/raid1/www/Hosts/bankrupt/TCRLA_Public/190710.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, July 10, 2019, Vol. 20, No. 137
Headlines
A R G E N T I N A
ARGENTINA: Expects to Have Access to US$5.4 Billion IMF Funds
B R A Z I L
NII HOLDINGS: Mar-Bow Wants to Revisit 2015 Sale, McKinsey Role
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Failed to Reach Wage Hike Pact Again
J A M A I C A
JAMAICA: Senate Passes Amendments to Petroleum Act
JAMAICA: State of Emergency Declared in South St. Andrew
M E X I C O
CAMPECHE: Moody's Withdraws B2 Global Scale Issuer Rating
DOCUFORMAS SAPI: Fitch Gives BB-(EXP) Rating on $300MM Unsec. Notes
DOCUFORMAS SAPI: S&P Rates New $300MM Unsecured Notes 'BB-'
UNIFIN FINANCIERA: Fitch Assigns BB(EXP) Rating to USD Unsec. Notes
UNIFIN FINANCIERA: S&P Rates New $400MM Unsecured Notes 'BB'
V E N E Z U E L A
PETROLEOS DE VENEZUELA: Tiny Turkish Firm Among Oil Buyers
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A R G E N T I N A
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ARGENTINA: Expects to Have Access to US$5.4 Billion IMF Funds
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David Lipton, the International Monetary Fund's Acting Managing
Director issued the following statement on Argentina:
"I am pleased to announce that IMF staff and the Argentine
authorities reached an agreement on the fourth review of the
economic program supported by the Stand-By Arrangement. Subject to
the approval of the Executive Board, Argentina would have access to
about US$5.4 billion (SDR3.9 billion).
"I commend the Argentine authorities on their continued efforts and
steadfast implementation of their economic policy program. The
authorities completed all their fiscal, monetary and the social
expenditure targets under the IMF-backed program in the context of
this review.
"Argentina's economic policies are yielding results. Financial
markets stabilized in May and June. Inflation -- while still at
high levels -- is expected to continue to fall in the coming
months. The fiscal and external positions continue to improve.
There are also signs that the economy is improving in the second
quarter.
"I fully support Argentina's efforts to bolster confidence, lay the
foundation for sustainable growth and protect the most vulnerable.
Steadfast implementation of the commitments and policies underlying
the authorities' IMF-backed program will be critical for continued
progress. I look forward to discussing this review with the IMF's
Executive Board on July 12."
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Mauricio Macri is the
incumbent president of Argentina.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and -- in the recent decades --increasing poverty.
Standard & Poor's credit rating for Argentina stands at B with
stable outlook (November 2018). Moody's credit rating for Argentina
was last set at B2 with stable outlook (November 2017). Fitch's
credit rating for Argentina was last reported at B with negative
outlook (November 2018). DBRS's credit rating for Argentina is B
with stable outlook.
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B R A Z I L
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NII HOLDINGS: Mar-Bow Wants to Revisit 2015 Sale, McKinsey Role
---------------------------------------------------------------
Mar-Bow Value Partners, LLC, has asked the U.S. Bankruptcy Court
for the Southern District of New York to re-open NII Holdings,
Inc., et al.'s long-closed Chapter 11 cases, citing an alleged
fraud by consulting firm McKinsey & Company over its failure to
disclose connections with AT&T, the winning bidder for NII's Mexico
assets.
In January 2015, the Debtors sought approval to sell their
operations in Mexico. The court approved the sale to lone bidder
New Cingular Wireless, a subsidiary of AT&T, for the purchase price
of $1.875 billion. NII Holdings won confirmation of its bankruptcy
exit plan following the sale and, in October 2016, the Court
entered a final decree closing the Chapter 11 case.
McKinsey Recovery & Transformation Services US LLC, which was
retained by NII Holdings as turnaround advisor, earned $1.34
million for its services.
Mar-Bow, established by veteran bankruptcy adviser Jay Alix, filed
with the bankruptcy court on May 28, 2019, a request for leave,
seeking authorization to file an "amicus" motion for entry of an
order reopening the Chapter 11 cases. Mar-Bow alleges that AT&T is
a client of McKinsey but McKinsey RTS never disclosed that
relationship to the Court. Mar-Bow also alleges that McKinsey RTS
concealed equity interests in the Debtors based on investments in
funds managed by Whitebox Advisors, LLC. Whitebox was a member of
the Ad Hoc Group of Creditors referred to as the "LuxCo Group."
Mar-Bow alleges that McKinsey had an indirect equity interest in
the Reorganized Debtors because holders of the LuxCo note claims at
the time of plan confirmation received stock in the reorganized
debtors. McKinsey RTS also concealed investments in interested
parties through the McKinsey Investment Office ("MIO") Partners,
McKinsey's $25 billion internal hedge fund.
McKinsey contends Mar-Bow has no conceivable economic interest in
the already closed case and the request should be denied.
According to McKinsey, Mar-Bow lacks Article III and bankruptcy
standing, so even if the Court did reopen the cases, Mar-Bow's
fraud on the court motion would fail just as it did in the Alpha
Natural Resources case. In May 2019, bankruptcy Judge Kevin
Huennekens ruled that Mar-Bow, which fought to reopen the ANR case,
did not have standing to pursue its claims.
Bankruptcy Judge Shelley C. Chapman will convene a hearing on July
31, 2019, in New York to consider the motion.
McKinsey created McKinsey RTS in 2010 to expand its share of the
turnaround business.
Jay Alix, the founder, board member, and 35% stakeholder in
consulting company AlixPartners LLP, a rival of McKinsey, has been
investigating alleged unlawful practices by McKinsey RTS and
bringing them to light. Alix has told about half dozen judges
that
McKinsey knowingly and habitually concealed conflicts of interest
while advising bankrupt companies.
Attorneys for McKinsey RTS:
Faith E. Gay, Esq.
Maria Ginzburg, Esq.
David S. Flugman, Esq.
SELENDY & GAY PLLC
1290 Avenue of the Americas
New York, NY 10104
Telephone: (212) 390-9000
E-mail: fgay@selendygay.com
mginzburg@selendygay.com
dflugman@selendygay.com
- and -
M. Natasha Labovitz, Esq.
John Gleeson, Esq.
Erica Weisgerber, Esq.
DEBEVOISE & PLIMPTON LLP
919 Third Avenue
New York, NY 10022
Telephone: (212) 909-6000
E-mail: nlabovitz@debevoise.com
jgleeson@debevoise.com
eweisgerber@debevoise.com
Local Counsel to Mar-Bow Value Partners:
Sheryl P. Giugliano, Esq.
Allan B. Diamond, Esq.
Sheryl P. Giugliano, Esq.
Charles M. Rubio, Esq.
DIAMOND MCCARTHY LLP
295 Madison Avenue, 27th Floor
New York, NY 10017
Tel: (212) 430-5400
Counsel to Mar-Bow Value Partners:
Steven Rhodes, Esq.
STEVEN RHODES CONSULTING, LLC
1610 Arborview Blvd.
Ann Arbor, MI 48103
Tel: (734) 646-7406
E-mail: rhodessw@comcast.net
- and -
Sheldon S. Toll, Esq.
LAW OFFICE OF SHELDON S. TOLL PLLC
29580 Northwestern Hwy., Suite
1000 Southfield, MI 48034
Tel: (248) 797-9111
E-mail: sst@lawtoll.com
- and -
Sean F. O'Shea, Esq.
Michael E. Petrella, Esq.
Amanda L. Devereux, Esq.
CADWALADER, WICKERSHAM & TAFT LLP
200 Liberty Street
New York, NY 10281
Tel: (212) 504-5551
Counsel to Reorganized NII Holdings:
David G. Heiman, Esq.
Carl E. Black, Esq.
JONES DAY
901 Lakeside Avenue
Cleveland, OH 44114
E-mail: DGHeiman@jonesday.com
CEBlack@jonesday.com
- and -
Scott Greenberg, Esq.
JONES DAY
222 East 41st Street
New York, NY 10017
E-mail: sgreenberg@jonesday.com
- and -
Jefrrey R. Gleit, Esq.
SULLIVAN & WORCESTER LLP
1633 Broadway
New York, NY 10019
E-mail: jgleit@sandw.com
About NII Holdings
NII Holdings Inc. provided wireless communication services for
businesses and consumers in Brazil, Mexico and Argentina. NII
Holdings had the exclusive right to use the Nextel brand in its
markets pursuant to a trademark license agreement with Sprint
Corporation and offers unique push-to-talk services associated with
the Nextel brand in Latin America.
NII Holdings and its affiliated debtors sought bankruptcy
protection (Bankr. S.D.N.Y. Lead Case No. 14-12611) in Manhattan on
Sept. 15, 2014, before Judge Shelley C. Chapman, listing $1.22
billion in assets and $3.068 billion in liabilities.
On June 19, 2015, Judge Shelley C. Chapman confirmed the First
Amended Joint Plan of Reorganization proposed by the Debtors and
the Creditors' Committee. The Plan embodies the sale transaction.
Under the Plan, 100 million shares of NII Holdings' new common
stock and $745 million in cash will be distributed to holders of
senior notes issued by the Company's subsidiaries, NII Capital
Corp. and NII International Telecom S.C.A. The Company applied to
list the shares of NII Holdings' new common stock on the NASDAQ
Stock Exchange.
The Plan was declared effective on June 26, 2015, signaling the
emergence of NII Holdings, et al., from the bankruptcy.
The Company sold Nextel Argentina to Clarin Group, an Argentinian
media conglomerate, to focus on its Brazil operations.
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D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Failed to Reach Wage Hike Pact Again
--------------------------------------------------------
Dominican Today reports that after almost four hours of holding
meetings separately, employers and workers' unions in the Dominican
Republic concluded talks over the salary increase without reaching
an agreement.
The nearly 10th round of talks was postponed, according to
Dominican Today.
Dominican Employers Confederation (Copardom) President Juan Alfredo
de la Cruz said the issue of the reclassification of companies can
no longer be delayed, the report notes.
"T[he] meeting did not address the issue of percentage to increase
the minimum wages of the non-sectorized private sector" the report
quoted Mr. de la Cruz a saying.
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.
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."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with stable outlook (2015). Moody's credit rating for Dominican
Republic was last set at Ba3 with stable outlook (2017). Fitch's
credit rating for Dominican Republic was last reported at BB- with
stable outlook (2016).
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J A M A I C A
=============
JAMAICA: Senate Passes Amendments to Petroleum Act
--------------------------------------------------
The Jamaican Information Service reports that the Petroleum
(Amendment) Act of 2019, which seeks to transfer the rights and
obligations of the PetroCaribe Development Fund (PDF) to the
Government of Jamaica, was passed in the Senate on Friday, July 5.
Under the amendments, the PDF's functions and a small amount of
liabilities will be integrated into the Ministry of Finance and
Public Service, and the Fund, as a separate entity, will cease to
exist.
Legislation to allow for this new arrangement had become necessary
given that the Fund, which was established as a public body in
2006, has now fulfilled its mandate.
The PDF had the responsibility of managing the proceeds, which
accrued to Jamaica under the Energy Co-operation Agreement entered
into between the Governments of Jamaica and the Bolivarian Republic
of Venezuela.
It was charged with lending to self-financing public bodies for
human capital development, offering assistance to the Ministry of
Finance for domestic debt refinancing as well as lending to reduce
Jamaica’s dependence on fossil fuel.
Minister without Portfolio in the Ministry of Economic Growth and
Job Creation, Senator the Hon. Pearnel Charles Jr., who piloted the
legislation, said that transfer of the Fund to Central Government
is crucial in light of the Standby Agreement with the International
Monetary Fund (IMF) and is also in keeping with good public
financial management.
He noted that the inflows to Jamaica under the PetroCaribe
Agreement have been negligible since financial year 2015/2016 and
the prospects for any improvement in inflows "appears to be
unlikely given the clear outlook on Venezuela’s economy and the
sanctions that have been imposed by the United States and other
Governments."
JIS relays that in his contribution to the debate, Government
Senator, Don Wehby, noted that the legislation forms part of the
Government's overall policy to rationalise the public service in
order to ensure greater efficiencies in the use of public
resources.
“When you have an efficient Government, we will have more fiscal
space to spend on health, education and welfare programmes to
improve the quality of life of each Jamaican. This Bill, therefore,
is one step to achieving this outcome,” he said.
The PDF's establishment resulted from an agreement between
Venezuela and a group of countries in the Caribbean and Central
America, and was aimed at ameliorating the impact of the
significant increase in oil prices on these countries.
Its functions included receiving loan repayments from borrowers
from the Fund; receiving other proceeds, which might accrue from
the Fund’s investments; financing projects and programmes; and
settling Jamaica’s debt service obligations for the purchase of
oil and petroleum products under the PetroCaribe Agreement or any
other bi-lateral arrangements between Jamaica and Venezuela.
The Fund provided grants for housing, school sanitation, and
assistance to children in the inner-city communities; and
investment in infrastructure, such as the port in Falmouth,
renovation of the Norman Manley International Airport and the
downtown markets, and Highway 2000.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. It is
the fourth largest country in the Caribbean.
Standard & Poor's credit rating for Jamaica stands at B with
positive outlook. Moody's credit rating for Jamaica was last set at
B3 with positive outlook. Fitch's credit rating for Jamaica was
last reported at B+ with stable outlook.
As reported in the Troubled Company Reporter-Latin America on June
27, 2019, RJR News said that Steven Gooden, Chief Executive Officer
of NCB Capital Markets, is warning that the increasing liquidity in
the Jamaican economy might result in heightened risk to the
financial market if left unchecked. This, he said, is against the
background of the local administration seeking to reduce the debt
to GDP to 60% by the end of the 2025/26 fiscal year, which will see
Government repaying more than J$600 billion which will get back
into the system, according to RJR News.
JAMAICA: State of Emergency Declared in South St. Andrew
--------------------------------------------------------
Caribbean360.com reports that Prime Minister Andrew Holness
declared a State of Public Emergency (SOE) for South St Andrew, in
the southeast of the country, after what he said was "careful
consideration and review of the current crime situation."
St Andrew South has recorded the highest number of murders since
the start of the year with 94 cases, according to Caribbean360.com.
That figure is 15 more than the 79 murders recorded for the
corresponding period last year, the report notes.
Commissioner of Police, Major General Antony Anderson, noted that
the St. Andrew South division is experiencing "a high level of
violent crimes," the report relays.
"The upswing in the last two months is at a scale and of a nature
such that it greatly endangers public safety. Already, since the
start of 2019, the division has recorded the highest number of
murders, 94, and shootings 98, among police divisions in Jamaica,"
he noted, the report discloses.
Meanwhile, Chief of Defence Staff, Jamaica Defence Force (JDF),
Lieutenant General Rocky Meade, said security personnel from the
JDF and the Jamaica Constabulary Force (JCF) were deployed to the
division, the report notes.
He appealed for members of the public, who traverse the areas of
the SOE, to cooperate with the police officers and soldiers at the
various check points, the report says.
"The State of Emergency will give the security forces temporary
additional powers of search, arrest and detention. We believe that
this is necessary in order to give the security forces the
necessary space to carry out the operational tasks that will be
required to help bring a sense of normality to the communities
affected," he said, the report notes.
The security forces are encouraging members of the public to use
the tip lines to report gang and other criminal activity in their
communities, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. It is
the fourth largest country in the Caribbean.
Standard & Poor's credit rating for Jamaica stands at B with
positive outlook. Moody's credit rating for Jamaica was last set at
B3 with positive outlook. Fitch's credit rating for Jamaica was
last reported at B+ with stable outlook.
As reported in the Troubled Company Reporter-Latin America on June
27, 2019, RJR News said that Steven Gooden, Chief Executive Officer
of NCB Capital Markets, is warning that the increasing liquidity in
the Jamaican economy might result in heightened risk to the
financial market if left unchecked. This, he said, is against the
background of the local administration seeking to reduce the debt
to GDP to 60% by the end of the 2025/26 fiscal year, which will see
Government repaying more than J$600 billion which will get back
into the system, according to RJR News.
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M E X I C O
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CAMPECHE: Moody's Withdraws B2 Global Scale Issuer Rating
---------------------------------------------------------
Moody's de Mexico S.A. de C.V. withdrew the B2/Ba2.mx (Global
Scale, local currency/Mexico National Scale) issuer ratings of the
Municipality of Campeche and also withdrew the stable outlook.
Moody's has decided to withdraw the ratings for its own business
reasons.
DOCUFORMAS SAPI: Fitch Gives BB-(EXP) Rating on $300MM Unsec. Notes
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Fitch Ratings assigns Docuformas S.A.P.I. de C.V.'s upcoming USD300
million five-year senior unsecured notes an expected long-term
rating of 'BB-(EXP)'. The final rating is contingent upon the
receipt of final documents conforming materially to information
already received.
The notes will be issued at a fixed rate, pay interest
semi-annually in arrears, are redeemable in whole or in part at the
option of the issuer and will be irrevocably and unconditionally be
guaranteed by four operating subsidiaries of Docuformas (Analistas
de Recursos Globales, S.A.P.I. de C.V., ARG Fleet Management,
S.A.P.I. de C.V., Rentas y Remolques de Mexico, S.A. de C.V., and
Inversiones y Colocaciones Inmobiliarias, S.A.P.I. de C.V.).
The net proceeds from the offering (together with cash on hand)
will be used to pay a tender offer of the 2022 senior notes,
refinance existing liabilities and for general corporate purposes.
To mitigate the exchange rate risks associated with the notes,
Docuformas intends to hedge this risk through derivative financial
instruments for both the principal and interest payments.
KEY RATING DRIVERS
The rating assigned to these notes is at the same level as
Docuformas' long-term Issuer Default Ratings (IDRs) of 'BB-' as the
likelihood of default of the notes is the same as the IDRs.
Docuformas' ratings are mainly influenced by its well-positioned
and growing franchise among Mexican independent leasing companies
built through organic and inorganic growth -- although small within
the Mexican financial system -- as well as its stable and
specialized business model that generates recurrent core earnings
through the economic cycles. Inherent risks of its high loan growth
and a higher-than-peers appetite for inorganic growth, although
reasonably executed, also highly influence the ratings.
The company's asset quality ratios, stable but weaker than the
segment, enhanced capital base after a recent capitalization,
recurrent but decreasing profits, a funding mix with an adequate
portion of unsecured funding sources, and an adequate liquidity
position reflected in positive maturity gaps were also factored in
the ratings. Although Fitch believes management and corporate
governance exhibit some improvements, other areas that require
improvements were still factored in the ratings.
The company's tangible leverage position (debt to tangible equity
ratio) decreased to 4.3x as of December 2018 from 9.2x at the close
of 2017. As of December 2018, the company's pre-tax profit to
average assets ratio was 2.1%, reflecting FX and trading and
derivative gains, together with higher interest and operating
costs. As of 1Q19, the NPL ratio (including the whole balance of
all leasing and loan contracts with payments overdue by more than
90 days) was 5.4% of gross loans, slightly below the 5.8% average
from 2015 to 2018. Fitch believes Docuformas has access to
relatively flexible and diverse funding sources, especially within
the universe of NBFIs in Mexico; however, it shows some
concentration in market debt. As of March 2019, 70% of its funding
was unsecured. After the issuance of these senior notes and the
expected prepayment of liabilities, the coverage of the
unencumbered portfolio to unsecured funding will be around 1.25x,
according to Fitch's pro forma.
DOCUFORMAS SAPI: S&P Rates New $300MM Unsecured Notes 'BB-'
-----------------------------------------------------------
S&P Global Ratings said that it has assigned its 'BB-' issue-level
rating to Docuformas S.A.P.I. de C.V.'s proposed senior unsecured
notes for up to $300 million. The tenure of the notes will be five
years and will bear a fixed rate.
S&P said, "At the same time, we affirmed our global scale 'BB-'
long-term ICR and our national scale 'mxBBB+/mxA-2' ICRs on
Docuformas. We also affirmed our 'BB-' issue-level rating on the
lender's outstanding $150 million senior unsecured notes due 2022.
"Our 'BB-' rating on the new notes is at the same level as the
long-term global scale ICR. The debt rating reflects our
expectation that Docuformas' unencumbered assets will fully cover
the unsecured debt, and that the lender's secured debt will
represent less than 15% of adjusted assets as of 2019. The new
notes will rank equally in right of payment with all of Docuformas'
existing and future senior unsecured debt.
"We expect Docuformas to use the proceeds to refinance about 80% of
its existing notes 2022 senior notes of $150 million, prepay in
full several loans and local commercial paper ($35 million - $40
million), and the remainder to fund internal growth for the next
12-24 months. The rating on the new notes incorporates a hedge
against currency exchange fluctuations on the total amount of the
principal and interest during the issuance's term, which will
include a call spread on the principal and a coupon swap for the
interest coupons. We expect Docuformas to complete the hedge in the
next 15 days.
"We believe the new issuance will increase the lender's available
stable funding at a significantly higher pace with respect to its
funding needs. This, along a very manageable maturity profile--due
to the long tenured structure— will allow the lender to have a
stable funding ratio above 90% during the next 24 months. On the
other hand, we consider Docuformas' funding structure to be
slightly less diversified after this issuance, because the latter
would represent more than 70% of total debt in 2019. In this sense,
Docuformas' funding structure will remain concentrated in market
debt--at about 75% of total liabilities, up from 50% before the
issuance. The remainder of its funding will rely on credit
facilities from commercial banks (25%). Therefore, our view of
Docuformas' funding and liquidity remains the same, even though we
believe the funding structure will be more concentrated with
respect to other finance companies we rate.
"Under our base-case and stress scenarios, Docuformas' cash flow
analysis remains positive, and we expect the lender to cover its
liquidity needs on a monthly basis for more than 12 months, even in
the absence of market funding. The issuance will increase
Docuformas' broad liquid assets in 2019 and will reduce the portion
of medium-term wholesale debt to total debt for the next few years.
This is because the maturities of the market/banking debt, which
Docuformas expects to prepay, are between 2021 and 2023. Under such
a scenario, we expect the lender's liquid assets to increase this
year and its liquidity coverage metric to rise above 1.5x by the
end of 2019 from 0.98x as of March 2019.
"After incorporating the new issuance in our capital and earnings
assessment, the latter remains unchanged. However, we're revising
our forecast for 2019 and 2020 to factor in additional growth
funded with the proceeds from the new issuance. In this sense, we
expect Docuformas' portfolio to grow about 50% by the end of 2019,
compared to our previous expectation of a 35% growth, resulting in
a higher-than-expected capital consumption according to
risk-adjusted capital framework (RACF). Therefore, we expect
Docuformas' risk-adjusted capital (RAC) ratio to fall to
10.2%-10.7% in 2019 and 2020 from around 12.0% average in our prior
estimate, bringing the ratio closer to our 10% threshold for a
lower capital and earning assessment category. In our view,
Docuformas' capital and earnings generation is sufficient to
support its revised growth plans, while all other factors remain
unchanged, which continues to support the ratings." However,
external factors, such as heightened economic risks in Mexico,
could lead to a higher strain on the lender's capital through
higher risk-weighted assets. Specifically, if Mexico's negative
economic risk trend in the country's Banking Industry Country Risk
Assessment (BICRA) materializes.
Finally, the ratings on Docuformas continue to reflect its weaker
asset quality than those of domestic peers. This, coupled with the
lender's relatively high risk concentrations, reflects S&P's
opinion of Docuformas' relatively high risk position, which limit
the ratings. Conversely, the lender's expanding market presence in
the Mexican leasing business, while Docuformas maintains its
customer base continues to support the ratings. Docuformas'
stand-alone credit profile (SACP) remains at 'bb-'.
S&P said, "The negative outlook on Docuformas reflects the negative
trend on Mexico's economic risk assessment in our BICRA analysis,
which stems from our negative outlook on the sovereign.
"In this sense, we could downgrade Docuformas by one notch if we
lower the anchor for banks and financial companies operating in
Mexico, as a result of a weaker economic risk assessment.
"We would downgrade Docuformas an additional notch (a two-notch
downgrade in total) as a result of higher risk-weighted assets in
our capital model, stemming from higher economic risk under the
scenario we described above. This is because our revised growth
forecast, in combination with higher risk weights due to increased
economic risk (both spurring RWAs on their own count) will lower
Docuformas' RAC ratio below the 10% threshold during the
forecasting period. Therefore, we could downgrade Docuformas in the
next 12 months if the economic risks scenario materializes.
"We could revise our outlook on Docuformas to stable if we revise
Mexico's economic risk trend in our BICRA analysis to stable, which
most likely would be preceded by a revision of the outlook on
Mexico to stable from negative."
UNIFIN FINANCIERA: Fitch Assigns BB(EXP) Rating to USD Unsec. Notes
-------------------------------------------------------------------
Fitch Ratings has assigned Unifin Financiera, S.A.B. de C.V.'s
(BB/Stable) proposed U.S. dollar senior unsecured notes a 'BB(EXP)'
expected rating. The final rating is contingent upon the receipt of
final documents conforming to information already received.
The proposed notes will be issued for up to USD400 million and up
to 10 years at a fixed rate with annually interest payments. The
principal will be paid at maturity, may be redeemed at the option
of the issuer and will be fully and unconditionally guaranteed by
two operating subsidiaries of Unifin (Unifin Credit, S.A. de C.V.,
SOFOM, E.N.R. and Unifin Autos, S.A. de C.V.).
The net proceeds from the offering will be used for general
corporate purposes and to continue matching the asset-liability
tenor profile.
KEY RATING DRIVERS
The rating assigned to these senior notes is at the same level as
Unifin's Long-Term Issuer Default Ratings (IDRs) of 'BB' as the
likelihood of default of the notes is the same as the IDRs.
There will not be increased exposure to market risk as a result of
this transaction, as the company will hedge both FX rate risk and
interest rate risk with cross-currency swaps for both the principal
and interest payments.
Unifin's ratings are highly influenced by its national leadership
in the independent leasing sector in Mexico (non-related to
financial holding company) and its ample expertise in its core
market focused on SME typically unattended by the banking sector.
The ratings are also significantly influenced by its relatively
tight capitalization metrics. The ratings also consider Unifin's
good earnings, controlled asset quality, and well-managed liquidity
and funding.
The adoption of IFRS accounting standards in 1Q19 gives better
clarity on Unifin's asset quality, which has led to stronger
reserve coverage. However, this put further pressure on the
company's already tight capitalization and leverage position under
Fitch's core metric. As of March 2019 and following the adoption of
IFRS, Unifin's leverage ratios (measured as total debt to tangible
common equity) exceeded Fitch's sensitivity according to its
ratings level, as it reached 8.5x. This ratio was mainly impacted
by around 190 bps, after IFRs application by an immediate and
sizeable effect on retained earnings, but Fitch expects a leverage
recovery in the following 18 to 24 months through internally
generated capital, to levels around 7x. The company projections
consider leverage gradually improving to nearly 7.1x as of YE 2020,
a ratio that Fitch believes is still relatively tight but
consistent with the current rating level. If the company does not
show a consistent improvement of leverage metrics toward the 7x
threshold, negative rating actions could occur in the near future.
Fitch does not expect a greater deterioration of leverage metrics
after the issuance of the expected senior notes as they will
refinance some existing liabilities, some others will mature and
the new notes will continue to effective match the asset-liability
tenor profile.
Unifin's profitability remains at good levels but lower than
historical records. As of March 2019, Unifin's pre-tax income to
average assets ratio was 2.7% from historic average levels of 4.0%,
still a credit strength to the current rating level. Under IFRS
there is more visibility on non-performing loans (NPLs) and more
prudential loan loss allowance approach. As of March 2019, Unifin's
NPL ratio stood at 3.6%, which was lower than its closest peers,
while its loan loss allowance coverage of NPLs increased to 57.0%,
which continues to be relatively limited, in Fitch's opinion.
Unifin continues with a more diversified and unsecured funding
structure than local peers. However, the entity is heavily reliant
on wholesale financing through local debt issuances via
securitizations and international senior bonds. Nevertheless, this
funding structure has proven effective for Unifin because it helps
to properly match the asset-liability tenor profile. As of March
2019, the unsecured debt to total debt stood at 56%, a sound level
than compares better than peers. Unencumbered loans to total loans
were around 62% as of March 2019.
UNIFIN FINANCIERA: S&P Rates New $400MM Unsecured Notes 'BB'
------------------------------------------------------------
S&P Global Ratings assigned its 'BB' issue-level rating to Unifin
Financiera S.A.B. de C.V.'s (Unifin; global scale: BB/Negative/--;
national scale: mxA/Negative/mxA-1) proposed senior unsecured notes
for up to $400 million with a maturity profile up to 10 years.
Unifin will use the proceeds for general purposes and to increase
its debt maturity profile. The issuance will have a full
cross-currency swap to hedge against currency exchange
fluctuations, as S&P saw with Unifin's outstanding global debt
issuances.
S&P said, "Our view that the firm's priority debt (secured debt)
will represent less than 15% of adjusted assets for the next 12
months supports our 'BB' rating on the proposed notes. Unifin's
unencumbered assets will also cover more than 1x of its rated
unsecured debt (including the proposed debt issuance)." Finally,
the rating indicates that the notes will rank equally in right of
payment with all of Unifin's existing and future senior unsecured
notes.
The lender will primarily use the proceeds from the issuance to
expand its debt maturity profile and relieve liquidity pressure for
the next 24 months. S&P's base-case scenario assumptions already
incorporate the proceeds from this issuance to cope with the
projected loan growth for the next two years.
S&P said, "Our funding and liquidity assessment of Unifin remains
unchanged. We expect market debt to remain Unifin's main funding
source (85% of total funding), including the potential and
outstanding unsecured notes, as well as the firm's subordinated
perpetual notes. Despite this concentration, the firm's market debt
is diversified across many issuances. Therefore, by the end of
2019, we expect the funding mix to be in line with our
expectations: global issuances (57%), local securitizations (28%),
and banking lines (15%). Finally, the firm's stable funding ratio
was 87.7% as of March 31, 2019, and we expect it to improve after
this issuance is completed.
"Unifin's sufficient resources to fund daily operations support our
liquidity analysis. After incorporating the potential unsecured
notes in our cash-flow analysis, our base-case and stress scenarios
remain positive, and we expect the firm to survive without the need
to access market funding for the next 12 months and to cover its
funding needs on a monthly basis.
"The ratings also reflect our business position assessment of
Unifin, which benefits from stable and growing business operations
that are oriented towards pure leasing activities--primarily in the
small- to mid-size enterprise lending sector. Furthermore, the
ratings reflect our forecasted risk-adjusted capital ratio above 7%
for the next 12 and 24 months. Finally, Unifin's risk position
reflects subpar reserve coverage, with asset quality metrics in
line with those of the company's main competitors."
Ratings List
New Rating
Unifin Financiera, S.A.B. de C.V.
Senior Unsecured BB
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: Tiny Turkish Firm Among Oil Buyers
----------------------------------------------------------
Marianna Parraga, Luc Cohen, Deisy Buitrago at Reuters report that
with U.S. sanctions blocking Venezuela from selling oil to the
United States, state-owned energy firm Petroleos de Venezuela, S.A.
(PDVSA) has turned to several little-known buyers that include a
tiny Turkish company with no refineries but ties to President
Nicolas Maduro's government, according to internal documents and a
PDVSA source.
Until recently, some of the world's largest petroleum and refining
firms, including U.S. companies Chevron and Valero Energy, lined up
to take Venezuelan oil cargoes and PDVSA had a rigorous vetting
process to ensure potential buyers had the capacity to pay,
according to Reuters.
But U.S. sanctions imposed in January in an effort to oust Maduro
have driven away many of those customers. PDVSA's exports have
slumped by more than a fifth since sanctions were imposed,
according to company records and Refinitiv Eikon data, the report
notes. Its biggest buyers today are Chinese and Indian companies,
the report relays.
Three sources with knowledge of the matter told Reuters that
directors at a March 14 meeting of PDVSA's board temporarily waived
some requirements for new customers or suppliers, including that of
having at least two years' experience in the oil industry, the
report says.
In the wake of the changes, a Turkish company called Grupo Iveex
Insaat started buying Venezuelan oil in April, according to
documents related to PDVSA loading plans and internal reports on
exports and imports for the first half of the year reviewed by
Reuters.
Istanbul Chamber of Commerce records show that Iveex Insaat was
formed less than a year ago with capital of just 10,000 lira
(US$1,775) and listed "residential construction" as its main
activity, Reuters notes. It was one of only five firms that loaded
tankers to take Venezuela's upgraded crude -- among its most
valuable oil -- from April through June, the documents showed.
Iveex loaded four cargoes of Venezuelan crude and products in April
-- equivalent to just under 8 percent of Venezuela's oil exports --
and nothing in May or June, according to PDVSA documents obtained
by Reuters.
Turkish corporate records show Iveex Insaat is owned by Miguel
Silva, a Venezuelan businessman who heads the Caracas-based
Venezuelan Exporters' Chamber and also served as a housing ministry
commissioner in Maduro's administration, the report relays.
Reuters was unable to determine the terms under which Iveex Insaat
is receiving Venezuelan oil and was unable to confirm who would
ultimately buy and refine the crude, as the company has no
refineries.
The PDVSA source, a shipping broker and a maritime inspector -- all
of whom declined to be named -- told Reuters that Iveex had agreed
to deliver refined products to Venezuela in exchange for receiving
crude. With its refinery network crippled by maintenance issues,
the OPEC nation has struggled with severe fuel shortages in recent
months.
The two other companies that only began chartering tankers to take
PDVSA's oil after sanctions hit are Panama-registered Melaj
Offshore Corp and Sahara Energy, a unit of Nigeria-based Sahara
Group, the report notes. The two loaded PDVSA oil cargoes shortly
after the sanctions were announced, internal company documents
show, the report says.
Ties With Turkey
The deals with Iveex highlight growing commercial links between
Venezuela and Turkey, whose President Tayyip Erdogan has stood by
Maduro, alongside Russia, Cuba and China, the report notes.
Turkey is one of the main buyers of the South American country's
gold, which has become an important source of cash as oil output
falls, the report adds.
Silva registered Iveex Insaat with a Turkish partner named Erhan
Kap on Sept. 27, 2018, just a week after Maduro visited Istanbul.
According to Silva's biography on the Iveex website, Silva has had
a number of posts within Maduro's administration, including serving
in the national Housing Ministry in 2014 and coordinating a
government development plan for the western state of Tachira in
2013, Reuters notes.
PDVSA sold barrels for the first time to Iveex Insaat in April,
when it loaded the tanker Seamuse with 294,413 barrels of natural
gasoline and light virgin naphtha bound for the Middle East, trade
documents from PDVSA show, the report says.
The vessel has not yet discharged and remains anchored near a
Kuwaiti port, according to Refinitiv Eikon data. Days later, a
similar cargo was loaded for Iveex on the tanker Vinjerac.
The Turkish firm also loaded the tankers Delta Kanaris and Delta
Harmony with more than 1 million barrels each of Hamaca crude, an
upgraded oil that PDVSA has struggled to sell because its primary
market was the United States, the report says.
However, these three vessels remain anchored off Venezuelan ports.
PDVSA has not allowed them to sail until Iveex delivers at least
one of several fuel cargoes intended to offset the first cargo it
took, the PDVSA source and two shipping sources said, the report
discloses.
About PDVSA
Petroleos de Venezuela, S.A. is the Venezuelan state-owned oil and
natural gas company. It has activities in exploration, production,
refining and exporting oil as well as exploration and production of
natural gas.
As reported in Troubled Company Reporter-Latin America on June 3,
2019, Moody's Investors Service withdrew all the ratings of
Petroleos de Venezuela, S.A. including the senior unsecured and
senior secured ratings due to insufficient information. At the time
of withdrawal, the ratings were C and the outlook was stable.
*********
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