/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/200708.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, July 8, 2020, Vol. 21, No. 136 Headlines B R A Z I L BRAZIL: Loses Almost 332,000 Formal Jobs in May, CAGED Reports BRK AMBIENTAL: Moody's Gives Ba2/Aa2.br Ratings to 2021 Debenture ODEBRECHT ENGENHARIA: Fitch Affirms 'RD' Issuer Default Ratings VALE OVERSEAS: Moody's Rates New Sr. Unsecured Notes Due 2030 'Ba1' C H I L E LATAM AIRLINES: White & Case Represents LATAM Bondholders D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: 25,000 Jobs at Risk, Shuttered Casinos Warn J A M A I C A DIGICEL GROUP: Pulls Ads From Facebook Over its Hate Speech Policy M E X I C O ALPHA HOLDING: Moody's Cuts CFR & LT Issuer Ratings to B2 BANCO MERCANTIL: Moody's Rates New AT1 Capital Notes 'Ba2(hyb)' BANCO MERCANTIL: S&P Rates New Tier 1 Capital Notes 'BB-' P A R A G U A Y PARAGUAY: Beats the Pandemic and Seeks New Growth, IMF Says U R U G U A Y URUGUAY: IDB Approves $80 Million Loan for MSMEs V E N E Z U E L A VENEZUELA: High Court Denies Access to Funds at Bank of England X X X X X X X X LATAM: IMF Forecasts 9.4% Economic Contraction in Region for 2020 - - - - - =========== B R A Z I L =========== BRAZIL: Loses Almost 332,000 Formal Jobs in May, CAGED Reports -------------------------------------------------------------- Xiu Ying at Rio Times Online reports that according to data from the National Register of Employees and Unemployed (CAGED) released June 29, Brazil had a net loss of 331,901 jobs with a signed worker's record book in May. The result is the difference between hirings, which totaled 703,921, and dismissals, totaling 1,035,822, according to Rio Times Online. As reported in the Troubled Company Reporter-Latin America on May 8, 2020, Fitch Ratings has affirmed Brazil's Long-Term Foreign Currency Issuer Default Rating at 'BB-' and has revised the Rating Outlook to Negative. The Outlook revision to Negative reflects the deterioration of Brazil's economic and fiscal outlook, and downside risks to both given renewed political uncertainty, including tensions between the executive and congress, and uncertainty over the duration and intensity of the coronavirus pandemic. On April 10, 2020, the TCR-LA reported that S&P Global Ratings revised on April 6, 2020, its outlook on its long-term ratings on Brazil to stable from positive. At the same time, S&P affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings. S&P also affirmed its 'brAAA' national scale rating and its transfer and convertibility assessment of 'BB+'. The outlook on the national scale rating remains stable. BRK AMBIENTAL: Moody's Gives Ba2/Aa2.br Ratings to 2021 Debenture ------------------------------------------------------------------ Moody's America Latina Ltda. assigned Ba2/Aa2.br (respectively, in global and Brazil's national scale) to BRK Ambiental Participacoes S.A.'s new debenture issuance of BRL450 million (7th issuance) due in 2021. At the same time, Moody's affirmed BRK's Ba2/Aa3.br corporate family ratings. The outlook is stable. Proceeds from BRK's BRL450 million 7th debentures refinanced the maturing 4th debentures. The new debentures have a 18-month tenor from the issuance date (May, 2020), with principal paid at maturity while interest is paid semi-annually starting in November 2020. The debentures have a conditional corporate guarantee from BRK Ambiental - Ativos Maduros S.A. and also contain standard acceleration clauses including cross default provisions with other outstanding debt from both BRK and BRK Mature Assets. Other clauses include change in control, bankruptcy and a financial covenant of total debt at the BRK level below or equal to BRL1.23 billion. RATINGS RATIONALE The Ba2/Aa2.br ratings assigned to the new debenture issuance incorporate BRK's credit quality as well as its view of the strength of the conditional corporate guarantee from BRK Mature Assets that mitigate structural subordination considerations given the guarantor's strong asset features combined with solid liquidity and low leverage with limitations on cash leakage or additional indebtedness. The guarantee is valid from the earlier of September 2020 or whenever any of the following happens: (i) injection of BRK Mature Assets' shares held by BR-FIP in BRK Ambiental; (ii) concession termination of any operating asset from BRK Mature Assets; (iii) sale of any operating asset from BRK Mature Assets, including equity interests; (iv) bankruptcy or judicial recovery of BRK Ambiental or BRK Mature Assets; (v) debt acceleration >BRL50mm at BRK Ambiental. BRK's ratings continue to incorporate the company's solid business profile with a diversified customer base that provides revenue visibility through low demand elasticity and long-term contracts. Also, BRK has a comfortable debt maturity profile with relatively long tenors and benefits from solid access to debt markets. In addition, Moody's notes a strong shareholder commitment to retain dividend payments over the next five years which further supports the ratings. On the other hand, BRK Ambiental's leverage is high, as shown in FFO/net debt of 7.9% and a significant portion of projects in ramp-up phase which Moody's expects will continue to drive high capex needs and negative free cash flow. The stable outlook takes into consideration the company will prudently manage its leverage in line with the current credit quality and maintain discipline in its financial policy. This outlook relates to Moody's expectation that BRK will be successful in continue to improve its operating performance and implement its capital spending plan, with minimal cost overruns. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The national scale ratings could be upgraded if the consolidation of BRK Mature Assets is concluded successfully or if BRK demonstrates sustained better-than-expected operational performance or a reduction in leverage such that its FFO interest coverage rises above 2.0x and its FFO/net debt remains above 10% on a sustained basis. An upgrade would also require the company to maintain a solid liquidity profile and conservative financial policy. Also, lower indebtedness at the holding level and higher cash coverage could add positive pressure to the debenture's national scale rating. Its views on the shareholder's support could also pressure the ratings, nonetheless BRK is somewhat limited to the sovereign credit quality. On the other hand, a deterioration in the company's operating performance or significant capital spending overruns, such that FFO interest coverage and FFO/net debt remain below 1.8x and 7%, could result in downward pressure. Perceptions of a more aggressive financial policy or a deterioration of Brazil's sovereign credit could also pressure the company's credit quality as well as new investments and acquisitions or a further increase in the already significant capital spending plan. Its view of deteriorated strength from BRK Mature Assets credit profile or the guarantee structure could affect downwards the backed senior unsecured ratings. BRK Ambiental is one of Brazil's largest private companies in the sanitation sector, with 22 SPEs (including BRK Mature Assets) in the water & sewage segment and a population served of 15 million inhabitants. The company is present in more than 100 municipalities and 12 states, through 15 concessions, 6 public-private-partnerships and one asset lease, with coverage rates of 96% for water supply, 52% for sewage collection and 83% for sewage treatment. In 2019 BRK had net revenues of BRL1.4 billion and EBITDA of BRL560 million according to Moody's adjustments. The principal methodology used in these ratings was Regulated Water Utilities published in June 2018. ODEBRECHT ENGENHARIA: Fitch Affirms 'RD' Issuer Default Ratings --------------------------------------------------------------- Fitch Ratings has affirmed Odebrecht Engenharia e Construcao S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings at 'RD' and Long-Term National Scale Rating at 'RD (bra)'. Concurrently, Fitch has affirmed the 'C/RR5' rating of approximately USD3.3 billion of Odebrecht Finance Ltd. issuances, which OEC unconditionally and irrevocably guarantees. The ratings reflect the payment default of USD348 million in coupons and USD73 million in principal of OFL's senior unsecured notes since of Oct. 2018 that are fully and irrevocably guaranteed by OEC. OEC's unpaid coupons have surpassed the minimum thresholds of default, triggering cross-default clauses and accelerating OFL's bond maturities. The classification also embraces the ongoing debt restructuring process with OFL's bondholders, which Fitch sees as a Distress Debt Exchange. OEC's holding company Odebrecht S.A. and 19 of its subsidiaries, including OFL, filed for bankruptcy protection in June 2019, which should result in a material reduction in terms for the debtholders of the group compared with original contractual terms. Fitch understands such measure was necessary to avoid bankruptcy. OFL's ongoing DDE proposal recognizes 45% of the outstanding bonds as debt, maintains coupons payments, and postpones each original maturity in 4.5 years. OEC would have the right to PIK coupons over the next five years, starting with 100% in the first year and gradually reducing in the following years. The 55% remaining debt would be transferred to a HoldCo instrument with maturity in Sept. 2058 that bears no interest and would be amortized as OEC pays dividends if the company generates excess cash from its operations. The DDE proposal is subject to the minimum 60% approval of the bond holders, which is expected to be voted by the end of July 2020. If approved by bond holders, the Extrajudicial Recovery will need to be approved by responsible legal authorities. KEY RATING DRIVERS Ongoing Debt Restructuring: Since Oct. 25, 2018, OEC has paid no coupons of OFL and engaged in extrajudicial debt restructuring discussion with an Ad Hoc group of bond holders and the help of legal advisors. This group of investors agreed with the plan that recognizes 45% of the outstanding bonds as debt and also gives OEC the right to PIK coupons over the next five years, starting with 100% and gradually reducing the percentage in the following years. On-balance-sheet working capital lines have been kept out of the restructuring. Relevant Operating Challenges: On top of restructuring OFL bonds, OEC still needs to build cash to support its working capital needs. The company continues with the substantial challenge to recover its backlog; execute and monetize new projects to generate positive operating cash flows and stop the cash burn; collect past due receivables while it settles plea bargain agreements with remaining six countries; and rebuild its reputation within a weak market environment. So far, OEC has signed plea bargain agreements with Brazil, Dominican Republic, Ecuador, Guatemala, Panama, and Peru on top of the Swiss and American authorities. In 2019, OEC reported a negative EBITDA of BRL438 million as per Fitch's criteria, impacted by the business deceleration and provisions. The CFFO was negative at BRL1.6 billion and FCF negative at BRL1.7 billion, after capex of BRL160 million and no dividends. Deterioration of the Operating Environment: The operating environment for the Engineering and Construction companies in Brazil has substantially deteriorated and increased uncertainties about OEC's capacity to recover the backlog on a sustainable basis. OEC has substantially reduced its size over the past six years as the Car Wash probe materially limited the company's ability to replace its backlog. From a backlog of USD33.9 billion in 2014, the company closed 2019 with an order book of USD3.4 billion (58% in Brazil), after the regular execution and contracts cancellation by the Venezuelan government in 2019. The new strategy is to focus its activities in five countries: Angola, Brazil, Dominican Republic, Panama, and Peru. ESG Influence: OEC has an ESG Relevance Score of '5' for Governance Structure. The group still needs to settle plea bargain agreements in six countries due to the Car Wash probe. OEC also has an ESG Relevance Score of '5' for Group Structure due to complex related-party transactions between OEC and ODB. DERIVATION SUMMARY OEC's 'RD' rating reflects the application of the DDE methodology due to the missed USD348 million coupon payments and USD73 million principal amortization by OFL on its senior unsecured notes outstanding, which are fully and irrevocably guaranteed by OEC. KEY ASSUMPTIONS Fitch's Key Assumptions Within its Rating Case for the Issuer -- Backlog of BRL15.8 billion in 2020 and BRL15.9 billion 2021, executed on average in four years. -- Gradual recovery of recurring EBITDA margins. -- Capex of BRL122 million in 2020. -- No dividends in the foreseeable future. -- Sale of past due receivable amounting BRL1.3 billion in 2020. KEY RECOVERY RATING ASSUMPTIONS The recovery analysis assumes OEC as a going-concern and a 10% administrative claim. These assumptions result in a recovery rate for OFL's bonds within the 'RR5' range. Going-Concern Approach -- OEC's going-concern EBITDA considers Fitch recurring EBITDA forecast for 2020. -- An EV EBITDA multiple of 5x is used to calculate a post-reorganization valuation and reflects a mid-cycle multiple. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Amortization of past due coupons and principal or the successful conclusion of the debt restructuring process. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Filing for bankruptcy protection would lead corporate ratings to 'D'. 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 Weak Liquidity: OEC's poor liquidity position led it to restructure its debt. On Dec. 31, 2019, the company had BRL482 million (USD120 million) of cash and BRL13 billion (USD3.2 billion) of short-term debt, mostly composed of the par-value of the accelerated bonds of OFL and working capital lines. The company has increased its cash balance during the first half of 2020 with the sale of past due receivables and other claims in the amount of USD270 million, which is an important input to support the company's operations. Total adjusted debt was BRL13.1 billion as of Dec. 31, 2019. In Dec. 2019, OEC accounted as debt the fair value of the bond guarantees of BRL2.5 billion (USD627 million). On balance-sheet debt amounted to BRL3 billion, of which 85% was the fair-value of the bonds and the remaining 15% (BRL421 million) was composed of working capital lines for the projects' execution. Fitch considered the difference between the fair-value and par value of the bonds of BRL10 billion (USD2.5 billion) as off-balance sheet debt. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch added back the remaining BRL10.1 billion off-balance sheet debt of OFL. 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 Odebrecht Engenharia e Construcao S.A.: Customer Welfare - Fair Messaging, Privacy & Data Security: 4, Management Strategy: 4, Group Structure: 5, Governance Structure: 5, Financial Transparency: 4 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, either due to their nature or the way in which they are being managed by the entity. Odebrecht Engenharia e Construcao S.A. - LT IDR RD; Affirmed - LC LT IDR RD; Affirmed - Natl LT RD (bra); Affirmed Odebrecht Finance Ltd. - Senior unsecured; LT C; Affirmed VALE OVERSEAS: Moody's Rates New Sr. Unsecured Notes Due 2030 'Ba1' ------------------------------------------------------------------- Moody's Investors Service has assigned a Ba1 rating to the proposed senior unsecured notes due 2030 to be issued by Vale Overseas Limited and fully and unconditionally guaranteed by Vale S.A. The outlook is stable. Net proceeds from the proposed issuance will be used primarily for general corporate purposes. The rating of the notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and assume that these agreements are legally valid, binding and enforceable. Rating assigned: Issuer: Vale Overseas Limited Gtd Senior Unsecured Notes due 2030: Ba1 RATINGS RATIONALE Vale's Ba1 rating is supported by its strong production profile, substantive portfolio of long lived assets (in iron ore, nickel, copper and coal), low cost position and significant reduction in debt levels over the past few years (from roughly $30 billion in 2015-2016 to $14.8 billion at the end of 2019), which better position Vale to withstand volatility in the prices for iron ore and base metals. The gradual return of operations that have been suspended after the accident with the tailings dam at the Corrego do Feijao mine in Brumadinho in January 2019 is also a consideration to the rating. Accordingly, Vale produced 302 million tons of iron ore in 2019, from 385 million tons in 2018. Production levels in 2020 will be in the 310 to 330 million tons range [1]. As Vale continues to generate positive free cash flows ($7.4 billion in the twelve months ended March 2020), Moody's does not expect a material impact in the company's liquidity coming from expenses directly related to Brumadinho. Vale provisioned a total of $6.6 billion in 2019 for decommissioning of tailings dams and socioeconomic and environmental recovery in the affected areas and incurred in additional expenses of about $852 million, for a total of $7.4 billion impacting the company's EBITDA as a result of the Brumadinho accident. Cash disbursement will occur over the next few years -- about $989 million already incurred in 2019 -- and the balance of such provisions at the end of 1Q20 was $4.0 billion. Despite all the cash disbursements related to the accident, Vale has been able to maintain a comfortable liquidity position, with $12.3 billion in cash at the end of 1Q20, which includes the withdrawal of $5 billion under the committed credit facilities in March to enhance the company's liquidity cushion. Despite the increase in debt levels, total adjusted leverage (total debt to EBITDA) remained comfortably positioned at 1.4x, with about $5.2 billion in debt maturities from 2020 until 2023 (including $ 2 billion under the revolving credit facility due in June 2022), or 30% of its gross debt. The rating is constrained by the implications of the tailings dam accident in Brumadinho, in particular from an environmental, social and governance perspective. Moody's does expect material changes and higher scrutiny in the company's corporate governance practices, with a strong strategic focus on safety and operational excellence. As those initiatives are implemented over time, Moody's expects to see evidence of stricter risk management and oversight of all operations. Besides, Vale remains exposed to contingent liabilities related to Samarco, as well as to the volatility of iron ore and base metals prices. The stable outlook reflects the higher visibility into the costs and financial liabilities that Vale will incur as a result of the accident with the tailings dam at the Corrego do Feijao mine. With Vale's strong liquidity and positive FCF, Moody's does not expect a significant impact on the company's liquidity or leverage. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING An upgrade of Vale's rating would require evidences of material enhancements in the company's corporate governance oversight and risk controls, while production gradually normalizes and there are no material additional provisions or cash disbursements related to the accident. An upgrade would also depend on the maintenance of a solid liquidity, credit profile and positive free cash flow generation, supported by leading market positioning in its main segments and low-cost operations. Quantitatively, an upgrade would also require Vale's adjusted total debt/EBITDA to remain below 2.5x and EBIT/interest expense above 5x on a sustainable basis. Conversely, Vale's ratings could be downgraded should the ultimate costs related to the disaster in Brumadinho be materially above the amounts already provisioned due to higher fines and settlements, litigations and class actions, or if operations do not fully recover within the expected timeframe, affecting cash costs and free cash flow generation. Quantitatively, the ratings or outlook could suffer negative pressure should conditions for iron ore and base metals deteriorate, leading to lower profitability, with leverage ratios (total debt to EBITDA) trending towards 3x or above and EBIT/Interest expense falling below 4x. A marked deterioration in the company's liquidity position would also precipitate a downgrade. The principal methodology used in this rating was Mining published in September 2018. Headquartered in Rio de Janeiro, Brazil, Vale S.A. is one of the world's largest mining enterprises. The company has (1) substantive positions in iron ore and nickel, (2) relevant operations in copper and coal, and (3) supplemental positions in energy and steel production. Vale is among the largest global supplier of iron ore and nickel. The company's principal mining operations are in Brazil, Canada, Indonesia, New Caledonia and Mozambique. In the twelve months ended in March 2020, Vale reported net revenues of $36.3 billion. ========= C H I L E ========= LATAM AIRLINES: White & Case Represents LATAM Bondholders --------------------------------------------------------- In the Chapter 11 cases of LATAM Airlines Group S.A., et al., the law firm of White & Case LLP submitted a verified statement under Rule 2019 of the Federal Rules of Bankruptcy Procedure, to disclose that it is representing the Ad Hoc Group of LATAM Bondholders. The Ad Hoc Group of certain holders of the 6.875% Senior Notes due 2024 and 7.00% Senior Notes due 2026, each issued by LATAM Finance Limited, and the Series A Local Bonds due 2028, Series B Local Bonds due 2028 Series C Local Bonds due 2022, Series D Local Bonds due 2028, and the Series E Local Bonds due 2029, each issued by LATAM Airlines Group S.A. The 2024 Bonds, 2026 Bonds, Series A Local Bonds, Series B Local Bonds, Series C Local Bonds, Series D Local Bonds, and Series E Local Bonds are collectively referred to herein as the "Bonds". As of June 29, 2020, members of the Ad Hoc Group and their disclosable economic interests are: Administradora de Fondos de Pensiones Capital S.A. Av. Apoquindo 4820, Las Metropolitana, Chile * Holder of $13,692,829 of Series B Local Bonds, $4,940,711 of Series D Local Bonds and $38,078,769 of Series E Local Bonds Administradora de Fondos de Pensiones Cuprum S.A. Bandera 236, Piso 6, Metropolitana, Chile * Holder of $4,000,000 of 2026 Bonds and $53,694,946 of Series E Local Bonds Administradora General de Fondos SURA S.A. Av. Apoquindo 4820, Oficina 1501 Las Condes, Region Metropolitana, Chile * Holder of $16,101,731 of Series A Local Bonds, $3,654,669 of Series B Local Bonds, $8,174,454 of Series C Local Bonds, and $2,577,689 of Series D Local Bonds BICE VIDA Compania de Seguros S.A. Av. Providencia 1806 Santiago, Region Metropolitana, Chile * Holder of $22,500,00 of 2024 Bonds, $8,000,000 of 2026 Bonds, $176,454 of Series B Local Bonds, $4,499,577 of Series D Local Bonds Caius Capital LLP 135-137 New Bond Street London, W1S 2TQ * Holder of $16,649,000 of 2024 Bonds and $25,833,000 of 2026 Bonds Compania de Seguros Confuturo S.A. Av. Apoquindo 6750, Piso 19 Las Condes, Region Metropolitana, Chile * Holder of $45,500,000 of 2024 Bonds and $5,000,000 of 2026 Bonds. DoubleLine Capital LP 333 S. Grand Ave, 18th Floor Los Angeles, CA 90071 * Holder of $55,466,000 of 2024 Bonds, $43,553,000 of 2026 Bonds, and $1,377,306 of 2027 EETCs HSBC Securities Inc. USA 452 5th Avenue New York, NY 10018 * Holder of $30,515,000 of 2026 Bonds, $5,150,000 of 2023 EETCs and $7,416,000 of 2027 EETCs Livello Capital Management LP 1 World Trade Center, 85th Floor New York, NY 10007 * Holder of $1,500,000 of 2026 Bonds, and $1,000,000 of 2027 EETCs LMR Partners LLP 10th Floor, 363 Lafayette Street New York, NY 10012 * Holder of $10,000,000 of 2024 Bonds, and $1,150,000 of 2026 Bonds Penta Vida Compania de Seguros de Vida S.A. Av. El Bosque Norte 500, Piso 3 Las Condes, Region Metropolitana, Chile * Holder of $17,645,398 of Series A Local Bonds, $17,998,306 of Series B Local Bonds, $7,058,159 of Series C Local Bonds, $9,916,714 of Series D Local Bonds, and $899,915 of Series E Local Bonds Seguros Vida Security Prevision S.A. Av. Apoquindo 3150, Piso 8 Las Condes, Region Metropolitana, Chile * Holder of $7,058,159.24 of Series A Local Bonds and $3,405,561.83 of Series C Local Bonds TCW Investment Management Company 865 South Figueroa Street, Suite 1800 Los Angeles, CA 90017 * Holder of $34,000,000 of 2026 Bonds VR Global Partners, L.P. 300 Park Avenue, 16th Floor New York, NY 10022 * Holder of $3,257,000 of 2024 Bonds, $53,742,000 of 2026 Bonds, $7,601,000 of 2023 EETCs, and $1,000,000 of 2027 EETCs Warlander Asset Management LP 250 West 55th Street 33rd Floor New York, NY 10019 United States * Holder of $7,250,000 of 2026 Bonds On June 15, 2020, the Ad Hoc Group retained Counsel to represent it in connection with the Debtors' Chapter 11 Cases. Each member of the Ad Hoc Group has consented to Counsel's representation. No member of the Ad Hoc Group represents or purports to represent any other entities in connection with these chapter 11 cases. The information contained in the Verified Statement or attached Exhibit A is intended only to comply with Bankruptcy Rule 2019 and nothing contained in herein should be construed as a limitation or waiver of any rights of any member of the Ad Hoc Group. The undersigned verifies that the foregoing is true and correct to this best of his knowledge. Counsel reserves the right to amend or supplement this Verified Statement. Counsel for the Ad Hoc Group of LATAM Bondholders can be reached at: WHITE & CASE LLP John K. Cunningham, Esq. John Ramirez, Esq. Mark Franke, Esq. 1221 Avenue of the Americas New York, NY 10020 Telephone: (212) 819-8200 Facsimile: (212) 354-8113 Email: jcunningham@whitecase.com john.ramirez@whitecase.com mark.franke@whitecase.com Jason N. Zakia, Esq. 111 South Wacker Drive, Suite 5100 Chicago, IL 60606-4302 Telephone: (312) 881-5400 Facsimile: (312) 881-5450 Email: jzakia@whitecase.com Richard S. Kebrdle, Esq. Southeast Financial Center, Suite 4900 200 South Biscayne Boulevard Miami, FL 33131 Telephone: (305) 371-2700 Facsimile: (305) 358-5744 Email: rkebrdle@whitecase.com A copy of the Rule 2019 filing, downloaded from PacerMonitor.com, is available at https://is.gd/fRrHml About LATAM Airlines LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. LATAM Airlines Group S.A. is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM Airlines Group S.A. and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as general bankruptcy counsel; FTI Consulting as restructuring advisor; and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. Prime Clerk LLC is the claims agent. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: 25,000 Jobs at Risk, Shuttered Casinos Warn --------------------------------------------------------------- Dominican Today reports that representatives of the Dominican of Gambling Casinos Association complained that the authorities maintain that sector without a confirmed date for the restart of its operations, threatening the stability of 25,000 direct and indirect jobs. Association president David Moniz warned that as time goes by casinos lose the ability to reactivate themselves and indicated that they were the only ones excluded from the gambling sector in phase two, established by the Government to the restart of economic activities, according to Dominican Today. Moniz said the sector he represents does not have access to bank loans, which puts its survival at risk, the stability of thousands of families and their corresponding tax contribution, 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 internationa 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). ============= J A M A I C A ============= DIGICEL GROUP: Pulls Ads From Facebook Over its Hate Speech Policy ------------------------------------------------------------------ RJR News reports that Digicel Group will cease all paid advertising activities on Facebook platforms globally for July, as the company takes a stand against hate speech online. The company said the move is in solidarity with a number of leading global brands who have moved to send a strong message to Facebook that enough is enough, according to RJR News. Digicel Group Chief Executive Officer Jean-Yves Charlier said it is hoped that Facebook will be forced into affirmative action instead of idly standing by as its platforms are used to spark and spread negative, damaging and violent messaging, the report note. About Digicel Group Digicel Group is a mobile phone network provider operating in 33 markets across the Caribbean, Central America, and Oceania regions. The company is owned by the Irish billionaire Denis O'Brien, is incorporated in Bermuda, and based in Jamaica. As reported in the Troubled Company Reporter-Latin America April 17, 2020, Moody's Investors Service downgraded Digicel Group Limited's probability of default rating to Caa3-PD from Caa2-PD. At the same time, Moody's downgraded the senior secured rating of Digicel International Finance Limited to Caa1 from B3. All other ratings within the group remain unchanged. The outlook is negative. On April 10, 2020, the TCR-LA reported that Fitch Ratings has downgraded Digicel Limited to 'C' from 'CCC', and its outstanding debt instruments, including the 2021 and 2023 notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also downgraded Digicel International Finance Limited to 'CCC+' from 'B-'/Negative, and its outstanding debt instruments, including the 2024 notes and the 2025 credit facility, to 'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative Rating Outlook from DIFL. =========== M E X I C O =========== ALPHA HOLDING: Moody's Cuts CFR & LT Issuer Ratings to B2 --------------------------------------------------------- Moody's Investors Service has downgraded Alpha Holding, S.A. de C.V.'s long-term global local and foreign currency issuer ratings, its Corporate Family Rating and long-term foreign currency senior unsecured debt ratings to B2 from B1. At the same time, Moody's affirmed AlphaCredit's short-term global local and foreign currency issuer ratings at Not Prime. The issuer level outlook was changed to negative, from positive. The following AlphaCredit ratings were downgraded: - Long-term global local currency issuer rating to B2, from B1 - Long-term global foreign currency issuer rating to B2, from B1 - Corporate Family Rating to B2, from B1 - Long-term global foreign currency senior unsecured debt ratings to B2, from B1 The following AlphaCredit ratings were affirmed: - Short-term global local currency issuer rating of Not Prime - Short-term global foreign currency issuer rating of Not Prime Outlook, changed to negative from positive RATINGS RATIONALE The downgrade of AlphaCredit's ratings to B2, from B1, reflects Moody's assessment of the company's weakened asset quality following the disclosure of a considerable portfolio of loans that are past due for more than 180 days, whose recoverability could be constrained by the effects of the coronavirus pandemic on Mexico's economic growth, including a sharp GDP contraction in 2020 and a limited recovery in 2021. The downgrade also incorporates Moody's assessment of certain deficiencies in the payroll-linked lender's risk management and governance, as reflected in the asset quality reporting and recoverability assumptions. The outlook change to negative, from positive, incorporates the rating agency's expectation that Mexico's more difficult operating environment will pressure the asset quality of AlphaCredit's currently performing portfolio, as for the whole financial system, and that AlphaCredit's ability to achieve the business volumes and profitability targets that would allow it to organically replenish capital and generate cash will take much longer. The rating agency regards the coronavirus outbreak as a social risk under its environmental, social and governance framework, given the substantial implications for public health and safety. AlphaCredit's B2 ratings take into consideration the company's improving capitalization, much lower levels of secured debt, and the ample growth opportunities in Mexico given the country's low levels of credit intermediation. In April 2020, AlphaCredit's Moody's-adjusted tangible common equity to tangible managed assets increased substantially to about 10%, from -1% as of 1Q 2020, following the completion of a $100 million capital injection led by SoftBank Group Corp.'s (Ba3 negative) Latin America Fund. Earlier in the year, AlphaCredit's $400 million senior unsecured debt issuance had significantly improved the company's 12-month debt maturity coverage with liquid assets to about 200%, from a mere 20% as of year-end 2019 and lowered its asset encumbrance, with secured debt declining to 12% of gross tangible assets, from about 40% as of same date. Moody's expects AlphaCredit's focus on the origination of relatively lower-risk payroll-linked loans to government employees and retirees to support future growth. However, in assessing AlphaCredit's asset quality, Moody's has incorporated the company's Other Recoverable Portfolio account in its problem loan calculation to reflect the large share of impaired assets in the company's balance sheet. These were originated by AlphaCredit's operational difficulties to collect loans that are past due more than 180 days. As such, AlphaCredit's problem loan ratio increases substantially to a high 17%, compared to the company's reported past due loan ratio of 4.1% as of 1Q 2020, which included loans past due between 90 and 180 days. About 60% of these past due loans is legacy from acquisitions of other payroll businesses, without which the problem loan ratio of the company is still a high of about 10%. Prior to 2019, AlphaCredit's loans currently in ORP were accounted as held-for-sale and reported as performing loans; once they were recognized as ORP, they have been accruing interest. Moody's believes that market conditions will remain depressed over the next 12 to 18 months, causing a low and lengthy recoverability of the ORP portfolio, thereby delaying a normalization of asset quality and profitability metrics. In addition, slower loan growth amid the softer economy will affect AlphaCredit's cash flow generation, a credit negative trend that will limit the company's ability to replenish its capital organically with earnings. Despite improvements in funding costs following AlphaCredit's unsecured debt issuance early this year, these benefits tend to be offset by the company's need to maintain high operating and provisioning costs. Even after excluding non-recurring expenses, the company's net income to average managed assets amounted to a relatively modest average of 1.2% for full year 2019 and 1Q 2020. Moody's believes AlphaCredit's exposure to environmental risks is low, consistent with its general assessment for the global banking sector and finance companies. As well, governance risks are largely internal rather than externally driven. AlphaCredit's governance concerns stem from its inadequate risk management that resulted in the need to restate three years of financial statements and its optimistic growth and recovery assumptions for the past due loans under ORP. AlphaCredit's exposure to social risks is moderate, consistent with Moody's general assessment for the global banking sector and finance companies. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The negative outlook on the ratings indicate an upgrade is unlikely. However, the ratings could be stabilized if recoveries under ORP are successful of if developments lead to the lowering of past due loans, despite Mexico's more challenging operating environment. Sustained cash flow generation that leads to improvements in probability and continued replenishment of capital would also be consistent with a stable outlook. Conversely, the ratings could be downgraded if asset quality continues to deteriorate, with a resulting negative effect on the company's profitability and capitalization. A greater reliance on secured debt or a deterioration in the company's liquidity would also lead to a downgrade. The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. BANCO MERCANTIL: Moody's Rates New AT1 Capital Notes 'Ba2(hyb)' --------------------------------------------------------------- Moody's Investors Service has assigned a Ba2(hyb) foreign currency junior subordinated debt rating to Banco Mercantil del Norte, S.A. (Cayman I)'s proposed issuance of perpetual callable subordinated non-preferred non-cumulative Additional Tier 1 capital notes, with an optional redemption on the first call date. The Contingent Convertible Capital Notes will be issued through Banorte's Cayman Islands branch, Banco Mercantil del Norte, S.A. The capital notes total up to $1,500,000,000, split into two tranches of different maturities of five and ten years. LIST OF AFFECTED RATINGS: The following rating was assigned to Banco Mercantil del Norte, S.A.'s Perpetual Convertible Capital Notes issued through Banco Mercantil del Norte, S.A. (Cayman I): Long-term foreign currency junior subordinated debt rating of Ba2(hyb) RATINGS RATIONALE The assigned Ba2(hyb) rating is positioned three notches below Banorte's baa2 adjusted baseline credit assessment (adjusted BCA), in line with Moody's standard notching guidance for contractual non-viability securities and reflects both the high probability of default of these notes as well as the high loss given default resulting from their subordination to the bank's senior debt and deposits. Under the terms of the notes, principal will be partially or fully written down in the event that (i) the bank's fundamental capital ratio, as calculated pursuant to applicable Mexican capitalization regulations, is equal to or below 5.125%; (ii) the bank's license is revoked, or (iii) if Mexico's Banking Stability Committee makes a determination that Banorte requires financial assistance, prior to the revocation of its license, in order to avoid a systemic risk. In the case that any of the aforementioned events occur, the notes would be written down, together with any concurrent pro rata write down or conversion of any other subordinated non-preferred indebtedness issued by the bank and then outstanding, in an amount sufficient to return the bank's common equity Tier 1 ratio to the minimum level required by local regulations at that time and to restore any countercyclical and/or systemically important bank (D-SIB) supplemental capital requirements then in place. Banorte will automatically cancel interest due on the notes if (a) the bank is classified as Class II or below pursuant Articles 121 and 122 of the Mexican Banking Law, or (b) the bank would be classified as Class II or below as a result of the applicable interest payment. Based upon current regulations, the bank will be classified as Class II if its capital levels fall below the following minimum thresholds: 10.5% for the Total Capital (Capital Neto) ratio, 8.5% for the Tier 1 (Capital Basico) ratio, and 7.0% for the CET1 ratio. The bank will also be classified as Class II if it fails to meet any additional D-SIB and countercyclical capital supplements required by the regulator. In addition to the contractual write-down provisions, interest on the notes will be due and payable subject to Banorte's sole and absolute discretion, always and for any reason, to cancel any interest payment in whole or in part. These notes constitute subordinated non-preferred indebtedness and will rank: (i) subordinate and junior in right of payment and in liquidation to all of the Bank's present and future Senior Indebtedness; (ii) pari passu without preference among themselves and with all the Bank's present and future other unsecured Subordinated Non-Preferred Indebtedness and; (iii) senior only to all classes of the bank's equity or capital stock. Despite the very high probability that the government will support Banorte's depositors considering the bank's large deposit market share of 12.4% in March 2020, the ratings assigned to these notes do not benefit from uplift stemming from government support because they are intended to provide loss absorption. Banorte has $1,650 million total outstanding perpetual callable subordinated non-preferred non-cumulative Tier 1 capital notes, rated Ba2(hyb), and issued in June 2019, which will rank pari passu to the proposed AT1 capital notes. Moody's considers a CET1 ratio of 5.125% to be at or close to a bank's point-of-non-viability. Under the Mexican banking regulation, the minimum fundamental CET1 ratio is 7%, plus an additional capital requirement of 0.9% related to Systemically Important Bank Capital Supplement. In March 2020, Banorte reported a CET1 ratio of 13.65%, which was 8.53% above the write-down trigger of 5.125%. Moody's believes Banorte's exposure to environmental risks is low, consistent with its general assessment for the global banking sector. The bank's exposure to social risks is moderate, consistent with Moody's general assessment for the global banking sector. Governance is highly relevant for Banorte, as it is to all participants in the banking industry. Governance risks are largely internal rather than externally driven, and for Banorte, Moody's does not have any particular governance concerns. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Banorte's ratings, including the subordinated rating, is likely to face downward pressure if the baseline credit assessment weakens as a result of material decline in the banks' core capitalization or if there is a substantial deterioration of asset quality in the event the operating environment deteriorates sharply. Upward rating pressure could accumulate if Banorte's asset quality is sustained while the bank continues to seek for diversification of its loan book into consumer lending in a very weak operating environment, while maintaining its ample core capitalization and profitability levels. The principal methodology used in this rating was Banks Methodology published in November 2019. BANCO MERCANTIL: S&P Rates New Tier 1 Capital Notes 'BB-' --------------------------------------------------------- S&P Global Ratings said it assigned its 'BB-' long-term issue-level rating to Mexico-based Banco Mercantil del Norte S.A. Institucion de Banca Multiple Grupo Financiero Banorte's (Banorte; BBB/Negative/A-2) perpetual callable subordinated non-preferred non-cumulative Tier 1 capital notes, issued through its Grand Cayman Branch, for up to $1.5 billion. The rating on these hybrid notes is subject to its review of the final documentation. In S&P's view, this issuance will allow Banorte to keep strengthening its regulatory capitalization ratios and is part of its asset and liability management strategy. In accordance with S&P's criteria for hybrid capital instruments, the rating on Banorte's hybrid notes is four notches below the issuer credit rating (ICR), reflecting: -- One notch because the notes are contractually subordinated to other senior debt; -- An additional notch downward for its discretionary and mandatory non-payment clause, which allows the instrument to defer coupon payments; -- One additional notch for its regulatory Tier 1 classification, which heightens the potential for coupon non-payment on a going-concern basis when it comes to the regulatory capital buffer requirements for systemically important financial institutions such as Banorte; and -- An additional notch for its mandatory contingent capital clause that would lead to a principal write-down. S&P said, "Once Banorte's hybrid capital notes have been issued and confirmed as part of the bank's tier 1 capital base, we expect to assign intermediate equity content to them, in accordance with our criteria. This reflects our understanding that the notes are perpetual regulatory tier 1 capital instruments that have no step-up clauses that could increase the incentive to redeem the notes (although they can be redeemed under other circumstances). We believe the notes can absorb losses in stress scenarios through non-payment of coupon and principle write-down. There are no material restrictions on deferrals, because the bank can discretionally suspend coupon payments. "According to our criteria, a hybrid capital instrument with intermediate equity content is eligible for being included in the total adjusted capital (TAC) calculation until the aggregate amount of all instruments with intermediate equity content is equivalent to up to 33% of the bank's adjusted common equity (ACE). As of March 31, 2020, Banorte's outstanding hybrid capital issuances with intermediate equity content already exceeded our 33% threshold of its ACE base. Therefore, this proposed $1.5 billion hybrid notes issuance wouldn't be included in Banorte's TAC until the bank's internal capital generation capacity increases its ACE base, allowing Banorte's TAC to gradually incorporate this issuance and strengthening its risk-adjusted capital (RAC) ratio. Thus, our forecasted RAC ratio remains unchanged and doesn't affect our current view of Banorte and the group's capital and earnings assessment, because we already consider it strong. We forecast our RAC ratio for Banorte to be 13.4%-13.9% for the next two years. "The proposed notes also don't affect our view of Banorte's funding and liquidity. The notes only make up 2.4% of the bank's total funding base. In our opinion, Banorte's funding structure represents an additional credit strength--it's mostly composed of core customer deposits (75% of the bank's total funding base, as of March 2020), which we view as more stable during adverse market and economic situations. Additionally, Banorte's wholesale deposits have remained stable, which underscores its long-standing relationships with institutional clients." Banorte has additional funding sources, such as repos (17%), senior unsecured debt in local and global markets (4%), interbank loans (2%), and hybrid capital instruments--with intermediate equity content, such as the proposed $1.5 billion tier 1 hybrid notes--issued abroad by its Grand Cayman Branch (2%). These issuances (and the one that the bank is proposing) are part of Banorte's funding strategy and have allowed the bank to extend its debt maturity profile. Banorte holds 13.5% of the domestic market in terms of core customer deposits as of April 2020, and is the fourth largest player in the Mexican banking system. In addition, a large component of the bank's core customer deposits belong to retail clients, which is key in terms of funding costs and diversification. S&P said, "In our view, Banorte's large and stable deposit base, along with its sound capital and its debt and hybrid capital issuances, allow for an adequate and improving stable funding ratio (SFR). The bank's SFR stood at 101.2% as of March 2020 (101.5% on average during the past three years). We expect the SFR to remain above 100% in the next two years because we don't anticipate any changes in Banorte's funding structure, and it will finance its long-term funding needs (such as infrastructure loans) with long-term liabilities to avoid significant mismatches in the balance sheet." S&P said, "In our opinion, Banorte's liquidity position continues to be underpinned by its comfortable debt maturity profile with modest short-term liquidity needs that translate into low refinancing risk amid local and global uncertainties. As of March 2020, our broad liquid assets to short-term wholesale funding stood at 1.53x (and 1.37x is the average for the past three years). The bank's liquidity assessment also reflects its track record of prudent liquidity management and a proactive stance toward refinancing future debt. We expect this type of management to continue, and so don't have any concerns about Banorte's liquidity position for the next 12-24 months. "Our ratings on Banorte reflect its sound business position along with its good diversification by business lines, sectors, and customers, which supports its business and revenue stability. The severe impact on the Mexican economy in 2020 from the COVID-19 pandemic and the weak recovery prospects in 2021 will damage Banorte's asset quality and profitability. However, we expect this will be manageable based on the bank's adequate risk diversification. Considering the these factors and despite our higher risk-weighted assets (RWAs) to reflect Mexico's weakening economic risk, we expect Banorte's RAC ratio to remain strong. Lastly, our ratings incorporate Banorte's funding structure--which is mostly composed by well-diversified core customer deposits--and its sound liquidity to meet short-term financial obligations. As a result of these factors, Banorte's stand-alone credit profile (SACP) is 'bbb+'." =============== P A R A G U A Y =============== PARAGUAY: Beats the Pandemic and Seeks New Growth, IMF Says ----------------------------------------------------------- Bas B. Bakker and Tobias Roy of the IMF Western Hemisphere Department reports that Paraguay acted forcefully against COVID-19 and succeeded in containing the pandemic with very few cases and casualties. But the economic impact has been harsh: GDP is forecast to shrink 5 percent this year. As it seeks to revive growth, the country is also undertaking reforms to improve governance and business climate. Nineteen people have died, out of around 2,100 cases, in a population of 7 million (about 2 people per million inhabitants). Neighboring Bolivia had more than 31,000 cases and over 1,000 casualties among its over 11 million inhabitants. But the impact on the economy has been severe. In January, IMF predicted growth of at least 4 percent this year, and there were signs that IMF was being pessimistic. With agriculture bouncing back from the drought and floods last year, it looked like economic growth would be strong in 2020. After a deep recession in the late 1990s and early 2000s, Paraguay had been growing at an average rate of more than 4 percent in the past 15 years, thanks to a boom in agricultural commodity prices and sound macroeconomic policies. Then the pandemic hit. As in other countries, the lockdown hit economic activity severely. Consumption and investment plummeted. Imports of capital goods in April were 60 percent lower than a year before. Tourism and trade have similarly dried up. Our current GDP forecast for 2020 is -5 percent, but the exact depth of the recession is hard to predict. The pandemic and the recession had a severe impact on Paraguay's public finances, already weakened by last year's drought, which doubled the deficit to almost 3 percent of GDP. While the plan earlier this year was to rein the deficit in, the COVID-19 onslaught made that impossible-and not desirable. Spending on health care and social protection became urgent as lockdown measures hit people's livelihoods. Paraguay's containment measures were effective, because the authorities acted fast and forcefully. The first COVID-19 case was known on March 7. By March 20, the country was in full lockdown, which lasted until May 3. The Ministry of Health used the time to ramp up testing and contact-tracing capabilities, allowing the country to begin a gradual reopening program ("smart quarantine"). While social distancing requirements have been eased, face masks are still mandatory in public, temperatures are measured at building entrances, and clients and employees must wash hands with disinfecting agents. To help finance the higher fiscal deficit, Paraguay asked for International Monetary Fund (IMF) lending under the Rapid Financing Instrument (RFI), designed to quickly provide assistance to countries hit by natural disasters or other shocks-like COVI-19. A $274 million loan was approved in late April and complemented by help from other international organizations. What's next? Now that the economy is starting to reopen, it is time to think about the next steps. Paraguay has traditionally had good macroeconomic policies, with low deficits and debt, which has helped to avoid the boom-bust cycles of other countries in the region. These solid fundamentals will be important now as the country plots its future. Once the economic recovery has strengthened, it will be important to restore the health of public finances. The deficit needs to go back toward the Fiscal Responsibility Law ceiling of 1.5 percent of GDP. How quickly will depend on the strength of the recovery. The country will have to find a balance between rebuilding its buffers and continuing to support its people and the economy. To reduce the deficit, it will be crucial to have both effective spending and stronger revenues. Paraguay's government revenue-to-GDP ratio is extremely low, about the same as in sub-Saharan Africa, and well below other emerging countries. Last year's tax reform was a welcome first step, but more may be needed to mobilize domestic revenue. It will also be important to ensure that the income gap with rich countries continues to narrow. Even before COVID-19, Paraguay's future growth was probably going to be slower than in the past 15 years, as some of the propellers of that growth (the boom in agricultural commodity prices and the rapid expansion of cultivated land) have lost strength. Real income growth was already slowing sharply compared to the 2000s, when it grew much faster than GDP, contributing to a rapid decline in poverty. That was explained by the rise in soy prices, which allowed the country to import more for each ton of soybeans exported. In recent years, the opposite has happened, causing poverty rates to fall more slowly. Many countries manage to have strong growth spurts, but few succeed in closing that income gap. What is needed to achieve more convergence? Macroeconomic stability is a necessary but not sufficient condition. A recent IMF working paper argues that strong governance, good business climate and human capital can help poor countries achieve higher incomes faster. Paraguay scores poorly on these indicators, compared with most other emerging countries. The government is aware and acting on these challenges. In early March, just before the lockdown, experts from the IMF and Inter-American Development Bank team visited the country to assess vulnerabilities to corruption. Their findings will help in developing a national strategy and action plan to combat corruption and improve governance. And just a few days ago, the government announced an ambitious Economic Recovery Plan, which aims to address not only COVID-19 related near-term problems, but also longer-standing structural issues. For the near term, the plan seeks higher public investment (which helps employment); loan guarantees for informal and small enterprises (which addresses their financing problems); and social transfers to poor households (which will stabilize income and consumption). The plan also proposes important structural reforms, including civil service reform, a review of the fiscal responsibility law, administrative reform of the state, and better public procurement systems. All these reforms would help boost future growth in Paraguay and there are not many countries that have come up with such a holistic plan in response to the crisis. When future economic historians look back at Paraguay in 2020, they will hopefully write that the COVID-19 crisis was the beginning of a period of profound reforms that set Paraguay on the road to a bright future. ============= U R U G U A Y ============= URUGUAY: IDB Approves $80 Million Loan for MSMEs ------------------------------------------------ The Inter-American Development Bank (IDB) has approved an $80 million loan to strengthen the sustainability of micro, small and medium-sized enterprises (MSMEs) impacted by the COVID-19 crisis, which are a key pillar of employment in Uruguay. The operation is part of a $1.7 billion-plus support plan announced by the IDB to help the country cope with the sanitary emergency and its impact on health, social, economic and fiscal issues. The loan was approved under new, simplified procedures adopted by the Bank to speed up assistance so countries in the region can tackle emergencies more efficiently. MSMEs are a key component of Uruguay's production and employment capabilities, accounting for more than 99 percent of the private sector companies and more than 67 percent of the jobs. Their activities are mostly concentrated on services and commerce-two sectors badly affected by the coronavirus crisis. The Global Credit Program for Safeguarding the Productive Fabric and Employment will uphold the short-term financial sustainability of Uruguay's MSMEs and foster their economic recovery through access to productive financing. In this sense, it will contribute to the capitalization efforts of the National System of Guarantees (SIGA) to underwrite credits extended by Intermediate Financial Institutions to MSMEs affected by the crisis. The goal is to help them overcome temporary liquidity problems, meet their commercial and financial commitments, and ensure the continuity of their operations through financing aimed at normalizing their commercial cycle. In addition, the program will promote Uruguay's MSMEs economic recovery by providing sustained access to financing so they can reestablish their production capabilities, cover their productive conversion needs, or meet any eventual increase in demand as a consequence of the pandemic. It has been estimated that the program's resources will benefit some 15,000 formally constituted MSMEs that have been affected by the crisis, helping them gain access to credit and producing a positive impact on their sustainability as well as on their employment and sales levels. ================= V E N E Z U E L A ================= VENEZUELA: High Court Denies Access to Funds at Bank of England --------------------------------------------------------------- Emily Beeken at Jurist reports that the High Court in London denied Venezuelan President Nicolas Maduro access to more than 1 billion dollars worth of gold. According to the ruling, Maduro cannot access the funds because the UK does not recognize him as president of Venezuela, the report notes. The conflict arose when the Bank of England refused to release the funds to Maduro, according to Jurist. The UK recognizes, like the US and more than 50 other governments, Juan Guaido as the interim president of Venezuela, although Maduro has the support of Russia and China, the report relays. The highly controversial election in 2018 re-elected Maduro to a second six-year term, the report discloses. The election was boycotted by most opposition groups, and went unrecognized by the opposition-held National Assembly, the report relates. The National Assembly considered the presidency vacant, the report says. Guaido, the leader of the National Assembly, assumed the role of president as authorized by the Constitution, the report notes. Maduro claimed he sought the funds to transfer to the United Nations Development Programme (UNDP), the report discloses. Theoretically, the UNDP would then use the funds to administer aid to Venezuela to help fight the spread of COVID-19, the report says. Guaido, on the other hand, prefers the Bank of England hold onto the funds, not wanting it to fall into Maduro's hands, the report relays. Guaido claims the Maduro administration is illegitimate and corrupt, the report adds. Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. S&P Global Ratings, in May 2019, removed its long- and short-term local currency sovereign credit ratings on Venezuela from CreditWatch with negative implications and affirmed them at 'CCC-/C'. The outlook on the long-term local currency rating is negative. At the same time, S&P affirmed its 'SD/D' long- and short-term foreign currency sovereign credit ratings on Venezuela. Moody's credit rating (long term foreign and domestic issuer ratings) for Venezuela was last set at C with stable outlook in March 2018. Meanwhile, Fitch's long term issuer default rating for Venezuela was last in 2017 at RD and country ceiling was CC. Fitch, on June 27, 2019, affirmed then withdrew the ratings due to the imposition of U.S. sanctions on Venezuela. =============== X X X X X X X X =============== LATAM: IMF Forecasts 9.4% Economic Contraction in Region for 2020 ----------------------------------------------------------------- RJR News reports that the International Monetary Fund is forecasting a nearly double-digit recession for Latin America and the Caribbean in 2020 -- a contraction of 9.4% -- as the region is dragged down by its two largest economies, which continue to suffer from the coronavirus. The updated outlook for the region, released, is down sharply from the 5.2% recession forecast in April, which already would have been the worst performance since at least 1980, according to RJR News. The multilateral lending agency said in Latin America, most countries are still struggling to contain infections, the report notes. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2020. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *