/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/181218.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 Tuesday, December 18, 2018, Vol. 19, No. 250 Headlines B R A Z I L AVIANCA BRASIL: Azul Might Consider Acquisition in The Future AVIANCA BRASIL: Can Keep Disputed Aircraft for 30 Days, Judge Says CEMIG DISTRIBUICAO: Moody's Rates BRL550MM Debt 'B1/Baa2.br' C O S T A R I C A BANCO NACIONAL: Moody's Cuts LC Deposit Rating to B1; Outlook Neg. D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: US-Cafta-DR Free Trade Pact to be Revised DOMINICAN REPUBLIC: Exporters Assume Commitment for Excellence E L S A L V A D O R EL SALVADOR: S&P Affirms 'CCC+/C' Sovereign Credit Ratings M E X I C O FANSTEEL INC: Can Use Cash Collateral Use Thru Jan. 26 P A R A G U A Y PARAGUAY: Cabbies Protest Arrival of Uber P U E R T O R I C O PONCE REAL: Seeks to Hire EMG Despacho as Legal Counsel PONCE REAL: Seeks to Hire Tamarez CPA as Accountant V E N E Z U E L A BANCO EXTERIOR: Fitch Lowers Viability Rating to 'c' - - - - - =========== B R A Z I L =========== AVIANCA BRASIL: Azul Might Consider Acquisition in The Future ------------------------------------------------------------- Azul SA is not currently engaged in negotiations for a possible acquisition offer for struggling Avianca Brasil, Azul Chief Executive John Rodgerson told Reuters. But he acknowledged there could be space for a possible deal with Brazil's fourth largest airline, which filed for bankruptcy protection, according to Reuters. "Their bankruptcy protection case is very recent. It is possible that, in the future, we take a look at it, but right now there is nothing," Mr. Rodgerson said, noting he will watch the "natural course" of the case, Reuters relays. Alberto Alerigi at Reuters reports that Mr. Rodgerson's remarks followed a report in financial newspaper Valor Economico that said the company was considering making an offer to buy Avianca Brasil. Quoting Azul's chairman David Neeleman, the paper said Azul was evaluating that possibility for the "short term" and that, if it goes ahead, the acquisition would be paid for using Azul's available cash, Reuters relays. Mr. Rodgerson, Reuters notes, said the company is obliged to evaluate all market opportunities, but that there was "nothing happening" at the moment regarding a possible offer for Avianca. AVIANCA BRASIL: Can Keep Disputed Aircraft for 30 Days, Judge Says ------------------------------------------------------------------ Marcelo Rochabrun at Reuters reports that a Brazilian bankruptcy judge said that airline Avianca Brasil can keep its leased aircraft for 30 days, marking a loss for leasing companies that had sought to repossess planes and obtained initial victories. Brazilian judges initially ordered the repossession of at least 14 of Avianca Brazil's planes, but lessors have only managed to seize three planes so far, according to Reuters. The carrier said some 80,000 passengers' December travel plans could be disrupted if the planes were taken back, the report relays. CEMIG DISTRIBUICAO: Moody's Rates BRL550MM Debt 'B1/Baa2.br' ------------------------------------------------------------ Moody's America Latina assigned B1/Baa2.br (Global Scale and Brazil National Scale, respectively) ratings to Cemig Distribuicao S.A. (Cemig D, B1/Baa2.br stable)'s 6th issuance of BRL550 million senior secured debentures due June 2020. The debentures are backed by a corporate guarantee from Cemig D's parent company, Companhia Energetica de Minas Gerais (Cemig, B1/Baa2.br stable), and secured by preferred shares of Companhia de Gas de Minas Gerais -- Gasmig. The proceeds of the issuance will be used to replenish CEMIG-D's cash position following high expenses with energy acquisition costs in 2018 and to pay debt due in 2019. RATINGS RATIONALE Cemig D's (B1/Baa2.br stable) credit profile reflects that of the consolidated profile of its parent company, Cemig (B1/Baa2.br stable) given the corporate guarantees and cross default clauses embedded in the various debt instruments across the corporate family. The senior secured ratings of B1/Baa2.br reflect the difficulty in assessing the additional recovery benefits from the pledge of Gasmig preferred shares. From a credit perspective, it is difficult to assess the additional value of equity, particularly if non-publicly traded and if related to a subsidiary, which is already consolidated within the corporate family. Cemig's credit profile already includes that of Gasmig, since CEMIG fully controls (99.6% stake as of Dec. 2017) and consolidates this subsidiary. The debentures carry an interest rate of 1.75% over the DI rate, payable on a monthly basis as of January 2019. The principal amortization schedule is set for 12 monthly amortizations, starting in July 2019. The debentures can be prepaid at any point in time, without any prepayment premium fees. The indenture also establishes limitations on dividend distributions above legal minimum requirements and change on dividends payment policy as established in Cemig's and Cemig D's by-laws. Financial covenants have been set for both Cemig D and Cemig, as guarantor. For Cemig D, covenants are set at Net Debt to EBITDA of 4.5x by December 2018, scaling down to 3.8x in June 2019 and December 2019. For Cemig, as guarantor, the covenants are set at Net Debt / Ebitda levels of 4.25x by December 2018, 4.25x for June 2019 and 3.5x in December 2019. Cemig's ratings reflect a perception of general improvement in the company's liquidity profile following indemnification payments, asset sales, and short-term debt refinancing, with pro-forma cash position well positioned to cover 12-month debt maturities. Furthermore, the company is showing a more prudent liability management strategy, which will assist in mitigating liquidity risks. Improving operational profile of Cemig D following the May 2018 tariff review (+23% increase in distribution tariffs) will help compensate for lower revenue generation at Cemig Geracao e Transmissao S.A. (Cemig GT) following the expiration of important hydro concessions in 2017, with contractual energy buffers assisting in mitigating exposure to hydrology risks in light of low rainfall and high spot prices. Cemig D has historically represented 60% of the corporate family's net revenues and 30% of EBITDA, but is expected to grow in relevance to the overall group after the 2018 tariff review, which led to a 23.2% average increase. The increase recognizes higher weighted average cost of capital and substantial capital investment, and should add BRL450 million in additional EBITDA in 2019 relative to 2017. Cemig's overall leverage, incorporating its standard adjustments, is moderate. CFO pre-WC/debt registered 19.4% as of June 2018, and CFO pre-WC + interest expense/interest expense registered 3.2x. Debt/EBITDA stood at 3.8x as of the same date. Moody's expects leverage to increase in the short term as a function of the lower EBITDA in Cemig GT and a slower pace of deleveraging at Cemig D to finance working capital related to higher energy costs, with CFO pre-WC/debt reaching a low 17% in 2019. Moody's expects leverage metrics to improve in line with the hydrological conditions in the medium-to-long term. WHAT COULD CHANGE THE RATINGS UP/DOWN The ratings could be upgraded if Moody's believes that Cemig's medium-term and long-term consolidated credit metrics will remain within the expected thresholds on a sustained basis, with CFO pre- WC/Debt above 18% and/or CFO pre-WC + interest/interest above 2.5x. The successful execution of most of Cemig's divestment plan would also put positive pressure on the ratings, with its liquidity and leverage metrics improving under a prudent management of those proceeds. A rating downgrade, although unlikely at this time, could happen if Moody's believes that Cemig's liquidity risks (consolidated basis) are not being prudently managed or if there is a sustainable increase in leverage such that the company's consolidated CFO pre-WC/debt remains below 15% and/or Net debt/EBITDA, according to covenant definitions, exceeds 4.0x and 3.5x by June 2019 and December 2019, respectively. Headquartered in Belo Horizonte, the capital city of the State of Minas Gerais (B2 stable), Cemig D is an electricity distribution company covering a concession area equivalent to 97% of the state, serving 8.4 million consumers, as of June 2018. Following a renewal agreement signed with the Ministry of Energy and Mining as grantor, the concession is to expire in December 2046. As of June 2018, Cemig D reported last twelve month net revenues and EBITDA of BRL13.1 billion and BRL1.2 billion, respectively. The company is fully owned by Cemig. Headquartered in Belo Horizonte in the State of Minas Gerais (B2 stable), Cemig is a leading Brazilian integrated utility operating in the electricity distribution, generation and transmission sectors, with 4,800 megawatts (MW) in installed capacity and around 8,200 kilometers of transmission lines across the country. The company also owns controlling equity participation in the electricity utility Light S.A. (Ba3 stable) and the transmission company Transmissora Alianca de Energia Eletrica (Ba1 stable). CEMIG is controlled by the State of Minas Gerais, which owns 50.97% of the company's voting capital and 17.08% of overall shares. For the 12 months ended June 2018, Cemig reported net revenues of BRL22.2 billion and EBITDA of BRL3.5 billion. =================== C O S T A R I C A =================== BANCO NACIONAL: Moody's Cuts LC Deposit Rating to B1; Outlook Neg. ------------------------------------------------------------------ Moody's Investors Service has downgraded the long-term local currency deposit ratings of both Banco Nacional de Costa Rica and Banco de Costa Rica to B1 from Ba2. The banks' foreign currency deposit ratings were downgraded to B2 from Ba3. At the same time, Moody's downgraded BNCR's baseline credit assessment and adjusted BCA to b1 from ba2, while it downgraded BCR's BCA and adjusted BCA to b2 from b1. The rating agency also downgraded BNCR's long-term foreign currency senior unsecured debt rating to B1 from Ba2. The outlook on the long-term ratings was changed to negative. In addition, Moody's downgraded the deposit rating and adjusted BCA of Banco Internacional de Costa Rica, S.A. (BICSA) to B2 from B1 and to b2 from b1, respectively. The outlook on the deposit rating was changed to stable. Moody's affirmed BICSA's b2 BCA. These actions conclude the reviews for downgrade that were initiated on these issuers on October 19, 2018. The actions follow Moody's downgrade of Costa Rica's government bond rating to B1 with a negative outlook, from Ba2 under review for downgrade. The following ratings and assessments were downgraded: Banco Nacional de Costa Rica Baseline credit assessment, to b1 from ba2 Adjusted baseline credit assessment, to b1 from ba2 Long-term local currency deposit rating, to B1 from Ba2, outlook changed to negative from rating under review Long-term foreign currency deposit rating, to B2 from Ba3, outlook changed to negative from rating under review Long-term foreign currency senior unsecured debt rating, to B1 from Ba2, outlook changed to negative from rating under review Long-term local and foreign currency counterparty risk ratings, to Ba3 from Ba1 Long-term counterparty risk assessment, to Ba3(cr) from Ba1(cr) Banco de Costa Rica Baseline credit assessment, to b2 from b1 Adjusted baseline credit assessment, to b2 from b1 Long-term local currency deposit rating, to B1 from Ba2, outlook changed to negative from rating under review Long-term foreign currency deposit rating, to B2 from Ba3, outlook changed to negative from rating under review Long-term local and foreign currency counterparty risk ratings, to B1 from Ba2 Long-term counterparty risk assessment, to B1(cr) from Ba2(cr) Banco Internacional de Costa Rica, S.A. Adjusted baseline credit assessment, to b2 from b1 Long-term foreign currency deposit rating, to B2 from B1, outlook changed to stable from rating under review Long-term foreign currency counterparty risk rating, to B1 from Ba3 Long-term counterparty risk assessment, to B1(cr) from Ba3(cr) The following ratings and assessments were affirmed: Banco Nacional de Costa Rica and Banco de Costa Rica Short-term local and foreign currency deposit and counterparty risk ratings, at Not Prime Short-term counterparty risk assessment of Not Prime(cr) Banco Internacional de Costa Rica, S.A. Baseline credit assessment, at b2 Short-term foreign currency deposit and counterparty risk rating, at Not Prime Short-term counterparty risk assessment of Not Prime (cr) Outlook Actions: Banco Nacional de Costa Rica and Banco de Costa Rica Outlook changed to negative, from ratings under review Banco Internacional de Costa Rica, S.A. Outlook changed to stable, from ratings under review RATINGS RATIONALE DOWNGRADES OF BCR AND BNCR's RATINGS The downgrades of BCR and BNCR's assessments and ratings consider the deterioration of Costa Rica's operating environment for banks coupled with the weaker capacity of the government of Costa Rica to provide them with financial support in an event of stress, as reflected in the downgrade of Costa Rica's sovereign rating. The sovereign rating action reflected the continued and projected worsening of debt metrics on the back of large deficits despite fiscal consolidation efforts. It also captures the significant funding challenges emerging for the country as rising debt, deficits and interest costs lead to rapidly rising borrowing requirements. The negative outlook on the sovereign ratings incorporates the considerable implementation risks associated with the government's fiscal consolidation efforts. The strength of the government's newfound commitment to fiscal reform remains unproven, and falling real GDP growth will make it even more difficult to meet fiscal revenue targets. Rising global interest rates for emerging market issuers will also pressure funding costs higher. BNCR's and BCR's local currency deposit ratings, as well as BNCR's foreign currency debt rating continue to be in line with Costa Rica's government bond rating. The banks' B2 foreign currency deposit ratings are constrained by Costa Rica's sovereign ceiling for foreign currency deposits. The ratings reflect Moody's assessment of full support from the government, which is based on the government's 100% ownership of the banks, its guarantee of their senior obligations under Article 4 of the Banking Law, the banks' public policy mandate, and the importance of their deposit and loan franchise within the Costa Rican financial system. The negative outlooks on the banks' ratings consider the negative outlook on Costa Rica's sovereign rating. DOWNGRADES OF BCR AND BNCR's BCAs The downgrades of the BCAs of both banks reflect the reduction of Costa Rica's Macro Profile to Weak+ from Moderate-. The lowering of the Macro Profile, which measures the strength of operating conditions for the country's banks as a whole, incorporates a reduction in Moody's assessments of Costa Rica's institutional strength and government liquidity risks in conjunction with the sovereign downgrade. The BCAs of both banks continue to capture their modest capitalization and weak profitability, owing to high operating costs and significant mandatory transfers to government entities. Asset risks are increasing at both banks because of increasing local- and foreign-currency interest rates, coupled with a depreciation of the colon in light of the high share of foreign currency loans to local-currency earners. On the other hand, these two lenders benefit from a good access to low-cost retail deposits and to deposits from public-sector entities. BCR's b2 BCA also continues to reflect corporate governance concerns following allegations of improper terms and conditions for certain loans extended by the bank, notwithstanding changes to the bank's risk management and controls. While these events had limited impact on the bank's financial fundamentals, the revised internal risk management and controls practices still need to be tested over time. DOWNGRADE OF BICSA The downgrade of BICSA's deposit rating and adjusted BCA consider the reduced capacity of its controlling parent, BCR, to provide it financial support in an event of need. BICSA's rating previously benefited from a notch of uplift from its b2 BCA to reflect Moody's assessment of BCR's high willingness to support its subsidiary. As a result of the downgrade of BCR, however, BICSA's B2 deposit rating is now in line with the foreign currency deposit rating of BCR and BICSA's ratings no longer receive any rating uplift for affiliate support. Consequently, even if BCR is downgraded further in line with its negative outlook, there will be no direct impact on BICSA's ratings, which explains its stable outlook. BICSA's BCA was affirmed, notwithstanding the downgrade of the bank's deposit rating, to reflect its improved asset quality, as well as its gradually recovering, though still low, profitability, and stable capital levels. Also, Moody's considered its more steady corporate governance, with BCR and BNCR -- the latter being BICSA's minority shareholder - aiming to manage BICSA in a more coordinated fashion than it the past. WHAT COULD CAUSE THE RATINGS TO MOVE UP OR DOWN In line with their negative outlooks, BCR's and BNCR's deposit and debt ratings, coupled with their standalone assessments, will face downward pressure should Costa Rica's government bond rating be downgraded further. Upward pressures on BNCR's and BCR's ratings are limited given the negative outlook on the two issuers and on the sovereign ratings of the Government of Costa Rica. However, the outlook on the banks' ratings could stabilize if the sovereign outlook stabilizes. The BCA of BCR could be upgraded in the case of proven and tested improvements in terms of risk management and controls, coupled with maintained financial fundamentals. BNCR's BCA has limited upward pressures as it is already at the level of Costa Rica's government bond rating. BICSA's long-term deposit rating could be upgraded if its profitability improves amid continued good asset quality, and if the bank avoids any recurrence of the recent challenges it faced related to corporate governance. On the contrary, the ratings would face downward pressure again if the bank's asset quality, profitability, or capital deteriorate substantially, or it faces further corporate governance challenges. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: US-Cafta-DR Free Trade Pact to be Revised ------------------------------------------------------------- Dominican Today reports that Dominican Republic Agriculture Minister Osmar Benitez recently disclosed a mechanism to protect and improve domestic production, and one of those issues is related to the Central America, Dominican Republic and United States free trade agreement (US-Cafta-DR). The free trade agreement concerns some of the most sensitive productive sectors that in a few months will have to face liberalized tariffs under the treaty, according to Dominican Today. But Mr. Benitez said that president Danilo Medina has already created a commission that is authorized to maintain contact with US authorities aimed at revising the agreement, the report relays. "We're going to request a review of DR-Cafta. Why? Because the members of the agreement, including the United States, pledged to reduce the subsidies and we have seen that they have not done so. We are trying to reach an agreement. We want that revision to maintain the protection of sensitive programs, as long as you keep me protected there. The President already authorized it," said the official, quoted by Diario Libre, the report notes. He said the procedure starts with a dialogue, continues with the consensus and then with the agreements, the report notes. "The attitude we have seen from the North American authorities has been very conciliatory and willing to listen to us," he added. But the US isn't the only market on which the Dominican Republic has set its sights, the report relays. After the government established diplomatic relations with China, the authorities have been defining the mechanisms to access that market, the report says. The report relays that Mr. Benitez said there are products, such as cocoa, tobacco, cigars, cassava and starch, as well as pineapples, which are coveted in the Asian nation and are already being shipped to that country. "The only challenge is logistics, distance." As reported in the Troubled Company Reporter-Latin America on Sept. 24, 2018, Fitch Ratings affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. DOMINICAN REPUBLIC: Exporters Assume Commitment for Excellence -------------------------------------------------------------- Dominican Today reports that Dominican Exporters Association (Adoexpo) executives and representatives of the winning companies of the 32nd annual Exporting Excellence Awards 2018 visited president Danilo Medina, and stressed the sector's consolidation, the quality of local products and the need to continue public- private partnerships aimed at conquering international markets. Adoexpo Vice President Odile Minino Bogaert; past presidents Ricardo Koenig and Sadala Khoury, and board members Manuel Singer, Karel Castillo, Juana Barcelo and Elizabeth Mena headed the delegation, which was received by Medina in the National Palace, according to Dominican Today. Mr. Minino expressed to the President Adoexpo's commitment to create an export culture and the best conditions to opening the doors of international markets to local producers, assuming a commitment to quality and added value, the report notes. The winning companies were represented by Jose Leopoldo Vicini, from Gerdau Metaldom, winner of the "Grand Exporter 2018"; Christian Reynoso, from Molinos Valle del Cibao, as "Industrial Export Excellence"; Roberto Teran, from BAXTER Healthcare, as " Export Free Zones Excellence," and Raul Reyes, from AMR Agro, as "Agricultural Exporter Excellence," the report relays. As reported in the Troubled Company Reporter-Latin America on Sept. 24, 2018, Fitch Ratings affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. ==================== E L S A L V A D O R ==================== EL SALVADOR: S&P Affirms 'CCC+/C' Sovereign Credit Ratings ---------------------------------------------------------- S&P Global Ratings, on Dec. 13, 2018, affirmed its 'CCC+/C' long- and short-term sovereign credit ratings on El Salvador. The outlook on the long-term ratings remains positive. S&P's 'AAA' transfer and convertibility (T&C) assessment is unchanged. OUTLOOK The positive outlook indicates the at least one-in-three likelihood of an upgrade in the next 12 months if ongoing Congressional negotiations result in agreements on financing that would enable the government to meet a eurobond amortization ($800 million) due in December 2019. S&P said, "In addition, the positive outlook reflects our expectation of consistently moderate fiscal deficits and stable debt levels. It also incorporates our expectation of consistent, albeit moderate, economic growth in the next three years." S&P said, "In contrast, we could lower the ratings over the same period if access to external financing for the sovereign narrows, raising the risk of another default toward the end of next year, or if economic performance deteriorates significantly, so that GDP per capita grows less than 1.5% annually." RATIONALE S&P said, "Our ratings on El Salvador reflect the sovereign's weak political institutions that continue to create uncertainty about its capability and willingness to maintain timely debt service. Also, they reflect its relatively poor and moderately growing economy. "El Salvador's limited monetary flexibility (because it's fully dollarized) and its vulnerability as a small and open economy, highly dependent on external financing, are also incorporated in our ratings, as are the limited contingent liabilities arising from its stable banking system. "We expect that the decline in the general government deficit and the stabilization of El Salvador's debt level that we have observed over the last two years will continue up to 2021." Flexibility and performance profile: Lower fiscal and external deficits should keep financing requirements moderate over the next three years. -- Fiscal correction would keep the change in general government debt below 3% of GDP and interest payments below 15% of general government revenues in 2019-2021, on average. -- S&P expects current account deficits (CADs) to remain moderate, keeping external financial requirements at current levels. -- Dollarization should continue to lead to low inflation rates in the coming years. The Fiscal Responsibility Law (FRL) -- enacted in November 2016 -- and the approval of the pension reform last year enabled El Salvador to consolidate its fiscal correction. In 2017, the general government fiscal deficit (which includes the central government and the central bank) reached 2.5% of GDP, down from 4.4% in 2013. For this year, S&P is forecasting a general government deficit of 2.7% that should remain below 3% of GDP, on average, up to 2021. S&P said, "We are assuming the rate of general government revenue growth will be similar to nominal GDP growth, as the government has ruled out tax increases ahead of the election cycle early next year. Moreover, we are assuming a moderate increase in expenditures as the government is committed to complying with the FRL that caps expenditures for wages and goods and services." Overall, El Salvador's fiscal flexibility will continue to be limited. Significant shortfalls in basic services and infrastructure constrain the government's ability to reduce significantly its expenditures, while a large informal economy limits its ability to raise additional revenues. Following moderate fiscal deficits, S&P forecasts net general government debt to stay around 66% up to 2021 -- where it has been over the last two years. Unlike previous years, this implies a change in general government debt below 3% of GDP over the same period. The debt burden had risen in recent years, largely because of the need to fund obligations of the pension system, highlighting the importance of the pension reform approved last year. As of September 2018, 30% of its debt -- excluding debt to pensions -- is with multilateral institutions while 51% is bond issuances. Most of it is external (74%), with internal debt consisting of short-term loans (LETES) and long-term special bonds (CIPs). LETES represented a moderate 5.8% of total debt. Interest payments increased to 13.6% of general government revenues in 2017, from 12.8% a year before. This increase partially reflects the liquidity pressures and default that the sovereign went through in 2017. S&P expects this ratio to stay broadly stable if Congress approves soon the rollover of its debt maturing in 2019 and beyond. Externally, El Salvador's position has also improved. In 2017, its CAD stayed at 2% GDP, balancing higher oil prices with remittances growth (10%). This compares positively with the CAD of close to 5% of GDP, on average, over the previous five years. S&P expects relatively higher CADs in the next three years as a result of likely less dynamic remittances. S&P's forecast also incorporates U.S. growth of about 3% that would continue to benefit the country's exports. Over the next three years, the CAD will be partly funded by foreign direct investment (FDI), which may remain around 1.2% of GDP. S&P expects that El Salvador's gross external financing needs will remain stable around 100% of current account receipts and usable reserves, while its narrow net external debt will stay around 82% of its current account receipts. Overall, the government's high debt burden continues to expose the sovereign to potentially adverse shifts in market sentiment. Relatively low FDI has led to reliance on external debt to fund the country's persistent CAD. The country moved to full dollarization in 2001, and S&P believes this will continue in the coming years. This supports S&P's 'AAA' T&C assessment, as well as S&P's opinion that the sovereign would not restrict dollar outflows by private parties to make debt- service payments. S&P said, "While we expect that dollarization continues to lead to low inflation rates, the inflexible monetary regime has not helped to promote growth and investment. "We assess El Salvador's banking system in our Banking Industry Country Risk Assessment (BICRA) group '10'. (BICRAs are grouped on a scale from '1' to '10', ranging from what we view as the lowest- risk banking systems [group '1'] to the highest-risk [group '10'].) We believe that the banking system and the public-sector enterprises pose a limited contingent liability to the sovereign." El Salvador has a relatively small state-owned enterprise sector, thanks to privatization the sovereign implemented in previous years." Institutional and economic profile: Economic growth remains weak as political stalemate and crime hurt investment -- GDP per capita growth could reach close to 2% in the next two years. -- The historically polarized political environment could be changing with the emergence of new political figures. -- Uncertainty about the approval of the 2019 eurobond refinancing continues. GDP growth is expected to hover around 2.3% this year, the same as in 2017. Resolution of the default last year mitigated, to a great extent, a bigger effect on investors' confidence, as shown by increased FDI that continued growing this year. For the next three years, S&P is forecasting a slightly stronger economic performance. On a per capita basis, this would translate to growth of close to 1.9%, on average, up to 2021. El Salvador's GDP per capita would surpass $4,000 at the end of this year. Historically low GDP growth has been fueled by low investment, high emigration, weak competitiveness, and political gridlock. On the other hand, private consumption is underpinned by remittances growth that in 2017 accounted for 21% of GDP. As a small and open economy, El Salvador's performance is closely linked to the U.S. because close to 50% of its exports go to that country. Also, about one-third of its population lives in the U.S. El Salvador continues to rank poorly on the Human Development Index, and over the last year, it has fallen to 121 from 117 (out of 188 countries). El Salvador falls under the "medium human development" category, signaling significant shortfalls in basic services and infrastructure. Raising potential growth in coming years will require reforms to foster competitiveness and investment, supported by measures to reduce crime. Job creation through more dynamic economic activity is essential to tackle the large informal sector, which represents about 70% of the working-age population, according to the International Monetary Fund. Relative to a year ago, termination of the Temporary Protected Status (TPS) and massive deportations is now less likely because a U.S. local court ruled against such termination. There are about 195,000 Salvadorians currently benefiting from TPS, accounting for around 16% of the Salvadorian migrant population in the U.S. The ruling political party, Frente Farabundo Marti para la Liberacion Nacional (FMLN), has little common ground with El Salvador's other major party, the Alianza Republicana Nacionalista (ARENA), which has led to political gridlock and has damaged government effectiveness in the past. However, this situation might change with the emergence of new political figures. A competitive presidential election in February 2019 could incentivize major political parties to cooperate with the next administration and among one another, especially in FMLN, whose candidate is doing poorly in the presidential polls and now has a weaker position in Congress. In the last Congressional election, in March 2018, ARENA strengthened its position by two seats to a total of 37 seats, while the FMLN lost eight seats to end with 23 seats. The FMLN also lost its veto power -- it needed to hold at least 28 seats (one-third of Congress) to maintain veto power. The government is negotiating now in Congress the 2019 budget that includes the refinancing of the $800 million eurobond due in December 2019. Approval of such refinancing would secure debt repayment and would increase investor confidence. If that doesn't happen, S&P's ratings on El Salvador could be under pressure in the fourth quarter of 2019. S&P has seen progress made on tackling corruption in the country. The current attorney general imprisoned the former attorney general as well as El Salvador's former president Antonio Saca. Still, El Salvador is poorly ranked in the Corruption Perceptions Index from Transparency International. In 2017, its score worsened, and it's now ranked at 112, out of 180 countries. El Salvador's World Bank Ease of Doing Business ranking also worsened in 2018, to 85 from 73 a year earlier (out of 190). The main challenges are dealing with construction permits, protecting minority investors, starting a business, and enforcing contracts. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. RATINGS LIST Ratings Affirmed El Salvador Sovereign Credit Rating CCC+/Positive/C Transfer & Convertibility Assessment AAA Senior Unsecured CCC+ =========== M E X I C O =========== FANSTEEL INC: Can Use Cash Collateral Use Thru Jan. 26 ------------------------------------------------------ The Hon. Anita L. Shodeen of the U.S. Bankruptcy Court for the Southern District of Iowa authorized Fansteel, Inc. to continue to use the cash collateral of TCTM Financial FS, LLC through January 26, 2018, pursuant to and upon the same terms as those previously agreed to by TCTM and the Official Committee of Unsecured Creditors in a May 2017 Court-approved Stipulation and Consent Order. A copy of the Debtor's request is available at: http://bankrupt.com/misc/iasb16-01823-1158.pdf About Fansteel and Affiliates Headquartered in Creston, Iowa, Fansteel, Inc., manufactures aluminum and magnesium castings for the aerospace and defense industries. Fansteel has four locations in the USA and one in Mexico and has a workforce of more than 600 employees. Fansteel generated $87.4 million in revenue in 2015 on a consolidated basis. Wellman Dynamics Corporation contributed 67% of Fansteel's sales. The rest of the sales are generated from Intercast, a division of Fansteel, and other non-debtor subsidiaries. Fansteel, Wellman Dynamics, and Wellman Dynamics Machinery & Assembly, Inc., filed Chapter 11 petitions (Bankr. S.D. Iowa Case Nos. 16-01823, 16-01825 and 16-01827) on Sept. 13, 2016. The petitions were signed by Jim Mahoney, CEO. The cases are assigned to Judge Anita L. Shodeen. The Debtors disclosed total assets of $32.9 million and total debt of $41.97 million. The companies tapped Jeffrey D. Goetz, Esq., and Krystal R. Mikkilineni, Esq., at Bradshaw, Fowler, Proctor & Fairgrave, P.C., as counsel; RSM US LLP as tax advisor; Jeffrey Sands and Dorset Partners, LLC as business broker; and Mark J. Steger, Esq., at the Clark Hill Law Firm, as Environmental Counsel. The companies filed motions to jointly administer the cases pursuant to Bankruptcy Rule 1015(b), and the court ordered the joint administration on Oct. 17, 2016. The court subsequently entered an order on May 24, 2017, vacating its Oct. 17 order and discontinuing the joint administration of the cases under the lead case of Fansteel. On Sept. 23, 2016, the U.S. Trustee for Region 12 appointed an official committee of unsecured creditors in Fansteel's bankruptcy case. The committee retained Morris Anderson & Associates, Ltd., as financial advisor; and Archer & Greiner, P.C. and Nyemaster Goode, P.C., as counsel. In March 2017, the U.S. trustee announced that the unsecured creditors' committee of Fansteel would no longer serve as the official committee in its case and that it would be reconstituted as the official committee of unsecured creditors in the Chapter 11 cases of Wellman Dynamics and Wellman Dynamics Machinery. As of March 22, 2017, a new creditors' committee has not yet been appointed in Fansteel's bankruptcy case. Wellman Dynamics filed a Chapter 11 plan of reorganization and disclosure statement on Jan. 11, 2017. On May 8, 2017, the creditors' committee of Wellman Dynamics filed a rival Chapter 11 plan of liquidation for the company. =============== P A R A G U A Y =============== PARAGUAY: Cabbies Protest Arrival of Uber ----------------------------------------- EFE News reports that hundreds of taxi drivers demonstrated here in front of Paraguay's Palace of Justice in protest against the arrival of Uber on the streets, as lawyers representing the cabbies filed a motion seeking an injunction against the ride- sharing service. From the earliest hours of the morning, taxi cabs from more than a score of cities blocked roads to the building, according to EFE News. The caravan of cars, joined in solidarity by some city buses, forced other drivers to change their usual route to work and even drive on the sidewalks when necessary, the report relays. The protest exploded simultaneously in other towns far removed from the capital like Ciudad del Este and Encarnacion, where the cabbies also quit working for the day to gather in front of courthouses, the report notes. The report relays that the taxi drivers union considers that Uber's arrival, as well as the presence of the home-grown app MUV, could mean the loss of 40,000 jobs across the country. "We believe this is a threat, it breaks all the rules. There's no longer any security under law that can protect our citizens, whatever business they're in," the secretary general of the Professional Taxi Drivers Association of Asuncion, Francisco Brite, told EFE. The union demanded that both the Paraguayan government and the Asuncion municipality sit down at a table to debate the conditions that the new transport companies must submit to, the report relays. "Paraguay is a fifth-world country, it's not a country to be copying Europe and imposing here whatever they do there," Mr. Brite said, recalling that 70 percent of the nation's population are under 35 and struggling to find jobs, the report says. Amid cries of "Uber out, MUV out," the demonstrators marched symbolically several times around the Palace of Justice and later joined hands to form a long human chain that for several minutes encircled the building. The protests came two days after the regional manager of Uber in the Southern Cone of South America, Mariano Otero, announced the arrival of the ride-sharing service in Paraguay and launched the process of selecting drivers, the report notes. Uber began negotiating its move into Paraguay last September, when company executives met with the deputy minister of the Secretariat of State for Taxation (SET), Fabian Dominguez, the report adds. 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 U E R T O R I C O ====================== PONCE REAL: Seeks to Hire EMG Despacho as Legal Counsel ------------------------------------------------------ Ponce Real Estate Corp. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire EMG Despacho Legal, CRL as its legal counsel. The firm will advise the Debtor regarding its duties under the Bankruptcy Code and will provide other legal services related to its Chapter 11 case. EMG charges these hourly fees: Edgardo Mangual Gonzalez, Esq. $250 Associate Attorneys $250 Paralegal Staff $90 Administrative $75 The firm received a retainer of $3,000 prior to the Debtor's bankruptcy filing. Edgardo Mangual Gonzalez, Esq., principal of EMG, disclosed in a court filing that he and other attorneys of the firm are "disinterested" as defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Edgardo Mangual Gonzalez, Esq. EMG Despacho Legal, CRL Edificio La Electr6nica, Suite 212 Calle Bori 1608 San Juan, PR 00927 Tel: (787) 753-0055 Fax: (787) 767-5015 Email: lcdomangual@gmil.com About Ponce Real Estate Corp. Ponce Real Estate Corp., a real estate company headquartered in Ponce, Puerto Rico, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 18-06805) on Nov. 24, 2018. At the time of the filing, the Debtor estimated assets of $1 million to $10 million and liabilities of the same range. PONCE REAL: Seeks to Hire Tamarez CPA as Accountant --------------------------------------------------- Ponce Real Estate Corp. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire Tamarez CPA, LLC as its accountant. The firm will assist the Debtor in the preparation of monthly operating reports; provide tax-related services; assist the Debtor in the preparation of supporting documents for its plan of reorganization; and provide other accounting services related to its Chapter 11 case. Tamarez charges these hourly fees: Albert Tamarez-Vasquez $150 CPA Supervisor $100 Senior Accountant $85 Staff Accountant $65 The firm received a retainer of $2,000 before the petition date. Albert Tamarez Vasquez, a certified public accountant employed with Tamarez, disclosed in a court filing that he and his firm are "disinterested" as defined in section 101(14) of the Bankruptcy Code. The firm can be reached through: Albert Tamarez Vasquez Tamarez CPA, LLC P.O. Box 194136 San Juan, PR 00919-4136 Tel: (787) 795-2855 Fax: (787) 200-7912 Email: atamarez@tamarezcpa.com About Ponce Real Estate Corp. Ponce Real Estate Corp., a real estate company headquartered in Ponce, Puerto Rico, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 18-06805) on Nov. 24, 2018. At the time of the filing, the Debtor estimated assets of $1 million to $10 million and liabilities of the same range. ================= V E N E Z U E L A ================= BANCO EXTERIOR: Fitch Lowers Viability Rating to 'c' ---------------------------------------------------- Fitch Ratings has conducted a portfolio review for Venezuelan Banks and Related Entities and has taken several rating actions. The entities include: Banco del Caribe, C.A. Banco Exterior, C.A. Banco Nacional De Credito C.A. Banco Occidental de Descuento C.A. Mercantil C.A. Mercantil Servicios Financieros CA The bank's Long-Term Issuer Default Ratings have been affirmed at 'CC' as Fitch expects these banks to continue meeting their deposit obligations in the absence of government intervention given the domestic market's high liquidity. As such, Fitch views the probability that the depositors will have to bear losses is lower than the probability of the banks' failure. Fitch notes that the Venezuelan banks have no international market debt outstanding. The Viability Rating of Banco Exterior, C.A., Banco Universal has been downgraded to 'c' from 'cc' due to a sharp drop in capitalization to critically low levels in light of hyperinflation. In Fitch's view, the probability of failure has increased as Exterior's ability to meet the regulatory minimum for capitalization required extraordinary injections of capital from its shareholders. After declining to 11.01% at end of June 2018, the minimum required in Venezuela, Exterior's regulatory capital ratio increased to 12.9% at the end of September 2018. Fitch notes that this ratio is among the lowest of the banks it rates in Venezuela, particularly in light of Exterior's comparatively weaker asset quality. At the same time, Fitch has placed all National Ratings for Venezuelan banks and related entities on Rating Watch Negative. The Negative Watch of the Long-Term and Short-Term National Ratings reflects the difficulty to determine relativities of these ratings within Venezuela due to a reduction in coverage of Venezuelan entities more generally and a more challenging operating environment and financial performance for banks. Additionally, Fitch faces increasing limitations to obtain full information from all rated banks to ensure a proper ranking of the relativities within the local market on a national scale, particularly in light of the distortionary effect of hyperinflation. Over the next six months, Fitch will attempt to obtain additional information for analysis and will either take a rating action based on new information or withdraw the ratings if sufficient information is not available. KEY RATING DRIVERS VRs AND IDRS With the exception of Exterior, the banks' VRs drive their IDRs. The operating environment and the banks' pressured tangible common equity/tangible assets ratio highly influence the banks' VRs. In the case of Exterior, its Long-Term IDR was affirmed at 'CC' as Fitch continues to believe that the bank will meet its deposit obligations given the high level of liquidity in the domestic market even if the bank were to fail. The analysis of asset quality and profitability ratios, company profiles and risk management under hyperinflationary conditions is not meaningful at this time. In particular, Fitch is concerned about the banks' ability to maintain capitalization under hyperinflationary conditions. While Fitch expects most banks to continue meeting regulatory requirements for capitalization due to ongoing revaluations of fixed assets, currency depreciation and favorable risk weighting of assets, the banks' tangible common equity/tangible assets ratios have declined to critically low levels, indicating a limited ability to deal with unexpected losses in the future. SUPPORT RATING AND SUPPORT RATING FLOOR The banks' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF' reflect Fitch's expectation of no support. Despite the systemic importance of these banks, support cannot be relied upon given Venezuela's Restricted Default (RD) rating and lack of a consistent policy on bank support. RATING SENSITIVITIES VRS AND IDRS A resolution of the sovereign's Restricted Default could relieve pressure on the banks' VRs and Long-Term, Foreign-Currency IDRs, which are currently capped at the country ceiling. The Long-Term, Local-Currency IDRs and Short-Term IDRs are capped at the sovereign and would move in line with a positive rating action of more than two notches on the sovereign. Nevertheless, upside potential to the bank's ratings is limited in the near term due to the current crisis. While not Fitch's base case due to capital controls and domestic market liquidity, a persistent nominal decline in deposits would pressure ratings. A sustained decline in the banks' regulatory capital ratio, either due to nominal growth or losses, which increases the risk of some form of regulatory intervention, could also lead to a downgrade. SUPPORT RATING AND SUPPORT RATING FLOOR Venezuela's propensity or ability to provide timely support is not likely to change given the sovereign's very low speculative-grade ratings. As such, the SR and SRF have no upgrade potential at this time. NATIONAL RATINGS The Rating Watch Negative on National Ratings is expected to be resolved over the next six months, once Fitch gathers additional information or decides to withdraw the ratings. The rating actions are as follows: BANCO DEL CARIBE, C.A. BANCO UNIVERSAL -- Long-Term, Foreign- and Local-Currency IDRs affirmed at 'CC'; -- Short-Term, Foreign- and Local-Currency IDR affirmed at 'C'; -- Viability Rating affirmed at 'cc'; -- Support Rating affirmed at '5'; -- Support Rating Floor affirmed at 'No Floor'; -- National long-term rating 'BBB+(ven)'; assigned Rating Watch Negative; -- National short-term rating 'F2(ven)'; assigned Rating Watch Negative. BANCO EXTERIOR, C.A., BANCO UNIVERSAL -- Long-Term, Foreign- and Local-Currency IDRs affirmed at 'CC'; -- Short-Term, Foreign- and Local-Currency IDR affirmed at 'C'; -- Viability Rating downgraded to 'c' from 'cc'; -- Support Rating affirmed at '5'; -- Support Rating Floor affirmed at 'No Floor'; -- National long-term rating 'A-(ven)'; assigned Rating Watch Negative; -- National short-term rating 'F2(ven)'; assigned Rating Watch Negative. BANCO NACIONAL DE CREDITO C.A. -- Long-Term, Foreign- and Local-Currency IDRs affirmed at 'CC'; -- Short-Term, Foreign- and Local-Currency IDR affirmed at 'C'; -- Viability Rating affirmed at 'cc'; -- Support Rating affirmed at '5'; -- Support Rating Floor affirmed at 'No Floor'; -- National long-term rating 'BBB-(ven)'; assigned Rating Watch Negative; -- National short-term rating 'F3(ven)'; assigned Rating Watch Negative. BANCO OCCIDENTAL DE DESCUENTO, BANCO UNIVERSAL C.A. -- Long-Term, Foreign- and Local-Currency IDRs affirmed at 'CC'; -- Short-Term, Foreign- and Local-Currency IDR affirmed at 'C'; -- Viability Rating affirmed at 'cc'; -- Support Rating affirmed at '5'; -- Support Rating Floor affirmed at 'No Floor'; -- National long-term rating 'BBB-(ven)'; assigned Rating Watch Negative; -- National short-term rating 'F3(ven)'; assigned Rating Watch Negative. MERCANTIL, C.A. BANCO UNIVERSAL -- Long-Term, Foreign- and Local-Currency IDRs affirmed at 'CC'; -- Short-Term, Foreign- and Local-Currency IDR affirmed at 'C'; -- Viability Rating affirmed at 'cc'; -- Support Rating affirmed at '5'; -- Support Rating Floor affirmed at 'No Floor'; -- National long-term rating 'A(ven)'; assigned Rating Watch Negative; -- National short-term rating 'F1(ven)'; assigned Rating Watch Negative. MERCANTIL SERVICIOS FINANCIEROS CA -- National long-term rating 'A(ven)', assigned Rating Watch Negative; -- National short-term rating 'F1(ven)', assigned Rating Watch Negative; -- Senior unsecured bond issuance national-scale 'A(ven)', assigned Rating Watch Negative; -- Senior unsecured commercial papers national-scale rating 'F1(ven)', assigned Rating Watch Negative. *********** 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 * * *