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/raid1/www/Hosts/bankrupt/TCRLA_Public/200518.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 Monday, May 18, 2020, Vol. 21, No. 99 Headlines A R G E N T I N A ARGENTINA: Coronavirus - Just One More Crisis for Start-Ups B R A Z I L BRAZIL: Rio de Janeiro Will Not Open Beauty Salons and Gyms C A Y M A N I S L A N D S KAWA SOLAR: BlackRock Values $6.6MM Loan at 50% of Face KAWA SOLAR: BlackRock Values $8.7MM Loan at 25% of Face C O L O M B I A AVIANCA HOLDINGS: Files for Bankruptcy, Shares Fall C O S T A R I C A [*] Fitch Cuts 4 Costa Rican Banks on Sovereign Rating Downgrade D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Farmhands Ask Government to Buy Agro Surplus DOMINICAN REPUBLIC: Merchants Demand Opening of Small Companies M E X I C O SERVICIOS CORPORATIVOS JAVER: Moody's Withdraws B1 CFR P A R A G U A Y VISION BANCO: S&P Alters Outlook to Stable & Affirms 'B' ICR P U E R T O R I C O HUB INT'L: Moody's Rates New $350MM Senior Unsecured Notes 'Caa2' J & M SALES: No Injustice in Dismissal of Pegasus Suit, Court Says - - - - - ================= A R G E N T I N A ================= ARGENTINA: Coronavirus - Just One More Crisis for Start-Ups ----------------------------------------------------------- Benedict Mander at The Financial Times reports that while most of the world contemplates with dread the economic destruction wreaked by the coronavirus, for many Argentine entrepreneurs, it is just one more challenge to overcome. Accustomed to dealing with crises on an all-too-regular basis, many start-ups have succeeded in turning misfortune to their advantage, according to Financial Times. Argentina's last major economic collapse in 2001-02 served as a catalyst for the rise of some of its most successful companies, the report notes. In fact, Argentina has been on crisis footing since long before Covid-19; it is still suffering from a debilitating devaluation in 2018 that fuelled one of the highest inflation rates in the world and could lead to the country's ninth sovereign debt default, the report relays. "You either adapt or die," says Ezequiel Calcamari, president of Argentina's association for entrepreneurs, the report discloses. "Being an entrepreneur in Argentina isn't for just anybody. Maybe they're not heroes, but almost," he added. The report says that even so, Mr. Calcamari is convinced that there is "a great opportunity" for investors in Argentina today: "it's cheap", he explains, referring to the devaluation that has made the country competitive in dollar terms. Argentines never fail to underline the high quality of their entrepreneurial talent -- a result of good universities and strong foreign ties, as well as a bustling "ecosystem" of start-ups in Buenos Aires that has spawned numerous successful enterprises from which to learn, the report relays. On the other hand, start-ups must still confront Argentina's complicated and punitive tax rules, inflexible labour laws and strict currency controls — all of which pose serious barriers to business, the report notes. A widely applauded law that simplified the creation of new companies, implemented by the previous government, has been suspended by the new administration of Alberto Fernandez. "Argentina is wasting its great potential. How many countries wouldn't die to have what we have - this is a hotbed of entrepreneurs," the report quoted Mr. Calcamari as saying. Even so, Gustavo Markier, chief executive of Plataforma 10, one of the fastest-growing companies in Argentina in recent years, sees reasons for optimism, the report relays. While he admits that his travel website, founded in 2001, is feeling the effects of the coronavirus crisis, with the help of financing, he says, his company could still expand "several times over" by growing in the rest of the region, the report discloses. "We have grown in Argentina, with the Argentina that we have -- and we could grow much more," said Mr. Markier, whose company had a compound annual growth rate of 63.3 per cent between 2015 and 2018, according to the FT Americas ranking of fast-growing businesses in the region, compiled with Statista, a research company. The entrepreneur identifies a lack of investors for "scale-ups" as the biggest challenge -- especially for those looking to expand beyond national borders -- with more financing opportunities available for smaller companies just starting out, the report relays. "The Argentine banking system has its back turned on start-ups," the report quoted Mr. Markier as saying. "Successive changes in the rules of the game, hyperinflation, recession and other economic storms have generated formidable training and resilience for Argentine entrepreneurs. But restricted access to capital is what has really prevented them from transforming that potential into greater added value," he added. Marta Cruz, co-founder and managing partner of NXTP, a venture capital fund in Buenos Aires, points out that the macroeconomic headwinds in Argentina are "just one more" challenge for start-ups, the report notes. "It doesn't matter where a company is based, the important thing is where its revenues are generated. And businesses in the tech sector are able to serve multiple markets from anywhere in the world," she said. Ninety per cent of the companies financed by NXTP also have operations abroad, the report notes. Here, Argentina has form. It produced a crop of "unicorns" -- tech companies valued at more than $1 billion -- in the wake of the country's 2001-02 crisis, the report notes. Mercado Libre, Latin America's leader in ecommerce, is now Argentina's most valuable company with a market capitalisation of nearly $30 billion, the report relays. With the economy now in its third year of recession and on the brink of a debt crisis, a similar phenomenon may be under way, suggests Pierpaolo Barbieri, who in 2017 founded Uala, a fast-growing mobile payments app, the report says. "The disruptions created by crisis are fertile ground for innovation," he said. "Teams, capital and great ideas can coalesce at a time of crisis," he added. 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. As reported by the Troubled Company Reporter - Latin America on April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term Foreign Currency Issuer Default Rating to 'CC' from 'RD' and Short-Term Foreign Currency IDR to 'C' from 'RD'. The TCR-LA reported on April 13, 2020, that S&P Global Ratings also lowered its long- and short-term foreign currency sovereign credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also affirmed the local currency sovereign credit ratings at 'SD/SD'. There is no outlook on 'SD' ratings. On April 9, the TCR-LA reported that Moody's Investors Service downgraded the Government of Argentina's foreign-currency and local-currency long-term issuer and senior unsecured ratings to Ca from Caa2. =========== B R A Z I L =========== BRAZIL: Rio de Janeiro Will Not Open Beauty Salons and Gyms ----------------------------------------------------------- Xiu Ying at Rio Times Online reports that despite the decree issued by President Jair Bolsonaro on May 11, in an extra edition of the Federal Gazette that included gyms, hairdressers, barbershops and beauty salons as "essential" services during the coronavirus pandemic, Rio de Janeiro will not release these activities for the time being. The state government said it will not comply with the President's decree, basing its position on the Federal Supreme Court (STF) decision leaving it up to states and municipalities to determine what measures to implement in order to prevent the spread of Covid-19, according to Rio Times Online. As reported in the Troubled Company Reporter-Latin America on May 8, 2020, Fitch Ratings has affirmed Brazil's Long-Term Foreign Currency Issuer Default Rating at 'BB-' and has revised the Rating Outlook to Negative. The Outlook revision to Negative reflects the deterioration of Brazil's economic and fiscal outlook, and downside risks to both given renewed political uncertainty, including tensions between the executive and congress, and uncertainty over the duration and intensity of the coronavirus pandemic. On April 10, 2020, the TCR-LA reported that S&P Global Ratings revised on April 6, 2020, its outlook on its long-term ratings on Brazil to stable from positive. At the same time, S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings. S&P also affirmed its 'brAAA' national scale rating and its transfer and convertibility assessment of 'BB+'. The outlook on the national scale rating remains stable. =========================== C A Y M A N I S L A N D S =========================== KAWA SOLAR: BlackRock Values $6.6MM Loan at 50% of Face ------------------------------------------------------- BlackRock TCP Capital Corp. has marked its $6,578,877 loan extended to privately held Kawa Solar Holdings Limited (Conergy) to market at $3,289,438, or 50% of the outstanding amount, as of March 31, 2020, according to a disclosure contained in a Form 10-Q filing with the Securities and Exchange Commission for the quarterly period ended March 31, 2020. BlackRock is a lender under Kawa Solar's Bank Guarantee Credit Facility, which is scheduled to mature May 26, 2020. The investment is non-income producing. Kawa Solar Holdings Limited (Conergy) is in the Electric Utilities industry. KAWA SOLAR: BlackRock Values $8.7MM Loan at 25% of Face ------------------------------------------------------- BlackRock TCP Capital Corp. has marked its $8,668,850 loan extended to privately held Kawa Solar Holdings Limited (Conergy) to market at $2,129,936, or 25% of the outstanding amount, as of March 31, 2020, according to a disclosure contained in a Form 10-Q filing with the Securities and Exchange Commission for the quarterly period ended March 31, 2020. BlackRock is a lender under Kawa Solar's Revolving Credit Facility, which is scheduled to mature May 26, 2020. The investment is non-income producing. Kawa Solar Holdings Limited (Conergy) is in the Electric Utilities industry. =============== C O L O M B I A =============== AVIANCA HOLDINGS: Files for Bankruptcy, Shares Fall --------------------------------------------------- Devika Krishna Kumar at Reuters reports that Colombian airline Avianca Inc filed for Chapter 11 bankruptcy after saying last month there is "substantial doubt" about its ability to stay in business due to the coronavirus crisis. Avianca, Latin America's second-largest airline, estimated liabilities between $1 billion to $10 billion in a filing with the U.S. Bankruptcy Court for the Southern District of New York, according to Reuters. Shares of Avianca Holdings Inc sharply on the Bogota stock exchange on May 12 after a New York court approved initial motions in the Colombia-based airline's bankruptcy case. Many airlines have been forced to suspend flights since March in the wake of quarantine measures to slow the spread of the novel coronavirus, the report notes. Avianca filed for Chapter 11 bankruptcy protection in New York after failing to meet a bond payment deadline and as its pleas for assistance from Colombia's government over the coronavirus crisis were met with a tepid response, the report relays. The airline said all "first day" motions related to its reorganization had been approved by the bankruptcy court for the Southern District of New York, the report discloses. "We are very pleased with the prompt approval by the court of our 'first day' motions," Chief Executive Anko van der Werff said in a statement, adding the decisions support the airline's continued operation during bankruptcy, the report relays. The approvals allow the airline to continue to pay obligations to employees, maintain customer benefit programs and pay suppliers, it said, the report notes. The company's next hearing is scheduled for June 11. Avianca shares plummeted 85.3% to close at 66 pesos ($0.01) on May 11. Finance Minister Alberto Carrasquilla told local radio the Colombian government would "try to be a piece of the solution" to Avianca's problems, possibly via a loan, the report says. "I think as a lender, it's difficult to predict, but obviously entering as a shareholder is something that would be extremely delicate, I don't think that's a solution to put on the table first," Carrasquilla told Blu Radio, the report discloses. If it fails to come out of bankruptcy, Avianca would be one of the first major carriers worldwide to go under as a result of the pandemic, which has crippled world travel, the report relays. Avianca, the second-oldest continually operating airline in the world after the Netherlands' KLM, had $7.3 billion in debt in 2019, the report notes. The airline said it would continue operations while it restructured debt, the report adds. As reported in the Troubled Company Reporter-Latin America on May 14, 2020, S&P Global Ratings lowered its issuer credit rating on Latin American air transportation company Avianca Holdings S.A. to 'D' from 'CCC-' and issue-level rating to 'D' from 'CCC-' on its 9.0% senior secured notes due 2023. S&P also lowered its issue-level rating to 'D' from 'CC' on its 8.375% senior unsecured notes due May 10, 2020. =================== C O S T A R I C A =================== [*] Fitch Cuts 4 Costa Rican Banks on Sovereign Rating Downgrade ---------------------------------------------------------------- Fitch Ratings has downgraded four banks following the downgrade of Costa Rica's sovereign rating to 'B' from 'B+' with a Negative Rating Outlook and the downgrade of the Country Ceiling to 'B+' from 'BB-'. The Foreign- and Local-Currency Long-Term Issuer Default Ratings of Banco Nacional de Costa Rica and Banco Popular y de Desarrollo Comunal were downgraded to 'B' from 'B+', mirroring the action on the sovereign ratings as the banks are government linked that are rated at the sovereign level. The Support Rating of BNCR was affirmed at '4', while BPDC's SR was downgraded to '5', the former given the explicit guarantee from the government. Support Rating Floors for both banks were revised, reflecting the decreased likelihood of support from the Costa Rican government despite the nature of each bank and their systemic importance. Fitch has downgraded the FC LT IDRs of Banco BAC San Jose, S.A. (BAC San Jose) and Banco Davivienda (Costa Rica), S.A. (Davivienda CR) to 'B+' from 'BB-' as they are constrained by the Costa Rican Country Ceiling of 'B+'. In turn, the downgrade of the banks' LC IDRs to 'BB-' is consistent with a maximum uplift of two notches above the sovereign rating, per Fitch's criteria for IDRs driven by institutional support. The SRs of these banks were downgraded to '4' from '3', reflecting the likelihood of decreased support given the higher risk in the operating environment. The Viability Ratings of BAC San Jose, BNCR, BPDC and Davivienda CR were downgraded to 'b' from 'b+'. The downgrades maintain these ratings at the same level as the sovereign rating, reflecting the high influence of the operating environment on the financial sector and their credit profiles. Fitch believes these banks' VRs have limited potential to be rated above the sovereign rating given. Considering their credit and financial performance along the near-term challenges associated to the operating environment, these banks' VRs are more consistent to the 'b' rating level. The negative outlook on the operating environment score reflects that this has further downside potential as Fitch expects deteriorating operating conditions from the coronavirus to pressure asset quality and weigh on earnings due to lower loan growth and higher credit costs over the medium term. Fitch also downgraded BNCR's senior unsecured debt rating to 'B/RR4' from 'B+/RR4'. In accordance with Fitch's rating criteria, the recovery prospects of the senior unsecured debt of BNCR are average and are reflected in a Recovery Rating of 'RR4'. KEY RATING DRIVERS BNCR BNCR's IDRs and senior unsecured debt ratings are aligned with the sovereign and reflect the explicit guarantee stated in the National Banking System Law and complete ownership by the Costa Rican government. According to the law, the Costa Rican government is responsible for all unsubordinated liabilities of the state-owned banks in the event of the banks' liquidation. In addition, Fitch's support assessment considers the high and long-lasting policy role, which would be difficult to transfer, and the systemic importance of the bank for the Costa Rican government. BNCR's VR is highly influenced by the operating environment and its company profile, which is marked by a strong franchise and consistent business model. Fitch believes its key metrics could face pressure in light of the deteriorating macroeconomic situation derived from the coronavirus pandemic. The asset quality has been reasonable, despite showing an increase in 2018, which was normalized in 2019. The bank's profitability improved and reversed its downward trend in 2019. Fitch believes these metrics could exhibit a deterioration given the current environment, although there could be a lag considering that the measures taken by the bank could mitigate the impact to some extent. BNCR's capitalization is adequate and with a cushion to face pressures that could arise from the effect of the health crisis. BNCR's financing and liquidity profile is one of its main strengths, with its broad and stable deposit base, based on the bank's robust franchise and government support. BNCR's SRs of '4' map to a support-based IDR at 'B' and is consistent with the sovereign rating. The SRF is aligned with Costa Rica's sovereign rating. BPDC BPDC's IDRs are based on its VR and are highly influenced by the operating environment, to which it is particularly sensitive given its business model, as well as the bank's public nature profile and the benefits conferred by constitutive law. The ratings also consider, with moderate importance, Fitch's expectation regarding the bank's profitability and asset quality due to the economic crisis stemming from the coronavirus outbreak. Fitch believes that the bank's asset quality could be pressured in the medium term, driven by its higher-than-peer exposure to the retail segment sensitive to economic downturns. The agency also estimates that the bank's profitability could weaken if adverse economic conditions persist. BPDC's adequate capitalization is likely to remain at sound levels given the advantages granted by its founding law, enabling it to maintain a solid loss absorption capacity. The bank's funding, based on its client deposits, has shown stability over the economic cycle, although unlike state-owned banks, BPDC does not have explicit government support. The bank's SR of '5' and SRF of 'B-' reflect the possibility of support from the Costa Rican government but it cannot be relied on, despite the nature of the bank and its systemic importance due to a lack of propensity to provide support reflected in the lack of explicit guarantees from the sovereign, which are present in other government linked banks. FOREIGN-OWNED COMMERCIAL BANKS BAC San Jose and Davivienda CR's IDRs are rated above the sovereign rating based on Fitch's appreciation of the ability and propensity of potential support they could receive from their respective shareholders, Banco de Bogota and Banco Davivienda, both rated 'BBB-'/Negative. In Fitch's view, their parents' commitment to support the subsidiaries is sufficient to allow them to be rated two notches above the sovereign rating. BAC San Jose's VR is highly influenced by the challenging operating environment and its sound company profile. The bank has a strong franchise within the local market and follows a universal banking model with a leading position in the credit card sector. Also, BAC San Jose's VR is moderately influenced by its financial performance, and the agency does not rule out the bank's financial profile will continue under relative pressure as a consequence of reduced commercial activities and lower consumption. Its increased non-performing metrics could be affected over the medium term by further impairment in some retail loans, while its profits and capitalization are exposed to potentially higher deterioration on its main segments. The bank's funding reflects its good deposits franchise in the local market. Davivienda CR's VR is highly influenced by the operating environment and its moderate franchise. Also, it considers the bank's reasonable financial profile. The bank's delinquency ratio remains at good levels, although in 2019 it increased. However, NPL ratios continue to compare positively to those of the industry. Profitability is modest but has been improving slightly. The agency believes these metrics could deteriorate as a result of the spread of the coronavirus. Capital levels are tight compared with local and international peers, but Fitch estimates that in an adverse economic event, ordinary support from its parent will continue to maintain regulatory capital ratios above the minimum required. The VR also reflects the appropriate funding structure of Davivienda CR. The banks' SRs are based on Fitch's opinion of shareholders' capacity and propensity to give support to their subsidiaries, if required. These ratings are also constrained by Costa Rica's sovereign rating, as reflected in the Country Ceiling. According to Fitch's criteria, BAC San Jose and Davivienda CR's 'B+' IDRs correspond with an SR of '4'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: IDRs, VRs, SRs and SRFs -- BNCR, BPDC, BAC San Jose and Davivienda CR's IDRs and VRs could be upgraded in the event of an upgrade of Costa Rica's sovereign rating and Country Ceiling. However, the Negative Rating Outlook on the IDRs results in a limited upside in the near future. -- The VRs are limited by the worsening operating environment as a result of the impact of the economic disruption from the coronavirus outbreak. An improvement of the operating environment that improves the banks' financial metrics could lead to an upgrade of their VRs. -- BNCR, BPDC, BAC San Jose and Davivienda CR's SRs are constrained, but could be upgraded if Costa Rica's sovereign and Country Ceiling ratings are upgraded, as this would reflect a reduction in the potential constraints on the banks' capacity to receive extraordinary support. -- BNCR's senior unsecured debt ratings are aligned with the bank's LT IDR, and would mirror any positive change in BNCR's IDR. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- BNCR, BPDC, BAC San Jose and Davivienda CR's ratings remain sensitive to changes in Costa Rica's sovereign and Country Ceiling ratings. Negative changes in the banks' IDRs and SRs would mirror any movement in Costa Rica's sovereign ratings and Country Ceiling. -- The VRs of the four banks are sensitive to changes in Costa Rica's operating environment. Downgrades in BNCR, BPDC, BAC San Jose and Davivienda CR's VRs could also come from a material deterioration in the banks' financial and company profiles. -- BNCR's senior unsecured debt ratings would be downgraded in case of negative rating actions on the bank's IDR. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. SUMMARY OF FINANCIAL ADJUSTMENTS BNCR: Prepaid expenses, guarantee deposits, construction in process and other deferred assets were reclassified as intangibles and deducted from Fitch Core Capital because of their low loss absorption capacity. Impaired loans were adjusted to reflect only loans that are overdue by 90 days or more to be consistent with Fitch's criteria and global industry practices. Recoveries from chargeoffs were reclassified to non-operating income. BPDC: Intangible assets and other prepaid expenses were deducted from Fitch Core Capital according to Fitch as the agency considers these to have a low capacity to absorb losses. BAC San Jose: Prepaid expenses and other deferred assets were reclassified as intangible assets and were deducted from FCC since Fitch considers these to have low capacity to absorb losses. Impaired loans were adjusted to reflect only loans that are overdue by 90 days or more to be consistent with Fitch's criteria and global industry practices. Recoveries from charge offs were reclassified to non-operating income. Davivienda CR: Prepaid expenses, deposits in guarantee, deposits received, software and deferred charges were reclassified as other intangibles and deducted from Fitch Core Capital due to their low loss absorption capacity. Impaired loans were adjusted to reflect only loans that are overdue by 90 days or more to be consistent with Fitch's criteria and global industry practices. Recoveries from charge offs were reclassified to non-operating income. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BNCR's ratings are based on the potential support the bank would receive from the Costa Rican government (rated B/Negative). BNCR's IDRs are aligned with the sovereign's and reflect the explicit guarantee stated in the National Banking System Law and complete ownership by the Costa Rican government. The FC LT IDR of BAC San Jose of 'B+' is constrained by the Costa Rican Country Ceiling of 'B+'. In turn, the bank's LC IDR of 'BB-' is consistent with a maximum uplift of two notches above the sovereign rating. BAC San Jose's IDRs are rated above the sovereign rating based on Fitch's appreciation of the ability and propensity of the potential support it could receive from its respective shareholder, Banco de Bogota, rated 'BBB-'/Negative. Davivienda CR's IDRs are rated above the sovereign rating based on Fitch's appreciation of the ability and propensity of potential support it could receive from it shareholder, Banco Davivienda, rated 'BBB-'/Negative. In Fitch's view, its parent's commitment to support the subsidiary is sufficient to allow the bank to be rated two notches above the sovereign rating. 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. In the case of BNCR, it has ESG Relevance Scores of '4' for Governance Structure Issue driven by its state ownership that could potentially influence the business model and financial performance of the bank due to the government's plans and incentives. Banco Davivienda (Costa Rica), S.A. - LT IDR B+; Downgrade - ST IDR B; Affirmed - LC LT IDR BB-; Downgrade - LC ST IDR B; Affirmed - Viability b; Downgrade - Support 4; Downgrade Banco Popular y de Desarrollo Comunal - LT IDR B; Downgrade - ST IDR B; Affirmed - LC LT IDR B; Downgrade - LC ST IDR B; Affirmed - Viability b; Downgrade - Support 5; Downgrade - Support Floor B-; Support Rating Floor Revision Banco Nacional de Costa Rica - LT IDR B; Downgrade - ST IDR B; Affirmed - LC LT IDR B; Downgrade - LC ST IDR B; Affirmed - Viability b; Downgrade - Support 4; Affirmed - Support Floor B; Support Rating Floor Revision - Senior unsecured; LT B Downgrade Banco BAC San Jose, S.A. - LT IDR B+; Downgrade - ST IDR B; Affirmed - LC LT IDR BB-; Downgrade - LC ST IDR B; Affirmed - Viability b; Downgrade - Support 4; Downgrade =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Farmhands Ask Government to Buy Agro Surplus ---------------------------------------------------------------- Dominican Today reports that Dominican Farm Laborer Movement (DCM) president Martin Nivar asked the Dominican Republic Government to buy the agro surplus from small and medium producers, to mark Farmer's Day. He proposed that groceries, vegetables, rabbits, chickens, pork, milk and other domestic items be used in social programs run by the Government in the midst of the state of emergency by the COVID-19, according to Dominican Today. In a press release, the labor leader said production of small and medium rural producers is lost due to the lack of a market that guarantees fair prices, the report notes. 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 in April 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: Merchants Demand Opening of Small Companies --------------------------------------------------------------- Dominican Today reports that Dominican Merchants Federation (FDC) president Ivan Garcia demanded that the Dominican Republic Government allow micro, small and medium-sized companies to open during the state of emergency as a result of the pandemic. Mr. Garcia said businesses are in mourning and can no longer endure another unopened day, according to Dominican Today. He said they make the call before President Danilo Medina extends the state of emergency, the report notes. "We have already reached a limit," said Garcia, in a virtual meeting with more than 200 members of the federation through Zoom, the report relays. At the meeting, it was agreed that if the president does not issue a decree in the coming days where he determines that they can open, May 18 they will hold a press conference, dressed in black, in which they will announce the measures to follow, such as opening businesses as a message of protest, the report notes. 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 in April 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 =========== SERVICIOS CORPORATIVOS JAVER: Moody's Withdraws B1 CFR ------------------------------------------------------ Moody's Investors Service has withdrawn the B1 corporate family rating of Servicios Corporativos Javer, S.A.B. de CV. At the time of withdrawal, the outlook was stable. Withdrawal: Issuer: Servicios Corporativos Javer, S.A.B. de CV Corporate Family Rating, Withdrawn, previously rated B1 Outlook Action: Issuer: Servicios Corporativos Javer, S.A.B. de CV Outlook, Changed To Rating Withdrawn From Stable RATINGS RATIONALE At the time of withdrawal, there was no instrument rating outstanding. Headquartered in the city of Monterrey, Mexico, Javer is one of the country's largest house developers, specializing in the construction of low- and middle-income housing, with close to 10% of units sold in the residential high-priced segment. The company operates in the states of Nuevo Leon, Aguascalientes, Tamaulipas, Jalisco, Queretaro, Quintana Roo, the state of Mexico and Mexico City. Javer is the largest supplier of Mexican Workers' Housing Fund (Infonavit) homes in the country and in the states of Nuevo Leon, Aguascalientes, Jalisco and Estado de Mexico. In 2019, the company reported revenue of MXN7,396 million and a gross margin of 27.7%. =============== P A R A G U A Y =============== VISION BANCO: S&P Alters Outlook to Stable & Affirms 'B' ICR ------------------------------------------------------------ S&P Global Ratings revised its outlook on Vision Banco S.A.E.C.A (Vision) to stable from positive. S&P also affirmed its 'B' long-term global scale issuer credit rating on the bank. S&P's rating action on Vision reflects uncertainties over the impact of COVID-19 on the bank's profitability, credit losses, and capital levels, which raised its concerns about the bank's ability to improve and maintain a higher capital ratio once it completed its capital increase plan. In April 2018, Vision shareholders agreed to increase the bank's capital for a total of PYG110 billion. The capital strengthening was going to occur through preferred and ordinary stocks during the next two years. Vision planned to issue the committed common stock for PYG55 billion in halves during 2019 and 2020, while issuing preferred stock for another PYG55 billion in the local market during 2018. By the end of 2019, the shareholders integrated PYG12.3 billion in new common stocks, while the remaining amount to reach the committed PYG27,5 billion for the year was done through retained earnings. The remaining committed amount for 2020 would be integrated in a mix of new capital and retained earnings. Additionally, Vision was able to place only PYG32.5 billion in preferred stocks in the local market in two tranches during 2018 and 2019. The remaining PYG22.5 billion will be proposed in upcoming shareholders meeting to be integrated with retained earnings and no dividend payments from 2019 results. Finally, Vision posted lower results in 2019 than we expected because the bank increased its credit-loss provisions against bad loans, which also dented capital levels. All of these factors, in addition on the uncertainties over the duration and extent of the impact of COVID-19, hamper the improvements in the bank's capital levels. ===================== P U E R T O R I C O ===================== HUB INT'L: Moody's Rates New $350MM Senior Unsecured Notes 'Caa2' ----------------------------------------------------------------- Moody's Investors Service has assigned a Caa2 rating to $350 million of six-year senior unsecured notes being issued by Hub International Limited (corporate family rating B3, together with its subsidiaries, Hub). Hub will use net proceeds from the offering plus cash on hand to repay revolver borrowings and pay related fees and expenses. The rating outlook for Hub is unchanged at stable. RATINGS RATIONALE For insurance brokers, including Hub, the coronavirus and related economic downturn will negatively impact revenues, earnings and cash flows depending on the duration and severity of the slowdown. Insurance premium volumes will be hurt by declining insured exposures and return premium provisions in various commercial lines, all of which will put downward pressure on brokers' commissions and fees. However, brokers will benefit from the mandatory nature of many insurance products (to meet insured parties' regulatory and financing requirements) and by the brokers' largely variable cost structure. Hub maintains a USD$500 million and a CAD$130 million revolver, and this debt issuance pays down a portion of the USD$ revolver, providing additional flexibility to operate in the current environment. Moody's expects that Hub will limit discretionary spending, including acquisitions, in the months ahead to protect its credit profile. Hub's B3 corporate family rating reflects its solid market position in North American insurance brokerage, good diversification across products and geographic areas in the US and Canada, and consistently strong EBITDA margins. Hub has generated good organic growth averaging in the low-single digits and has achieved strong EBITDA margins in the low 30s (per Moody's calculations) over the past few years. These strengths are tempered by the company's high financial leverage and limited fixed charge coverage. The company also faces potential liabilities from errors and omissions, a risk inherent in professional services. Hub has grown through acquisitions, which gives rise to integration risk, although the company has a favorable track record in absorbing small and mid-sized brokers. Giving effect to the transaction, Moody's estimates that Hub's pro forma debt-to-EBITDA ratio will be between 7.5-8.0x, with (EBITDA - capex) interest coverage above 2x, and a free-cash-flow-to-debt ratio in the mid-single digits. These metrics incorporate Moody's accounting adjustments for operating leases, deferred earnout obligations and run-rate earnings from completed acquisitions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Factors that could lead to an upgrade of Hub's ratings include: (i) debt-to-EBITDA ratio below 7.0x, (ii) (EBITDA - capex) coverage of interest consistently exceeding 2x, and (iii) free-cash-flow-to-debt ratio exceeding 5%. Factors that could lead to a rating downgrade include: (i) debt-to-EBITDA ratio above 8x, (ii) (EBITDA - capex) coverage of interest below 1.2x, or (iii) free-cash-flow-to-debt ratio below 2%. Moody's has assigned the following rating (with loss given default (LGD) assessment): $350 million six-year senior unsecured notes at Caa2 (LGD5). The following Hub International Limited ratings remain unchanged: Corporate family rating at B3; Probability of default rating at B3-PD; $500 million senior secured revolving credit facility maturing in April 2023 at B2 (LGD3); $4,570 million senior secured term loan maturing in April 2025 at B2 (LGD3); $1,320 million senior unsecured notes maturing in May 2026 at Caa2 (LGD5 from LGD6). The following Hub International Canada West ULC rating remains unchanged: CAD130 million senior secured revolving credit facility maturing in April 2023 at B2 (LGD3). The rating outlook for Hub is stable. The principal methodology used in this rating was Insurance Brokers and Service Companies published in June 2018. Based in Chicago, Hub ranks in the top ten of North American insurance brokers, providing property and casualty, life and health, employee benefits, investment and risk management products and services through offices located in the US, Canada and Puerto Rico. The company generated total adjusted revenue of $2.4 billion in 2019. J & M SALES: No Injustice in Dismissal of Pegasus Suit, Court Says ------------------------------------------------------------------ In the case captioned, PEGASUS TRUCKING, LLC, a Delaware Limited liability company Plaintiff, v. GEORGE MILLER, solely in his capacity as Chapter 7 trustee for the bankruptcy estates of J & M Sales, Inc., and its affiliated debtor entities; GORDON BROTHERS RETAIL PARTNERS, LLC, a Delaware limited liability company; GORDON BROTHERS FINANCE COMPANY, a Delaware limited liability Corporate; and GORDON BROTHERS FINANCE COMPANY, LLC, a Delaware limited liability company, Defendants, Adv. Pro. No. 19-50267 (JTD) (Bankr. D. Del.), Bankruptcy Judge John T. Dorsey denied Plaintiff's motion for reconsideration of the order dismissing the complaint. On August 6, 2018, J&M Sales, et al. (the "Debtors") filed voluntary chapter 11 petitions in the Delaware Bankruptcy Court. During the Debtors' case, Pegasus purchased 85 of the Debtors' store locations, with the order entered on Oct. 17, 2018 and the sale closed two days later. In connection with the sale, Pegasus and the Debtors entered into a Transition Services Agreement (TSA) filed on Nov. 19, 2018 which, among other things, provided for Pegasus to use the Debtors' credit and debit card processing firms and accounts until Dec. 31, 2018. Gordon Brothers, the Debtors' liquidator, was to receive the funds from the card processors and transfer the funds (net of processing fees) to Pegasus within 48 hours of receiving credit or debit card funds that were generated from the Pegasus outlets. On June 3, 2019, Pegasus filed an administrative claim asserting that the Debtors are holding at least $390,000 of funds generated through credit card processing that rightly belong to Pegasus. On June 25, 2019, Pegasus filed the Adversary Proceeding against the Trustee and Gordon Brothers for recovery of those same funds, alleging 8 counts: (I) Declaratory Relief; (II) Breach of Contract; (III) Conversion; (IV) Wrongful Withholding of Funds and Imposition of Constructive Trust; (V) Money Had And Received; (VI) Open Book Account; (VII) Account Stated; and (VIII) Accounting. Defendants filed Motions to Dismiss on August 22, 2019. A hearing on the Motions to Dismiss was held on Nov. 13, 2019 with the Court issuing an oral ruling dismissing Count I and Counts III-VIII with prejudice and dismissing Count II without prejudice, to be dealt with through the administrative claims process. The Order dismissing the Complaint was entered on the docket on Nov. 25, 2019. Pegasus filed the Motion for Reconsideration of Dismissal of Complaint on Dec. 9, 2019. The Court finds that the Plaintiff does not allege any change in the law or new evidence but asserts that the dismissal of the Complaint at this stage "represents a manifest error of law and injustice, and should be reconsidered and corrected." The Plaintiff asserts two causes for relief. First, that the remaining breach of contract count does not address the Plaintiff's "chief allegation" that the funds in question belong to Pegasus irrespective of the existence of the contract and that even a successful breach of contract determination in the proof of claim proceedings would not offer full relief due to only receiving a pro rata share of estate funds. In its second claim for relief, Pegasus contends that by dismissing the Complaint and leaving it only the ability to pursue an administrative expense claim, the Court cut off Pegasus from any relief or recovery from Gordon Brothers. In its first claim for relief, Pegasus asserts that "on multiple occasions throughout the Complaint and in connection with virtually every count in the Complaint, Plaintiff expressly alleged that the 'Pegasus Funds belong to, and are the exclusive property of, Pegasus.'" Pegasus sought such a determination from the Court in Count I (Declaratory Relief) of the Complaint and refers to the funds in question as "Pegasus Funds" in all other counts as well. Pegasus is asserting that the Court did not properly consider Pegasus' overarching contention that the funds in question belong to Pegasus, "irrespective of, and having nothing to do with, the contract." However, in Count II of the Complaint (Breach of Contract), Pegasus acknowledges that the TSA is a valid and enforceable contract between Pegasus and the Debtors, and that the Debtors' duties were assumed by the Debtors' bankruptcy estates. This position was confirmed at oral argument. Further, Plaintiff's counsel also stated that the Plaintiff's claim to these funds arises from the TSA. In its second claim for relief, Pegasus asserts that the dismissal of the Complaint, which limited it to recovery through the administrative claims process, unjustly bars it from seeking relief from Gordon Brothers as Gordon Brothers "is actually not a party to the TSA" and not a party to the administrative proceedings. The Complaint states that Gordon Brothers "acted as an agent to the Debtors" and that Gordon Brothers is bound by the TSA, "in its capacity as agent for or representative of the Debtors . . ." However, pursuant to the TSA, it is the responsibility of the Debtors to remit the credit card proceeds from the Pegasus stores to Pegasus. The Plaintiff's Complaint did not assert a theory of liability of Gordon Brothers other than through its actions on behalf of the Debtors. A comment by Plaintiff's counsel raising this issue after the decision was rendered by the Court does not save it. The issues raised by Pegasus in its Motion for Reconsideration do not support a finding of a clear error of law or fact or a finding of manifest injustice as would be necessary to grant the Plaintiff's Motion. Therefore, the Plaintiff's Motion for Reconsideration of Dismissal of Complaint is denied. A copy of the Court's Memorandum Opinion dated March 13, 2020 is available at https://bit.ly/2V2JkdI from Leagle.com. Pegasus Trucking LLC, Plaintiff, represented by Aaron H. Stulman -- astulman@potteranderson.com -- Potter Anderson & Corroon LLP. George L. Miller, solely in his capacity as chapter 7 trustee for the bankruptcy estates of J & M Sales, Inc. and its affiliated debtor entities, Defendant, represented by Kevin M. Capuzzi -- kcapuzzi@beneschlaw.com. -- Benesch Friedlander Coplan & Aronoff LLP & Jennifer R. Hoover -- jhoover@beneschlaw.com -- Benesch Friedlander Coplan & Aronoff LLP. Gordon Brothers Finance Company & Gordon Brothers Finance Company, LLC, Defendants, represented by Erin R. Fay -- efay@bayardlaw.com -- Bayard, P.A. About National Stores, J&M Sales National Stores was a 344-store chain in 22 U.S. states and Puerto Rico. National Stores currently does business as Fallas, Fallas Paredes, Fallas Discount Stores, Factory 2-U, Anna's Linen's by Fallas, and Falas (spelled with single "l" in Puerto Rico). Fallas was a discount retailer offering value-priced merchandise, including apparel, bedding and household supplies. The brands of National Stores were located in retail plazas, specialty centers, and downtown areas to serve the communities its customers and staff members call home. National Stores, Inc., and its affiliates sought Chapter 11 protection and Aug. 6, 2018, and announced that Hilco Merchant Resources, LLC, was conducting going-out-of-business sales for 74 stores. The lead case is In re J & M Sales Inc. (Bankr. D. Del. Lead Case No. 18-11801). J & M Sales estimated assets and debt of $100 million to $500 million as of the bankruptcy filing. The Hon. Laurie Selber Silverstein was assigned to the case. The Debtors tapped Katten Muchin Rosenman LLP as general bankruptcy counsel; Pachulski Stang Ziehl & Jones LLP as bankruptcy co-counsel; Retail Consulting Services, Inc., as real estate advisor; Imperial Capital, LLC, as investment banker; and Prime Clerk LLC as the claims and noticing agent. SierraConstellation Partners, LLC, is providing personnel to serve as chief restructuring officer and support staff. Pegasus Trucking LLC, acquired 85 of the Debtors' store locations. The bankruptcy case was later converted to a liquidation in Chapter 7 and George Miller was appointed Chapter 7 trustee. ********* 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. 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