/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/190705.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, July 5, 2019, Vol. 20, No. 134 Headlines B A H A M A S BAHAMAS: Account Deficit Widened to 16.4 % of GDP in 2018, IMF Says B A R B A D O S BARBADOS: Moody's Raises Issuer Ratings to Caa1, Outlook Stable B E R M U D A WEATHERFORD INT'L: Files Voluntary Chapter 11 Bankruptcy Petition WEATHERFORD INT'L: Obtains Court Approval to Access DIP Financing B O L I V I A BANCO DE CREDITO BOLIVIA: Fitch Assigns BB- LT IDRs, Outlook Neg. B R A Z I L GENERAL SHOPPING: Fitch Lowers IDRs to CCC-; Off Watch Negative D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Convenes Foreign Envoys to Defend Tourism [*] DOMINICAN REPUBLIC: Passport Becomes 'Less Powerful' E C U A D O R ECUADOR: Gets $300 Million IDB Loan for Fiscal Stability M E X I C O GRUPO IDESA: S&P Cuts ICR to 'CCC' on Increased Refinancing Risk P U E R T O R I C O MONTE IDILIO: Case Summary & 3 Unsecured Creditors - - - - - ============= B A H A M A S ============= BAHAMAS: Account Deficit Widened to 16.4 % of GDP in 2018, IMF Says ------------------------------------------------------------------- On June 3, 2019, The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with The Bahamas on June 3, 2019. Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. In this particular case, the discussion included the Financial System Stability Assessment (FSSA) of The Bahamas. Via the consultations, IMF noted that the Bahamas real GDP expanded by 1.6 percent in 2018, up from 0.1 percent in 2017. Economic activity was supported by tourism, while foreign investment projects continued to provide the impetus for construction sector activity. The consumer price index (CPI) increased by 2.2 percent on average in 2018 due mainly to the Value Added Tax (VAT) rate increase from 7.5 to 12 percent in July 2018. Unemployment remains high, at 10.7 percent in November 2018, as employment creation has lagged labor force growth. The current account deficit widened to 16.4 percent of GDP in 2018, reflecting higher oil prices and imports associated with the conclusion of a large FDI project. The budget deficit narrowed to 3.4 percent of GDP in FY2017/18, down from 5.5 percent a year earlier. Central government debt increased to 63.3 percent of GDP in FY2017/18 from 54.4 percent in FY2016/17. The banking system is well capitalized, but credit to the private sector continued to contract in 2018, even if at a more moderate rate. Banks have improved their balance sheet quality and average non-performing loans (NPLs) declined from its peak of 15.4 percent in 2013 to 9.1 percent in 2018. The financial system is resilient to current stability threats. Growth is projected to reach 1.8 percent in 2019 before converging to its potential of 11/2 percent in the medium term. The increase in inflation is projected to have been temporary. Domestic bottlenecks and lagging economic diversification constrain medium-term growth, and unemployment is projected to decline only gradually. External accounts are expected to strengthen over the medium-term, backed by high tourism receipts, fiscal consolidation and lower oil prices, and the current account deficit is projected to converge to 5 percent of GDP. Risks to global growth, particularly in key trading partners, have increased. Slowing external demand or a tightening of financial conditions in key advanced economies could adversely affect growth prospects. Vulnerability to hurricanes and climate change remains high. Domestically, reform momentum could stall delaying fiscal consolidation and the implementation of competitiveness-enhancing reforms. In the international sector, reputational risks could intensify despite the recent strengthening of regulatory and transparency standards, possibly challenging existing business models. Executive Board Assessment Executive Directors welcomed the Bahamas' strengthening economic activity and the prospect of continued growth, underpinned by prudent policies and comprehensive structural reforms. At the same time, Directors noted the still high unemployment rate, rising public debt, and risks associated with external imbalances. They underscored the need to rebuild policy buffers, safeguard financial stability, and further enhance resilience to natural disasters. Directors welcomed the decisive steps to consolidate the fiscal position and the authorities' commitment to fiscal sustainability and macro-financial stability. They particularly welcomed the enactment of the Fiscal Responsibility Law, noting that its effective implementation would bolster policy credibility and ensure durable gains from fiscal consolidation. Directors encouraged steps to further strengthen public financial management systems, tighten expenditure control, and operationalize the fiscal council as planned. They also saw value in a comprehensive review of the tax regime to enhance its efficiency and progressivity, including by reducing distortions and other preferential treatment. Directors stressed the importance of advancing structural reforms to boost competitiveness and unlock the economy's potential for high and inclusive growth. In view of the planned accession to the WTO, they recommended prioritizing reforms that tackle high energy costs, improve access to credit, and address skill mismatches in the labor market. Lowering the cost of doing business would help attract needed foreign direct investment. Directors noted that significant progress has been made in implementing the 2013 FSAP recommendations, and that the overall banking system remains resilient. They encouraged further efforts to revive credit growth, resolve nonperforming loans, and strengthen supervision of credit underwriting. To this end, they supported developing a real estate price index and operationalizing the credit bureau. Directors welcomed ongoing efforts to strengthen the central bank's recovery and resolution powers, as well as its governance and independence. They highlighted the need to complete the legislative reform of the banking resolution framework, improve governance of public asset management companies and state-controlled financial institutions, and address remaining deficiencies in the AML/CFT framework. Directors looked forward to the swift implementation of the new framework for the international sector aimed at enhancing its transparency and monitoring. They encouraged the Bahamas authorities to remain vigilant against potential spillovers into the domestic financial system from the unification of banking license regimes. Directors also welcomed the authorities' initiatives to advance financial inclusion while emphasizing the need to proceed with caution on the issuance of a central bank digital currency, mindful of possible risks to financial stability. Directors welcomed the recent subscription to the enhanced General Data Dissemination System. They looked forward to further progress in improving the availability and quality of economic data. =============== B A R B A D O S =============== BARBADOS: Moody's Raises Issuer Ratings to Caa1, Outlook Stable --------------------------------------------------------------- Moody's Investors Service upgraded Barbados' foreign and local currency issuer ratings to Caa1 from Caa3, affirmed the foreign currency senior unsecured bond rating at Caa3, and maintained the stable outlook. The rating actions reflect the following considerations: (1) The material improvement in Barbados' fiscal and debt metrics, and reduced susceptibility to event risk, following the restructuring of its local currency debt (2) The expectation that the improving policy framework and on-going fiscal and structural adjustment will place government debt on a downward trajectory (3) Alongside the unresolved external debt restructuring which supports maintaining the Caa3 rating on outstanding foreign currency bonds The stable outlook balances its expectations of continued improvement in the government's fiscal performance and debt metrics against the risk of policy slippage and implementation challenges, facing the structural reform agenda. The long-term foreign currency bond ceiling is changed to B2, while the short-term foreign currency bond ceiling is unchanged at NP. The long-term foreign currency deposit ceiling is changed to Caa2, while the short-term foreign currency deposit ceiling remains at NP. The long-term local currency bond and deposit ceilings are changed to B1. RATINGS RATIONALE RATIONALE FOR THE UPGRADE OF ISSUER RATINGS TO Caa1 With the completion of Barbados' local currency debt restructuring (representing 80% of the government's debt stock), and expectation of a resolution in due course of its privately-held foreign currency debt restructuring (representing a further 12% of outstanding debt), the country's capacity to service its restructured and potential future debt obligations has materially improved. The decision to upgrade Barbados' foreign and local currency issuer ratings to Caa1 signals the improved debt service capacity now and in relation to future issuances. The decision to maintain a Caa3 foreign currency senior unsecured rating signals the losses that private sector holders of outstanding foreign currency bonds can expect. The gap between foreign currency issuer and senior unsecured ratings signals Moody's view that while it is extremely unlikely that the government will choose to issue into the international markets in the near future, were it do so the debt issued would carry a lower risk than the instruments currently subject to restructuring negotiations. FIRST DRIVER: MATERIAL IMPROVEMENT IN BARBADOS FISCAL AND DEBT METRICS, AND REDUCED SUSCEPTIBILITY TO EVENT RISK In November 2018, the government of Barbados completed the restructuring of its stock of local currency debt, and reached agreement with the IMF on a four-year, $290 million Extended Fund Facility (EFF). As a result, Moody's estimates that the stock of government debt fell to 90% of GDP from 101% the year before (excluding debt held by the National Insurance Scheme) -- a material cut, though still to a very high level of indebtedness. The debt restructuring has also resulted in a significant cut in the interest burden on the government's budget. Moody's estimates that the government's interest payments more than halved, to 13% of revenue in 2018 from 27% in 2017. In addition, government liquidity risk has significantly improved, reducing Barbados' susceptibility to event risk. The government's financing needs and overall liquidity risks have diminished following the debt restructuring, which has significantly extended the maturity structure of the debt stock. Several years of large fiscal deficits and central bank monetarization of the deficits increased Barbados gross borrowing requirements to nearly 50% of GDP in June 2018, with the majority of maturing principal in short-term paper. Following the debt restructuring, nearly the entire T-bill stock was written down or converted into long-term instruments. At the same time, medium- and long-term instruments had their maturities significantly extended, further reducing rollover risk over the rating horizon. As a result, Barbados' gross borrowing needs are likely to remain very low, at no higher than 5% of GDP, over the next five years. SECOND DRIVER: IMPROVING POLICY FRAMEWORK AND ON-GOING FISCAL AND STRUCTURAL ADJUSTMENT WILL PLACE DEBT BURDEN ON A DOWNWARD TRAJECTORY The government of Barbados has embarked on an ambitious structural reform program, supported by the IMF, which will contribute to improving Barbados' macroeconomic framework and policy effectiveness. Combined with the debt relief, structural reforms will help correct the sovereign's fiscal imbalances and put the country's debt burden on a downward trajectory over the next three to four years. Key to improving fiscal management in Barbados is the stronger oversight and accountability framework for SOE finances and limiting central bank financing to the government. The government now requires SOEs to report their finances on a quarterly basis, and approval of a new central bank law is expect in 2020 as a structural benchmark of the EFF program. In addition, the government is planning a new fiscal rule, which will aim to restrict the magnitude of fiscal deficits the government is able to run and to limit the increase in public debt. This recent turnaround in economic and fiscal policies will contribute to reducing public debt to reach the government's target of 60% of GDP by 2033. The EFF also calls for an increase in the primary surplus to 6.0% of GDP in FY2019, up from 3.4% of GDP in fiscal 2018. The government has implemented a number of revenue enhancing and expenditure measures to reach its primary surplus target. RATIONALE FOR THE AFFIRMATION OF FOREIGN CURRENCY BOND RATING AT Caa3 THIRD DRIVER: UNRESOLVED EXTERNAL DEBT RESTRUCTURING SUPPORTS MAINTAINING Caa3 RATING ON OUTSTANDING FOREIGN CURRENCY BONDS While the government has swiftly been able to reach an agreement on restructuring its local currency debt with domestic creditors, negotiations with external commercial creditors to restructure the stock of foreign currency debt (bonds and commercial loans) have taken longer. In June 2018, the government stopped servicing commercially held foreign currency debt and has been in negotiations with external creditors over the past year. The government made a number of offers to external creditors, along the lines of the exchange offer accepted by domestic creditors and negotiations are still ongoing. While Moody's expects these negotiations to be protracted, it believes that losses to external commercial creditors will ultimately prove to be similar to those incurred by domestic creditors, consistent with the Caa3 rating assigned to outstanding foreign currency bonds. RATIONALE FOR THE STABLE OUTLOOK The stable outlook focuses on the underlying factors supporting the credit rating of Barbados -- rather than specific debt instruments. It therefore balances its expectations of continued improvement in the government's fiscal performance and debt metrics against the risk of policy slippage and implementation challenges, facing the structural reform agenda. Moody's expects the government will maintain its effort to achieve the fiscal targets and structural reform goals of its IMF-supported program. However, there is also a risk of reform fatigue, after several years of fiscal austerity. A weak growth environment, with GDP growth unlikely to exceed 1% by 2020, will also increase the burden of fiscal consolidation through next year. WHAT COULD CHANGE THE RATING-UP The very high level of indebtedness remains a key constraint on the rating. Further upward pressure on issuer ratings would likely only materialize as a result of actions which provided assurance that the debt burden would continue to fall over the coming years. In that regard, successful implementation of the government's ambitious fiscal and structural adjustment offering the prospect of higher medium-term economic growth and improved competitiveness would be helpful, alongside successful implementation and application of the planned fiscal rule. Completion of the foreign currency debt restructuring would likely lead to the foreign currency senior unsecured debt rating moving to the same level as the foreign currency issuer rating. WHAT COULD CHANGE THE RATING-DOWN The rating would come under renewed downward pressure if, the government were to fail to maintain its fiscal adjustment efforts, leading to renewed fiscal deficits and buildup of government debt, which will also renew pressure on the currency peg and increase external vulnerability. GDP per capita (PPP basis, US$): 18,534 (2018 Actual) (also known as Per Capita Income) Real GDP growth (% change): -0.5% (2018 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 0% (2018 Actual) Gen. Gov. Financial Balance/GDP: -0.3% (2018 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -3.5% (2018 Actual) (also known as External Balance) External debt/GDP: 43.9% Level of economic development: Moderate level of economic resilience Default history: At least one default event (on bonds and/or loans) has been recorded since 1983. On June 27, 2019, a rating committee was called to discuss the rating of the Barbados, Government of. The main points raised during the discussion were: The issuer's fiscal or financial strength, including its debt profile, has materially increased. The issuer has become less susceptible to event risks. ============= B E R M U D A ============= WEATHERFORD INT'L: Files Voluntary Chapter 11 Bankruptcy Petition ----------------------------------------------------------------- Weatherford International plc, Weatherford International Ltd., and Weatherford International, LLC (collectively, "Weatherford" or the "Company") on July 1 disclosed that the Company has initiated its previously-announced financial restructuring by commencing voluntary cases under chapter 11 of the U.S. Bankruptcy Code to effectuate its "pre-packaged" Plan of Reorganization (the "Chapter 11 Cases"). The Company's other entities and affiliates are not included in the Chapter 11 Cases. Weatherford also expects to file Bermuda and Irish examinership proceedings (collectively with the Chapter 11 Cases, the "Cases") in the coming months. The comprehensive financial restructuring would significantly reduce the Company's long-term debt and related interest costs, provide access to additional financing and establish a more sustainable capital structure. The Company has received commitments from lenders for $1.75 billion of debtor-in-possession financing (the "DIP Facility"). The proceeds of the DIP Facility will be available to fund the Company's working capital needs throughout the Cases. Additionally, upon exit from bankruptcy the Company will have access to additional financing in the form of (a) an undrawn first lien exit revolving credit facility in the principal amount of up to $1.0 billion, and (b) up to $1.25 billion of new tranche A senior unsecured notes with a five-year maturity. In addition, on emergence from bankruptcy the Company will issue $1.25 billion of new tranche B senior unsecured notes with a seven-year maturity to holders of the Company's existing unsecured notes. BUSINESS AS USUAL The Company has filed "first day" motions to obtain the requisite court authority for the Company to continue operating its businesses and facilities in the ordinary course without disruption to its customers, vendors, partners or employees. The Company is working to complete all necessary milestones and will disclose details regarding planned emergence in due course. Lazard is acting as financial advisor for the Company, Latham & Watkins, LLP as legal counsel, and Alvarez & Marsal as restructuring advisor. Evercore is acting as financial advisor for the group of the Company's senior noteholders and Akin Gump Strauss Hauer & Feld LLP as legal counsel. About Weatherford Weatherford (NYSE: WFT), an Irish public limited company and Swiss tax resident -- http://www.weatherford.com/-- is a multinational oilfield service company providing innovative solutions, technology and services to the oil and gas industry. The Company operates in over 80 countries and has a network of approximately 650 locations, including manufacturing, service, research and development and training facilities and employs approximately 26,000 people. Weatherford reported a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2018, compared to a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2017. As of March 31, 2019, Weatherford had $6.51 billion in total assets, $10.62 billion in total liabilities, and a total shareholders' deficiency of $4.10 billion. * * * Weatherford's credit ratings have been downgraded by multiple credit rating agencies and these agencies could further downgrade the Company's credit ratings. On Dec. 24, 2018, S&P Global Ratings downgraded the Company's senior unsecured notes to CCC- from CCC+, with a negative outlook. Weatherford's issuer credit rating was lowered to CCC from B-. On Dec. 20, 2018, Moody's Investors Services downgraded the Company's credit rating on its senior unsecured notes to Caa3 from Caa1 and its speculative grade liquidity rating to SGL-4 from SGL-3, both with a negative outlook. The Company said its non-investment grade status may limit its ability to refinance its existing debt, could cause it to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest rates of its borrowings. Suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with the Company thereby increasing the need for higher levels of cash on hand, which would decrease the Company's ability to repay debt balances, negatively affect its cash flow and impact its access to the inventory and services needed to operate its business. WEATHERFORD INT'L: Obtains Court Approval to Access DIP Financing ----------------------------------------------------------------- Weatherford International plc, Weatherford International Ltd., and Weatherford International, LLC (collectively, "Weatherford" or the "Company"), one of the largest multinational oilfield service companies providing innovative solutions, technology and services to the oil and gas industry, on July 2 disclosed that the Company has completed a successful first day hearing in the U.S. Bankruptcy Court for the Southern District of Texas related to the voluntary Chapter 11 petitions filed on July 1, 2019. Notably, the Court granted Weatherford interim approval to access up to $1.5 billion of debtor-in-possession ("DIP") financing with the request for approval on a final basis (including an additional $250 million of financing) to be heard on August 1, 2019. This financing, combined with access to the cash generated by the Company's ongoing operations, is available to meet the Company's day-to-day needs during the Chapter 11 cases. In addition to the approved financing, Weatherford received approval to continue its customer programs, to maintain its insurance and insurance-related items and to continue to utilize its existing cash management system. The Court also granted additional procedural motion filed by the Company. Employee wages and benefits are unaffected by the filings and will continue to be paid in the ordinary course. The Court's approval of the Company's first day motions coupled with the approval of the proposed DIP financing will allow Weatherford to operate in the ordinary course during the pendency of the cases. ADDITIONAL INFORMATION Court filings and information about the claims process are available at https://cases.primeclerk.com/weatherford/ or by calling the Company's claims agent, Prime Clerk, toll-free in the U.S. and Canada at 844-233-5155 (or + 917-942-6392 for international calls) or by sending an email to Weatherfordinfo@primeclerk.com. Lazard is acting as financial advisor for the Company, Latham & Watkins, LLP as legal counsel, and Alvarez & Marsal as restructuring advisor. Evercore is acting as financial advisor for the group of the Company's senior noteholders and Akin Gump Strauss Hauer & Feld LLP as legal counsel. About Weatherford Weatherford (NYSE: WFT), an Irish public limited company and Swiss tax resident -- http://www.weatherford.com/-- is a multinational oilfield service company providing innovative solutions, technology and services to the oil and gas industry. The Company operates in over 80 countries and has a network of approximately 650 locations, including manufacturing, service, research and development and training facilities and employs approximately 26,000 people. Weatherford reported a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2018, compared to a net loss attributable to the company of $2.81 billion for the year ended Dec. 31, 2017. As of March 31, 2019, Weatherford had $6.51 billion in total assets, $10.62 billion in total liabilities, and a total shareholders' deficiency of $4.10 billion. * * * Weatherford's credit ratings have been downgraded by multiple credit rating agencies and these agencies could further downgrade the Company's credit ratings. On Dec. 24, 2018, S&P Global Ratings downgraded the Company's senior unsecured notes to CCC- from CCC+, with a negative outlook. Weatherford's issuer credit rating was lowered to CCC from B-. On Dec. 20, 2018, Moody's Investors Services downgraded the Company's credit rating on its senior unsecured notes to Caa3 from Caa1 and its speculative grade liquidity rating to SGL-4 from SGL-3, both with a negative outlook. The Company said its non-investment grade status may limit its ability to refinance its existing debt, could cause it to refinance or issue debt with less favorable and more restrictive terms and conditions, and could increase certain fees and interest rates of its borrowings. Suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with the Company thereby increasing the need for higher levels of cash on hand, which would decrease the Company's ability to repay debt balances, negatively affect its cash flow and impact its access to the inventory and services needed to operate its business. ============= B O L I V I A ============= BANCO DE CREDITO BOLIVIA: Fitch Assigns BB- LT IDRs, Outlook Neg. ----------------------------------------------------------------- Fitch Ratings has assigned Banco de Credito de Bolivia S.A Long-Term Foreign and Local Currency Issuer Default Ratings of 'BB- 'and Viability Rating of 'b+'. The Rating Outlook is Negative. KEY RATING DRIVERS IDRs and Support Rating Banco de Credito de Bolivia's IDRs, reflect the support it would receive from its parent, Credicorp Ltd, if required. Fitch believes there is a high degree of integration between BCP Bolivia and its parent, reflected in the Board of Directors composition and in the several synergies with the parent. Nevertheless, the IDRs are constrained by Bolivia's Country Ceiling of 'BB-', which, according to Fitch's criteria, captures transfer and convertibility risks. This caps the subsidiary's IDRs to a lower rating than would be possible based solely on Credicorp's ability and propensity to provide support. The Negative Outlook on the bank's IDRs is in line with that of the sovereign. BCP Bolivia's support rating of '3' reflects a moderate probability of support due to uncertainties about Credicorp's ability or propensity to provide support. VR BCP Bolivia's VR is highly influenced by the bank's operating environment and its company profile, which reflects the bank's solid franchise and the benefits of belonging to the Credicorp group. The VR also considers the bank's risk appetite and financial profile, which is aligned with similarly rated peers (emerging market commercial banks in sub-investment grade operating environments). As of March 2019, BCP Bolivia was the fifth largest bank in its market as measured by total assets, with a market share of 9.6%. The entity is 100% owned by Credicorp Ltd, the largest financial group in Peru. BCP Bolivia benefits significantly from the best practices of its shareholder, as well as from its reputation, synergies, technological developments and strategies. Historically the bank's branch expansion in the country has not been aggressive, as its strategy has focused on a higher market presence with ATMs and bank agents. BCP Bolivia has complied with the regulator's requirements under the New Banking Law. These requirements include the establishment of loan portfolio quotas (60% must be allocated in productive sectors), as well as caps and floors on loan and deposit interest rates. In Fitch's view, this law has limited profitability, and weakened loan quality and capitalization metrics. Given the loan quotas set by the regulator, BCP Bolivia's loan portfolio expanded quickly between 2015 and 2018. As compulsory loans tend to be of a lower quality, the bank's impaired loan ratio deteriorated to 2.15% at end march 2019 from 1.38% at year-end 2014, similar to local market trends. Fitch expects this ratio to stabilize around 2% as the compulsory loans requirement will limit credit growth. BCP Bolivia's net interest margin declined to 4.73% at end-March 2019 from 5.84% at year-end 2014, in line with the system, mainly as a consequence of regulatory requirements. This pressured profitability, underpinning the deterioration in the bank's operating profit to risk weighted assets (RWA) ratio. At 1.39%, the bank's operating profits/RWA ratio was at the low end of the range for similarly rated peers. Fitch believes that profitability will be limited in the medium term, in line lower loan growth. Although capitalization remains within the metrics of its rating category, BCP Bolivia's capitalization has deteriorated. The bank's Fitch Core Capital (FCC) to RWA ratio declined to 9.85% at year-end 2019 from 13.5% in 2014, as a consequence of an increase in RWA due to rapid loan growth in recent year that has outpaced capital generation. Fitch expects the bank's FCC ratio to stabilize around 10% as credit growth decelerates over its forecast horizon. Although Fitch recognizes that funding concentration is a systemic issue, in the agency's view, the bank's high funding concentration is its main weakness. BCP Bolivia's two largest institutional clients represented 41% of total deposits at end-March 2019. This risk is partially offset by the bank's solid liquidity, as illustrated by the maintenance of its Liquidity Coverage Ratio and Net Stable Funding Ratio in excess of 100%. The bank's loans to deposit ratio of 93.05% was in line with its rating category. Fitch expects the bank to improve its funding structure and decrease deposit concentrations in line with its strategic objectives. =========== B R A Z I L =========== GENERAL SHOPPING: Fitch Lowers IDRs to CCC-; Off Watch Negative --------------------------------------------------------------- Fitch Ratings has downgraded General Shopping e Outlets do Brasil S.A.'s Long-Term Foreign- and Local-Currency Issuer Default Ratings to 'CCC-' from 'CCC+'. In related rating actions, Fitch has downgraded the company's senior secured notes to 'CCC-'/'RR4' from 'CCC+'/'RR4', its perpetual notes to 'CC'/'RR5' from 'CCC+'/'RR4' and its subordinated perpetual notes to 'C'/'RR6' from 'CCC-'/'RR6'. Fitch has affirmed GSB's National Scale rating at 'CCC(bra)'. These rating actions reflect Fitch's view that the recent assets transfer is credit negative, as it has resulted in the deterioration of GSB's capital structure due to a reduction in its cash flow generation and asset base. KEY RATING DRIVERS Assets Transfer Executed: During the second quarter of 2019, GSB executed and completed the process of transferring the equity interests, direct or indirectly held, in 11 of 16 of its shopping centers to a real estate investment fund in addition to the distribution of BRL829 million of unrealized profits. Approximately BRL207 million of the dividend was paid in cash; the balance was distributed as shares in the real estate investment fund that received the stakes in the shopping malls. In addition, the real estate investment fund has to pay BRL350 million to GSB during the next 10 years. Fitch views the assets transfer transaction as a negative for GSB's credit consideration as it reduces the company's cash flow generation and its unencumbered assets base. Material Decline in EBITDA: As a result of the assets transfer transaction, GSB's total owned gross leasable area (GLA) decreased from 198,582 square meters (sqm) in March 2019 to 50,510sqm. On a proforma basis, considering GSB's reduced GLA base and the management fees it will receive from the malls that were transferred, Fitch estimates that GSB's EBITDA will be approximately BRL83 million and BRL67 million during 2019 and 2020, respectively. Fitch's 2019 EBITDA expectation includes the company's ownership and operation of all 16 malls for the first four months of the year. These figures compare with BRL152 million of EBITDA in 2018. Increasing Leverage: On a proforma basis post assets transfer, GSB's total debt is estimated at approximately BRL1.4 billion, as only BRL300 million of debt was transferred to the new entity. GSB's proforma debt consists of BRL195 million in secured loans and financing, BRL458 million in perpetual notes, BRL683 million in subordinated perpetual notes, and BRL35 million in secured notes. The company's proforma net leverage is estimated at 19x. When considering the 50% equity credit given to the company's subordinated perpetual debt, GSB's net leverage debt ratio is 13x. Lower Unencumbered Assets Base: GSB maintains relatively low levels of unencumbered assets post transaction, which limits its financial flexibility. GSB's total assets value (proforma) is estimated at BRL550 million. Encumbered and unencumbered assets values were BRL220 million and BRL330 million, respectively. The company's proforma LTV ratio is 250%, while the company's proforma unencumbered assets to unsecured debt ratio is low at 0.3x. Equity Treatment for Subordinated Perpetual Notes Given Equity-Like Features: GSB's subordinated perpetual notes qualify for 50% equity credit as they meet Fitch's criteria with regard to deep subordination, with an effective maturity of at least five years, full discretion to defer coupons for at least five years and limited events of default. These are key equity-like characteristics. Equity credit is limited to 50% given the hybrid's cumulative interest coupon, a feature considered more debt-like in nature. Since the second half of 2015, the company has exercised its right to defer the payment of interest under its 10% perpetual subordinated notes. The interest payment deferral does not constitute an event of default under the indenture. Fitch assumes the company will continue deferring interest payments on the subordinated perpetual notes during the foreseeable future. DERIVATION SUMMARY GSB's 'CCC-' rating reflects the company's track record of maintaining high financial leverage, negative FCF and weak liquidity. Fitch does not expect the company's capital structure and liquidity to materially improve during 2019-2020. Fitch views GSB's capital structure as weaker than regional peers such as BR Malls Participacoes S.A. (BB/Stable) and InRetail Real Estate S.A. (BB+/Stable). GSB's 'CCC-' rating reflects weakness in several rating considerations. In terms of net leverage, measured as the net debt/EBITDA, BR Malls and InRetail Real Estate had ratios of 3x and 5x, respectively, during 2019. In terms of liquidity and capacity to consistently cover interest expenses paid with recurrent cash flow generation, BR Malls and InRetail Real Estate had coverage ratios of 3.5x and 3.5x, respectively, during the period. Fitch expects GSB's net leverage ratio and net interest coverage ratios to be around 14x and 0.9x during 2019-2020. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Assets transfer transaction fully executed during second-quarter (2Q) 2019; -- Average annual net revenue - proforma -- around BRL115 million during 2019-2020; -- The company continues deferring interest payments on the subordinated perpetual notes during 2019-2021; -- Cash interest coverage trends to levels around 0.9x during 2019-2020; -- GSB's FCF margin, after capex, is negative during 2019-2021. Recovery Rating Assumptions: The recovery analysis assumes that GSB would be considered a going-concern in bankruptcy and that the company would be reorganized rather than liquidated. Fitch has assumed a 10% administrative claim. GSB's going concern EBITDA is based on the expected level of EBITDA in 2020 and includes pro forma adjustments for the assets transferred executed during 2Q2019. The going-concern EBITDA estimate reflects Fitch's view of a sustainable, post-reorganization EBITDA level upon which Fitch bases the valuation of the company. The going-concern EBITDA is 20% below the 2020 proforma EBITDA to reflect the company's operational performance when facing a distress scenario. An EV multiple of 6x is used to calculate a post-reorganization valuation and reflects a mid-cycle multiple. Fitch has reduced the EV multiple from prior level (10x) to reflect GSB's reduced property portfolio post assets transfer transaction, which will make the company less attractive for potential investors. The lowering of the ratio also reflects the fact that the company remains linked to the new entity through service agreements; these related party transactions also make the company less attractive for investors. The USD9 million secured notes due in 2026 have been assigned a Recovery Rating of 'RR4'. The bespoke analysis indicated the potential for a higher recovery; however, Fitch capped the ratings at 'RR4' in accordance with its Country Specific Treatment of Recovery Rating Criteria, which caps recovery ratings in Brazil at 'RR4' due to concerns about issues such as creditor's rights during a debt restructuring or the consistent application of the rule of law. The perpetual notes have been notched down one notch for the IDR and the subordinated perpetual notes two notches to indicate below average or poor recovery prospects in the event of a default. RATING SENSITIVITIES Future Developments That May, Individually or Collectively, Lead to Positive Rating Action - Material improvement in the company's liquidity and financial leverage through some combination of the following actions: equity injection, asset sales with limited impact on cash flow generation, and lower FX exposure. Future Developments That May, Individually or Collectively, Lead to Negative Rating Action - Further deterioration of GSB's liquidity position; - Execution of a distressed debt exchange; - Defaults on scheduled amortization/interest payments and/or formally filing for bankruptcy protection. LIQUIDITY Limited Capacity to Cover Interests Expenses: GSB's capacity to cover interest expenses and taxes with its cash flow from operations is viewed as tight, adding pressure to the company's liquidity during 2019-2020. The company's liquidity position was BRL567 million and its short-term debt was BRL81 million as of March 31, 2019. The company has no specific target to maintain a minimum cash position and could use part of its liquidity in funding capex. GSB's 2019-2020's annual average cash paid interest expenses level is estimated at BRL84 million. GSB is expected to continue deferring the interest expenses on its 12% subordinated perpetual notes. The company's cash paid interest coverage is expected at levels around 0.9x during 2019-2020. FULL LIST OF RATING ACTIONS Fitch has downgraded the following ratings: General Shopping e Outlets do Brasil S.A.: - Long-Term Foreign Currency IDR to 'CCC-' from 'CCC+'; - Long-Term Local Currency IDR to 'CCC-' from 'CCC+'. General Shopping Finance Limited (GSF): - USD250 million perpetual notes to 'CC'/'RR5' from 'CCC+'/'RR4'. General Shopping Investment Limited (GSI): - USD150 million subordinated perpetual notes to 'C'/'RR6' from 'CCC-'/'RR6'; - USD8.9 million of senior secured notes due 2026 to 'CCC-'/'RR4' from 'CCC+'/'RR4'. Fitch has affirmed General Shopping e Outlets do Brasil S.A.'s National Scale rating at 'CCC(bra)'. The Rating Watch Negative was removed. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Convenes Foreign Envoys to Defend Tourism ------------------------------------------------------------- Dominican Today reports that the Dominican government will gather foreign ambassadors to defend its tourism sector, the country's main source of income, after the death of several American tourists in hotels in the country. Foreign Minister Miguel Vargas said the meeting will include several ministers, including Tourism, Francisco Javier Garcia; and Attorney General Jean Alain Rodriguez, according to Dominican Today. The report notes that Mr. Vargas told journalists that there is a "discredit campaign" against the Dominican Republic "with the purpose of harming the political order and the economic order" after the death of eight US citizens since the beginning of the year, deaths that the Dominican authorities attribute to health issues of the visitors. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Fitch Ratings affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook in September 2018. The Troubled Company Reporter-Latin America reported on April 4, 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." [*] DOMINICAN REPUBLIC: Passport Becomes 'Less Powerful' -------------------------------------------------------- Dominican Today reports that the annual ranking of Henley Passport Index ranks the Dominican Republic at 81st place among the "most powerful" passports in the world, determined by the ability of the official document to enter any country without the need of a foreign visa or prior approval. According to the ranking updated July 2, citizens of the world with a Dominican passport can enter 63 different destinations. The ranking also establishes that the country fell six places in relation to the previous year (75), the report notes. Dominicans can travel without a visa to: Asian countries: Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan. Africa: Botswana, Gambia. Oceania: Micronesia. The Caribbean: Grenada, Monserrat, Trinidad and Tobago, Belize. South America: Bolivia, Colombia, Ecuador, El Salvador, Guatemala, Guyana, Peru. Middle East: Georgia, Israel and Qatar. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Fitch Ratings affirmed Dominican Republic's Long-Term, Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook in September 2018. The Troubled Company Reporter-Latin America reported on April 4, 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." ============= E C U A D O R ============= ECUADOR: Gets $300 Million IDB Loan for Fiscal Stability -------------------------------------------------------- The Board of the Inter-American Development Bank (IDB) approved a $300 million loan to contribute to Ecuador's fiscal stability, facilitating sustainable growth and maintaining the main indicators of social development. This loan will strengthen macro-fiscal management, improve the quality and efficiency of public spending and transparency and the management of tax policy and management. The program contemplates the strengthening of the fiscal responsibility framework through a limit of growth of public expenditure of the central government; and greater transparency in public debt statistics. It will also expand the fiscal capacity for public investment with private contributions through reforms to the Law on Incentives for Public-Private Partnerships (PPP) and the creation of the PPP Unit for subnational governments. As a result, it is expected to increase the percentage of the amount of national PPP projects structured and tendered for 2023. Support will be given to the strengthening of State management and control over public companies through the submission to the National Assembly of amendments to the Organic Law of Public Enterprises (EEPP), including improvements to the corporate governance system thereof, the alignment of its fiscal regime to that of its peers in the private sector, improvements in the transparency requirements of the EEPPs and a greater participation of women in the executive boards of these companies, going from 3 percent to 40 percent between 2018-2023. The program establishes improvements to the tax and customs administration with the presentation of an action plan for the integration of processes of the Internal Revenue Service and the National Customs Service in data management, control and taxation of taxpayers, and implementation of online services for the delivery and receipt of tax information, and the payment of tax obligations. As a result of these reforms, it is expected to improve the fiscal balance by increasing the non-oil primary balance of the Non-Financial Public Sector, reducing the ratio of public spending to GDP, decreasing the average time in tax compliance; and increasing VAT collection. The program will benefit the entire population by improving the allocation of fiscal resources to spending priorities. The private sector will have a stable macroeconomic and fiscal context, conducive to investment; and taxpayers will benefit from reductions in the cost of tax compliance. The IDB loan, for $300 million, has a repayment term of 20 years, a six-year grace period and an interest rate based on LIBOR. This policy reform program is structured under the multi-tranche modality. The executing agency is the Ministry of Economy and Finance of Ecuador. As reported in the Troubled Company Reporter-Latin America on Feb. 1, 2019, Fitch Ratings has assigned a 'B-' rating to Ecuador's USD1 billion notes maturing January 2029. The notes have a coupon of 10.75%. Proceeds from the issuance will be used in accordance with local laws for government programs, infrastructure projects or to refinance existing debt obligations on more favourable terms. =========== M E X I C O =========== GRUPO IDESA: S&P Cuts ICR to 'CCC' on Increased Refinancing Risk ---------------------------------------------------------------- S&P Global Ratings, on July 2, 2019, lowered its issuer credit rating on Grupo Idesa S.A. de C.V. (IDESA) to 'CCC' from 'CCC+'. At the same time, S&P lowered its issue-level rating on the company's senior unsecured notes to 'CCC' from 'CCC+'. S&P's recovery rating on the notes remains unchanged at '4'. The negative outlook reflects increased risk of a debt refinancing over the next six months unless financial performance significantly improves. The downgrade reflects the increased likelihood that IDESA could default within the next 12 months, unless there's an unexpected positive development that could mitigate the company's high refinancing risk. Although IDESA is actively discussing with some banks a definitive resolution to refinance its bank loan amortization due on June 30, 2020, a resolution is still uncertain. Additionally, its weakening operating performance is reflected in its declining EBITDA, coupled with continued delays in receiving inflows from its joint ventures (JVs) with Braskem S.A. These factors have resulted in continuous weak credit metrics, with debt to EBITDA at 13.9x as of March 2019. ===================== P U E R T O R I C O ===================== MONTE IDILIO: Case Summary & 3 Unsecured Creditors -------------------------------------------------- Debtor: Monte Idilio Inc. aka Motel Destiny aka Motel Monte Idilio PO Box 10 Hormigueros, PR 00660 Business Description: Monte Idilio Inc. is the 100% owner of Motel Destiny, a 59-room motel located in Arecibo, Puerto Rico. The property is valued by the Company at $1.3 million. Chapter 11 Petition Date: July 1, 2019 Court: United States Bankruptcy Court District of Puerto Rico (Ponce) Case No.: 19-03828 Judge: Hon. Edward A. Godoy Debtor's Counsel: Damaris Quinones Vargas, Esq. BUFETE QUINONES VARGAS & ASOC PO Box 429 Cabo Rojo, PR 00623 Tel: 787-851-7866 Fax: 787-851-1717 E-mail: damarisqv@bufetequinones.com - and - Jose F. Cardona, Esq. JOSE F. CARDONA PO Box 9023593 San Juan, PR 00902-3593 Tel: (787) 724-1303 E-mail: jf@cardonalaw.com Total Assets: $1,300,000 Total Liabilities: $2,777,793 The petition was signed by Wilmer Tacoronte Negron, administrator. A full-text copy of the petition containing, among other items, a list of the Debtor's three unsecured creditors is available for free at: http://bankrupt.com/misc/prb19-03828.pdf ********* 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 * * *