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/raid1/www/Hosts/bankrupt/TCRLA_Public/200710.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 Friday, July 10, 2020, Vol. 21, No. 138 Headlines A N T I G U A A N D B A R B U D A LIAT: CARICOM Leaders Discussing Replacement for Airline A R G E N T I N A RIO NEGRO: Moody's Withdraws Ca Rating on Class 2 Notes RIO NEGRO: S&P Lowers ICR to 'SD' on Missed 2025 Bond Payment VICENTIN: Argentina Protests Expropriation of Agribusiness B R A Z I L BRASKEM: S&P Lowers ICR to 'BB+' on Consistently High Leverage C O L O M B I A COLOMBIA TELECOMUNICACIONES: S&P Rates New $500 Unsec. Notes 'BB+' D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Aid for Laid Off Workers at US$101.7MM Monthly DOMINICAN REPUBLIC: Layoff Looms Over 827,000 Workers E C U A D O R ECUADOR: Reaches Debt Deal in Principle With Major Creditors X X X X X X X X LATAM: Devastating Tourism Shocks Region, IDB Report Says LATAM: Unemployment to Soar This Year, Worst in Region, OECD Warns - - - - - ===================================== A N T I G U A A N D B A R B U D A ===================================== LIAT: CARICOM Leaders Discussing Replacement for Airline -------------------------------------------------------- RJR News reports that Barbados Prime Minister Mia Mottley has said regional leaders are discussing plans to stimulate and facilitate intra-regional travel even as the regional airline, LIAT, is moving into liquidation. Ms. Mottley said the plan includes a review of taxes, long blamed for the high cost of intra-regional travel, and matters relating to licensing, according to RJR News. She said it will not be business as usual, as CARICOM leaders discuss efforts to replace the cash-strapped airline that has racked up millions of dollars in debt, the report note. About LIAT LIAT Ltd., formerly known as Leeward Islands Air Transport or LIAT, is an airline headquartered on the grounds of V. C. Bird International Airport in Antigua. It operates high-frequency inter-island scheduled services serving 15 destinations in the Caribbean. The airline's main base is VC Bird International Airport, Antigua and Barbuda, with bases at Grantley Adams International Airport, Barbados and Piarco International Airport, Trinidad and Tobago. The airline is owned by seven Caribbean governments, with three being the major shareholders: Barbados, Antigua & Barbuda and St. Vincent and the Grenadines along with Dominica(94.7 %); other Caribbean governments, private shareholders and employees (5.3%). In the last few years, LIAT has been challenged with financial difficulties, often needing additional funding as the airline dealt with the high cost of operations. In November 2016, the Barbados government defended LIAT's operations, even as opposition legislators called for a cessation of the business. In early 2015, LIAT offered early retirement packages to employees in efforts to downsize. In 2014, LIAT knew it had to deal with unprofitable routes to make operations viable. In the third quarter of 2013, the airline's top management was shaken, with news Chief Executive Officer Captain Ian Brunton's sudden resignation. LIAT's current chief executive officer is Julie Reifer-Jones, chairman is Jean Holder, and chief financial officer is Rojer Inglis. Dr. Ralph Gonsalves, prime minister of St. Vincent & the Grenadines, serves as chairman of LIAT shareholders. ================= A R G E N T I N A ================= RIO NEGRO: Moody's Withdraws Ca Rating on Class 2 Notes ------------------------------------------------------- Moody's Latin America Agente de Calificacion de Riesgo S.A. withdrawn Province of Rio Negro's Ca/Ca.ar senior unsecured ratings for its Class 2 notes because the obligation is not outstanding. The outlook on the province's ratings is negative. The following ratings were withdrawn: Province of Rio Negro Class 2 Notes: Ca/Ca.ar RATINGS RATIONALE Moody's has decided to withdraw the ratings on the notes because the obligation is not outstanding. RIO NEGRO: S&P Lowers ICR to 'SD' on Missed 2025 Bond Payment ------------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on the province of Rio Negro to 'SD' from 'CC'. S&P also lowered the issue-level rating on the 2025 bond to 'D' from 'CC'. Outlook S&P doesn't assign outlooks to 'SD' or 'D' ratings because they express a condition and not a forward-looking opinion of default probability. Upside scenario S&P said, "We could raise our ratings on the province upon completion of a formal bond restructuring. Our post-restructuring ratings tend to be in the 'CCC' or low 'B' categories, depending on the new debt structure, the expected fiscal trajectory, as well as Argentina's macroeconomic prospects and potential access to markets. Nonetheless, we highlight that the current 'CCC+' transfer and convertibility (T&C) assessment on Argentina constitutes a rating cap on domestic subnational governments." Rationale S&P lowered its issuer credit rating on Rio Negro to 'SD' following the missed interest payment on its 2025 international bond during its grace period. The $11.6 million interest payment was originally due June 7, and had a 30-day grace period that expired on July 7, 2020. Rio Negro is now the third Argentine province to enter into selective default this year, following the provinces of Buenos Aires (May 15) and Mendoza (June 19). Rio Negro's fiscal stance has been exacerbated by the collapse in its revenues, including hydrocarbon royalties, following the national lockdown to stem COVID-19 and the deepening economic recession. Moreover, the interest payments on the 2025 bond constitute Rio Negro's main service payments for 2020. As a result, on June 3, 2020, the province announced that it was initiating negotiations with bondholders to alleviate its short-term debt service. The restructuring offer hasn't been disclosed yet, but S&P considers that the timing of the operation will hinge on development in the sovereign's own debt exchange, whose offer expiration has been now extended to Aug 4, 2020. In addition, on July 2, the province exchanged 50% of its ARP1.8 billion bond due July 6, 2020, for the RN2021 bond due July 2021. Despite Rio Negro's precarious fiscal conditions, there was no face value reduction, and the new bonds entailed higher interest than the existing ones. Moreover, bondholders that didn't agree to the exchange were paid according to original terms and conditions. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List Downgraded; CreditWatch/Outlook Action To From Province of Rio Negro Issuer Credit Rating SD/-- CC/Negative/-- Senior Unsecured D CC VICENTIN: Argentina Protests Expropriation of Agribusiness ---------------------------------------------------------- EFE News reports that Argentina was the scene of marches, honks and the sound of banging pots and pans in several cities against the expropriation of agro-export company Vicentin by the government of Alberto Fernandez. Thousands of people gathered around the Obelisk monument of Buenos Aires, many on foot and others in their cars carrying Argentinian flags amid the COVID-19 epidemic lockdown, to demand that the state back down with the expropriation of the company, originating in the province of Santa Fe, according to EFE News. =========== B R A Z I L =========== BRASKEM: S&P Lowers ICR to 'BB+' on Consistently High Leverage -------------------------------------------------------------- S&P Global Ratings lowered its ratings on Brazil-based petrochemicals company Braskem to 'BB+' from 'BBB-'. S&P also assigned a '3' recovery rating to Braskem's senior unsecured notes. S&P said, "Demand for global chemicals products took a substantial hit this year, and the rebound to the 2019 levels remains uncertain amid our view of a likely uneven economic recovery across the globe. While our base-case scenario assumes a gradual increase in petrochemical volumes in 2021, risks remain on the downside. Also, given our view of an oil price rebound and continued market oversupply at least until mid-2021, mainly of the polyethylene (PE), Braskem's margins could again be pressured next year. As a result, we now expect the company to post net debt to EBITDA at 3.5x-4.5x by the end of 2020 and 3.0x–4.0x by 2021 compared with our previous expectation of 3.0x-3.5x for 2020." Potential for additional cash outflows stemming from the geological phenomenon at the state of Alagoas or some limited support the Mexican project finance unit could make it difficult for the company to reduce its net debt to EBITDA below 3.5x in the next 12 months. This could be the case despite possible countercyclical measures, such as non-core asset sales. S&P said, "Our base-case scenario doesn't assume any asset sales, given the uncertainties about timing and proceeds, particularly because of currently volatile market conditions. Still, we incorporate management's commitment to reduce leverage in our stable outlook on the rating." Considering COVID-19 outbreak effects, Braskem's cracker utilization rates fell to 70%-75%. S&P said, "Therefore, we forecast volumes to be down 5%-10% this year. In the second half of the year, Braskem should benefit from the lower feedstock costs given the naphtha price collapse. In addition, the weakening real, with our expectation of R$4.95 per $1 in 2020 compared with R$3.95 per $1 in 2019 will contribute to cash flows because most of Braskem's cost structure is set in that currency. As a result, we expect EBITDA (without Braskem Idesa) at $1.25 billion - $1.35 billion, 20%-30% higher than in 2019." =============== C O L O M B I A =============== COLOMBIA TELECOMUNICACIONES: S&P Rates New $500 Unsec. Notes 'BB+' ------------------------------------------------------------------ S&P Global Ratings assigned its 'BB+' issue-level rating to Colombia Telecomunicaciones S.A. E.S.P.'s (Coltel; BB+/Negative/--) proposed senior unsecured notes of up to $500 million, maturing between 7 and 10 years. Coltel plans to use proceeds for debt refinancing on a portion of its $750 million senior unsecured notes due 2022, increasing its debt weighted average maturity profile. S&P said, "The credit rating on Coltel reflects our view of its position as the third-largest player in Colombia's fixed telecom market by subscribers, which we expect to remain so given the high demand for fixed voice, broadband, and pay-TV services. Additionally, its business position reflects the company's status as the country's second-largest mobile telecom player. The rating also includes our expectation that debt to EBITDA will remain above 3.0x, FFO to debt 20%-30%, and FOCF to debt below 5% for the next 12-18 months. "The negative outlook on the issuer credit rating reflects our view of a possible two-notch downgrade in the next 12 months if the company falls below our leverage metric expectations, while we believe Coltel is no longer a moderately strategic subsidiary." Ratings List New Rating Colombia Telecomunicaciones S.A. E.S.P Senior Unsecured BB+ =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Aid for Laid Off Workers at US$101.7MM Monthly ------------------------------------------------------------------ Dominican Today report that in May, some 650,000 workers received social assistance through the FASE program, a number equivalent to a quarter of the employed population in the country. Monthly spending exceeded RD$6.1 billion (US$101.7 million) in that month, an effort of public spending that the government has highlighted, according to Dominican Today. But the sacrifice does not seem to be on par with other countries in the region, the report notes. Compared to other nations in LatAm, the Dominican Republic's fiscal efforts are among the lowest, and account for only 0.7% of GDP, according to the Economic Commission for Latin America (Eclac) in its most recent report, the report notes. They point out that only Haiti has less fiscal effort than the Dominican Republic, the report says. El Salvador, Chile and Peru are the nations that have allocated the highest percentage of their national GDP to deal with the effects of the pandemic, at levels that range between 11.1 and 4.8%, 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: Layoff Looms Over 827,000 Workers ----------------------------------------------------- Dominican Today report that although employers have not requested the extension of work suspension to more than 827,000 workers, the Ministry of Labor will continue to pay them economic assistance until August 16, the entity said. It notes that even employers have the opportunity to request the suspension for an additional month, the report note. However, at the end of that period layoffs in the private sector are lurking, which are believed to be more than 100,000, said union leader Gabriel del Rio, the report discloses. In fact, the atmosphere is not encouraging, the report says. Long lines of downcast or apparently desperate employees are seen in the Ministry of Labor looking for their estimates of severance pay, 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). ============= E C U A D O R ============= ECUADOR: Reaches Debt Deal in Principle With Major Creditors ------------------------------------------------------------ Ben Bartenstein and Stephan Kueffner at Bloomberg News reports that Ecuador reached a preliminary agreement with some of its largest bondholders to restructure $17.4 billion in outstanding debt, reducing the South American nation's obligations significantly over the coming decade. President Lenin Moreno's government intends to exchange 10 existing bonds maturing between 2022 and 2030 for three new notes due in 2030, 2035 and 2040, reducing the average coupon rate to 5.3%, according to the Finance Ministry, according to Bloomberg News. Under the proposal, interest payments would resume at the beginning of next year, while the earliest principal would come due in January 2026, Bloomberg News relates. The plan still needs approval from a share of the remaining creditors, Bloomberg News notes. Funds managed or advised by AllianceBernstein, Ashmore Group Plc, BlackRock Inc., BlueBay Asset Management LLP and Wellington Management Company LLP are among those supporting the deal, the ministry said in a statement, Bloomberg News relays. It said discussions will continue with other bondholder groups, Bloomberg News discloses. “With this, we're freeing up $16 billion over the coming 10 years,” Moreno wrote on Twitter. The accord generates savings of $1.4 billion this year and practically gives Ecuador a grace period of two years, Finance Minister Richard Martinez added in a conference call, Bloomberg News notes. =============== X X X X X X X X =============== LATAM: Devastating Tourism Shocks Region, IDB Report Says --------------------------------------------------------- Latin America and the Caribbean will suffer an unprecedented economic shock from a sharp downturn in tourism, according to a new paper by the Inter-American Development Bank. The report - Extreme Outlier: The Pandemic's Unprecedented Shock to Tourism in Latin America and the Caribbean - launches a new global Tourism Dependency Index for countries, including 35 Latin American and Caribbean economies. It urges governments to take unprecedented measures to prevent the spread of the virus, and to support citizens and economies through this shock to the most tourism-dependent region in the world. Based on simulations, the direct impacts of the shock to tourism flows for The Bahamas could cause an economic contraction relative to pre-crisis baseline estimates of between 8 percent and 13 percent. Similar exercises incorporating the potential indirect contribution of tourism for economic activity would further increase these loss estimates. While less dependent on tourism than many Caribbean economies, large economies like Brazil and Mexico could experience shocks to growth linked to this sector of between 2 and 5 percent, respectively, relative to pre-crisis estimates. The Americas are home to many of the world's most tourism-dependent economies. Aruba - with a Tourism Dependency Index of 84.7 - is the world's most tourism-dependent economy, followed by Antigua and Barbuda (61.4) and The Bahamas (59.4). Venezuela (5.5), Paraguay (3.7) and Suriname (3.2) are among the least tourism dependent economies in the region. Fourteen of the 15 most tourism-dependent nations in the Americas are located in the Caribbean region. Still, the sector is significant for some of the largest economies in the region. From 2014 to 2018, tourism accounted for an average of about 16 percent of both economic output and employment in Mexico, and about 10 percent of both GDP and employment for Uruguay, Argentina, and Chile. In Brazil, tourism was responsible for about 8 percent of employment—representing hundreds of thousands of jobs. "Taken together, our Tourism-Dependency Index and various related indicators suggest that countries in Latin America and the Caribbean are likely to suffer more than most in terms of the COVID-19 generated shock," said IDB economics advisor for the Caribbean Department, Henry Mooney. "Governments can provide focused and tailored support to preserve productive assets, help replace lost incomes for individuals engaged in the sector, and use the interim period to prepare the ground for the resumption of activity under uncertain circumstances." The authors analyzed six historical shock episodes to compare against the outbreak of COVID-19, including the 9-11 attacks and the Ebola outbreak. None of those historic precedents came close to the shock to tourism arrivals during the current pandemic. While tourism flows to the region contracted by as much as about 4 percent (relative the previous year) during the global financial crisis, the Pandemic could lead to a negative shock of between 40 and 70 percent in a single year—an extreme outlier. The report also simulates tourism-driven shocks to employment, export earnings and the balance of international payments. Aruba, where almost one in three jobs is linked to the tourism industry, could see a disruption of employment in excess of 20 percent of the entire workforce. The report also highlights just how destabilizing a shock of this nature and magnitude could be for external sustainability, forcing many economies in the region to deal with unprecedented pressures on the current account and exchange rates. "Even for larger and more diversified economies, the net impact on economic activity could still lead to contractions on a scale not often experienced," said IDB researcher María Alejandra Zegarra. "Countries entering the crisis with inadequate policy frameworks or lacking strong external buffers will be particularly hard hit." The report is included in the eBook COVID-19 in Developing Economies , a collaboration with the Center for Economic Policy research (CEPR). LATAM: Unemployment to Soar This Year, Worst in Region, OECD Warns ------------------------------------------------------------------ EFE News reports that unemployment levels will be higher by the end of 2020 than in the 2008 financial crash, with Latin America set to be the worst, the Organization for Economic Co-operation and Development warned. The economic crisis caused by the coronavirus pandemic will see an average drop in employment of four percent this year in the OECD's 37 member countries, the organization said in a global report, according to EFE News. If there is a second wave of Covid-19 infections then this figure will increase to almost five percent, it warned, the report notes. OECD secretary-general Angel Gurría said at a press conference in Paris presenting the report that it "paints a rather grim picture of what the Covid-19 pandemic has done to our labor markets," the report discloses. The epidemic in "both health and economic terms has been and continues to be dramatic", he added. He warned that the pandemic has "wiped out the progress made in the last decade after the financial crisis," the report relay. Colombia will be the worst-affected country economically with a decrease of 10 to 12 percent and the rest of Latin America is expected to be hard hit, according to the OECD, the report dicloses. The next worst-affected countries will be the United States, which will see a contraction of between eight and almost 10 percent, Ireland with six to eight percent, Portugal with almost six to seven percent and Spain with five to six percent, the report note. "These numbers do not convey the massive hardship from mass unemployment on this scale", Gurria continued, the report says. He said the bleak economic outlook "underlines the need to find the balance between supporting firms and supporting people in need and on the other hand making sure this support is directed towards activities that are viable in the medium-term," 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. 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 * * *