/raid1/www/Hosts/bankrupt/TCRLA_Public/200129.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, January 29, 2020, Vol. 21, No. 21
Headlines
A R G E N T I N A
ARGENTINA: Lawyer Builds Creditor Group for Rematch
VICENTIN: In Takeover Talks With Firms Including Glencore
B E R M U D A
SEABRAS 1 USA: Seeks to Hire Bracewell as Legal Counsel
B R A Z I L
COPASA MINAS GERAIS: Moody's Hikes Global CFR to Ba2
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Elections Won't Roil Economy, Banker Says
DOMINICAN REPUBLIC: S&P Assigns BB- Rating on US$2.5BB Unsec. Notes
M E X I C O
ALPHA HOLDING: Moody's Affirms B1 CFR; Alters Outlook to Positive
ALPHA HOLDING: S&P Puts 'B-' LongTerm ICR on Watch Positive
ALPHA HOLDING: S&P Rates Up to $350MM Unsec. Notes 'B+'
PETROLEOS MEXICANOS: Has MXN87.9BB Net Loss for Sept. 30 Quarter
P U E R T O R I C O
WESTERN HOST: Plan & Disclosures Filing Deadline Extended
V E N E Z U E L A
PETROLEOS DE VENEZUELA: Total Debt Remained Unchanged in 2019
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Lawyer Builds Creditor Group for Rematch
---------------------------------------------------
Global Insolvency, citing Bloomberg News, reports that Dennis
Hranitzky, an attorney who helped hedge fund billionaire Paul
Singer win a 15-year bond battle against Argentina, is gearing up
for a potential rematch against the South American nation.
The veteran restructuring lawyer, who joined Quinn Emanuel Urquhart
& Sullivan, said he is building up an Argentina bondholder group
that now totals about 20 funds, according to Global Insolvency.
The creditors are focused on notes that were part of the nation's
2005 and 2010 debt exchanges, the report notes. Those securities
have collective action clauses stating that holders of just a third
of the principal amount of a single bond could veto any
restructuring deal they don't support, the report 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 current president 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.
Moody's credit rating for Argentina was last set at Caa2 from B2
with under review outlook. Moody's rating was issued on Aug. 30,
2019. S&P Global Ratings, in December 2019, raised its foreign
currency sovereign credit ratings on Argentina to 'CC/C' from
'SD/D'. S&P's outlook on the long-term sovereign credit ratings is
negative. Fitch Ratings, in December 2019, upgraded Argentina's
Long-Term Foreign-Currency Issuer Default Rating to 'CC' from 'RD',
and its Short-Term Foreign-Currency IDR to 'C' from 'RD'. DBRS,
Inc. meanwhile downgraded Argentina's Long-Term and Short-Term
Foreign Currency - Issuer Ratings to Selective Default (SD), from
CC and R-5, respectively, also in December 2019.
VICENTIN: In Takeover Talks With Firms Including Glencore
---------------------------------------------------------
Reuters' Hugh Bronstein and Maximilian Heath, citing two sources
close to the negotiations, report that Vicentin is in talks over a
potential takeover deal with firms including European grains giant
Glencore to help resolve a debt crisis, according to two sources
close to the negotiations.
The near 90-year-old firm, which defaulted on payments to suppliers
late last year, has also told grains farmers it owes money to that
it will make a debt restructuring offer in the days ahead, the
sources said, according to Reuters.
The discussions over a deal come after Vicentin was forced to sell
part of its stake in a joint venture with Glencore (GLEN.L) in
December, when spending on expansion caught up with the firm amid a
widening economic crisis in Argentina, the report notes.
The report relates that Glencore upped its stake in that venture,
Renova, whose operations include a major crushing plant on the
banks of the Parana River. Vicentin is now in talks to sell the
rest of its stake in Renova, one of the sources told Reuters.
"Vicentin has decided to sell, but not to declare bankruptcy," said
the source, who asked not to be identified due the sensitivity of
the matter, the report says. "Vicentin has been talking with
Glencore, principally, about a sale," the source added.
Vicentin and Glencore declined to comment.
Vicentin recorded sales of $3.2 billion worth of soy products in
fiscal year 2019, according to a company presentation, excluding
revenue from Renova, the report notes. Argentina is the global top
exporter of soy meal and soy oil, the report relays.
Renova, with over 20,000 tonnes of daily crushing capacity, is one
of the world's top soy processing facilities, the report
discloses.
The company has already met with farmers and suppliers to inform
them that the firm will be ready to make a debt restructuring
proposal in the coming days, the two sources said, the report
relays.
The soy crusher went on a credit-fueled expansion last year before
political uncertainties sparked a market crash and led
international banks to pull back from the South American grains
powerhouse, further pressuring the company, the report notes
Vicentin has more than $300 million in commercial debt and more
than $1 billion in loans from local and international banks, the
report says. Once restructuring talks conclude with farmers, it is
expected to start talks with the banks, the report relates.
The negotiations for the sale of the firm's assets are fluid, with
no resolution expected anytime soon, according to one of the two
sources, speaking with direct knowledge of the situation, the
report notes.
"They are sitting down with farmers and all the other individuals
they owe money to, to keep them informed about the restructuring
proposal," said the source, the report relates.
"They are talking with companies including Glencore about a sale
either of all Vicentin's remaining assets or the 30-plus percent of
Renova that Glencore still does not own. If anyone buys the rest
of Renova, it will be Glencore," the source added.
The two sources did not give details on the potential stakes that
could be sold and valuation of any deal, the report notes.
Argentine crusher Molinos Agro (MOLA.BA) was also mentioned as a
potential suitor. The firm declined to comment.
Vicentin's financial meltdown underscores the challenge facing the
new Peronist government of President Alberto Fernandez as he looks
to revive growth, calm rampant inflation and revamp about $100
billion in sovereign debt, the report relates
Argentine relies heavily on its agricultural sector -- especially
processed soy -- for export dollars, sorely needed to service its
foreign debts with creditors including the International Monetary
Fund (IMF), the report says.
Fernandez, inaugurated in December after thumping business-friendly
predecessor Mauricio Macri in October elections, has raised grains
export taxes and may take additional measures to raise government
revenue from farmers, the report notes.
Vicentin's issues spiked after farmers had looked to sell crops
earlier to processors, hoping to avoid paying increased export
taxes that had been anticipated under the new government, the
report discloses.
"That was the bullet that killed Vicentin. All the farmers came to
the company at once, asking for their money immediately," one of
the sources said, the report adds.
=============
B E R M U D A
=============
SEABRAS 1 USA: Seeks to Hire Bracewell as Legal Counsel
-------------------------------------------------------
Seabras 1 USA, LLC, and Seabras 1 Bermuda Ltd. seek approval from
the U.S. Bankruptcy Court for the Southern District of New York to
hire Bracewell LLP as their legal counsel.
Bracewell will provide these services in connection with the
Debtors' Chapter 11 cases:
(a) advise the Debtors of their rights, powers and duties
under the Bankruptcy Code;
(b) perform legal services to administer the Debtors'
businesses;
(c) assist in the negotiation and documentation of financing
agreements and debt restructurings;
(d) advise the Debtors in the operation of their businesses
to
ensure compliance with both the Bankruptcy Code and applicable
laws
and regulations;
(e) counsel the Debtors, if necessary, in connection with the
formulation, negotiation and consummation of a sale of their
assets;
(f) review the nature and validity of agreements relating to
the Debtors' interests in real and personal property and advise the
Debtors of their corresponding rights and obligations;
(g) advise the Debtors in understanding their rights under the
Bankruptcy Code with respect to their ownership or participation in
foreign investments, partnerships and joint ventures;
(h) advise the Debtors concerning preference, avoidance,
recovery or other actions that they may take to collect and to
recover property for the benefit of the estates and their
creditors;
(i) prepare legal documents and review all financial reports
to be filed in the Debtors' bankruptcy cases;
(j) prepare responses to legal papers that may be filed and
served in the Debtors' bankruptcy cases;
(k) counsel the Debtors in connection with the formulation,
negotiation and promulgation of a plan of reorganization;
(l) work with and coordinate efforts among other professionals
to avoid duplication of effort and guide them in the overall
framework of the Debtors' reorganization; and
(m) work with professionals retained by other parties to
structure a consensual plan of reorganization or other resolution
for the Debtors.
The hourly rates range from $685 to $1,225 for partners, $550 to
$1,200 for of counsel, $425 to $900 for associates, and $230 to
$375 for paralegals.
The primary bankruptcy attorneys anticipated to handle the cases
are:
Robert Burns, Esq. $1,193 per hour
Mark Dendinger, Esq. $1,100 per hour
Joshua Neifeld, Esq. $770 per hour
Finney Abraham, Esq. $565 per hour
The primary attorneys anticipated to work on litigation matters
are:
Rachel Goldman, Esq. $1,000 per hour
Keith Blackman, Esq. $925 per hour
Russell Gallaro, Esq. $845 per hour
Mark Wulfe, Esq. $815 per hour
Grace Condro, Esq. $675 per hour
Galen Stump, Esq. $515 per hour
Oliver Irwin, Esq., and Benjamin Pridgeon, Esq., attorneys at
Bracewell UK, will also provide assistance in matters related to
the Debtors' bankruptcy cases. Messrs. Irwin and Pridgeon will
charge $795 per hour and $675 per hour, respectively.
During the 90 days prior to the petition date, Bracewell and
Bracewell UK received total payments of $271,727. As of the
petition date, Bracewell held a retainer of $100,000.
Robert Burns, Esq., a partner at Bracewell, disclosed in court
filings that his firm is "disinterested" within the meaning of
Section 101(14) of the Bankruptcy Code.
In accordance with Appendix B-Guidelines for reviewing fee
applications filed by attorneys in larger Chapter 11 cases, the
attorney made the following disclosures:
(1) Bracewell and the Debtors have agreed to reduce Mr. Burns'
standard rate by 10 percent, and to reduce Mr. Irwin's and Mr.
Pridgeon's rate by approximately 23 percent.
Bracewell and the Debtors have not agreed to any variations from,
or alternatives to, the firm's standard billing arrangements. The
rate structure provided by the firm is appropriate and is not
significantly different from the rates that it charges for other
non-bankruptcy representations or the rates for other comparably
skilled professionals.
(2) No Bracewell professional has varied his rate based on the
geographic location of the Debtors' bankruptcy cases. The hourly
rates charged by the firm for representing the Debtors are
consistent with the rates that it charges other comparable Chapter
11 clients regardless of the location of the case.
(3) Bracewell represented the Debtors in the 12 months prior
to the petition date. During that representation, the firm raised
its billing rates as it does customarily from time to time. The
material financial terms for the pre-bankruptcy engagement remained
the same as the engagement was on an hourly basis.
(4) Bracewell will coordinate with the Debtors to develop a
prospective budget and staffing plan for the period beginning
December 2019 and ending January 2020.
Bracewell can be reached through:
Robert G. Burns, Esq.
Mark E. Dendinger, Esq.
Josh Neifeld, Esq.
Bracewell LLP
1251 Avenue of the Americas, 49th Floor
New York, NY 10020
Tel: (212) 508-6100
Fax: (212) 508-6101
E-mail: Bob.Burns@Bracewell.com
mark.dendinger@bracewell.com
josh.neifeld@bracewell.com
About Seabras 1 USA
Seabras 1 Bermuda LLC and its wholly-owned subsidiary Seabras 1 USA
LLC own a fiber optic cable system between New York USA and Sao
Paulo Brazil known as Seabras-1. Seabras-1 itself is fully operated
by Seaborn Networks, a developer-owner-operator of submarine fiber
optic cable systems.
Seabras 1 Bermuda and Seabras 1 USA filed Chapter 11 petitions
(Bankr. S.D.N.Y. Lead Case No. 19-14006) on Dec. 22, 2019. In the
petitions signed by CEO Larry W. Schwartz, the Debtors were
estimated to have $50 million to $100 million in assets and $100
million to $500 million in liabilities.
The Debtors tapped Bracewell LLP as bankruptcy counsel; Barbosa
Mussnich Aragao as local counsel; and Stretto as claims agent.
===========
B R A Z I L
===========
COPASA MINAS GERAIS: Moody's Hikes Global CFR to Ba2
----------------------------------------------------
Moody's America Latina upgraded the Corporate Family Ratings and
senior unsecured debt ratings assigned to Companhia de Saneamento
de Minas Gerais (COPASA MG) to Ba2 from Ba3 on the global scale and
to Aa3.br from A1.br on Brazil's national scale. The ratings
outlook was changed to stable from positive. At the same time
Moody's has raised Copasa's baseline credit assessment to ba2 from
ba3.
RATINGS AFFECTED:
Issuer: Companhia de Saneamento de Minas Gerais
Corporate Family Ratings upgraded to Ba2 (Global Scale)
and Aa3.br (Brazilian National Scale) from Ba3/A1.br
Senior unsecured debt ratings upgraded to Ba2/Aa3.br
(Global Scale and Brazil National Scale, respectively)
from Ba3/A1.br
Outlook: changed to stable from positive
RATINGS RATIONALE
The rating upgrade was prompted by solid operating performance that
has led to a maintenance of strong credit metrics -- illustrated by
key ratios of funds from operations (FFO) interest coverage of 6.4x
and FFO to Debt exceeding 37% for the last twelve months ended
September 2019 -- and a solid liquidity profile. Copasa's operating
performance is mainly driven by the successive tariff increases
received on the back of the company's first tariff review in
2016-2017, as well as efficiency gains which contributed to the
4.31% and 8.4% tariff increases granted by the regulator in June
2018 and June 2019, respectively. Moody's considers that the 2018
and 2019 tariff adjustments were in line with parameters that were
set during the tariff review process, which supports the agency's
view of a continued evidence of predictable regulatory framework
under which Copasa operates. That said, Moody's notes the
relatively short track record of the tariff mechanism as the
company is still in the middle of its first tariff cycle
(2017-2021).
The upgrade also considers Copasa's more robust corporate
governance structure, with the creation of an audit committee and a
leverage-base dividend distribution policy which in Moody's view
better protects Copasa's credit profile against the risk of
political interference from its controlling shareholder, the state
of Minas Gerais (B2 stable). While the Minas Gerais state
government retains the ability to exert material influence over the
direction of the company through their control over board
decisions, including executive management nomination, the state's
influence has been very limited over the recent years, even as the
state's liquidity profile continued to deteriorate. This supports
the larger distance between the rating of the company and that of
its controlling parent.
Copasa's Ba2/Aa3.br corporate family ratings reflect (i) strong
business profile with low demand risk and high predictability over
cash flow, (ii) attractive concessions are presenting growth
potential given the large portion of municipalities under water
concession contracts but without access to sewage services and
(iii) moderate leverage with a reported Net Debt / EBITDA metric of
1.8x in September 2019. On the other hand, the ratings also
consider (i) the erosion of water consumption pattern, which
reduces the scope for growth, as the company has yet to restore its
billed volumes which peaked in 2014, (ii) significant capital
expenditures needed to expand coverage of services and reduce water
loss rates, and (iii) recent increase in bad debt provisions, in
particular from the public sector.
RATING OUTLOOK
The stable outlook incorporates the view that Copasa's credit
metrics will remain adequately positioned for the Ba2 category, as
reflected in FFO to Net Debt in the 39%-44% range and FFO interest
coverage of 6.0x-6.8x.
WHAT COULD CHANGE THE RATING UP/DOWN
Copasa's global scale rating is constrained by Brazil's government
bond rating (Ba2 stable), given the highly regulated nature of the
water sector and exposure to the same operating environment as the
sovereign; therefore, a rating upgrade is unlikely at this time.
Conversely, a perception of a material change in the regulatory
framework under which Copasa operates, a disruptive political
interference in the normal course of its business and a
deterioration in the company's credit metrics, such that FFO to Net
Debt ratio falls below 15% and FFO interest coverage ratio remains
sustainably below 3.0 times, could prompt a rating downgrade.
The methodologies used in these ratings were Government-Related
Issuers published in June 2018, and Regulated Water Utilities
published in June 2018.
Headquartered in Belo Horizonte, in the state of Minas Gerais,
Brazil, Copasa is the second largest state water and sewage company
in Brazil, serving 5.3 million water units and 3.7 million sewage
units, spread across 641 municipalities through its 55,624 km water
distribution and 28,031 km sewage collection networks (as of
September 2019). Copasa is controlled by the state of Minas Gerais,
which owns 50.04% of its voting shares while the remaining shares
are listed on the domestic B3's stock exchange. Most of the floated
shares are held by foreign investors.
Copasa has concessions to operate water services in 641
municipalities and sewage services in 311 of them. Copasa provides
water and sewage services to the northern region of the state
through its wholly-owned subsidiary, COPANOR, which accounts for
less than 1% of consolidated revenues. In the last twelve months
ended in September 2019, Copasa reported net operating revenues
(excluding construction revenues) of about BRL4.5 billion, and
EBITDA (as reported by the company) of BRL1.6 billion.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Elections Won't Roil Economy, Banker Says
-------------------------------------------------------------
Dominican Today reports that central banker, Hector Valdez Albizu,
discarded the notion that this year's elections will negatively
impact economic activity.
"He who is betting on that, is going to strike out," said the
official at the Altar de la Patria, where the Central Bank
authorities laid a wreath to mark founding father Juan Pablo
Duarte's birth date, according to Dominican Today.
He said the Dominican Republic will continue to post the highest
economic growth in Latin America this year, the report notes.
"The Central Bank's commitment is to guarantee price stability,
which is what the Constitution indicates, and exchange stability.
We have achieved it and we will maintain it," the report notes.
US Currency
On the price of the dollar, which so far in January has gone from
RD$52.96 to US$53.20, Valdez said the increase is similar to last
year for these dates, which he affirms was 0.5%, 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).
DOMINICAN REPUBLIC: S&P Assigns BB- Rating on US$2.5BB Unsec. Notes
-------------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue rating on Dominican
Republic's US$2.5 billion senior unsecured notes:
-- US$1 billion at an interest rate of 4.50% due in January 2030,
and
-- US$1.5 billion at an interest rate of 5.875% due in January
2060.
The rating on the notes is the same as the long-term foreign
currency sovereign credit rating on Dominican Republic.
S&P's ratings on Dominican Republic reflect its expectation of
solid and above peers' economic growth over the next three years,
which should continue to improve living standards. The ratings also
reflect the track record of a sounder monetary policy framework,
which includes inflation targeting. The ratings are constrained by
the country's institutional weaknesses, increasing general
government debt burden, and still-vulnerable external position that
keeps the sovereign exposed to external shocks.
===========
M E X I C O
===========
ALPHA HOLDING: Moody's Affirms B1 CFR; Alters Outlook to Positive
-----------------------------------------------------------------
Moody's Investors Service affirmed all ratings of Alpha Holding,
S.A. de C.V., including its B1/Not Prime long- and short-term
global local and foreign currency issuer ratings, the B1 long-term
Corporate Family Rating and its B1 long-term foreign currency
senior unsecured debt rating. The issuer level outlook was changed
to positive, from negative.
At the same time, Moody's assigned a B1 long-term foreign currency
debt rating to AlphaCredit's proposed senior unsecured 144A/Reg S
fixed-rate five-year $350 million notes.
Moody's also has withdrawn the outlooks on AlphaCredit's issuer and
senior unsecured ratings for its own business reasons. This has no
impact on the outlook for the entity.
The following AlphaCredit ratings were affirmed:
-- Long-term global local currency issuer rating of B1
-- Short-term global local currency issuer rating of Not Prime
-- Long-term foreign currency issuer rating of B1
-- Short-term foreign currency issuer rating of Not Prime
-- Long-term Corporate Family rating of B1
-- Long-term foreign currency senior unsecured debt rating of B1
-- Outlook, changed to positive from negative
The following rating was assigned to AlphaCredit's proposed foreign
currency 144A/Reg S fixed-rate five-year $350 million proposed
senior notes:
-- Long-term foreign currency senior unsecured debt rating of B1
RATINGS RATIONALE
Moody's affirmed all ratings of AlphaCredit as it acknowledged
management's credit positive decision to decelerate loan growth
from its previously intended targets while focusing its loan
origination on less risky asset classes, including payroll loans,
in response to weakening operating conditions in Mexico. At the
same time, Moody's changed the issuer level outlook on AlphaCredit
to positive, from negative, to reflect the issuance of unsecured
debt, a positive departure from the company's prior secured debt
issuances, and particularly, the recent announcement of a capital
injection, which will bring its capitalization ratio to about 10%
upon conclusion.
On January 26, AlphaCredit announced it will receive a $125 million
capital injection through an investor group led by SoftBank Group
Corp.'s (Ba1 stable) Latin America Fund. The expected capital
injection, which is pending regulatory and third-party approvals,
will bring the company's capitalization ratio, which Moody's
measures as tangible common equity (TCE) relative to tangible
managed assets to about 10%, from a negative 3.6% as of September
2019. The capitalization addresses one of AlphaCredit's main credit
challenges, although Moody's expects the TCE ratio to nevertheless
remain moderate because of still modest profitability. Moody's
notes that in its calculation of AlphaCredit's capitalization,
Moody's deducts the $190 million in contracts and other agreements
with government entities that the company acquired in 2016 (equal
to 22% of total assets as of September 2019). Although these assets
are valued annually by the company's external auditors, their
present value in times of stress would be difficult to ascertain
and could be of limited loss-absorption capacity.
AlphaCredit's loan origination decelerated materially to 15%, from
40%, in the 12 months to September 2019, a level that was well
below the company's initial growth expectation of 60% for 2019.
This credit positive adjustment followed the deceleration of the
Mexican economy and led to AlphaCredit's decision to grow less
risky payroll-linked loans in Colombia. These measures have allowed
AlphaCredit to preserve asset quality, which remain its key credit
strength. Although AlphaCredit plans to accelerate growth over the
next year or two, Moody's is now more confident the company will
adjust growth if asset risks increase as they did in 2019.
Furthermore, Moody's expects the company to focus loan expansion on
relatively lower risk assets in 2020 in the form of payroll-linked
loans in Colombia and loans to small and midsize enterprises (SME)
in Mexico. The Colombia-based loan portfolio now represents 17.5%
of the company's total loans, up from 10.9% in 3Q2018, with loans
to SMEs at 6%, from 4.8% in the same period. As the Mexican economy
grows faster in 2020, Moody's expects AlphaCredit to expand its
payroll-linked consumer loan book to Mexican government employees.
Moody's rating action also incorporates the credit positive
implications of AlphaCredit's proposed debt issuance, which will
allow the company to substantially lower its funding costs as it
repays more expensive debt and increase its long-term funding
sources, with more than 85% of debt eventually maturing in 2022 and
beyond. Moreover, the repayment of a large share of secured debt
will reduce asset encumbrance and limit the possible subordination
of the new senior unsecured debt and other outstanding senior debt,
which Moody's views positively. As such, AlphaCredit's secured debt
will decrease to a range of 15% to 20% of total debt, from almost
50% as of September 2019.
Moody's views earnings generation as being AlphaCredit's main
challenge because sustainable profitability would further
strengthen the company's capital. AlphaCredit has reported
substantial extraordinary costs, higher-than-expected financing
costs, and investments in technology that have hampered its
profitability over the past two years. At 0.6% of total assets,
AlphaCredit's net income remains well below the company's and
Moody's expectations.
However, Moody's outlook change to positive, from negative,
reflects its expected benefits from higher business volumes and
lower financing costs stemming from its unsecured debt issuance and
capitalization. Over the next 12 to 18 months, AlphaCredit also
expects improved efficiency, stemming from the optimization of its
branch network, which management expects could shrink by almost a
third. Efficiency will also benefit from the company's new mobile
sales capabilities, which AlphaCredit expects will be evidenced by
lower origination costs towards end-2020.
WHAT COULD CHANGE THE RATINGS UP/DOWN
In line with the positive outlook, AlphaCredit's ratings could be
upgraded if following the injection of capital and issuance of
unsecured debt, the company is able to improve its profitability
while maintaining good asset quality and continued replenishment of
capital.
The company's ratings could be stabilized if profitability falls
materially, weakening the benefits of AlphaCredit's capital
injection. An increase in nonperforming loans and/or charge-offs,
in line with a deterioration in underwriting quality or increased
risk appetite or in the operating environment, could add downward
pressure on AlphaCredit's ratings. The ratings could also
experience downward pressure if the benefits from the planned
capital injection and/or senior unsecured issuance were to be
diminished materially.
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
ALPHA HOLDING: S&P Puts 'B-' LongTerm ICR on Watch Positive
-----------------------------------------------------------
S&P Global Ratings placed its long-term 'B-' global scale issuer
credit and 'B+' senior unsecured debt ratings on Alpha Holding S.A.
de C.V. on CreditWatch with positive implications.
The rating action follows Alpha Holding's announcement that it will
receive a capital injection for up to $125 million from SoftBank
Latin America Fund. The company will use the proceeds to fund
portfolio growth and daily operations across Mexico and Colombia.
Although the company already signed a formal agreement for capital
injection, approvals from local authorities are still pending.
S&P said, "In our opinion, there's a one-in-two possibility of an
upgrade over the coming months if Alpha Holding's forecasted RAC
ratio improves while the other risk factors remain unchanged.
Nevertheless, we need to evaluate the company's new business
strategy, the impact on its growth prospects, and risk appetite
after the incorporation of its new shareholder. We also need to
analyze the contractual conditions that were agreed with the
investment fund, as well as its permanence in the company.
"Our consolidated group creditworthiness remains unchanged at 'b+',
continuing to reflect Alpha Holding's stable and growing business
operations that mostly involve payroll lending to public-sector
employees and pensioners. It further reflects our expectations of
business stability, reflected in the likely rising operating
revenue and business volumes, and the widening business
diversification. Ratings also incorporate the firm's healthy asset
quality indicators that are in line with its regional peers.
Finally, we base our funding and liquidity assessment on Alpha
Holding's more diversified funding base than the Mexican nonbank
financial institution industry average, and its sufficient
liquidity, even in our stress scenario, to cover financial
obligations and daily operations."
ALPHA HOLDING: S&P Rates Up to $350MM Unsec. Notes 'B+'
-------------------------------------------------------
S&P Global Ratings assigned its 'B+' issue-level rating to Alpha
Holding S.A. de C.V.'s (B-/Watch Pos/--) proposed senior unsecured
notes for up to $350 million with a five-year tenor. The rating on
the notes is at the same level as the group credit profile on the
company because the notes will be unconditionally and irrevocably
guaranteed by all of Alpha Holding's operating subsidiaries and,
consequently, the rating on the notes represents our view of the
consolidated group's creditworthiness.
S&P said, "At the same time, we placed our 'B+' issue-level rating
on the notes on CreditWatch with positive implications to reflect a
possible upgrade of Alpha Holding if the capital injection, after
the approval of local authorities, improves our forecasted
risk-adjusted capital (RAC) ratio, while we analyze the firm's new
business strategy and risk appetite."
Once the transaction is completed, the company's priority debt
(secured debt) will represent slightly less than 5% of Alpha
Holding's adjusted assets for the next 12 months, which supports
S&P's 'B+' rating on the proposed notes. Alpha Holding's
unencumbered assets will also cover more than 1x the company's
rated unsecured debt (including the proposed debt issuance).
Finally, the rating indicates that the notes will rank equally in
right of payment with all of the company's existing and future
senior unsecured notes.
The company will use the proceeds of the issuance mainly to
refinance existing debt. The rating incorporates a hedge against
currency exchange fluctuations on the coupon payments through a
cross-currency swap and a participating swap for the face value.
S&P expects Alpha Holding to complete the hedge within the next 60
days.
With the proposed transaction, the company will improve its debt
maturity profile. Nevertheless, Alpha Holding's funding profile
will be concentrated in market debt, representing about 95% of the
company's total funding base (two international issuances and one
local securitization). Despite this concentration, which compares
negatively with other finance companies S&P rates in the region, it
expects Alpha Holding will actively manage its refinancing risk in
2022 and 2024. S&P expects the stable funding ratio to hover at
about 90% after this issuance is completed.
The use of the proceeds to refinance existing debt provides a
greater liquidity cushion, because the company will free up
collateral from its secured credit facilities. In S&P's base-case
and stress scenarios, Alpha Holding's cash flow analysis remains
positive, and it expects the lender to cover its liquidity needs on
a monthly basis for more than 12 months, even in the absence of
market funding.
S&P said, "Our consolidated analysis reflects Alpha Holding's
stable and growing business operations that mostly involve payroll
lending to public-sector employees and pensioners. It also
incorporates our expectations of business stability, reflected in
the likely rising operating revenue and business volumes, and
widening business diversification. In addition, the rating
incorporates our forecast RAC ratio of about 0.9% by year-end 2020,
given that internal capital generation will start to compensate for
the current amount of intangibles in the company's adjusted capital
base." Finally, the rating accounts for Alpha Holding's relatively
healthy asset quality indicators that are better than those of its
regional peers.
Ratings List
New Rating; CreditWatch/Outlook Action
Alpha Holding S.A. de C.V.
Senior Unsecured B+/Watch Pos
PETROLEOS MEXICANOS: Has MXN87.9BB Net Loss for Sept. 30 Quarter
----------------------------------------------------------------
Petroleos Mexicanos filed its Form 6-K, disclosing a net loss of
MXN87,858,154,000 on MXN350,487,613,000 of total sales for the
three months ended Sept. 30, 2019, compared to a net income of
MXN26,770,585,000 on MXN439,148,498,000 of total sales for the same
period in 2018.
At Sept. 30, 2019, the Company had total assets of
MXN2,031,116,643,000, total liabilities of MXN3,765,700,374,000,
and MXN1,734,583,731,000 in total deficit.
During the nine-month periods ended September 30, 2019 and 2018,
PEMEX recognized a net loss of MXN176,367,306 and MXN23,089,810,
respectively. In addition, PEMEX had a negative equity of
MXN1,734,583,731 and MXN1,459,405,432 as of September 30, 2019 and
December 31, 2018, respectively, mainly due to continuous net
losses and a negative working capital of MXN93,749,122 and MXN
54,666,333, respectively.
PEMEX also has important debt, contracted mainly to finance
investments needed to carry out its operations. Due to its heavy
fiscal burden resulting from the payment of hydrocarbon extraction
duties and other taxes, the cash flow derived from PEMEX's
operations in recent years has not been sufficient to fund its
operating and investment costs and other expenses, so that its
indebtedness has increased significantly, and its working capital
has decreased in part as a result of the drop in oil prices that
began at the end of 2014 and the subsequent oil price fluctuation.
Additionally, at the beginning of 2019, some rating agencies
downgraded PEMEX's credit rating, which could have an impact on the
cost and terms of PEMEX's new debt, as well as contract
renegotiations during the remainder of 2019.
The Company said, "All these matters show the existence of
substantial doubt about PEMEX's ability to continue as a going
concern."
A copy of the Form 6-K is available at:
https://is.gd/U5y4Ts
Petroleos Mexicanos engages in the exploration, exploitation,
refining, transportation, storage, distribution, and sale of crude
oil and natural gas in Mexico. The Company was founded in 1938 and
is based in Mexico City, Mexico.
=====================
P U E R T O R I C O
=====================
WESTERN HOST: Plan & Disclosures Filing Deadline Extended
---------------------------------------------------------
Judge Brian K. Tester granted the motion filed by Debtor Western
Host Associates, Inc. d/b/a Plaza De Armas Hotel requesting
extension of time of 46 days to file the Disclosure Statement and
Plan of Reorganization.
A full-text copy of the order dated Jan. 2, 2020, is available at
https://tinyurl.com/tpsn24v from PacerMonitor.com at no charge.
About Western Host Associates
Western Host Associates, Inc., owns a four-story commercial hotel
building located at 202 San Jose Street, Old San Juan, Puerto
Rico.
The hotel is currently non-operational and is valued by the company
at $1.35 million.
The company previously sought bankruptcy protection on Nov. 14,
2012 (Bankr. D.P.R. Case No. 12-09093) and on May 19, 2011 (Bankr.
D.P.R. Case No. 11-04152).
Western Host Associates sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 18-02696) on May 15, 2018.
In the petition signed by Luis Alvarez, president, the Debtor
disclosed $1.36 million in assets and $4.82 million in
liabilities.
Judge Brian K. Tester oversees the case.
The Debtor tapped Gratacos Law Firm, PSC, as its legal counsel and
the Law Offices of Jose R. Olmo-Rodriguez, as special counsel.
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: Total Debt Remained Unchanged in 2019
-------------------------------------------------------------
Luc Cohen at Reuters reports that Petroleos de Venezuela S.A., said
its financial debt fell less than 0.1% in 2019 from the prior year
to some $34.5 billion, though it remained in default on its bonds
as sanctions freeze it out of the global banking system.
PDVSA has stopped paying interest on most its bonds, and together
with Venezuela's government has accumulated billions of dollars in
late interest payments, according to Reuters.
The company's announcement, in the form of an advisory in a local
newspaper last week, said it owed almost $25.2 billion to
bondholders, up slightly from $24.7 billion at the end of 2018, the
report notes.
PDVSA said its commercial debts with foreign joint venture
partners, including Chevron Corp and China National Petroleum Corp,
dipped to $2.65 billion by the end of 2019, down from $2.66 billion
at the end of the prior year, the report relays.
The company, which has not published a complete annual report since
2017, did not detail other obligations, such as pending debt to
providers, an issue that has contributed to declining output in
recent years, the report notes.
PDVSA defaulted on some of its bonds in 2017 and on the rest of its
bonds in 2019, the report discloses. It is in default on $6
billion in interest and principle, the report relays.
Venezuela reported to OPEC an average crude production of about 1
million barrels per day (bpd) in 2019, its lowest level in almost
75 years amid sanctions imposed by the United States to oust
socialist President Nicolas Maduro, lack of investment capital and
staff, and mismanagement, the report adds.
About PDVSA
Founded in 1976, Petroleos de Venezuela, S.A. (PDVSA) is the
Venezuelan state-owned oil and natural gas company, which engages
in exploration, production, refining and exporting oil as well as
exploration and production of natural gas. It employs around
70,000 people and reported $48 billion in revenues in 2016.
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.
Citgo Petroleum Corporation (CITGO) is Venezuela's main foreign
asset. CITGO is majority-owned by PDVSA. CITGO is a United
States-based refiner, transporter and marketer of transportation
fuels, lubricants, petrochemicals and other industrial products.
However, CITGO formally cut ties with PDVSA at about February 2019
after U.S. sanctions were imposed on PDVSA. The sanctions are
designed to curb oil revenues to the administration of President
Nicolas Maduro and support for the Juan Guaido-headed party.
*********
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 2020. 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 * * *