/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/200601.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, June 1, 2020, Vol. 21, No. 109 Headlines A R G E N T I N A ARGENTINA: Traders Eye CDS Payout as Fitch Cuts Country to RD IRSA INVERSIONES: S&P Lowers ICR to 'CCC-', Outlook Negative C H I L E LATAM PASS-THROUGH 2015-1A: Moody's Cuts Class A Certs to B3 D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Most of the Country is Open for Business M E X I C O BANCO DEL BAJIO: Fitch Affirms BB+ LongTerm IDRs, Outlook Negative T R I N I D A D A N D T O B A G O NATIONAL GAS: Moody's Alters Outlook on Ba1 CFR to Negative TRINIDAD & TOBAGO: AG Highlights Country's Debt Sustainability TRINIDAD PETROLEUM: Moody's Alters Outlook on Ba3 CFR to Negative U R U G U A Y BANCO DE LA NACION - URUGUAY: Fitch Affirms 'CC' IDRs PROVINCIA CASA: Fitch Affirms CC IDRs on BAPRO's Credit Profile X X X X X X X X [*] BOND PRICING: For the Week May 25 to May 29, 2020 - - - - - ================= A R G E N T I N A ================= ARGENTINA: Traders Eye CDS Payout as Fitch Cuts Country to RD ------------------------------------------------------------- Scott Squires and Ben Bartenstein at Bloomberg News report that Argentina's ninth default on its external debt is now official after some of its bonds were cut to default status by two rating companies. Fitch Ratings reduced the South American nation to restricted default, while S&P Global downgraded four of its dollar-denominated bonds to default from CC following a missed $500 million payment. That sets up a potential payout for traders who hold credit derivatives, according to Bloomberg News. The Credit Derivatives Determinations Committee said in a statement that it's been asked to rule on whether a "failure to pay" credit event occurred, Bloomberg News notes. There were net wagers of $1.5 billion on the nation's debt swaps, according to the latest data compiled by ISDA, Bloomberg News says. President Alberto Fernandez's government is locked in talks with creditors to restructure $65 billion in overseas securities, Bloomberg News relates. Argentina extended the deadline for a deal until June 2, raising the stakes for a quick negotiation, Bloomberg News discloses. "The parties involved have indicated recent progress toward a comprehensive restructuring, although uncertainty remains around the prospects for reaching a deal with acceptance from bondholders sufficient to meet the different thresholds set in ‘collective action clauses' in the securities," Fitch analysts led by Todd Martinez wrote in a statement obtained by the news agency. The country is burdened by inflation near 50% and an economy that was shrinking even before the pandemic hit, Bloomberg News relates. The government has said Argentina needs $40 billion in debt relief to set it back on the path to sustainable growth and officials have been in talks with bondholders for two months, Bloomberg News discloses. Economy Minister Martin Guzman said in an interview that the government would improve its offer to creditors, but didn't give any details on his plans, Bloomberg News relays. Discussions with creditor groups continue, he said, adding that the latest proposals from bondholders have closed the gap between the two sides, Bloomberg News notes. Moody's Investors Service maintained Argentina's credit rating at "Ca," a rating consistent with significant expected losses for investors as the country renegotiates its debt, Moody's senior credit officer Gabriel Torres said. 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. IRSA INVERSIONES: S&P Lowers ICR to 'CCC-', Outlook Negative ------------------------------------------------------------ S&P Global Ratings, on May 28, 2020, lowered its issuer credit and issue-level ratings on IRSA Inversiones y Representaciones S.A. (IRSA) and its subsidiary, IRSA Propiedades Comerciales S.A. (IRCP) to 'CCC-' and 'CCC', respectively, from 'CCC+'. S&P also removed the rating from CreditWatch with negative implications, where it placed them on May 17, 2020. As of December 2019, IRSA's cash position was $165 million mainly at the IRCP level, down 35% from June 2019, while debt remained at around $900 million. Between this July and November, the company faces debt maturities for $450 million, including $150 million at IRCP (without netting bond repurchases for $60 million which are considered in cash position). S&P understand the company is working on several refinancing alternatives and it believes the group has a long track record particularly in the domestic capital market, and a solid asset base. However, given that Argentina has yet to restructure its debt, and that the company's shopping malls and hotels remain closed due to COVID-19 with murky outlook on when operations could be resumed, refinancing challenges are increasing. Therefore, the likelihood of a debt exchange is on the rise and given the company's tight liquidity, S&P might consider a de facto restructuring under its rating methodology. IRSA faces maturities in July and August of around $115 million, and in November of $180 million, while IRCP faces $140 million in September. Therefore, an exchange at IRSA would occur first and could prevent one for IRCP. This, together with IRCP's slightly stronger cash position in our view, supports the one-notch rating difference. For the following 12 months, IRSA's cash sources won't cover the expected cash uses, and the company will rely on accessing the domestic capital market and bank loans, equity infusions, or asset sales (such as offices or IRCP stocks) to refinance its debt. Moreover, in 2019, IRSA committed to transfer around $60 million to its subsidiary, IDB Development Corp. (IDB), in three $20 million installments, the last two of which are planned for September 2020 and 2021. In May 21, 2020, IRSA issued $65 million in nonconvertible notes due February 2021, May 2021, and May 2022. The company will use proceeds to refinance shorter-term debt. This issuance slightly improves IRSA's liquidity, but S&P doesn't believe it will remove refinancing risk in upcoming months. IRSA's shopping malls and hotels remain closed since mid-March due to the COVID-19 lockdown. S&P said, "We believe IRSA's operating performance will be under enormous pressure for at least until December 2020. In the medium term, we expect occupancy rates to be lower than those prior to the pandemic at the company's three segments -- malls, hotels, and offices -- further weakening cash flows." A significant number of tenants could fail to pay rent or negotiate rent deferrals. Customer behavior could alter for a long period, taking more precautions and avoiding places with concentration of people. Companies leasing office spaces could allow their employees to work remotely more frequently once the pandemic fears have abated, and could reduce office space needs in the future. Environmental, Social and Governance (ESG) factors relevant to the rating action: -- Health and safety ========= C H I L E ========= LATAM PASS-THROUGH 2015-1A: Moody's Cuts Class A Certs to B3 ------------------------------------------------------------ Moody's Investors Service downgraded its ratings of the Enhanced Equipment Trust Certificates of LATAM Airlines Group, S.A., LATAM Pass Through Certificates, Series 2015-1: Class A issued by LATAM Pass Through Trust 2015-1A to B3 from Baa2 and Class B issued by LATAM Pass Through Trust 2015-1B to Ca from Ba1. The corporate family rating of LATAM was downgraded to Ca on May 26th following its filing for reorganization under Chapter 11 of the US Bankruptcy Code earlier that day and was withdrawn subsequently. The ratings outlook on the EETC issuers and the EETC ratings is negative. Its actions conclude the review for downgrade initiated on March 17, 2020 and continued on May 6, 2020. The company rejected the Certificates in its bankruptcy filing. The spread of the coronavirus outbreak, the deteriorating global economic outlook, low oil prices and asset price declines are sustaining a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The passenger airline industry is one of the sectors most significantly affected by the shock given its exposure to travel restrictions and sensitivity to consumer demand and sentiment. Passenger demand is currently down by more than 90% across most of the world, excluding a few countries in Asia. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Price (aircraft value) discovery in the market is currently scant as few transactions are taking place, providing limited content for aircraft appraisers to provide reliable estimates of aircraft market values. The current circumstances will cause some to promote steep haircuts to pre-coronavirus aircraft values. On its surface, the rejection of the EETC transaction by LATAM, which was unexpected, is a stark indicator of the market disruptive impact of the coronavirus crisis on airlines' need for aircraft, at least in the near term. It is also a likely an example of how airlines that choose to reorganize may use the current environment to gain leverage in negotiations with lenders and aircraft owners given the current limited demand for aircraft. Values realized in upcoming months if aircraft are sold could trail current expectations, even for more attractive models that would otherwise be in demand if not for the coronavirus, like the A321-200s, 787-9s and A350-900s that comprise the collateral for the LATAM EETC. The aircraft have an average age of 4.9 years. The wide-bodies are the most fuel-efficient in the fleet. The 787-9s are powered by the Rolls Royce Trent 1000 engine, which has had durability issues that have reduced the on-wing time versus the design specifications. This has negatively impacted the utilization of the company's 787s, as has been the case for all Rolls-powered 787s, increasing costs and adversely impacting this model's market value. The negative outlook considers the relationship between expected loss and the resolution of the rejection of the EETCs, including whether the controlling party will repossess and look to sell the aircraft or renegotiate the EETC's payment terms in order to not have to repossess and sell the aircraft in this anemic market. The negative outlook also captures the current high uncertainty of aircraft values. Downgrades: Issuer: LATAM Pass Through Trust 2015-1A Senior Secured Enhanced Equipment Trust, Downgraded to B3 from Baa2 Issuer: LATAM Pass Through Trust 2015-1B Senior Secured Enhanced Equipment Trust, Downgraded to Ca from Ba1 Outlook Actions: Issuer: LATAM Pass Through Trust 2015-1A Outlook, Changed To Negative From Rating Under Review Issuer: LATAM Pass Through Trust 2015-1B Outlook, Changed To Negative From Rating Under Review RATINGS RATIONALE The B3 rating assigned to the Class A certificates reflects the increased risk because of the rejection of the transaction and the potential for a negotiated change to the transaction's payment terms or a repossession and subsequent delay in monetizing the aircraft because of current paucity of demand for aircraft. The Ca rating on the Class B certificates reflects the likelihood of a less than full recovery given the rejection of the transaction, current market conditions, and the potential for payment terms to be renegotiated in lieu of repossession. Moody's had assumed equity cushions of about 35% and 25% before priority claims when it previously downgraded the ratings on May 6th, reflecting the following valuation assumptions for aircraft: $37 million for the 2015 vintage A321-200s, $98 million for the 2015 787-9s, and $101 million for the 2015 vintage A350-900s. The timing of monetization of the aircraft or renegotiation of terms relative to a recovery in passenger demand will impact the ultimate recovery of the obligations. A default on the rated certificates is defined as non-payment of scheduled interest or non-payment of remaining principal at the legal final maturity dates (August 15, 2029 for the Class A, and August 15, 2025 for the Class B). The separate 21-month liquidity facilities will now be utilized to fund interest payments, including the May 15, 2020 installment that LATAM did not make when due, absent the company curing the missed payment. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Changes in the ratings of the LATAM EETCs can result from declines in Moody's estimates of aircraft values and/or the company curing the missed payment and agreeing to observe the original payment schedule going forward. The methodologies used in these ratings were Enhanced Equipment Trust and Equipment Trust Certificates published in July 2018. LATAM Airlines Group S.A is a Chile-based airline holding company formed by the business combination of LAN Airlines S.A. of Chile and TAM S.A. of Brazil in June 2012. LATAM is the largest airline group in South America, with a local presence for domestic passenger services in six countries (Brazil, Chile, Peru, Ecuador, Argentina and Colombia). The company also provides intraregional and international passenger services and has a cargo operation that is carried out using belly space on passenger flights and dedicated freighter service. In 2019, LATAM generated $10 billion in net revenue and carried more than 74 million passengers and 904,000 tons of cargo. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Most of the Country is Open for Business ------------------------------------------------------------ Dominican Today reports that Dominican Republic Economy Minister, Juan Ariel Jimenez, told Diario Libre that the opening of businesses in shopping centers has been authorized. Of those businesses, only bank branches and, where there were, supermarkets, which are essential activities, were operating, according to Dominican Today. The shopping centers were not included in phase 1 of the de-escalation, but their operations would begin within the framework of the second phase, that is, tentatively as of June 3, 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 negative outlook (April 2020). Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). =========== M E X I C O =========== BANCO DEL BAJIO: Fitch Affirms BB+ LongTerm IDRs, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has affirmed Banco del Bajio S.A. Institucion de Banca Multiple's Viability Rating at 'bb+' and its Long- and Short-Term Foreign and Local Currency Issuer Default Ratings at 'BB+' and 'B', respectively. Fitch also affirmed BanBajio's Support Rating and Support Rating Floor at '4' and 'B+'. The Rating Outlook on the Long-Term IDRs is Negative. Fitch has also affirmed BanBajio's and Financiera Bajio, S.A. de C.V. Sofom E.R.'s Long- and Short -Term National scale ratings at 'AA+(mex)' and 'F1+(mex)', respectively. The Rating Outlook on the National Scale rating was revised to Negative from Stable. BanBajio's Negative Outlook reflects that further deterioration of the operating environment due to the coronavirus pandemic will pressure the bank's financial metrics. Mainly affected will be asset quality and profitability from lower expected business volumes and portfolio weakening over the medium term given its business model focused on SMEs and certain sectors that Fitch considers more sensitive to the current economic conditions. The Negative Outlook for the Long-Term National Scale Ratings reflects that a greater deterioration in BanBajio's credit profile relative to its domestic peers would also pressure its national ratings. KEY RATING DRIVERS BanBajio - IDRs, VR, SENIOR DEBT and NATIONAL RATINGS BanBajio's IDRs and national scale ratings are driven by its intrinsic creditworthiness, as reflected in its VR of 'bb+'. BanBajio's VR is highly influenced, by the operating environment that presents increasing risks for the bank's credit profile and its company profile supported by a strong regional franchise but still moderate size on a global basis, and its consolidated business model. The ratings also consider the bank's controlled-asset quality, appropriate funding and liquidity profile, and recurrent earning generation that underpin its sound capitalization. BanBajio has a strong regional franchise and consolidated business model, particularly in the SMEs and agribusiness sectors. Despite this, Fitch believes further deterioration of the operating environment will pressure the bank's financial metrics due to its above-average exposure than peers to SMEs and agribusiness, which are vulnerable segments of the economy, although the ultimate credit risk is partially mitigated by the use of guarantees from development agencies in many instances. As of March 2020, BanBajio was the eighth-largest bank in Mexico by gross loans and deposits. Fitch views BanBajio's asset quality as good, with the bank delivering low non-performing loan ratios and comparing favorable against peers, although the bank's concentration by region, segment, and industry weighs on its asset quality assessment. As of March 2020, impaired loans to gross loans and net charge-offs to gross loan ratios increased to 1.2% and 1.5%, respectively, but were still at levels below the industry and its peers. While 1Q20 did not show sharp loan deterioration, Fitch expects asset quality to deteriorate further over the following months given the bank's higher than average exposure to vulnerable segments; however, BanBajio is acting prudently by creating additional credit reserves to absorb further asset quality deterioration. Fitch considers BanBajio's asset quality deterioration could be partially contained by application of the relief program approved by the regulator to support clients and by the bank's relatively ample collateral coverage and loan loss reserves above 100%. The bank's profitability metrics are underpinned by controlled loan impairment charges, relatively low-cost of funding benefitted by its ample customer deposits base, and reasonable operating efficiency. As of March 2020, its operating profit to risk-weighted assets ratio decreased to 3.5% after two consecutive years above 4%. The bank's profitability is expected to further diminish in the mid-term as the economic crisis pressures business volumes and potential loan deterioration arises. BanBajio is not expecting the loan impairment charges to increase materially over the next three to six months due to the debtor-relief measures, but the bank is creating additional loan loss allowances that could pressure its earnings. BanBajio's capital metrics are solid and have remained comparable with other local-rated peers. Capitalization metrics are supported by its recurrent earning generation despite dividend payments. As of March 2020, its Common Equity Tier 1 ratio was 15.9%, a level which is largely unchanged since 2017 when the bank received a capital injection from the IPO. Fitch does not anticipate BanBajio's capital base to weaken materially in 2020 despite lower expected earnings. Slower loan growth and plans for non-dividend distribution previously announced by the bank would partially ease pressures on capital. BanBajio's appropriate funding profile relies on its growing deposit franchise. As of March 2020, its deposits represented 74.6% of total funding and the loan to deposit ratio was 119.6%, a slight improvement compared to the four-year average of 126.5% although still higher than the largest franchises in the country and similar to local mid-sized banks. In the same period, BanBajio's LCR was 136.2%, which, along with its access to funding lines from development banks, underpins its adequate liquidity position. SUPPORT RATINGS BanBajio's Support Rating of 4 reflects Fitch's opinion of a moderate probability of sovereign support in case of need, given the bank's mid-size franchise and moderate market share of core customer deposits in the investment-grade Mexican operating environment. As of March 2020, the market-share in loans and deposits was around 3.3% and 2.8%, respectively. The Support Rating Floor of 'B+' indicates a base level for the bank's Long-Term IDRs as long as the assessment of the support factors does not change. SENIOR DEBT BanBajio's senior unsecured national debt ratings are aligned with the bank's national scale ratings, as the likelihood of default is the same as the banks. FinBajio'S NATIONAL RATINGS FinBajio's national scale ratings mainly reflect the high propensity and ability of support from BanBajio, if necessary, based on Fitch's assessment that the subsidiary is core to its bank's strategy due to its relevant role in providing core products such as factoring and leasing, which complement the range of financial services that the bank offers to its clients. RATING SENSITIVITIES BanBajio - IDRs, VR and National Ratings Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade of BanBajio's VR and IDRs could result from a material deterioration of the bank's financial performance that drops its CET1 ratio consistently to levels below 13% and operating profit to RWAs consistently under 2%. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Negative Outlook could be revised back to Stable if the impact of the coronavirus shock on the bank's credit profile is less than expected with a relatively quick recovery, which will also depend on BanBajio's ability to confront current challenges and minimize the impact on asset quality and profitability; -- The current Negative Outlook makes an upgrade highly unlikely in the near term. -- Over the medium term, the ratings could be upgraded by the confluence of an improvement of the operating environment and the financial profile of the bank, specifically, if the bank significantly enhances its franchise while continuing to diversify its business model and maintaining its financial profile at healthy levels. SUPPORT RATINGS Upside potential for BanBajio's SR and SRF is limited and can only occur over time with a material gain in the bank's systemic importance. These ratings could be downgraded if the bank loses material market share in terms of retail customer deposits. SENIOR DEBT Although the bank's debt rating does not have an explicit Rating Outlook, it would mirror any potential movements on BanBajio's IDRs. The senior unsecured national debt ratings would continue to be aligned with the bank's national scale ratings. FinBajio - National Ratings -- Any potential changes of FinBajio's national scale ratings will be driven by any changes in BanBajio's national scale ratings. -- A modification of the entity's strategic importance to the bank. 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 Prepaid expenses and other deferred assets were classified as intangibles and deducted from Fitch Core Capital or tangible equity to reflect its low absorption capacity. In the case of BanBajio, Fitch has made adjustments to the RWAs following its criteria, and the agency consolidated the bank's RWAs with those of its subsidiaries with credit operations. 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 FinBajio's ratings are driven by BanBajio's ratings. 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). Banco del Bajio, S.A. - LT IDR BB+; Affirmed - ST IDR B; Affirmed - LC LT IDR BB+; Affirmed - LC ST IDR B; Affirmed - Natl LT AA+(mex); Affirmed - Natl ST F1+(mex); Affirmed - Viability bb+; Affirmed - Support 4; Affirmed - Support Floor B+; Affirmed - Senior unsecured; Natl LT AA+(mex); Affirmed Financiera Bajio, S.A. de C.V., SOFOM, E.R. - Natl LT AA+(mex); Affirmed - Natl ST F1+(mex); Affirmed ===================================== T R I N I D A D A N D T O B A G O ===================================== NATIONAL GAS: Moody's Alters Outlook on Ba1 CFR to Negative ----------------------------------------------------------- Moody's Investors Service affirmed the Ba1 corporate family rating on National Gas Company of Trinidad & Tobago's and its $400 million global bonds due 2036. Simultaneously, Moody's affirmed the company's ba1 baseline credit assessment. The outlook on all ratings is now negative. These rating actions follow Moody's announcement on May 22, 2020 that it had changed the Government of Trinidad and Tobago's outlook to negative from stable and affirmed its Ba1 ratings. Affirmations: Issuer: National Gas Company of Trinidad and Tobago Corporate Family Rating, Affirmed Ba1 Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 Outlook Actions: Issuer: National Gas Company of Trinidad and Tobago Outlook, Changed to Negative from Stable RATINGS RATIONALE NGC's Ba1 rating and ba1 BCA reflect the company's long track record as a profitable and conservatively-managed company, although credit metrics deteriorated in 2019 from low prices and operating margins. The company continues to benefit from its monopoly position in the transmission and distribution of natural gas from Trinidad and Tobago's offshore gas fields to the domestic petrochemical, electrical power generation, steel and light industrial sectors. However, the BCA also considers the highly cyclical nature of the petrochemical sector and longer-term natural gas supply risk. The BCA incorporates the company's economic burden of serving as a conduit for the government for national development, including the need to extend special credit terms to the gas consuming electric utility company. The rapid and widening spread of the coronavirus outbreak, 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. The combined credit effects of these developments are unprecedented. The oil and gas sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in NGC's credit profile has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and NGC remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. In its joint default analysis, Moody's assumes a high default correlation between NGC and the sovereign, its sole shareholder, and a very high support probability from the government to the company, in case of need. The high level of dependence on credit factors, such as the oil and gas industry dynamics, that could cause stress to both the government and the company simultaneously, hinders the government's ability to provide extraordinary support. In addition, Moody's expects that NGC and the government will remain committed to maintaining the company's solid balance sheet, avoiding increase in debt to transfer funds to the government. NGC has strong liquidity, with a cash balance and short-term investments of $1 billion in September 2019, which compares with negligible debt maturities in 2020-21 and annual maintenance capital expenditure of $100 million. The company does not have committed banking credit facilities but has had minimal need for external funding over the last several years. The negative outlook on NGC's Ba1 ratings coincides with the negative outlook on Trinidad's Ba1 rating given the importance of the sovereign's credit strength to the company's ratings. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS NGC's ratings could be downgraded because of materially weakened margin or cash flow performance, greater government interference via increased taxation or dividends that could jeopardize the company's liquidity profile, or a diversion of the company away from its core gas pipeline operations into public policy programs, including the extension of special credit terms to less profitable state entities. In addition, NGC's Ba1 rating could be downgraded as a result of a decreased likelihood that the government of Trinidad & Tobago would provide extraordinary support to NGC, or as a result of a downgrade of the government's Ba1 rating. NGC's BCA could be raised if size and scale improves, in combination with sustainable low leverage and satisfactory returns. Although unlikely at this point, an upgrade of the ratings of the government of Trinidad & Tobago would provide a lift to the company's rating. The methodologies used in these ratings were Midstream Energy published in December 2018. NGC is a diversified natural gas transmission and distribution company 100% owned by the Trinidad and Tobago's government. NGC is Trinidad & Tobago's sole purchaser, transporter, and distributor of natural gas to the domestic natural gas-based energy sector and is also the designated agent of the Trinidad and Tobago's government to promote and facilitate natural gas-based investment in the country. TRINIDAD & TOBAGO: AG Highlights Country's Debt Sustainability -------------------------------------------------------------- Trinidad Express reports that Trinidad and Tobago has a $18,992 balance a $7 million loan it took in 1941 under the War Loan Ordinance of 1941. It's one of several loans the Government has with local financial institutions which amount to close to $50 billion, according to Trinidad Express. The list of loans is contained in the latest Auditor General's Report for the period October 1, 2018 to September 30, 2019. The report is dated April 29, 2020, the report notes. That sum is $49,603,142,063.76. According to the report, the Ministry of Finance services several loans for State enterprises such as the Tourism Industrial Development Company Limited, The National Maintenance and Security Company Limited, the Urban Development Corporation of Trinidad and Tobago, the National Insurance Property Development Company Limited, Evolving Technologies and Development Company Limited and Caribbean Airlines (CAL), the report relays. The balance on those loans amounts to $1,368,403,727.44 with over $1 billion owed to State-owned First Citizens Bank (FCB), the report relays. Interestingly, one of the balances is a 20 year-old loan for the restructuring of FCB, the report notes. The balance on that is $52.5 million, the report relates. Internationally, the State owes $24,109,387,066.96, the report discloses. In total, the loans to central Government as at September 30,2019 totaled $75,080,932,858.16, the report notes. Here are its contingent liabilities: * Balances on Loans assumed by the GORTT - $2,106,721.02 * Loans and Credits Guaranteed by the State - $12,457,933,805.34 * Letters of Comfort - $15,915,400,411.43 * Promissory Notes - $5,335,917,827.84 * Open Market Operations re: Treasury Bills - $15,493,500,000 * In total - $124,391,155,893.07 "The issue of the public debt and debt sustainability has long been a concern for policymakers of both fiscal and monetary authority. The Central Government debt and contingent liability must be examined and analyzed in its entirely to ensure present and future debt sustainability. It is important for overall macroeconomic policy to manage the debt and it needs to be coordinated closely with fiscal, monetary and other macro-economic and financial policies, the report notes. "For this reason, debt managers and fiscal and monetary authorities should share an understanding of the objectives of debt, fiscal and monetary policies, given the independence among the policy instruments. Close coordination is needed to choose an appropriate mix of financing and policy adjustment to facilitate economic recovery while preventing the build-up of an unsustainable debt burden," said Catherine Laban, Comptroller of Accounts, the report discloses. The report noted that in 2019, the Exchequer Account was overdrawn by $41,380,061,388.10, an increase of $1.134 billion or 2.82 per cent when compared with the previous year's balance of $40,246,393,438.68, Trinidad Express relates. It noted that the account has been consistently in overdraft since 2003, the report says. Revenues The report noted that the Statements of Returns of Revenue received showed Arrears of Revenue totaling $32,056,748,995 which is a decrease of $2,417,157,233.00 or seven per cent from the previous year's balance of $34,473,906,228.00, the report notes. "The Inland Revenue Division has informed the permanent secretary, Ministry of Finance of the following reasons for the reduction of arrears of revenue: (a) The Tax Amnesty 2019 project, which collected approximately $2.3 billion (b) Debt management initiatives (c) Application of risk analysis to prioritise collectible arrears," the report said. The Consolidated Arrears reported by the Ministry is comprised of: Funds The report noted that during the financial year ended September 30, 2019, the Minister of Finance, by Warrants, authorized withdrawals totaling $2,939,527,991 from four Funds, the report relays. The report notes that total disbursements of $2,911,038,892.73 were made from these Funds during the year as shown below: Status of the Funds: 1. Unemployment Fund - $7,873,342,785.42 Infrastructure Development Fund - $63,971,599.46 National Union of Government and Federated Workers (NUGFW) Training Fund - $8,620,981.07 Government Assistance for Tuition Expenses (GATE) Fund - $76,374,336.61 Green Fund - $6,946,131,930.49 Caricom Trade Support Fund - 0 Caricom Petroleum Fund - $244,392,748.66 National Wastewater Revolving Fund of Trinidad and Tobago - $16,965,400.00. TRINIDAD PETROLEUM: Moody's Alters Outlook on Ba3 CFR to Negative ----------------------------------------------------------------- Moody's Investors Service affirmed Trinidad Petroleum Holdings Limited's corporate family rating, backed senior secured bank credit facility and backed senior secured ratings at Ba3 and Baseline Credit Assessment at b2. Simultaneously, Moody's changed Trinidad Holdings outlook to negative from stable. These rating actions follow Moody's announcement on May 22, 2020 that it had changed the Government of Trinidad and Tobago's outlook to negative from stable and affirmed its Ba1 ratings. Affirmations: Issuer: Trinidad Petroleum Holdings Limited Corporate Family Rating, Affirmed Ba3 Baseline Credit Assessment, Affirmed b2 Gtd Senior Secured Term Loan A1, Affirmed Ba3 Gtd Secured Term Loan B, Affirmed Ba3 Gtd Senior Secured Regular Bond/Debenture, Affirmed Ba3 Issuer: Petroleum Co. of Trinidad & Tobago (Petrotrin) Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 (Assumed by Trinidad Petroleum Holdings Limited) Underlying Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 (Assumed by Trinidad Petroleum Holdings Limited) Outlook Actions: Issuer: Trinidad Petroleum Holdings Limited Outlook, Changed to Negative from Stable RATINGS RATIONALE The Ba3 ratings on Trinidad Holdings are based on a b2 BCA, which reflects the company's intrinsic credit risk regardless of government support considerations. In turn, Trinidad Holdings' BCA is based on the credit profile of Heritage Petroleum, an Exploration and Production oil and gas company, the former's main operating subsidiary. Heritage's credit profile considers its small oil and gas production and asset base; lack of detailed historical financial and operating information; and expectation of adequate cash generation and a stable growth in production, which had been declining in the last several years. Heritage's experienced management profile also supports Trinidad Holdings' ratings. Heritage's reserve life is low at about 7 years, which increases execution risk. Despite the company's long operating history, only recently the E&P industry became a core business. Therefore, in order to reach an annual reserve replacement rate of above 100%, as planned, Heritage will have to reduce its operating costs significantly and work closely with partners to increase capital efficiency and grow efficiently. Because of Heritage's current focus on E&P and the caliber of some of its partners (Royal Dutch Shell Plc, rated Aa2 negative, and EOG Resources Inc., rated A3 stable), Moody's believes that it is probable that the company will be successful in achieving its production and reserve replacement rate targets. However, execution risk is high. The rapid and widening spread of the coronavirus outbreak, 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. The combined credit effects of these developments are unprecedented. The oil and gas sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment. More specifically, the weaknesses in Trinidad Holdings' credit profile has left it vulnerable to shifts in market sentiment in these unprecedented operating conditions and Trinidad Holdings remains vulnerable to the outbreak continuing to spread. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Since Trinidad Holdings' is 100% owned by the Government of Trinidad & Tobago (Trinidad, Ba1 negative), the company's Ba3 rating reflects the application of Moody's joint default rating methodology for government-related issuers. Trinidad Holdings' Ba3 rating benefits from two notches of uplift from the b2 BCA given Moody's assumption of a high probability of support from the government of Trinidad in a distress situation. Trinidad Holdings is strategically important to the energy sector in Trinidad as demonstrated by its relevant contribution to the government's fiscal budget of over 9% of total in 2019 and roughly 60% market share of the country's crude oil production. The government directly appoints the majority of the company's board members and is closely involved in Trinidad Holdings' budget approval and business strategy. The government's ability to provide support to the company is measured by its Ba1 rating, weakened by the very high correlation between the government and the company on credit factors that could cause stress on both simultaneously. Heritage has adequate liquidity. Moody's expects the company to keep around $100 million in cash by the end of fiscal year 2020, in September 2020, and generate enough cash flow from operations in the twelve months ending in September 2020 to cover Trinidad Holdings' annual interest payments of about $140 million, debt amortization of $37 million and capital spending of around $55 million in 2020. Trinidad Holdings currently has a comfortable debt maturity profile, with sizable maturities starting in 2022, and Moody's assumes that the company will successfully refinance short-term debt as it matures. Trinidad Holdings also counts on the government to support its liquidity, in case of need. As of the fiscal year ended September 30, 2019, Heritage had $173 million in cash and equivalents. The negative outlook on Trinidad Holdings' ratings coincides with the negative outlook on Trinidad's Ba1 rating given the importance of the sovereign's credit strength to the company's ratings. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Trinidad Holdings' Ba3 ratings could be upgraded if Heritage manages to increase production and reserve life efficiently, with minimal deterioration in its financial metrics. Quantitatively, an upgrade would require that its debt/proved and developed reserves is consistently below $6 and EBITDA/interest expenses is well above 5 times. An upgrade on the ratings of the government of Trinidad would not necessarily translate into an immediate upgrade of Trinidad Holding's ratings. Trinidad Holding's Ba3 ratings could be downgraded if Heritage's retained cash flow (funds from operations less dividends) to total debt declines to around 15%, or if its interest coverage, as per EBITDA to interest expense, falls to below 2.5 times with limited prospects of a quick turnaround. In addition, a deterioration of Heritage's liquidity profile coupled with a slow execution of is growth plans could lead to a rating downgrade or if the rating on the government of Trinidad is downgraded. The methodologies used in these ratings were Independent Exploration and Production Industry published in May 2017. Trinidad Petroleum Holdings Limited is a holding company 100% owned by the Government of Trinidad & Tobago and focused on oil and gas production. The holding company has four operating subsidiaries, including Heritage, which is focused on E&P and is Trinidad Holdings' main source of cash generation. Being a dominant oil producer in Trinidad, Heritage explores and produces crude oil and natural gas, contributing close to 60% of the country's total oil production in 2019. Heritage has assets located onshore and offshore, and also has strategic partnerships with local and international oil companies, which are managed by its joint venture business unit. Heritage operates 34 fields and 2,991 productive wells and owns seven tank farms and around 1,400 kilometers of pipelines. ============= U R U G U A Y ============= BANCO DE LA NACION - URUGUAY: Fitch Affirms 'CC' IDRs ----------------------------------------------------- Fitch Ratings has affirmed Banco de la Nacion Argentina's (Sucursal Uruguay) Long-Term Foreign Currency and Local Currency Issuer Default Ratings at 'CC'. KEY RATING DRIVERS IDRs BNAUY's is a full branch of Banco de la Nacion Argentina and part of the same legal entity. Its IDRs reflect Fitch's opinion on BNA's financial and business profile. BNA is fully owned by the Argentine state, and its liabilities (including its branches abroad) are guaranteed by the sovereign. In Fitch's view, BNA's creditworthiness is highly influenced by Argentina's volatile operating environment. In addition, BNA has a leading franchise and systemic importance in Argentina as the largest bank in terms of loans and deposits. BNAUY is the smallest bank in Uruguay due to its narrow business focus. It is fully integrated with the head office's structure, strategies, corporate governance practices and risk management procedures. BNAUY operates through one main office. BNAUY has volatile profitability, a fairly liquid balance sheet and adequate asset quality and capitalization metrics. Fitch expects the economy to be hampered further by the ongoing coronavirus crisis, which will impact the bank's financial metrics. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The IDRs would be pressured by significant deterioration in BNA's financial profile caused by deterioration in the Argentine operating environment beyond current expectations. -- Any policy announcement in Argentina that would be detrimental to either BNA or BNAUY's ability to service their obligations would be negative for their creditworthiness. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The IDRs would benefit from an upgrade of Argentina's sovereign rating, which seems unlikely in the near future. 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. 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 The ratings of Banco de la Nacion Argentina Sucursal Uruguay reflect Fitch's opinion of Banco de la Nacion's financial and business profile. PROVINCIA CASA: Fitch Affirms CC IDRs on BAPRO's Credit Profile --------------------------------------------------------------- Fitch Ratings has affirmed Provincia Casa Financiera's Long-Term Foreign and Local Currency Issuer Default Ratings at 'CC'. KEY RATING DRIVERS Provincia is a branch of Banco de la Provincia de Buenos Aires (BAPRO) and part of the same legal entity. Provincia's IDRs therefore reflect Fitch's opinion of BAPRO's credit profile, which is highly influenced by the volatile operating environment in Argentina, and its leading franchise and systemic importance in Argentina and the Province of Buenos Aires as the third-largest bank in terms of deposits and the fourth largest by loans as of December 2019. Fitch also considers the bank's ample liquidity, as well as its low capital base, above-industry delinquency and high exposure to the public sector. BAPRO and Provincia are also wholly owned by the government of the Province of Buenos Aires. BAPRO's liabilities, including those of its branches abroad, are fully guaranteed by the government of the Province of Buenos Aires. In Uruguay, Provincia is small due to its narrow business focus. Its legal status is a casa financiera, which differs from a banking license because it is not allowed to raise residents' deposits and has much lower regulatory costs. However, in terms of regulatory capital limits, Provincia has to comply with the rules applied to banks. Provincia is in the process of changing its legal status to an institucion financiera externa, which is only allowed to do businesses with nonresidents. Being part of the same legal entity, Provincia is fully integrated with its head office's structure, strategies, corporate governance practices, and risk-management policies and procedures. It operates through one office and reports to the Finance Division of BAPRO. Provincia has improving profitability; low credit risk; a highly liquid, albeit concentrated, balance sheet; and adequate capitalization metrics. Fitch expects the economy to be hampered further by the ongoing coronavirus crisis, which will affect the financial metrics of Provincia the same as the rest of the financial system. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The IDRs would be pressured by a significant deterioration in BAPRO's financial profile caused by a deterioration in the Argentine operating environment beyond current expectations; -- Any policy announcement in Argentina that would be detrimental to either BAPRO's or Provincia's ability to service their obligations would be negative for their creditworthiness. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The IDRs would benefit from an upgrade of Argentina's sovereign rating, which seems unlikely in the near future. 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. 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 The ratings of Provincia Casa Financiera reflect Fitch's opinion of Banco de la Provincia de Buenos Aires' financial and business profile. =============== X X X X X X X X =============== [*] BOND PRICING: For the Week May 25 to May 29, 2020 ----------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- 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 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 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 ********* 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. 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