/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/190806.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, August 6, 2019, Vol. 20, No. 156 Headlines A R G E N T I N A ALBANESI SA: Fitch Affirms B- LT IDR, Outlook Negative ARCOR SAIC: Moody's Rates ARS2MM New Sr. Unsec. Notes Ba3 YPF ENERGIA: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable B R A Z I L BRAZIL: Industry Stagnant in First Half of 2019, Says CNI BRAZIL: Sees its Oil Production Shrink Over Three Months PETROLEO BRASILEIRO: Considers Downsizing Logistics Unit E L S A L V A D O R EL SALVADOR: S&P Puts 'B-' Rating on US$1.097BB Sr. Unsec. Notes P A N A M A AES PANAMA: S&P Affirms 'BB' ICR Despite Lower Expected Cash Flows P U E R T O R I C O AMERICAN PARKING: Plan Confirmation Hearing Set for Aug. 30 PUERTO RICO: Has New Governor, But His Stay May Be Short V E N E Z U E L A PETROLEOS DE VENEZUELA: ICC Dismisses Conoco's $1.5BB Claim - - - - - ================= A R G E N T I N A ================= ALBANESI SA: Fitch Affirms B- LT IDR, Outlook Negative ------------------------------------------------------ Fitch Ratings has affirmed Albanesi S.A.'s Long-Term Foreign Currency and Local Currency Issuer Default Ratings at 'B-'. The senior unsecured notes co-issued by Central Termica Roca and Generacion Mediterranea SA, are guaranteed by Albanesi S.A., have also been affirmed at 'B-'. Each of the issuers and Albanesi S.A. are jointly and severally liable for any payment obligations under the notes. The ratings have been removed from Rating Watch Negative and assigned a Negative Outlook. The Negative Outlook reflects the company's tight FFO debt service coverage ratio over in the next 12 to 18 months, assuming there are no payment delays over 51 days from Compania Administradora del Mercado Mayorista Electrico (CAMMESA), and the general uncertainty of its ability to refinance upcoming maturities of USD106 million between 2019 and 2020 and an additional USD71.9 million in commercial debt during the same period. KEY RATING DRIVERS Expansion Projects Postponed Indefinitely: Fitch's rating case no longer assumes Albanesi will add 275MW of combined cycle capacity at two of its plants, Maranzana and Ezeiza, by 2020 after the company postponed a USD300 million bond issuance to finance the projects. CAMMESA had awarded Albanesi power purchase agreements (PPAs) for the projects under Resolution 287/2017, which would have added about USD86 million of annual EBITDA. The company remains responsible for USD49.5 million in payments to turbine suppliers and a penalty of USD36.8 million, payable in 48 monthly installments beginning in 2021, to CAMMESA for failure to complete the expansions as scheduled. Tight Debt Service Coverage: Albanesi's cash flow is relatively stable and predictable provided that CAMMESA continues to pay within its current time of 51 days. As of first-quarter 2019, 100% of the company's revenue was denominated in U.S. dollars and 80% of EBITDA was derived from long-term take-or-pay contracts under Resolutions 220/2007 and 21/2016. Fitch estimates Albanesi's 2019 leverage, including commercial debt, at 4.0x, which is expected to decline to 3.1x over the rating horizon as the company pays off maturing obligations with cash flow. In 2019 and 2020, FFO interest coverage will be tight at 2.3x and 2.1x, respectively, due to new debt added and high financing costs. Uncertain Refinancing Ability: Fitch believes that Albanesi has demonstrated an ability to refinance upcoming debt with the newly issued USD80 million amortizing note due 2023. The note will be secured by eight turbines and their respective five PPAs, representing USD105 million of revenue. The proceeds, in conjunction with ongoing cash flow, will help to cover USD32 million in financial debt due in 2019 and USD74 million in 2020, USD49.5 million and USD22 million of commercial debt in these respective years and deferred value-add taxes. Despite the note issuance, Fitch believes Albanesi remains vulnerable to refinancing risk given its tight liquidity profile in 2020 and 2021. Fitch expects the company to renegotiate and/or extend certain obligations in 2019 and 2020 to accumulate more cash, which was USD3 million in 1Q19, improving its overall liquidity profile. Energia Base Compensation Reduced: Payments to legacy generation units without a PPA in Argentina are determined by a regulatory framework called Energia Base. Resolution 1/2019 in February 2019 reduced capacity payments made to generation companies under Energia Base in order to lower deficits caused by peso depreciation in 2018. Between the end of 2020 and 2022, Albanesi has 300MW of nominal capacity with PPAs under Resolution 220/2007 set to expire. Fitch expects this capacity to become remunerated under Energia Base, which will be a driving factor in annual EBITDA declining by approximately USD30 million over the rating horizon. Heightened Counterparty Exposure: Albanesi depends on payments from CAMMESA, which acts as an agent for an association representing electricity generators, transmission, distribution and large consumers or the wholesale market participants (Mercado Mayorista Electrico). Albanesi is exposed to potential delays in payment from CAMMESA and also to risks in fuel supply, although the latter is mitigated by Albanesi's affiliated gas trading business. CAMMESA has been able to comply with its commercial agreements to provide payments within 51 days, even after the recent Argentinian peso depreciation, but Fitch estimates that due to the company's financial and commercial obligations, it cannot afford prolonged delays in payments. Uncertain Regulatory Environment: Fitch believes Argentina's current economic and political environment increases the uncertainty that the Macri administration will be able to effectively implement the required electricity regulatory tariffs adjustments in order for the system to be self-sustainable. The company operates in a highly strategic sector where the government has a role as both the price/tariff regulator and also controls subsidies for industry players. Fitch assumes the Macri administration continues to be committed to and prioritizes developing a long-term sustainable regulatory environment, moving toward a more unregulated market and reducing the deficit. Legal Uncertainty Surrounding Shareholder: In August 2018, Albanesi's former chairman and principal shareholder Armando Roberto Loson was arrested as part of a federal graft investigation. Mr. Loson, Albanesi's chairman prior to the arrest and head of the family that is the controlling shareholder, was detained together with 10 business executives and former public employees as part of an alleged graft case. Original allegations included collusion and bribery; however, the charges have been lowered to illegal campaign contributions. His son, Armando Loson Jr., now serves as Chairman of the Board. Fitch believes uncertainty remains regarding how the arrest of Mr. Loson will affect the company. DERIVATION SUMMARY Albanesi's (B-/Negative) expected 2019 gross leverage, measured as total debt/EBITDA, is 4.0x, weaker than AES Argentina's (B/Negative) 3.3x, Pampa Energia's (B/Negative) 2.6x and Capex's (B/Negative) 1.2x for 2020, but lower than Genneia's (B/Negative) 4.8x and MSU Energy's (B-/Stable) 7.8x. Similar to the one Albanesi is attempting, MSU Energy is currently executing a combined cycle expansion due first-half 2020 under the same resolutions. Thus its leverage is heightened to finance its expansion. Both MSU Energy's and Albanesi's working capital levels are vulnerable to delays in payments from CAMMESA. ARCOR SAIC: Moody's Rates ARS2MM New Sr. Unsec. Notes Ba3 --------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo assigned a Ba3 rating in the global scale and an Aa1.ar rating in the national scale to Arcor S.A.I.C.'s new senior unsecured notes for up to ARS 2,000 million due January 2021. Proceeds will be used for liability management purposes. The outlook is negative. The assigned Ba3/Aa1.ar ratings to the notes are based on preliminary documentation received by Moody's as of the rating assignment date. Moody's does not expect changes to the documentation reviewed over this period, nor does it anticipate changes in the main conditions that the notes will carry. Should issuance conditions and/or final documentation of the program deviate from the original ones submitted and reviewed by the rating agency, Moody's will assess the impact that these differences may have on the ratings and act accordingly. RATINGS RATIONALE Arcor's Ba3/Aa1.ar ratings are supported by its solid position as one of the largest sweets producers globally and leading manufacturer of cookies, processed food and corrugated cardboard with a strong diversification in revenues and assets overseas including plants, distribution centers and commercial offices mainly in Argentina, Brazil, Chile, Mexico and Peru. At the same time, the ratings consider its solid access to local and foreign capital markets with a long track record of prudent financial policy. Offsetting Arcor's credit strengths is the company's country risk exposure to Argentina as its first largest market. As a result following the revision of the Argentine government's B2 rating outlook to negative from stable on July 12, 2019, Arcor's national scale ratings (NSR) were recently downgraded to Aa1.ar based on the deterioration of the company's overall credit profile, in particular, leverage metrics which rose to 4.2x adjusted debt to EBITDA as of fiscal-year ended December 2018, from 3.7x as in fiscal-year 2017 as a result of the sharp Argentine peso depreciation in 2018 and the company's high portion of US dollar denominated debt. In addition, the company's liquidity profile was also negatively affected by currency depreciation, with cash to short term debt lowering to 44% as of December 2018, from 63% in 2017. Although Arcor's revenue and earnings have trended positively overall, Argentina's recent economic recession, high inflation and political uncertainties affected Arcor's revenue growth in 2018. Moody's expects an increase in revenue for 2019 in line with Moody's inflation expectation at around 40% in 2019 and 30% in 2020, mainly driven by price increases rather than volume growth. Moody's also expects some deterioration in the profitability margin. More specifically, Moody's expects the adjusted EBIT margin to decline to around 7% in 2019 from roughly 9% in 2016 (before inflation adjustment) as high inflation has increased labor costs and currency depreciation has impacted the company's cost structure. Arcor's consolidated liquidity remains tight. The company has available foreign-currency cash balances and short-term investments of around ARS3,609 million ($83 million) as of March 31, 2019, and around ARS13,551 million ($312 million) in adjusted short-term debt, which translates into cash and marketable securities/short-term debt of 26.6%. About 34% of Arcor's total adjusted debt is comprised of short-term debt, which mainly includes some local bonds and bank debt. Although the company has foreign-exchange exposure from US dollar-denominated debt (around 65%-70% of total debt), its revenue from the international business, which represented 33% (around ARS28,953 million) of total revenue for the 12 months ended March 2019, partially mitigates this risk. Moody's expects the company to continue rolling over its short-term debt as it has done historically, given the ample amount of revolving credit available through facilities in different countries, including Argentina, Brazil and Chile. RATING OUTLOOK The negative outlook on Arcor followed the revision of the Argentine government's B2 rating outlook to negative from stable on July 12, 2019. Arcor's creditworthiness cannot be completely de-linked from the credit quality of the Argentine government, and thus it needs to closely reflect the risk that Arcor shares with the sovereign. WHAT COULD CHANGE THE RATING UP/DOWN The ratings could experience upward pressure if Argentina's B2 government bond rating is upgraded. In addition, upward pressure could arise if Arcor accomplishes solid operating performance over the medium term, maintains an adequate liquidity buffer and continues strengthening its international revenue, leading to increasing operating margins and modest financial leverage. Quantitatively, improved credit metrics, with adjusted debt/EBITDA falling well below 1.5x on a sustained basis (compared with 5.6x for the 12 months ended March 31, 2019 -- including IAS29 adjustment first quarter 2019), under the current business configuration could lead to a rating upgrade. Downward pressure on Arcor's ratings could occur if its credit metrics deteriorate because of lagging performance in key markets or because of an aggressive financial policy that would jeopardize liquidity. Quantitatively, a downgrade could occur if adjusted debt/ EBITDA rises above 3.5x over a prolonged period under the company's current business configuration. If growth investments are more aggressive than expected, overexpansion (that is, investments are not matched by near-term earnings growth) could also affect the ratings. Reducing cash and equivalents to below total short-term debt on a sustained basis or lack of a significant contribution to the development of the international business, or both, could also put pressure on the ratings. Finally, the notes' ratings could also be downgraded if Argentina's B2 foreign-currency rating is downgraded. The principal methodology used in these ratings was Procedures Manual to Rate Companies and/or Securities Issued published in January 2019. YPF ENERGIA: S&P Affirms 'B' Issuer Credit Rating, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings affirmed the 'B' ratings on Argentina-based energy generation company YPF Energia Electrica S.A. (YPF Luz) and lowered the company's stand-alone credit profile (SACP) to 'b' from 'b+', given its expectation of higher debt cost to fund its 634 megawatt (MW) expansion, which has weakened the financial metrics. S&P said, "The stable outlook on YPF Luz reflects our view that it will post more than $200 million in EBITDA in 2019 and $300 million in 2020, backed by 1,224 MW in long-term, dollar-denominated contracts. As a result, we expect YPF Luz to post average gross debt to EBITDA below 4.0x and interest coverage ratio below 3.0x, in the next two years. "The 'B' issuer credit and issue-level ratings on YPF Luz reflect our view that it operates under a still weak, although improving, regulatory framework in Argentina. The downward revision of YPF Luz's SACP reflects our updated financial metrics projections, after it issued $400 million notes at a higher interest expense than we were projecting." The company could use the proceeds from the issuance to fully fund the company's capex plan, or for a combination of funding capex and pre-paying existing financial debt. =========== B R A Z I L =========== BRAZIL: Industry Stagnant in First Half of 2019, Says CNI --------------------------------------------------------- Richard Mann at Rio Times Online reports that the first semester of the year saw stagnation in Brazilian industry, according to a survey by the National Confederation of Industry (CNI), released, August 1. The research corroborates the poor performance of industrial activity in Brazil, according to Rio Times Online. "The sector's revenues fell one percent from those of the same period of 2018, hours worked in production remained stable, employment fell slightly by 0.1 percent, the actual salary bill declined by 1.9 percent, and the average actual worker income decreased 1.8 percent compared to the first half of 2018. The average capacity use in the first semester is 0.1 percentage point lower than the same period in 2018," said CNI, the report notes. The June data shows that of all industrial indicators, only turnover recorded a favorable rate; the others retreated, the report discloses. According to CNI, after the 2.2 percent drop recorded in May, the industry's revenues increased 0.3 percent in June compared to May in the non-seasonal series, the report relays. The use of installed capacity fell 0.7 percent compared to May, the report notes. The actual salaries paid decreased 0.7 percent, similar to the drop in the average worker income indicator, which also dropped 0.7 percent in June in relation to May in the non-seasonal series, the report says. The June drop in the actual salary bill reversed the growth recorded in the previous two months and is 0.8 percent lower than in June of last year. The number of hours worked in production fell slightly by 0.1 percent in June compared to May in the non-seasonal series, the report discloses. The survey also shows that employment remained stable in June. The data show that, in the last twelve months, the employment indicator was stable for seven months, dropping four months and growing only one, notes the report. "Industry ended the semester without progress in terms of activity and employment. It is clear that, in addition to the structural, long-term measures required for a new cycle of growth, short-term measures to boost the economy are also urgent and critical. The 0.5 percentage point reduction in the Selic rate was a crucial first step in this direction. There is room for further reductions. Additionally, measures to facilitate and reduce the cost of financing would also be very significant," said CNI economist Marcelo Azevedo, the report adds. As reported in the Troubled Company Reporter-Latin America on May 27, 2019, Fitch Ratings has affirmed Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. BRAZIL: Sees its Oil Production Shrink Over Three Months -------------------------------------------------------- Richard Mann at Rio Times Online reports that oil production in the country dropped 6.4 percent from May to June after rising in the first months of the current year. According to data from the National Oil, Natural Gas, and Biofuels Agency (ANP), 2.557 million barrels of oil were produced in the national fields per day, the report notes. Compared to June last year, the decline has reached 1.3 percent, the report relays. Natural gas production, which totaled 111 million cubic meters per day, also dropped 5.8 percent compared to May and 3.3 percent to June of last year, according to Rio Times Online. The decline in oil and gas production was mainly caused by the stoppage for maintenance of the FPSO Cidade de Mangaratiba platform, operating in the Campo de Lula, the report discloses. Production of the pre-salt layer totaled 1.551 million barrels of oil per day, which represents 60.7 percent of the national total and 62.8 million cubic meters of natural gas per day, 56.6 percent of the national total, the report adds. As reported in the Troubled Company Reporter-Latin America on May 27, 2019, Fitch Ratings has affirmed Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook. PETROLEO BRASILEIRO: Considers Downsizing Logistics Unit -------------------------------------------------------- Reuters reports that Brazilian state-run oil firm Petrobras is studying a mass transfer of employees out of its Transpetro logistics unit, according to a document seen by Reuters, in a sign the company may be gearing up to privatize additional assets. The human resources departments of "Petroleo Brasileiro SA", as the company is formally known, and Transpetro are developing an "action plan for the evaluation and possible return of employees ceded to Transpetro from the parent company," according to the document, dated July 24th, Reuters notes. Reuters says that it is common at Petrobras for employees to be hired by the parent company and later transferred to a subsidiary. Such workers technically remain employed by the parent company and are transferred back to Petrobras if a unit is privatized. A similar process occurred at fuel distribution unit "Petrobras Distribuidora SA", according to two sources familiar with the matter, before it was privatized via share offering this month, the report discloses. Transpetro had 6,435 employees at the end of 2016, 1,090 of whom had been "ceded" to the company by Petrobras, according to the company, the report notes. "After individual evaluations, human resources will consolidate the information and, together with executive managers, come up with a return plan for employees," reads the internal Petrobras document about workers ceded to Transpetro, the report relays. Asked about the plans, Petrobras said that it is "constantly carrying out evaluations of the profile and quantity of its personnel, taking into account goals, competencies and knowledge," the report notes. Petrobras Chief Executive Roberto Castello Branco, who took the reins in January, is working to sell midstream and downstream assets in a bid to reduce debt and sharpen the focus on offshore oil exploration and production, the report notes. In April, Petrobras agreed to sell a collection of gas pipelines to France's Engie SA for US$8.6 billion (R$34.4 billion), the report relays. The firm is also considering the sale of eight refineries, the report discloses. Castello Branco said this would fetch US$15 billion, the report relays. While the refineries are not part of the Transpetro unit, formally known as "Petrobras Transporte SA", Petrobras will be selling a number of associated pipelines and terminals, which are part of Transpetro, the report says. Transpetro operates over 7,500 km (4,660 miles) of oil pipelines, according to its website, and has a fleet of over fifty ships, among other assets, the report relays. It reported net revenue of R$10.4 billion in 2018, contributing about two percent of the parent company's revenue, the report adds. As reported in the Troubled Company Reporter-Latin America on Feb. 25, 2019, S&P Global Ratings raised the stand-alone credit profile (SACP) on Petrobras to 'bb' from 'bb-'. S&P also affirmed its global scale ratings on the company at 'BB-' and its Brazilian national scale rating at 'brAAA'. ===================== E L S A L V A D O R ===================== EL SALVADOR: S&P Puts 'B-' Rating on US$1.097BB Sr. Unsec. Notes ----------------------------------------------------------------- S&P Global Ratings assigned its 'B-' issue rating on El Salvador's US$1.097 billion senior unsecured notes maturing in January 2050. Interest on the notes will be payable semiannually. El Salvador will use the proceeds for general budgetary purposes and to refinance existing debt, including its US$800 million eurobond due in December 2019. The rating on the notes is the same as the long-term foreign currency sovereign credit rating on El Salvador, which reflects our expectation of consistently moderate fiscal deficits and stable debt levels, along with consistent, albeit moderate, economic growth in the next three years. El Salvador's limited monetary flexibility (fully dollarized economy) and its vulnerability as a small and open economy, highly dependent on external financing, are also incorporated in S&P's ratings, as are the limited contingent liabilities arising from its stable banking system. =========== P A N A M A =========== AES PANAMA: S&P Affirms 'BB' ICR Despite Lower Expected Cash Flows ------------------------------------------------------------------ On July 31, 2019, S&P Global Ratings affirmed its 'BB' issuer credit and issue-level ratings on Panama-based electric generation company AES Panama S.R.L. (AES Panama). S&P said, "We expect Panama-based electric generation company AES Panama S.R.L. (AES Panama) to post more aggressive credit metrics in the short term than what we originally expected due to a rise in spot market prices. However, we expect the company's adjusted debt to EBITDA of about 4.5x starting in 2020, in line with the current rating level." The company is currently purchasing a significant portion of electricity on the spot market in order to supply its contracts, given that the 175 megawatt (MW) hydro power plant Changuinola will be out of operations due to an unexpected stoppage until mid-October 2019. "The rating affirmation reflects our view that although AES Panama's debt to EBITDA will deteriorate to almost 6.0x and FFO to debt to about 7% because of the company's exposure to higher-than-expected spot market prices--we expect these ratios to improve starting in 2020 to about 4.5x and 12%, respectively." The improvement will mainly stem from Changuinola's return to operations in mid-October 2019, which should slash AES Panama's exposure to electricity purchases on the spot market, and consequently, its volatility. Panama's severe drought throughout 2019 and Changuinola's stoppage caused spot market prices to rise. Given the existing contract between AES Panama and Changuinola, even without delivering the power, the company has been obligated to make the payments, while it also has to purchase electricity at the spot market in order to honor its contracts, facing higher costs than in previous years. Therefore, S&P is revising its base-case scenario. Main change is related to the average spot market prices in 2019, which S&P now expects will range in the $110 per megawatt hour (MWh) from $90 per MWh previously. ===================== P U E R T O R I C O ===================== AMERICAN PARKING: Plan Confirmation Hearing Set for Aug. 30 ----------------------------------------------------------- Bankruptcy Judge Edward A. Godoy issued an order approving American Parking System, Inc.'s disclosure statement referring to its chapter 11 plan dated June 29, 2019. Acceptances or rejections of the Plan and any objection to confirmation of the plan may be filed 14 days prior to the date of the hearing on confirmation of the Plan. A hearing for the consideration of confirmation of the Plan will be held on August 30, 2019 at 9:30 AM at the United States Bankruptcy Court, Jose V. Toledo Fed Bldg & US Courthouse, 200 Recinto Sur Street, 2nd Floor, Courtroom 1, San Juan, Puerto Rico. The Troubled Company Reporter previously reported that the Plan contemplates the sale of the three parcels of land at Monacillos Ward, Rio Piedras, to the Universidad Interamericana de Puerto Rico, for $2,600,000. Such funds will be used for the payment of the IRS' secured, priority, and unsecured claims, on the Effective Date. A copy of the Disclosure Statement is available at https://tinyurl.com/y327yhyq from Pacermonitor.com at no charge. About American Parking System Headquartered in San Juan, Puerto Rico, American Parking System owns and manages parking lots. The Company previously sought bankruptcy protection (Bankr. D.P.R. Case No. 16-02761) on April 8, 2016. American Parking System, filed a Chapter 11 petition (Bankr. D.P.R. Case No. 19-02243) on April 24, 2019. In the petition signed by Miguel A. Cabral Veras, president, the Debtor estimated $10 million to $50 million in both assets and liabilities. Alexis Fuentes-Hernandez, Esq., at Fuentes Law Offices, LLC, serves as bankruptcy counsel to the Debtor. PUERTO RICO: Has New Governor, But His Stay May Be Short -------------------------------------------------------- Luis Valentin Ortiz at Reuters reports that the handpicked successor to disgraced Puerto Rico Governor Ricardo Rossello was sworn in after Rossello stepped down, but lawyer Pedro Pierluisi said his term as governor might be short as the island's Senate still had to ratify his position. At his first news conference as leader of the bankrupt U.S. territory, Pierluisi said Puerto Rico's Senate would meet to vote on whether to confirm his position as governor, according to Reuters. Pierluisi, a lawyer who formerly advised the despised, federally created board supervising Puerto Rico's bankruptcy, was sworn in even though his appointment had not yet gone before the Senate for a vote, the report notes. Senate President Thomas Rivera Schatz, who calls Pierluisi "the lawyer for Puerto Rico's number one enemy," termed the controversial move "unethical and illegal," the report relays. "The Senate will have its say and we'll know whether I am ratified," Pierluisi, who until last week was a corporate attorney for Washington law firm O'Neill & Borges, told reporters, the report discloses. "If I am not ratified then the second in line, the secretary of justice of Puerto Rico, will take over the governorship," he added. Rossello, a 40-year-old, first-term governor, had tapped Pierluisi as secretary of state, a position that would put him first in line as successor to the governor, the report relays. The island's leading newspaper El Nuevo Dia subsequently reported that Schatz had rescheduled the session to vote on the appointment, the report notes. Hundreds of people, many waving the Puerto Rican flag, chanted and rang bells outside the governor's mansion in the historic center of San Juan, after Rossello's resignation, the report notes. Police on several occasions warned they would fire tear gas to disperse protesters, but by 9.30 p.m. they had yet to do so or move in on demonstrators, the report relays. Pierluisi's instatement capped off a week of political chaos in Puerto Rico after Rossello said he would resign over offensive chat messages that drew around a third of the island's 3.2 million people to the streets in protest, the report recalls. The publication of the messages unleashed anger building for years in Puerto Rico over the island's painful bankruptcy process, ineffective hurricane recovery efforts and corruption scandals linked to a string of past governors, including Rossello's father. The departure of Rossello began a succession battle, with leaders of his ruling party opposing Pierluisi on grounds his work for the control board, known for targeting pensions and bonuses, posed conflicts of interest, the report says. Puerto Rico's House of Representatives approved Pierluisi as secretary of state. Until an appointment was confirmed by both chambers, Schatz and other senators said the next in line for governor, under law, was Justice Secretary Wanda Vazquez, notes the report. "He did not respect the wishes of the people. In fact, he mocked them using new accomplices," Schatz said in a tweet after Rossello announced that Pierluisi would be sworn in, the report notes. "The disrespect, the lying the unethical and illegal behavior went viral," he added. The island's political stability is a concern to the U.S. federal government which has allocated $42.5 billion to hurricane recovery efforts, the report says. Investors are watching its efforts to restructure $120 billion in debt and pension liabilities from the largest ever bankruptcy in the U.S. municipal bond market, the report relays. Puerto Rican law professor Julio Fontanet saw the risk of a "constitutional crisis," which could involve the island's supreme court, given the law, in his opinion, made clear the justice secretary should have been appointed governor, the report notes. "This constitutes a completely unnecessary crisis, the fruit of the irresponsibility and immaturity of Ricardo Rossello," Fontanet said in a television interview, the report adds. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States that's facing a massive bond debt of $70 billion, a 68% debt-to-GDP ratio and negative economic growth in nine of the last 10 years. The Commonwealth of Puerto Rico has sought bankruptcy protection, aiming to restructure its massive $74 billion debt-load and $49 billion in pension obligations. The debt restructuring petition was filed by Puerto Rico's financial oversight board in U.S. District Court in Puerto Rico (Case No. 17-01578) on May 3, 2017, and was made under Title III of 2016's U.S. Congressional rescue law known as the Puerto Rico Oversight, Management, and Economic Stability Act ('PROMESA'). The Financial Oversight and Management Board later commenced Title III cases for the Puerto Rico Sales Tax Financing Corporation (COFINA) on May 5, 2017, and the Employees Retirement System (ERS) and the Puerto Rico Highways and Transportation Authority (HTA) on May 21, 2017. On July 2, 2017, a Title III case was commenced for the Puerto Rico Electric Power Authority ("PREPA"). U.S. Chief Justice John Roberts has appointed U.S. District Judge Laura Taylor Swain to oversee the Title III cases. The Honorable Judith Dein, a United States Magistrate Judge for the District of Massachusetts, has been designated to preside over matters that may be referred to her by Judge Swain, including discovery disputes, and management of other pretrial proceedings. Joint administration of the Title III cases, under Lead Case No. 17-3283, was granted on June 29, 2017. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets, as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at O'Neill & Borges are on-board as attorneys. McKinsey & Co. is the Board's strategic consultant, Ernst & Young is the Board's financial advisor, and Citigroup Global Markets Inc. is the Board's municipal investment banker. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains a case web site at https://cases.primeclerk.com/puertorico Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA, and PREPA. O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), the agency responsible for negotiations with bondholders. The Oversight Board named Professor Nancy B. Rapoport as fee examiner and to chair a committee to review professionals' fees. Bondholders' Attorneys Kramer Levin Naftalis & Frankel LLP and Toro, Colon, Mullet, Rivera & Sifre, P.S.C. and serve as counsel to the Mutual Fund Group, comprised of mutual funds managed by Oppenheimer Funds, Inc., and the First Puerto Rico Family of Funds, which collectively hold over $4.4 billion of GO Bonds, COFINA Bonds, and other bonds issued by Puerto Rico and other instrumentalities. White & Case LLP and Lopez Sanchez & Pirillo LLC represent the UBS Family of Funds and the Puerto Rico Family of Funds, which hold $613.3 million in COFINA bonds. Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, and Jimenez, Graffam & Lausell are co-counsel to the ad hoc group of General Obligation Bondholders, comprised of Aurelius Capital Management, LP, Autonomy Capital (Jersey) LP, FCO Advisors LP, and Monarch Alternative Capital LP. Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera are co-counsel to the ad hoc coalition of holders of senior bonds issued by COFINA, comprised of at least 30 institutional holders, including Canyon Capital Advisors LLC and Varde Investment Partners, L.P. Correa Acevedo & Abesada Law Offices, P.S.C., is counsel to Canyon Capital Advisors, LLC, River Canyon Fund Management, LLC, Davidson Kempner Capital Management LP, OZ Management, LP, and OZ Management II LP (the QTCB Noteholder Group). Committees The U.S. Trustee formed an official committee of retirees and an official committee of unsecured creditors of the Commonwealth. The Retiree Committee tapped Jenner & Block LLP and Bennazar, Garcia & Milian, C.S.P., as its attorneys. The Creditors Committee tapped Paul Hastings LLP and O'Neill & Gilmore LLC as counsel. ================= V E N E Z U E L A ================= PETROLEOS DE VENEZUELA: ICC Dismisses Conoco's $1.5BB Claim ----------------------------------------------------------- Luc Cohen at Reuters, citing a copy of a court ruling, reports that the International Chamber of Commerce's arbitration tribunal has dismissed U.S. oil company ConocoPhillips' $1.5 billion claim against Venezuelan state oil company Petroleos de Venezuela, S.A. (PDVSA). The case related to Venezuela's breaking of a contract with Conoco regarding its stake in an offshore oil project called Corocoro, according to Reuters. Under the arbitration ruling, PDVSA will have to pay only $33.7 million, plus interest, for an outstanding loan to Conoco, according to the ruling, the report notes. The ruling was signed by three New York-based arbitrators and dated July 29. The report relays that the Corocoro case is separate from an $8.7 billion award granted to Conoco by the World Bank's International Center for Settlement of Investment Disputes (ICSID) related to the 2007 expropriation of all of Conoco's projects in the South American country. Jose Ignacio Hernandez, designated by opposition leader Juan Guaido as his chief legal representative abroad, is seeking to annul that award, arguing that the methodology to determine the compensation was "errant," the report notes. Guaido, the leader of the opposition-controlled National Assembly, in January invoked Venezuela's constitution to assume an interim presidency, arguing President Nicolas Maduro's 2018 re-election was illegitimate, the report relays. Maduro calls Guaido a U.S. puppet seeking to oust him in a coup, the report notes. Guaido and Hernandez have prioritized protecting PDVSA's assets abroad, namely U.S. refining subsidiary Citgo, which has come under threat by creditors and other parties seeking compensation from Venezuela's highly indebted government, the report says. Conoco's assets in Venezuela were expropriated in 2007 following the nationalization of the country's oil industry led by then-President Hugo Chavez, the report discloses. The firm left the OPEC nation after it could not reach a deal to convert its projects into joint ventures controlled by PDVSA, the report notes. Reuters relays that the ICC had in 2018 ruled that PDVSA had to pay Conoco $2.04 billion for the early termination of a partnership contract that allowed Conoco to participate in the Hamaca and Petrozuata projects in Venezuela. In a statement, Conoco acknowledged that it "received the final award in the Corocoro ICC arbitration against PDVSA" and said its award totaled $54 million, including interest, the report notes. It said it had received $665 million from PDVSA toward the 2018 ICC ruling, the report adds. Conoco tried to enforce the award by seizing PDVSA's Caribbean assets, but the dispute was resolved last year through a payment agreement, the report notes. Conoco has separately sued PDVSA and Citgo in a Texas court requesting that Citgo's assets be protected from other creditors and not sold until the arbitration process is ultimately resolved, the report says. 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. ********* 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 * * *