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/raid1/www/Hosts/bankrupt/TCRLA_Public/181003.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, October 3, 2018, Vol. 19, No. 196 Headlines A R G E N T I N A ALGODON WINES: All Five Proposals Approved at Annual Meeting ARGENTINA: IMF Doesn't Have the Right Medicine for Country CABLEVISION SA: Fitch Withdraws B IDR Amid Telecom Argentina Deal B O L I V I A BOLIVIA: Gets $51.6MM-IDB Loan to Boost Electricity Sector B R A Z I L ADECOAGRO SA: Moody's Affirms Ba2 CFR & Alters Outlook to Stable ECORODOVIAS CONCESSOES: Moody's Puts Ba2 CFR for Review D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: 3 Power Plants Coming to Ease Energy Crunch DOMINICAN REPUBLIC: Will Allocate US$580MM for Electricity Subsidy M E X I C O BANORTE BNTECB 07-2: Moody's Puts Ba3 on Sub. Certs on Review OFFSHORE DRILLING: Fitch Affirms CC LT Issuer Default Ratings T R I N I D A D & T O B A G O PETROLEUM CO: Energy Chamber Meets With Transition Team - - - - - ================= A R G E N T I N A ================= ALGODON WINES: All Five Proposals Approved at Annual Meeting ------------------------------------------------------------ Algodon Wines and Luxury Development Group, Inc. reconvened its 2018 Annual Stockholder Meeting on Sept. 28, 2018, at which the stockholders: (1) elected John I. Griffin as director to be effective upon the uplisting of the Company's common stock to a national exchange; (2) ratified and approved Marcum, LLP as the Company's independent registered accounting firm for the year ended Dec. 31, 2018; (3) approved a reverse stock split of the outstanding shares of common stock in a range from one-for-two up to one-for-twenty, or anywhere between, if required for the uplisting of the Company's common stock to a national exchange; (4) approved the 2018 Equity Incentive Plan; and (5) approved an amendment to the Company's certificate of incorporation to change Company's name from "Algodon Wines & Luxury Development Group, Inc." to "Algodon Group, Inc." About Algodon Wines Through its wholly-owned subsidiaries, Algodon Wines & Luxury Development Group, Inc. -- http://www.algodongroup.com/-- invests in, develops and operates real estate projects in Argentina. Based in New York, AWLD operates a hotel, golf and tennis resort, vineyard and producing winery in addition to developing residential lots located near the resort. The activities in Argentina are conducted through its operating entities: InvestProperty Group, LLC, Algodon Global Properties, LLC, The Algodon - Recoleta S.R.L, Algodon Properties II S.R.L., and Algodon Wine Estates S.R.L. AWLD distributes its wines in Europe through its United Kingdom entity, Algodon Europe, LTD. Algodon Wines reported a net loss attributable to common stockholders of $8.25 million for the year ended Dec. 31, 2017, compared to a net loss attributable to common stockholders of $10.04 million for the year ended Dec. 31, 2016. As of June 30, 2018, the Company had $5.39 million in total assets, $4.67 million in total liabilities, $9.02 million in series B convertible preferred stock, and a total stockholders' deficiency of $8.30 million. Marcum LLP, in New York, the Company's auditor since 2013, issued a "going concern" opinion in its report on the consolidated financial statements for the year ended Dec. 31, 2017, citing that the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. ARGENTINA: IMF Doesn't Have the Right Medicine for Country ---------------------------------------------------------- Jon Sindreu at The Wall Street Journal reports that faced with a currency crisis, Argentine President Mauricio Macri's first instinct was to call the International Monetary Fund. The conditions of the bailout deal, however, risk prolonging the IMF's dubious track record when it comes to helping emerging economies, according to The Wall Street Journal. The agreement reached between Argentina and the IMF brought the total bailout package to $57.1 billion through 2021, according to The Wall Street Journal. The cash injection is good news in the short term because Argentina's government has a lot of U.S. dollar-denominated debt to service and the peso is down more than 50% against the greenback this year, the report notes. But it seems unlikely that the conditions imposed by the IMF will ensure the robust economic recovery many international investors are hoping for, the report says. First, the IMF will only allow the Argentine central bank to shore up the peso if it falls beyond a certain level, and only by spending a maximum of $150 million dollars, the report discloses. If investors are intent on selling, that quantity may be little more than a water gun, the report relays. Second, to fix its inflation problem, the central bank will be forced to keep the amount of money it issues unchanged - it's now growing at a 24% annual pace -- and the government will need to massively slash its budget deficit, the report notes. This cocktail of policies echoes back to the 1970s, when limiting the amount of money central banks could print became all the rage, the report relays. The approach proved unworkable and was soon abandoned, the report notes. Many of the countries the IMF helped back then weren't doing any better by the 1990s, the report discloses. For countries like Argentina, the key determinant of inflation isn't the amount of money in the economy, government spending or even central-bank policy, the report relays. Instead, they are at the mercy of global capital flows, the report notes. When the Federal Reserve raises rates and investors flock to the dollar, emerging-market currencies plummet and import prices surge, the report says. Workers and companies respond by trying to set wages and prices higher, the report discloses. Argentina is particularly prone to this problem because of its strong unions and dollarized utility prices, the report notes. Fixing Argentina's economy may require painful measures, such as freezing public-sector wages, tempering union power and putting up with lower corporate profit margins, the report relays. The government should also limit dollar debts, the report notes. In the longer term, elements of China's development success might offer a roadmap: Exchange rate stability, coordinated policy on incomes and a focus on producing exports in scale industries, the report says. Targeting deficits and arcane monetary targets could indirectly achieve some of these goals, but it could also do a lot of damage, the report discloses. Rehashing the 1970s doesn't look a useful path forward for Argentina, the report notes. Investors should stay away, the report adds. As reported in the Troubled Company Reporter-Latin America on Sept. 4, 2018, S&P Global Ratings placed on Aug. 31, 2018, its 'B+' long-term and 'B' short-term sovereign credit ratings on Argentina on CreditWatch with negative implications. At the same time, S&P placed its 'raAA' national scale rating on CreditWatch negative and affirmed its 'BB-' transfer and convertibility assessment. The CreditWatch negative reflects the risk of worsening creditworthiness due to potentially weakened implementation of the government's strategy to stabilize the economy. Exchange rate volatility, as shown by recent pressure on the Argentine currency, could jeopardize the effective implementation of economic adjustment measures, absent further steps to boost investor confidence. Consequently, S&P Global Ratings corrected its short-term ratings on Argentina by removing them from CreditWatch with negative implications. Fitch Ratings affirmed on May 8, 2018, Argentina's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B' and revised the Outlook to Stable from Positive. On December 4, 2017, Moody's Investors Service upgraded the Government of Argentina's local and foreign currency issuer and senior unsecured ratings to B2 from B3. The senior unsecured shelves were upgraded to (P)B2 from (P)B3. The outlook on the ratings is stable. At the same time, Argentina's short-term rating was affirmed at Not Prime (NP). The senior unsecured ratings for unrestructured debt were affirmed at Ca and the unrestructured senior unsecured shelf affirmed at (P)Ca. As previously reported by the TCR-LA, Argentina defaulted on some of its debt late July 30, 2014, after expiration of a 30- grace period on a US$539 million interest payment. Earlier that , talks with a court-appointed mediator ended without resolving a standoff between the country and a group of hedge funds seeking full payment on bonds that the country had defaulted on in 2001. A U.S. judge had ruled that the interest payment couldn't be made unless the hedge funds led by Elliott Management Corp., got the US$1.5 billion they claimed. The country hasn't been able to access international credit markets since its US$95 billion default 13 years ago. On March 30, 2016, Argentina's Congress passed a bill that will allow the government to repay holders of debt that the South American country defaulted on in 2001, including a group of litigating hedge funds that won judgments in a New York court. The bill passed by a vote of 54-16. CABLEVISION SA: Fitch Withdraws B IDR Amid Telecom Argentina Deal ----------------------------------------------------------------- Fitch Ratings has withdrawn Cablevision S.A.'s Local Currency Issuer Default Rating (IDR) of 'BB-'/Stable and Long-Term Foreign Currency IDR of 'B'/Stable, following its merger with Telecom Argentina S.A., with the latter being the surviving entity. As of Jan. 1, 2018, all assets and liabilities of Cablevision were absorbed into Telecom Argentina, including USD500 million senior unsecured notes due 2021. Fitch currently maintains a 'B+'/'RR3' Rating on USD500 million senior unsecured notes due 2021, which were assumed by Telecom Argentina. The rating for these notes has been transferred to the Telecom Argentina entity in Fitch's database. No other rating actions have been taken. On April 27, 2018, Fitch assigned a Long- Term Local Currency IDR of 'BB-'/Stable and Long-Term Foreign Currency IDR of 'B'/Stable to Telecom Argentina. Fitch will continue to provide ratings for Telecom Argentina; the company's current ratings reflect its strong business position and conservative financial profile. Telecom Argentina's Long-Term Foreign-Currency IDR is constrained by the 'B' country ceiling of the Republic of Argentina, which limits the FC rating of most Argentine corporates. FULL LIST OF RATING ACTIONS Fitch has withdrawn the following ratings: Cablevision S.A. - Foreign Currency IDR 'B'; Outlook Stable; - Local Currency IDR 'BB-'; Outlook Stable; Fitch has transferred the following issuance rating from Cablevision to Telecom Argentina - USD500 million Senior Unsecured Notes ('B+'/'RR3') ============= B O L I V I A ============= BOLIVIA: Gets $51.6MM-IDB Loan to Boost Electricity Sector ---------------------------------------------------------- The Inter-American Development Bank (IDB) has approved a $51.6 million loan for Bolivia which will strengthen sustainable development of the electricity sector, including the promotion of renewable energies such as geothermal, solar and wind power. At present, 80 percent of the electricity that Bolivia produces comes from fossil fuels and the rest from renewable sources. This funding will also boost efficient use of energy and contribute to universal access to electricity. Currently, Bolivia's electrical power service coverage is estimated at 90 percent but the challenge remains of reaching the remaining 10 percent, which to a large extent includes rural areas. In a bid to close that gap, the government of Bolivia approved the National Economic and Social Development Plan for 2016-2020 (known as the PDES in Spanish) which spells out goals, results and sector-by-sector action over the medium term, with the pillars of the so-called Patriotic Agenda 2025. For the electricity sector the PDES establishes energy sovereignty, the universalization of electrical power service, a boost in use of renewable energy sources and energy integration and security. This Programmatic Policy-based Loan (PBP) is in line with the goals set out in the PDES for 2016-2020, as it will generate benefits through the diversification of the electricity grid with renewable energies, both conventional and non-conventional, that will help cut greenhouse gas emissions. Benefits are also expected through the export of surplus natural gas and lower costs of generating electricity. The program also features a gender equality component. The Bolivian energy sector, particularly the part involving electricity, is a major source of employment and revenue. This led the National Electricity Company, or ENDE, with the support of the IDB, to carry out a gender study to understand the low representation of women in the company and boost its policy and operational framework so as to achieve greater gender equality. The results of the study prompted the development of recommendations and guidelines for coming up with a gender policy and action plan within the company. The program approved foresees total lending of $51.6 million. Of that, $43.86 million is from regular ordinary capital that is to be paid back by 2033 and with an interest rate pegged to the LIBOR, while $7.74 million is concessional ordinary capital granted over a span of 40 years, with a 40 year grace period and an interest rate of 0.25 percent. As reported in the Troubled Company Reporter-Latin America on July 5, 2018, Fitch Ratings has affirmed Bolivia's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. =========== B R A Z I L =========== ADECOAGRO SA: Moody's Affirms Ba2 CFR & Alters Outlook to Stable ---------------------------------------------------------------- Moody's Investors Service has affirmed Adecoagro S.A.'s Ba2 Corporate Family Rating and the Ba2 rating on its senior unsecured rating. Outlook changed to stable from negative. Outlook Actions: Issuer: Adecoagro S.A. Outlook, Changed To Stable From Negative Affirmations: Issuer: Adecoagro S.A. Corporate Family Rating, Affirmed Ba2 Senior Unsecured Regular Bond/Debenture, Sep 21, 2027, Affirmed Ba2 RATINGS RATIONALE The stabilization of Adecoagro's outlook follows the company's decision to scale back on the investment proposal to acquire control of SanCor Cooperativas Unidas Limitadas, an Argentinean dairy cooperative. When the deal was announced, on March 24, Moody's estimated the deal could amount to up the $390 million. The transaction would have increased leverage to above its downgrade triggers while also incorporating execution risks. But, September 12, 2018, Adecoagro announced that it had withdrawn the initial joint-venture offer and submitted to SanCor a new proposal to acquire two milk processing plants and two trademarks. Currently, Moody's expects that any acquisition of assets from the cooperative will be modest in size, not pressuring leverage or liquidity levels. Adecoagro's Ba2 ratings incorporate its relevant position in Brazil's sugar-ethanol sector, economies of scale due to the large size of its plants, high productivity levels, and the ownership of over 89% of its sugarcane, which allow for a low cost profile among its peers. The company's strong credit metrics, conservative financial policies, and adequate liquidity profile are also key rating considerations, especially in light of the sugar-ethanol industry's inherent volatility. Adecoagro's experienced management and the diversification into agricultural products in Argentina partly mitigate weather and other event risks, being additional credit positives. In 2017, Adecoagro had a production cost of 11.5 cents per pound, including planting renewal and annual plantation maintenance, which compares to an average 15 cents per pound for Brazilian producers. In 2018 Moody's expects the company's cost to reach 9 cents per pound, driven by higher crushing volumes, cost efficiency gains and the depreciation of the Brazilian Real. Supporting the company's overall cost efficiency and profitability levels are (i) the continuous harvest system, eliminating the off- season downtime, thus further increasing production and energy generation relative to its fixed costs; (ii) a lower land lease cost by being mainly located in the state of Mato Grosso do Sul (MS), in comparison to most sugar and ethanol installed capacity in Sao Paulo; (iii) high installed cogeneration capacity having generated 712 thousand MWh in 2017, or 69 KWh per ton; and (iv) tax benefits for ethanol sales in the state of MS. In turn, Argentina, where the company has most of its farming operations, is a competitive global producer of soybeans and corn. In 2017/2018 Argentina was the 4rd largest soybean producer globally and 5th largest corn producer. Seventy percent of the company's crops are produced in the humid Pampas region, with a favorable weather pattern and rich soil. Even after the severe drought suffered in Argentina in 2017/2018, the company results observed little impact with the lower yields on soybeans and corn being compensated by higher average prices and improved yields on rice production. Adecoagro remains focused on improving productivity and reducing unitary production costs. The company's most relevant investments will be concentrated in expanding its sugarcane crushing capacity to 14.2 million tons by 2022 from to 11.2 million in 2016. Other projects include doubling the amount of milking cows to 14,000 heads in 2022 compared to 7,000 in 2016, and improving rice processing and distribution assets. Moody's expects capex to amount to $206 million in 2018, being $100 million directed to expansion projects. The ratings are constrained by Adecoagro's exposure to commodity price volatility and its raw material concentration in the state of Mato Grosso do Sul, where about 74% of its EBITDA was generated by two sugarcane mills in 2017 (an average participation of 66% in the last three years). Moody's views the organization in production clusters in the sector as an important competitive advantage, since it increases operating efficiencies and enhances cost structure. Nevertheless, the fact that Adecoagro runs just one major cluster and concentrates most of its EBITDA generation in a limited geographic region exposes it to relevant weather and event risks. Partly offsetting this risk is the company's diversification into different crops in Argentina. In 2017 Adecoagro generated $933 million in sales of which 65% from sugar, ethanol and energy sales; 16% from soybeans, corn, wheat, sunflower and others; 11% from rice; and 4% from the dairy business. This segmental diversity helps to mitigate negative sales and margin impacts stemming from each specific segments. Still, given the relevance of the sugar-ethanol segment, the company's credit quality is highly correlated to the performance of such business. Other constraints are its small scale, considering annual revenues as compared to global peers, and its country risk exposure to Brazil and Argentina. Because of the importance of the agricultural sector to these economies, the political environment may influence demand, supply, prices and costs. Recently, a deteriorating fiscal environment in Argentina led to the implementation of export taxes that impacted soybeans and all other agriculture commodities. Despite these measures the fundamentals of the agricultural sector in Argentina remain positive, given its natural competitive advantages such as land and water availability, favorable weather, adequate soils, and an overall low marginal production cost. For exporters, in the short- term, the taxes will be compensated by the depreciation of the Argentinean Peso, since commodities are mostly traded in US dollars while most cost are denominated in local currency. As of June 2018, the seasonal peak of working capital needs, Adecoagro's cash position of $145 million covered short-term debt by 1.0x. The company also has $105 million in readily marketable inventories (RMI). The company's average term of debt is of 7 years, with short-term lines related to working capital. Adecoagro's leverage was at 2.4x in the LTM ended June 2018 and Moody's estimates it will remain in a range of 2.5x to 3.0x in the next 12 to 18 months. Rating Outlook The stable outlook reflects its expectation that Adecoagro will continue to benefit from an increasing sugarcane crushing capacity providing continuous cost dilution, despite a low global sugar price environment. It also incorporates that Adecoagro will pursue its expansion investments without jeopardizing its adequate liquidity and leverage. Upgrade Triggers An upgrade would require increased production diversification, sustained free cash flow generation and an improvement in liquidity profile, with a cash balance that consistently covers its short-term obligations. Quantitatively an upgrade would require Debt/EBITDA below 2.0x and EBITA/Interest Expense above 5.0x. Despite a relevant export element in Adecoagro's sales and price environment, its operations are highly reliant on the local dynamics. Accordingly, the company's rating could be impacted by a rating actions on Brazil. Downgrade Triggers The ratings could be downgraded in case of a deterioration in the company's liquidity profile, profitability or credit metrics. Quantitatively, a downgrade could happen if Debt/EBITDA remains above 3.5x or EBITA/Interest Expense remains below 2.0x. Adecoagro S.A., the group's ultimate parent company, is headquartered in Luxembourg and it generated sales of $910 million for the last twelve months ending June 30, 2018. An average of 77% of these sales were generated by the Brazilian operations in the last three years. The company is primarily engaged in agricultural and agro-industrial activities into three segments: (i) sugar- ethanol and energy, mainly in Brazil; (ii) farming, including the production and commercialization of soy, corn, wheat, rice, dairy and others, and (iii) land transformation. In the LTM the company's consolidated EBITDA reached $348 million with a margin of 38.3%. The principal methodology used in these ratings was Global Protein and Agriculture Industry published in June 2017. ECORODOVIAS CONCESSOES: Moody's Puts Ba2 CFR for Review ------------------------------------------------------- Moody's America Latina Ltda. has placed the Ba2 global scale and Aa3.br national scale corporate family ratings and Ba3 global scale and A2.br national scale senior unsecured ratings of Ecorodovias Concessoes e Servicos S.A. under review for downgrade. RATINGS RATIONALE The rating actions relate to the federal investigations conducted by Brazil's Federal Prosecution Service (Ministerio Public Federal -- MPF) in conjunction with the Federal Police (Policia Federal) which resulted in the arrest of two senior employees of the company's toll road subsidiaries and the search and seizure of documents. The federal investigation is entitled "Operacao Integracao". The investigations relate to allegations of potential briberies to government employees in return for favored contractual conditions and/or amendments related to toll road concessions in the State of Parana. Ecorodovias owns and operates two toll road concessions in the state: Concessionaria Ecovia Caminho do Mar S.A. and Rodovia das Cataratas S.A. -- Ecocataratas (Ecocataratas). Ecovia was originally awarded in 1997, for a stretch of 136.7 km connecting the state capital Curitiba to the Port of Paranagua, and is set to expire in November 2021. Ecocataratas was also awarded in 1997, for a stretch of 387,1 km connecting the central region of the state to the city of Foz do Iguacu, and is also set to expire in November 2021. The investigations affect the company's reputation and can result in heightened refinancing risks and substantial fines. As of June 2018, the company maintained a consolidated cash position of approximately BRL1.1 billion and short term maturities of approximately BRL1.2 billion. Although the timing and legal outcome of the on-going investigations is difficult to predict, this review will focus on the development of the investigations and potential impact on leverage and liquidity. WHAT COULD CHANGE THE RATINGS UP/DOWN The ratings can be downgraded by multiple notches upon erosion of the company's cash position and/or a perception of increased refinancing risks as the date of important debt maturities approaches, mostly scheduled to occur in the second quarter 2019. The rating can also be downgraded by multiple notches upon an actual conviction or assumption of guilt leading to the application of fines that affect the company's leverage profile. A positive rating action is unlikely at this time. The rating can be confirmed upon dismissal of allegations and repayment/refinancing of relevant short term debt maturities. ECO C&S manages 2,602 km of toll roads through nine concessions with an average remaining life of twelve years. In the last twelve months ended June 2018 the company generated BRL2.4 billion in net revenues (excluding construction revenues) and EBITDA of BRL1.8 billion after Moody's standard adjustments, resulting in Debt to EBITDA of 3.1x and FFO to Debt of 21.4%, respectively. ECO C&S is a subholding company created to consolidate the operational toll road business under Ecorodovias Infraestrutura e Logistica S.A. (ECO I&L), the owner of 100% of its shares. ECO I&L is in turn controlled by the CR Almeida Group and Italy-based Gavio Group. The principal methodology used in these ratings was Privately Managed Toll Roads published in October 2017. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: 3 Power Plants Coming to Ease Energy Crunch --------------------------------------------------------------- Dominican Today reports that administrative minister Jose Ramon Peralta said three gas-fired 33-megawatt power plants will arrive in the country from Puerto Rico, which could be operating in 30 days, which will guarantee electricity when the plants are taken off line on for maintenance. "The good news that they gave us is that three 33-megawatt gas plants are coming from Puerto Rico this week, which will be operational in 30 days," the official said on CDN, Channel 37, according to Dominican Today. He said that from late October to early Nov., AES Andres will have gone from 110 to 230 MW and would be in full capacity in February, the report notes. The official said that during president Danilo Medina's visit to the UN, American investors expressed their interest in the Punta Catalina power plant, "because there has been talk of wanting to offer 50 percent of Punta Catalina," the report relays. The report discloses that Mr. Peralta added that Punta Catalina will start operating in October, "between October and December will be synchronized and from December 40 MW will begin to enter the system, so that in February one of the turbines will be generating more than 300 MW and the entrance will be felt. " As reported in the Troubled Company Reporter-Latin America on Sept. 24, 2018, Fitch Ratings has affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. DOMINICAN REPUBLIC: Will Allocate US$580MM for Electricity Subsidy ------------------------------------------------------------------ Dominican Today reports that the government of the Dominican Republic will allocate RD$28.7 billion (US$580.0 million) to subsidize the electricity sector next year, as stated in the 2019 Budget, submitted to the Senate by Finance minister Donald Guerrero. In his letter to the Senate with the proposed initiative, president Danilo Medina includes Customs revenues of RD$161.0 billion, RD$490.0 billion from Internal Taxes and RD$35.0 billion from the National Treasury, according to Dominican Today. As reported in the Troubled Company Reporter-Latin America on Sept. 24, 2018, Fitch Ratings has affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. =========== M E X I C O =========== BANORTE BNTECB 07-2: Moody's Puts Ba3 on Sub. Certs on Review ------------------------------------------------------------- Moody's de Mexico S.A. de C.V. has placed on review for downgrade the ratings of Banorte - BNTECB 07 and Banorte - BNTECB 07-2 issued in connection with a Mexican collateralized loan obligation securitization sponsored by Banco Mercantil del Norte, S.A. The complete rating action is as follows: BNTECB 07 Senior Certificates: the ratings of Baa3 (sf) (Global Scale, Local Currency) and Aa3.mx (sf) (Mexican National Scale) were placed on review for possible downgrade. BNTECB 07-2 Subordinate Certificates: the ratings of Ba3 (sf) (Global Scale, Local Currency) and A3.mx (sf) (Mexican National Scale) were placed on review for possible downgrade. Interest and principal payments to certificate holders are backed by cash flows received from a portfolio of securitized loans granted to Mexican states, municipalities and related decentralized entities, and originated by Banorte (LT bank deposit local currency A3/Aaa.mx). Most of the loans are backed by revenues that states and municipalities receive directly from the federal government (federal participation revenues). The loans have been assigned to a trust established in accordance with Mexican law. Originator: Banco Mercantil del Norte, S.A. Trustee: CIBanco, S.A., Institucion de Banca Multiple, Fiduc. RATINGS RATIONALE Moody's has placed the ratings of the affected certificates on review for possible downgrade due to considerations pertaining to the credit quality of loans granted to the state of Baja California. On September 11, 2018, Moody's downgraded Baja California's issuer ratings to B1/Baa2.mx from Ba3/A3.mx, reflecting the state's recurring consolidated deficits and significant cash financing needs, which continue to put pressure on its liquidity metrics. The state of Baja California is the fifth largest obligor in this transaction, accounting for 13.9% of the total loan pool. During the review period, Moody's will assess the impact of Baja California's weaker credit profile on the quality of the state's loans that form part of the collateral. Moody's will also assess the rating impact of any deterioration in the pool's credit quality. Consistent with "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017, in updating its assessment of the collateral's credit quality, Moody's takes into account a credit measure for each underlying loan, including either a credit rating or a credit estimate. Credit estimates are unpublished point-in-time opinions of the approximate credit quality of an individual security, financial contract, or issuer for which no Moody's credit rating exists. The BNTECB 07 Senior certificates have a target size equal to 94% of the pool balance excluding defaulted loans. As of August 2018, the total credit enhancement for BNTECB 07 was 6.2%, composed of 2% of subordination and 4.2% of overcollateralization. The BNTECB 07-2 Subordinate certificates are subordinate to the BNTECB 07 certificates and have a target size equal to 2% of the pool balance excluding defaulted loans. The subordinate certificates currently have 4.2% of credit enhancement in the form of overcollateralization. The overcollateralization level has remained at 4.2% as a percent of total loan balance over the last few years. Moody's ratings also reflect the role of Banorte as collateral manager, as well as the availability of a fully funded cash reserve whose holdings are equivalent to one coupon payment. These factors mitigate the liquidity risks associated with this transaction's dual waterfall structure. As of August 2018, the interest coverage ratio over the previous 12 months averaged 1.13x. Moody's notes that the transaction has demonstrated a consistently strong payment history since closing, with no reported delinquencies since the deal closed in 2007. According to the collateral manager report as of August 2018, all of the loans were current. The loan portfolio, comprised of 22 loans to eight obligors, is relatively concentrated. The largest obligor concentration is 20.4% and the lowest is 0.4% of the total pool balance. The three largest loans account for 56.1% while the top five loans account for 73.5% of the total pool balance. As of July 2018, the pool's weighted average remaining life was 11.75 years and the weighted average interest rate borne by the loans was 8.81%. The BNTECB 07 Senior Certificates and the BNTECB 07-2 Subordinate Certificates pay interest monthly and have a legal final maturity date on May 15, 2037. However, if the total target credit enhancement is not met by the coupon date, the certificates will receive principal payments until the minimum credit enhancement has been met. As of August 2018, both certificates, which have been paying pro rata since issuance, had been paid down by 51.8% of the original amounts. The principal methodology used in these ratings was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in August 2017. Moody's assessed the servicer's practices and considers them adequate. The period of time covered in the financial information used to determine the Banorte - BNTECB 07 and BNTECB 07-2 ratings is between February 2008 and August 2018; (source: the financial information came from parties related to the ratings.) Factors that would lead to an upgrade or downgrade of the ratings: Factors that would lead to an upgrade of the ratings: - In case of prepayment of a loan, use of proceeds from prepayment for early amortization of certificates. - A significant improvement in the credit quality of the largest obligors of the pool. Factors that would lead to a downgrade of the ratings: - A deterioration in the credit quality of the loans comprising the pool of loans backing the certificates. - A decline in total collections. - A deterioration in the interest coverage ratio or overcollateralization metrics. OFFSHORE DRILLING: Fitch Affirms CC LT Issuer Default Ratings ------------------------------------------------------------- Fitch Ratings has affirmed Offshore Drilling Holding, S.A.'s Long- Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'CC'. Fitch has also affirmed the company's USD950 million of senior secured notes due 2020 at 'CC'/'RR4'. ODH's ratings reflect the likelihood that the company will cease or interrupt payments in the future given that its cash flow from operations has been compromised, although it is currently meeting its obligations on a timely basis. The Recovery Rating of 'RR4' assigned to ODH's senior secured notes reflects Fitch's expectations of an average recovery of between 31% and 50% given default as a result of the company's assets' reduced cash flow generation potential. KEY RATING DRIVERS Expected Restructuring: Fitch views a debt restructuring as very likely in the medium term given ODH's pressured cash flow generation. Fitch believes it will be very difficult for the company to be awarded new contracts in the short term under current market conditions for offshore drilling and that any potential award should come at insufficiently low day rates that will not support the current debt level. Under its base case scenario, Fitch estimates ODH will be able to re-contract one currently uncontracted ultra-deep-water-drilling rig in 2H19 at a day rate of USD150,000, which, together with cash on hand, may generate enough cash flow to cover interest expense. Irrecoverable Capital Structure: Fitch expects ODH's leverage as measured by total debt to EBITDA for 2018 to be 11.0x, which is in line with 2017, and to remain elevated for the next three years. ODH will likely need to restructure since cash flow from operations (CFFO) will not be sufficient to fully amortize the senior secured notes due in 2020, and the company's access to debt capital markets is uncertain. Liquidity Risk Temporarily Alleviated: ODH's liquidity is now adequate as a result of the recent settlement agreement with PEMEX (BBB+/Stable) for USD230 million. Fitch expects the company to use this amount to cover the USD160 million of interest expense until the maturity of the notes in September 2020, but this is not a requirement under the notes' indenture. Fixed costs include opex requirement for uncontracted rigs reaching USD1 million per month and a five-year major maintenance project (dry docking), which may range from USD20 million to USD30 million per unit. Fitch estimates the company will spend around USD80 million on capex from 2018 to 2022. In September 2018, PEMEX early terminated two charter agreements concerning Bicentenario and Centenario. Only La Muralla IV remains contracted through 2021 at a current day rate of USD350,000 until April 2019 and a to be determined day rate thereafter. Partial Structural Subordination: ODH's senior secured notes are guaranteed by the unencumbered restricted subsidiaries that own the Centenario and Bicentenario drilling rigs and are structurally subordinated to a project-finance bank loan due in June 2020 of approximately USD150 million, as of June 30, 2018, related to the financing of the La Muralla IV rig. This bank debt has certain cash-sweep provisions restricting cash flow distributions to ODH. The bank loan amortizes through 2018, and once repaid La Muralla IV will become a co-guarantor for the notes. The company's tight debt amortization profile remains at risk. As of June 30, 2018, cash and cash equivalents totalled USD6.0 million with another USD40 million in the interest reserve account. Short-term debt was USD141.8 million, and total debt was USD1.4 billion. Increasing Competition: Investment opportunities are opening up competition in the oil sector with various rigs re-entering the marketplace. The recent deep-water oil blocks awarded in Mexico are bringing back various players into the market and increasing demand for rigs operators through the end of 2020 when exploration for oil block concessions will expire. Nevertheless, oil producers will likely favor long-term relationship with drill suppliers offering very competitive prices. While ODH benefits from a competitive position in the Mexican market and good relationship with its off-taker Petroleos Mexicanos (PEMEX), the recent consolidation in the global oilfield services sector has weakened the company's competitive position in an evolving industry that favors larger players. DERIVATION SUMMARY ODH's business risk is similar to other peers in the deteriorated drilling services environment such as QGOG Constellation' (RD) in Brazil and China-based Anton Oilfield Services Group (B-/Stable). ODH is rated two notches above QGOG, which has missed interest payment on its notes after the 30-day grace period. Anton is rated two notches above ODH due to the completion of the company's new USD300 million 2020 bond issuance, alleviating the refinancing burden for its existing bonds. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- La Muralla IV remains contracted at the existing day rate of $350,000. -- One of the other two rigs is re-contracted in 2H19 at a day rate of $150,000. -- Regular maintenance capex of approximately $80 million during the next four years. KEY RECOVERY RATING ASSUMPTIONS -- The recovery analysis assumes that ODH would be considered a going-concern in bankruptcy and that the company would be reorganized rather than liquidated. -- Fitch has assumed 10% of value is allocated for administrative claims. Going-Concern Approach -- ODH's going concern EBITDA is based on 2017 EBITDA without a discount as the company's cash flow generation has been severely stressed by the industry downturn and current cash flow is considered distress. -- The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of the company. -- An EV multiple of 5x is used to calculate a post- reorganization valuation and reflects a mid-cycle multiple. The estimate considered the following factors: -- All ODH's debt is secured with different collateral. The USD950 million notes are secured by interest in Centenario and Bicentenario. Bank loans are secured by La Muralla IV or the recently acquired Jack-Ups. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action No positive rating actions are currently contemplated over the near term given the expectations of low cash flow generation and Fitch's projections for leverage that exceeds through-the-cycle levels. Developments That May, Individually or Collectively, Lead to Negative Rating Action A negative rating action may be considered if ODH announces a debt restructuring that materially reduces terms in comparison with original terms or fails to timely pay interest or principal of an obligation due in accordance with its terms. FULL LIST OF RATING ACTIONS Fitch has affirmed ODH's ratings as follows: -- Foreign and local currency IDRs at 'CC'; -- Senior secured notes at 'CC'/'RR4'. ================================ T R I N I D A D & T O B A G O ================================ PETROLEUM CO: Energy Chamber Meets With Transition Team -------------------------------------------------------- Trinidad Express reports that the Energy Chamber met earlier with members of the Petroleum Co. of Trinidad & Tobago (Petrotrin) transition team to discuss the impending closure of the refinery and new opportunities with the refocused exploration and production company and the terminal operations. Service companies and contractors, that are members of the Energy Chamber, had a chance to discuss the process of shutting down the refinery, possible business opportunities and how they should do business with the new Petrotrin, according to Trinidad Express. As reported in the Troubled Company Reporter-Latin America on Sept. 28, 2018, Moody's Investors Service placed Petroleum Co. of Trinidad & Tobago's B1 corporate family rating and senior unsecured debt ratings on review for downgrade. This rating action was based on the lack of clarity regarding Petrotrin's new business profile and strategy as well as increasing liquidity risk related to the approaching maturity of the 2019 bonds. *********** 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. 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