/raid1/www/Hosts/bankrupt/TCRLA_Public/200525.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 25, 2020, Vol. 21, No. 104
Headlines
A R G E N T I N A
AEROPUERTOS ARGENTINA 2000: S&P Raises ICR to 'CCC+', Outlook Neg.
ARGENTINA: Default Could Be Cured Quickly, Investors Say
JUJUY, ARGENTINA: S&P Lowers ICR to 'CCC-', Outlook Negative
B R A Z I L
AZUL SA: Postpones Delivery of 59 Embraer E2 Jets
BRAZIL: April Demand for Flights Down 93% From Last Year
BRAZIL: Jumps to World's No. 2 in Coronavirus Cases
USIMINAS: Reports Q1 Net Loss of BRL424 Million
C O L O M B I A
AVIANCA HOLDINGS: Egan-Jones Lowers Senior Unsecured Ratings to D
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Economy Gradually Reopened May 20
DOMINICAN REPUBLIC: Over 200,000 Workers to Get Cash Relief
DOMINICAN REPUBLIC: Pandemic Will Cost Country US$1 Billion
E C U A D O R
ECUADOR: BlackRock, Ashmore Form Creditor Group as Swaps Pay Out
E L S A L V A D O R
AES EL SALVADOR II: Fitch Affirms B- IDRs & Alters Outlook to Neg.
M E X I C O
BANCO AHORRO FAMSA: Moody's Cuts Deposit Ratings to Caa1
GRUPO AEROMEXICO: S&P Lowers ICR to 'B-', Outlook Negative
P E R U
NEXA RESOURCES: S&P Lowers Stand-Alone Credit Profile to 'bb-'
PORT PAITA: S&P Alters Outlook to Negative & Affirms 'BB+' ICR
X X X X X X X X
[*] BOND PRICING: For the Week May 18 to May 22, 2020
- - - - -
=================
A R G E N T I N A
=================
AEROPUERTOS ARGENTINA 2000: S&P Raises ICR to 'CCC+', Outlook Neg.
------------------------------------------------------------------
S&P Global Ratings raised the issuer credit rating on
Argentina-based airport operator, Aeropuertos Argentina 2000 S.A.
(AA2000) to 'CCC+' from (selective default) 'SD' and the existing
notes rating on the company to 'CCC+' from 'D'. S&P also assigned a
'CCC+' rating on the new senior secured notes due 2027 (Series 2020
additional notes) that were part of the exchange offer.
The upgrade of AA2000 reflects the successful completion of the
exchange and the bank debt refinancing, which brings significant
relief in terms of short-term obligations, given the unprecedented
business disruption stemming from the COVID-19 pandemic. S&P said,
"We view this restructuring as a proof of support from investors
and the banking community. Our base-case scenario assumes liquidity
sources over uses slightly of above 1x for the next 12 months."
Since mid-March, airports in Argentina have been closed to domestic
and international commercial flights--with only a handful of
sanitary and cargo flights allowed--until September. Despite recent
talks over lifting the lockdown in July, no official announcements
have been made because of lingering uncertainties.
Also, macroeconomic conditions in Argentina have worsened as a
result of the pandemic-induced deepening of recession, widening
fiscal deficit, sustained depreciation of the peso, and sovereign
default. Even if the air travel lockdown starts to ease in the
fourth quarter, the country's deep economic woes will cause air
traffic to be fragile amid anemic disposable income levels. The
uncertainty over appetite for travel before a vaccine becomes
available and the way airlines will manage fleet capacity could
also cast a chill over the recovery.
S&P said, "We believe AA2000's ability to operate through the
crisis in the next 12 months is now stronger. However, the margin
of deviation from our base-case assumptions remains slim because
the company has already implemented many measures to reduce cash
burn during the lockdown. We expect liquidity to remain weak, given
that cash flows will remain subdued as long as air traffic lockdown
isn't eased. For more information, please refer to the liquidity
section below."
ARGENTINA: Default Could Be Cured Quickly, Investors Say
--------------------------------------------------------
Scott Squires at Bloomberg News reports that even if Argentina
defaults for the ninth time in its history, creditors say the issue
could be cured quickly as the two sides work to restructure $65
billion in overseas bonds.
Although an event of default will be hard to avoid for Argentina,
there is willingness to resolve the negotiations, said Greylock
Capital Management LLC's Chief Executive Officer Hans Humes at an
online event, according to Bloomberg News.
Bloomberg News discloses that Humes, whose fund is part of one of
three key creditor groups, the Argentina Creditor Committee, said
that a resolution was in all parties' best interest, and that
greater flexibility was needed by both sides to reach an
agreement.
"Any kind of default event can be cured in short order," Humes
said. "I would hate to have something as disorderly as a hard
default."
Bloomberg News notes that even if there's a default, that wouldn't
be immediately followed by litigation because taking legal action
amid the talks wouldn't be productive, said Guggenheim Securities'
senior managing director Mark Walker, a restructuring expert.
Argentina said it would extend the deadline for creditors to
consider an initial debt restructuring offer until June 2 as both
sides need more time reach a deal, according to a government
statement, Bloomberg News says. The government received two formal
counteroffers from creditors, after the bondholder groups roundly
rejected an initial government offer, Bloomberg News relays.
The government is planning to stick to the same formal offer it
presented in mid-April, allowing several more weeks for talks
between the parties to continue, said the people, who could not be
named because the negotiations are private, Bloomberg News
discloses. In the meantime, Argentina plans to miss a delayed
interest payment on about $500 million due May 22, the people said,
Bloomberg News says.
The Exchange Bondholder Group -- alongside the Argentina Creditor
Committee, Fintech Advisory and Gramercy Funds Management --
submitted a joint proposal to the government that people familiar
with the matter said would give bondholders about 55 cents on the
dollar, Bloomberg News notes. A separate group that includes
BlackRock Inc., Ashmore Group Plc and Fidelity Investments sent a
plan that the people valued at about 59 cents on the dollar,
Bloomberg News relays.
After several weeks of impasse, some progress has been made in
recent days, Bloomberg News notes. In an online forum, Economy
Minister Martin Guzman said there was a "big chance" that
negotiations will extend, Bloomberg News relays.
"We are having a constructive dialog with the bondholders," Guzman
added.
Negotiations started more than two months ago, and Argentina's
proposal had sought $40 million of debt relief and a three-year
moratorium on debt payments, Bloomberg News notes. The country,
home to South America's second-largest economy, says it can't meet
its obligations amid high unemployment, a sharp drop in the value
of its currency, accelerating inflation and a deep recession made
worse by the coronavirus pandemic, Bloomberg News adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the 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.
JUJUY, ARGENTINA: S&P Lowers ICR to 'CCC-', Outlook Negative
------------------------------------------------------------
S&P Global Ratings lowered its long-term credit ratings on the
province of Jujuy to 'CCC-' from 'CCC+'. The outlook remains
negative.
Outlook
The negative outlook on the province reflects the rising risks of a
distressed exchange offer or a missed debt service payment in the
next six months, given the rapid erosion of Jujuy's cash position
amid deterioration of its fiscal performance, weakening
macroeconomic conditions in Argentina, complex financial market
dynamics, and low likelihood of support from the national
government.
Downside scenario
S&P could lower the long-term ratings on the province in the next
six months if it announces its intention to undertake an exchange
offer or similar debt restructuring that it classifies as
distressed. Also, S&P could lower the ratings to selective default
('SD') if the province misses any debt service payments.
Upside scenario
S&P could revise the outlook on the province to stable in the
upcoming 12 months if it sees clear strategy for timely payment of
financial obligations. This would come from faster-than-expected
fiscal consolidation beyond 2020 that allows Jujuy to build
sufficient cash to service its debt. Also, the stabilization of the
macroeconomic and financial conditions in Argentina would cause the
province's creditworthiness to strengthen, given its dependence on
national government's fiscal transfers.
Rationale
The downgrade reflects S&P's view that a default or distressed
exchange appears to be inevitable in the next six months, absent
unexpected and significantly favorable changes in the issuer's
circumstances. The province is facing a severe liquidity crunch
amid the erosion of its revenue base because of Argentina's deep
recession. The province's timely debt service is now dependent on
the opening of its Cauchari project, but which could encounter
further delays due to the imposed lockdown in Argentina. Moreover,
the national government has stated that provinces with
unsustainable debt profiles won't receive extraordinary fiscal
support. The ratings also incorporate Jujuy's debt stock, which
currently represents almost 90% of revenue and is one of the
highest among other Argentine provinces, reflecting a history of
accumulation of large fiscal imbalances.
Expected setbacks in Jujuy's fiscal consolidation raises concerns
over timely payment of financial obligations
The province has undertaken to gradually correct its large fiscal
imbalances in the past three years, reaching operating surplus at
the end of 2019 and keeping balanced fiscal results until March
2020. However, the current economic shock will erode results for
the rest of 2020. Data as of March already signaled a
year-over-year increase of only 23% in revenue, below the inflation
rate of 48%. We consider that the province could compensate part of
the losses by delaying public-employee salary increases, as it has
been the case over the past few years. Moreover, wage negotiations
are currently suspended and salaries of political appointees were
already cut at the beginning of the year. S&P said, "At the same
time, we expect a substantial cut in the public works over the next
few years. The province has almost finished its Cauchari project,
construction of which required almost 13% of its budget , we now
expect capex to average 4% of total expenses in the next three
years. Nonetheless, fiscal belt-tightening won't compensate for
revenue losses and we expect a wide fiscal imbalance, with an
operating deficit of 6% of operating revenues and a deficit after
capex of nearly 9% of total revenues in 2020."
S&P said, "Jujuy's free cash is likely to remain extremely low,
based on our expectations of persistent fiscal deficits and limited
borrowing. At the same time, we highlight that the province's
liquidity planning largely relied on the cash flows to come from
the solar farm Cauchari (whose operational phase is overdue) and
loans from the sovereign." The latter diminished substantially when
the national government changed in December 2019, as President
Alberto Fernandez and Economy Minister Martin Guzman have indicated
that the sovereign wouldn't assist the provinces in servicing their
debt. Jujuy's largest upcoming payment is its 2022 bond interest of
$9 million.
Jujuy's debt stock is one of the highest among Argentine provinces,
given the accumulation of large fiscal imbalance in the past
decade. In 2019, the province's reported debt was ARP48 billion,
accounting for almost 90% of estimated operating revenue. We expect
a gradual reduction in debt stock and interest burden in 2021 and
2022 given our base-case assumption of a real appreciation of the
Argentine peso because around 50% of Jujuy's debt is denominated in
dollars. Nonetheless, adverse exchange-rate movements could add
volatility in its debt profile.
Rapid deterioration of economic conditions and lower support from
the national government
Jujuy's socio-economic profile is weaker than of the sovereign and
regional peers. S&P said, "We estimate its GDP per capita average
was $4,459 between 2017 and 2019, far below the sovereign's average
of $12,100 for the same period. Moreover, the likely deep economic
contraction in 2020 will further erode the province's economic
profile. We expect the provincial economy to shrink 7% in 2020, in
line with our expectation for Argentina's economy. At the same
time, we believe the structural weakness of the Argentine economy,
which existed prior to the pandemic, indicates that the recovery
will be only moderate."
Argentina is in a fragile fiscal position and we consider that its
ongoing debt restructuring could delay and limit support to
subnational governments, including Jujuy. S&P assesses the
institutional framework for Argentina's local and regional
governments (LRGs) as very volatile and underfunded, reflecting its
perception of the sovereign's very weak institutional
predictability and volatile intergovernmental system that has been
subject to various modifications by fiscal regulations and lack of
consistency over the years, jeopardizing LRGs' financial planning
and consequently their credit quality.
Governor Gerardo Morales (from the Cambia Jujuy coalition) was
reelected in June 2019 and will be in office until 2023. During the
first term, the administration increased capex and gradually
consolidated the structural fiscal imbalances. The administration's
liquidity policy has been informal and largely relied on the
national government lending. Moreover, the deterioration of the
province's socioeconomic indicators as well as the diminishing
access to external liquidity cast doubts over the continuation of
the prioritization of timely debt service. Therefore, S&P considers
that the province is likely to engage in a distressed exchange over
the next few months.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Downgraded
To From
Jujuy (Province of)
Issuer Credit Rating CCC-/Negative/-- CCC+/Negative/--
Senior Unsecured CCC- CCC+
===========
B R A Z I L
===========
AZUL SA: Postpones Delivery of 59 Embraer E2 Jets
-------------------------------------------------
Bart Noeth at aviation24.be reports that Azul Brazilian Airlines
has reached an agreement with Embraer to postpone 59 Embraer E2's
deliveries, expected to take place between 2020 and 2023, to 2024
and beyond. The Brazilian airline said that it is adapting its
business to the coronavirus pandemic, according to aviation24.be.
The airline was forced to cut its capacity by 90% in April
(compared to 2019), has made jobs redundant and has offered lower
wages to its staff, the report relays.
"Azul entered this crisis as one of the most profitable airlines in
the world. The impact of the pandemic on the Brazilian and global
economy has been unprecedented, and the timing of the recovery
still remains uncertain. With the contribution of all of our
stakeholders, we believe we will be able to come out of this crisis
as an even stronger company. The agreement reached with Embraer to
defer aircraft deliveries to 2024 is one important
component of our comprehensive plan that allows us to create the
liquidity runway for this crisis. With this support, we are able
to ensure that we have the liquidity and the resources required to
optimize the airline for the future," said John Rodgerson, Azul's
CEO, the report relays.
The airline continues to work with its partners on its fleet
optimization plan and will keep the market informed of further
developments, the report adds.
As reported in the Troubled Company Reporter-Latin America on
March 19, 2020, S&P Global Ratings placed its 'B+' global and
'brAA' national scale ratings on Azul S.A. on CreditWatch with
negative implications, including the issuer credit and debt
ratings.
BRAZIL: April Demand for Flights Down 93% From Last Year
--------------------------------------------------------
Richard Mann at Rio Times Online, citing Brazilian Airlines
Association (ABEAR), reports that demand for domestic flights in
Brazil was down 93.09 percent in April compared to the same month
last year, reflecting the increased impact of the novel coronavirus
pandemic on Brazilian commercial aviation.
The number of passengers carried on domestic flights contracted by
94.55 percent to 399,558, and the offer of aircraft seats fell by
91.35 percent in the same comparison, according to Rio Times
Online.
According to the association, these were the worst monthly results
in 20 years, the report notes. The aircraft occupancy rate stood
at 65.45 percent in April, the report relays.
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.
BRAZIL: Jumps to World's No. 2 in Coronavirus Cases
---------------------------------------------------
Pedro Fonseca at Reuters, citing the Health Ministry, reports that
Brazil became the world No. 2 hotspot for coronavirus cases, second
only to the United States, after it confirmed that 330,890 people
had been infected by the virus, overtaking Russia.
Brazil registered 1,001 daily coronavirus deaths, taking total
deaths to 21,048, according to the Health Ministry, Reuters
relays.
In Sao Paulo, the worst hit city, aerial video showed rows of open
plots at the Formosa Cemetery as it rushed to keep up with demand,
the report notes.
Far-right President Jair Bolsonaro has been widely criticized for
his handling of the outbreak and is at the center too of a
deepening political crisis, Reuters cites. The former army captain
has seen his poll ratings drop, hurt by his opposition to social
distancing measures, support of the unproven remedy chloroquine,
and tussles with experienced public health officials, the report
discloses.
The true number of cases and deaths is likely higher than the
figures suggest, as Latin America's top economy has been slow to
ramp up testing, the report relays.
Brazil overtook Britain to become the country with the third
highest number of infections, Reuters relays. It surpassed Russia
on Friday, May 22, but is unlikely to pass the United States soon,
the report cites. The world's No. 1 economy has more than 1.5
million cases, the report notes.
Since the outbreak began, Bolsonaro has lost two health ministers,
after pressuring them to promote the early use of anti-malarial
drugs like chloroquine and hydroxychloroquine, the report
discloses. Several high-profile public health experts have also
left, the report says. Many have been replaced by soldiers.
Interim Health Minister Eduardo Pazuello, an active-duty army
general, authorized new guidelines for the wider use of chloroquine
and hydroxychloroquine in mild cases, Reuters adds.
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.
USIMINAS: Reports Q1 Net Loss of BRL424 Million
-----------------------------------------------
Carolina Mandl at Reuters reports that Brazilian steel company
Usinas Siderurgicas de Minas Gerais SA posted a first-quarter net
loss of BRL424 million, from a net income BRL76 million a year
earlier, despite higher revenues.
The company's earnings before interest, taxes, depreciation and
amortization rose 14% from a year earlier, to BRL539 million.
Headquartered in Belo Horizonte, Minas Gerais, Usinas Siderurgicas
de Minas Gerais S.A. (Usiminas) is the largest integrated
flat-steel manufacturer in Latin America, with production of 3.3
million tons of crude steel and 4.1 million tons of rolling steel,
and consolidated net revenue of BRL14.9 billion (around $3.8
billion converted using the average exchange rate) in 2019.
Usiminas also owns iron ore mining properties, steel distribution
and capital goods subsidiaries in Brazil.
On April 27, 2020, Moody’s Investors Service affirms Ba3 rating
of the $750 million senior unsecured notes due 2026 issued by
Usiminas International S.a r.l. and unconditionally guaranteed by
Usinas Siderurgicas de Minas Gerais S.A. ("Usiminas", Ba3
negative). The outlook for the rating was changed to negative from
stable. At the same time, Moody's affirmed Usiminas' corporate
family ratings at Ba3 (global scale) and A2.br (national scale) and
changed the outlook for the ratings to negative from stable.
===============
C O L O M B I A
===============
AVIANCA HOLDINGS: Egan-Jones Lowers Senior Unsecured Ratings to D
-----------------------------------------------------------------
Egan-Jones Ratings Company, on May 11, 2020, downgraded the foreign
currency and local currency senior unsecured ratings on debt issued
by Avianca Holdings SA to D from CC.
Headquartered in Bogota, Colombia, Avianca Holdings is a Latin
American airline holding company formed in February 2010 by the
merger of two airlines, Avianca from Colombia and TACA Airlines
from El Salvador.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Economy Gradually Reopened May 20
-----------------------------------------------------
Dominican Today reports that after a little over two months of
strict measures, the Dominican Republic begins May 20 the gradual
reopening of its economy that, despite being one of the best in
Latin America, has been severely hit by the pandemic and that now
faces the challenge of activating its production without outbreaks
and causing a collapse, both in the health and economic sectors.
With 441 deaths and 5,997 (45.3%) active cases of 13,223 people
affected, it starts with the first of the four phases, in which
around 600,000 workers return to their jobs, according to Dominican
Today.
In this phase, small companies with up to 10 employees will open,
which will only be able to open with five or no more than 50% of
them, while those with a range of between 10 and 50 employees will
be able to work with a minimum of 10 people and not more than 50%,
as instructed by President Danilo Medina in the speech, the report
notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. The capital city is Santo
Domingo. The nation's current President is Danilo Medina of the
Dominican Liberation Party (Partido de la Liberacion Dominicana or
PLD), who took office on August 16, 2012.
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 the Dominican Republic stands
at BB- with negative outlook (April 2020). Moody's credit rating
for the Dominican Republic was last set at Ba3 with stable outlook
(July 2017). Fitch's credit rating for the Dominican Republic was
last reported at BB- with negative outlook (May 8, 2020).
DOMINICAN REPUBLIC: Over 200,000 Workers to Get Cash Relief
-----------------------------------------------------------
Dominican Today reports that a total of 202,000 independent
employees will benefit from the new program announced by the
Government called "Pa' Ti" (for you).
"This program will assign RD$5,000 monthly for 60 days, during the
months of May and June, to independent workers who qualify as such
based on the classification assigned by the Superintendence of
Banks and the asset evaluation regulations," said the Minister of
Finance Donald Guerrero, according to Dominican Today.
"We in the Ministry of Finance have had access to the database of
the Superintendence of Banks and we have been able to identify no
less than 202,000 employees by independent workers who will benefit
from the Pa' Ti program," he said, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. The capital city is Santo
Domingo. The nation's current President is Danilo Medina of the
Dominican Liberation Party (Partido de la Liberacion Dominicana or
PLD), who took office on August 16, 2012.
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 the Dominican Republic stands
at BB- with negative outlook (April 2020). Moody's credit rating
for the Dominican Republic was last set at Ba3 with stable outlook
(July 2017). Fitch's credit rating for the Dominican Republic was
last reported at BB- with negative outlook (May 8, 2020).
DOMINICAN REPUBLIC: Pandemic Will Cost Country US$1 Billion
-----------------------------------------------------------
Dominican Today reports that Dominican Republic Finance Minister
Donald Guerrero said it will cost Dominican Republic RD$57.5
billion (US$1.0 billion) to deal with the pandemic as of June this
year.
"With these new programs as of June 30 of this year 2020, the cost
of pandemic care will reach RD$57.5 billion, both with the Stay at
Home program, PHASE, the PATI program and the assistance that has
been given through the Ministry of Public Health, the National
Health System and the social assistance programs of the
Presidency," he said, according to Dominican Today.
The official offered the statements to the press through the Zoom
platform, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. The capital city is Santo
Domingo. The nation's current President is Danilo Medina of the
Dominican Liberation Party (Partido de la Liberacion Dominicana or
PLD), who took office on August 16, 2012.
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 the Dominican Republic stands
at BB- with negative outlook (April 2020). Moody's credit rating
for the Dominican Republic was last set at Ba3 with stable outlook
(July 2017). Fitch's credit rating for the Dominican Republic was
last reported at BB- with negative outlook (May 8, 2020).
=============
E C U A D O R
=============
ECUADOR: BlackRock, Ashmore Form Creditor Group as Swaps Pay Out
----------------------------------------------------------------
Ben Bartenstein at Bloomberg News report that Ashmore Group Plc and
BlackRock Inc. are joining together to present a united front for
restructuring talks in yet another emerging market.
The money managers, which are already collaborating in Argentina
and Lebanon, also plan to work together in negotiations with
Ecuador, according to people with direct knowledge of the matter,
according to Bloomberg News. A team at White & Case LLP, including
veteran restructuring specialist Ian Clark, will act as legal
advisers, the people said, who requested anonymity because the
talks are private, Bloomberg News notes.
A separate group led by UBS Group AG and Broadspan Capital LLC is
also recruiting mutual funds and hedge funds that hold Ecuador
bonds, they said, Bloomberg News says.
Bloomberg News notes that the talks with Ecuador could prove
challenging as the South American nation grapples with a unique set
of problems. Battling one of Latin America's worst Covid-19
outbreaks and a crash in crude oil prices, the government is unable
to raise spending because it has no currency of its own and is
effectively locked out of international credit markets, Bloomberg
News says. As a result, it has slashed spending while negotiating
a new loan package with the International Monetary Fund, Bloomberg
News discloses.
"It's a binary situation," said Oren Barack, the managing director
of fixed income at New York-based AGP Alliance Global Partners, the
report relays. "Either the country makes the necessary adjustments
to resume payments later this summer or the loss of revenue from
oil and spending to fight coronavirus and stimulate the economy
prevents them from getting on a sustainable path," he added.
Spokespeople at BlackRock, White & Case, Broadspan and UBS declined
to comment, while an official at Ashmore didn't respond to requests
for comment.
Ecuador bonds rebounded after nation dodged default in March
Creditors gave officials in Quito some breathing room last month
when they supported a deal to suspend coupon payments on the
nation's foreign debt until mid-August, Bloomberg News notes.
Ecuador's dollar bonds due in 2028 have jumped to 35 cents on the
dollar from as low as 20 cents in late March, Bloomberg News
discloses. The nation's notes have rallied the second-most among
developing nations this month, trailing only Angola, Bloomberg News
says.
Still, the payment delay triggered Ecuador's credit-default swaps,
generating payments of about $60 million, Bloomberg News relates.
The country's congress passed $4 billion in spending cuts this
week, just as the nation's fiscal needs mount. With few borrowing
options open to them, the government must reach an accord with the
IMF soon and bondholders later in the year, Bloomberg News relays.
The Inter-American Development Bank approved a $250 million loan to
help Ecuador with its pandemic response, Bloomberg News discloses.
"It's a dollarized economy," said Siobhan Morden, head of Latin
American fixed income strategy at Amherst Pierpont Securities in
New York, Bloomberg News notes. "You can't spend what you don't
have. It's their reality," he added.
About Ecuador
The Republic of Ecuador is a country in northwestern South America.
The sovereign state of Ecuador is a middle-income representative
democratic republic and a developing country that is highly
dependent on commodities, namely petroleum and agricultural
products. As of May 12, 2020, Ecuador has defaulted on sovereign
debt in 2020.
On April 3, 2020, Moody's Investors Service downgraded the
long-term foreign-currency issuer and senior unsecured rating of
the Government of Ecuador to Caa3 from Caa1 and changed the outlook
to negative from stable. Moody's decision to downgrade Ecuador's
rating reflects the increased and now very high probability of a
restructuring, distressed exchange or default on Ecuador's market
debt as a result of the economic and financial shock the country is
experiencing due to the coronavirus outbreak that has led to
extremely tight financing conditions for Ecuador.
On April 13, 2020, S&P Global Ratings lowered its long- and
short-term sovereign credit ratings on Ecuador to 'SD/SD' from
'CCC-/C'. S&P removed the ratings from CreditWatch. S&P said
Ecuador's already large budgetary financing needs have been
exacerbated by the plunge in global oil prices and the negative
global economic impact of the COVID-19 pandemic. The country is one
of the worst affected by the virus outbreak in the region.
Also, in mid April 2020, Fitch lowered Ecuador's longterm foreign
currency issuer default rating to C from CC. The 'C' rating
reflects Fitch's view that a sovereign default of some kind is
imminent following the "consent solicitation" made by the
Ecuadorian government to defer external bond payments while it
pursues a comprehensive restructuring. A deferment in payments, if
agreed to by bondholders, would constitute a distressed debt
exchange in Fitch's view.
=====================
E L S A L V A D O R
=====================
AES EL SALVADOR II: Fitch Affirms B- IDRs & Alters Outlook to Neg.
------------------------------------------------------------------
Fitch Ratings has affirmed AES El Salvador Trust II's (AESL's)
foreign- and local-currency Issuer Default Ratings (IDRs) at 'B-'
and affirmed the rating AESL's senior unsecured notes due 2023 at
'B-'/'RR4'. The Outlooks on the Foreign and Local Currency IDRs
have been revised to Negative from Stable. The Negative Rating
Outlook reflects El Salvador's sovereign Rating Outlook, which is
due to a deterioration in debt sustainability metrics as a result
of the widening of the fiscal deficit and economic contraction as
well as financing constraints stemming from increased reliance on
short-term debt, limited scope for additional local market
financing and uncertain access to external market financing given
high borrowing costs. Approximately half of AESL's operating
companies' EBITDA can be attributed to government subsidies,
reflecting a significant dependence on the government.
Fitch expects a recently-announced government relief program for
electricity end users to pressure the company's liquidity over the
next two months. The program allows end users to delay electricity
payments for the months of March, April and May if they consume 250
KWh or less and are affected economically or financially by the
coronavirus. Fitch expects the company to incur additional debt of
USD50 million to cover the delays in payment and 2020 leverage to
rise as a result to 3.8x from 3.4x in 2019. The El Salvadoran
government recently announced that AESL's operating companies would
be able to delay payments to electricity generators in both the
contract and spot markets to match payment arrears from end
customers. Fitch believes this announcement will provide the
company with sufficient liquidity given its cash position of
approximately USD65 million and assuming that the end user payment
relief program is not extended until May.
AES El Salvador is a special-purpose vehicle (SPV) located in
Panama that was created to issue USD310 million of notes on behalf
of AES El Salvador Group. AES El Salvador's ratings are based on
the combined credit strength of the operating companies that
guarantee its debt and reflect the group's strong market position,
low business risk profile and its predictable cash flow generation
from users. The ratings also reflect the exposure to regulatory
risk and to sovereign risk through subsidies. A significant portion
of AES El Salvador's cash flow generation comes from government
subsidies, which exposes the company to El Salvador's
creditworthiness and payment ability.
KEY RATING DRIVERS
Exposure to Government Subsidies: Due to a reduction in subsidies
in 2017 to USD3 and USD4 per month for users consuming up to 60 KWh
and 99 KWh, respectively, AESL's total subsidies fell to USD36.1
million from USD69.6 million in 2016. In August 2018, a new scheme
was adopted allowing USD5 per month for users consuming an average
of up to 105 KWh over a six-month period, which the company
believes equates to roughly USD50 million annually. Fitch estimates
subsidies will account for roughly half of AESL's EBITDA going
forward, underscoring their importance to the company's cash flow.
Despite the current crisis, Fitch understands the government
intends to pay the full monthly subsidy on time.
Collection Delays to Pressure Liquidity: Fitch estimates AES El
Salvador's distribution companies' current consolidated cash
position of USD65 million will allow them to operate through July
without additional funding should the delay in end user payments
persist. A recently-announced government relief program allows end
users affected by the coronavirus consuming up to 250 KWh per month
to defer electricity payments from March until May. The company has
tapped USD40 million in credit lines and is in talks with the
government and multilateral organizations regarding additional
subsidies and loans, respectively. The company will be able to pay
its income tax payment due in April in eight monthly instalments
and delay payments to generation companies in both the contract and
spot markets to match arrears from end customers. Fitch assumes the
relief program will not extend beyond May.
Leverage to Rise Temporarily: Fitch believes AESL will have ample
leverage headroom in 2020 despite the ongoing crisis. AESL's total
debt to LTM EBITDA was 3.4x as of year-end 2019, which Fitch
expects rise to 3.8x in 2020 largely due to additional borrowing to
cover increased working capital needs, lowered inflation that
decreases its value-added from distribution and a reduction in
demand due to an expected -4.8% decline in real GDP growth. Fitch
expects leverage to fall to 3.3x in 2022 due to a combination of
energy loss reduction, user and demand growth, tariff inflation
adjustments and the amortization of debt incurred in the first half
of 2020 as end users repay the company.
Political Uncertainty Lingers Surrounding Subsidies: The economic
minister of newly-elected president, Nayib Bukele, recently stated
that gas and electricity subsidies would be reviewed to determine
those who "most need them", hinting at changes in eligibility
rules. For the time being, the government's 2020 budget includes
the expected USD64 million for electricity subsidies while the gas
subsidy was cut from USD74.5 million to USD65.5 million. Given
their size relative to AESL's EBITDA, Fitch believes continued
timely subsidy payments to be important for the company's liquidity
and working capital and that the electricity subsidies could be
targeted in the future should the government's finances become
strained.
Strong Market Position: While the company's distribution service
territories are non-exclusive, Fitch believes the risk of new
competition is low given that distribution companies possess
significant economies of scale that make it inefficient for more
than one company to operate in any particular geographic area.
AESL's four companies combine to serve 1.4 million clients, or
nearly 80% of the market, and provided approximately 70% of energy
distributed in 2018, up from 60% in 2014. The company's network
includes 36,172 km of cables, 99 substations and 55,901
transformers. Due to its extensive asset base, territory and number
of clients, Fitch considers the company's market position strong.
Rising Losses and Reduction Efforts: Energy losses have exhibited a
slightly upward trend over the past several years, largely driven
by non-technical losses as the country continues to grapple with
high crime and instability. Total losses in 2019 were 10.89%, up
from 10.59% the year prior. Fitch estimates that nearly 3% of total
energy costs are losses absorbed by AESL and that a 1% change in
losses equates to about a USD5.5 million change in energy margin,
depending on prevailing energy prices. Fitch's base case assumes a
0.5% loss reduction over the medium term due to the company's
investment in anti-theft lines, telemeters, smart meters and
efforts to raise community awareness.
Low Business Risk Profile: As an electricity distribution company,
AESL is allowed to pass on to end users, or the government in the
form of subsidies, the full unmanageable cost of energy purchased,
thereby limiting its commodity price exposure. The company's gross
margin is determined by the regulator every five years and adjusts
year to year depending on factors such as growth in user base and
consumption as well as local inflation. The current tariff period
lasts until the end of 2022. While its concession is non-exclusive,
the capital-intensive nature of its business is inherently
monopolistic and limits competition. Fitch believes these factors
add to AESL's cash flow stability and low business risk.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
AES El Salvador's ratings could be positively affected by clear
signals of sustainable independence from the government funding,
indications of reliable government receipts through the medium
term, or further positive sovereign rating actions.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
AES El Salvador's ratings could be negatively affected by any
combination of the following factors: Material adverse changes to
the government subsidy program; shortages of electricity supply
resulting in lower consumption and lower cash flow generation;
further political or regulatory intervention that negatively
affects the company's financial performance, increased credit risk
associate with the government that could affect its ability to pay
energy subsidies or sustained total debt to EBITDA of 5.5x or
above.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
===========
M E X I C O
===========
BANCO AHORRO FAMSA: Moody's Cuts Deposit Ratings to Caa1
--------------------------------------------------------
Moody's de Mexico downgraded Banco Ahorro Famsa, S.A.'s (BAF)
long-term global local and foreign currency deposit ratings to
Caa1, from B1 -- In the same rating action, Moody's downgraded
BAF's long-term counterparty risk assessment to B3(cr), from
Ba3(cr) -- The rating action follows Moody's decision to downgrade
BAF's standalone baseline and adjusted baseline credit assessments
to caa1, from b1, as it concluded the rating review initiated March
25, 2020 -- The outlook on the ratings was changed to negative.
Moody's also downgraded BAF's long-and short-term Mexican national
scale deposit ratings to B2.mx/MX-4, from Baa3.mx/MX-3.
Moody's affirmed BAF's short-term global local and foreign currency
deposit ratings at Not Prime and the bank's short-term counterparty
risk assessment at Not Prime(cr).
The rating action reflects Moody's assessment that the Mexican
economy will contract in 2020 as a result of the coronavirus
outbreak, which will have a direct negative impact on BAF's and
other Mexican banks' asset quality and profitability -- Moody's
regards the coronavirus outbreak as a social risk under its
environmental, social and governance (ESG) framework, given the
substantial implications for public health and safety.
The following ratings and assessments of Banco Ahorro Famsa, S.A
-- (820539657) were downgraded:
-- Baseline Credit Assessment to caa1, from b1
-- Adjusted Baseline Credit Assessment to caa1, from b1
-- Long-term global local currency deposit rating to Caa1,
from B1, Negative from Ratings Under Review
-- Long-term global foreign currency deposit rating to Caa1,
from B1, Negative from Ratings Under Review
-- Long-term Mexican National Scale deposit rating to B2.mx,
from Baa3.mx
-- Short-term Mexican National Scale deposit rating to MX-4,
from MX-3
-- Long-term counterparty risk assessment to B3(cr), from
Ba3(cr)
Outlook changed to negative, from ratings under review
The following ratings and assessments of Banco Ahorro Famsa, S.A
-- (820539657) were affirmed:
-- Short-term global local currency deposit rating of Not Prime
-- Short-term global foreign currency deposit rating of
Not Prime
-- Short-term counterparty risk assessment of Not Prime(cr)
RATINGS RATIONALE
Moody's three-notch downgrade of BAF's ratings and negative outlook
incorporates the deterioration in asset quality and profitability
metrics, and the expectation that business activity will remain
under pressure, further weakening the bank's ability to generate
core earnings and to replenish its capital -- The ratings also
capture BAF's continued exposure to high-risk and illiquid assets,
which weakens liquidity, despite the bank's ample access to core
deposit funding which remains a credit strength relative to other
rating factors.
BAF's nonperforming loans have continued to increase in 1Q 2020 to
16.8%, from 14.6% as of December 2019 because of the difficult
operating environment in Mexico -- The disruptions brought about
by the coronavirus outbreak, which has led to stay-at-home measures
and a sharp drop in economic activity in Mexico, is further
straining operating conditions for the bank and its asset quality
-- This is because BAF's targeted borrowers are among the most
vulnerable to the downturn, and its unsecured consumer lending
business model dependents on foot traffic at its parent group's
retail stores, severely limiting origination and collections under
present circumstances -- BAF's management has introduced
enhancements to its origination and collections processes in 2019
and has started to diversify away from risky consumer finance, but
given current conditions, any improvement in asset quality can only
be anticipated in 2021.
Moody's therefore expects further deterioration in the bank's
nonperforming loan ratio stemming from the deep contraction in
Mexico's GDP in 2020 and the limited economic recovery Moody's
forecasts in 2021 -- In addition, BAF holds real estate assets in
the form of retail stores it received in lieu of payment from its
holding company, Grupo Famsa, S.A.B -- de C.V., and more recently,
the acquisition of an MXN4.25 billion, 25-year available for sale
security with at least a 10% yield, that represents an investment
in a trust that will benefit from the earnings generation of its
sister company, Impulsora Promobien, S.A -- de C.V -- The
available for sale security, which accounted for 10% of the bank's
total assets as of 1Q 2020, is of limited liquidity given the
unfavorable market conditions for divestment, and does not
materially lower the risk in BAF's balance sheet, materially
weakening BAF's liquidity profile.
BAF's profitability continues to be affected by high provisioning
needs, which led to a net loss in the 1Q 2020 -- Net income as a
percent of tangible assets was a negative 3.6%, down from an
already very modest 0.35% in December 2019 -- Recurring provisions
represented almost 140% of the bank's preprovision income
(resultado de la operacion antes de estimaciones preventivas), up
from 90% over the last three years, and are unlikely to decline in
the short-term, because lower business volumes, though temporary,
will limit earnings generation -- Management anticipates being
able to divest some real estate during 2020, generating an
extraordinary net profit by year end -- The bank's profitability
will nevertheless benefit from lower funding costs following
interest rates cuts in Mexico.
BAF's capitalization, measured as Moody's-adjusted tangible common
equity to risk-weighted assets, declined 200 basis points to 12%
during the first quarter of 2020 driven by BAF's negative bottom
line results -- The bank's newly acquired available-for-sale
security is sizable and represents a large portion of the bank's
tangible common equity as of 1Q 2020 -- In assessing BAF's capital
Moody's incorporates the limited capacity to absorb losses of the
available for sale security.
Moody's ratings on BAF also incorporate the limited business
diversification and its focus on high risk unsecured consumer
lending, which reflects the vulnerability of the bank's asset risk
and earnings to shifts in current market conditions -- In
addition, BAF's asset allocation and overall balance sheet
management, which is influenced by its parent group, carries a high
degree of complexity that weakens its assessment of BAF's corporate
governance -- Corporate governance remains a key credit
consideration particularly in terms of the high degree of
intercompany relations.
In assigning a negative outlook to BAF's ratings, Moody's said the
rapid spread of the coronavirus, deteriorating global economic
outlook, falling oil prices, and asset price declines are creating
a severe and extensive credit shock across many sectors, regions
and markets, including Mexico -- These conditions will challenge
BAF to generate earnings and stabilize asset quality considering
its direct lending exposures to consumer clients, which may be most
affected by the pandemic.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
In line with the negative outlook, there is limited upward pressure
on BAF's ratings -- However, the outlook could be stabilized if
BAF's asset quality stabilizes and profitability returns to
historic levels, as the bank is able to offset Moody's expected
increase in delinquencies in a weaker operating environment with a
substantial reduction in problem assets.
Conversely, downward ratings pressure will mount if the bank's
capitalization is further affected by losses or its funding mix,
which remains a relative strength of the bank, were to be affected
by BAF's increasing asset risks.
The principal methodology used in these ratings was Banks
Methodology published in November 2019.
GRUPO AEROMEXICO: S&P Lowers ICR to 'B-', Outlook Negative
----------------------------------------------------------
S&P Global Ratings lowered its issuer credit and issue-level
ratings on Mexico-based air transportation and cargo service
provider, Grupo Aeromexico, S.A.B. de C.V. to 'B-' from 'B+'. We
also removed ratings from CreditWatch with negative implications,
where we placed them on March 20, 2020.
The company maintains a 23%-24% of Mexico's market share in
domestic and 40%-41% in international services as of March 31,
2020. As of this report's date, Aeromexico operates close to 10% of
total capacity amid global lockdowns and economic malaise, mostly
consisting of cargo services. S&P said, "Our current forecast
assumes the industry's slower-than-expected resumption of
operations, anemic air passenger traffic, and ongoing cash burn
stemming from fixed costs. Therefore, we estimate a revenue drop of
53.8% and a barely breakeven EBITDA MXN900 million for Aeromexico
in 2020, compared with our previous forecast of a 25% fall and
MXN7.8 billion, respectively. Moreover, Aeromexico's need for debt
funding has increased, preventing deleveraging in the next two
years, leading to debt to EBITDA well above 5.0x, funds from
operations (FFO) to debt below 12%, and EBITDA interest coverage
below 2%."
Given high uncertainty over the pandemic's impact on the Mexican
population's spending on air travel, the company's total capacity
could vary. Moreover, there's a high risk that lockdowns could
remain in place for a longer-than-expected period, delaying a
recovery in Aeromexico's operations. This could cause the company's
metrics to weaken further in the next two years.
The company has been increasing liquidity sources. S&P believes
Aeromexico has managed to maintain the liquidity sources-to-uses
ratio at about 0.95x for the next 12 months, compared with 1.2x for
us to assess liquidity as adequate. On May 12, 2020, Aeromexico
announced that through PLM Premier, S.A.P.I., it will receive a $50
million intercompany loan and $50 million through advance award
ticket purchases, which S&P includes in its liquidity assessment.
Moreover, the company continues searching for potential liquidity
sources to withstand the current economic downturn, alleviate
future operating cost burdens, and recover in the future from low
passenger traffic. As of this report's date, the company has
managed to conclude negotiations with main lessors and main
suppliers to delay payments and alleviate pressures on liquidity.
However, Aeromexico's liquidity still faces potential risks
stemming from the uncertainty over the severity and duration of air
travel restrictions among most of the company's international
destinations and over the population appetite for air travel. Such
uncertainty could prevent Aeromexico from generating cash flows in
the next 12 months.
S&P said, "Although we currently don't envision a potential default
scenario for the company in the next 12 months, we will continue
evaluating Aeromexico's ability to reduce leverage metrics upon
resuming operations. Given that most of Aeromexico's potential
liquidity sources are in the form credit lines, which could imply
higher debt levels. Therefore, if the recovery of Aeromexico's
operations are delayed and debt funding increases, its debt
structure could become unsustainable amid low operating cash flows.
As a result, we could lower the ratings even further. As of this
report's date, we believe the company could meet its short-term
debt and lease repayments."
Environmental, social and governance (ESG) credit factors taken
into account for this rating.
-- Health and safety
=======
P E R U
=======
NEXA RESOURCES: S&P Lowers Stand-Alone Credit Profile to 'bb-'
--------------------------------------------------------------
S&P Global Ratings revised downward Nexa Resources Peru's
stand-alone credit profile (SACP) to 'bb-' from 'bb'. At the same
time, S&P affirmed its 'BB+' issuer credit and issue-level ratings
on NRP.
During the first quarter of 2020, NRP posted revenue of $119.4
million and EBITDA shortfall of $16.2 million, a 40% and 125% drop,
respectively, from the same period last year. More than two-thirds
of the drop stemmed from the plunge in metals prices (mostly zinc,
copper, and lead). The remainder was due to lower production
resulting from maintenance activities and two weeks of operating
shutdowns as a result of COVID-19. This spiked NRP's gross adjusted
leverage ratio to 4.4x for the last 12 months ended March 2020 from
2.8x at the end of 2019. For the second quarter, the scenario is
likely to be grimmer given that NRP's operations have been
suspended until May 10, which will erode its top-line results,
EBITDA, and cash flows. S&P only expects a gradual recovery in
operations during the second half of the year, which should lead to
a breakeven or slightly positive EBITDA in 2020. Additionally, the
coronavirus outbreak will trim global growth, which will likely
cause a high degree of volatility in commodity prices. Therefore,
S&P expects NRP's credit metrics to weaken in 2020, and to rebound
amid our expectations of global economic recovery and production
activities to normalize in 2021.
As of March 2020, NRP maintained a cash balance of $214.3 million
and has no debt maturity before 2023 when its $128.5 million senior
unsecured notes come due. Under this unprecedented scenario, the
company is taking extraordinary measures to protect its liquidity
and contain its cash burn by cutting non-essential expenses,
preserving working capital, suspending all types of exploration
activities, and postponing capital expenditures amid the
pandemic-induced industry downturn.
S&P said, "According to our group rating methodology, we continue
to view NRP as a core subsidiary of Nexa and the latter as a highly
strategic subsidiary of Votorantim. Therefore, we believe that NRP
would receive extraordinary support from Nexa if it requires it.
Therefore, we limit our rating on NRP and Nexa to one notch below
that on its ultimate parent company. In this sense, the outlook on
NRP directly mirrors the outlook on Nexa, and indirectly that on
Votorantim."
PORT PAITA: S&P Alters Outlook to Negative & Affirms 'BB+' ICR
--------------------------------------------------------------
S&P Global Ratings revised its outlook on port operator, Terminales
Portuarios Euroandinos Paita S.A. to negative from stable, and
affirmed the debt rating at 'BB+'.
Following the first case of COVID-19 in Peru in early March,
President Martin Vizcarra took measures in order to contain the
virus, such as the country-wide lockdown, closing of borders,
restrictions on domestic travel and nonessential business
operations, excluding health facilities, food vendors, pharmacies,
and financial institutions. The services that ports provide are
also considered as essential in order not to disrupt the supply
chain. Therefore, Paita continued operate despite the pandemic.
However, several industries including the agricultural commodities
that are a key driver of the volumes handled at TPE, took a hit not
only because of a collapsed demand but more importantly, because of
mandated lockdowns.
Therefore, during the first quarter of the year, volumes of
containers handled at Paita, which represent 80%-90% of revenues,
increased only 1.6% year over year. This was drastically down from
our expectation of a 10% growth stemming from a record harvest of
fruits such as avocados, grapes, bananas, and mangos, which are the
principal products that Paita handles. The much lower growth in
volumes at TPE was mainly due to a 27% reduction in exports during
the past two months, which stemmed from a lower output of
fish-derived products because of the lockdowns.
S&P said, "Going forward we expect this negative trend to continue
in particular until the lockdown finalizes which we expect to
happen by the end of May but also along the remaining of 2020 due
to lower growth projections in all those countries where Paita
exports (including the U.S. and Netherlands, China, and Spain). Our
revised base-case scenario assumes a decrease of 6% in volumes
handled this year and growth next year. In such a scenario, we
continue to expect Paita's performance to be relatively resilient
with a minimum DSCR of 1.65x by December 2020, although tighter
than our forecast of 2.00x. The negative outlook indicates the
inherent uncertainty of the impact of COVID-19 and a rebound in
traffic, including the risk of downgrade if we don't expect
recovery to start in late 2020."
During 2019, the project spent $13 million to finalize the dredging
of the existing pier, install special systems for handling solid
and liquid bulk shipments, and implement 800 additional taps for
Reefer containers and the Reefer Monitoring System. TPE planned to
extend the dock and other minor works, totalling $20 million, in
2020 and 2021. Although the project has some flexibility in
adjusting capital expenditures (capex) in order not to weaken its
financial performance, the regulator has already approved these
works, and we expect Paita to perform $12 million in 2020 and $8
million in 2021. The project will fund these works with cash held
on a special reserve account. As of this report's date, the account
held $13 million and the TPE has already spent $1.5 million during
the first quarter of the year. S&P said, "Therefore, we now expect
the project to use $10.5 million from the reserve account during
2020, and the remainder during 2021. We now expect the project will
add $5.8 million to the special reserve account during 2020, which
is 45% higher than we previously projected. We believe the higher
capex will also pressure 2020 DSCRs."
S&P said, "Moreover, stage III capex, which involve reinforcing the
existing jetty pier, will be triggered once the port reaches
300,000 equivalent units annually (TEUs), which we now expect will
occur by 2024 rather than in 2020. Works will be financed with
funds from a special account which is funded with the remaining
cash available after the payment of debt service and funding of
DSRAs, which give some relief to the project's debt structure. As
of this report's date, the reserve account totaled $9.2 million
while stage III will cost about $19.8 million. Our base-case
scenario assumes the reserve account could be fully funded by
mid-2021."
Environmental, social, and governance (ESG) factors relevant to the
rating action:
-- Health and safety
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week May 18 to May 22, 2020
-----------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Corp Universidad de Co 5.9 64.2 11/10/2021 CL CLP
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
Enel Americas SA 5.8 32.7 6/15/2022 CL CLP
Empresa Provincial de 12.5 0.0 1/29/2020 AR USD
Odebrecht Finance Ltd 7.0 17.0 4/21/2020 KY USD
SACI Falabella 2.3 50.6 7/15/2020 CL CLP
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Banco Security SA 3.0 27.4 6/1/2021 CL CLP
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
KrisEnergy Ltd 4.0 40.4 6/9/2022 SG SGD
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Plaza SA 3.5 38.3 8/15/2020 CL CLP
Banco Security SA 3.0 5.6 7/1/2019 CL CLP
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Energetica de Pern 6.2 1.1 1/15/2022 BR BRL
Yida China Holdings Lt 7.0 74.3 4/19/2020 CN USD
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Provincia del Chubut A 4.5 2208 3/30/2021 AR USD
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Polarcus Ltd 5.6 71.8 7/1/2022 AE USD
MIE Holdings Corp 7.5 56.4 4/25/2019 HK USD
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Empresa de Transporte 4.3 30.9 7/15/2020 CL CLP
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Empresa Electrica de l 2.5 63.8 5/15/2021 CL CLP
Sociedad Austral de El 3.0 17.0 9/20/2019 CL CLP
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Esval SA 3.5 49.9 2/15/2026 CL CLP
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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.
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of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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