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/raid1/www/Hosts/bankrupt/TCRLA_Public/200131.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, January 31, 2020, Vol. 21, No. 23 Headlines A R G E N T I N A ARGENTINA: Senate to Debate Bill on Debt Restructuring B O L I V I A BOLIVIA: Interim Government Gets Minor Facelift Ahead of Elections B R A Z I L BANCO CITIBANK: Moody's Affirms Ba3 LongTerm Bank Deposit Rating C O L O M B I A AVIANCA HOLDINGS: Restructuring Going Well, Ruling Out Bankruptcy D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Remittances, Exports Cushioned Tourism Plunge J A M A I C A JAMAICA: Fitch Affirms B+ Foreign Curr. IDR, Alters Outlook to Pos. M E X I C O GFMEGA: S&P Assigns 'BB' LongTerm ICR, Outlook Negative P U E R T O R I C O ADVENTURE FITNESS: To Seek Plan Confirmation April 1 BAHIA DEL SOL: Triangle Asks Time to Finalize Deal on Sale JC PENNEY: Egan-Jones Withdraws 'C' Commercial Paper Rating V E N E Z U E L A VENEZUELA: Congress Approves $20 Million for Foreign Litigation - - - - - ================= A R G E N T I N A ================= ARGENTINA: Senate to Debate Bill on Debt Restructuring ------------------------------------------------------ The Associated Press reports that the Chamber of Deputies voted overwhelmingly to approve a bill to restructure the Argentine government's $100 billion debt, which officials say is unpayable amid a deep recession that has reawakened old fears of financial crises. With the support of the main opposition parties, the government of President Alberto Fernandez saw the measure pass 224-2 while leftist groups opposing the legislation protested outside congress, according to The Associated Press. The bill now goes to the Senate for debate. The center-left government's handling of the bill in a special session highlighted the importance it attaches to the South American country's huge debt to the International Monetary Fund and private creditors, the report relays. Economy Minister Martin Guzman has warned that Argentina needs "a sustainable solution" to paying its debt, the report notes. "Today the situation is critical, the debt burden cannot be sustained," he added. Argentina periodically faces financial crises and liquidity problems that have led it to refinance its debt, the report notes. At the end of 2001, it declared a record default on just over $100 billion in debt during the worst economic crisis in its history, the report relays. It is currently dealing with a contracting economy, high inflation and a weakened currency, the report says. If enacted into law, the legislation would declare the sustainability of external public debt a "priority" and authorize the government to carry out a "restructuring of interest maturity services and capital amortization of public securities issued under foreign law." It would give the executive branch power to determine the nominal amounts, the report discloses. The legislative debate is taking place as the economy minister begins talks with the IMF to renegotiate the payment of some $44 billion transferred to Argentina under a 2018 credit agreement worth more than $56 billion. The talks will continue in February, the report notes. Carlos Heller, head of the Chamber of Deputies' Committee on Budget and Finance, said before the start of the debate that there is a consensus on the need to renegotiate the debt, the report relays. He recalled that the 2015-2019 government of conservative President Mauricio Macri acknowledged it was unpayable, the report notes. Macri's opposition party, Together for Change, agreed to support the bill in exchange for creating a working table to analyze the sustainability of the debts that Argentina's provinces have with the federal government, the report dicloses. Leftist lawmaker Nicolas de Cano criticized the pact between the Fernandez's government and the opposition to "pay the fraudulent debt that Macri left us," 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. ============= B O L I V I A ============= BOLIVIA: Interim Government Gets Minor Facelift Ahead of Elections ------------------------------------------------------------------ The Latin American Herald reports that the top officials of the interim Bolivian administration led by former Sen. Jeanine Anez resigned en masse at her request to make way for a "transition" Cabinet ahead of the special elections set for May. But the remodeled team she formally introduced in a ceremony at the presidential palace included only three new faces, according to The Latin American Herald. Anez, a member of a right-wing party that got only 4 percent of the vote nationwide in last October's subsequently annulled elections, asked for the resignations after her communications minister, Roxana Lizarraga, quit in anger over the interim president's decision to seek the presidency in the May 3 ballot, the report notes. "This adjustment to the Cabinet was necessary to be absolutely sure that all of the members of the team of collaborators are committed to an honest and transparent management for the good of all Bolivians," Anez said during the event at Quemado Palace, the report says. The most prominent addition to the administration is former Vice President Victor Hugo Cardenas, replacing Virginia Patty as education minister, the report relays. The report discloses that Anez said she was "honored" to have Cardenas, who she described as "one of the most capable educators Bolivia has." Lawmaker Eliane Capobianco takes charge of the Rural Development Ministry from Mario Ordonez, while journalist Isabel Fernandez fills the vacancy left by the departure of Lizarraga, who is not alone in objecting to Añez's presidential bid, announced, the report says. Critics point out that Anez said at the time of her installation as interim president by the armed forces that she would serve only until voters elected a new government, the report notes. The military brass administered the oath of office to Añez in an otherwise empty legislative chamber on Nov. 12, two days after Evo Morales resigned as president at the "suggestion" of the generals amid mob violence directed at his political allies and family members, the report relays. While the attorney general appointed by Anez said she does not need to step down now in order to be a candidate, Morales' leftist MAS party contends that she must resign to run because she acceded to the highest office by means other than an election, the report notes. Morales fled Bolivia after he was forced from office, going first to Mexico and later, to Argentina, where he remains, the report says. MAS leaders and activists traveled to Buenos Aires for a Jan. 19 meeting that ended with the designation of Luis Arce, who was economy minister for most of Morales' 2006-2019 tenure, as the party's presidential candidate, the report discloses. Arce, 57, flew from Buenos Aires to El Alto International Airport, near La Paz, where he was greeted by MAS supporters and by his running mate, former Foreign Minister David Choquehanca, the report notes. Also waiting for Arce were representatives of the Attorney General's Office who presented the presidential hopeful with a summons to appear before prosecutors early Wednesday for questioning in a case the president of the Senate, Eva Copa of MAS, called on the AG Office to deal with Arce in an "impartial and transparent" manner so as not to undermine his candidacy, the report relays. The Anez administration said that Arce need have no fear of arrest and that he will be able to campaign without interference, the report notes. Anez and Arce will be joined on the ballot by former presidents Carlos Mesa and Jorge Quiroga and Luis Fernando Camacho, a far-right business mogul, the report notes. New general elections were scheduled for May 3 after the cancellation of the balloting held on Oct. 20, in which Morales narrowly won a fourth term in office, the report discloses. Those elections were annulled after an Organization of American States (OAS) audit -- conducted amid accusations of fraud by Bolivia's opposition -- claimed the results could not be validated due to "deliberate actions that sought to manipulate" the vote count, the report relates. Morales, the first indigenous president of this poor, majority indigenous nation, denied the OAS allegation but agreed to a new general election, yet he was still forced to resign hours later, the report adds. =========== B R A Z I L =========== BANCO CITIBANK: Moody's Affirms Ba3 LongTerm Bank Deposit Rating ---------------------------------------------------------------- Moody's Investors Service affirmed Banco Citibank S.A.'s long-term foreign currency bank deposit rating at Ba3, the Ba1 long-term foreign currency counterparty risk rating, and the Baa3 long-term local currency counterparty risk rating . At the same time, Moody's upgraded Citi Brazil's adjusted baseline credit assessment (adjusted bca) to baa3, from ba1, to reflect Moody's assessment of affiliate support to the Brazilian subsidiary. Moody's affirmed all other ratings and assessments. The outlook on the ratings remains stable. RATINGS RATIONALE In affirming Citi Brazil's ba2 bca, Moody's acknowledged improvements in the asset quality and profitability, a result of the bank's increasing focus on its traditional core corporate lending business and consequent earnings power realization. Citi Brazil's repositioning in the Brazilian market with the divestment of its consumer operation in 2016 follows the multi-year strategy to simplify Citigroup's operations, reduce its global consumer footprint, enhance its safety and soundness and pursue sustainable growth. Citi Brazil's problem loan ratio was 0.2% in FY 2018 and 1H 2019, materially lower than the 1.36% average NPLs for large corporate lending in the Brazilian Industry in the 1H2019, despite a more concentrated loan book by borrower and sector. A large portion of Citi Brazil's credit risk stems from off-balance sheet assets in the form of contingent guarantees and notional derivative exposures, which could add volatility to asset quality, reflecting its business focus on servicing corporate and international clients. Nevertheless, Citi Brazil has been disciplined about its large exposures, supported by management's conservative underwriting policies, a credit strength Moody's expects the bank will maintain as the local economy recovers and loan demand picks up. Citi Brazil's bca also incorporates the bank's adequate capital metrics, which have been largely stable since 2016. Its capitalization ratio, measured by Moody's as tangible common equity (TCE) relative to risk weighted assets (RWA), has been at around 11.4% over the past 10 years, comparing favorably to the 10% industry average, despite consistent high dividends payouts. Net income to tangible banking assets spiked at 1.8% in 1H2019 supported by higher interest income, improved credit risk and leaner operating efficiency , offsetting narrowing spreads that resulted from the business shift into corporate lending. Moody's expects that increasing competition and low interest rates will continue to pressure margins over the next 12-18 months, but profitability will benefit from low credit costs, a lean structure cost and favorable investment banking pipeline in Brazil which will boost Citi's earnings because of its leading market position in this business segment. The bank's BCA also reflects the bank's prudent liquidity management and ample liquidity cushion, helping mitigating Citi Brazil's strong reliance on market funds in excess of 45% to tangible banking assets, as part of its wholesale banking business profile. Citi Brazil's strategic realignment to Citi's global business priorities has strengthened the Brazilian subsidiary's market position in the business areas that are core to the group. This is evidenced by its role as a key hub for Citi's trade finance, corporate and investment banking and institutional client services in Brazil, and the fifth largest corporate franchise contributor for the group by revenues. To reflect the subsidiary's relevance to Citi, Moody's has raised its assessment of affiliate support that resulted in two notches uplift, from one notch, and upgraded its adjusted baseline credit assessment to baa3, from ba1. The bank's global foreign currency deposit rating of Ba3 is constrained by Brazil's Ba3 foreign currency deposit ceiling. Because of the incorporation of uplift from parental support, the stable outlook on Citi Brazil's ratings reflects the stable outlook on Citibank N.A. as well as the stable outlook on the Brazilian sovereign. The outlook also incorporates Moody's view that Citibank Brazil's financial metrics will remain adequate over the next 12-18 months. Moody's does not have any particular governance concern for Citi Brazil, and does not apply any corporate behavior adjustment to the bank's ratings. The solid asset quality indicator's relative to peers reflects the bank's strong risk governance culture, illustrated by its delinquency levels that have long outperformed those of its domestic peers. WHAT COULD CHANGE THE RATING -- DOWN/UP At this point, upward ratings movement is limited because Citi Brazil's rating is constrained by Brazil's foreign-currency deposit ceiling. Conversely, the rating will likely be downgraded if Brazil's (Ba2 stable) sovereign rating and its foreign-currency deposit ceiling are lowered. Also, Citi Brazil's BCA could be lowered if the bank's asset quality and profitability weakens materially hurting its capitalization or if its reliance on institutional funding increases without a mitigating increase in the level of liquid resources. However, this would not have an effect on the foreign currency deposit rating, which is currently constrained by the country ceiling. METHODOLOGY USED The principal methodology used in these ratings was Banks Methodology published in November 2019. =============== C O L O M B I A =============== AVIANCA HOLDINGS: Restructuring Going Well, Ruling Out Bankruptcy ----------------------------------------------------------------- Luis Jaime Acosta at Reuters reports that Colombian flag carrier Avianca Holdings is making progress with a restructuring plan for its finances that will keep it in the air without having to take measures such as declaring bankruptcy or insolvency, company executives said. Over the course of the restructuring, which began last year, the company will divest its non-core activities and simplify its fleet to improve profits and leave behind a financial crisis that arose in 2019, according to Reuters. "The company's financial situation has turned 180 degrees. We have much more certainty about the future, we are looking forward with a lot of optimism and the numbers are much better," said Avianca Chief Executive Anko van der Werff, the report notes. Avianca management changed last May after majority shareholder Synergy Group Corp lost control of the company when it breached a loan agreement with United Airlines, the report relays. The loan was backed by Synergy's stake in Avianca. However, the contract United Airlines has with its pilots restricts it from majority ownership in another carrier, so it ceded management of Avianca to minority partner Kingsland Holdings Limited, the report says. In the second half of last year, Avianca received $250 million in loans from United Airlines and Kingsland, as well as a further $125 million from other investors, the report discloses. At the same time, it also finalized a public offer for around $480 million dollars in bonds part of its debt restructuring, the report relates. "Today we do not have any financial problems, we are meeting all of our obligations within the agreed deadlines and we have enough capital to operate with the liquidity we need," Chief Financial Officer Adrian Neuhauser told journalists at an event celebrating the airline's 100th birthday, the report notes. Neuhauser said in June last year the airline renegotiated repayment plans with its creditors and suppliers due to not being able to make payment deadlines, adding that the situation was fixed in December, the report says. "We do not see bankruptcy anywhere on our horizon, we are operating and focused on the next 100 years," he added. At the start of January, Avianca agreed with planemaker Airbus to reduce it's purchase of A320neo planes by 20 and reached a mutual agreement with Boeing in relation to a pending order for two 787-9 planes as part of plans to reorganize its finances and improve its fleet, the report discloses. The airline closed 2019 with 156 planes in operations and carried around 30 million passengers, the report adds. About Avianca Holdings S.A. Avianca Holdings SA -- http://www.avianca.com/-- is a Panama-based company engaged, through its subsidiaries, in the provision of air transportation services for passengers and commercial purposes. With a fleet of 175 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. KPMG S.A.S., in Bogota, Colombia, the Company's auditor since 2018, issued a "going concern" qualification in its report dated April 26, 2019, on the Company's consolidated financial statements for the year ended Dec. 31, 2018, citing that the controlling shareholder of the Company obtained a loan and pledged its shares in Avianca Holdings S.A. as security for this loan agreement (the loan agreement), which requires compliance with certain covenants by the controlling shareholder, including compliance with the Company financial ratios. Breach of these covenants provides the lender the right to enforce the security, leading to a change of control over the Company. A change of control over the Company would breach covenants included in some loan and financing, aircraft rental, and other agreements of the Company, which in turn could trigger early termination or cancelation of these contracts. On April 10, 2019, the Company was informed by the controlling shareholder and its lender, that there was a non-compliance with covenants established in the controlling shareholder's loan agreement, and no waiver was in place; thus, there is a potential risk of change of control. The auditors said this circumstance raises a substantial doubt about the Company's ability to continue as a going concern. As of Dec. 31, 2018, Avianca Holdings had US$7.11 billion in total assets, US$6.12 billion in total liabilities, and US$992.46 million in total equity. * * * As reported by the TCR on Dec. 19, 2019, Fitch Ratings upgraded Avianca Holdings' Long-Term Foreign and Local Currency Issuer Default Ratings to 'CCC+' from 'RD'. The upgrades follow Avianca's announcement that it has completed its debt restructuring, including receipt of a US$250 million convertible secured stakeholder facility loan from United Airlines, Inc. (BB/Stable) and Kingsland Holdings Limited. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Remittances, Exports Cushioned Tourism Plunge ----------------------------------------------------------------- Dominican Today reports that the fall in tourism and free zone exports squeezed the flow of currencies into the Dominican economy. The most recent data published by the Dominican Central Bank show that at the end of 2019 foreign exchange earnings grew at a slower pace compared to the previous year, according to Dominican Today. At the end of last year, foreign exchange income totaled US$30.6 billion, a year-on-year increase of 4.8%, while a year earlier, in 2018, some US$29.2 billion entered the Dominican economy, a 5.7% jump compared to 2017, the report notes. The Central Bank this week shows that merchandise shipments from free zones fell from US$6.2 billion in 2018 to US$6.1 billion last year (-1.5%) and revenues from tourism services fell 1.2% in 2019, to US$7.5 billion, from US$7.6 billion the previous year, the report says. The strong recovery of other sources of foreign exchange income, such as remittances, foreign direct investment and national exports cushioned the total result, 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- withstable outlook (2016). ============= J A M A I C A ============= JAMAICA: Fitch Affirms B+ Foreign Curr. IDR, Alters Outlook to Pos. ------------------------------------------------------------------- Fitch Ratings Affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating at 'B+' and revised the Rating Outlook to Positive from Stable. KEY RATING DRIVERS The Outlook revision reflects Fitch's expectation that Jamaica will continue to make progress in reducing government debt, supported by large primary budget surpluses. Fitch expects government debt-to-GDP to fall to 92% at end-FY19 (April 2019 to March 2020) from 135% at end-FY12. Fitch projects it to decline to 85% of GDP by end-FY21 and to 63% of GDP by end-FY28. Nevertheless, government debt-to-GDP and interest-to-revenue ratios are still about two times the 'B' range median. Following the conclusion of six and half years of IMF programs in November 2019, the government is building on reforms aimed at entrenching fiscal discipline. The fiscal responsibility law passed by parliament in 2014 includes a target fiscal balance that is set according to a fiscal rule which seeks to reduce public debt to 60% of GDP by the end of FY25, a goal Fitch believes is optimistic. The government is planning to create a fiscal council, the legislation for which is expected to reach parliament in April 2020 and become law before the end of the year. The government has signed a memorandum of understanding with the Economic Programme Oversight Committee (EPOC) -- created to hold the government accountable for the targets agreed with the IMF -- to continue monitoring the fiscal accounts until the fiscal council is operational. In the FY19 budget, the government lowered the primary surplus target to 6.5% of GDP from 7% after several years of over performance. The target reduction created room for a tax break that the government estimated was going to reduce revenue by JMD14 billion or 0.7% of GDP. Despite the tax reduction, Fitch expects tax revenues in FY19 will be 4.5% higher than the year before; between April and November 2019 tax revenues were 6% higher year-on-year and 1.4% higher than budgeted. Strong tax collection shows consumption-driven growth and a robust labor market. Fitch expects that the government will achieve the primary surplus target of 6.5% of GDP in FY19. Given the under execution of capex, this target could be exceeded. Between April and November 2019 the government executed 1.5% of GDP (JMD33.2 million) in capital projects; this is 18.4% lower than in the same period in 2018 and 14.1% lower than budget. This underexecution is in the context of rising capex; the FY19 budget increased the target to 3.4% of GDP, up from 1.5% in FY14. Large primary surpluses continue to push down government debt-to-GDP, but the FY25 goal remains ambitious. The government has complied with the fiscal rule to date, but Fitch believes there are risks associated with the implementation of the rule over the longer term as debt comes down and economic priorities shift or in the event of shocks. According to Fitch's debt dynamic model (assuming that primary surpluses gradually fall to 5% of GDP by FY25 and then to 4% by FY28, GDP growth averages 1.5% over the medium term and the JMD depreciates by 3% annually with respect to the U.S. dollar, in line with the projected inflation differential between Jamaica and the U.S.) the government would not achieve its goal of 60% of debt-to-GDP by FY25, reaching a ratio of 72% instead. The government faces no substantial external market debt maturities until 2028 (USD1.4 billion). Jamaica's 'B+' rating also reflects World Bank Governance Indicators that are substantially stronger than the 'B' and 'BB' range medians. The rating is also supported by GDP per capita above the 'B' range median, a favorable business climate according to the World Bank Doing Business Survey, moderate inflation, low GDP growth volatility and moderate commodity dependence. Jamaica's GDP growth is low, averaging just 1.1% between 2014 and 2018, well below the 'B' median of 4.6%. However, growth prospects have been improving and Fitch expects growth to hover around 1% in 2019 and 2020 before firming to 1.5% in 2021. In October 2019, Alpart (an alumina refining plant) closed its operations for 18 to 24 months to upgrade the facility. About 900 people lost their jobs and the government lowered its growth forecast for FY19 to 0.6% from 1.5%. Nonetheless, the unemployment rate has fallen to a record low of 7.2% (October 2019). A flexible exchange rate should allow Jamaica to absorb shocks and lower the risk of external imbalances. However, the advent of the BOJ's move to inflation targeting has led to an increase in the volatility of the JMD with respect to the U.S. dollar. In 2019, the BOJ made 16 sell auctions via B-FXITT for a total of USD395 million while in 2018 it made 14 sale auctions for USD200 million. In 2019 the movements in the exchange rate were in both directions with an average duration of 45 days between peak and trough and an average movement of +/-7%. The average exchange rate in 2019 depreciated by 3.5% relative to 2018. The BOJ points at two reasons to expect market volatility to fall over the medium to short-term: 1) the launch in March 2020 of an electronic trading platform for authorized dealers and cambios, 2) greater use of forward contracts that allow participants to hedge against FX swings. In 2019, a relatively small current account deficit (estimated at 1.9% of GDP) and strong net FDI (estimated at 4.5% of GDP) keep the international reserves at an adequate level (4.5 months of CXP in November). However, the economy has a narrow base with a high import content, exposing it to shocks. Net external debt at 31.5% of GDP and a net international investment position of -153.0% of GDP compare unfavorably with 'B' rated peers. Inflation averaged 3.9% for 2019, just below the BOJ target range of 4% to 6%. The BOJ lowered the policy rate by 125bp during 2019, leaving the rate at the current level of 0.5%, substantially negative in real terms. As the government borrows less from local markets, investors look for other ways to invest excess liquidity, creating risks of financial imbalances emerging. Credit from commercial banks to the private sector increased by 18.2% year-on-year by November 2019. Higher liquidity has also pushed interest rates down. The residential real estate price index showed a year-on-year growth of 10.3% in June 2019 (latest available) from an average growth rate of 3.4% in 2017. As of end-2019, the Jamaica stock exchange index grew by 34.3% year-on-year following a similar growth rate in 2018. The government has been working with the World Bank (WB) to develop a natural disaster risk financing policy. The WB estimated that a high severity natural disaster could lead to emergency losses of USD685 million or 4.3% of GDP (excluding reconstruction cost). The government already has in place a contingent credit line with the IDB (USD285 million), National Disaster Fund (USD4.1 million), Contingencies Fund (USD15.6 million) and Caribbean Catastrophe Risk Insurance Facility (CCRIF) that could pay out up to USD207.3 million depending on the severity of the disaster. Acknowledging a potential financing gap of USD173 million for a high severity disaster the government is planning to issue a catastrophe bond next fiscal year. General elections are due in 2021, five years after the last election. Fitch's baseline is that monetary and fiscal policy will have broad continuity even if there is a change in governing party. It is worth highlighting that the two IMF programs were carried out first by a PNP and then by a JLP administration. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Jamaica a score equivalent to a rating of 'BB-' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows: - External Finances: -1 notch, to reflect high dependency on the U.S. economy, exposure to economic shocks, relatively high probability of a natural disaster and net external debt that is about twice that of 'B' rated peers. The committee added the notch adjustment because the SRM output has increased to 'BB-' from 'B+', and Jamaica's external finances look weak relative to 'BB' range sovereigns. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within Fitch's criteria that are not fully quantifiable and/or not fully reflected in the SRM. RATING SENSITIVITIES The main factors that could, individually or collectively lead to an upgrade: -- A primary budget balance consistent with sustained reduction in government debt-to-GDP; -- A strengthening of growth prospects without the emergence of macroeconomic imbalances; -- Entrenchment of institutional improvements in monetary and fiscal policy frameworks that enhance confidence in medium-term economic and fiscal performance. The main risk factors that could, individually or collectively, lead to a negative rating action: -- Failure to reduce government debt-to-GDP, for example by departing from the fiscal rule; -- External shocks or policy mistakes that heighten risks of macroeconomic and/or financial sector instability. KEY ASSUMPTIONS U.S. growth and oil prices perform in line with the forecasts contained in the December 2019 Global Economic Outlook. ESG CONSIDERATIONS Jamaica has an ESG Relevance Score of 5 for Political Stability and Rights, as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. Jamaica has an ESG Relevance Score of 5 for Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as World Bank Governance Indicators have the highest weight in the SRM and this is therefore highly relevant to the rating and a key rating driver with a high weight. Jamaica has an ESG Relevance Score of 4 for Human Rights and Political Freedoms, as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. Jamaica has an ESG Relevance Score of 4 for Creditors Rights as willingness to service and repay debt is relevant to the rating and a rating driver, as for all sovereigns. Jamaica restructured domestic debt in 2010 and 2013 but continued to service external debt. =========== M E X I C O =========== GFMEGA: S&P Assigns 'BB' LongTerm ICR, Outlook Negative ------------------------------------------------------- S&P Global Ratings assigned its 'BB' long-term issuer credit rating to Operadora de Servicios Mega, S.A. de C.V. SOFOM, E.R. (GFMEGA). The outlook is negative. In addition, S&P assigned a 'BB' rating to the company's proposed senior unsecured notes for up to $300 million with a five-year tenor. S&P said, "The rating on GFMEGA takes into account its increasing operating scale, although still modest compared with those of peers we rate in the region. The rating also reflects the company's very solid capital base thanks to a strong internal capital generation and a capital injection that will compensate for the expected portfolio growth in the next 24 months. Our risk position assessment on the company takes into account its asset quality ratios that are in line with those of its main peers. However, an NPA coverage of about 60% and the rise in the customer concentration limit this assessment. Finally, our funding and liquidity assessment reflects GFMEGA's projected concentrated funding profile because about half of it will consist of the proposed notes and the remainder of credit lines and local market debt." However, these resources, along with expected cash flows, provide sufficient liquidity to support daily operations and cover financial obligations. GFMEGA's proposed senior unsecured notes will have a tenure of five years and will bear a fixed rate with semiannual interest payments. The finance company will use the proceeds mostly to prepay $142 million in secured credit facilities and a bridge loan, and the remainder for business growth. The issue-level rating also incorporates S&P's expectation that GFMEGA will hedge the interest and half of the principal with a full cross-currency swap (CCS) for the whole term and the other half with a cancellable call spread to limit currency risk. The 'BB' issue-level rating is at the same level as the long-term global scale issuer credit rating, reflecting the notes' pari passu status because they will rank equally in right of payment with all of GFMEGA's existing and future senior unsecured debt. GFMEGA will use the proceeds to pay down a large amount of its existing secured debt, preventing the notching down of the rating on new notes. This is because the firm's priority debt (secured debt) will represent slightly less than 20% of adjusted assets for the next 12 months. Also, GFMEGA's unencumbered assets will cover more than 1x of its rated unsecured debt (including the proposed debt issuance). Nevertheless, S&P could lower the rating on the notes by one notch if, contrary to its expectations, GFMEGA pays down only a small portion of priority debt or significantly increases its secured funding. S&P will also analyze if the amount of unencumbered assets is sufficient to cover the new notes in such scenario. ===================== P U E R T O R I C O ===================== ADVENTURE FITNESS: To Seek Plan Confirmation April 1 ---------------------------------------------------- Judge Brian K. Tester has ordered that Disclosure Statement filed by INC Adventure Fitness Club Inc is finally approved. A hearing for the consideration of confirmation of the Plan and of such objections as may be made to the confirmation of the Plan will be held on April 1, 2020 at 2:00 PM at the Jose V. Toledo Federal Building and Courthouse, Courtroom 1, Second Floor, 300 Recinto Sur Street, Old San Juan, Puerto Rico. Objections to claims must be filed prior to the hearing on confirmation. Any objection to confirmation of the plan shall be filed on/or before 7 days prior to the date of the hearing on confirmation of the Plan. About Adventure Fitness Club Adventure Fitness Club, Inc., sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 19-03651) on June 26, 2019. At the time of the filing, the Debtor estimated assets of less than $50,000 and liabilities of less than $500,000. Luis D. Flores Gonzalez, Esq., of the Luis D Flores Gonzalez Law Office, represents the Debtor. BAHIA DEL SOL: Triangle Asks Time to Finalize Deal on Sale ---------------------------------------------------------- Triangle Cayman Asset Co. 2, secured creditor of Bahia del Sol Hotel Corp., asks the U.S. Bankruptcy Court for the District of Puerto Rico to grant an additional extension of time of 10 days to finalize the execution of a stipulation between the parties, or for Triangle to otherwise plead in connection with the Debtor's proposed sale of the real property currently known as "Plaza Parguera Hotel" located at La Parguera Ward, Road 304, Km. 3.2, Lajas, Puerto Rico, to Puerto Rico Asset Management, LLC for $1.3 million, subject to overbid. On Aug. 16, 2019, Triangle filed Proof of Claim 9 in the amount of $1,141,306, which repayment is secured with, among other things, property 15,629, located at Road 305, La Parguera, Lajas, where Debtor operates its hotel business ("Real Estate Property"). During the status conference held on Aug. 21, 2019, the Debtor stated it would be filing a motion to sell the Real Estate Property by Sept. 30, 2019. On Sept. 27, 2019, the Debtor requested an extension to file the motion to sell, which the Court granted, until Oct. 21, 2019. On Oct. 21, 2019, the Debtor and Triangle jointly requested another extension to file the motion to sell because good faith negotiations for the consensual repayment of the Triangle Claim were ongoing. As a result, the Court granted such request until Nov. 22, 2019. On Nov. 22, 2019, the Debtor filed the Motion. On Dec. 13, 2019, Triangle sought a short extension of time of seven days to respond to the Motion, which the Court granted on Dec. 16, 2019; the current timeframe to file responses thereto expires as of the date of the Motion. Triangle informs the Court that the Parties have reached an agreement in principle. In particular, on Dec. 24, 2019, Triangle circulated a draft of the proposed agreement to the Debtor's counsel. In consideration of the foregoing, Triangle needs additional time to allow the Parties to discuss the proposed agreement, in order to finalize and execute the same. Thus, Triangle respectfully asks that the Court grants it an additional extension of time of 10 days to allow the Parties to finalize and execute a stipulation as to the repayment of Triangle's claim, or in the alternative, for Triangle to otherwise plead in connection with the Motion. About Bahia Del Sol Corporation Bahia Del Sol Hotel Corporation filed a Chapter 11 bankruptcy petition (Bankr. D.P.R. Case No. 19-03234) on June 5, 2019, estimating under $1 million in both assets and liabilities. The Debtor tapped Noemi Landrau Rivera, Esq., at Landrau Rivera & Assoc., as counsel. JC PENNEY: Egan-Jones Withdraws 'C' Commercial Paper Rating ----------------------------------------------------------- Egan-Jones Ratings Company, on January 23, 2020, withdrew its 'C' local currency commercial paper rating on debt issued by JC Penney Company Incorporated. Headquartered in Plano, Texas, JCPenney Company, Incorporated is an American department store chain with 865 locations in 49 U.S. states and Puerto Rico. ================= V E N E Z U E L A ================= VENEZUELA: Congress Approves $20 Million for Foreign Litigation --------------------------------------------------------------- Globalinsolvency.com, citing Reuters, reports that Venezuela's opposition-run congress said it had set aside $20 million held in accounts in the United States to pay for litigation abroad as part of efforts to protect the country's offshore assets from lawsuits by creditors. Offshore assets including U.S. refiner Citgo have long been seen as attractive by investors holding the country's defaulted bonds and companies seeking to be paid back for the nationalization of their holdings, according to Globalinsolvency.com. The funds are to be drawn from accounts previously held by the government of President Nicolas Maduro but frozen last year after the United States imposed a broad set of sanctions meant to force a change of government, the report adds. About Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. Standard and Poor's long- and short-term foreign currency Sovereign credit ratings for Venezuela stands at 'SD/D' (November 2017). S&P's local currency sovereign credit ratings on the other hand Are 'CCC-/C'. The May 2018 outlook on the long-term local currenc sovereign credit rating is negative, reflecting S&P's view that the sovereign could miss a payment on its outstanding local currency debt obligations or advance a distressed debt exchange operation, equivalent to default. Moody's credit rating (long term foreign and domestic issuer ratings) for Venezuela was last set at C with stable outlook (March 2018). Fitch's long term issuer default rating for Venezuela was last set at RD (2017) and country ceiling was CC. Fitch, on June 27, 2019, affirmed then withdrew the ratings due to the imposition of U.S. sanctions on Venezuela. ********* 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. 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