/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/181203.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, December 3, 2018, Vol. 19, No. 241 Headlines A R G E N T I N A CUOTAS CENCOSUD III: Moody's Rates Class A Debt Ba2 B E R M U D A SAGICOR: S&P Alters Watch Implications to Developing on BB- ICR B R A Z I L BRAZIL: President Calls for Prudence in Trade Deals W/Big Powers CYRELA BRAZIL: S&P Affirms Long-Term 'BB-' ICR, Outlook Stable GAFISA S/A: Moody's Withdraws Caa1 CFR for Business Reasons G U Y A N A REPUBLIC BANK: Move to Own 55% of Banking Services "Unacceptable" J A M A I C A JAMAICA: IMF Says Financial Sector Has Significantly Expanded N I C A R A G U A NICARAGUA: Fitch Lowers LT FC IDR to B-, Outlook Negative P A R A G U A Y PARAGUAY: IDB Approves $125 Million in Financing P E R U NAUTILUS INKIA: S&P Assigns BB- Rating on New $200MM Unsec. Notes S T. L U C I A SCOTIABANK: Former St. Lucia MP Warns of Consequences With Exit U R U G U A Y TECPETROL INTERNACIONAL: Fitch Affirms BB+ LT IDRs, Outlook Stable X X X X X X X X X * BOND PRICING: For the Week November 26 to December 1, 2018 - - - - - ================= A R G E N T I N A ================= CUOTAS CENCOSUD III: Moody's Rates Class A Debt Ba2 --------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo has rated Fideicomiso Financiero Cuotas Cencosud Serie III. This transaction will be issued by TMF Trust Company S.A. acting solely in its capacity as issuer and trustee. This credit rating is subject to the fulfillment of contingencies that are highly likely to be completed, such as finalization of documents and issuance of the securities. This credit rating is based on certain information that may change prior to the fulfillment of such contingencies, including market conditions, financial projections, transaction structure, terms and conditions of the issuance, characteristics of the underlying assets or receivables, allocation of cash flows and of losses, performance triggers, transaction counterparties and other information included in the transaction documentation. Any pertinent change in such information or additional information could result in a change of this credit rating. The full rating action for the "Fideicomiso Financiero Cuotas Cencosud Serie III" deal is as follows: - ARS454,333,105 in Class A Floating Rate Debt Securities (VDFA), rated Aaa.ar (sf) (Argentine National Scale) and Ba2 (sf) (Global Scale) - ARS5,115,008 in Class B Floating Rate Debt Securities (VDFB), rated B1.ar (sf) (Argentine National Scale) and Caa2 (sf) (Global Scale) - ARS21,964,448 in Class C Floating Rate Debt Securities (VDFC), rated Caa1.ar (sf) (Argentine National Scale) and Caa3 (sf) (Global Scale) - ARS298,065 in Certificates (CP), rated Caa2.ar (sf) (Argentine National Scale) and Caa3 (sf) (Global Scale) RATINGS RATIONALE The rated securities are payable from the cash flow derived from the trust assets, which includes a static and amortizing pool of approximately 311,798 eligible purchases in credit card installments denominated in Argentine pesos and originated by Cencosud (Argentina) S.A. ("Cencosud Argentina"), the local subsidiary of Cencosud S.A. ("Cencosud" Baa3, Negative). Cencosud is among Latin America's largest retailers, with presence in Chile, Argentina, Peru, Colombia and Brazil. Only installments payable after January 1st, 2019 will be assigned to the trust. The assigned installments pertain to credit cards issued by Cencosud Argentina. Cencosud credit cardholders can make purchases in affiliated stores and split the payments in several monthly installments bearing no interest. The monthly installments are detailed in the cardholder's monthly credit card statements. Not all installments due under a given credit card will be assigned to the trust; a given credit card account may also have other installments that do not serve as collateral for this transaction. In this transaction, the minimum payment level of cardholders' credit card monthly statement will always include 100% of any installments assigned to the trust and due in that month. Therefore, the trust will receive the expected cash flows without any delays as long as the cardholder is considered a performing obligor. A reserve fund covering two times the next interest accrual of the VDFA and VDFB will be funded using collections received on the pool. Moody's based the analysis on the following factors: (i) the strong credit profile of Cencosud and Cencosud Argentina and their position as key players in the retail sector of Argentina and the region; (ii) the relatively short expected life of the notes; and (iii) the strong performance of Cencosud's portfolio. TRANSACTION STRUCTURE The VDFA will bear a floating interest rate (BADLAR plus 150 bps). The VDFA's interest rate will never be higher than 46.0% or lower than 38.0%. The VDFB will bear a floating interest rate (BADLAR plus 250 bps). The VDFB's interest rate will never be higher than 47.0% or lower than 39.0%. The VDFC will bear a floating interest rate (BADLAR plus 350 bps). The VDFC's interest rate will never be higher than 48.0% or lower than 40.0%. Overall credit enhancement is comprised of: (i) subordination; ii) overcollateralization and iii) expense reserve accounts. The transaction has initial subordination levels of 24.5% for the VDFA, 23.7% for the VDFB and 20.0% for the VDFC, calculated over the pool's undiscounted principal balance. Finally, the transaction has an estimated 36.9% of negative annual excess spread, before considering losses, taxes or prepayments and calculated at the interest rate cap for the notes. As mentioned, the assigned monthly installments do not bear interest. Available credit enhancement and a relatively short estimated term of 8 months for Class A largely mitigate this risk. Moody's analyzed the historical performance data of previous transactions and the dynamic credit card portfolio of Cencosud Argentina, ranging from February 2015 to September 2018. The rating agency also analyzed the payment levels in the seller's overall credit card dynamic portfolio, identifying a payment rate (monthly payment / monthly balance) averaging 65.6% during the last twelve months as of September 2018. In assigning the ratings to this transaction, Moody's assumed a lognormal distribution of losses for the static securitized pool with a mean expected loss of 6.3% and a PCE of 12.6% (PCE, or the portfolio credit enhancement, represents the credit enhancement consistent with the highest rating achievable -i.e., the local currency ceiling- in the country). These assumptions were derived considering the historical performance of Cencosud's loan pools and prior transactions. Factors that would lead to an upgrade or downgrade of the ratings: Factors that may lead to a downgrade of the ratings include a downgrade in Argentina's local currency ceiling and an increase in delinquency levels beyond the level Moody's assumed when rating this transaction. Although Moody's analyzed the historical performance data of previous transactions and similar receivables originated by Cencosud, the actual performance of the securitized pool may be affected, among others, by the economic activity, high inflation rates compared with nominal salaries increases and the unemployment rate in Argentina. Factors that may lead to an upgrade of the ratings include an upgrade in Argentina's local currency ceiling and the building of credit enhancement over time due to the turbo sequential payment structure, when compared with the level of projected losses in the securitized pool. The principal methodology used in these ratings was "Moody's Approach to Rating Consumer Loan-Backed ABS" published in September 2015. The Credit Rating for Fideicomiso Financiero Cuotas Cencosud Serie III was assigned in accordance with Moody's existing Methodology entitled "Moody's Approach to Rating Consumer Loan-Backed ABS," published in September 2015. Please note that on November 14, 2018, Moody's released a Request for Comment, in which it has requested market feedback on potential revisions to its Methodology for Consumer Loan-Backed transactions. If the revised Methodology is implemented as proposed, the Credit Rating on Fideicomiso Financiero Cuotas Cencosud Serie III may be neutrally affected. ============= B E R M U D A ============= SAGICOR: S&P Alters Watch Implications to Developing on BB- ICR --------------------------------------------------------------- S&P Global Ratings revised the CreditWatch implications to developing from negative on its 'BB-' issuer credit ratings on Bermuda-based non-operating holding company Sagicor Financial Corporation Limited (SFCL), on its Cayman Islands-based financing vehicle Sagicor Finance (2015) Limited (SF15), and on S&P's 'BB-' issue-level rating on SF15's $320 million seven-year senior unsecured notes due 2022. The government of Barbados has completed its local currency debt exchange, while engaging with external creditors to begin a foreign currency-denominated debt exchange in the near term. S&P said, "As a result, on Nov. 16, 2018, we raised our long-term local currency rating on Barbados to 'B-' from 'SD', and assigned our 'B-' local currency issue-level rating to the domestic debt issued in the exchange. We also affirmed our 'SD' foreign currency sovereign ratings and our 'D' issue-level ratings on the country's foreign currency issuances. "After Barbados completed its local currency debt exchange, and considering the Sagicor group's strong earnings retained in the last year, we've confirmed that its capital adequacy will remain comfortably above our 'BBB' rating category. However, we still need to analyze how the foreign currency-denominated debt exchange and further economic effects from Barbados' default may affect Sagicor." On Nov. 27, 2018, the Sagicor group announced an arrangement agreement in which Alignvest would acquire shares of Sagicor, and that the group would also acquire Scotiabank's life insurance operations in Jamaica and Trinidad & Tobago. The transactions, if completed, could affect Sagicor's credit profile. S&P said, "The CreditWatch developing listing on SFCL, SF15, and on SF15's issue-level rating reflects the need for additional information on the transactions in progress and on Barbados' sovereign foreign currency default resolution, so that we can incorporate it into Sagicor's credit fundamentals. We expect to resolve our CreditWatch on the group's ratings over the next months once we gather the required information to assess its implications on the group's creditworthiness." =========== B R A Z I L =========== BRAZIL: President Calls for Prudence in Trade Deals W/Big Powers ---------------------------------------------------------------- EFE News reports that Brazil's President-elect Jair Bolsonaro called for prudent consideration before his country signs any trade agreements with other nations, a reference to the negotiations of a possible treaty between Mercosur (Brazil, Argentina, Uruguay and Paraguay) and the European Union. According to Bolsonaro, Argentine President Mauricio Macro wants to "bring forward" treaty negotiations between the two economic blocs, a decision that the next Brazilian head of state prefers to take with more caution, as recommended by his future foreign minister, Ernesto Araujo, EFE News says. As reported in the Troubled Company Reporter-Latin America on Oct. 18, 2018, Egan-Jones Ratings Company, on October 8, 2018, withdrew its 'B+' foreign currency and local currency senior unsecured ratings on debt issued by the Federative Republic of Brazil. CYRELA BRAZIL: S&P Affirms Long-Term 'BB-' ICR, Outlook Stable -------------------------------------------------------------- S&P Global Ratings affirmed its long-term 'BB-' global scale issuer credit rating on Cyrela Brazil Realty S.A. S&P also affirmed its 'brAAA' national scale issuer credit ratings on the company. The outlook on both scales remains stable. S&P said, "The affirmation reflects our expectation that Cyrela will maintain solid cash flows over the next few quarters. We believe that improving consumer confidence and lending from banks at lower interest rates should bolster housing demand. Under this scenario, we expect Cyrela's launches sales value to grow about 15% annually until 2020. While higher launches will gradually require greater capital than in the past years, we believe that cash generation from sales of current inventories and adequate sales speed will compensate for that factor. "We believe that Cyrela's revenue diversification between low-, mid-, and high-income housing segments should allow it to maintain lower volatility than its domestic peers, because the company can adjust its product mix depending on industry conditions. For instance, in the first nine months of 2018, the company's launches under the low-income government-housing program, Minha Casa Minha Vida (MCMV), represented 47% of total launches, higher than its historical average of about 30%. Given that this program has been more resilient to Brazil's weak economy over the past years and faces lower cancelations than mid-high income segments, we believe Cyrela will benefit from higher earnings predictability." Cyrela's 2018 FFO has been pressured mainly due to reparatory expenses in Sao Luis project of R$94 million and still relatively high cancelation rates. S&P said, "Given that we don't expect other significant provisions starting in 2019, and we believe cancelations will continue to decrease to below R$650 million in 2019 from R$1.8 billion in 2017, higher FFO generation is likely. This would result in stronger FFO to debt of above 15%, compared with around 13% in 2017 and 2018. And while this ratio is currently somewhat weak for the rating level, the company's relatively low cash consumption for land acquisition and prudent approach to leverage, by maintaining debt to capital below 25%, mitigates this risk." The ratings on Cyrela remain capped at the same level as Brazil (BB-/Stable/B). S&P said, We stress the company under a hypothetical sovereign default scenario for Brazil, in which we don't believe the company would have sufficient sources of cash to cover its obligations. Given that the homebuilding industry is highly correlated and sensitive to macroeconomic conditions, and because homebuilders depend on the banking sector that provides financing for both construction and homebuyers, we believe that during sovereign distress, the homebuilders' operations would face significant bottlenecks." GAFISA S/A: Moody's Withdraws Caa1 CFR for Business Reasons ----------------------------------------------------------- Moody's America Latina has withdrawn Gafisa S/A Caa1/Caa1.br corporate family rating and senior secured ratings. The following ratings were withdrawn: - Corporate Family Rating, Caa1/ Caa1.br - BRL48 million secured debentures due in 2021 (10th Issuance), Caa1/ Caa1.br Prior to the withdrawal, the outlook on the rating was negative RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. The last rating action on Gafisa S/A was taken on November 13, 2018 when Moody's downgraded the company's ratings to Caa1/Caa1.br from B3/B2.br, outlook negative. Headquartered in Sao Paulo, Brazil, and founded in 1954, Gafisa S/A is a major fully integrated homebuilder in Brazil, with operations concentrated in Sao Paulo and Rio de Janeiro, and in the commercial and middle- and high-income residential segments. The company also has a 30% interest in the capital of Alphaville, a major developer of residential lots in Brazil. In the 12 months ended September 2018, Gafisa generated net revenue of BRL933 million ($267 million), with an adjusted gross margin of -2%. =========== G U Y A N A =========== REPUBLIC BANK: Move to Own 55% of Banking Services "Unacceptable" ----------------------------------------------------------------- Trinidad Express reports that Guyana government has described as "unacceptable" a move that would allow the Trinidad-based Republic Bank to "actually own" at least 53 per cent of the banking services in the country. Minister of State Joseph Harmon said that the move by Republic Bank to acquire the operations of Scotiabank in Guyana and eight other Caribbean countries is still to be assessed, according to Trinidad Express. ============= J A M A I C A ============= JAMAICA: IMF Says Financial Sector Has Significantly Expanded ------------------------------------------------------------- The Executive Board of the International Monetary Fund (IMF) concluded on November 5, 2018 that the IMF's latest Financial System Stability Assessment (FSSA) of Jamaica. The financial sector has significantly expanded since the last FSSA in 2006. Financial sector assets now stand at about 180 percent of GDP. The financial sector is dominated by large and complex financial conglomerates that span many activities, including banking, insurance, pension fund management, and collective investment fund management. Since the 2006 FSSA, the authorities have considerably strengthened macroeconomic policies, including under IMF-supported programs. Decades of high fiscal deficits, combined with the financial sector crisis of the late 1990s, had led to rapid government debt accumulation and financial dollarization. The high public borrowing needs, in turn, had crowded out private credit and stifled economic growth. Fiscal discipline has been central to the reduction in the public debt since 2013. With the stock of debt declining (to 60 percent of GDP by FY2025/26 under the Fiscal Responsibility Law), the financial sector is confronted with new challenges, as it seeks to play a major role as an engine of economic growth. One significant challenge is the search for non-government investment opportunities. Even though commercial banks appear to be profitable and well capitalized, the loan-to-deposit remains low. The main risks to the financial system arise from exposure to natural disasters (including climate-related disasters), tightening global financial conditions, and economic reform fatigue. Delays in the economic reform agenda could erode confidence and impact financial institutions' balance sheets. A tightening of global financial conditions could reduce foreign inflows, which would dampen economic growth (through consumption and investment) and lead to rising nonperforming loans. A natural disaster could cause protracted negative growth and large losses for banks and other financial institutions. The FSAP stress tests suggest broad resilience to solvency shocks; however, highly interconnected financial conglomerates make the financial sector particularly vulnerable to contagion. Vulnerabilities arise from concentrated ownership, related party and large group exposures, and off-balance sheet positions. Also, several conglomerates operate in multiple jurisdictions with different oversight practices. Sizable public debt holdings by all segments of the groups and across financial institutions mean that the stability of the financial system is closely bound to discipline in public finance, sustainability of the macroeconomic outlook, and debt dynamics. Executive Board Assessment Executive Directors concurred with the main findings and recommendations of the Financial System Stability Assessment (FSSA). They commended the authorities for the progress made in the implementation of the reform program since the 2006 FSSA. Directors noted that the financial sector is sizeable and complex, and dominated by large intra- and inter-connected financial conglomerate groups with cross-border linkages. They agreed that the financial sector overall shows broad resilience, and the main risks arise from exposure to natural disasters, the tightening of global financial conditions, and a possible reversal of fiscal discipline driven by reform fatigue. Directors cautioned that, given the increased interconnectedness of the financial sector and associated risks of contagion, priority should be given to intensified oversight and consolidated risk-based supervision, especially of systemically important groups with systemically important connections. Directors underscored the importance of improved data sharing, cooperation, and coordination with regional supervisors, in particular for those affecting systemically important groups. They emphasized the importance of an effective oversight framework together with heightened commitment to transparency and accountability. Work reinforcing the resilience of securities dealers, the deepening of capital markets and broadening of instruments to manage credit, liquidity and market risks should continue. Directors encouraged efforts to expand skilled supervisory resources, highlighting that all supervisory agencies need to expand their capacity to fulfill their current mandates and new demands. They noted that data collection also needs to be strengthened to further facilitate the monitoring of risks of a complex group-based financial system, and to conduct sound financial stability analyses and risk assessments. Directors welcomed progress on the crisis preparedness and resolution management frameworks, but highlighted that the reforms are incomplete. They underscored the need for further work to clarify several key aspects and properly sequence the work on recovery planning, resolution plans, and resolvability assessments. Directors agreed that system-wide preparation for a systemic crisis is an area that requires the authorities' attention. Directors welcomed efforts to maintain correspondent banking relationships in Jamaica, including through ongoing strengthening of the AML/CFT framework. As reported in the Troubled Company Reporter-Latin America on Sept. 27, 2017, Moody's Investors Service has upgraded the Government of Honduras' foreign currency and local currency issuer and senior unsecured ratings to B1 from B2. The rating outlook was moved to stable from positive. ================= N I C A R A G U A ================= NICARAGUA: Fitch Lowers LT FC IDR to B-, Outlook Negative --------------------------------------------------------- Fitch Ratings has downgraded Nicaragua's Long-Term Foreign- Currency Issuer Default Rating to 'B-' from 'B'. The Outlook is Negative. KEY RATING DRIVERS The downgrade and Negative Outlook reflect a bigger than expected economic contraction, a growing fiscal deficit, weaker external liquidity and heightened risks of domestic and external financing constraints. Although the level of violence has subsided since Fitch's last review in June, the risk of political instability remains high and undermines prospects for an economic recovery. Dialogue between the government and the opposition made little progress, and the government is subject to growing international pressure over its handling of recent political protests. Political demonstrations on April 19, 2018 were followed by about three months in which roadblocks set by the opposition reduced traffic nationwide substantially, including within the capital Managua. The government forcibly removed the roadblocks and regained control of the territory. International observers estimate the death toll from the unrest at about 400 people, with a similar number imprisoned. Fitch estimates that in 2018 and 2019 the economy will contract by 4% and 1%, respectively, in line with recent IMF forecasts, a steeper contraction than estimated at its last review in June. The economy shrank by 4.4% yoy in 2Q18 due to falls in consumption and capital investment. While the most intense part of the contraction has passed, the fallout will linger. For example, the Nicaraguan chamber of tourism estimates a near halving of tourism revenues in 2018 from USD840 million (11% of CXR) in 2017. The economic contraction has pressured public finances. Fitch projects that central government revenue/GDP will fall by 1.6pp in 2018 due to lower activity and weaker tax compliance. The government reacted to the fall in revenue by revising the 2018 budget to cut expenses by 1.4% of GDP, substituting external for local financing and widened the deficit target to 2.1% of GDP from a budgeted 0.6%. The social security institute (INSS) deficit continues to grow. Fitch forecasts that in 2018 the deficit will be 1.1% of GDP from 0.6% in 2017 and will worsen in the absence of a parametric reform. The government has tabled a package of reforms but it is not clear they can be implemented in the current climate. Reforms to the INSS were the trigger for the political unrest in April. The general government (GG) deficit is projected to more than double in 2018 to 3.2% of GDP from 1.4% in 2017, still better than the 'B' median of 3.9%. GG debt is forecast to rise to 46.8% of GDP at end-2018, in line with the 'B' median. 89% of the GG debt is denominated in foreign currency or indexed to a foreign currency (mostly the U.S. dollar) posing FX risks to debt dynamics. Flexibility to finance higher deficits is relatively limited, and borrowing is becoming more expensive. Financing is switching from external grants and concessional loans to local capital markets. It is unclear how much new issuance the shallow local capital market can absorb. According to the revised 2018 budget the government plans to issue bonds worth 2.9% of GDP locally and the 2019 budget calls for a further 2.5% of GDP. Average local issuance between 2013 and 2017 was 1.1% of GDP. Local bonds are typically indexed to the U.S. dollar and payable in cordobas (currently the bonds yield 8%). On Sept. 25 the government issued local bonds denominated and payable in euros for EUR105 million (0.9% of GDP) with a seven-year maturity. Fitch projects that GG net external financing will fall by 60% yoy in 2018. External loan disbursements could be further reduced in view of political pressure especially if the Nicaragua Human Rights and Anticorruption Act passes the U.S. congress. The legislation would impose targeted sanctions on Nicaraguan government officials (the U.S. has already sanctioned four high- ranking officials under the Global Magnitsky Act) and would make the U.S. government use its influence to restrict multilateral lending to Nicaragua. The legislation includes an exception for projects that ensure basic human needs which could limit its impact. The bill was approved by the Senate Foreign Relations Committee on Sept. 26. A fall in deposits at local banks has translated into a credit crunch. Between March and September of this year bank deposits fell by 21%, although outflows have slowed since early September. The BCN promptly injected liquidity into the market and banks have been able to maintain an adequate level of liquidity coverage. However, between March and September net credit fell by 7.2%. This reduction in credit could be further exacerbated by crowding out as the GG increases local borrowing. External liquidity has deteriorated although the pace of decline has moderated in line with a slowdown in the pace of bank deposit withdrawals. Between March and September international reserves fell by USD590 million (20%), despite the BCN drawing on a USD200 million credit line from BCIE. Fitch expects the level of reserves (USD2.302 billion or 3.3 months of CXP as of September) to stabilize in Q4, below the 'B' median of 3.9 months of CXP. Risks to external liquidity are to the downside given the reduction in FDI, the decline in external financing and the volatile political environment. Reserve coverage of the monetary base is adequate, but Nicaragua is particularly sensitive to its reserve level given its crawling peg (5% annual devaluation with respect to the dollar) and high level of dollarization (89% of credit as of September). Pressure on external finances has concentrated on the capital account, although there has also been some deterioration on the current account. In 1H18 net FDI contracted by USD126 million (23%) yoy. Fitch projects that in 2018 net FDI will be 3.2% of GDP, down from 5.9% in 2017. On the current account, remittances increased by USD60 million (9.1%) yoy in 1H18 (remittances were 10% of GDP in 2017). Fitch expects an increase in the current account deficit to 6.2% of GDP in 2018 from 5% in 2017 caused by lower tourism receipts and higher oil prices; this compares unfavorably with the 'B' median of 4.2%. SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Nicaragua a score equivalent to a rating of 'B-' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee did not adjust the output from the SRM to arrive at the final LT FC IDR. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The Outlook is Negative. Future developments that could result, individually or collectively, in a downgrade include: -- An inability to access external or local sources of financing or evidence of heightened risks in meeting debt-service payments. -- A reduction in external liquidity that forces a disorderly adjustment to the exchange rate regime. Future developments that could, individually or collectively, result in the Outlook being revised to Stable include: -- Reduction of the risks of government access to external and domestic financing. -- Stabilization of the political environment and a recovery of financial, investment, and economic conditions; KEY ASSUMPTIONS -- Fitch assumes the global economy and international oil prices perform in line with its Global Economic Outlook. The full list of rating actions is as follows: Long-Term Foreign-Currency IDR downgraded to 'B-' from 'B'; Outlook Negative Long-Term Local-Currency IDR downgraded to 'B-' from 'B'; Outlook Negative Short-Term Foreign-Currency IDR affirmed at 'B' Short-Term Local-Currency IDR affirmed at 'B' Country Ceiling downgraded to 'B-' from 'B'. =============== P A R A G U A Y =============== PARAGUAY: IDB Approves $125 Million in Financing ------------------------------------------------ The Inter-American Development Bank (IDB) has approved $125 million in financing requested by Paraguay in support of a program to upgrade and modernize Acaray, the country's only 100 percent state-owned hydroelectric power plant, which was built with IDB support and is almost 50 years old. The Acaray Hydroelectric Power Plant Upgrade and Modernization Program will extend the facility's working life, boosting its availability, reliability and generating capacity. To this end, the program will finance the design, manufacture, delivery and installation of the plant's electrical and electro- mechanical infrastructure including two new turbines and generators, in addition to two transformers and the upgrading of the high-, medium-, and low-voltage substation. The plan also calls for financing improvements in the plant's civil engineering features, the addition of an integrated control system and upgrades to the waste collection facilities of the Acaray and Yguazu dams. These investments will help increase the dams' operational safety. This initiative also foresees investments to protect the plant's facilities and improvements to its operation and management, including the construction of a visitors center and implementation of a gender and diversity strategy and action plan. This program is designed to boost the sustainability of Paraguay's electricity supply by ensuring the continuity of and an increase in renewable energy while at the same time limiting CO2 emissions. The plan will benefit all users of the country's interconnected electricity grid. The National Electricity Administration will see an enhancement in its staff's technical training, especially with regard to the upgrading of hydroelectric power plants and how to operate one with cutting-edge technology which includes control and auscultation systems and the latest in digital panels and management tools. The $125 million IDB financing package is over 24 years with a six-and-a-half year grace period and an interest rate based on LIBOR. There is a local contribution of $20.2 million. As reported in the Troubled Company Reporter-Latin America on June 28, 2018, S&P Global Ratings, on June 25, 2018, affirmed its 'BB/B' long-and short-term sovereign credit ratings on Paraguay. The outlook remains stable. At the same time, S&P affirmed its 'BB+' transfer and convertibility assessment on Paraguay. ======= P E R U ======= NAUTILUS INKIA: S&P Assigns BB- Rating on New $200MM Unsec. Notes ----------------------------------------------------------------- S&P Global Ratings assigned its 'BB-' issue-level rating to Peruvian energy producer Nautilus Inkia Holdings LLC, Nautilus Distributions Holdings LLC, and Nautilus Isthmus Holdings LLC's proposed $200 million senior unsecured bullet notes due in 2028, which they intend to co-issue, jointly and severally. The entities will use the proceeds from the notes to fully repay an existing bridge loan used to acquire a minority stake in two Peruvian assets, Kallpa Generacion S.A. and Samay I.S.A. S&P said, "We base our 'BB-' rating on the proposed issuance on our view that the co-issuers are core subsidiaries for its ultimate parent, Nautilus Energy Holdings LLC (Nautilus; not rated) given their importance to the group's long-term strategy, and the level of integration and synergies among the members of the group. In addition, all share the same controlling shareholder and top management. Nautilus became, after a recent corporate reorganization, the ultimate vehicle that consolidates all the operating assets in the generation and distribution segments. In our view, Nautilus benefits from stable EBITDA generation because approximately 75% of it comes from long-term power purchase agreements (PPAs) with creditworthy counterparties, with variable price formulas that allow it to pass on cost increases related to the main raw material--natural gas--or to receive availability payments. The group also participates in Guatemala's regulated distribution segment, which enjoys some stability from a relatively transparent tariff-setting process under a technical and independent regulatory framework. On the other hand, we include Nautilus's presence, although still small, in riskier jurisdictions such as Bolivia, Nicaragua, El Salvador, and Jamaica; and its exposure to competition (typical for unregulated power utilities) in our analysis. These factors partially counterbalance its strengths. "From a financial perspective, we do not envision this liability management as a change in the risk appetite, because under our base case scenario we still expect that main credit metrics will continue to improve, illustrated by annual EBITDA between $500 million and $550 million for the next two years and EBITDA margins around 30%. In addition, we expect net debt to EBITDA to peak at around 5x in the next six months, which is slightly higher compared to our previous expectations of close to 4.8x, but then decreasing to 4.5x in 2019 and 4.0x in 2020." RATINGS LIST Nautilus Inkia Holdings LLC Issuer Credit Rating BB/Stable/-- New Ratings Nautilus Inkia Holdings LLC Nautilus Distribution Holdings LLC Nautilus Isthmus Holdings LLC Senior Unsecured BB- =============== S T. L U C I A =============== SCOTIABANK: Former St. Lucia MP Warns of Consequences With Exit --------------------------------------------------------------- RJR News reports that former St. Lucia MP warns of consequences with Scotiabank's exit from some Caribbean countries. A former government minister in St. Lucia, Peter Josie, has warned of potential dire consequences from the decision by Scotiabank to exit nine Caribbean countries, including St Lucia, according to RJR News. Scotiabank disclosed plans to sell the Caribbean businesses to Trinidad and Tobago-based Republic Financial Holdings subject to regulatory approvals and closing conditions, the report relays. Mr. Josie has expressed concern that the reserve currencies of the countries of the Organisation of Eastern Caribbean States (OECS) in US dollars could be put at the mercy and in the hands of Republic Bank or its agents in Trinidad and Tobago. He called for the Prime Minister and others to look into the matter and try to summon a meeting of all OECS leaders and Finance Ministers to see if they can halt the deal, the report notes. He noted that Republic Financial Holdings was not buying Scotiabank in Jamaica, Barbados, Trinidad and Tobago or anywhere else in the Caribbean, the report adds. ============= U R U G U A Y ============= TECPETROL INTERNACIONAL: Fitch Affirms BB+ LT IDRs, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed the Long-Term, Foreign- and Local- Currency Issuer Default Ratings of Tecpetrol Internacional S.L at 'BB+'. The Rating Outlooks are Stable. Tecpint's ratings reflect its diversified geographic footprint of oil and gas operating assets throughout six Latin American countries, including a 10% ownership in two blocks within Camisea natural gas fieldin Peru, conservative leverage and the implicit support provided by its parent, the Techint Group. Techint is the majority owner of its sister companies, Tenaris S.A. and Ternium S.A. Tecpint's ratings are consistent with a 'BB' rating on a standalone basis and have received a one notch uplift as a result of implicit parent support. Tecpint's ratings also reflect the company's somewhat predictable cash flow generation from businesses outside of Argentina, namely cash flow generated from Peru, Colombia and Mexico. The company's production growth in Argentina with its Fortin de Piedra asset bodes well for future cash flow generation, although development of this asset has increased the company's already high exposure to Argentina. Tecpint's production size of 126,000 barrels of oil equivalent per day (boed) as of June 2018 is aligned with other 'BB' rated issuers, while its reserve life of 11 years is consistent with the company's credit quality. Tecpint has moderate leverage below 1.9x, as measured by total debt/last 12 months (LTM) EBITDA as of the second quarter of 2018 (2Q18). Tecpint's foreign-currency rating is not constrained by the Republic of Argentina's country ceiling, due to its cash flow diversification outside of Argentina, primarily from Peru and its Camisea investment. KEY RATING DRIVERS Diversified Asset Base: Fitch views Tecpint's diversified asset base as a credit positive. Tecpint has oil and gas exploration and production operations in six countries across Latin America (Argentina, Peru, Ecuador, Mexico, Colombia and Bolivia) as well as gas transportation and distribution in Argentina and Mexico and electricity generation in Mexico. The company's principal reserves are in Peru (43%), Argentina (37%), Bolivia (8%) and Ecuador (9%). Approximately 60% of E&P revenues come from exports and sales of oil & gas and services outside Argentina, and nearly 65% of equivalent proved reserves are located outside of Argentina. Camisea Stake: Tecpint's 10% ownership stake in blocks 88 and 56 within the Camisea natural gas field in Peru, which contributed approximately 21% of its LTM EBITDA as of 2Q18, provides stable and predictable cash flows far beyond the maturities of the company's debt obligations. Fitch forecasts Camisea's contribution to Tecpint's EBITDA will alone be more than adequate to cover interest expense, on average 2.5x, through 2021. Camisea's reserve life is estimated to extend for more than 25 years; although the license agreements for Camisea's two blocks, 88 and 56, expire in 2040 and 2044, respectively. As of year-end 2017, Tecpint's stake in Camisea's proved reserves for blocks 88 and 56 amounted to 175.4 million barrels of oil equivalent and 45.2 million barrels of oil equivalent, respectively. Tecpint's' participation was approximately 27,720 boed in 2Q2018. Production levels have been stable for the past few years and have significantly increased since the Camisea field started producing. Medium Production Profile and Strong Hydrocarbon Reserve Life: Tecpint's ratings reflect the company's medium production size, consistent with a 'BB' rated category, and relatively strong reserve life of approximately 11.1 years compared with peers. As of June 2018, Tecpint's total owned and operated production amounted to approximately 126,000 boed (46.0 million boe per year). As of year-end 2017, Tecpint's had proved reserves of 512 million boe (71% gas and 29% Liquids). Peru has the largest percentage by country at 43% followed by Argentina (37%), Bolivia (8%) and Ecuador (9%). Increasing Production with Favorable Gas Prices: Fitch expects the company will continue to increase production of its Fortin de Piedra asset, within Vaca Muerta, to around 90,000 boed by year- end 2018. As of October 2018, production reached 84,000 boed, a material increase of 9.0x compared with year-end 2017. Fitch believes Tecpint strongly benefits from a preferential pricing scheme awarded to its Fortin de Piedra asset under Resolution 46 (Res. 46). Fitch estimates on average, 20% of Tecpint's consolidated revenues will be attributed to Res. 46 - where the Argentine government guarantees a natural gas (NG) price of USD7.50 per million Btu (MMBtu) for qualified production in 2018 decreasing by USD0.50 per MMBtu over the next three years and stabilize at USD6.00 per MMBtu in 2021. Under Resolution 46, the government pays the difference between the industry's average realized natural gas price and the guaranteed price during that period. This preferential pricing offers Tecpint a unique opportunity to profit in a higher-cost environment over the medium term, while simultaneously lowering its average lifting costs to be profitable at Henry Hub. Fitch estimates that Tecpint's Argentine 2017 lifting cost for its gas operation was approximately USD6.00MMBtu-USD7.00MMBtu, and estimates that the company will continue lowering its lifting costs to USD3-USD4 per MMBtu in 2019-2020. Strong Financial Profile: Tecpint reported approximately LTM EBITDA as of 2Q18 of USD580 million, a 58% margin, compared with USD295 million EBITDA in 2017, at a 40% margin. Fitch estimates Tecpint's gross leverage defined as total consolidated debt to EBITDA will be less than 1.0x over the rated horizon, assuming no further indebtedness, and will be FCF positive in 2019 through 2021. Implicit Parent Support: Tecpint's rating ratings reflect implicit support from its parent, The Techint group. Tecpint's ratings received a one notch uplift from its standalone credit profile of 'BB' as a result from its parent's implicit support. Techint is a global industrial conglomerate that is the principal investor in Tenaris, Ternium, Techint Engineering & Construction, Tenova and Humanitas. Techint's 2017 revenues were USD18.5 billion with total assets of USD-35.0 billion. Techint has a very conservative capital structure with strong cash flow generation. DERIVATION SUMMARY Tecpint's production size of approximately 126,000 boed compares favorably with 'BB'-rated oil and gas E&P producers in the region. These peers include Pan American Energy (B+/Stable) with 229,700 boed, Murphy Oil Corporation (BB+/Stable) with 171,000 boed and YPF SA (B/Negative) with 475,000 boed. Further, Tecpint's reported 512 million boe of 1P reserves at the end of 2017 equating to a reserve life of 11.1 years in line with Murphy Oil's at 11.2 years, higher than YPF's at 4.6 years and lower than PAE's at 17.3 years. Fitch expects the company will continue to maintain its strong reserve life. Tecpint's capital structure remains strong as LTM EBITDA at 2Q18 was 1.9x, slightly higher than PAE's 1.3x. Fitch estimates its 2019 gross leverage to be 0.6x, lower than PAE (1.7x), Murphy Oil (2.3x) and YPF (2.1x). On debt to 1P reserve basis, Fitch estimates Tecpint's debt as of 2Q18 to year-end2017 1P reserves was USD2.14 boe compared with PAE at USD1.58boe, Murphy Oil at USD4.01boe and YPF at USD10.49boe. PAE operates in a lower operating environment, which is a constraining factor for its ratings, but received a one notch uplift from the country ceiling due to its cash flows from export revenues and cash flows from abroad. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer -- Fortin de Piedra production to reach 90,000 boed by year-end 2018 and remain flat at 100,000 boed through 2021; -- Production in Bolivia, Colombia, Ecuador, Mexico and Peru to remain flat through 2021; -- Long-term oil prices converge with world prices over the next five years; -- Fixed unconventional gas prices for Fortin de Piedra production until 2021 (USD7.50/MMBtu for 2018, USD7.00/MMBtu for 2019, USD6.50/MMBtu in 2020, decreasing to USD6.00 in 2021); -- EBITDA margins are expected to remain at an average of 50% for the next three years; -- Total Capex of USD 2.1 billion between 2019-2021; -- Dividends of USD30 million paid annually from 2018 through 2021. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- An upgrade of Argentina, Bolivia and/or Ecuador's ratings and country ceilings may result in a positive rating action; -- Production rising consistently to 170,000 boe/d on a sustained basis; -- Reserve life stays robust, despite production growth, at approximately 10 years; -- Company's ability to maintain a conservative financial profile with gross leverage of 2.0x or below. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- The ratings could be negatively affected by a deterioration of Argentina, Bolivia, Ecuador and/or Peru's credit quality combined with a material increase in the government's interference in the sector; -- An increase of sustained, after expansion, leverage above 3.5x coupled with a decrease in interest coverage below 4.5x also negatively affect ratings. LIQUIDITY Strong Liquidity: Tecpint reported a total cash and equivalent including short-term investments of USD453.5 million as of June 30, 2018, covering amortizing debt through 2020. Given the company's strong operational track record along with strong parent company support, Fitch does not anticipate any difficulties for the company in tapping local and international debt markets in order to refinance short-term debt. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings: Tecpetrol Internacional S.L. -- Long-Term, Foreign-Currency Issuer Default Rating at 'BB+'; Outlook Stable; -- Long-Term, Local-Currency Issuer Default Rating at 'BB+'; Outlook Stable. Tecpetrol S.A. -- USD500 million Senior Unsecured notes guaranteed by Tecpetrol Internacional S.L. at 'BB+'. ================= X X X X X X X X X ================= * BOND PRICING: For the Week November 26 to December 1, 2018 ------------------------------------------------------------ Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- Banco do Brasil SA/Cayman 6.25 75.043 KY USD Rio Energy SA 6.875 71.638 2/1/2025 AR USD Cia Latinoamericana 9.5 60.447 7/20/2023 AR USD CSN Islands XII Corp 7 69.44 BR USD Agua y Saneamientos 6.625 71.982 2/1/2023 AR USD Odebrecht Finance Ltd 7.5 39.15 KY USD YPF SA 16.5 50.96 5/9/2022 AR ARS Odebrecht Finance Ltd 4.37 35.715 4/25/2025 KY USD Banco Macro SA 17.5 50 5/8/2022 AR ARS Odebrecht Finance Ltd 7.12 37.293 6/26/2042 KY USD China Huiyuan 6.5 75.1 8/16/2020 CN USD Odebrecht Finance 5.125 45.754 6/26/2022 KY USD Noble Holding 6.2 74.46 8/1/2040 KY USD Noble Holding 5.25 70.444 3/15/2042 KY USD Odebrecht Finance 7 58.985 4/21/2020 KY USD Noble Holding 6.05 73.508 3/1/2041 KY USD Odebrecht Finance 5.25 36.2 6/27/2029 KY USD Rio Energy SA 6.875 71.551 2/1/2025 AR USD BCP Finance Co 1.751 74.397 KY EUR Provincia del Chubut 4 10/21/2019 AR USD YPF SA 16.5 50.96 5/9/2022 AR ARS Argentina 7.125 76 6/28/2117 AR USD Automotores Gildemeister 6.75 62.759 1/15/2023 CL USD Odebrecht Finance 6 37.193 4/5/2023 KY USD Banco do Brasil 6.25 76.375 KY USD Cia Latinoamericana 9.5 60.621 7/20/2023 AR USD Polarcus Ltd 5.6 70 7/1/2022 AE USD Argentina 6.875 74.985 1/11/2048 AR USD Provincia del Chubut 7.75 72.304 7/26/2026 AR USD Banco Macro SA 17.5 50 5/8/2022 AR ARS CSN Islands XII Corp 7 74.375 BR USD Provincia de Rio Negro 7.75 70.153 12/7/2025 AR USD Provincia de Entre Rios 8.75 71.083 2/8/2025 AR USD Argentina 4.33 70 12/31/2033 AR JPY Provincia de Entre Rios 8.75 72.333 2/8/2025 AR USD Odebrecht Finance Ltd 4.375 35.242 4/25/2025 KY USD Ironshore Pharma 13 69.621 2/28/2024 KY USD Automotores Gildemeister 8.25 60.583 5/24/2021 CL USD Odebrecht Finance Ltd 7.125 38.674 6/26/2042 KY USD Odebrecht Finance Ltd 5.25 36.187 6/27/2029 KY USD Province of Santa Fe 6.9 74.177 11/1/2027 AR USD Provincia del Chubut 7.75 71.654 7/26/2026 AR USD Argentina 6.25 72.711 11/9/2047 AR EUR Cia Energetica 6.1827 1.105 1/15/2022 BR BRL Odebrecht Finance 7.5 43.5 KY USD Argentina 0.45 31.75 12/31/2038 AR JPY SACI Falabella 2 7/15/2020 CL CLP Province of Jujuy 8.625 72.788 9/20/2022 AR USD Province of Santa Fe 6.9 73.44 11/1/2027 AR USD Ironshore Pharma 13 69.621 2/28/2024 KY USD Tanner Servicios 3.8 52.42 4/1/2021 CL CLP AES Tiete Energia SA 6.78 1.06 4/15/2024 BR BRL Odebrecht Finance Ltd 6 37.19 4/5/2023 KY USD Provincia de Rio Negro 7.75 70.15 12/7/2025 AR USD Odebrecht Finance 7 59.466 4/21/2020 KY USD Odebrecht Finance Ltd 5.12 47.298 6/26/2022 KY USD Provincia de Cordoba 7.12 74.286 8/1/2027 AR USD Argentina 7.125 75.752 6/28/2117 AR USD Automotores Gildemeister 8.25 60.583 5/24/2021 CL USD Enlasa Generacion 3.558 11/15/2023 CL CLP Metrogas SA/Chile 645 8/1/2024 CL CLP Automotores Gildemeister 6.75 62.759 1/15/2023 CL USD Provincia del Chaco 9.375 72.315 8/18/2024 AR USD Fospar S/A 6.53 1.034 5/15/2026 BR BRL Sociedad Concesionaria 2.9547 6/30/2021 CL CLP Esval SA 3.453 3/15/2028 CL CLP Caja de Compensacion 7.75 35.23 3/27/2024 CL CLP Sociedad Austral 318.478 9/20/2019 CL CLP Provincia de Neuquen 7.5 74.753 4/27/2025 AR USD Caja de Compensacion 5.2 9/15/2018 CL CLP Empresa de Transporte 4.341 7/15/2020 CL CLP Corp Universidad 5.968 11/10/2021 CL CLP Provincia de Cordoba 7.125 74.802 8/1/2027 AR USD Provincia del Chaco 9.375 72.585 8/18/2024 AR USD Argentine Republic 7.125 75.322 6/28/2117 AR USD Sylph Ltd 2.367 61.194 9/25/2036 KY USD Banco Security SA 311 7/1/2019 CL CLP Sylph Ltd 2.657 73.081 3/25/2036 KY USD *********** Monday's edition of the TCR-LA delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-LA editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-LA constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-LA editor holds some position in the issuers' public debt and equity securities about which we report. Tuesday's edition of the TCR-LA features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. Submissions about insolvency-related conferences are encouraged. Send announcements to conferences@bankrupt.com *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2018. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *