bra)', from 'A(bra)'. The Outlook for the LC IDR and the National Scale ratings remains Positive. The outlook of the FC IDR was revised to Stable, from Positive, as Fitch expects the FC IDR to continue constrained by Brazil's 'BB' Country Ceiling. ============= J A M A I C A ============= MELIA BRACO: General Manager Quits ----------------------------------- RJR News reports that Dimitris Kosvogiannis has quit as general manager of Melia Braco Village resort, for what sources say were irreconcilable differences with the hotel management company with regards to necessary action for the resort to turn a profit. The all-inclusive hotel is owned by the National Insurance Fund (NIF), the agency overseeing the investment of public pension funds, according to RJR News. Neither NIF and its oversight ministry nor Melia Hotels International spoke of the circumstances of Kosvogiannis' departure and his successor, the report notes. Melia Jamaica Braco Village is the NIF's most valuable property in a real estate portfolio, valued at around $12 billion in 2017, the report relays. It is managed and marketed by Melia Hotels, a Spanish chain contracted by the NIF, through the NIF Resort Management Company Limited, the report adds. ================= N I C A R A G U A ================= NICARAGUA: Invites International Entities to Probe Unrest Deaths ---------------------------------------------------------------- EFE News reports that Nicaragua invited the Inter-American Commission on Human Rights (IACHR), the Office of the United Nations High Commissioner for Human Rights, and the European Union (EU) to visit the country during the crisis that has already left 200 people dead, various sources reported. The Office of the UN High Commissioner for Human Rights in Central America confirmed in a press release that "our office has received the letter from the government giving us access to the country, our team is coordinating the logistics for the visit and we will promptly inform the details," according to EFE News. IACHR Executive Secretary Paulo Abrao, for his part, announced on Twitter that experts from the Special Follow-up Mechanism for Nicaragua (MESENI) will arrive in Managua, the report relays. He explained that the task of the monitoring team will be to accompany the Verification and Citizenship Commission formed as part of the national dialogue and support civil society, the report says. The report discloses that Mr. Abrao further added that a group of international observers will arrive in Nicaragua in the first week of July to investigate the deaths and the violent incidents that transpired in the country since Apr. 18 as well as to identify people responsible for those atrocities. The report relays that the government also agreed to grant an EU human rights delegation access to Nicaragua, which was part of the requirements to unblock the national dialogue, a member of the Civic Alliance for Justice and Democracy said. After the dialogue was temporarily suspended on May 23 and later reinstated on Jun. 15, the government agreed to invite "immediately" the IACHR, the Office of the United Nations High Commissioner for Human Rights, the EU and the Secretariat General of the Organization of American States (OAS) for a visit to Nicaragua, the report notes. With Daniel Ortega as the president, Nicaragua has for 64 days been embroiled in one of the bloodiest sociopolitical crises in its history, leaving at least 200 people killed, the report relays. The protests against Ortega and his wife, Vice President Rosario Murillo, began on Apr. 18 due to failed social security reforms and became a national demand for his resignation after 11 years in power, the report adds. As reported Troubled Company Reporter-Latin America on June 15, 2018, Moody's Investors Service has changed Nicaragua's rating outlook to stable from positive and affirmed its B2 long-term issuer ratings. ====================== P U E R T O R I C O ====================== KONA GRILL: BDO USA Replaces Ernst & Young as Auditors ------------------------------------------------------- The Audit Committee of the Board of Directors of Kona Grill, Inc., recently conducted a competitive process to determine the Company's independent registered public accounting firm for the year ending Dec. 31, 2018. The Audit Committee invited several accounting firms to participate in this process, including Ernst & Young LLP, the Company's independent registered public accounting firm since 2001. As a result of this process and following careful deliberation, on June 12, 2018, the Company dismissed EY as the Company's independent registered public accounting firm. The reports of EY on the Company's consolidated financial statements as of and for the years ended Dec. 31, 2017 and 2016 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. The Company said that during its two most recent fiscal years and the subsequent interim period preceding EY's dismissal, there were no disagreements (within the meaning of Item 304(a)(1)(iv) of Regulation S-K) with EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. On June 15, 2018, the Audit Committee selected BDO USA, LLP as the Company's independent registered public accounting firm for the fiscal year ending Dec. 31, 2018, subject to completion of its standard client acceptance procedures. During the Company's two most recent fiscal years and the subsequent interim period preceding BDO's selection, neither the Company nor anyone on its behalf consulted with BDO with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's consolidated financial statements, or any other matters set forth in Item 304(a)(2)(i) or 304(a)(2)(ii) of Regulation S-K. About Kona Grill Kona Grill, Inc., headquartered in Scottsdale, Arizona, Kona Grill, Inc. -- http://www.konagrill.com/-- currently owns and operates 46 restaurants in 23 states and Puerto Rico. The Company's restaurants offer freshly prepared food, attentive service, and an upscale contemporary ambiance. Additionally, Kona Grill has three restaurants that operate under a franchise agreement in Dubai, United Arab Emirates; Vaughan, Canada and Monterrey, Mexico. Kona Grill incurred a net loss of $23.43 million in 2017 and a net loss of $21.62 million in 2016. As of March 31, 2018, Kona Grill had $87.01 million in total assets, $83.84 million in total liabilities and $3.16 million in total stockholders' equity. The Company has incurred losses resulting in an accumulated deficit of $79.7 million, has a net working capital deficit of $7.6 million and outstanding debt of $37.8 million as of Dec. 31, 2017. The Company said in its 2017 Annual Report that these conditions together with recent debt covenant violations and subsequent debt covenant waivers and debt amendments, raise substantial doubt about its ability to continue as a going concern. STONEMOR PARTNERS: Austin So Remains as GP's Chief Legal Officer ---------------------------------------------------------------- StoneMor GP LLC, the general partner of StoneMor Partners L.P., and Austin K. So, general counsel, chief legal officer and secretary of StoneMor GP have entered into an employment agreement pursuant to which Mr. So continues to serve as general counsel, chief legal officer and secretary of StoneMor GP. The agreement superseded the letter agreements previously entered into with Mr. So in May 2016 and January 2017. Mr. So's base salary under the agreement remains $375,000 per year, which base salary is subject to annual review by the Board of Directors of StoneMor GP. Any decrease in base salary will be made only to the extent StoneMor GP contemporaneously and proportionately decreases the base salaries of all of its senior executives. The agreement provides that Mr. So is eligible to receive an annual incentive cash bonus with respect to each fiscal year of StoneMor GP, provided that he will not be eligible to receive such bonus if he is not employed on the last day of the fiscal year to which such bonus relates and, further, he will not be eligible for such bonus unless other senior executive team members have also earned a bonus for such fiscal year. The amount of the cash bonus will be targeted at 50% of his base salary with respect to the applicable fiscal year. Mr. So remains entitled to receive a quarterly retention bonus of $25,000 per quarter, payable in cash after the end of each quarter in 2018, provided that he is employed by StoneMor GP on the day StoneMor GP pays the applicable retention bonus. Under the agreement, Mr. So is also entitled to participate in the Partnership's 2014 Long-Term Incentive Plan to the extent that StoneMor GP offers the LTIP to all senior executives of StoneMor GP. Mr. So's participation in the LTIP, if offered by StoneMor GP, will be in an annual amount equal to 50% of his base salary, with 50% of such annual amount vesting in equal annual installments over three years and 50% of the annual amount vesting based upon attainment of performance goals as determined by the Compensation Committee of the Board. To the extent Mr. So's employment terminates on account of "Retirement" during a performance period applicable to a particular LTIP grant, the portion of such LTIP grant that is subject to performance goals will be earned pro-rata based on actual performance and the number of months that Mr. So was employed during the performance period. To be eligible for a pro-rated portion of the LTIP grant in the event of a Retirement, Mr. So must execute a release substantially in the form attached to his agreement. If Mr. So's employment is terminated by StoneMor GP for "Cause" or by Mr. So without "Good Reason" or in the event of Mr. So's death or "Disability", Mr. So will be entitled to receive the following: (i) any base salary for days actually worked through the date of termination; (ii) reimbursement of all expenses for which Mr. So is entitled to be reimbursed pursuant to the agreement, but for which he has not yet been reimbursed; (iii) any vested accrued benefits under StoneMor GP's employee benefit plans and programs in accordance with the terms of those plans and programs, as accrued through the date of termination; (iv) vested but unissued equity in StoneMor GP or the Partnership; (v) any bonus or other incentive (or portion thereof) for any preceding completed fiscal year that has been awarded by StoneMor GP to Mr. So, but has not been received by him prior to the date of termination; and (vi) accrued but unused vacation, to the extent Mr. So is eligible in accordance with StoneMor GP's policies. If Mr. So's employment is terminated by StoneMor GP without "Cause" or by Mr. So for "Good Reason", and provided that Mr. So enters into a release as provided for in the agreement, Mr. So would be entitled to receive, in addition to the benefits described in the preceding paragraph, the following: (i) payment of his base salary for a period of 12 months following the effective date of his termination, to be paid in equal installments in accordance with the normal payroll practices of StoneMor GP, commencing within 60 days following the date of termination, with the first payment including any amounts not yet paid between the date of termination and the date of the first payment and (ii) a pro-rata cash bonus for the fiscal year in which such termination occurs, if any, determined by StoneMor GP (subject to certain the restrictions as set forth above), which will be paid at the same time that annual incentive cash bonuses are paid to other executives of StoneMor GP, but in no event later than March 15 of the fiscal year following the fiscal year in which the date of termination occurs. In the event of a "Change in Control", all outstanding equity interests granted to Mr. So that are subject to time-based vesting provisions and that are not fully vested will become fully vested as of the date of such Change in Control. The agreement also includes customary covenants running during Mr. So's employment and for 12 months thereafter prohibiting solicitation of employees, directors, officers, associates, consultants, agents or independent contractors, customers, suppliers, vendors and others having business relationships with StoneMor GP and prohibiting Mr. So from directly or indirectly competing with StoneMor GP. The agreement also contains provisions relating to protection of StoneMor GP's property, its confidential information and ownership of intellectual property as well as various other covenants and provisions customary for an agreement of this nature. Agreements with Patricia D. Wellenbach and Stephen J. Negrotti Restricted Phantom Unit Agreements On June 15, 2018, each of Ms. Wellenbach and Mr. Negrotti entered into a Director Restricted Phantom Unit Agreement with StoneMor GP under the LTIP. Each Restricted Phantom Unit Agreement provides, among other things, as follows: * commencing on July 1, 2018, compensation in the annual amount of $20,000 payable to each director in consideration for service as a director, pro rated for 2018, will be deferred and credited, in the form of restricted phantom units, to a mandatory deferred compensation account established by StoneMor GP for the Director; * the Annual Deferral will be credited in equal quarterly installments, each installment to be credited on the date of the regular quarterly meeting of the Board for that quarter; provided, however, that the Annual Deferral for 2018 will be credited in installments of $10,000 and $5,000 on the date of the regular quarterly meeting of the Board for the third and fourth quarter, respectively, of 2018; * the number of restricted phantom units (or fractions thereof) to be credited to the Director's Mandatory Deferred Compensation Account will be determined by dividing the amount of each quarterly installment by the closing price for common units of the Partnership for the trading day immediately prior to the first day of such regular quarterly Board meeting (in the event that there is no meeting of the Board during any calendar quarter, the crediting will occur on such date as is designated by StoneMor GP); * for each restricted phantom unit in the Mandatory Deferred Compensation Account, StoneMor GP will credit the account, solely in additional restricted phantom units, an amount of distribution equivalent rights so as to provide the Directors a means of participating on a one-for-one basis in distributions made to holders of the Partnership's common units; * payments of the Director's Mandatory Deferred Compensation Account will be made on the earliest of (i) separation of the Director from service as such, (ii) disability (as described in the Restricted Phantom Unit Agreement), (iii) "Unforeseeable Emergency" (as defined in the Restricted Phantom Unit Agreement), (iv) death or (v) "Change of Control" (as defined in the Plan including the last sentence thereof applicable to 409A Awards (as defined in the Plan)) of the Partnership or StoneMor GP; * payments for restricted phantom units (or fractions thereof) credited to the Mandatory Deferred Compensation Account will be made in the Partnership's common units, provided that StoneMor GP, at its option, may elect to pay all or any portion of the Mandatory Deferred Compensation Account in cash instead of paying in common units; and * restricted phantom units (or fractions thereof) credited to the Mandatory Deferred Compensation Account shall be valued at the closing price for the Partnership's common units as published in The Wall Street Journal or in Yahoo Finance for the trading day immediately prior to the payment date. Indemnification Agreements On June 15, 2018, each of Ms. Wellenbach and Mr. Negrotti entered into an indemnification agreement with StoneMor GP, the terms of which are consistent with the terms of the indemnification provided to the other directors of StoneMor GP and by StoneMor GP's limited liability company agreement. Under the indemnification agreements, StoneMor GP is required to indemnify Ms. Wellenbach and Mr. Negrotti to the fullest extent of the law against liabilities, costs and expenses incurred by them in their capacities as a director or agent of StoneMor GP unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the director acted in bad faith or engaged in fraud, willful misconduct or gross negligence. The indemnification agreements also require StoneMor GP to indemnify Ms. Wellenbach and Mr. Negrotti for criminal proceedings unless the applicable director acted with knowledge that such director's conduct was unlawful. Any such indemnification will be only out of the assets of StoneMor GP. About StoneMor Partners StoneMor Partners L.P., headquartered in Trevose, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 316 cemeteries and 93 funeral homes in 27 states and Puerto Rico. StoneMor is the only publicly traded death care company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. For additional information about StoneMor Partners L.P., please visit StoneMor's website, and the investors section, at http://www.stonemor.com. As of Sept. 30, 2017, StoneMor had $1.79 billion in total assets, $1.66 billion in total liabilities and $136.74 million in total partners' capital. StoneMor incurred a net loss of $30.48 million in 2016, a net loss of $23.39 million in 2015 and a net loss of $9.78 million in 2014. * * * As reported by the TCR on April 6, 2018 S&P Global Ratings affirmed its 'CCC+' corporate credit rating on StoneMor Partners L.P. S&P said, "The rating affirmation reflects our expectation that the company can generate operating cash flow of approximately $25 million in 2018 to support operating needs for at least another year." STONEMOR PARTNERS: Successfully Amends Credit Facility ------------------------------------------------------ StoneMor Partners L.P. has secured an amendment to its credit agreement that extends the deadline for delivering the Partnership's audited financial statements for the year ended Dec. 31, 2017 to June 30, 2018, with the Partnership being required to deliver the unaudited financial statements for the quarter ended March 31, 2018 no later than 60 days after the date on which the Partnership delivers the audited 2017 financial statements, and for the quarter ending June 30, 2018 no later than 105 days after the Partnership delivers the audited 2017 financial statements. Leo Pound, interim chief executive officer of StoneMor commented, "Our amended credit agreement is the result of significant collaboration with our lenders to meet their desire to utilize more GAAP-based metrics, and we are pleased with the result. StoneMor has previously stated its commitment to operating within the four corners of its balance sheet and to deemphasize the use of non-GAAP financial measures. Historically, the Consolidated Leverage Ratios we reported have included non-GAAP financial measures and unsecured debt unrelated to the credit facility. Working with our lenders, our new Consolidated Secured Net Leverage Ratio is calculated primarily using GAAP financial measures, including specific GAAP-based cash flow adjustments, and uses primarily our senior bank facility. The Partnership and its lenders mutually agreed on the new covenant metrics to more clearly reflect the cash flows and relevant debt used to measure its leverage ratio. We believe this creates a cleaner, more transparent view of our leverage covenant. We appreciate our lenders continued support." Under the terms of the amended credit agreement, effective June 12, 2018, the credit facility: * Increases the Partnership's maximum leverage ratio, which is now a Consolidated Secured Net Leverage Ratio, from 4.25:1.00 to 5.75:1.00 through September 30, 2018, after which it reduces to 5.50:1.00 through December 31, 2018, to 5.00:1.00 for periods ending in the year ending December 31, 2019 and to 4.50:1.00 for periods ending in the year ending December 31, 2020; * Decreases the revolving credit commitment from $200 million to $175 million while increasing the interest rate by 0.50%; * Reduces the fixed charge coverage ratio from 1.2x to 1.0x in 2018 and 1.1x in 2019 and eliminates the consolidated debt service coverage ratio; * Establishes limitations on incurring additional unsecured indebtedness and using subordinated debt to fund certain acquisitions; and * The Partnership will continue to restrict distributions to partners until the Consolidated Leverage Ratio (which includes the effect of unsecured indebtedness, of which there was approximately $173.5 million outstanding at March 31, 2018) is not greater than 7.50:1.00 and there is at least $25.0 million of availability under the revolving credit agreement. The increase in the maximum CSNLR from 4.25 to 5.75 is primarily due to the change in the way the ratio is calculated, relying mostly on GAAP financial measures, as mentioned above. The revised consolidated secured net leverage and fixed charge coverage ratios provide StoneMor with financial flexibility while the lower total commitment will reduce fees on capacity the Partnership did not intend to use. It is anticipated that any future growth acquisitions will either be funded through equity issuances by the Partnership or completed by the general partner. A full-text copy of the Sixth Amendment and Waiver Agreement is available for free at https://is.gd/iIPDLu About StoneMor Partners StoneMor Partners L.P., headquartered in Trevose, Pennsylvania -- http://www.stonemor.com/-- is an owner and operator of cemeteries and funeral homes in the United States, with 316 cemeteries and 93 funeral homes in 27 states and Puerto Rico. StoneMor is the only publicly traded death care company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. As of Sept. 30, 2017, StoneMor had $1.79 billion in total assets, $1.66 billion in total liabilities and $136.7 million in total partners' capital. StoneMor incurred a net loss of $30.48 million in 2016, a net loss of $23.39 million in 2015 and a net loss of $9.78 million in 2014. * * * As reported by the TCR on April 6, 2018 S&P Global Ratings affirmed its 'CCC+' corporate credit rating on StoneMor Partners L.P. S&P said, "The rating affirmation reflects our expectation that the company can generate operating cash flow of approximately $25 million in 2018 to support operating needs for at least another year." *********** 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 * * *