/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/190607.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, June 7, 2019, Vol. 20, No. 114 Headlines A N T I G U A A N D B A R B U D A LIAT: Barbados Discloses Plan to Sell Shares in Airline A R G E N T I N A SALTA: Fitch Affirms B Issuer Default Ratings, Outlook Negative B R A Z I L BANCO FIBRA: Moody's Alters Outlook on B3 Deposit Rating to Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Paid US$14.3 Billion of Foreign Debt [*] DOMINICAN REPUBLIC: Ports Eyed by Dubai's Sultan G U A T E M A L A CEMENTOS PROGRESO: Fitch Affirms LT IDR & Unsec. Notes at BB+ M E X I C O MEXICO: President Is Committed to Free Trade P U E R T O R I C O ARQUIDIOCESIS DE SAN JUAN: Bid for Stay Pending Appeal Partly OK'd J.C. PENNEY: Moody's Cuts CFR to Caa1 & Sr. Unsec. Notes to Caa3 KONA GRILL: Taps Keen-Summit as Real Estate Advisor KONA GRILL: Taps Pachulski Stang as Legal Counsel SEARS HOLDINGS: Wollmuth, Mulder Represent 2 Retirees V E N E Z U E L A VENEZUELA: Oil Exports Fall 17% in May - - - - - ===================================== A N T I G U A A N D B A R B U D A ===================================== LIAT: Barbados Discloses Plan to Sell Shares in Airline ------------------------------------------------------- RJR News reports that the Barbados government has announced plans to sell its shares in the cash strapped regional airline, LIAT Ltd., formerly known as Leeward Islands Air Transport. Prime Minister Mia Mottley confirmed reports that Antigua and Barbuda would be seeking to replace Barbados as the largest shareholder government by seeking to acquire the shares Bridgetown would be outing up for sale, according to RJR News. Speaking in Parliament, Ms. Mottley said the decision was due to the country's economic situation, the report notes. However, she said Barbados would continue to hold minimum shares in the Antigua-based carrier, the report relays. Barbados along with Antigua and Barbuda, Dominica Grenada and St. Vincent and the Grenadines are the main shareholders of the airline that employs over 600 people and operates 491 flights weekly across 15 destinations, the report adds. About LIAT LIAT Ltd., formerly known as Leeward Islands Air Transport or LIAT, is an airline headquartered on the grounds of V. C. Bird International Airport in Antigua. It operates high-frequency inter-island scheduled services serving 15 destinations in the Caribbean. The airline's main base is VC Bird International Airport, Antigua and Barbuda, with bases at Grantley Adams International Airport, Barbados and Piarco International Airport, Trinidad and Tobago. The airline is owned by seven Caribbean governments, with three being the major shareholders: Barbados, Antigua & Barbuda and St. Vincent and the Grenadines along with Dominica(94.7 %); other Caribbean governments, private shareholders and employees (5.3%). In the last few years, LIAT has been challenged with financial difficulties, often needing additional funding as the airline dealt with the high cost of operations. In November 2016, the Barbadosgovernment defended LIAT's operations, even as opposition legislators called for a cessation of the business. In early 2015, LIAT offered early retirement packages to employees in efforts to downsize. In 2014, LIAT knew it had to deal with unprofitable routes to make operations viable. In the third quarter of 2013, the airline's top management was shaken, with news Chief Executive Officer Captain Ian Brunton's sudden resignation. LIAT's current chief executive officer is Julie Reifer-Jones, chairman is Jean Holder, and chief financial officer is Rojer Inglis. Dr. Ralph Gonsalves, prime minister of St. Vincent & the Grenadines, serves as chairman of LIAT shareholders. ================= A R G E N T I N A ================= SALTA: Fitch Affirms B Issuer Default Ratings, Outlook Negative --------------------------------------------------------------- Fitch Ratings has affirmed the Province of Salta's Long-Term Foreign and Local Currency Issuer Default Ratings at 'B' with a Negative Rating Outlook. Fitch has also affirmed both the 'B' long-term ratings on Salta's 9.5% senior secured notes for USD185 million due March 16, 2022 and 9.125% senior unsecured notes for USD350 million due July 7, 2024. Salta is rated at the same level as Argentina's sovereign rating (B/Negative). Salta's 'B' IDRs factor its 'vulnerable' risk profile resulting from structural country weaknesses that affect Argentine local and regional governments, including a weak institutional framework and fiscal regime and a macroeconomic context of high inflation and currency depreciation that create risks to revenue, expenditure and liquidity performance. KEY RATING DRIVERS Revenue Robustness Assessed as Weaker The Province of Salta is located in the northwest region of Argentina with a small and weak local economy concentrated in the tertiary sector with an important weight from social services and the public sector. The primary sector is also important and includes hydrocarbon extraction. The province is the eighth most populated out of 24 jurisdictions with its GDP contributing to an estimated 2% of the country's GDP. Salta has a low GDP per capita and a higher than average percentage of population with unsatisfied basic needs, which in turn translates into structurally high infrastructure needs. Relative to Argentine peers Salta's revenue structure has higher than average dependence on federal transfers from the federal co-participation tax-sharing regime, with around 67.4% of its operating revenues being automatic transfers from the co-participation scheme. These automatic transfers come from a B/Negative sovereign counterparty with negative economic growth prospects currently under economic recession; in 2018 national GDP dropped 2.5% and is expected to decrease around 1.7% in 2019, which was factored into Fitch's revenue robustness assessment. Co-participation transfers are an important determinant of fiscal performance for Argentine LRGs as on average these represent around 45% of consolidated provincial operating revenues. Although there have been recent agreements between the nation and provinces to address the structural imbalances between revenue and expenditure decentralization, a profound comprehensive reform of the co-participation law is still pending. Revenue Adjustability Assessed as Weaker Provincial jurisdictions have the legal autonomy to set tax rates on local revenues that mainly consist on Turnover Tax (Ingresos Brutos) and Stamps (Sellos). However, the affordability of additional taxation is perceived as low, considering Salta's weak economy and the legal pledge in place from the province's adherence to the Fiscal Pact between the nation and provinces. The Pact requires adhered provinces to gradually lower the maximum tax rates on ingresos brutos in an attempt to partially relieve the country's high tax burden. Although the province also has some hydrocarbon royalties linked to the USD they represent a small portion of operating revenues, at around 2.7% in 2018. Other factors impacting revenue dynamics are the current negative macroeconomic context and persistently high inflation that as of March 2019 are causing an 11.7% real term drop in operating revenues compared to the same period of 2018. This reflects that the current macroeconomic context also limits the ability to boost operating revenues. Expenditure Sustainability Assessed as Weaker Argentine provinces have high expenditure responsibilities, including healthcare, education, water, transportation, and other service provisions. The country's fiscal regime is structurally imbalanced regarding revenue-expenditure decentralization and the recent national SBA with the IMF is transferring some additional expenditure weight to the provinces by cutting down subsidies. Another weakness considered is the structurally high inflation in Argentina that challenges expenditure sustainability, given the lagged effect that inflation tends to have on expenditure. During 2018 the province managed to contain real-term operating expenditure through diverse expenditure control policies. However, 2019 expenditure pressures will remain high as Fitch expects inflation will end the year above 40% (down from 47.6% in 2018) and a certain level of real term wage re-composition is expected. According to the 2018 Fiscal Pact amendment, jurisdictions that had an increase in their net current primary expenditure below consumer price growth during fiscal year-2018 will be able to have an increase above the limit imposed by the Federal Fiscal Responsibility Regime during 2019. This weakened the budget balance rules that were set in place, also in the context of an electoral year. Expenditure Adjustability Assessed as Weaker In 2018 Salta's share of operating expenditure/ total expenditure was of around 88%, with staff expenses representing a rigid 56% of total expenses which is deemed high relative to international peers. Salta's leeway or flexibility to cut expenses is viewed as weak relative to international peers, considering that only a low average 10.9% of the province's total expenditure corresponds to capex. Similarly to other Argentine peers, the province has very high infrastructure needs. According to the province increasing capex does not translate into economic growth due to the important infrastructure lag, which also reflects that there is not much flexibility to adjust capex. Liabilities and Liquidity Robustness Assessed as Weaker Limited capital markets have caused a structural reliance on external markets for financing sources. Salta has low debt levels but has a high exposure to currency exchange risk. In 2018 Salta's total debt was of ARS26.3 billion, and around 72% of its direct debt was denominated in USD, unhedged and is mainly composed of issuances in the external and local markets. There are some revenues linked to the USD that partially mitigate FX risk. During 2018 debt grew a nominal 61.3% versus 2017 mainly because of currency depreciation and also due to some new debt acquired with the nation. Regarding Salta's debt maturity profile, there is some refinancing risk towards the medium term as capital maturities peak towards 2022-2024 due the use of bullet and capital balloon payment debt instruments. Market vulnerability remains in Argentina, and there have been no new external market issuances by provinces in 2018 and 2019. Liabilities and Liquidity Flexibility Assessed as Weaker For liquidity, Argentine provinces rely mainly on their own unrestricted cash. The main available tool to cover seasonal cash imbalances are short-term treasury bill issuances, but these have growingly become riskier instruments after 2018 and 2019 interest rate increases in Argentina. The national framework in place regarding liquidity support and funding available to subnationals is perceived by Fitch as weak, also currently high monetary policy rates and the sovereign's external market access affect the entity's refinancing capacity. Debt Sustainability Assessment: 'a' Salta's primary metric of payback (net adjusted debt/operating balance) is expected to remain between 5-9 years in the next three years, resulting in a 'aa' sustainability score , but Fitch revised the final assessment to 'a'. The revision was based on the entity's weak secondary metric score of 'b' from its actual debt service coverage that is expected to remain close to/below 1x between 2019-2021. SCP AND RATING DERIVATION The combination of Salta's 'vulnerable' risk profile and 'a' debt sustainability assessment lead to a Standalone Credit Profile (SCP) of 'b'. There are no additional considerations regarding support from upper tiers or asymmetric additive risk considerations. KEY ASSUMPTIONS Fitch's key assumptions within its base case for the issuer include: -- A real term decrease in taxes and federal transfers in 2019. -- Real-term salary adjustments during 2019. -- A slight recovery in revenue and expenditure moderation towards 2020-2021 if inflation decreases. RATING SENSITIVITIES Salta's ratings are at the same level as the sovereign rating. A higher level of refinancing risk reflected in a higher payback or a weaker coverage ratio could result in a downgrade of Salta's ratings as well as a downgrade from the sovereign rating. Stabilization of the sovereign rating could also stabilize Salta's Rating Outlooks. =========== B R A Z I L =========== BANCO FIBRA: Moody's Alters Outlook on B3 Deposit Rating to Stable ------------------------------------------------------------------ Moody's Investors Service has affirmed Banco Fibra S.A.'s ratings, including its long-term local and foreign-currency deposit rating of B3, its long-term senior unsecured foreign currency debt program rating of (P)B3 and its b3 baseline credit assessment (BCA). The outlook was changed to stable from negative. RATINGS RATIONALE The change in outlook to stable, from negative, on Banco Fibra acknowledges the modest improvements in the bank's profitability, benefiting from lower credit costs and tight control on operating expenses. The stable outlook also reflects Moody's expectation that asset quality will stabilize, though at high levels, as loan origination quality improves with new vintages and with a growing share of loans backed by receivables to mid-sized companies. Despite these credit positive developments, Fibra's capitalization, measured by Moody's as tangible common equity relative to risk weighted assets, remains weak and well below that of other medium-size banks in the system. Fibra's past due loans were essentially flat in 2018, but a 12.8% contraction in total loans caused the problem loan ratio to spike to 8.14%, while the bank continued to write off legacy nonperforming loans. Fibra improved the quality of new loan vintages by targeting increased loan granularity and guarantees, which also allowed the bank to reduce provisioning expenses. Having largely exited the consumer lending business, Fibra's has been focused on higher-margined commercial loans to medium size companies and agribusinesses, with revamped risk management and governance. These efforts should support asset quality metrics positively over the outlook horizon, although the slowly recovering economy may yet affect lending volumes and borrowers' asset quality overall. As of December 2018, Fibra's Moody's core capitalization ratio (TCE/RWA) was a low 3.78%, also reflecting Moody's deduction of most of Fibra's sizable deferred tax assets (DTAs) and the risk weighting of government securities at 100%. Although modest, the capitalization ratio is bound to improve slightly in 2019 as the bank manages to maintain positive profitability and reduce the stock of DTAs. Fibra's ability to generate earnings, which management plans to achieve by focusing on business diversification and customer profitability, is therefore critical to ensure that the bank reduces its balance sheet vulnerability, by rebuilding its core capital and improving its asset quality. The rating affirmation also incorporates Fibra's relatively steady funding profile, as the bank has kept the participation of market funds below 10% of total assets since 2016, while also extending funding duration. In addition, Fibra's funding has become more granular, a credit positive, but most of its deposits are now sourced from brokers, which makes them potentially less stable than core deposits. The bank mitigates funding risks by holding a sizable volume of liquid assets, which equaled to more than 20% of tangible banking assets as of December 2018. While Fibra's funding tenor far exceed its assets, maintaining such a liquidity cushion is costly and hurts its profitability. WHAT COULD CHANGE THE RATING -- DOWN/UP Upward pressure on Fibra's BCA could result from consistent improvement in the bank's profitability and capitalization. Further strengthening of asset risk metrics could also have positive pressure on the bank's BCA. Fibra's ratings could be downgraded if the bank is required to increase provisions as a result of persistent deterioration of asset quality, which could lead to a return of net losses. The weakening of the bank's capital position would also put downward pressure on its ratings. METHODOLOGY USED The principal methodology used in these ratings was Banks published in August 2018. Banco Fibra S.A., is headquartered in São Paulo, Brazil, and reported BRL6.5 billion in assets and BRL1.0 billion in shareholders' equity as of 31 December 2018. LIST OF AFFECTED RATINGS AND ASSESSMENTS The following ratings and assessments of Banco Fibra S.A. were affirmed: - Long-term global local currency deposit rating of B3, stable outlook - Short-term global local currency deposit rating of Not Prime - Long-term global foreign currency deposit rating of B3, stable outlook - Short-term global foreign currency deposit rating of Not Prime - Senior Unsecured Medium-Term Note Program of (P)B3 - Other Short Term of (P)Not Prime - Long-term global local currency counterparty risk rating of B2 - Short-term global local currency counterparty risk rating of Not Prime - Long-term global foreign currency counterparty risk rating of B2 - Short-term global foreign currency counterparty risk rating of Not Prime - Long-term Brazilian national scale deposit rating of B2.br - Short-term Brazilian national scale deposit rating of BR-4 - Long-term Brazilian national scale counterparty risk rating of Ba2.br - Short-term Brazilian national scale counterparty risk rating of BR-4 - Baseline credit assessment of b3 - Adjusted baseline credit assessment of b3 - Long-term counterparty risk assessment of B2(cr) - Short-term counterparty risk assessment of Not Prime(cr) Outlook Actions: Outlook, changed to Stable from Negative =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Paid US$14.3 Billion of Foreign Debt -------------------------------------------------------- Dominican Today reports that the Dominican Government said it has paid US$14.3 billion of foreign debt service in the last seven years. About US$8.9 billion of the paid debt correspond to capital maturities and US$5.4 billion to commissions and interest, according to Dominican Today. In a press release, the Dominican Finance Ministry said it carried out "prudent and responsible debt management, focused on ensuring the maintenance of macroeconomic stability and the flow of resources to meet social investment in education and health, as well as infrastructure," the report notes. "The responsibility to cover the maturities of capital and interests of debts contracted in previous governments has contributed to maintaining macroeconomic stability and stability in the exchange rate," it said, the report relays. It adds that the State has not only focused on the proper fulfillment of its commitments for repayments, "but also to ensure that financing benefits all Dominicans through the quality of spending," the report adds. As reported in the Troubled Company Reporter-Latin America on June 5, 2019, Dominican Today said that in the first quarter, retail sustained one of the most intense slowdowns of all Dominican economic sectors, from a 7.8% growth from January to March 2018, to just 2.6% this year, Dominican Republic's Central Bank revealed. National Merchants and Entrepreneurs Council (Conacerd) vice president Antonio Cruz said the result, which denotes a drop in demand in that period, is explained by a smaller amount of money circulating in the economy, according to Dominican Today. On June 3, TCRLA reported that Fitch Ratings has assigned a 'BB-' rating to Dominican Republic's DOP50.523 billion notes (equivalent to USD1 billion ), maturing 2026 and to the USD1.5 billion bonds maturing 2049. [*] DOMINICAN REPUBLIC: Ports Eyed by Dubai's Sultan ---------------------------------------------------- Dominican Today reports that Dominican Republic's economic growth and strategic geographic location were the main topics in the speech by Dubai Sultan Ahmed bin Sulayem, in a luncheon to mark the National Business Council's (Conep) 56th anniversary. "Growth, performance inspires us and encourages us to have more confidence as foreign investors," he said, according to Dominican Today. The report notes that he said he's willing to contribute so that the Dominican Republic can take more advantage of its ports because the country has the potential to become a platform or a logistics hub for all regional and global markets. "We have the opportunity to develop RD as a central. But we have to adapt to technology, which is a key element to have more power," the report relays. The Sultan stressed that the current trade war between the United States and China and technological challenges can become opportunities for the country, the report notes. In that regard, Conep president, Pedro Brache, stressed that bin Sulayem is one of the investors who has "wagered more decisively on the country in recent years," the report adds. As reported in the Troubled Company Reporter-Latin America on June 5, 2019, Dominican Today said that in the first quarter, retail sustained one of the most intense slowdowns of all Dominican economic sectors, from a 7.8% growth from January to March 2018, to just 2.6% this year, Dominican Republic's Central Bank revealed. National Merchants and Entrepreneurs Council (Conacerd) vice president Antonio Cruz said the result, which denotes a drop in demand in that period, is explained by a smaller amount of money circulating in the economy, according to Dominican Today. On June 3, TCRLA reported that Fitch Ratings has assigned a 'BB-' rating to Dominican Republic's DOP50.523 billion notes (equivalent to USD1 billion ), maturing 2026 and to the USD1.5 billion bonds maturing 2049. ================= G U A T E M A L A ================= CEMENTOS PROGRESO: Fitch Affirms LT IDR & Unsec. Notes at BB+ ------------------------------------------------------------- Fitch Ratings has affirmed Cementos Progreso, S.A.'s (Cempro) Long-Term Foreign Currency and Local Currency Issuer Default Ratings and senior unsecured notes due in 2023 at 'BB+'. The Rating Outlook on the Foreign Currency IDR is Negative, while the Rating Outlook on the Local Currency IDR is Stable. The Stable Outlook on the company's LC IDR reflects Cempro's dominant market position, low cost structure, and sound financial profile characterized by strong credit metrics and robust projected FCF. Further factored is Cempro's increasing access to local currency debt financing which has allowed the company to maintain a higher proportion of local currency debt in its capital structure than anticipated when the company issued the 2023 notes. Cempro's FC IDR and Rating Outlook are constrained by Guatemala's 'BB+' Country Ceiling. As a result, a downgrade of Guatemala's (BB/Negative) Country Ceiling could result in a downgrade of Cempro's FC IDR and of the 2023 notes given a lack of material exports, operations abroad and/or committed lines of credit. KEY RATING DRIVERS Dominant Market Position: Cempro's market share in Guatemala, as measured by volume, has remained stable since 2007 at about 80%. The company's solid market position is supported by its retail network of independent distributors that allows the company to serve a highly fragmented consumer base. Barriers to entry are high in Guatemala, as Cempro maintains an exclusive relationship with about 80% of these distributors. About 80% of the cement sold by the company is sold in bags, which gives it a relatively strong pricing position. High Profitability: Medium-term EBITDA margins should remain robust at around 40%, mainly due to the startup of Cempro's San Gabriel cement plant. This plant is located on the opposite side of Guatemala City from the company's existing plant. By having plants on both sides of the city, the company should be able to reduce its transportation costs significantly, which further improves its competitiveness in the market. This plant, which is expected to begin cement shipments efficiently by YE 2019, will solidify the company's low cost structure and increase barriers to entry. With this new plant Cempro's capacity increased to 5.1 million tons from 2.8 million tons. Leverage Expected to Decline: Fitch estimates that Cempro's net leverage will approach 1.5x within two years following the completion of the access road to its new plant, which is expected to be completed during 3Q19. This compares with 2.0x as of first-quarter 2019. Road construction slowed in 2018 due to delays in the acquisition of rights of way, which Cempro has now secured. The company generated USD253 million of operating EBITDA in the LTM ended March 31, 2019 unchanged from a year earlier. This compares with debt of USD565 million in first-quarter 2019, slightly below the USD583 million registered a year ago. Solid FCF Expected: Cempro's total capex, excluding capitalized interest, should decline significantly in 2020 as the company completes its USD1,056 million multiyear investment plan for construction of the San Gabriel plant. Fitch estimates modest expansion capex and dividends averaging USD70 million per year will result in recurring positive FCF of about USD80 million per year in 2021 and beyond. Robust positive FCF should support net debt deleveraging to levels below 2.0x over the next two to three years, compared with a projected peak close to 2.5x in 2019 as the company makes the final investments to complete the infrastructure surrounding the plant. Country Constraints: Cempro's performance depends on continued stability and economic development in Guatemala, where the company derives almost all of its revenues. Fitch expects cement demand to maintain annual growth rates in the 3% range, in line with projected GDP growth. Growth expectations are supported by an increasing population, high expected urbanization rates and growing worker remittances. Infrastructure investment from public and private partnerships has accelerated in recent months. Continued traction under the new administration should result in incremental demand for cement. KEY ASSUMPTIONS -- Cement volumes grow mid- to low single digits in 2019 and beyond; -- Prices in USD decline slightly over the rating horizon reflecting increased competition; -- Costs spike in 2019-2020 due to start-up expenses and to lesser extent higher fuel prices before declining because of distribution and other cost efficiencies of the new plant in subsequent years; -- Negative FCF in 2019 of about USD30 million, mostly due to expansion capex, with positive FCF in 2020 and beyond; -- The Guatemalan quetzal depreciates modestly over the next three years. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Cempro's FC ratings are capped at Guatemala's Country Ceiling, limiting positive rating actions; -- An upgrade to the LC IDR is unlikely in the near term, as company's operations and assets are substantially located in Guatemala. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- The FC ratings would be downgraded in case of a downgrade of Guatemala's Country Ceiling. -- A significant deterioration in Guatemala's macroeconomic and business environment; -- Increasing competition from CEMEX; -- Operational efficiency loss resulting in EBITDA margin deterioration; -- Sustained leverage levels above 3.5x on a gross basis or 3.0x on a net basis. LIQUIDITY Sound Liquidity: Cempro's liquidity is strong. This is due to the company's ability to generate cash flow from operations (CFFO) of around USD170 million per year, its low leverage and good access to local bank lending. Additionally, Cempro faces no significant near term maturities and its capex is projected to decline significantly beginning in 2020 as the company completes the road and electricity infrastructure surrounding the San Gabriel plant. The company successfully secured 10-year local currency bank credit agreements in 2016 and has paid down or refinanced short term maturities. Total debt of USD565 million as of first-quarter 2019, consists of amortizing local currency bank debt and USD350 million of notes due 2023. Cash balance was USD41 million as of March 2019. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings of Cementos Progreso, S.A.: -- Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB+'; Outlook Negative; -- Long-Term Local Currency IDR at 'BB+';Outlook Stable; -- Unsecured debt at 'BB+'. =========== M E X I C O =========== MEXICO: President Is Committed to Free Trade -------------------------------------------- The Latin American Herald reports that President Andres Manuel Lopez Obrador said that Mexico was committed to free trade and would try to reach an agreement that avoided a confrontation with the United States at the high-level meeting taking place in Washington. "Free trade is the best thing. Not imposing tariffs, duties, not closing ourselves off," Lopez Obrador in response to a question from a reporter, according to The Latin American Herald. Foreign Relations Secretary Marcelo Ebrard is meeting in the US capital with Vice President Mike Pence and Secretary of State Mike Pompeo, the report notes. Lopez Obrador said he was still "optimistic" that a deal would be reached with the United States to avoid the imposition of tariffs, the report says. Mexico wants to maintain "the relationship of friendship" with the United States once the tariff conflict is resolved, the president said, the report discloses. President Donald Trump said his administration would impose escalating tariffs on Mexico unless that country took aggressive steps to stop the flow of illegal migrants from Central America, the report relays. Trump said in a Twitter post that he would impose a 5 percent tariff starting June 10 on all Mexican imports unless the neighboring country halted the northward flow of US-bound migrants, the report notes. Lopez Obrador said he preferred dialogue and avoiding isolation to the alternatives -- a trade war or preventing a conflict and no longer communicating, the report discloses. "We want to maintain our unity with the people and government of the United States. And maintain good relations with President Donald Trump," the president said, the report says. In response to a question from reporters, Lopez Obrador said Mexico had not ruled out expanding trade relations with China and Russia, but he noted that it was still important to "cultivate" the relationship with the United States, the report relays. Lopez Obrador said Washington would cross the line in the conflict if it interfered with the "sovereignty and dignity" of the Mexican people, the report notes. Trump said the US government would raise the tariffs on Mexican goods each month until the rate hit 25 percent in October unless the Lopez Obrador administration took action to stop the flow of migrants, the majority of them from Central America, to the United States, the report relays. "The Tariff will gradually increase until the Illegal Immigration problem is remedied," the US president said, the report adds. As reported in Troubled Company Reporter-Latin America on May 5, 2016, Moody's de Mexico upgraded State of Mexico's issuer ratings to Ba1 (Global Scale, local currency) and A1.mx (Mexico National Scale) from Ba2 and A2.mx, respectively. The outlook on issuer ratings was changed to negative. This concludes the review that began on April 1, 2016, when the rating was put under review with uncertain direction. ===================== P U E R T O R I C O ===================== ARQUIDIOCESIS DE SAN JUAN: Bid for Stay Pending Appeal Partly OK'd ------------------------------------------------------------------ Bankruptcy Judge Edward A. Godoy grants in part Debtor Arquidiocesis de San Juan de Puerto Rico's motion for a stay pending appeal. Bankruptcy Rule 8007 governs motions for stay pending an appeal. Courts consider the traditional four-part standard applicable to preliminary injunctions. The Court must consider "(1) whether the applicant has made a strong showing of success on the merits; (2) whether the applicant will be irreparably harmed absent injunctive relief; (3) whether issuance of the stay will injure other parties; and (4) where the public interest lies." As to the first prong, most if not all of the arguments raised by the Debtor in its motion were considered and rejected by the Court in its adjudication of the state court plaintiff's motion to dismiss. Nevertheless, the Court acknowledges that this case is sui generis in that the Debtor is an entity whose rights derive ultimately from the Treaty of Paris of 1898. This is not a typical Debtor incorporated under state law. Even the case law cited by the state court plaintiffs in their motion to dismiss is not entirely on point, since those cases concern churches incorporated under state law. Thus, the Court finds that the Debtor meets the first factor. Regarding the second factor, the Court also finds in favor of the Debtor. The testimonies of Father Saenz Ramos and Ms. Barroso, both of whom the Court found credible, detailed the financial harm the attachments caused the Debtor and would cause again if no stay were put in place. Turning to the third factor, the Court first notes that the state court plaintiffs' counsel informed the court at the hearing that they are currently unable to proceed with the execution of the pre-judgment attachment orders for reasons unrelated to this bankruptcy case. If this is the case, then the imposition of a stay pending appeal would cause no further harm. In any event, the Court finds that any harm to the state court plaintiffs from the issuance of stay can be minimized by crafting a narrowly stay order. The Court, therefore, finds that the third prong also favors the Debtor. Finally, as to the fourth factor, the Court is persuaded that staying the case until the appeal is decided by BAP is in the public's interest. The Court, therefore, imposes a limited stay on any attempt to attach any debtor-in-possession bank account(s) identified in the Debtor's monthly operating reports until the appeal is decided by BAP. A copy of the Court's Opinion and Order dated April 25, 2019 is available at https://tinyurl.com/y2tyrt89 from Pacermonitor.com at no charge. About Arquidiocesis de San Juan de Puerto Rico Arquidiocesis de San Juan de Puerto Rico -- http://www.arqsj.org/ -- is an unincorporated religious association in San Juan, Puerto Rico. Arquidiocesis de San Juan de Puerto Rico, a/k/a Iglesia Catolica Apostolica Y Romana, Arquidiocesis De San Juan De Puerto Rico, filed a petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 18-04911) on Aug. 29, 2018. In the petition signed by Father Alberto Arturo Figueroa Morales, vicar general, the Debtor estimated $10 million to $50 million in assets and liabilities. Carmen D. Conde Torres, Esq., at C. Conde & Assoc., is the Debtor's counsel. J.C. PENNEY: Moody's Cuts CFR to Caa1 & Sr. Unsec. Notes to Caa3 ---------------------------------------------------------------- Moody's Investors Service downgraded Penney (J.C.) Company, Inc. Corporate Family Rating to Caa1 from B3 and its Probability of Default rating to Caa1-PD from B3-PD. Moody's also downgraded Penney (J.C.) Corporation, Inc.'s senior secured ABL Revolving Credit Facility to B2 from Ba3, its senior secured term loan and senior secured notes to B3 from B1, its secured second lien notes downgraded to Caa2 from Caa1 and its senior unsecured notes were downgraded to Caa3 from Caa2. The rating outlook is stable. The company's SGL-1 rating has been downgraded to SGL-2. "J.C. Penney's continues its aggressive liquidation of inventory as it works to recapture customers in a very competitive environment," Moody's Vice President Christina Boni stated. "Further pressure on sales performance in 2019 is expected to result in leverage remaining elevated" Boni further added. Downgrades: Issuer: Penney (J.C.) Company, Inc. Probability of Default Rating, Downgraded to Caa1-PD from B3-PD Speculative Grade Liquidity Rating, Downgraded to SGL-2 from SGL-1 Corporate Family Rating, Downgraded to Caa1 from B3 Issuer: Penney (J.C.) Corporation, Inc. Senior Secured Term Loan, Downgraded to B3 (LGD3) from B1 (LGD3) Senior Secured ABL Revolving Credit Facility, Downgraded to B2 (LGD3) from Ba3 (LGD2) Senior Secured Regular Bond/Debenture, Downgraded to B3 (LGD3) from B1 (LGD3) Senior Secured 2nd Lien Regular Bond/Debenture, Downgraded to Caa2 (LGD5) from Caa1 (LGD4) Senior Unsecured Medium-Term Note Program, Downgraded to (P)Caa3 from (P)Caa2 Senior Unsecured Regular Bond/Debenture, Downgraded to Caa3 (LGD5) from Caa2 (LGD5) Senior Unsecured Shelf, Downgraded to (P)Caa3 from (P)Caa2 Outlook Actions: Issuer: Penney (J.C.) Company, Inc. Outlook, Remains Stable RATINGS RATIONALE J.C. Penney's credit profile is supported by the company's good liquidity with approximately $1.75 billion - $171 million of cash and approximately $1.6 billion of undrawn revolving credit commitments as of May 4, 2019. Moody's expects the company will generate minimal free cash flow in fiscal 2019 as the company works to improve its competitive position. Debt/EBITDA is estimated to be in excess of 7 times at fiscal year-end 2019. The need to reduce inventory levels and connect more effectively with its core customer suggests that leverage levels will remain elevated as the company works with new leadership to define and execute its strategy to return to stabilizing its market position and improving profitability. The credit is also constrained by the structural challenges facing the department store segment, which include market share losses to off-price retailers, and the cost of investments associated with managing consumer preferences for online shopping. The stable rating outlook assumes that J.C. Penney will continue to maintain good liquidity as its moves toward stabilizing both sales and operating margins. Ratings could be upgraded if the company maintains a good liquidity profile and has consistent growth in sales and operating earnings indicating its business initiatives are succeeding. Quantitatively, the company could be upgraded if Debt/EBITDA was reduced and sustained below 6.0x. Ratings could be downgraded if credit metrics were to weaken such that company's good liquidity profile were to erode. J.C. Penney Company, Inc. is the holding company of J.C. Penney Corporation, Inc., a U.S. department store operator headquartered in Plano, Texas, with about 860 locations in the United States and Puerto Rico. It also operates a website, www.jcp.com. Revenues are approximately $11.9 billion. KONA GRILL: Taps Keen-Summit as Real Estate Advisor --------------------------------------------------- Kona Grill, Inc., received approval from the U.S. Bankruptcy Court for the District of Delaware to hire Keen-Summit Capital Partners LLC as its real estate advisor. The firm will provide lease restructuring services to the company and its affiliates and will be compensated pursuant to the terms of this fee structure: (1) Lease Modification. Upon full execution of the lease modification agreement, the Debtors will pay the firm on a per property basis, $2,000, plus 6 percent of "savings." (2) Early Termination Right. For each acceptable lease modification agreement that includes an early termination right/kick-out right, the Debtors will pay an additional fee of $750 per modification. (3) Lease Termination. Upon full execution of the lease modification agreement, the Debtors will pay the firm, on a per property basis, 5 percent of "savings." Rejecting a lease in a bankruptcy situation does not trigger a transaction fee. Matthew Bordwin, managing director of Keen-Summit, disclosed in court filings that his firm is "disinterested" as defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Matthew Bordwin Keen-Summit Capital Partners LLC 1 Huntington Quadrangle, Suite 2C04 Melville, NY 11747 Telephone: (646) 381-9202 Email: mbordwin@Keen-Summit.com About Kona Grill Kona Grill, Inc. -- https://www.konagrill.com/ -- owns and operates 27 casual dining restaurants in 18 states, as well as Puerto Rico, serving contemporary American favorites, sushi, and alcoholic beverages throughout the United States and Puerto Rico. Kona Grill, Inc., and its subsidiaries sought protection under Chapter 11 of the Bankruptcy Code (Bankr. Del. Lead Case No. 19-10953) on April 30, 2019. As of Dec. 31, 2018, the Debtors' total assets is $53,613,000 and total liabilities of $74,049,000. The petition was signed by Christopher J. Wells, chief restructuring officer. The Debtors tapped Pachulski Stang Ziehl & Jones LLP as counsel; Piper Jaffray as investment banker; Alvarez & Marsal North America, LLC as restructuring advisor and Epiq Corporate Restructuring, LLC, as claims and noticing agent. KONA GRILL: Taps Pachulski Stang as Legal Counsel ------------------------------------------------- Kona Grill, Inc., received approval from the U.S. Bankruptcy Court for the District of Delaware to hire Pachulski Stang Ziehl & Jones LLP as its legal counsel. The firm will provide services to the company and its affiliates in connection with their Chapter 11 cases, which include legal advice regarding their powers and duties under the Bankruptcy Code and the preparation of a bankruptcy plan. The firm's hourly rates are: Partners $725 - $1,395 Of Counsel $650 - $1,095 Associates $575 - $695 Paraprofessionals $325 - $425 Pachulski received payments from the Debtors in the amount of $520,552.61 during the year prior to the petition date. James O'Neill, Esq., a partner at Pachulski, disclosed in court filings that his firm is "disinterested" as defined in Section 101(14) of the Bankruptcy Code. In accordance with Appendix B-Guidelines for reviewing fee applications filed by attorneys in larger Chapter 11 cases, Mr. O'Neill disclosed that his firm has not agreed to a variation of its standard or customary billing arrangements for its employment with the Debtors, and that no Pachulski professional has varied his rate based on the geographic location of the Debtors' bankruptcy cases. Pachulski represented the Debtors in the 12 months prior to the petition date. The billing rates and material financial terms for the pre-bankruptcy period remain the same as the post-petition period, according to Mr. O'Neill. The attorney also disclosed that the Debtors have already approved the firm's budget and staffing plan for the first 13 weeks of the Debtors' bankruptcy cases. Pachulski can be reached through: Jeremy V. Richards, Esq. James E. O'Neill, Esq. John W. Lucas, Esq. Pachulski Stang Ziehl & Jones LLP 919 N. Market Street, 17th Floor Wilmington, DE 91899 Tel: (302) 652-4100 Fax: (302) 652-4400 Email: jrichards@pszjlaw.com jo'neill@pszjlaw.com jlucas@pszjlaw.com About Kona Grill Kona Grill, Inc. -- https://www.konagrill.com/ -- owns and operates 27 casual dining restaurants in 18 states, as well as Puerto Rico, serving contemporary American favorites, sushi, and alcoholic beverages throughout the United States and Puerto Rico. Kona Grill, Inc., and its subsidiaries sought protection under Chapter 11 of the Bankruptcy Code (Bankr. Del. Lead Case No. 19-10953) on April 30, 2019. As of Dec. 31, 2018, the Debtors' total assets is $53,613,000 and total liabilities of $74,049,000. The petition was signed by Christopher J. Wells, chief restructuring officer. The Debtors tapped Pachulski Stang Ziehl & Jones LLP as counsel; Piper Jaffray as investment banker; Alvarez & Marsal North America, LLC as restructuring advisor and Epiq Corporate Restructuring, LLC, as claims and noticing agent. SEARS HOLDINGS: Wollmuth, Mulder Represent 2 Retirees ----------------------------------------------------- Pursuant to Rule 2019 of the Federal Rules of Bankruptcy Procedure, the law firms of Wollmuth, Maher, & Deutsch LLP and Michael M. Mulder provided notice that they are representing these creditors in the Chapter 11 cases of Sears Holdings Corp., et al.: (1) Richard Bruce 145 S. York St. Unit 228 Elmhurst, IL 60126 Creditor and Sears retiree (2) Ronald Olbrysh 624 E. Central Ave Lombard, IL 60148 Creditor and Sears retiree On or about May 15, 2019, Michael M. Mulder was retained to represent the Retirees of Sears Holding Corporate. On or about May 15, 2019, Messrs. Bruce and Olbrysh retained Wollmuth as local co-counsel. As of May 28, 2019, the Firms only represent Messrs. Bruce and Olbrysh in the Chapter 11 Case. The Firms can be reached at: WOLLMUTH MAHER & DEUTSCH LLP James N. Lawlor Cassandra Postighone 500 Fifth Avenue New York, New York 10110(212) 382-3300 -and -- THE LAW OFFICES OF MICHAEL M.MULDER Michael M. Mulder Elena N. Liveris 1603 Orrington Avenue, Suite 600 Evanston, Illinois 60201 Telephone: 312-263-0272 About Sears Holdings Sears Holdings Corporation (NASDAQ: SHLD) -- http://www.searsholdings.com/-- began as a mail ordering catalog company in 1887 and became the world's largest retailer in the 1960s. At its peak, Sears was present in almost every big mall across the U.S., and sold everything from toys and auto parts to mail-order homes. Sears claims to be is a market leader in the appliance, tool, lawn and garden, fitness equipment, and automotive repair and maintenance retail sectors. Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 US stores between them. Kmart emerged in 2005 from its own bankruptcy. Unable to keep up with online stores and other brick-and-mortar retailers, a long series of store closings has left it with 687 retail stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands as of mid-October 2018. The Company employs 68,000 individuals, of whom 32,000 are full-time employees. As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total assets, $11.33 billion in total liabilities and a total deficit of $4.40 billion. Unable to cover a $134 million debt payment due Oct. 15, 2018, Sears Holdings Corporation and 49 subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15, 2018. The Hon. Robert D. Drain is the case judge. The Debtors tapped Weil, Gotshal & Manges LLP as legal counsel; M-III Partners as restructuring advisor; Lazard Freres & Co. LLC as investment banker; DLA Piper LLP as real estate advisor; and Prime Clerk as claims and noticing agent. The U.S. Trustee for Region 2 appointed nine creditors, including the Pension Benefit Guaranty Corp., and landlord Simon Property Group, L.P., to serve on the official committee of unsecured creditors. The committee tapped Akin Gump Strauss Hauer & Feld LLP as legal counsel; FTI Consulting as financial advisor; and Houlihan Lokey Capital, Inc., as investment banker. ================= V E N E Z U E L A ================= VENEZUELA: Oil Exports Fall 17% in May -------------------------------------- MecroPress, citing Reuters, reports that Venezuelan oil exports fell by 17% in May compared to April, due to the difficulty to sell barrels of heavy crude oil that US refiners used to buy and process before the sanctions imposed on the Nicolas Maduro government. According to documents published by the state company and data from Refinitiv Eikpn, this harsh blow to the Venezuelan oil company is due to the imposition of sanctions by the United States on PDVSA, which has forced Venezuela to empty its crude inventories since the end of January, MecroPress notes. However, these inventories allowed the company to maintain exports around 1 million bpd over the next three months, despite the measures, MecroPress relays. According to the British agency, during May PDVSA sent a total of 33 shipments of crude oil and fuel, mainly to Asian destinations. Being the Russian oil company Rosneft, which takes the majority of oil deliveries as reimbursement of billions of dollars in loans to Venezuela, the report relays. According to the data, Europe took 8% of the total, the report says. The decline in Venezuela's crude oil exports is the main reason why the US refineries have recently struggled to find heavy oil, causing an impact on the prices of qualities such as the Maya of Mexico, the report discloses. To dilute the extra heavy oil, Venezuela has imported about 190,000 bpd of refined products such as heavy naphtha, as well as gasoline, diesel and liquefied petroleum gas, products that PDVSA has stopped producing in recent years, the report notes. Most of the fuel loads have been supplied by Rosneft itself, Reliance Industries of India, Repsol and the unit of China National Petroleum Corp, PetroChina, the report says. ********* 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 2019. 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 * * *