/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/191115.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, November 15, 2019, Vol. 20, No. 229 Headlines A R G E N T I N A ARGENTINA: Bonds Sink to 36 Cents as President-Elect Stays Mum PROVINCIA SEGUROS: Moody's Withdraws B3 Global IFS Rating B R A Z I L BRAZIL: Adheres to IMF's Special Data Dissemination Standard Plus CEMIG GERACAO: Fitch Hikes IDR to BB- & Alters Outlook to Stable ITAU UNIBANCO: Moody's Gives B1(hyb) Rating on Tier 2 Sub. Notes ITAU UNIBANO: Fitch to Rate Tier 2 Subordinated Notes 'B+(EXP)' PETROBRAS: To Sell All Assets in Uruguay C O S T A R I C A COSTA RICA: Fitch Rates US$1.2 Billion Bonds Due 2031 'B+' D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Hoteliers Reject Rentals Bill M E X I C O CEMEX SAB: Fitch Assigns BB Rating to $1BB Unsec. Notes Due 2029 P U E R T O R I C O DESTINATION MATERNITY: Landlords, Businesses Object to Cash Motion T R I N I D A D A N D T O B A G O YARA TRINIDAD: Ammonia Plant to Close X X X X X X X X LATAM: Value of Exports From LAC Region Declines, IDB Study Finds - - - - - ================= A R G E N T I N A ================= ARGENTINA: Bonds Sink to 36 Cents as President-Elect Stays Mum -------------------------------------------------------------- Sydney Maki and Andres Guerra Luz at Bloomberg News report that investors are souring on how much they can recoup from a potential Argentine default as President-elect Alberto Fernandez procrastinates on plans to save his nation from financial ruin. Argentine dollar bonds due in 2028 now fetch as little as to 36 cents on the dollar -- a drop of about 20 cents since the immediate aftermath of the leftist's surprise primary victory in August, according to Bloomberg News. A mountain of debt, staggeringly high inflation and little sign of who Fernandez will pick for his cabinet -- and which policies they will implement -- have bondholders begging for clarity, Bloomberg News says. "It doesn't inspire confidence for effective crisis management," according to Siobhan Morden, who runs Amherst Pierpoint Securities' Latin America fixed-income strategy from New York. "If there is no obvious growth model and no commitment for fiscal reform, then the burden may shift to bondholders for debt relief," Bloomberg News notes. Bloomberg News relates that the information void surrounding Fernandez's economic policies or specific restructuring plans means some analysts are hesitant to be specific on how much bondholders will ultimately get if Argentina reneges on payments. Morden puts the figure at between 35 and 40 cents, implying a 50% principal haircut, payment in kind and a five-year maturity extension, in a recent note, Bloomberg News says. Juan Manuel Pazos, chief economist at Buenos Aires brokerage TPCG Valores, pegs it at 40 cents, Bloomberg News notes. For Ezequiel Zambaglione, head of strategy at Balanz Capital Valores in Buenos Aires, a "hard default" would push bond prices below 30 cents, while a "friendly negotiation" could mean investors get more than 50 cents, Bloomberg News discloses. Bloomberg News notes that the expectations represent an enormous gap from the closest Fernandez has gotten to addressing investor concerns: In the run-up to the election, he repeatedly referred to Uruguay's 2003 default, which left creditors with a loss of just 20%. In the meantime, while bondholders have begun to prepare for a renegotiation, little can be done without details on how the incoming leader will behave, Bloomberg News relates. Investors understand the "poison chalice" that Fernandez inherited, said Edwin Gutierrez, a London-based head of emerging-market sovereign debt at Aberdeen Asset Management, Bloomberg News discloses. "We never believed the 20% haircut, nor does the market. Bonds wouldn't be here if that were the case." That said, if Fernandez can steer policy without the heavy hand of his running mate, former President Cristina Fernandez, it may be enough to reassure money managers and invite a honeymoon at the beginning of his term, said Ray Zucaro, chief investment officer at RVX Asset Management in Miami, Bloomberg News notes. Should Fernandez clarify his plans and express a desire to work with creditors, "It could turn quickly," said Shamaila Khan, the New York-based director of emerging-market debt at AllianceBernstein, Bloomberg News says. For now, though, Argentina's closely watched century bond is trading at just about 37 cents -- half its value before the August market meltdown, Bloomberg News relays. It's among notes governed by foreign laws, including those due in 2021, 2028 and 2048, that fell to all-time lows on Nov. 13. The 2028 bonds were trading at 35.8 cents as of 1:26 p.m. New York time. Credit-default swaps already imply a 98% probability that Argentina will stop making debt payments within the next five years, compared with 75% right after the primary and 49% just before the vote, Bloomberg News says. Fernandez, who has a dwindling stock of net reserves, is widely expected to renegotiate Argentina's $56 billion line of credit with the International Monetary Fund, Bloomberg News notes. Bad news is still piling up. In a U.K. lawsuit, three hedge funds -- Palladian Partners LP, HBK Master Fund LP and Hirsh Group LLC -- say Argentina restated economic figures to avoid paying out on securities tied to its growth, Bloomberg News relates. The funds want the nation to fork over EUR384 million ($423 million) in compensation, Bloomberg News relays. Fernandez threw his first barbs at U.S. President Donald Trump, expressing an opposing view over political upheaval in Bolivia, Bloomberg News notes. "He has been sounding more radical than expected, and investors started to increase the probability of a hard default," said Balanz's Zambaglione, Bloomberg News adds. About Argentina Argentina is a country located mostly in the southern half of South America. It's capital is Buenos Aires. Alberto Angel Fernandez is the President-elect of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. 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 foreign and local currency sovereign credit ratings for Argentina stands at CCC- with negative outlook. S&P said, "The negative outlook reflects the prominent downside risks to payment of debt on time and in full per our criteria over the coming months amid very complex political, economic, and financial market dynamics." Moody's credit rating for Argentina was last set at Caa2 from B2 with under review outlook. Fitch's credit rating for Argentina was last reported at CC with n/a outlook. DBRS's credit rating for Argentina is CC with under review outlook. S&P, Moody's and DBRS ratings were issued on Aug. 30, 2019; Fitch rating on Sept. 3, 2019. PROVINCIA SEGUROS: Moody's Withdraws B3 Global IFS Rating --------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo, S.A. withdrawn the B3 global local currency and Baa2.ar Argentine national scale insurance financial strength ratings of Provincia Seguros. At the time of the withdrawal, the ratings were under review for downgrade. Moody's has decided to withdraw the ratings for its own business reasons. =========== B R A Z I L =========== BRAZIL: Adheres to IMF's Special Data Dissemination Standard Plus ----------------------------------------------------------------- Brazil has completed the requirements for adherence to the IMF's Special Data Dissemination Standard (SDDS) Plus -- the highest tier of the Data Standards Initiatives. This makes Brazil the first country in Latin America to adhere to the SDDS Plus. Brazil's SDDS Plus data are now posted on the Dissemination Standards Bulletin Board. Mr. Louis Marc Ducharme, Director of the IMF's Statistics Department and Chief Statistician and Data Officer of the IMF welcomed Brazil's adherence and noted that "the dissemination of the new data sets under the SDDS Plus will be invaluable in fostering a deeper understanding and more informed assessments of the performance of Brazil's financial sector, the cross-border-financial linkages, and the vulnerabilities of the economy to shocks." The SDDS Plus builds on the SDDS and its purpose is to assist statistically advanced countries with the publication of comprehensive, timely, and reliable economic and financial data in an environment of continuing economic and financial integration. The Data Standards Initiatives were established in the mid-1990s to enhance member countries' data transparency and to promote the development of sound statistical systems. The need for data standards was highlighted by the financial crises of the mid-1990s and again in the late-2000s, when information deficiencies were seen to play a role. The Data Standards Initiatives also include the SDDS and the Enhanced General Data Dissemination System (e-GDDS). Detailed information on the Data Standards Initiatives can be found on the Dissemination Standards Bulletin Board . CEMIG GERACAO: Fitch Hikes IDR to BB- & Alters Outlook to Stable ---------------------------------------------------------------- Fitch Ratings upgraded the ratings for Companhia Energetica de Minas Gerais and its wholly owned subsidiaries Cemig Distribuicao S.A. and Cemig Geracao e Transmissao S.A. Fitch has also revised Cemig's Rating Outlook to Stable from Positive. Cemig's upgrades reflect the group's improving financial profile as a result of decreasing leverage and an extended debt maturity profile. In addition, the group has shown a better operating performance and cash flow generation due to improvements in its energy distribution business. Fitch expects Cemig to start reporting positive FCF in 2019. Cemig's ratings reflect the company's diversification and large scale of operations, which mitigate business risk. The group is one of the largest electric utilities in Brazil with operations in generation, distribution and transmission. Cemig's ratings also reflect the group's moderate consolidated adjusted leverage, which Fitch expects to remain at around 4.0x on a net debt basis. Fitch analyses Cemig and its subsidiaries' credit profiles on a consolidated basis due to cross default clauses and centralized cash management. The Stable Outlook reflects Fitch's expectation that the company will continue strengthening its capital structure by repaying debt with either internal cash flow generation or asset disposal. Fitch expects Cemig to solidify its capital structure in anticipation of the July 2025 expiration of its Embarcacao and Nova Ponte hydroelectric plants, which currently account for 30% of Cemig GT's installed capacity. This will help avoid repeating the similar situation in 2017, which negatively impacted the company's capital structure, cash flow generation and liquidity position. KEY RATING DRIVERS Favorable Business Profile: Cemig ratings reflect the company's diversification and large scale of operation, which lowers business risk. The company is one of the largest integrated electric utilities in Brazil, distributing electricity to 8.5 million users and operating 6.1 GW of generation installed capacity and 9.8 thousand km of transmission lines. This business diversification lowers operational risks and ads to cash flow stability. Fitch expects Cemig's distribution segment to represent 63% of revenues and 50% of EBITDA by the end of 2019, while generation and transmission should account for 49% of EBITDA. Moderate Leverage: Fitch expects Cemig's consolidated adjusted net leverage to remain at or below 4.0x, which is supportive of the company's current rating. Consolidated net leverage excluding off-balance sheet guarantees to non-consolidated investments is expected to be approximately 3.0x starting in 2019. During the last twelve months (LTM) ended June 30, 2019, Cemig's consolidated net adjusted leverage decreased to 3.9x from 4.6x in 2018, while net leverage without guarantees decreased to 2.9x from 3.7x in 2018. Fitch's adjusted debt for Cemig includes guarantees of BRL5.0 billion to non-consolidated companies and adjusted EBITDA includes dividends received of BRL241 million. Positive FCF expected in 2019/2020: Fitch expects Cemig to report positive FCF of between BRL300 million and BRL400 million in 2019 and 2020 and flat to marginally negative thereafter. FCF will improve over the next two years as a result of operational improvements and recovery of non-manageable costs of BRL1.1 billion. Fitch expects lower cash flow generation from Cemig's generation segment to partially offset improving performance of its distribution segment. The company's consolidated EBITDA will likely remain at BRL4.0 billion level during 2019-2022, which should cover annual capex of approximately BRL1.2 billion-BRL1.5 billion and a dividend payout of 50%. Generation Segment Still Strong: Fitch considers Cemig's robust and predictable performance on the generation segment as key for its consolidated credit profile. Cemig GT expected average annual EBITDA of BRL1.7 billion during 2019-2022 will represent a significant contribution for the group, despite the decrease in margins to 27% from 43% achieved in the past. The company should have the ability to manage its portfolio in terms of uncontracted energy and third-party energy purchases to limit its exposure to the hydrologic risk. Fitch's base case scenario considers an average sales price of BRL231/MWh in the 2019-2020 period, with annual energy sales of 3.1 per average GWh year. Positive Trends in Distribution: Cemig D has been able to capture the positive output of the last tariff review, which propelled the company's distributions EBITDA to BRL1.9 billion for the LTM ended June 2019 from BRL1.5 billion in 2018 and closer to the regulatory EBITDA of BRL2.1 billion. Cemig D's EBITDA improvement is also the result of increased SG&A savings and an average 2.5% increase in demand throughout its concession area. Reduced Business Risk: Fitch considers Brazilian electricity sector risk lower than the average risk of other sectors within the country. Risks vary among segments and credit profiles of distribution companies are linked to volatility in demand, the ability to control manageable costs and secure positive results in periodic tariff reviews. In that sense, Cemig D next tariff review will not occur until 2023, which bodes well for cash flow stability and predictability over the short to medium term. In generation, Cemig GT is not significantly exposed to meaningful concession expiration until July 2025. During 2019-2024, long-term contracts with defined prices provide some cash flow predictability. DERIVATION SUMMARY Cemig's IDRs are lower than other electric energy groups in Latin America such as Enel Americas S.A. (Enel Americas: A-/Stable), Empresas Publicas de Medellin S.A E.S.P. (EPM: BBB/Rating Watch Negative), Grupo Energia Bogota S.A. E.S.P. (GEB: BBB/Stable) and AES Gener S.A. (AES Gener: BBB-/Stable). Excluding Enel Americas, a player with higher geography diversification and present in different countries in the regions, Cemig's business profile is as strong as the others Latam peers, distinguished by the high representativeness of regulated business and some diversification in terms of assets and segments. Cemig's ratings are lower than its regional peers predominately as result of the higher operating environment risk resulting from operational concentration in Brazil (BB-/Stable), while its peers are more exposed to investment countries, mainly Chile (A+/Stable) and Colombia (BBB+/Stable). Compared to Brazilian peers in the power sector, Cemig's credit profile is weaker than Engie Brasil S.A. (Engie Brasil) and Transmissora Alianca de Energia Eletrica S.A. (Taesa), both rated with Local-Currency and Foreign-Currency IDRs of 'BBB-' and 'BB', respectively, due to higher business risk coming from its distribution segment and typically worst operational performance as a state-owned company. In addition, Cemig's financial profile shows higher leverage and weaker liquidity ratios than the other two entities. Taesa operates in the highly predictable transmission segment, while Engie Brasil is the largest private player in the generation segment. In the case of Light S.A. (Light; BB-), the lower scale and relevant dependence on the volatile distribution segment of this company is compensated by a better financial profile. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Average energy consumption growth at Cemig D's captive market to increase 2.5% in 2019-2022; - Collection of BRL518 million related to energy purchase costs (CVA) in 2019 and in 2020; - Cemig D's non-manageable costs fully passed through tariffs; - Average consolidated capex of BRL1.3 billion during 2019-2022; - SAAG put option exercised an paid in cash in 2021 in the amount of BRL535 million; - Dividend payout of 50% of net income; - No further asset sale or acquisitions. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action - Strengthening on the consolidated cash generation; - Consolidated net adjusted leverage below 3.5x on a sustainable basis while maintaining an adequate liquidity profile. Developments That May, Individually or Collectively, Lead to Negative Rating Action - Deterioration of liquidity and reduction in financial flexibility; - Maintenance of net adjusted leverage higher than 5.0x; - Significant operational issues in its main subsidiaries Cemig D and Cemig GT. LIQUIDITY AND DEBT STRUCTURE Improved Financial Flexibility: Cemig group has been able to gradually improve its debt profile by extending its maturity schedule. The proceeds of BRL4.2 billion obtained in the second half of 2019 (BRL3.7 billion from Cemig D's seventh debenture issuance and the BRL625 million from the sale of shares in Light) reduced the group's refinancing needs in 2019 and 2020 to BRL1.9 billion from BRL3.4 billion in June 2019. Fitch believes the group will continue to benefit from improved financial flexibility. Cemig GT plans to raise another BRL3.0 billion, in a transaction that will represent financing cost reduction and incremental improvement in the debt repayment schedule. Fitch expects liabilities management will continue to be a key issue to the group over the next years, in order to reduce the still high average costs of the consolidated debt, which was 9.04% as of June 2019. On June 30, 2019, Cemig group's total adjusted debt amounted to BRL18 billion, including off-balance-sheet debt of BRL5.0 billion, which incorporates put options of BRL536 million, with the balance mainly comprised by debentures of BRL6.4 billion and Cemig GT's eurobonds of BRL5.8 billion to USD1.5 billion. Cash and equivalents of BRL1.4 billion covered the BRL1.9 billion pro forma debt maturing in 2019 and 2020 by 0.7x. The pro forma debt schedule reflects Cemig D's seventh debenture, raised in July 2019, but does not include the proceeds from the sale of shares of Light. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3. ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Cemig Geracao e Transmissao S.A. -- LT IDR; Upgraded to BB- from B+; -- LC LT IDR; Upgraded to BB- from B+; -- National LT Rating; Upgraded to A+(bra) from A-(bra) -- Senior Unsecured LT; Upgrade to BB- from B+ -- Senior Unsecured National LT; Upgraded to A+(bra) from A-(bra) Cemig Distribuicao S.A. -- LT IDR; Upgraded to BB- from B+; -- LC LT IDR; Upgraded to BB- from B+; -- National LT Rating; Upgraded to A+(bra) from A-(bra); Companhia Energetica de Minas Gerais (CEMIG) -- LT IDR; Upgraded to BB- from B+; -- LC LT IDR; Upgraded to BB- from B+; -- National LT Rating; Upgraded to A+(bra) from A-(bra) ITAU UNIBANCO: Moody's Gives B1(hyb) Rating on Tier 2 Sub. Notes ---------------------------------------------------------------- Moody's Investors Service assigned a B1(hyb) rating to the proposed USD-denominated contractual non-viability Tier 2 subordinated notes to be issued by Itau Unibanco Holding S.A. (Cayman Islands) under its $100 billion Global Medium term Note Program. The notes will be due in 2029 with a call option in five years. The capital securities are Basel III-compliant, and their terms and conditions have been defined so as to qualify the notes for treatment as Tier 2 capital pursuant to Brazilian regulation. RATINGS RATIONALE The B1(hyb) rating assigned to the new Tier 2 subordinated notes is positioned two notches below the ba2 adjusted baseline credit assessment (adjusted BCA) of Itau Unibanco S.A (IU), in line with Moody's standard notching guidance for contractual non-viability subordinated debt with a full or partial principal write-down triggered at or close to the point of non-viability. IUH is the holding company of IU, which contributes 99% to the holding's earnings. As such, debt obligations at the holding company incorporate their structural subordination to IU's senior debt obligations, which are rated (P)Ba2. The B1(hyb) assigned to IUH's new contractual non-viability Tier 2 notes reflects the higher probability of default related to the potential that the principal and/or interest payment could be written down in the event of the bank's failure. The B1(hyb) assigned to the proposed Tier 2 notes reflects the risk of a full or partial write-down of principal in the event that (i) IUH's common equity Tier 1 ratio falls below 4.5%, (ii) the bank receives a capital injection from government funds, (iii) the Central Bank of Brazil makes a discretionary determination that a write-down is necessary, or (iv) the Central Bank of Brazil intervenes in the bank or establishes a special administrative regime at IUH or IU. As with IUH's other ratings, the instrument rating does not incorporate any uplift from either affiliate or government support. This is because the purpose of the subordinated notes is to provide loss absorption and improve the ability of authorities to conduct a smooth resolution of troubled banks. For this reason, Moody's views government support for these instruments as unlikely and the agency therefore attributes only a low probability to a scenario where the government would support this debt class. The B1(hyb) rating is positioned one notch below the Ba3 rating assigned to IUH Cayman's existing plain vanilla Tier 2 subordinated debt due between 2020 and 2023. Those outstanding debts were issued under Basel II rules, and unlike the new notes, do not have a contractual provision for equity conversion or principal write down. IU's ba2 baseline credit assessment (BCA) reflects the bank's strong earnings recurrence resulting from Itau's well -established position in diversified businesses, which ensures pricing power and scale. For the first nine months of 2019, IUH reported net income to tangible assets of 1.5%, reflecting the expansion of its retail banking activities, supported by more favorable credit risk conditions. The low interest rates and inflation, and the gradual economic recovery also led to IUH growing the share of loans to small and very small companies and consumer products. Combined with lower funding costs, the higher-yielding loans supported margins, helping offset pressures from increasing competition on fee-based businesses, particularly in card acquiring and asset management. Asset quality has remained stable in the quarter, with problem loans at 2.9% of total loans, backed by conservative reserve levels of 6.2% of total loans. Accelerating loan growth, at the pace of 9.3% year-over-year, and higher dividend payout in the quarter pressured capitalization, with Moody's tangible common equity ratio declining to 8.97%, from 9.65% in previous quarter, however, remaining adequate to support further loan growth. Moody's believes IUH's exposure to environmental risks is low, consistent with its general assessment for the global banking sector. IUH's exposure to social risks is moderate, consistent with Moody's general assessment for the global banking sector. As well, governance risks are largely internal rather than externally driven. Moody's does not have any particular concerns with IUH's governance. WHAT COULD MOVE THE RATINGS -- UP/DOWN The ratings of the Tier 2 notes are notched from IU's adjusted BCA. As such, the ratings of the securities will move in tandem with IU's adjusted BCA, which does not incorporate any affiliate support. IU's ratings have a stable outlook and is currently constrained by Brazil's sovereign debt rating of Ba2, with stable outlook. IU's BCA could be upgraded if Brazil's sovereign rating is upgraded, and if the bank maintains strong asset quality, capital and profitability metrics supporting a continued strengthening in its loss-absorbing capital buffers. Conversely, the rating assigned to the Tier 2 notes would face downward pressure if Brazil's sovereign rating is downgraded or if IU's asset quality, capital and profitability weaken materially. LIST OF AFFECTED RATINGS The following rating was assigned to Itau Unibanco Holding S.A. (Cayman Branch): Foreign Currency Subordinate Bond Rating, assigned B1(hyb) PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks published in August 2018. Itau Unibanco Holding S.A. is headquartered in Sao Paulo, and is the bank-holding company of Itau Unibanco financial conglomerate. IUH had consolidated assets in the amount of BRL1,738.4 billion ($417.3 billion) and shareholders' equity of BRL138.5 billion ($33.3 billion) as of September 30, 2019. ITAU UNIBANO: Fitch to Rate Tier 2 Subordinated Notes 'B+(EXP)' --------------------------------------------------------------- Fitch Ratings assigned an expected rating of 'B+(EXP)' of Itau Unibanco Holding's Tier 2 subordinated notes. The size of this issuance through IUH's Grand Cayman Branch is yet to be determined. The notes have a 10-year tenor, but may be redeemed in whole at the option of the Issuer on the fifth anniversary of the issuance. Interest rate frequency will be semi-annual. The net proceeds of the Tier 2 subordinated notes will be used for general corporate purposes. According to the draft terms, the notes are U.S. dollar subordinated liabilities, have no coupon flexibility, coupons must be paid and cannot be deferred; and are subject to permanent partial or full write-off upon the occurrence of a non-viability event as determined by the Brazilian regulator or if IUH's Common Equity Tier 1 capital falls below 4.5% of its risk-weighted assets. The final rating is subject to the receipt of final documentation conforming to information already received by Fitch. KEY RATING DRIVERS The notes are rated two notches below IUH's Viability Rating (VR) of 'bb'. The notching is driven by the subordinated status and the expected high loss severity of the notes. No notching for non-performance is applied, because there is no coupon flexibility (i.e., coupons must be paid as they are not deferrable and the write-off trigger is close to the point of non-viability. As a result, Fitch believes that the incremental non-performance risk is not material from a rating perspective. IUH expects that these securities qualify as Tier 2 (T2) regulatory capital in accordance with Resolution 4192, subject to the Central Bank of Brazil's approval. RATING SENSITIVITIES As the notes are two notches below IUH's anchor, their rating is primarily sensitive to a change in the VR. The two-notch difference will likely be maintained under most circumstances, in the event of a change in IUH's ratings. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. PETROBRAS: To Sell All Assets in Uruguay ---------------------------------------- Rio Times Online reports Petrobras announced on Nov. 12, that it has begun to promote the potential sale of its fuel, lubricant and fertilizer distribution businesses in Uruguay. According to the report, Petrobras stated that its aim was to sell 100 percent of shares held in Petrobras Uruguay Sociedad Anonima de Inversiones (PUSAI), a holding company subsidiary, and in Petrobras Uruguay Distribuicion S.A. (PUDSA), an operating company in the fuel distribution segment. According to the state-owned company, "this operation is consistent with the improvement of our portfolio and the company's capital allocation, with a view toward the generation of added value for our shareholders," the report notes. About Petrobras Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian Petroleum Corporation - Petrobras) is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. Petrobras control significant oil and energy assets in 16 countries in Africa, the Americas, Europe and Asia. But, Brazil represents majority of its production. The Brazilian government directly owns 54% of Petrobras' common shares with voting rights, while the Brazilian Development Bank and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control 5%, bringing the State's direct and indirect ownership to 64%. A corruption scandal was uncovered in 2014 that involved Petrobras. The scandal related to money laundering that involved Petrobras executives. The executives were alleged to get received kickbacks from overpriced contracts, to the tune of about $3 billion in total. 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'. =================== C O S T A R I C A =================== COSTA RICA: Fitch Rates US$1.2 Billion Bonds Due 2031 'B+' ---------------------------------------------------------- Fitch Ratings assigned a 'B+' rating to Costa Rica's USD1.2 billion bonds maturing 2031. The bonds maturing in 2031 carry a coupon of 6.125%. Costa Rica's government also added USD300 million to the bonds maturing in 2045, which carry a coupon of 7.158%. Proceeds from the issuance will be used for general budgetary purposes. KEY RATING DRIVERS The bond ratings are in line with Costa Rica's Long-Term Foreign Currency Issuer Default Rating of 'B+'. RATING SENSITIVITIES The bonds are sensitive to any change in Costa Rica's Long-Term Foreign Currency IDR. Fitch affirmed Costa Rica's Long-Term Foreign Currency IDR at 'B+' with a Negative Outlook on Oct. 30, 2019. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Hoteliers Reject Rentals Bill ------------------------------------------------- Dominican Today reports that the National Hotels and Restaurants Association (Asonahores) and the Institutionalism and Justice Foundation (Finjus) said they oppose the bill for the Rentals and Real Estate Law that includes those properties that form a commercial premise. After a meeting with the Senate Justice Commission, Asonahores vice president, Andres Marranzini, considered that the aspects related to commercial rents would already be regulated in the Commercial Code and the Civil Code, so he considered it necessary that they are beyond the scope of the bill, according to Dominican Today. "Legislation should focus on housing," Marranzini said, the report notes. Finjus vice president, Servio Tulio Castanos Guzman said there's a need for a "restructuring" of the bill to focus its content only on homes and leave out of its regime rentals for industrial or tourist uses, the report adds. 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). =========== M E X I C O =========== CEMEX SAB: Fitch Assigns BB Rating to $1BB Unsec. Notes Due 2029 ---------------------------------------------------------------- Fitch Ratings assigned a 'BB' rating to CEMEX S.A.B. de C.V.'s USD1 billion senior secured notes due 2029. Proceeds from the notes will be used for general corporate purposes, including liability management. The guarantors for the notes will be CEMEX Mexico, S.A. de C.V., CEMEX Concretos, S.A. de C.V., Empresas Tolteca de Mexico, S.A. de C.V., New Sunward Holding B.V., CEMEX Espana, S.A., Cemex Asia B.V., CEMEX Corp., CEMEX Finance LLC, Cemex Africa & Middle East Investments B.V., CEMEX France Gestion (S.A.S.), Cemex Research Group AG and CEMEX UK. KEY RATING DRIVERS Strong Business Position: CEMEX is one of the world's largest cement producers, selling 69 million metric tons of cement during 2018. It is the leading cement producer in Mexico and one of the top cement producers in the U.S. CEMEX also has a large global presence in ready mix and aggregates, with sales of 53 million cubic meters of ready mix and 149 million metric tons of aggregates in 2018. CEMEX's main geographic markets, in terms of EBITDA, include Mexico (42%), Central and South America (15%), the U.S. (23%), Europe (13%), and Asia, Middle East and Africa (7%). Challenging Market in Mexico: Fitch expects cement demand to contract by high single digits in 2019 due to a severe contraction in construction activity. Demand in 2020 is likely to remain sluggish as economic growth should remain slow with reduced prospects for cement-intensive infrastructure spending. The weakening construction activity has been triggered by a decline in business confidence and uncertainty in economic policy as well as paralyzed construction activity in Mexico City. A more pronounced contraction in Mexican cement demand could increase price competition and pressure CEMEX's cash flow, which could result in negative rating actions. Steady U.S. Market: Spending on highway and street construction should increase to near mid-single digits in 2020 as the benefits of the long-term highway bill and states' initiatives to find additional funding for highway projects lead to continued spending. Infrastructure spending measures in some of CEMEX's key states, such California and Texas, should support stable levels of cement demand. At the federal level, the budget deal signed in February 2019 included a 2% increase to USD45 billion for the federal-aid highway obligation ceiling. Fitch expects new home construction to be relatively flat in 2019 and in 2020, compared with 3.3% in 2018. Private nonresidential construction is not projected to grow materially. Weak EBITDA Generation: CEMEX's EBITDA remained flat in 2017-2018 at USD2.5 billion. EBITDA growth in Mexico and the U.S. offset declines in South America and Central America, where EBITDA dropped 15% mainly due to more competition in Panama and Colombia. Fitch does not forecast CEMEX's EBITDA to grow materially in the near term, as projected expansion in U.S. EBITDA will not be sufficient to offset about USD300 million of lost EBITDA in the Mexican market in 2019, which is not projected to recover materially. FX Exposure: CEMEX reported 92% of total debt was denominated in U.S. dollars or euros, compared with about 35% of EBITDA generated in hard currency during 2018. CEMEX's main hard currency contributors are the company's operations in the U.S., the U.K. and in several euro-based countries. Various fuel and energy prices, which tend to be dollar-denominated, are an important portion of cement production costs. CEMEX employs hedging instruments to mitigate currency risk in costs and revenues. The company has historically been successful in maintaining U.S. dollar prices after steep currency depreciation in Mexico, its main market. DERIVATION SUMMARY CEMEX's ratings reflect its diversified business position across several large markets (notably Mexico, the U.S. and several European countries), its vertical integration and economies of scale, its improving credit profile and its positive FCF. CEMEX is the leading cement producer in Mexico. The company is also one of the top cement producers in the U.S. and the largest cement producer in Spain. CEMEX's closest comparisons are large global cement producers such as LafargeHolcim Ltd. (BBB/Stable) and HeidelbergCement AG (BBB-/Stable), with whom CEMEX competes in several markets. LafargeHolcim has the broadest geographic diversification, with operations spanning Europe, North America, the Middle East and Africa, Latin America and Asia, with no single region representing more than 25% or less than 18% of EBITDA. This compares with HeidelbergCement at 35% of EBITDA generated in the U.S. and Canada, while its exposure to Europe is 34% and Asia is 20%. Latin America is CEMEX's largest region, representing about 60% of EBITDA, of which approximately 40% is generated in Mexico. The U.S. represented about 20% of CEMEX's EBITDA, with Europe at close to 15% and, to a lesser extent, contributions from Israel, Egypt and the Philippines. CEMEX's broader geographic diversification and larger scale compare well with regional building materials companies such as Martin Marietta Materials, Inc. (BBB/Stable) and cement producers Votorantim Cimentos S.A. (BBB-/Stable) and Intercement Participacoes S.A. (B/Stable). Votorantim Cimentos, which has a dominant position in Brazil and operations in the U.S. and Canada and throughout the world, has a smaller scale and is not a direct peer, as its rating is tied to that of the Votorantim S.A., which includes mining, utilities and financial services subsidiaries. Martin Marietta is focused in the U.S. and the Caribbean. Intercement's portfolio is weighted heavily toward volatile, emerging market countries such as Brazil, Argentina, Paraguay and Mozambique, which leads to much greater cash flow uncertainty and higher exposure to FX risk than those of CEMEX. From a financial perspective, CEMEX's ratings reflect its weaker credit metrics relative to its global peers, which are rated higher. Its net adjusted debt to EBITDA ratio is projected to trend toward 4.0x, which is high for a 'BB' rated cement company with a global presence. CEMEX's global scale, business position and access to funding are all positive factors. CEMEX's FFO fixed-charge coverage is projected to trend toward 3.0x, which is slightly below the 3.5x expected for a typical 'BB' rated building materials issuer. KEY ASSUMPTIONS -- U.S. cement sales volumes increase in the low single digits in 2020; -- Consolidated sales volume growth in the low single digits over the intermediate term; -- EBITDA at around USD2.1 billion in 2019 and 2020; -- Capex of approximately USD900 million in 2020; -- Neutral FCF generation in 2020; -- Mexican peso/U.S. dollar exchange rate does not strengthen above 20:1. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action -- Net debt/EBITDA around 3.5x; -- Rising cement demand in international markets combined with robust cash flow generation in Mexico and the U.S. that leads to EBITDA expectations significantly above USD2.5 billion; -- A meaningful strengthening of CEMEX's business position in markets outside Mexico that leads to expectations of growing operating cash flow. Developments That May, Individually or Collectively, Lead to Negative Rating Action -- A reduction in cement demand expectations in Mexico or the U.S. that leads to prospects of net debt/EBITDA sustained significantly above 4.0x. -- Expectations of a pronounced deterioration in Mexico's economic environment that leads to a material contraction in EBITDA prospects LIQUIDITY Adequate Liquidity: Cemex's FCF is projected to be neutral in 2019 and modestly positive in 2020 and absent asset sales its deleveraging is expected to be limited. Positively, CEMEX has shown increasing access to bank debt and capital markets, as shown by successful debt refinancing in 2016 and 2017, which totaled approximately USD4.0 billion in bank debt and USD3.7 billion in capital market debt, including EUR400 million of notes issued in March 2019 and USD1 billion issued in November 2019. Fitch expects Cemex to continue to manage its debt maturities. The company had USD1.1 billion in committed credit facilities maturing 2022 as of September 2019. FULL LIST OF RATING ACTIONS Fitch has assigned the following rating: CEMEX, S.A.B. de C.V. -- Senior secured notes due 2029 'BB'. Fitch currently rates CEMEX as follows: CEMEX, S.A.B. de C.V. -- Long-Term Foreign-Currency and Long-Term Local-Currency IDRs 'BB'; -- Senior secured notes due 2024, 2025 and 2026 'BB'; -- National scale Long-Term Rating 'A+(mex)'; -- National scale Short-Term rating 'F1(mex)'. The Rating Outlook is Stable. CEMEX Materials LLC, a limited liability company incorporated in the U.S. -- Senior secured notes due 2025 'BB'. CEMEX Finance LLC, a limited liability company incorporated in the U.S. -- Senior secured notes due 2024 'BB'. C5 Capital (SPV) Limited, a British Virgin Island restricted purpose company C8 Capital (SPV) Limited, a British Virgin Island restricted purpose company C10 Capital (SPV) Limited, a British Virgin Island restricted purpose company C-10 EUR Capital (SPV) Limited, a British Virgin Island restricted purpose company -- Senior secured perpetual notes 'BB'. ===================== P U E R T O R I C O ===================== DESTINATION MATERNITY: Landlords, Businesses Object to Cash Motion ------------------------------------------------------------------ Atlanta Outlet Shoppes, LLC; BFO Factory Shoppes LLC; Bluegrass Outlet Shoppes CMBS, LLC; El Paso Outlet Center CMBS, LLC; and Westfield, LLC - landlords to Destination Maternity and debtor affiliates, jointly filed an objection to the Debtors' Motion to use cash collateral, seeking payment of unpaid Stub Rent. The Landlords complain about the Lenders receiving waivers with respect to Sections 506(c) and 552(b) of the Bankruptcy Code, which, if granted, would take effect well in advance of any Stub Rent payments, Susan E. Kaufman, Esq., counsel to the Landlords at The Law Office of Susan E. Kaufman, LLC, points out. A copy of the Atlanta Objection is available for free at: https://is.gd/VpYA78 In separate filings, other parties-in-interests also objected to the Debtors' cash collateral motion, as follows: * Taubman Landlords; * Brookfield Property REIT Inc., Gregory Greenfield & Associates, Ltd., Hines Global REIT, Inc., Jones Lang LaSalle Americas, Inc., Regency Centers, L.P., SITE Centers Corp., and Turnberry Associates; * KIR Pasadena L.P. And KIR Amarillo L.P.; * Cafaro-Peachcreek Joint Venture Partnership d/b/a Millcreek Mall, Meadowbrook Mall Company, dba Meadowbrook Mall; and Spotsylvania Mall Company dba Spotsylvania Towne Centre; and * Simon Property Group, Inc. About Destination Maternity Destination Maternity is a designer and omni-channel retailer of maternity apparel in the United States, with the only nationwide chain of maternity apparel specialty stores, as well as a deep and expansive assortment available through multiple online distribution points, including our three brand-specific websites. As of August 3, 2019, Destination Maternity operated 937 retail locations, including 446 stores in the United States, Canada and Puerto Rico, and 491 leased departments located within department stores and baby specialty stores throughout the United States and Canada. It also sells merchandise on the Internet, primarily through Motherhood.com, APeaInThePod.com and DestinationMaternity.com websites. Destination Maternity sells merchandise through its Canadian website, MotherhoodCanada.ca, through Amazon.com in the United States, and through websites of certain of our retail partners, including Macys.com. Destination Maternity's 446 stores operate under three retail nameplates: Motherhood Maternity(R), A Pea in the Pod(R) and Destination Maternity(R). It also operates 491 leased departments within leading retailers such as Macy's(R), buybuy BABY(R) and Boscov's(R). Generally, the company is the exclusive maternity apparel provider in its leased department locations. Destination Maternity and its two subsidiaries sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 19-12256) on Oct. 21, 2019. As of Oct. 5, 2019, Destination Maternity disclosed assets of $260,198,448 and liabilities of $244,035,457. The Hon. Brendan Linehan Shannon is the case judge. The Debtors tapped Kirkland & Ellis LLP as legal counsel; Greenhill & Co., LLC as investment banker; Landis Rath & Cobb LLP as local bankruptcy counsel; Hilco Streambank LLC as intellectual property advisor; Prime Clerk LLC as claims agent; and Berkeley Research Group, LLC as restructuring advisor. BRG's Robert J. Duffy has been appointed as chief restructuring officer. ===================================== T R I N I D A D A N D T O B A G O ===================================== YARA TRINIDAD: Ammonia Plant to Close ------------------------------------- Trinidad Express reports that YARA Trinidad Ltd (YTL) intends to close one of the three ammonia plants that it operates on the Point Lisas Industrial Estate by December 31 2019. In a statement, the Norwegian petrochemical concern said the plant, which is wholly owned by the parent company, is one of the company's smallest ammonia plants, with an annual production capacity of approximately 270,000 tons ammonia, according to Trinidad Express. The plant was originally commissioned in 1959, 60 years ago. Yara said that in addition to small scale, the plant also has a lower energy efficiency than Yara's average, the report notes. In the statement Yara said: "Over the last three years, YTL has implemented a focused strategic response to a number of structural challenges occurring in the ammonia market. Following a thorough review the company is left with no choice but to cease operating the Yara plant. As a result, steps have been taken to safely shut down the plant in the coming weeks and thereafter carry out a mothballing and blinding of the asset, the report notes. "This decision comes after several negotiating sessions with The National Gas Company of Trinidad and Tobago (NGC), which failed to reach an agreement that could sustain the operation of the Yara plant," the report discloses. Yara said it has commenced discussions with the OWTU to assist in the mitigation of the impact to affected employees, the report relays. While the Yara statement made no reference to the number of jobs that are likely to be lost as a result of the closure, reports from Point Lisas indicate that up to 60 employees are likely to be retrenched, the report notes. In a statement, state-owned NGC said it noted the decision by YTL to cease operations of the ammonia plan, the report relays. The gas aggregator recognised Yara as being a long-standing customer of NGC and one of the earliest occupiers of the Point Lisas Industrial Estate starting with commercial operations from 1966, the report notes. NGC said: "Like Yara Trinidad Limited, NGC has also felt the effects of the volatile and challenging environment currently facing both the local and global energy sector. NGC has used its best efforts to mitigate the effects of these challenges on its valued customers on the Point Lisas Industrial Estate, the report relates. "Such efforts have included securing gas from the upstream for the future; improving stability and reliability of supply; buffering downstream from upstream disturbances; focusing on energy efficiency initiatives; playing an active and visible role in finding solutions to the challenges in various forums, including PLEA (with all midstream and downstream CEOs); active participation at local and international energy conferences, shaping discussions on marginal fields and ensuring greater collaboration with the GORTT and all stakeholders in the gas value chain; while reducing claims through commercial resolution amongst others," NGC added. NGC also said it is in advanced stages of negotiations for renewal agreements with other customers on the Point Lisas Industrial Estate including two affiliate ammonia plants of Yara Trinidad Limited, the report relays. =============== X X X X X X X X =============== LATAM: Value of Exports From LAC Region Declines, IDB Study Finds ----------------------------------------------------------------- RJR News reports that a new study by the Inter-American Development Bank (IDB) has found that the value of exports from Latin America and the Caribbean (LAC) fell 1.3 per cent in the first half of 2019, compared with the same period last year. It is urging the LAC countries to increase non-traditional exports, particularly services with high-added value, according to RJR News. The study, which analyses trade flow trends in the region, notes that the value of exports of goods from the region had grown on average 8.8 per cent in 2018, the report notes. The IDB says the synchronized slowdown of advanced and emerging economies and the contraction of the terms of trade in the region indicate that Latin America needs an insurance policy to protect itself from external risks, the report adds. ********* 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 * * *