/raid1/www/Hosts/bankrupt/TCRLA_Public/200724.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 24, 2020, Vol. 21, No. 148
Headlines
A R G E N T I N A
ARGENTINA: President Tells Creditors 'We Can't Do Any More'
COMPANIA LATINAMERICANA: S&P Raises Sr. Sec. Notes Rating to CCC-
NEUQUEN PROVINCE: S&P Downgrades ICR to CC, Outlook Neg.
B R A Z I L
BANCO BV: Moody's Rates $500MM Senior Unsecured Notes Ba2
BANCO BV: S&P Puts BB- Issue-level Rating on New Sr. Unsec. Notes
JSL SA: S&P Puts BB- ICR on Watch Neg. on Corporate Reorganization
MV24 CAPITAL: Fitch Affirms BB Sr. Sec. Notes Rating, Outlook Neg.
NEOENERGIA SA: S&P Affirms BB- Issuer Credit Rating
D O M I N I C A N R E P U B L I C
AEROPUERTOS DOMINICANOS: S&P Affirms B+ Rating, Outlook Negative
DOMINICAN REPUBLIC: Fund and CCMUSA Enters Pact for Economic Boost
M E X I C O
INTERJET: Gets $150 Million Capital Injection to Offset Virus Hit
T R I N I D A D A N D T O B A G O
PETROLEUM CO: Deciding Factor for Pointe-a-Pierre Constituency
SWISSPORT TRINIDAD & TOBAGO: Over 300 Workers Retrenched
X X X X X X X X
LATAM: Fears Mount of a Fresh Debt Crisis in Region
- - - - -
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A R G E N T I N A
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ARGENTINA: President Tells Creditors 'We Can't Do Any More'
-----------------------------------------------------------
GlobalInsolvency, citing the Financial Times, reports that Alberto
Fernandez, Argentina's president, has made an impassioned appeal
for the world to accept that--with an economy devastated by
coronavirus--he cannot budge from his final offer to restructure
$65 billion of foreign debt.
Weighed down by $323 billion of borrowing, Argentina was already in
a deep recession before the pandemic and in May the South American
country defaulted for the ninth time in its history--although no
creditors have attempted to sue it yet, according to
GlobalInsolvency.
Mr. Fernandez told the Financial Times that "anything more would
put our ability to [pay our debts] at risk, and I don't want to
swindle anybody", as he dismissed bondholders' demands for
additional sweeteners before an August 4 deadline to accept one of
the emerging market world's biggest restructurings.
About Argentina
Argentina is a country located mostly in the southern half of
South America. It's capital is Buenos Aires. Alberto Angel
Fernandez is the current president of Argentina after winning the
October 2019 general election. He succeeded Mauricio Macri in the
position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
As reported by the Troubled Company Reporter - Latin America on
April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating to 'CC' from 'RD' and
Short-Term Foreign Currency IDR to 'C' from 'RD'.
The TCR-LA reported on April 13, 2020, that S&P Global Ratings
also lowered its long- and short-term foreign currency sovereign
credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also
affirmed the local currency sovereign credit ratings at 'SD/SD'.
There is no outlook on 'SD' ratings.
On April 9, the TCR-LA reported that Moody's Investors Service
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
COMPANIA LATINAMERICANA: S&P Raises Sr. Sec. Notes Rating to CCC-
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On July 21, 2020, S&P Global Ratings raised its rating on the
senior secured notes of Argentina-based conglomerate, Compania
Latinamericana de Infraestructura y Servicios S.A. (CLISA) to
'CCC-' from 'D'. S&P also affirmed its issuer credit rating and
senior unsecured notes ratings on CLISA at 'CCC'.
On July 20, 2020, S&P lowered its rating on CLISA's senior secured
notes to 'D', according to its ratings criteria, following the
exercise of the pay-in-kind (PIK) option on the interest payments.
The positive rating action on CLISA's senior secured notes reflects
the completion of the exercise of the PIK option on the company's
July 2020 interest payment, which is now capitalized and will be
payable at the notes' maturity in 2023. The PIK exercise and the
option for another PIK on January 2021 interest payment bring a
substantial relief to CLISA's cash flows, which are pressured amid
the unprecedented business disruption stemming from the COVID-19
pandemic. S&P considers the company's senior secured notes as
hybrid capital instrument with no equity content, given the ability
to defer interest payments without causing the issuer's legal
default or liquidation, allowing for cash conservation. Therefore,
the rating on CLISA's senior secured notes is one notch below the
issuer credit rating.
Since mid-March, Argentina has imposed a strict lockdown, which
halted CLISA's construction segment activities. Despite recent
discussions on relaxing the lockdown in the following weeks,
there's currently no clarity about when CLISA's operations will
normalize, and S&P believes the company will also face challenges
to increase its construction backlog. This might affect CLISA's
ability to generate cash and meet its financial obligations.
A key credit factor is the company's diversified revenue structure
with more than 50% of cash flows coming from more stable business
units that were more resilient to the pandemic. In particular, the
waste management concessions are providing more stable cash flows,
stemming from contracts that provide some protection against
inflation and foreign exchange variation.
Macroeconomic conditions in Argentina have worsened as a result of
the pandemic-induced deepening of recession, widening fiscal
deficit, sustained depreciation of the peso, and sovereign default.
Even when the lockdown starts to ease, S&P believes the country's
deep economic crisis will cause a delay in the public construction,
limiting recovery in CLISA's cash flows over the next quarters.
NEUQUEN PROVINCE: S&P Downgrades ICR to CC, Outlook Neg.
--------------------------------------------------------
S&P Global Ratings lowered its issuer credit ratings on the
province of Neuquen to 'CC' from 'CCC-'. The outlook on the ratings
is negative. S&P also lowered its senior unsecured issue-level
rating to 'CC' from 'CCC-'. Finally, S&P affirmed its senior
secured issue-level rating at 'CCC-'.
Outlook
The negative outlook reflects S&P's view that a default on the
province's debt is a virtual certainty during 2020, in the form of
a distressed dollar-denominated debt exchange. The outlook also
reflect the possibility of a missed debt payment.
Downside scenario
S&P said, "We would downgrade the province upon completion of the
likely debt restructure on its dollar-denominated debt, which is
likely to be performed under a distressed fiscal situation. We
would also lower the ratings if the province fails to meet its debt
obligation in time and in full."
Upside scenario
S&P could raise the ratings in the next six months if the province
avoids a distressed debt exchange as a result of the stabilization
of the macroeconomic and financial conditions in Argentina, which
would improve the province's creditworthiness.
Rationale
Argentina's deep recession continues to impair Neuquen's fiscal
position. The province's March 2020 fiscal figures already showed
an operating deficit, while tax revenue contracted nominally about
27% during May and June 2020, and hydrocarbon royalties are falling
given lower-than-budgeted oil prices and weaker energy demand. S&P
expects significant fiscal pressures during the remainder of 2020
This, coupled with Neuquen's liquidity that was already weak before
the pandemic, would most likely prompt the province to a distressed
debt exchange on its dollar-denominated debt during 2020, according
to our methodology.
While Neuquen hasn't officially made a proposal to its bondholders,
its governor announced its intention to seek a restructuring of its
dollar-denominated debt. In line with the national government's
debt restructuring proposal, S&P believes Neuquen's debt exchange
could entail an extension of maturities or a reduction in the face
value of the obligations, which we would most likely consider as an
equivalent to default. Debt obligation potentially to be included
in exchange or restructuring proposals include two international
bonds and a credit loan.
S&P believes Neuquen's senior secured bond "Ticap" with an
outstanding amount of $10 million due April 2021 won't be part of
the restructuring, given its small size and the upcoming maturity.
In an effort to stem the deterioration in cash flows, on July 3,
2020, Neuquen completed a liability management operation for ARP4.3
billion out of ARP4.9 billion outstanding "Letras" (domestic debt
obligations). In ours&P's opinion, while the fiscal position of the
province was already pressured, especially during the second
quarter of 2020, the exchange was voluntary and part of the
province's annual domestic currency debt strategy. As of June 30,
2020, the province had cash to meet its domestic currency debt
maturities. The local exchange paid a premium and Neuquen's new
debt program was able to raise fresh debt (ARP660 million).
Finally, the terms of the new instruments were competitive for
domestic debt market standards.
Other Argentine provinces are also under severe fiscal pressure
that had resulted in defaults or growing probabilities of a
distressed debt exchange. The provinces of Buenos Aires, Rio Negro,
Mendoza have 'SD' ratings; Salta is at 'CC'; and the rest of the
rated provinces are in the 'CCC' rating category.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
Downgraded
To From
Neuquen (Province of)
Issuer Credit Rating CC/Negative/-- CCC-/Negative/--
Neuquen (Province of)
Senior Unsecured CC CCC-
Ratings Affirmed
Neuquen (Province of)
Senior Secured CCC-
===========
B R A Z I L
===========
BANCO BV: Moody's Rates $500MM Senior Unsecured Notes Ba2
---------------------------------------------------------
Moody's Investors Service has assigned a Ba2 long-term foreign
currency debt rating to the senior unsecured notes of Banco BV in
the amount of USD500 million. The notes, which are part of BV's
USD5.0 billion senior unsecured GMTN Program, are denominated and
settled in USD and are due in July 2025. The outlook on the debt
rating is stable.
The following ratings were assigned:
Issuer: Banco BV
Senior Unsecured Regular Bond/Debenture, Assigned Ba2, stable
RATINGS RATIONALE
The Ba2 rating on the notes incorporates BV's fundamental credit
strength, as evidenced by its ba3 baseline credit assessment (BCA)
and a one-notch uplift to reflect its assessment of high affiliate
support from parent Banco do Brasil S.A. (BB, Ba2 stable, ba2).
BV's ratings reflect the improved profitability metrics and steady
capitalization the bank reported in 2018-2019, resulting from its
strategy to focus on secured, high-margined lending to medium-sized
companies. As for most banks in the system, however, BV's 1Q 2020
profitability was affected negatively by the sudden stop in
economic activity triggered by mobility restrictions in light of
the coronavirus outbreak and the build of additional loan loss
provisions against rising related credit risk. BV's problem loan
ratio increased by 18 basis points to 5.77% in 1Q 2020, while net
income as a percentage of tangible assets was 0.83%, down from
1.42% at 4Q 2019.
Moody's expects the bank's profitability and asset quality will
remain under pressure over the coming months reflecting the
uncertainty around the normalization of business activity and
further provisioning needs, despite the gradual recovery in the
demand for car loans, its main asset class, more recently. BV has
tightened credit standards on its car and consumer financing
portfolios and has added to its prudential provisions. In addition,
BV's predominantly market-based funding, tends to be more expensive
and volatile, pressuring profitability, a credit negative. BV has
benefited from alternative funding and liquidity support
instruments provided by Brazil's central bank to the banking system
since the start of the pandemic, and the much lower interest rates
will help mitigate cost of funding.
The rating, however, is still limited by BV's Moody's
lower-than-peers' capital ratio, measured as tangible common equity
as a percentage of risk weighted assets, at 5.27% in March 2020.
The large stock of deferred tax assets on BV's balance sheet and
which Moody's deduct in its calculation of the capitalization ratio
to reflect loss absorption capacity, is the main constraint to the
ratings. Sustainable profitability would allow for a credit
positive gradual realization of deferred tax assets over time.
Moody's regards the coronavirus pandemic as a social risk under its
ESG framework, given the substantial implications for public health
and safety. Despite that, BV's exposure to environmental and social
risks is low and moderate, respectively, consistent with Moody's
general assessment for the global banking sector. Please see
Moody's Environmental risks and Social risks heatmaps for further
information. Moody's does not have any particular concerns with
BV's governance. The bank shows an appropriate risk management
framework commensurate with its risk appetite.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook on the Ba2 debt rating, which is in line with
the stable outlook on Brazil's sovereign rating, indicates there is
limited upward pressure on BV's ratings. BV's BCA could be raised
if the bank's asset quality and profitability would improve in a
consistent and robust pace, allowing for a reduction in its DTAs
and resulting capital replenishment.
BV's ratings could be downgraded if the bank's asset quality
weakens over the next quarters leading to sizable provisions build
and much lower profitability. BV's inability to improve
profitability in the medium term or a permanent challenge to its
capitalization could lead to a downgrade of its BCA. A
deterioration in funding and a meaningful reduction in liquid
resources could also pressure its financial profile downward.
METHODOLOGY USED
The principal methodology used in this rating was Banks Methodology
published in November 2019.
Banco BV is headquartered in Sao Paulo, Brazil, and reported
BRL107.4 billion ($20.7 billion) in assets and BRL10.0 billion
($1.9 billion) in shareholders' equity as of March 31, 2020.
BANCO BV: S&P Puts BB- Issue-level Rating on New Sr. Unsec. Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' issue-level rating on Banco
BV's (BV; BB-/Stable/B) proposed senior unsecured notes. The $500
million issuance is part of the bank's $5 billion global notes
program, and it will use the proceeds primarily for general
corporate purposes.
S&P said, "Our rating on the notes reflects their pari passu
ranking with the bank's other senior unsecured debt obligations. As
a result, the rating is the same as the long-term issuer credit
rating on the bank. We expect the notes to mature in five years and
constitute a minor portion of BV's total funding base. Therefore,
this issuance doesn't change our view of the bank's funding profile
and doesn't increase refinancing risk.
"The ratings on BV reflect its 'bb-' stand-alone credit profile
(SACP), which we base on its leading market position in used
vehicle financing and its diversified portfolio of products for
corporate clients. The ratings also reflect fragile operating
conditions amid social distancing measures and the public health
crisis in Brazil. The bank's financials have improved in the last
few years thanks to the successful implementation of its
operational efficiency strategy and the adjustment of risk controls
in its consumer finance business. However, we believe that BV has
weaker capital metrics than those of peers and is subject to the
cyclical nature of the vehicle and corporate financing business. In
this sense, BV planned to launch its initial public offering this
year, but postponed it due to adverse market conditions, as in the
meantime it improves its digital services and increases
cross-selling opportunities in the retail segment. However, we
expect the support from shareholders to remain and shore up the
bank's capital and liquidity position during the current
recession."
JSL SA: S&P Puts BB- ICR on Watch Neg. on Corporate Reorganization
------------------------------------------------------------------
S&P Global Ratings placed its 'BB-' global scale and 'brAA+'
national scale issuer credit and 'brAA+' issue-level ratings on
Brazil-based transportation group JSL S.A. on CreditWatch with
negative implications.
On July 21, 2020, Brazil-based transportation group JSL S.A.
announced details on its planned corporate reorganization, which is
still subject to minority shareholders' approval.
The proposal involves JSL becoming an independent subsidiary of
Simpar S.A., which will succeed JSL as the group's non-operating
holding company.
If the reorganization is approved as proposed, S&P doesn't believe
the group's credit quality would be affected under the new holding
company, Simpar. However, the spin-off of JSL would weaken its
credit quality, in its view.
The spin-off of its logistics and cargo transportation business
should result in a subsidiary with reduced scope and higher
leverage than that of the consolidated group. S&P said, "As a
result, we will likely lower our issuer credit rating on JSL by one
notch on the global scale and up to two notches on the national
scale, if the reorganization is approved. We believe the new
subsidiary would present debt to EBITDA around 4.5x and funds from
operations (FFO) to debt close to 10% in 2020. In line with the new
issuer credit rating, we would also lower our rating on JSL's
eighth debentures issuance, which would remain on its balance
sheet. Therefore, we placed our ratings JSL on CreditWatch
negative."
Still, the debt transferred to the new non-operating holding would
be structurally subordinated to all other debt of the group's
subsidiaries. S&P said, "As a result, we believe that in a
hypothetical default scenario, Simpar's creditors would have lower
recovery expectations than those of the group's current structure.
Still, given that we believe the recovery would be higher than 30%,
we expect to maintain the 'BB-' and 'brAA+' issue-level ratings on
the debt instruments, which will be transferred to Simpar." This
would be the case for the 2024 senior unsecured notes, issued by
JSL Europe, for which Simpar would replace JSL as the full and
unconditional guarantor, and for the 13th debentures issuance.
Such a proposal concludes the group's operational restructurings
(as in 2017 and 2018), in line with the group's strategy of
unlocking value from its subsidiaries. Although the overhaul didn't
immediately change S&P's view of Simpar's credit quality, it should
have a positive influence because it will support continued growth
opportunities. The reorganization results in Simpar becoming the
non-operating holding company of the group, while the logistics and
cargo transportation business is spun off as an independent
subsidiary, at the same level of all other subsidiaries of the
group.
MV24 CAPITAL: Fitch Affirms BB Sr. Sec. Notes Rating, Outlook Neg.
------------------------------------------------------------------
Fitch Ratings has affirmed the 'BB' rating on senior secured notes
issued under the MV24 Capital B.V. transaction. The Rating Outlook
remains Negative.
The Negative Outlook for this transaction reflects its exposure and
direct linkage to Petrobras' credit quality and Brazil's Country
Ceiling. The ratings of the transaction is ultimately capped by
Fitch's view on the strength of the offtaker's payment obligation,
which is deemed one notch above Petroleo Brasileiro S.A.'s Issuer
Default Rating and equalized with Brazil's Country Ceiling, as
Petrobras acts as the controlling party of the joint venture.
The global coronavirus outbreak and resulting containment measures
have resulted in a highly uncertain macroeconomic outlook and
dampened global demand for oil. Fitch has observed volatility in
Brent crude pricing in the short term due to oversupply and lack of
demand. Even under the current volatile price environment, Fitch
expects the floating production storage and offloading unit
fixed-price contracts backing these transactions to remain
resilient to continued volatility. Pre-salt offshore oil production
in Brazil continues to be Petrobras' most efficient form of
production with relatively low break-even lifting costs.
Additionally, FPSOs are built to suit the characteristics of the
oil and field in question. FPSOs are seen as essential to long-term
production and cash generation for an offtaker, and the cash
generated by the FPSO typically far exceeds the costs to charter
and operate the vessel. Therefore, Fitch sees FPSO day rates less
correlated to the short-term changes in oil prices and more linked
to the overall attractiveness of the oil field to the charter
agreement offtaker.
Given these dynamics, Fitch has observed that Petrobras has honored
its obligations on charter contracts for FPSOs, even during low
price environments, such as those between 2014 and 2016. Fitch
believes the marginal production costs of this FPSO provides
substantial economic value and supports the continued existence of
this contract for the long term.
MV24 Capital B.V.
- Senior Secured Notes 55388RAA4; LT BB; Affirmed
TRANSACTION SUMMARY
The senior secured notes issued by MV24 Capital B.V. are backed by
the flows related to the charter agreement signed with Tupi B.V.
for the use of the FPSO Cidade de Mangaratiba MV24 for a term of 20
years. Tupi B.V., the offtaker of the charter agreement, is a
consortium between Petrobras, as controlling party with 65% share,
and BG Energy Holdings Ltd. (wholly owned subsidiary of Royal Dutch
Shell plc) with 25% share, and Galp Energia (a JV between Galp and
Sinopec) with 10% share of Tupi B.V.
The vessel is operated by Modec do Brasil Ltda., the Brazilian
subsidiary of Modec, Inc., through a services agreement. Modec is
jointly and severally liable for Modec Brasil's obligations under
the services agreement as an intervening party, and has provided a
guarantee to Tupi BV for the performance of the obligations of
Modec Brasil. Modec is one of four sponsors of the project. The
sponsors of the transaction are a Japanese consortium composed of
Modec, Inc., Mitsui & Co., Mitsui OSK Lines and Marubeni.
The MV24 FPSO began operating at the Lula oil field in October
2014. Fitch's rating addresses the timely payment of interest and
principal on a semiannual basis until legal final maturity in June
2034.
KEY RATING DRIVERS
Resilience to Coronavirus Disruption and Oil Price Declines: The
global coronavirus outbreak and resulting containment measures have
resulted in a highly uncertain macroeconomic outlook and dampened
global demand for oil. Fitch has observed volatility in Brent crude
pricing in the short term due to oversupply and lack of demand.
However, Fitch believes the structures remain resilient to these
disruptions as the break-even prices on pre-salt production remain
low. In addition, these charter contracts have continued to be
honored in low-price environments as recent as 2016, due to the
fixed-price nature of the contracts and availability-based payment
structure.
MV24 was recently shut down for 10.5 days in the second quarter due
to a coronavirus case on board, bringing down availability. The
average availability for 2020, considering this downtime, remains
resilient at approximately 92.5%. Given this level of availability,
coverage levels were only marginally impacted as this this was a
short-term event and the vessel has resumed operations since. Modec
takes a dynamic approach to minimizing the risk and spread of the
virus and is constantly improving its protocols to reduce
contamination.
Asset Supply and Demand Fundamentals: The FPSO market is
consistently stable as all vessels are built to suit the
characteristics of the oil and field in question and the lead time
for construction is long. FPSOs are contracted based on long-term
field production plans and have cash flow dynamics that are highly
favorable to the offtaker once oil is produced. For Brazil in
particular, FPSOs are essential to the country's development and
production of deep-water oil, which supports the strategic
importance of this asset to Petrobras' operations. Additionally,
charter rates are in line with those of other comparable FPSOs in
the region.
Linkage to Petrobras' Credit Quality: Fitch uses the offtaker's IDR
as the starting point to determine the appropriate strength of the
offtaker's payment obligation. On May 7, 2020, Fitch affirmed
Petrobras' Long-Term IDR at 'BB-' and revised the Rating Outlook to
Negative from Stable. Petrobras' ratings continue to reflect its
close linkage with the sovereign rating of Brazil due to the
government's control of the company and its strategic importance to
Brazil as the near-monopoly supplier of liquid fuels.
Strength of Offtaker's Payment Obligation: Fitch's view on the
strength of the offtaker's payment obligation acts as the ultimate
rating cap to the transaction. Given Fitch's qualitative assessment
of asset/contract/operator characteristics and the
offtaker's/industry's characteristics related to this transaction,
the strength of such payment obligation is deemed to be one notch
above Petrobras' IDR and equalized with the Country Ceiling of
Brazil as Petrobras acts as controlling party of the JV.
Credit Quality of the Operator/Sponsor: Modec Brasil's credit
quality is in line with investment-grade metrics, and this is
relevant due to the underlying support offered by Modec to the
transaction. In addition to the complexities involved with
replacement of the operator, the services agreement and overall
operating costs are supported by Modec.
Stable Asset Performance: The average availability since commercial
operation is 95.67% in line with Modec's fleet average. Finally,
operational expenses have remained relatively stable and will be
capped for the life of the transaction, with the exception of
insurance (guaranteed by Modec).
Leverage/Credit Enhancement: The key leverage metric for fully
amortizing FPSO transactions is the DSCR. The transaction is not
currently constrained by leverage at the 'BB' rating level. Fitch
expects base case DSCRs to be in the range of 1.23x-1.29x, which
would constrain the rating to the 'BBB' rating category. The
charter rates are fixed with escalators for inflation, and
operating expenses are capped with any overage guaranteed by Modec;
therefore, DSCR levels indicate sufficient buffer to mitigate any
downtime risks associated with operations. The most recent
semi-annual DSCR reported (December 2019) was 1.28x in line with
expectations.
Available Liquidity: The transaction benefits from a six-months
debt service reserve and a three-months operational expense
reserve. Fitch views this as sufficient to cover debt service under
any potential operational disruptions. The debt service reserve
account (DSRA) is funded through letters of credit provided by MUFG
Bank, Ltd. (A-/Stable), Mitsui Sumitomo Banking Corporation
(A/Negative) and Mizuho Bank, Ltd. (A-/Stable) that is sized to
cover six months of principal and interest payments due on the
notes.
Sovereign Ceiling: While the transaction is rated one notch above
the controlling party's credit quality, the transaction is
ultimately capped by the country ceiling of Brazil due to Petrobras
being the controlling party of the JV and the overall operations of
the asset being in Brazil. Brazil's Long-Term Foreign Currency IDR
is 'BB-'/Negative, and Brazil's Country Ceiling rated 'BB'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch does not anticipate developments that would trigger an
upgrade. The main constraint to the transaction rating is the
offtaker's current credit quality and Brazil's country ceiling. An
upgrade is only possible if the offtaker's credit quality is
upgraded and if Brazil's country ceiling were upgraded.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
This transaction's rating may be sensitive to movements in the
credit quality of the charter agreement controlling party, as well
as to significant deterioration of the credit quality of the FPSO's
operator and/or sponsor of the transaction.
In addition, this transaction's rating is sensitive to the
operating performance of the FPSO as the offtaker will make charter
payment adjustments depending on overall availability.
Most transactions in which local assets transfer dollars offshore
are capped by the sovereign Country Ceiling. Exceptions arise when
the FC IDR of the obligor/offtaker is higher than the sovereign
Country Ceiling. Given the sovereign's control over Petrobras as
main shareholder, and the influence it exerts within the company,
Petrobras' ratings are correlated to those of the sovereign.
Therefore, this transaction's rating could be sensitive to a
downgrade in Brazil's sovereign rating.
The rating assigned to the MV24 transaction is capped at one notch
above the Foreign Currency IDR assigned to Petrobras, as
controlling party of the JV offtaker to this transaction. If
Petrobras' Foreign Currency IDRs were downgraded below 'BB-', the
rating assigned to the respective senior notes would be downgraded
accordingly.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven 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 seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
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
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
NEOENERGIA SA: S&P Affirms BB- Issuer Credit Rating
---------------------------------------------------
S&P Global Ratings affirmed the ratings on 26 Brazilian electric
utilities. The affirmation of the ratings listed below reflects our
expectation that the companies have enough financial flexibility to
cope with the detrimental effects of the COVID-19 pandemic without
jeopardizing their credit quality. This is in spite of the
significant drop in demand and the measures announced by the
regulator to provide relief to customers. S&P expects leverage to
peak this year and for credit metrics should gradually recover in
the next few years.
In this context, S&P affirmed the following issuers and their
issue-level ratings:
-- CESP-Companhia Energetica de Sao Paulo (CESP)
-- CPFL Energia S.A. and its subsidiaries Companhia Paulista de
Forca e Luz, Companhia Piratininga de Forca e Luz, and RGE Sul
Distribuidora de Energia S.A (collectively CPFL)
-- EDP Espirito Santo Distribuicao de Energia S.A. and EDP Sao
Paulo Distribuicao de Energia S.A. (collectively EDP Brasil)
-- Eletrobras-Centrais Eletricas Brasileiras S.A. (Eletrobras)
-- Energisa S.A. and its subsidiaries Energisa
Sergipe-Distribuidora de Energia S.A. and Energisa
Paraiba-Distribuidora de Energia S.A. (Energisa)
-- ENEVA S.A. (Eneva)
-- Equatorial Energia S.A. and its subsidiaries Equatorial Alagoas
Distribuidora de Energia S.A., Equatorial Maranhao Distribuidora de
Energia S.A, Equatorial Para Distribuidora de Energia S.A., and
Integracao Transmissora de Energia S.A. (Intesa) (collectively
Equatorial group)
-- Itaipu Binacional
-- Light Servicos de Eletricidade S.A. (Light SESA)
-- Neoenergia S.A. and its subsidiaries Companhia de Eletricidade
do Estado da Bahia, Companhia Energetica de Pernambuco (CELPE),
Companhia Energetica do Rio Grande do Norte, and Elektro Redes S.A.
(collectively Neoenergia)
-- Alianca de Energia Eletrica S.A. (TAESA)
-- UHE Sao Simao Energia S.A. (Sao Simao)
Brazil's weak economy pressures utilities. S&P said, "We expect
economic conditions to remain subdued, with Brazil falling into a
recession in 2020. We forecast its GDP to contract 7% in 2020, and
then return to growth in 2021. Moreover, the National Electricity
Regulatory Agency (Agencia Nacional de Energia Eletrica; ANEEL)
implemented a series of initiatives to alleviate the burden of
utilities bills for residential clients, including exempting
low-income customers and prohibiting power cuts of residential
clients, which has also hampered operating performance, especially
those of the distributors."
The sector has comfortable liquidity. S&P said, "In our view, the
utilities that we rate have enough financial flexibility to deal
with the current situation. They're cutting costs and expenses and
adjusting investments and dividends to protect their
creditworthiness. Many utilities also recently resorted to issuing
bank debt to preserve cash, and have raised close to R$6 billion of
new credit facilities since mid-March on an aggregate basis. We
assess as adequate the liquidity of all the Brazilian electricity
groups that we rate." In addition, most of these companies have
stronger stand-alone credit profiles (SACPs) than the current
ratings, because the Brazilian sovereign ratings cap those on the
companies given the regulated nature of their business.
S&P said, "While in our view the "Conta Covid" should provide
timely short-term liquidity to the sector, the distributors could
continue facing longer-term impacts, including delinquency rates
above the historical average because these were exacerbated by the
prohibition to disconnect delinquent customers. The expected
decrease in consolidated EBITDAs will raise the risk of covenant
breaches in 2020 and 2021 as cushions get tighter, but we don't
expect any risk of debt acceleration."
Regulatory framework is supportive. In this context, an economic
equilibrium of the current concessions will be negotiated once the
pandemic subsides, which could result in additional compensation
for the distributors in the next few months. S&P sees the Brazilian
regulatory framework as having a solid record of maintaining the
economic and financial sustainability of the electricity market.
Government measures giving liquidity support to help distributors.
Overall, the social distancing measures to contain the virus are
taking a toll on the distribution business. To compensate for that,
the Brazilian distributors are entitled to receive about R$15
billion from "Conta Covid" over the next six months. "Conta Covid"
is an off-balance financing program put in place by the regulator
and Brazilian government to address the liquidity squeeze among the
distributors suffering from adverse effects of the pandemic,
including reduced consumption and related energy surpluses, higher
customer delinquency, and lower collections amid higher
dollar-denominated energy costs in 2020. While some of these
factors may persist after this year, the financial sustainability
of the concessions will be discussed in a public hearing set for
late August, which could result in extraordinary rate readjustments
to distributors in the fourth quarter of 2020. In S&P's view, this
mechanism limits further downside risks.
S&P said, "From our rated pool of Brazilian electric utilities, we
view groups like Equatorial, Energisa, and Neoenergia as more
exposed, given that their distribution businesses represent the
vast majority of their cash flows. Additionally, they have sizable
investment programs not only in their main businesses, but also as
they expand their presence into the transmission segment.
Integrated conglomerates such as CPFL and EDP are more diversified,
and they sell most of their generation capacity in the less risky
regulated market. Finally, we view Light and Companhia Energetica
de Minas Gerais (CEMIG; global scale: B/Positive/--; national
scale: brA+/Positive/--) as exposed to higher customer delinquency
while their generation contracts are in the free market."
Generators face higher counterparty risk. S&P said, "We believe
the rated generators are better positioned overall than
distributors, given that they usually sell energy through
long-tenor, take-or-pay contracts with solid counterparties in the
regulated and free markets. They also enjoy sufficient financial
flexibility to face the rising counterparty risk. While we don't
expect a significant impact in the regulated market because
distributors will receive financial support, this isn't necessarily
the case for the portion of the energy sold in the free market,
given the prevailing low spot prices (currently at R$91.19 per
megawatt hour [MWh]) and counterparty risk under bilateral sales
agreements." Contracts in the free market usually contain
flexibility clauses so that the contracted energy consumed can be
adjusted (usually within a 5%-15% range).
S&P said, "In our rated portfolio of Brazilian generators,
Eletrobras receives the bulk of its cash flows from indemnification
of non-depreciated assets related to the early renewal of the
transmission concessions (under Law 12,783/2013), and from the
availability of its transmission lines and generation capacity
(approximately 35% of it operates under an operations and
maintenance regime). In the case of Itaipu, its operating model
mitigates the operating risks of a hydro plant, including volume,
price, and hydrology risks, because its rates are calculated to
fully cover its costs, including operating and debt service costs
for the next year. In this specific case, we project Itaipu's
credit metrics to keep improving as the company amortizes its
debt."
About 60%-70% of the revenues from both Eneva and Sao Simao come
from the availability of their plants, which brings stability to
their cash flows. Finally, although CESP sells about 60% of its
capacity in the free market, it does so through long-term contracts
with solid counterparties, reducing counterparty risk.
The transmission segment is least exposed. S&P said, "We believe
that the public health crisis will have the least impact on
transmission companies, including TAESA and INTESA, given their
availability-based nature. Their concession contracts operate under
a revenue cap model--Receita Anual Permitida (Allowed Annual
Revenues). This establishes the annual revenues a transmission
concession is entitled to receive, based on the availability of the
lines, rather than the actual volume of power transmitted.
Therefore, we do not anticipate changes in their EBITDA
generation."
The overall outlook for the sector is stable. Thus far, Brazilian
electric utilities' credit quality has been resilient to the
economic fallout from the COVID-19 pandemic. Since March, S&P
hasn't taken any negative rating actions in its portfolio. In this
context, about 90% of the electric utilities it rates in Brazil
have a stable outlook. This compares with about one-third for all
Brazilian corporate ratings as a whole that currently either have a
negative outlook or are on CreditWatch with negative implications.
The outlooks on the electric utilities reflect the sector's
resilience to the COVID-19-related economic disruption. With the
exceptions of CEMIG and Light SESA, the groups that S&P rates are
either:
-- Capped at the sovereign level (Brazil; global scale:
BB-/Stable/B; national scale: brAAA/Stable/--), for those that have
global scale ratings; or
-- Already have a long-term national scale rating of 'brAAA' with
a stable outlook--at the top of the rating scale.
There are downside risks for the electricity sector, especially in
the next several years, including rising bad debt and lower
collection amid an even harsher scenario for electricity demand.
S&P said, "However, lowering our ratings would mostly depend on a
downgrade of the sovereign, because in general the electric
utilities have stronger intrinsic repayment capacity (which we
refer to as SACPs), but Brazilian sovereign ratings cap those on
the companies given the regulated nature of their business."
S&P's BASE-CASE SCENARIO
S&P revised its macroeconomic assumptions for the region on June
30, 2020.
S&P said, "Due to the coronavirus pandemic, we revised downwards
our expectations for electricity consumption, which we expect to
contract 7% in 2020 and grow 3.5% in 2021, in line with our
assumptions for Brazil's GDP trajectory.
"We currently don't assume an extraordinary readjustment of the
distributor's rates in 2020, although it may occur in the fourth
quarter this year. For 2021 and 2022, rates to increase in line
with our expectations for inflation of 3.5% and 3.8%,
respectively."
Reference interest rates at an all-time low of 2.25% in 2020 and
3.50% in 2021, which would help ease the groups' interest
expenses.
Table 1
Macroeconomic Assumptions
2020E 2021E 2022E 2023E
GDP growth (%) (7.0) 3.5 3.3 2.9
CPI growth (%) 1.7 3.5 3.8 4.0
Year-end interest rates (%) 2.25 3.50 4.50 5.00
Average exchange rate (R$/US$) 4.94 4.97 4.92 4.90
Revenue collections of distributors 3.0%-3.5% lower in 2020
following higher delinquency, given the combination of weaker
economic activity and the temporary restrictions imposed on
distributors from disconnecting non-paying residential and
essential-services customers from networks. Distributors exposed to
more challenging concession areas and lower per capita income
levels will likely be more affected.
Table 2
Lower Collections/Delinquency
Expected delinquency
(% of 2020 revenues)
Cemig-D 4.5-5.0%
CPFL 0.5-1.0%
EDP Brasil 2.5-3.0%
Equatorial 6.0-6.5%
Energisa 3.5-4.0%
Light 4.0-4.5%
Neoenergia 2.5-3.0%
All Brazilian distribution companies 3.0-3.5%
A 15% haircut on the generators' free-market contracted energy in
2020, given that non-regulated contracts in general contain
flexibility clauses that counterparties could trigger, so that the
contracted energy consumed could be adjusted (usually within a
5%-15% range).
S&P doesn't expect losses or delays in receiving payments for
transmission companies.
Distributors receiving cash inflows from "Conta Covid" over the
next six months. S&P expects 70%-80% to be received in the next few
weeks (mostly related to existing regulatory assets) while the
remainder will be received on a monthly basis until December, based
on the cash flow impact estimated for the period.
Table 3
Expected Cash In-Flows From "Conta Covid"
Contracted (Bil. R$)
Cemig-D 1,404
CPFL 1,382
EDP Brasil 574
Equatorial 1,296
Energisa 1,359
Light 1,326
Neoenergia 1,664
All Brazilian distribution companies 14,800
In this context, S&P projects the following credit metrics for 2020
and 2021, and as a result, forecast the entities' financial risk
profiles to be unchanged.
Table 4
Projected Credit Metrics
Average ratios
2020 Debt/ FFO/Debt(%) 2021 Debt/ FFO/Debt(%)
EBITDA (x) EBITDA (x)
Cemig 4.5-5.0x 10-15% 4.0-4.5x 10-15%
CESP 1.5-2.0x >50% 1.0-1.5x >50%
CPFL 2.5-3.0x 20-25% 2.5-3.0x 20-25%
EDP Brasil 3.0-3.5x 20-25% 2.5-3.0x 25-30%
Eletrobras >5.5x 5-10% > 5.5x
5-10%
Energisa 3.5-4.0x 15-20% 3.5-4.0x 15-20%
Eneva 4.5-5.0x 10-15% 3.5-4.0x 15-20%
Equatorial 4.0-4.5x 15-20% 3.5-4.0x 15-20%
Equatorial Maranhao1.5-2.0x 50-60% 1.5-2.0x 50-60%
Equatorial Para 1.5-2.0x 50-60% 1.5-2.0x 50-60%
Equatorial Alagoas >5.5x 5-10% > 5.5x
5-10%
INTESA 2.5-3.0x 25-30% 2.5-3.0x 25-30%
Itaipu Binacional* 2.0-2.5x 40-50% 1.5-2.0x >50%
Light 4.0-4.5x 10-15% 4.0-4.5x 10-15%
Neoenergia 3.5-4.0x 15-20% 3.5-4.0x 15-20%
Sao Simao 3.5-4.0x 10-15% 3.5-4.0x 10-15%
TAESA 4.0-4.5x 15-20% 4.0-4.5x 15-20%
Note: S&P said, "We make several adjustments to our ratios,
including considering pension-related liabilities and guarantees
provided to non-consolidated entities as debt. *We expect Itaipu's
credit metrics to gradually improve over the next few years as its
debt amortizes, improving its financial risk profile."
LIQUIDITY
Following the initiatives the utilities have taken since the
beginning of the pandemic to preserve cash, and considering the
amounts they'll receive from the "Conta Covid" program, S&P
assesses the liquidity of all the electricity groups that it rates
in Brazil as adequate.
Despite the pandemic, our portfolio of electric utilities have, in
general, financial flexibility to absorb weaker operating
performance until severe social distancing measures are lifted.
Electric utilities' initiatives to preserve cash include:
-- Most companies issued new bank loans. Since mid-March, the
rated electric utilities raised close to R$6 billion in new credit
facilities. In addition, the cash position among the sector's
players was already relatively robust, covering about 150% of
short-term maturities on an aggregate basis.
-- Reduced non-mandatory capital expenditures.
-- Curtailed or postponed dividend payments.
COVENANTS
S&Psaid, "Most of the distribution groups that we rate, including
EDP Brasil, Equatorial, Neoenergia, and especially Energisa and
Light, will have tighter covenant cushions in 2020, but we don't
anticipate any risk of debt acceleration. Because the "Conta Covid"
will be partially backed by existing regulatory assets in the
companies' balance sheets (i.e. already recognized as EBITDA for
the covenant calculation), in our view the primary impact of the
additional liquidity will be to reduce net debt. Although most of
the entities that we rate have their leverage covenants calculated
with adjustments for net regulatory assets, we expect those to be
monetized this year, resulting in tighter covenant cushions in
2020.
"Nevertheless, typically debt documentations establish that
covenant breaches occurs only if target ratios are not met for more
than a measurement period. This, in our view, give companies some
flexibility to comply with the ratios and to prevent potential debt
acceleration. Although not in our base-case scenario at this point,
metrics might improve once utilities implement extraordinary tariff
increases in order to compensate for the longer-term effects of the
pandemic.
"In the case of generators, as the support package improves
liquidity throughout the electricity system, risks in the regulated
market will dissipate, in our view. The generators and transmission
companies that we rate have comfortable credit metrics, which allow
for adequate cushion over the covenant thresholds. In our view, the
all-time low interest rates in Brazil should help companies to keep
coverage ratio-based covenants under control."
Ratings List
Ratings Affirmed
Transmissora Alianca de Energia Eletrica S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/brA-1+
Neoenergia S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/brA-1+
Companhia de Eletricidade do Estado da Bahia
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Companhia Energetica de Pernambuco (CELPE)
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Companhia Energetica do Rio Grande do Norte
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Elektro Redes S.A.
Issuer credit rating
National scale brAAA/Stable/--
Energisa S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Energisa Paraiba-Distribuidora de Energia S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Energisa Sergipe-Distribuidora de Energia S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
EDP Espirito Santo Distribuicao de Energia S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
EDP Sao Paulo Distribuicao de Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
CPFL Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
Companhia Paulista de Forca e Luz
Issuer credit rating
National scale brAAA/Stable/--
Companhia Piratininga de Forca e Luz
Issuer credit rating
National scale brAAA/Stable/--
RGE Sul Distribuidora de Energia S.A
Issuer credit rating
National scale brAAA/Stable/--
Eletrobras-Centrais Eletricas Brasileiras S.A.
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/brA-1+
Light Servicos de Eletricidade S.A.
Issuer credit rating
National scale brAA+/Stable/brA-1+
Eneva S.A.
Issuer credit rating
National scale brAAA/Stable/--
CESP-Companhia Energetica de Sao Paulo
Issuer credit rating BB-/Stable/--
National scale brAAA/Stable/--
Itaipu Binacional
Issuer credit rating
National scale brAAA/Stable/--
UHE Sao Simao Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
Equatorial Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
Equatorial Para Distribuidora de Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
Equatorial Maranhao Distribuidora de Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
Equatorial Energia Alagoas
Issuer credit rating
National scale brAA/Stable/--
Integracao Transmissora de Energia S.A.
Issuer credit rating
National scale brAAA/Stable/--
===================================
D O M I N I C A N R E P U B L I C
===================================
AEROPUERTOS DOMINICANOS: S&P Affirms B+ Rating, Outlook Negative
----------------------------------------------------------------
On July 22, 2020, S&P Global Ratings affirmed its ratings on
Dominican Republic-based airport operator, Aeropuertos Dominicanos
Siglo XXI (Aerodom) at 'B+', and maintained the negative outlook.
To mitigate the economic and financial impact of the coronavirus,
the central bank of the Dominican Republic introduced a debt
payment moratorium for domestic companies in March 2020 through a
credit line. Aerodom decided to take advantage of this facility,
and recently signed an addendum to the agreement on its loan that
allows the company to postpone three principal payments for an
aggregate amount of $21.7 million, which were originally due Sept.
30, 2020, Dec. 31, 2020, and March 31, 2021. The deferred principal
will be capitalized and paid in March 31, 2024, at the loan's
maturity. Meanwhile, the company will continue paying interest on
the outstanding debt amount. Domestic banks that participated in
extending the syndicated loan to Aerodom will benefit from the
relief measures implemented by the government. In addition, all
lenders (including international ones) will get on a pro rata share
an amendment fee of 0.4% of the aggregate principal amount of the
balloon payment.
S&P doesn't view this transaction as a distressed exchange because
it believes that absent the modifications, Aerodom would have been
able to continue honoring all its financial obligations in a timely
manner, due to the following reasons:
-- S&P believes that the amount of debt postponed is not material,
accounting for around 4% of the total stock of the company's debt.
-- Aerodom has resumed operations on July 1, 2020, which should
allow the company to start generating cash flows again and cover
the relatively low debt service even if traffic remains at
conservative levels in the short and medium term. Until 2024, the
company will only bear debt service of on average $50 million per
year given that the bonds will start amortizing in June of that
year.
-- The company's liquidity remains adequate. As of June 2020,
Aerodom had $62.3 million in cash, which should be sufficient to
meet maturities in the next 12 months, even including the amounts
deferred and no cash flows for a 12-month time horizon.
-- S&P believes Aerodom continues to benefit from its controlling
sponsor's (Vinci S.A) financial flexibility. So far, Aerodom hasn't
distributed dividends since its acquisition in 2016, and it doesn't
expect to do it under the current stress scenario.
S&P said, "Additionally, we don't believe that lenders will receive
less value than the original promise. Our analysis incorporates the
abovementioned amendment fee, no haircut to the amount of principal
differed, and Aerodom will continue paying interest as originally
scheduled." Moreover, based on the central bank's resolution,
there's a package of specific measures to compensate domestic
lenders for the deferral of principal payments on their loans, in
addition to the amendment fee.
In an effort to reactivate the economy, the Dominican Republic's
government allowed international airports to resume operations
starting July 1, 2020. Aerodom's first airport to start operations
was Santo Domingo Las Americas, which serves the country's capital
and is the second-largest airport in the country after Punta Cana.
Moreover, Puerto Plata International Airport (the company's
second-largest airport) has resumed operations on July 6. During
the first two weeks of operations, the airports have already
received more than 50,000 passengers coming mostly from U.S.
In order to ensure a safe and efficient air travel, the country's
airports had to implement a protocol defined by the authorities
that includes checking the temperature of all arriving passengers
and strictly adhering to sanitary measures. Moreover, social
distancing and use of face masks inside the airport and airplanes
are mandatory.
S&P said, "In terms of operating performance, although Aerodom's
main airports have already resumed operations, which we view as a
big step, we now project a sluggish recovery of traffic levels
during the next three months. First, there are many airports around
the world that remain closed. Second, we believe tourists might
avoid taking flights to reduce the risk of contagion. Finally,
there will be a limitation on airports and airplane capacity, given
compliance of new safety measures. Therefore, we now believe total
traffic at Aerodom's airports to drop around 60% in 2020, compared
with our previous forecast of 58%, leading to EBITDA of around $58
million for 2020. This scenario should lead to adjusted debt to
EBITDA of 8.4x, a negative funds from operations (FFO) to debt, and
FFO cash interest coverage of 1.0x, compared with the previous
assumption of 7.6x, 0.5%-1.0%, and 3.5x-4.0x. Still, we believe
such financial performance is in line with the current rating on
Aerodom."
DOMINICAN REPUBLIC: Fund and CCMUSA Enters Pact for Economic Boost
------------------------------------------------------------------
Dominican Today reports that with the purpose of promoting human
development, trade, education, reciprocal information and donations
between the Dominican Republic and the United States, the Rosario
Gaton Foundation recently signed an agreement with the Minority
Chamber of Commerce (CCMUSA) of said nation.
"Thanks to this alliance, the North American entity commits to
provide relevant economic and commercial data for Dominican
producers and entrepreneurs, including significant changes and
trends that may affect or improve trade, cooperation and
public-private investments between both nations," according to
Dominican Today.
Both entities have agreed to promote and organize programs that
benefit needy populations in both countries, in addition to
generating commercial networks of shared interest, the report
notes.
The agreement was signed by Doug Mayorga, representing the CCMUSA,
and by Dr. Julio Cesar Rosario, director of the Fundacion Rosario
Gaton, based in the Dominican Republic, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
===========
M E X I C O
===========
INTERJET: Gets $150 Million Capital Injection to Offset Virus Hit
-----------------------------------------------------------------
Reuters reports that Interjet said it received a $150 million
capital injection to help the company through a major restructuring
in a bid to offset the crisis in the airline sector as the
coronavirus pandemic choked global travel.
Interjet, one of Mexico's three biggest airlines with a portfolio
of more than 50 routes, announced restructure plans last month as
local media speculated about the carrier's financial health,
according to Reuters.
The struggling Mexican airline said a group of investors, headed by
businessmen Carlos Cabal and Alejandro del Valle, has injected
capital to help shore up the company, the report notes.
"The new operations plan considers the return, in the coming days,
of more Airbus 320 and 321 aircraft," the company said in a
statement obtained by the news agency.
Rival Aeromexico has already filed for Chapter 11 bankruptcy
proceedings.
About Interjet
Interjet is an international airline based in Mexico City carrying
almost 14 million passengers annually within Mexico and between
Mexico, the United States, Canada, Central, and South America. In
all, it provides air service to 54 destinations in 10 countries
offering its passengers greater connections and travel options
through agreements with major airlines such as Alitalia, All Nippon
Airways (ANA), American Airlines, British Airways, Emirates, Air
Canada, LATAM Group, EVA Air, Iberia, Lufthansa, Hainan
Airlines,Hahn Air, Qatar Airlines and Japan Airlines.
As reported in the Troubled Company Reporter-Latin America on Sep.
3, 2019, Interjet Airlines re-iterated the airline is not in
"technical bankruptcy" as erroneously reported by a financial news
agency.
Interjet Airlines is in a dispute with Mexico's Tax Administration
Service (SAT), related to alleged taxes owed by the airline. An
attempt by SAT to seize control of the airline's bank accounts in
an effort to collect the alleged taxes was denied by the courts and
the airline is in negotiation with the tax authorities to determine
what back taxes are actually due.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
PETROLEUM CO: Deciding Factor for Pointe-a-Pierre Constituency
--------------------------------------------------------------
Nikita Braxton-Benjamin at Trinidad Express reports that the
mothballed Petroleum Company of Trinidad and Tobago Limited
(Petrotrin) refinery was on the lips of all three candidates vying
for the Pointe-a-Pierre constituency as they filed nomination
papers.
United National Congress candidate David Lee, People's National
Movement candidate Daniel Dookie and David Abdulah of the Movement
for Social Justice expressed their views as they spoke to reporters
outside the Marabella South Secondary School, according to Trinidad
Express.
Lee arrived with supporters to the sound of tassa drums and the
waving of UNC flags, the report notes. He called on the Prime
Minister to "hold his hand" on the signing off of the refinery, the
report relates.
Prime Minister Dr Keith Rowley said the Government is ready to sign
off on the sale of the refinery to Oilfields Workers' Trade Union's
(OWTU) Patriotic Energies and Technologies Company Ltd, the report
discloses.
The report notes that Lee however said, "I want to put it on the
record that the procurement regulations are not fully operational
so that for the Prime Minister to come at this 99th hour to be able
to sell a crown jewel like the refinery, one has to ask why at this
99th hour without the proper procurement regulation in place.
Because the proper procurement regulation is not only about
contract procuring but it's also about the sale of assets,
especially State sale of assets, so that we are asking the Prime
Minister to hold his hand to ensure that there is proper
accountability and transparency in this sale of the refinery, if it
happens."
Asked whether the UNC will continue with the agreement with
Patriotic, should it become the government following the August 10
election, Lee said, "We have to see what the contract is all about,
the report relays. We will go into discussion with them and also
we might open back up for a proper procurement as far as the sale
of it or a private partnership with the State, with the
government," he added.
He added that the PNM Government had "literally decimated
Pointe-a-Pierre, especially the Marabella community with the loss
of jobs with the closure of the refinery".
Dookie: Sensitive and Emotive
The report relays that Dookie had music accompaniment on his
arrival, as well as flag-waving and whistle-blowing supporters. He
said he was not going to make Petrotrin a political issue and
described it as a "sensitive" and "emotive" one. He said, "What is
needed is compassion and understanding and the willingness to
listen to those who are affected and to see how we can represent
them as we chart a new Pointe-a-Pierre and build a better
Pointe-a-Pierre under my leadership . . .. We understand the impact
it would have had on people and what we're trying to do is listen
to them and we try to point them into a direction in the future
where they would be able to improve their lives," the report says.
Abdulah, who was surrounded by supporters as he arrived at the
school, said he had "called out the refinery issue" weeks ago, the
report notes.
"I called on Dr Rowley as the Prime Minister to sign the agreement
for the sale of the Pointe-a-Pierre refinery and the port
facilities to Patriotic Energies and Technologies Ltd, the company
owned by the Oilfields Workers' Trade Union. I made that call
several weeks ago and I repeated it several times. That call has
now become the defining issue in not only the election here in
Pointe-a-Pierre but in the country as a whole," he said, the report
discloses.
He said the Government had committed original sin by the closure of
the refinery, the report relays. "What they have done now with
respect to the negotiations with Patriotic was really not something
that was intended all the time."
Dr. Rowley made a statement when he announced the closure that the
union will have first preference. "I don't think that he really
believed that the union could put together a company and a bid that
would beat out international competitors and withstand scrutiny
that was the superior bid, the report relays. The union stood up,
upped the ante, and therefore the Government has had no choice but
to go that route. If they had another route they would have gone
another route, trust me. So people must not think that the
Government being prepared to sign an agreement, is either of its
own volition or was something that could rid the PNM of its
original sin of closing the refinery, sending home all the workers
of Petrotrin and destroying business activity in south. That
original sin remains and that is what people must remember when
they go to vote," he said.
About Petrotrin
State-owned Petroleum Co. of Trinidad & Tobago (Petrotrin) closed
its oil refinery in November 2018. Prior to closure, Petrotrin
underwent a corporate reorganization that started in the last
quarter of 2018. The T&T government insisted that the
reorganization was necessary to improve the company's efficiency.
As a result of the reorganization, Petrorin's refining business
was shut down and new entities were created: three operating
subsidiaries (Heritage Petroleum Company Limited, Paria Fuel
Trading Company and Guaracara Refining Company Limited), and the
new holding company, TPH, to which the international bonds were
transferred from Petrotrin.
SWISSPORT TRINIDAD & TOBAGO: Over 300 Workers Retrenched
--------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that over 300
workers at Swissport Trinidad and Tobago, will be thrown on the
breadline as of August 6, 2020.
Swissport operates at Piarco International Airport and the duties
include baggage handling, wheelchair assistance and cargo handling
according to Trinidad Express.
Just last month, Swissport International reported that 1,300
workers were laid off across Florida's major airports, the report
notes.
The company is based in Switzerland and is owned by a Chinese
firm.
The Express spoke to a worker, based on anonymity, who worked as a
wheelchair assistant at Piarco Airport, she said since the
announcement of the closure of T&T's borders on March 23, 2020, the
workers were laid off and told by management, that once the borders
reopen, they will be called back to resume their duties.
However, on June 23, the employees were called in one-by-one to the
administration and human resource manager's office, where they were
greeted with a letter of retrenchment notice, the report notes.
The letter obtained by the Express stated that the company is
currently experiencing a surplus of labour in light of the
prevailing circumstances and is constrained at this time to engage
in a restructuring of its workforce across the board, the report
relates.
"From the outset, we express our regret that the company was not
and is not in a position to enter into consultations with you with
a view to continued employment with it as the company has been left
with no choice but to take this action. The company was engaged in
a three-month temporary lay-off but due to closure of the borders
that is still in effect the company has determined that the current
level of business activity is not sufficient to support the current
staff complement," Swissport T&T said, the report discloses.
The letter further stated that in compliance with Section 4(1) of
the Retrenchment and Severance Benefits, Act the company has given
a 45 days formal notice of retrenchment and the last day at the
establishment will be on August 6, the report relays.
The worker said her colleagues are devastated by this move as some
of them have been with the company for 15 years, the report points
out.
She lamented that the workers have been uneasy since January as
management have been cutting their hours and days of work, the
report adds.
According to the employee, they were informed that once the borders
reopen they can reapply for a job, where the company will then
chose who will be rehired, the report notes.
The Express reached out to the CEO of Swissport T&T Eugene
Shairsingh three times via e-mail over a two day period, but up to
last night no response was forthcoming, the report relates.
However, we contacted a senior official at the company, who
confirmed the workers were being retrenched, as a result of the
minimal activity at the airport, the report discloses.
Back in 2016, Swissport T&T placed an advertisement in the
newspapers, which sought foreigners permitted to work in T&T for
employment at Piarco International Airport. This move was met with
great resentment by Oilfields Workers' Trade Union (OWTU) president
general Ancel Roget, who was at the time condemning private sector
practice of exclusively seeking foreign labor while locals grapple
with steady retrenchment in all industries, the report adds.
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X X X X X X X X
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LATAM: Fears Mount of a Fresh Debt Crisis in Region
---------------------------------------------------
Globalinsolvency News, citing the Financial Times, reports that
Latin America is at the centre of the coronavirus pandemic,
suffering some of the worst infection rates and highest death tolls
in the world.
Now economists warn that the region faces more bad news: its sickly
economies risk falling into a new debt crisis even worse than the
last big bust of the 1980s, according to Globalinsolvency News.
The continent was struggling with multiple "pre-existing
conditions" before the virus took hold: anaemic growth, weak health
systems, low tax revenues, high levels of borrowing and an
over-reliance on commodity exports, the report notes.
Now some of the longest lockdowns in the world, together with the
accompanying costly rescue programmes, have wreaked havoc on public
finances, the report relays. Chile, Brazil and Mexico were among
the five emerging markets globally with the biggest increase in
debt to GDP this year, according to the Washington-based Institute
for International Finance, 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
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2020. All rights reserved. ISSN 1529-2746.
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