/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/200624.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, June 24, 2020, Vol. 21, No. 126 Headlines B A H A M A S ONESPAWORLD HOLDINGS: Says Substantial Going Concern Doubt Exists B R A Z I L CONCESSAO METROVIARIA: Moody's Confirms Caa1 CFR, Outlook Negative RUMO SA: Fitch Corrects June 9 Ratings Release USINAS SIDERURGICAS: Fitch Affirms BB- IDRs, Outlook Stable C A Y M A N I S L A N D S NAGACORP LTD: Moody's Rates Senior Unsecured Notes 'B1' C H I L E VTR FINANCE: Fitch Affirms BB- LongTerm IDRs, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Complementary Budget Should be Nixed, CREES Say DOMINICAN REPUBLIC: Crops Can Meet Country Demand, Agro Chief Says DOMINICAN REPUBLIC: Pension Fund Bill Not Viable, Copardom Says M E X I C O AEROMEXICO: Looking to Restructure Financial Obligations AEROMEXICO: Shares Fall After Column Suggests Bankruptcy Plans NEMAK SAB: Moody's Confirms Ba1 CFR, Outlook Negative T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Sales of Foreign-Used Cars Plummet X X X X X X X X [*] LATAM: Businesses Expected to be More Resilient After COVID-19 - - - - - ============= B A H A M A S ============= ONESPAWORLD HOLDINGS: Says Substantial Going Concern Doubt Exists ----------------------------------------------------------------- OneSpaWorld Holdings Limited filed its quarterly report on Form 10-Q, disclosing a net loss of $198,662,000 on $114,307,000 of total revenues for the three months ended March 31, 2020, compared to a net loss of $22,579,000 on $19,014,000 of total revenues for the period from March 20, 2019 to March 31, 2019, and to a net loss of $24,781,000 on $118,452,000 of total revenues for the period from January 1, 2019 to March 19, 2019. At March 31, 2020, the Company had total assets of $717,379,000, total liabilities of $293,882,000, and $423,497,000 in total shareholders' equity. The Company said, "Obtaining equity financing as contemplated through the Investment Agreement is not guaranteed and is largely dependent on market conditions, cruise industry conditions, hospitality industry conditions, among other factors, together with the affirmative vote of the Company's shareholders. The Company may be required to pursue additional sources of financing to meet its financial obligations. If we are successful implementing these plans, including the consummation of the Private Placement, management believes that the Company will be able to generate sufficient liquidity to satisfy its obligations for the next twelve months. However, we can provide no assurances we will be successful executing these plans. Further, if we do not continue to remain in compliance with covenants in our existing credit facilities, we would have to seek amendments to these covenants from our lenders or evaluate the options to cure the defaults contained in the credit agreements. However, no assurances can be made that such amendments would be approved by our lenders. If an event of default occurs, the lenders under the existing credit facilities are entitled to take various actions, including the acceleration of amounts due under the credit facilities and all actions permitted to be taken by a secured creditor, subject to customary intercreditor provisions among the first and second lien secured parties, which would have a material adverse impact to our operations and liquidity. Management cannot predict the magnitude and duration of the negative impact from the COVID-19 pandemic; new events beyond management's control may have incrementally material adverse impact on the Company's results of operations, financial position and liquidity. Therefore, in light of all of these factors, we have concluded that there is substantial doubt about our ability to continue as a going concern within one year from the date these interim financial statements are issued." A copy of the Form 10-Q is available at: https://is.gd/30OPxJ OneSpaWorld Holdings Limited operates health and wellness centers onboard cruise ships and at destination resorts worldwide. Its health and wellness centers offer services, such as traditional body, salon, and skin care services and products; specialized fitness classes and personal fitness training; pain management, detoxifying programs, and body composition analyses; weight management programs and products; and medi-spa services. The company also provides its guests access to beauty and wellness brands, including ELEMIS, Kérastase, and Dysport, with various brands offered exclusively at sea. The company is based in Nassau, Bahamas. =========== B R A Z I L =========== CONCESSAO METROVIARIA: Moody's Confirms Caa1 CFR, Outlook Negative ------------------------------------------------------------------ Moody's America Latina Ltda. confirmed the Corporate Family Rating global scale of Concessao Metroviaria do Rio de Janeiro S/A (METRORIO) at Caa1. At the same time, the agency downgraded MetroRio's Brazil national scale rating to Caa1.br from B3.br. Moody's also confirmed the B3/B2.br, global and national scale rating, respectively, assigned to Linha Amarela S.A.'s senior secured debentures due in May 2027. The outlook for all ratings is negative. These actions conclude the review for downgrade initiated by Moody's on April 8, 2020. RATINGS RATIONALE Its action follows MetroRio's partial completion of debt restructuring initiatives to address the liquidity stress caused by the Covid-19 pandemic, which has severally affected the company's ability to service debt on time. In April 2020, MetroRio obtained the necessary waivers to defer for six months principal and interest payments on its 8th debentures originally due in April 2020. The deferred payments on the BRL585 million debt, amounting to approximately BRL115 million, prompted an increase in the interest rate linked to the interbank deposit rate to 5% up from 3.1% per year. Moody's considers this transaction as a distressed exchange because the non-payment of principal within the 3-day grace period of its original debt schedule results from insufficient cash position to avoid the payment default. Despite MetroRio's recent debt renegotiations, the company's credit profile remains exposed to strained passenger demand and deceleration in economic activity in the Municipality of Rio de Janeiro (Ba3 stable). Thus, Moody's views the current Caa1/Caa1.br ratings adequately reflecting the combined high probability of default and expected recovery for creditors. The relatively high intrinsic value of the concession is based on its assessment of net present value of future cash flows, supported by: (i) the long tenor of its concession agreement through January 2038, (ii) a moderate leverage profile as indicated by a net debt to EBITDA of 3.2x as of December 2019, and (iii) somewhat strong asset features with low investment requirements. The confirmation of Linha Amarela's B3/B2.br senior secured ratings continue to reflect primarily the credit linkages with MetroRio, due to an existing intercompany loan and cross-default provisions within its debt arrangements. Moody's recognizes the early maturity triggered by a cross-default event would be enacted upon a formal reorganization or bankruptcy proceeding only. Nevertheless, Linha Amarela is in a relatively better position to withstand the current traffic imbalance, due to its low-cost structure and customized long-term debt amortization profile. Linha Amarela also benefits from a lower leverage profile, as indicated by a net debt to EBITDA of 1.1x as of December 2019 leading to an expected higher recovery rate for creditors in an event of default. Reported volume numbers from Linha Amarela indicate a decrease in traffic in the range of 50% to 55% in April and May compared to 75% to 80% drop in of paying passengers at MetroRio. Its ratings scenarios also incorporate a more rapid recovery in traffic volumes at Linha Amarela as social distancing measures eventually ease, resulting in a total decrease of paying passengers of around 25% through year end 2020, compared to a 37% decrease in ridership at MetroRio. The negative outlook considers the sensitivity of MetroRio's credit profile to withstand a prolonged period of business disruption in its service region, leading to higher probability of default or additional debt restructurings over the next 6 to 12 months. The negative outlook on Linha Amarela is in line with that of MetroRio given the credit linkages between the two companies. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of MetroRio or Linha Amarela's ratings is unlikely at this time, but stabilization of their outlook would be considered if Moody's sees demand recovery quicker than anticipated of or external financial support leading to long-term solution to MetroRio's dire liquidity risks, such form that allows both companies continue to honor the existing debt service obligations on a timely basis. Further negative pressure for both companies would build if there is a prolonged and deeper slump in demand, leading to Moody's perception of a lower recovery prospects for creditors of MetroRio or Linha Amarela in an event of potential default. ABOUT METRORIO AND LINHA AMARELA Concessao Metroviaria do Rio de Janeiro S/A is an urban railway passenger transportation company, which has the concession rights to operate Lines 1 and 2 of the subway systems in the City of Rio de Janeiro comprising an extension of 42 km and 36 stations. The concession rights granted by the State Government of Rio de Janeiro in 1998 and regulated by AGETRANSP are valid for a 40-year period through January 2038. Since September 2016, MetroRio also operates and maintains Rio de Janeiro's subway system's Line 4, which added 12.7 kilometers and 5 stations to its operations. In the last twelve months ended December 31, 2019, MetroRio reported net revenues (excluding construction revenues) of BRL811 million and net loss of BRL6 million, as per Moody's standard adjustments. Linha Amarela S.A. has the concession to operate the toll road services of a 17.4 km urban route in the City of Rio de Janeiro, Brazil. The concession was granted by the Municipality of Rio de Janeiro (Ba3, stable) in 1994, and toll road operation started in 1998, for a 25-year period. On May 14, 2010, LAMSA signed an amendment to its concession contract, whereby the Municipality of Rio de Janeiro (the Granting Authority) granted a 15-year extension of the Concession, until December 2037. In the last twelve months ended December 31, 2019, Linha Amarela reported net revenues (excluding construction revenues) of BRL284 million and net profit of BRL111 million, as per Moody's standard adjustments. MetroRio and Linha Amarela are wholly owned by Investimentos e Participações em Infraestrutura S.A. - INVEPAR (INVEPAR, unrated), a holding company controlled by three of the largest Brazilian pension funds (PREVI, FUNCEF and PETROS) and the Yosemite FIP. INVEPAR is the guarantor of MetroRio's 8th debenture's issuance. MetroRio is the guarantor of part of Linha Amarela's 2nd debentures' issuance. The MetroRio guarantee is limited to the amount of an intercompany loan of BRL95 million, as reported on December 31, 2019. The principal methodology used in rating Concessao Metroviaria do Rio de Janeiro S/A was Global Passenger Railway Companies published in June 2017. RUMO SA: Fitch Corrects June 9 Ratings Release ---------------------------------------------- Fitch Ratings replaced a ratings release on Rumo S.A. published on June 9, 2020 to correct the name of the obligor for the bonds. The amended ratings release is as follows: Fitch Ratings has affirmed Rumo S.A.'s Long-Term Foreign Currency Issuer Default Rating at 'BB', Long-Term Local-Currency IDR at BB+', National Long-Term Ratings and unsecured debentures at 'AAA(bra)'. In addition, Fitch affirmed Rumo's national subsidiaries' National long-term ratings at 'AAA(bra)', and Rumo's unsecured bonds due in 2024 and 2025, which were issued by Rumo Luxembourg S.a.r.l., at 'BB'. The Rating Outlook for the LC IDR and the National long-term ratings is Stable. The Rating Outlook for the FC IDR is Negative, constrained by Brazil's 'BB-'/Negative Outlook, which results from the Country Ceiling or its direct link to the Sovereign rating, for which the Outlook was revised to Negative from Stable on May 5, 2020. Rumo's FC IDR is capped by Brazil's 'BB' Country Ceiling, as the company's operations are essentially in Brazil and does not have substantial assets or cash held abroad to mitigate transfer and convertibility risk. The rating affirmations reflect Fitch's belief that the impact of the coronavirus pandemic on Rumo's businesses is limited. The company should continue to benefit from the continued expansion of agribusiness in Brazil, maintaining solid margins, consistent operating cash flow generation and conservative capital structure, during the strong capex cycle. The Stable Outlook for the LC IDR and the National long-term rating incorporates Fitch's projections that Rumo can maintain low to moderate leverage over the medium term, peaking at 3.3x in 2021 when capex is at its highest level, then returning to levels below 3.0x from 2022 on, while the company captures additional volumes, mainly coming from its newest Malha Central network investments. Rumo's ratings are supported by its solid business position as one of the largest railroad operators in Brazil. The company has competitive advantages over other transportation options, with relatively high and stable operating profitability and robust cash flow generation. The industry fundamentals are strong and benefit from stable demand throughout the cycles. The rating incorporates Rumo's conservative capital structure, as well as its sound liquidity position, which are important credit factors, with low debt concentration during the strong capex period. The company has consistent access to the local and international debt and capital markets, even under more restrictive credit scenarios. Rumo is controlled by Cosan Limited (BB/Stable) and is part of Cosan Group, one of the largest Brazilian conglomerates, with leading companies in several sectors. KEY RATING DRIVERS Business Profile Remains Strong: Fitch believes the railroad sector risks are low, supported by consistent demand, high barriers to entrance and low competition threats. In this sector, Rumo benefits from its robust business position as the sole rail transport company in the south and midwest regions of the country, with five concessions to operate more than 13 thousand kilometers of tracks and access to three of Brazil's main ports. Due to a lower cost structure, the company enjoys solid competitive advantages over truck transport, which enhances its consistent demand and limits volume volatilities over cycles. Fitch believes the addition of the central section of Ferrovia Norte-Sul (Rumo Malha Central) to Rumo's portfolio in 2019, and the renewal of Rumo Malha Paulista concession contract, have positive credit implications. The new stretch, when operational, should increase Rumo's presence in Brazil's midwestern region. The Rumo Malha Paulista concession contract renewal, which is a strategic stretch to Rumo's business model, protects the company's access to Santos Port, preserving its business' profitability. Both projects offer vast opportunities for capturing greater volumes of grain in the region. Preserved Business Environment: Rumo's operations benefit from the solid international trade flow of agricultural products in Brazil, which has high growth potential, in addition to reducing the company's risks of operating in one region (Brazil). Fitch recognizes that the rail industry tends to suffer limited impacts from the coronavirus pandemic, due to the restricted dependence on domestic economic activity. These factors should reasonably protect Rumo's volumes, even during the crisis. Fitch expects Rumo to transport 65 billion revenue ton kilometer in 2020, and 70 billion RTK in 2021, which compares favorably to 60 billion RTK reported in 2019. Fitch estimates annual volume increases of 8% in 2020, and 10% to 16% annually from 2021 onwards, when the central stretch becomes operational. Rumo's main cargo is comprised of agricultural products, mainly soybean (38.8%), corn (32.5%), and sugar and fertilizers (10.7%) in 2019 for exports. Capex Put Pressures on FCF: Fitch expects a temporary reduction in Rumo's EBITDA margins to below 40% in 2020 and 2021, from 42.7% in 2019. Volume expansion and operational efficiency from its existing assets boosted 2019 margins, but should not offset pre-operating expenses related to Rumo Malha Central's new concession contract, and the concession fee for Rumo Malha Pauista. Fitch's base scenario foresees EBITDA and funds from operation of BRL3.0 billion and BRL2.0 billion in 2020, and BRL3.4 billion and BRL2.2 billion in 2021, respectively. The new cycle of investments in Rumo Malha Paulista should put pressure on the company's FCF, which will remain in the negative through 2023, totaling BRL4.8 billion for the period. Fitch projects around BRL14.8 billion of capex from 2020 to 2023, and BRL7.7 billion in the next two years. Leverage Remains Conservative: Rumo should report net leverage from 2.5x to 3.0x during the strong investment cycle over the next four years. Fitch's baseline scenario considers net leverage ratio, as measured by net debt/EBITDA, to reach 2.8x in 2020 and peak at 3.3x in 2021, during the highest investment period. Improvements in Rumo's operating cash flow generation, led by gains of scale coming from the investments, should result in net leverage closer to 2.5x from 2022 onwards. DERIVATION SUMMARY Rumo's ratings reflect its strong business profile in the logistics infrastructure industry in Brazil, which enjoys positive prospect. The railroad's low-cost structure and Rumo's position as the sole railroad provider in its covered region provides important competitive advantages, allowing it to report consistent volume improvements and increasing operating cash flow generation while its operational capacity expands. A rating constrain is its business concentration in one country, as it only serves Brazil's agribusiness and industrial regions, like most of its Brazilian peers, but different from other railroads worldwide, which enjoy a more diversified covered region. The company's track record on generating strong cash generation and its ability to improve its credit metrics over the last three years are important credit factors that support Rumo's ratings. Rumo's LC IDR (BB+/Stable) is positioned below Brazil's MRS S.A. (BBB-/Negative) which is the best-positioned railroad in the country, due to the more resilient cargo profile and track record of positive FCF of MRS, while Rumo needs to manage the negative FCF expectation, derived from its large investment programs. Rumo's and MRS's ratings are below those of other mature, more geographically diversified and less leveraged rail companies in Mexico, the U.S. and Canada, like Kansas City Southern, rated 'BBB' by Fitch. Rumo's LC IDR is above that of Hidrovias do Brasil S.A. (HdB, BB/Stable), due to the railroad's ability to generate more stable operating cash flow and to finance the large investment to increase volumes. HdB's net leverage is higher than Rumo's, consistent with its still immature profile, but based on predictable cash flow generation within the coastal shipping business in Brazil, which also enjoys low competition. KEY ASSUMPTIONS Fitch's main assumptions are: -- Agricultural volumes to increase 10% annually; -- Industrial volumes to decline 1% in 2020 and increase per GDP from 2021 onwards; -- Additional 2 billion RTL and 8 billion RTK in 2021 and 2022, respectively, coming from Rumo Malha Central; -- Average tariffs increasing by inflation rate in 2020 and 2021; -- Total capex of BRL14.8 billion from 2020 to 2023, being BRL7.7 billion over the next two years. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Upgrade in Rumo's LC IDR are unlikely in the medium term, due to the strong capex program over the next years, which results in leverage far from the upgrade sensitivity; -- Positive actions on National Scale Ratings does not applies as the rating is at the top of the national scale category. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Inability to finance capex with long-term and low-cost debt, putting pressure on debt amortization schedule; -- Substantial weakening of current EBITDA margin; -- Net adjusted leverage trends above 3.5x, on a sustainable basis. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate 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. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Fitch believes Rumo's liquidity will remain healthy over the next months and throughout the investment cycle. The short-term debt coverage ratio has remained above 1.5x since 2017, and should be sustained higher than 1.0x. Fitch believes Rumo' will continue to raise long-term funds to finance its negative FCF and preserve its debt coverage by cash. At the end March 2020, Rumo had a cash of BRL3.6 billion and consolidated total debt of BRL11.5 billion, mainly composed of senior notes (BRL5.5 billion), debt with BNDES (BRL3.1 billion) and debentures (BRL2.4 billion). Debts due until 2022 totaled BRL3.1 billion. The company raised relevant amount of debt over the next two months, which has enhanced its liquidity. SUMMARY OF FINANCIAL ADJUSTMENTS -- Confirming (reverse factoring) operations adjusted Rumo's debt. -- Fitch considers restricted cash (including long term) as readily available liquidity. -- Net derivatives adjusted to debt; D&A excluded from COGS; Dividends from associates and minorities are adjusting EBITDA. -- Fitch considers as operating expenses, impacting EBITDA, the lease and concession expenses. 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. ESG CONSIDERATIONS Rumo S.A.: Labor Relations & Practices: 4 Rumo has an ESG score of 4 for Labor Relations & Practices as it reports labor liabilities from the period when some of its assets were operated by the government. Company has exposure to cash flow impact of judgement regarding these liabilities. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). Rumo Luxembourg S.a.r.l - Senior unsecured; LT BB; Affirmed Rumo Malha Paulista S.A. - Natl LT AAA(bra); Affirmed Rumo Malha Norte S.A. - Natl LT AAA(bra); Affirmed Rumo Malha Sul S.A. - Natl LT AAA(bra); Affirmed Rumo S.A. - LT IDR BB; Affirmed - LC LT IDR BB+; Affirmed - Natl LT AAA(bra); Affirmed - Senior unsecured; Natl LT AAA(bra); Affirmed USINAS SIDERURGICAS: Fitch Affirms BB- IDRs, Outlook Stable ----------------------------------------------------------- Fitch Ratings has affirmed Usinas Siderurgicas de Minas Gerais S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB-' and its National Scale rating at 'A+(bra)'. Fitch has also affirmed the 'BB-' rating of the senior unsecured notes due in 2026 that were issued by Usiminas International S.a r.l. and are guaranteed by Usiminas. The Rating Outlooks for the international Foreign and Local Currency IDRs of Usiminas and its National Scale rating remains Stable. The rating affirmations reflect a positive pricing environment for iron ore during 2020 that should allow Usiminas to generate positive FCF despite the sharp drop in demand for flat steel in Brazil due to the coronavirus pandemic. The rating affirmations also reflect Usiminas' low absolute and relative debt levels, as well as its manageable debt amortization profile. KEY RATING DRIVERS Weak Steel Demand: The Brazilian Steel Institute is predicting domestic steel demand will fall 20% in 2020 due to weak economic activity and lockdown measures related to the coronavirus pandemic. Fitch projects that Usiminas' Brazilian sales volumes will drop by 25%, as it is exposed to the flat steel industry that has been hit hard by plummeting automobile production volumes and weak white goods sales. Usiminas closed two blast furnaces during April that have a combined production capacity of 1.3 million ton of crude steel per year and has concentrated its output in a larger blast furnace that has 2.3 million tons of production capacity. The company sold 1.050 million tons of steel during the first three months of 2020 and generated BRL523 million of EBITDA. Positive FCF: Fitch is projecting that Usiminas will generate BRL1.3 billion of EBITDA and BRL300 million of FCF in 2020 based on 8.2 million tons of iron ore sales, average iron ore prices of USD75/ton and BRL600 million of capex. EBITDA and FCF will be higher if iron ore prices continue to remain elevated in the third quarter. These projected 2020 figures compare with BRL1.8 billion of EBITDA, BRL1.3 billion of FCF, BRL700 million of capex, 8.6 million tons of sales and an average benchmark price of USD93 per ton during 2019. Usiminas' results would have been much worse given Fitch's projection of a drop in Usiminas' steel sales to 3.1 million tons in 2020 from 4.1 million ton in 2020 had iron ore prices not been abnormally high due to the shortage of iron ore caused by Vale's accident in 2019 and weather related supply disruption in Australia during 2019 and Brazil during 2020. Moderate Debt Burden: Fitch is projecting that Usiminas' net leverage will reach 3.4x in 2020 an increase from 1.9x in 2019. The company's operating income during the past two years has been bolstered by unique situations that have elevated iron ore prices. Over the medium to long term, Usiminas' results and credit profile are inextricably tied to its steel business. The company only exports around six million tons of iron ore, as more than two million tons of production are used internally, and at low prices its exports are not competitive given its cost position. High Uncertainty: The cash flow Usiminas generates from iron ore should normalize to lower levels in 2021 as supply constraints begin to ameliorate. The timing and the degree of the recovery of flat steel demand in Brazil remains highly uncertain. A quick and substantial economic rebound in Brazil and more vibrant economic activity in South America, which is the key market for Brazilian exports of manufactured goods and automobiles, remain the key variables. Against this uncertain backdrop, Fitch is projecting that Usiminas steel sales will grow to 3.5 million tons in 2021 and 3.8 million tons by 2022 and that net leverage will fall to below 2x in 2021 and remain at this level in 2022. DERIVATION SUMMARY Usiminas' business risk is similar to that of peer Companhia Siderurgica Nacional (CSN; B/Stable), as both are highly exposed to the local steel industry in Brazil. While CSN has greater business diversification, with larger mining operations and operations in the cement industry, Usiminas' robust business position in its niche markets and solid operating margins are a competitive advantage. Both Usiminas and CSN have a much weaker business position compared with the other Brazilian steel producer, Gerdau S.A (BBB-/Stable), which has a diversified footprint of operations with significant operating cash flows from its assets abroad, mainly in the U.S., and a more flexible business model that allows it to better withstand economic and commodities cycles. From a financial risk perspective, Usiminas benefits from much lower overall gross debt, more manageable cash outflows to maintain its capital structure and a better debt maturities ladder than CSN, which are all factored into the two-notch differential between the companies' ratings. Gerdau has the lowest financial risk of the three, and has been able to maintain positive FCF, strong liquidity and no refinancing risks over the last few years of recession in Brazil, as reflected in its investment-grade rating. KEY ASSUMPTIONS -- Benchmark iron ore prices average USD75/ton in 2020 and USD60/ton in 2021; -- Iron ore costs decline 15% in 2020 to reflect BRL weakness and lower shipping costs; -- Brazilian steel volumes fall 25% in 2020 and then increase by 15% in 2021; -- Capex of BRL600 million in 2020 and BRL1 billion in 2021; -- An exchange rate of BRL5.30/USD1.00 at YE 2020 and BRL4.90/USD1.00 at YE 2021. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Net debt/EBITDA leverage ratios consistently below 2.5x would be a consideration for a potential upgrade. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Maintenance of net debt/EBITDA leverage ratios above 3.5x; -- Negative FCF; -- A significant change in industry dynamics or an increase of steel imports into Brazil; -- Return of shareholder disputes. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate 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. LIQUIDITY AND DEBT STRUCTURE Low Refinancing Risk: Usiminas had BRL6.6 billion of debt as of March 31, 2020. The debt consists of BRL2 billion of Brazilian real denominated debentures that mature in 2023, 2024 and 2025; a USD750 million (BRL3.9 billion) note that matures in 2026; and BRL716 million of short-term forfaiting transactions that Fitch includes in its debt calculations. Usiminas had BRL2.4 billion of cash and marketable securities at the end of March. About BRL350 million of the cash reported by the company is held at its Mineracao Usiminas mining joint venture. The company doesn't face principal amortizations on its debt between 2020 and 2022. The debentures begin to amortize in 2023 when a BRL711 million payment is due. 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. ESG CONSIDERATIONS Usiminas has an ESG Relevance Score of 4 related to board independence and effectiveness, based in part on the disputes between its largest shareholders, Ternium and Nippon Steel, which hampered the company's strategy and led to elevated business risks. The shareholder agreement in2018 brought more clarity to its long-term strategy, and both major shareholders terminated all pending disputes, which alleviated some concerns over board effectiveness. Except for the matters discussed, the highest level of ESG credit relevance, if present, is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). Usiminas International S.a r.l. - Senior unsecured; LT BB-; Affirmed Usinas Siderurgicas de Minas Gerais S.A. (Usiminas) - LT IDR BB-; Affirmed - LC LT IDR BB-; Affirmed - Natl LT A+(bra); Affirmed =========================== C A Y M A N I S L A N D S =========================== NAGACORP LTD: Moody's Rates Senior Unsecured Notes 'B1' ------------------------------------------------------- Moody's Investors Service has assigned a B1 senior unsecured rating to the proposed senior notes to be issued by NagaCorp Ltd. The proposed notes are guaranteed by the major operating subsidiaries of NagaCorp and rank pari passu with its 2021 notes. The rating outlook is negative. NagaCorp will use the net proceeds to repay its 2021 notes and for general corporate purposes within the restricted subsidiaries. RATINGS RATIONALE "The rating on the proposed notes is aligned with NagaCorp's B1 corporate family rating, as the upstream guarantees from major operating subsidiaries mitigate structural subordination risk for bondholders," says Junling Tan, a Moody's Analyst. "The proposed bond issuance will reduce refinancing risk and address NagaCorp's 2021 debt maturity amid challenging market conditions for fund raising," adds Tan Proforma for committed dividend payments in June 2020, NagaCorp had cash and deposits of USD306 million at May 31, 2020, which Moody's expects will be sufficient to cover the estimated cash burn over the next 12 months in the event of a prolonged closure of its casino operations. Therefore, the company will likely rely on external funding to address its USD300 million bond maturing in May 2021. Moody's expects the temporary suspension of casino operations at NagaWorld since April 1, 2020 will have a material impact on NagaCorp's earnings. Nonetheless, the company's leverage is expected to remain within its B1 rating level. Based on Moody's assumption of casino operations resuming in 3Q2020 and the issuance of the proposed notes, adjusted debt/EBITDA will weaken to around 2.3x from 0.5x in 2019, against the 2.5x downgrade threshold. However, Moody's expects a subsequent gradual recovery in operating conditions due to increased international travel and bond repayments in May 2021 will drive an improvement in adjusted debt/EBITDA to around 0.7x in 2021. NagaCorp's B1 rating reflects its ownership of NagaWorld, which holds the exclusive right to operate casinos in and around the capital city of Phnom Penh, Cambodia. At the same time, the rating is constrained by its single-site operations and exposure to political risk and Cambodia's evolving regulatory framework. In terms of environmental, social and governance factors, Moody's has also considered the following. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. NagaCorp's gaming business is also exposed to elevated social risks, particularly around evolving demographic and societal trends that may drive a change in demand away from traditional casino-style gaming. These risks are somewhat mitigated by the company's ability to adjust capacity to suit market demand because there are no restrictions under its casino license on operating hours or the number of gaming tables and machines. Moody's has also considered governance risk around the controlling shareholder's concentrated ownership of NagaCorp. However, this risk is partially balanced by the oversight exercised through the board, which for the majority consists of independent directors, and the demonstration of support by the controlling shareholder, who has funded the company's expansion projects by injecting equity. The negative outlook reflects Moody's expectation that NagaCorp's earnings and credit metrics will weaken in 2020 with the extent and pace of any subsequent recovery remaining uncertain for now. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING Given the negative outlook, an upgrade is unlikely over the next 12-18 months. Nonetheless, the outlook could return to stable if the casinos at NagaWorld reopen, supporting a recovery of NagaCorp's earnings and credit metrics. On the other hand, NagaCorp's ratings could be downgraded if (1) Cambodia's sovereign rating is downgraded; (2) the operating environment deteriorates, resulting in protracted weakness in operating cash flow generation; (3) the company fails to maintain its 100% ownership of Ariston Sdn. Bhd, which holds its Cambodian casino license, and 100% ownership of NagaWorld; (4) the company increases its debt leverage, capital spending or shareholder returns, such that adjusted debt/EBITDA exceeds 2.5x and adjusted retained cash flow/debt falls below 20% over the next 12-18 months; and (5) the company has insufficient cash to cover its short-term debt obligations. The principal methodology used in this rating was Gaming Industry published in December 2017. NagaCorp Ltd. was incorporated in the Cayman Islands in 2003 and listed on the Hong Kong Stock Exchange in 2006. The company owns and manages NagaWorld, the largest integrated casino and hotel complex in Phnom Penh, Cambodia. NagaCorp was founded by Tan Sri Dr. Chen Lip Keong, the company's chief executive officer and largest shareholder with an approximate 70% stake as of March 31, 2020. ========= C H I L E ========= VTR FINANCE: Fitch Affirms BB- LongTerm IDRs, Outlook Stable ------------------------------------------------------------ Fitch Ratings has affirmed VTR Finance N.V.'s Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB-'. Fitch has also affirmed the company's USD1.26 billion senior secured notes due 2024 at 'BB-' and the revolving credit facility of VTR's Chilean subsidiary, VTR Comunicaciones SpA, at 'BB+'/'RR2'. The Rating Outlook is Stable. In conjunction with these rating actions, Fitch has assigned ratings of 'BB-/RR4' to USD550 million Senior Note of VTR Finance N.V. and 'BB+/RR2' to USD600 million Senior Secured Notes of VTR Comunicaciones SpA. Proceeds of the new notes and the close-out of FX swaps will be used to refinance the existing notes. VTR's ratings reflect its strong market position in the Chilean telecom industry, primarily through Internet and Pay TV services. VTR's ratings are supported by its competitive network quality, brand recognition, and successful commercial strategy for its bundled services offerings. The company's cash flow generation is relatively stable, despite an increasingly competitive environment, and boasts strong financial flexibility underpinned by a manageable debt amortization schedule and a committed credit facility. The ratings are tempered by Fitch's expectation of elevated leverage, and a lack of geographical and service diversification. Further factored in VTR's ratings is Fitch's expectation that parent Liberty Latin America (LLA, NR) will maintain net leverage between 3.5x - 4.0x, by upstreaming excess cash flow. KEY RATING DRIVERS Manageable Leverage over the Medium Term: Fitch expects Total Debt / EBITDA to rise above 4.5x in 2020, from 4.2x in 2019, before declining below 4.0x in 2021. In 1Q2020, the company partially drew down its committed facilities to ensure liquidity - Fitch expects the company to repay the facility in the near term. Fitch expects the jump in leverage to be temporary, as the company upstreams cash amid coronavirus to fund M&A elsewhere in the LLA group. VTR has the lowest leverage of the rated LLA entities, despite the acquisition of Costa Rican fixed-line operator Cabletica S.A. in 2018, and the consistent cash upstreams to LLA. The company's financial structure is supported by its strong operating performance in the Chilean broadband and Pay-TV sector, which is generally less volatile and competitive than mobile. LLA Linkages: VTR is a wholly owned subsidiary of LLA. LLA's financial management involves moderately high amounts of leverage across its operating subsidiaries, each ring-fenced from one another. While the credit pools are legally separate, LLA has a history of moving cash around the group for investments and acquisitions. This approach improves financial flexibility; however, it also limits the prospects for deleveraging. Fitch expects that VTR will contribute around USD100 million-150 million to fund Liberty Communications of Puerto Rico's acquisition of AT&T's assets in Puerto Rico and the U.S. Virgin Islands for USD1.95 billion. Pro forma for the acquisition, Fitch expects net leverage for the group of around 4.7-4.9x, with debt of approximately USD9.0 billion, cash of USD800 million-US900 million, and USD1.7 billion-1.8 billion in EBITDA. Historically, Fitch has rated VTR and CWC higher than LCPR; more recently, LCPR's standalone credit profile, pro forma for the acquisition, has improved. The high level of cash movements throughout the group and elevated leverage may result in a consolidated credit profile closer to 'B+' than 'BB-'. The strength of the linkages does not necessarily imply that the ratings of all three entities being equalized immediately. A deterioration of the financial profile in the other credit pools, or the group more broadly could potentially place more financial burdens on VTR, given LLA's acquisitive nature. Proposed Refinancing and Restructuring: The proposed refinancing of VTR's USD1.26 billion senior notes due 2024 with notes allocated to VTR and to the operating entity provides financial flexibility by extending the company's amortization profile. Fitch also expects LLA to allocate its 80% stake in Cabletica into the VTR credit pool by 1Q2021. Cabletica is the leading provider of Pay TV in Costa Rica, and has the second and third-largest broadband and fixed telephone subscriber bases. The consolidation will modestly improve diversification and should contribute to lower leverage in the credit pool. Coronavirus Impact: The impact of the coronavirus and the economic shutdowns will have a limited impact on VTR's business and financial profile. In general, the telecommunications industry is one of the most defensive against the effects of the pandemic, particularly for carriers that have a low reliance on prepaid mobile. Fitch expects that both EBITDA margins and working capital may deteriorate somewhat in 2020, depending on the severity of the lockdowns and economic downturn. Despite this, cost control and the flexibility of its capex plan should limit the impact, as should the company's subscription-like revenue base. Strong Market Position: VTR is the leading provider of broadband and Pay TV services in Chile, with subscriber market shares of 38% and 34%, respectively, followed closely by its main incumbent competitor, Telefonica Chile S.A. VTR is also the second largest fixed-line telephony service provider, with 21% of subscriber market share. The company has consistently increased its overall revenue generating units in recent years, backed by its effective bundled product strategy based on network and service competitiveness. In mobile, the company operates as a virtual network operator with a low market share of 1%. Fitch does not expect any material cash flow contribution from this segment in the short to medium term. Solid Operating Performance: VTR has achieved relatively stable growth between 2%-6% over the last 5 years between, while maintaining EBITDA margins between 38%-40%. This has been achieved mainly by growth in its Internet and pay TV services, which have fully offset revenue contraction in its fixed-line telephony services due to the ongoing mobile-fixed substitution trend. Fitch expects some pressure in operating margins in 2020 and beyond, due to higher competition, a weakened economic environment, and the devaluation of the peso. Fitch expects the company's organic revenue growth to continue over the medium term, with relatively stable EBITDA margins. RCF's Rating and Recovery Prospects: VTR's USD1.26 billion senior notes due in 2024 are structurally subordinated to the OpCo term loan and RCF. Fitch forecasts recovery rates commensurate with an RR1 for the RCF, the Term Loan and the proposed OpCo secured notes, and RR4 for the proposed parent notes. Fitch currently caps the uplift of the RCF by two notches, per Fitch's Country-Specific Treatment of Recovery Ratings Criteria, which limits the potential uplift for Chilean issuers to two notches, and is applying the same treatment to the OpCo secured notes. CWC recently completed a restructuring of its debt, resulting in the unsecured notes being downgraded to 'B+' from 'BB-'. Similarly, the VTR Finance notes could be downgraded to the extent that consolidated or prior-ranking leverage increases DERIVATION SUMMARY VTR's competitive position and financial profile compare favorably to other speculative-grade telecoms in the region, although the company's relative lack of diversification and LLA's financial management will likely keep the company in the 'BB' category. VTR has the most conservative financial profile of the LLA companies, with net leverage 0.5x - 1.0x lower than CWC and LCPR, making it the strongest of the 3 credit pools. Compared to sister company Cable & Wireless, VTR benefits from the Chilean operating environment and its status as the largest broadband and pay TV operator by subscriber share. Cable & Wireless has larger scale, better service and geographical diversification than VTR. Compared to sister company LCPR, VTR has larger scale, a better operating environment, and greater diversification. Following the AT&T acquisition, LCPR's scale will be comparable to VTR's, but with greater product diversification and a more complete convergent offering. VTR has a similar fixed-line operating profile to Telefonica Chile ('BBB+'/Stable), although Telefonica Chile benefits from leverage metrics around 2.0x-2.5x lower than VTR's, and the scale and diversification provided by its parent Telefonica Moviles Chile S.A. ('BBB+'). Compared to WOM Mobile S.A. (WOM, 'BB-'/Stable), VTR finance has slightly better diversification and scale, as well as a stability of its cash flow generation and stronger EBITDA margin. WOM's ratings reflect the company's short but impressive track record in Chile, taking on much larger competitors and demonstrating a clear path to deleveraging. WOM's ratings, like VTR's, incorporate Fitch's expectations that the company will be managed to moderate levels of net leverage. Fitch expects WOM to deleverage to around 3.5x, in line with VTR's, though both company's leverage profiles were broadly similar as of YE2019. LLA has a similar business profile compared to Millicom international Cellular (MIC, 'BB+'/Stable), but higher leverage. Millicom has embarked on an acquisitive spree over the last 2 years, buying Cable Onda ('BBB-'/Stable) and Telefonica S.A.'s ('BBB'/Stable) operations in Panama, as well as other Telefonica assets in Central America, although the company cancelled one acquisition. In 1Q2020, Fitch downgraded Millicom's largest subsidiary, Comcel Trust S.A. ('BB'/Stable), following a downgrade of Guatemala ('BB-'/Stable). A Guatemalan downgrade is one of the downgrade sensitivities for Millicom. ESG VTR has a score of '4' on both Group Structure and Financial Transparency. Scores of '4' indicate factors that are not key drivers to a rating, but can have an impact in combination with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3' - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. KEY ASSUMPTIONS -- Low- to mid-single-digit revenue growth over the medium term, with strong growth in Internet services, offset by reduction in fixed voice services; -- Refinancing of USD1.26 billion Senior Unsecured Note with new issuances, along with consolidation of Cabletica in 2021; -- Capex-to-sales ratio to remain around 20-22%; -- Neutral to positive FCF generation in 2020-2023. Dividends or cash upstreams projected in CLP40 billion; -- EBITDA margin in the range of 37%-39% during 2020-2023. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Fitch does not anticipate an upgrade as likely in the near term, given the company's and the larger group's elevated leverage profiles. -- Longer-term positive rating actions are possible to the extent that Total Debt / EBITDA and Net Debt / EBITDA sustained below 4.5x and 4.25x, respectively, at both VTR and LLA. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Total Debt / EBITDA and Net Debt / EBITDA at VTR sustained above 5.25x and 5.0x, respectively, due to a combination of organic cash flow deterioration or M&A. -- While the three credit pools are legally separate, LLA Net Debt / EBITDA sustained above 5.0x could result in negative rating actions at one or multiple rated entities in the group. -- The VTR Finance N.V. notes could be downgraded to 'B+' if consolidated leverage, or prior ranking leverage, continues to rise. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate 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. LIQUIDITY AND DEBT STRUCTURE Sound Liquidity Profile. VTR's liquidity profile is sound as the company does not face any debt maturity until 2022 and 2023, when its CLP174 billion credit facility becomes due. The company's cash balance amounted to CLP180 billion by end-March 2020, and its operational cash flow generation is relatively stable. Liquidity is further supported by VTR's access to a credit facility of USD185 million as well as a revolving credit facility of CLP45 billion, of which 61% is undrawn as of March 2020 SUMMARY OF FINANCIAL ADJUSTMENTS -- Adjusted leases consistent with new Fitch criteria. -- Minor adjustments to operating expenses and working capital items. 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. ESG CONSIDERATIONS VTR Finance B.V.: Group Structure: '4', Financial Transparency: '4' Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of '3' - ESG issues are credit neutral or have only a minimal credit impact on the entity(ies), either due to their nature or the way in which they are being managed by the entity(ies). VTR Comunicaciones SpA - Senior secured LT BB+; New Rating - Senior secured; LT BB+; Affirmed VTR Finance N.V. - LT IDR BB-; Affirmed - LC LT IDR BB-; Affirmed - Senior secured; LT BB-; New Rating - Senior secured; LT BB-; Affirmed =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Complementary Budget Should be Nixed, CREES Say ------------------------------------------------------------------- Dominican Today reports that Regional Center for Sustainable Economic Strategies (CREES) executive vice president Ernesto Selman said the complementary budget submitted by the Dominican Republic government in Congress should not be approved. Selman said the bill prepared lacks transparency, raises doubts about the electoral political moment in which it is presented, among other aspects that should be analyzed, according to Dominican Today. For the economist, the complementary budget should be based more on the reallocation of resources, to increase the items of the institutions that need it most at this juncture, and not on increasing spending and incurring more debt, the report relates. Selman added that with three or four months without budget execution, there was plenty of space to look for savings and make prudent management of public finances, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. The Troubled Company Reporter-Latin America reported 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). DOMINICAN REPUBLIC: Crops Can Meet Country Demand, Agro Chief Says ------------------------------------------------------------------ Dominican Today reports that Dominican Republic Agriculture Minister Osmar Benitez said that the ministry is developing a popular sales program together with the Dominican poultry sector to seek out 14 million pounds of frozen chicken that they have in stock. "We assure the Dominican people that the country has enough food to supply the needs of Dominicans," Benitez said, according to Dominican Today. Benitez said that in the country, there are extraordinary harvests of plantains, cassava, sweet potatoes and eggs, among others, the report relays. 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). DOMINICAN REPUBLIC: Pension Fund Bill Not Viable, Copardom Says --------------------------------------------------------------- Dominican Today reports that the bill that seeks to reimburse a percentage of the pension fund to workers continues to stoke controversy. The Employers' Confederation of the Dominican Republic (Copardom) announced that the piece "is not viable," according to Dominican Today. It also indicates that contrary to its objectives, "it would imply breaking with the monetary, exchange and price equilibrium that have constituted the angular basis of the macroeconomic stability exhibited by the country," the report relays. "Any change to legislation that creates the Dominican Social Security System must maintain the tripartite spirit present in Law 87-01, its origins and partner labor regulations," the entity said in a press release, the report notes. "Copardom, just as the Dominican Association of Pension Fund Administrators (ADAFP) recently did, proposes that bills such as the one that approves the early withdrawal of up to 30% of the funds accumulated by workers in their AFP, 'they must be deeply analyzed and debated by each and every one of the social partners without the environment, environment or political situation influencing these discussions," the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. The Troubled Company Reporter-Latin America reported 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 =========== AEROMEXICO: Looking to Restructure Financial Obligations -------------------------------------------------------- Aeromexico is analyzing its options for an orderly restructuring of its short- and medium-term financial commitments, the Mexican airline said, adding that it had not decided whether to seek Chapter 11 protections in the United States. Aeromexico shares fell more than 5% in early trading after a newspaper column said the Mexican airline was considering filing for bankruptcy. The company said it was identifying additional sources of financing and that it was analyzing "alternatives to successfully reach, in the short- and medium-term, an ordered restructuring of financial commitments." "The company informs that we have not started, or made the decision to start, a restructuring procedure under Chapter 11," it said in the statement. Aeromexico said any restructuring would not disrupt its operations. The future of many airlines has been in doubt after governments around the globe imposed curbs on travel to stem the spread of COVID-19, with Latin American airlines Avianca and LATAM already initiating bankruptcy procedures. Like other airlines, Aeromexico is struggling as demand plunged. Passenger numbers were down 92.4% in May versus a year ago. While some governments have given airlines a lifeline, Mexico's leftist President Andres Manuel Lopez Obrador has been adamant that he would not use taxpayer money to bail out shareholders in large companies. U.S. law firm White & Case and Citigroup are advising Aeromexico, according to Mexican newspaper El Financiero. White & Case and Citigroup did not immediately respond to requests for comment. "We consider that the news is negative for the company, as it reflects the important liquidity and operational challenges stemming from the effects of COVID-19," Mexican brokerage firm Monex wrote in a note to investors. Aeromexico had total liabilities of 116.6 billion pesos ($5.16 billion) as of March 31, according to its first-quarter results. U.S. airline Delta has a significant stake in Aeromexico. Headquartered in Mexico City, Mexico, Grupo Aeromexico SAB de CV operates as an airline. As reported in the Troubled Company Reporter-Latin America on June 18, 2020, Egan-Jones Ratings Company, on June 12, 2020, downgraded the foreign currency senior unsecured rating on debt issued by Grupo Aeromexico SAB de CV to B- from BB-. EJR also downgraded the rating on FC commercial paper issued by the Company to C from A3. AEROMEXICO: Shares Fall After Column Suggests Bankruptcy Plans -------------------------------------------------------------- Noe Torres at Reuters reports that shares in Aeromexico were down 5.4% on June 19 after a newspaper column said the Mexican airline was preparing to file for Chapter 11 bankruptcy protection in the United States due to the fallout from the coronavirus pandemic. The future of many airlines has been placed in doubt by the curbs on travel imposed by governments across the globe, with well-known Latin American airlines Avianca and LATAM already initiating bankruptcy procedures, according to Reuters. Like other airlines, Aeromexico is battling a sharp drop in demand, with passenger numbers down 92.4% in May from the same month last year, the report relays. Aeromexico shares were trading at 6.6 pesos at 12:58 p.m. local time (1:58 p.m. eastern time) on June 19, the report relays. Reuters was not able to independently verify the claims made by the column, in the El Financiero newspaper. Aeromexico did not immediately respond to a request for comment. While some airlines have been given bailouts by their governments, Mexico's leftist president, Andres Manuel Lopez Obrador, has been adamant that he would not use taxpayer money to bail out shareholders in large companies, the report relays. The column said Aeromexico had appointed financial advisers to help with bankruptcy proceedings, and was "following exactly the same steps" taken by Avianca and LATAM, the report discloses. "The process to restructure debts is underway," said the column's author, Dario Celis, without citing sources, the report adds. Headquartered in Mexico City, Mexico, Grupo Aeromexico SAB de CV operates as an airline. As reported in the Troubled Company Reporter-Latin America, Egan-Jones Ratings Company, on June 12, 2020, downgraded the foreign currency senior unsecured rating on debt issued by Grupo Aeromexico SAB de CV to B- from BB-. EJR also downgraded the rating on FC commercial paper issued by the Company to C from A3. NEMAK SAB: Moody's Confirms Ba1 CFR, Outlook Negative ----------------------------------------------------- Moody's Investors Service confirmed Nemak, S.A.B. de C.V.'s Ba1 senior unsecured and corporate family ratings. The outlook is negative. This action concludes the review initiated on March 26, 2020. Confirmations: Issuer: Nemak, S.A.B. de C.V. Corporate Family Rating, Confirmed at Ba1 Senior Unsecured Regular Bond/Debenture, Confirmed at Ba1 Outlook Actions: Issuer: Nemak, S.A.B. de C.V. Outlook, Changed to Negative from Rating Under Review RATINGS RATIONALE Nemak's Ba1 ratings incorporate its weakened credit metrics as a consequence of the coronavirus pandemic that hurt the global automotive industry. The ratings also reflect the company's sales concentration with the top three US automakers, which account for 48% of its volumes in North America, and its product focus into three main segments with the same demand drivers are additional rating constraints. On the other hand, the ratings reflect Nemak's leading position in the aluminum engine blocks and cylinder head markets, as well as its growing structural and electric vehicle component business. The ratings consider the company's status as the sole supplier for about 90% of its volumes, its strong technology and innovation capabilities, and the solid relationship with many of the major global automakers. 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 automotive sector has been one of the sectors most significantly affected by the shock given its sensitivity to lockdowns, economic contraction, consumer demand and sentiment. More specifically, the exposure of Nemak to North America and Europe have left it vulnerable to shifts in operating conditions, including an estimated severe reduction in vehicle sales and production. Still, Nemak's strong liquidity provide it with some cushion to withstand temporary volatility. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Nemak's operations are closely linked to the performance of the automotive industry in North America and Europe, where about 90% of its revenues are derived. Moody's has a negative outlook for the global automotive manufacturing industry. Moody's forecasts light vehicle sales in the US to drop by 25% in 2020 and to recover posting a 16.2% growth in 2021. Moody's expects Western European auto unit sales to plunge 30% in 2020 amid a projected 6.5% contraction in euro area GDP and to rise 17.5% in 2021. While auto production has restarted in the region, dealerships in some countries remain closed and demand is likely to remain very weak. Accordingly, Moody's expects Nemak's revenues and EBITDA to decline in 2020 and recover in 2021, in tandem with the automobile industry and economy recovery. The company has done efforts to reduce its operating costs in face of the coronavirus outbreak. Still, Moody's estimates its EBITDA margin will drop to around 13% in 2020 and gradually return to its historical levels above 14% in 2021. The company's credit metrics and EBITDA are affected by the effect of the coronavirus outbreak that temporarily closed manufacturing facilities around the world. As of March 31, 2020, the company withdrew around $500 million from its credit facilities to further strengthen its liquidity. As a result, Nemak's adjusted gross debt/EBITDA increased to 4.9 times as of March 31, 2020, up from 2.9 times as of December 31, 2019. Going forward, Moody's estimates Nemak will reduce its adj. gross debt/EBITDA below 4.0 times by the end of 2021 from higher EBITDA generation and debt reduction. Interest coverage will improve as well with adj. EBITDA/Interest expense reaching around 6.5 times in 2021; up from an expected 4.5 times in 2020. Nemak has strong liquidity, with cash on hand of $772 million as of March 31, 2020 that could cover by 5.8 times its short-term debt. Like many other companies in the region, in March Nemak withdrew around $500 million from its committed and advised credit facilities to further support its liquidity. In addition, the company cut down its dividend payments to $13 million in 2020 and Moody's expect them to be zero in 2021; down from an annual average of $155 million in 2017-19. Nemak's parent company Alfa (Baa3 stable) has always publicly mentioned its willingness to support its subsidiaries in case of need. As of March 31, 2020, Alfa held consolidated cash balances of $2.3 billion, which include $923 million that the company withdrew from some of its lines of credit. Nemak has a comfortable long-term debt amortization profile with no mayor indebtedness due until 2024. The negative outlook reflects Nemak's weakened credit metrics caused by the coronavirus outbreak that hurt the automobile industry worldwide. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The rating could be downgraded if the company's credit metrics do not improve over the next 18 months or if there is greater than expected decline on automobile sales that hurt Nemak's operation or liquidity. Failure to deliver the company with adj. gross debt/EBITDA declining towards 3.0 times or a deterioration in liquidity could lead to a downgrade. The ratings could be upgraded if the company proves able to grow its topline, while maintaining strong credit metrics in a softening industry environment with Moody's adj. gross debt/EBITDA below 2.5 times and adj. EBITA/Interest expense over 4.0 times. To be considered for an upgrade, the company would also need to improve its profitability and maintain its robust liquidity and cash generation. The principal methodology used in these ratings was Automotive Supplier Methodology published in January 2020. Nemak is a subsidiary of Alfa, S.A.B. de C.V. (Baa3 stable), a publicly traded Mexican business group. Nemak produces aluminum cylinder heads, engine blocks, transmission components, and structural and electric vehicle components for light vehicles manufactured by more than 50 customers worldwide, with 60% of its sales volumes coming from the Big Three US carmakers (Ford Motor Company, General Motors Company and Fiat Chrysler Automobiles N.V.). Nemak's products are sold mainly in North America and Europe, which account for 91% of its consolidated revenue. Nemak reported revenues of $3.8 billion over the twelve months ended March 31, 2020. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Sales of Foreign-Used Cars Plummet ----------------------------------------------------- Yvonne Baboolal at Trinidad Express reports that the COVID-19 lockdown has compounded ongoing problems facing registered foreign used vehicle dealers in Trinidad and Tobago and they are facing a very bleak period right now, says president of the T&T Automotive Dealers Association, Visham Babwah. "It looks bleak. It does not look bright right now from where I am sitting. . . I have been in the industry for 25 years and this is a very bleak moment," the report quoted Mr. Babwah as saying. Babwah owns and operates the Chaguanas-based P&V Marketing Company Ltd. He said the sale of foreign used vehicles has dropped dramatically since dealers reopened on June 1 after the lifting of public health restrictions, according to Trinidad Express. "Before the lockdown, 15 to 20 people would walk in daily looking to buy cars. For the year, the combined dealership might sell about 7,000 to 8,000 cars, the report notes. "Now about three or four people are coming in for the day. Since we reopened, customers are very scarce. Sales have been very slow," he added. Babwah said a predicted second wave of the virus and another lockdown would seriously impact the used car dealers, the report relays. He said people who may have savings are holding on to it, spending only on necessities, because they are uncertain of what lies ahead, the report notes. "A lot of people have also lost their jobs and have been using their savings. Many said they applied for the salary relief grant and are still waiting. "We think this will remain so for a while," he added. Babwah said there are between 400 and 500 active used car dealers in T&T who directly employ around 7,000 people, the report notes. Further, several contractors that sprung up around the used car industry, like the installation of car alarms and GPS trackers as well as cleaning, buffing and painting businesses, would also be impacted by the success or failure of the foreign used car industry, the report discloses. He said during the lockdown, all these people were temporarily out of work because car sales were not deemed to be an essential service, the report says. Babwah said about ten per cent of the active foreign used car dealers have been forced to shut their doors, the report notes. "A few hundred people went home already. It could be up to a 1,000." He said business started slowing before the pandemic, around September last year, after the lay-offs of thousands of people from Petrotrin and companies at the Point Lisas Industrial Estate. "The pandemic has now made it an even slower period," he added. The ongoing challenge to access foreign exchange at banks to purchase foreign used cars remain, he said, the report discloses. "Commercial banks are operating like a cartel in collaboration with Central Bank. "They are forcing you to take a loan if you want foreign exchange. Some dealers may have their finances in order and would not have any need for a loan," he added. Babwah said it was already difficult for contract workers to get loans to buys cars, too, the report relays. "Banks were asking people who may be on three-year contracts to first get a renewal of their contracts. This was before the pandemic. Now, they are more cautious about giving loans." Alongside registered used car dealers, there is a flourishing illegal used car industry, Babwah said, the report relays. "People are allowed to bring body shells minus the engine and transmission into the country claiming they're for parts. "They pay very little taxes and then put on engines and transmissions here and slap on a number plate. "They may not even take it to register and sell it to people. "They're able to sell a car for half the price we sell it for because of the low taxes they pay on them," he added. Babwah said he has repeatedly called on the Government to ban the importation of body shells, the report notes. Foreign used car dealer Inshan Ishmael said the Covid-19 pandemic only compounds the ongoing foreign exchange problems he has been facing for the last few years, the report says. Ishmael said there is a huge foreign exchange black market in operation and that is what has been driving the industry. "My company, R.O.C. in Bamboo #2, which brings in cars and parts has not brought a container in for the last four months. R.O.C. is 20 years old and within the last few years, we have had it very hard with regards to the foreign exchange," Ishmael added. He said the pandemic worsened this situation, the report relays. =============== X X X X X X X X =============== [*] LATAM: Businesses Expected to be More Resilient After COVID-19 ------------------------------------------------------------------ RJR News reports that a survey by PricewaterhouseCoopers (PwC) claims that 71 percent of Caribbean businesses are expected to be more agile and resilient after COVID-19. PwC's COVID-19 Pulse Survey on May 11 involved 867 chief financial officers, CFOs, in more than 24 countries and territories in the region, according to RJR News. It found that 63 per cent of the CFOs are planning to accelerate automation and new ways of working, compared to 43 per cent globally, the report notes. Over three-quarters of those surveyed said work flexibility will benefit their company in the long run, the report relays. Additionally, the survey found that 54 per cent of CFOs in the region are considering making remote working a permanent option where feasible, the report adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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