/raid1/www/Hosts/bankrupt/TCRLA_Public/200819.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, August 19, 2020, Vol. 21, No. 166
Headlines
A R G E N T I N A
ARGENTINA: Creditors Will Get Better Debt Deals From Provinces
ARGENTINA: Looks to IMF for More Breathing Space
ARGENTINA: Will Not Accept Any Conditions From IMF, Warns Pres.
B R A Z I L
BANCO DO BRASIL: Names Andre Guilherme Brandao as CEO
TRANSMISSORA ALIANCA: Fitch Affirms IDRs at BB, Outlook Neg.
C H I L E
LATAM AIRLINES: S&P Withdraws D Issuer Credit Rating
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Accumulated Inflation to July is 2.32%
DOMINICAN REPUBLIC: Crisis Closed 20% of Casinos
DOMINICAN REPUBLIC: Exports Fell 7.97% During First Half
M E X I C O
SIXSIGMA NETWORKS: Moody's Confirms B2 CFR, Outlook Negative
V E N E Z U E L A
VENEZUELA: Devastating Oil Spill Reaches National Park
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Creditors Will Get Better Debt Deals From Provinces
--------------------------------------------------------------
Buenos Aires Times reports that Argentina's debt-restructuring
accord this month was a benchmark for provinces renegotiating their
own bonds--setting a minimum, not a maximum for what investors can
expect.
Provincial governments are coming up with more generous proposals
for their creditors than the one agreed between the sovereign and
its bondholders, according to Bloomberg. One reason why valuations
are higher is that most provinces have less debt maturing in the
short term, Buenos Aires Times notes.
While most negotiations are at an advanced stage, regional
governments are still waiting for the green light from President
Alberto Fernández's administration, which wants Buenos Aires
Province to be the first to close a deal, BA Times relays. The
strategy: to prevent talks elsewhere from encouraging creditors to
demand better terms from the nation's largest province, BA Times
discloses.
"The sovereign agreement set the precedent and is positive, but the
provinces will not follow the same steps," says Ursula Cassinerio,
a sub-sovereign analyst at Moody's Investors Service in Buenos
Aires, notes the report. "Their proposals are friendlier and their
debt processes will be shorter."
Buenos Aires
Buenos Aires Province, which resumed talks with creditors, is
negotiating a deal under which bonds will have a net present value
three to seven points higher than the sovereign notes, which were
valued at almost 55 cents on the dollar in the debt-restructuring
accord. The deadline for accepting the last proposal expires on
August 14, but it will probably be extended once again, according
to people with direct knowledge of the talks, notes BA Times.
Mendoza
The province of Mendoza, which missed a payment on bonds due in
2024, started talks with creditors to restructure US$500-million
worth of overseas debt, says the BA Times. The latest exchange
offer, presented on July 6, has a net present value of 80 cents on
the dollar at an exit rate of 10 percent, and will expire on August
28. So far, holders of almost 60 percent of the securities gave
consent to the offer. The province needs to reach 75 percent to
avoid litigation.
Rio Negro
Rio Negro, which is in default after missing a coupon payment on
bonds due in 2025 in early July, is offering a net present value of
close to 73 cents on the dollar at an exit rate of 11 percent,
according to a person familiar with the matter. While talks should
be easier because two creditors hold 50 percent of the debt, the
negotiation was put on hold at the request of the national
government, the person said, notes the report.
Cordoba
According to BA Times, Cordoba Province hasn’t missed bond
payments yet, but it has hired JPMorgan Chase & Co, HSBC Holdings
Plc and the law firm Shearman & Sterling LLP to design a strategy
to refinance its debt. The province’s next bond payment is on
June 2021, amounting to US$725 million in principal.
Neuquen
The province of Neuquen is in talks with Citigroup Inc and its
longtime adviser Quantum Finanzas SA to refinance approximately
US$704 million in overseas debt, the report relates. Its latest
proposal includes a request for consent to extend capital
maturities and cut coupons without a capital reduction. A group of
creditors rejected the offer, but said in a statement they remain
open to talks with the province.
Salta
Salta is in talks with creditors to restructure US$380 million and
is being advised by Bank of America Corp and Banco Macro SA, BA
Times says. Last month, it took advantage of the grace period for
its foreign bonds maturing in 2024 to work on a proposal that would
ease its financial obligations in the short term and achieve debt
sustainability conditions, the province said.
Entre Rios
The province of Entre Ríos hired HSBC to restructure its overseas
debt after missing a coupon payment on August 8. The first
principal payment is in 2023, notes BA Times.
Chubut
The province of Chubut received approval from the local congress on
August 6 to renegotiate its overseas debt. Officials had already
hired UBS Group AG as an adviser ahead of a possible negotiation.
The province, which has US$650 million of overseas bonds that are
guaranteed by oil and gas royalties, has a payment coming due in
October, the report adds.
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.
ARGENTINA: Looks to IMF for More Breathing Space
------------------------------------------------
Rodrigo Campos at Reuters reports that after reaching a $65 billion
restructuring agreement in principle with its creditors earlier
this month, Argentina must now turn to relief from the
International Monetary Fund to free up cash in the near term, the
IIF said.
"We think external financing will be comfortable if the IMF rolls
over its exposure," the Institute of International Finance said in
a note, according to Reuters.
The agreement with creditors gives Argentina much-needed breathing
space, the report notes.
Cash flows into and out of the country have ground to a halt,
partly due to capital controls and the non-payment of obligations
during the debt negotiations, the report relays.
"As long as capital controls remain in place, resident capital
flight will not be a source of pressure," said the IIF note, the
report relays.
Payments to the IMF could quickly become unsustainable under the
current schedule, the report notes.
The large payments due to the IMF stem from having received the
largest-ever program from the Fund in 2018, the report discloses.
Beyond that new agreement expected with the IMF, investors are
focused on Argentina's medium-term economic plan, according to
Sergi Lanau, deputy chief economist at the IIF, the report notes.
Prudent fiscal policy has been hard to come by for Argentina, Lanau
said, adding that the government has done "a lot" on the tax side
and now it is "more likely that it's unavoidable to look for
savings on the spending side, the report relays.
"That's always politically and socially complicated, but it needs
to be done," he added.
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 Servic
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
ARGENTINA: Will Not Accept Any Conditions From IMF, Warns Pres.
---------------------------------------------------------------
Agence France-Presse reports that President Alberto Fernandez said
he will not allow the International Monetary Fund (IMF) to impose
austerity measures on Argentina during talks over a new financing
program.
The government, which sealed an initial US$65-billion debt
agreement with private foreign creditors, is looking to open formal
negotiations with the Fund after September 4 over repayments for
Argentina's US$44-billion credit line, according to official
sources, Agence France-Presse relays.
Argentina took a loan of US$57 billion from the IMF in 2018--the
Fund's largest ever--under former president Mauricio Macri, though
President Fernandez said he did not want to receive the remaining
disbursements upon taking office, according to Agence
France-Presse.
The government is seeking to seal a deal before the end of March
2021, officials have briefed, with the first repayments currently
due to begin in late December, the report notes.
Given the coronavirus pandemic and Argentina's economic turmoil,
the country is not in a position to accept any conditions from the
IMF, Fernandez said in a radio interview, the report relays.
"I am not in a position to accept any conditionality. I am not in a
condition because Argentina is not in condition to," Fernandez
said, referring to upcoming talks with the Fund.
"I ask them to trust us because we cannot accept conditions that
require us to make adjustments [austerity measures], though we know
that we must fulfil our obligations," he added.
The Peronist leader nevertheless praised the support the IMF had
given Argentina during its negotiations with bondholders, the
report notes.
"If the Fund said, as it was, that the debt is not sustainable, it
is because they said that Argentina has nowhere to get the
resources from. That is the same as saying that Argentina has
nowhere to adjust," the president stressed, the report relays.
"We are at a time where everything is under discussion. The Fund's
dogma has already fallen to pieces," he insisted, the report
discloses.
Long and Complex
According to the report, Economy Minister Martin Guzman predicted
that talks with the IMF will be "long" and "complex."
"We do not see an agreement arriving quickly due to the number of
issues that must be negotiated," Guzman said in a radio interview.
He vowed that officials would go through "every detail on the basis
of prudence," the report relates.
Pushed on a timeframe, amid reports that the government wants to
reach an agreement with the Fund by April next year, the minister
said it would "take months," adding that it was "possible that only
at the beginning of next year" would an accord be reached, the
report notes.
Argentina has been in recession since 2018 and a steep contraction
is expected this year as a result of the coronavirus pandemic.
Around 40 percent of the nation is living in poverty, the report
says.
The IMF's most recent estimate predicts that gross domestic product
wil shrink by 9.9 percent this year, though private forecasts point
to a bigger decline, the report discloses.
Public debt totals US$324 billion, close to 90 percent of GDP, the
report adds.
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 July 30, 2020, S&P Global Ratings lowered its issue
ratings on two of Argentina's foreign currency-denominated bonds,
BIRADs due January 2022 and January 2027, to 'D' from 'CC'.
Other similar bonds S&P already lowered to 'D' include the
BIRADs due 2021, 2026, January 2028, July 2028, 2036, 2046,
2048, and 2117, as well as a New York-law U.S. dollar-denominated
discount bond due December 2033 and an English-law
euro-denominated discount bond due December 2033.
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.
===========
B R A Z I L
===========
BANCO DO BRASIL: Names Andre Guilherme Brandao as CEO
-----------------------------------------------------
Rio Times Online reports that three weeks after Rubem Novaes'
sudden departure (returning to the private sector) from the
presidency of Banco do Brasil (BB), the state-owned financial
institution officially named Andre Guilherme Brandao as its new
CEO.
His name had been known for some two weeks and his appointment was
regarded as a victory for the "pragmatic" government wing because
of his profile, which is considered technical rather than
political, according to Rio Times Online.
As reported in the Troubled Company Reporter-Latin American on Oct.
14, 2019, Moody's Investors Service affirmed all of Banco do Brasil
S.A.'s ratings, following the affirmation of the bank's ba2
baseline credit assessment. BB is rated Ba2 and Not Prime for long-
and short-term local currency deposits and Ba3 and Not Prime for
long- and short-term foreign currency deposits. Banco Do Brasil
S.A. (Cayman)'s long-term senior unsecured foreign currency debt
rating is Ba2. All ratings have a stable outlook.
TRANSMISSORA ALIANCA: Fitch Affirms IDRs at BB, Outlook Neg.
------------------------------------------------------------
Fitch Ratings has affirmed Transmissora Alianca de Energia Eletrica
S.A.'s Foreign Currency and Local Currency Issuer Default Ratings
at 'BB' and 'BBB-', respectively. Fitch has also affirmed the
Long-term National Scale Rating 'AAA(bra)' for Taesa and its senior
unsecured debenture issuances. The Rating Outlook for the IDRs is
Negative, while the Rating Outlook for the National Scale rating is
Stable.
Taesa's ratings reflect its low business risk relative to its
strong and diversified portfolio of power transmission assets, with
predictable revenues, high operating margins and robust cash flow
from operations derived from long-term concession contracts in
Brazil. Positively, none of the 39 concessions that the company
participates in expire before 2030, which provides sustainability
to its operations. Taesa should also keep adequate liquidity
profile and low leverage for the industry, despite a peak in 2020
due to higher investments and meaningful dividend payments that
should lead to a negative FCF in the year.
Taesa's FC IDR is constrained by Brazil's country ceiling of 'BB',
as the company generates all of its revenues in reals, with no cash
and committed credit facilities abroad. Fitch also considers the
three-notch difference between the company's LC IDR and the
sovereign rating as appropriate due to its regulated nature. As a
result, the Negative Outlook for the FC and LC IDRs follows the
same Outlook of Brazil's 'BB-' sovereign rating.
Fitch anticipates no material change on the risk profile for power
transmission companies in Brazil and that Taesa will be able to
strengthen its already diversified asset base with ongoing
investments while maintaining a solid financial profile compared
with industry peers in Latin America rated at the same rating
category, which also supports the Stable Outlook for the National
Scale rating.
Taesa's ratings are not limited by the credit quality of one of its
shareholders, Companhia Energetica de Minas Gerais (LC and FC IDRs
'BB-'/Stable), since Cemig shares the company's control with
Interconexion Electrica S.A. E.S.P. (ISA; LC and FC IDRs
'BBB+'/Negative), and its access to Taesa's cash is limited to
dividends. Fitch considers the regulatory risk of the Brazilian
power sector as low to moderate, and views the risks associated
with the construction phase of six projects under development as
manageable. Fitch believes Taesa can support necessary investments
and equity contributions to these projects, given its strong
financial flexibility, and the startup of new projects is important
to mitigate the effects of expected revenue reductions in some
concessions.
KEY RATING DRIVERS
Low Business Risk: Taesa's IDRs are based on low business risk
associated with Brazil's power transmission segment in Brazil, as
revenues (permitted annual revenues) are based on line availability
rather than volume transported. Positively, PARs are annually
adjusted to inflation indexes, which tend to compensate cost
pressures. Companies in this sector have a diversified client base
and guaranteed payment structure.
Robust Asset Portfolio: Taesa's credit profile benefits from its
strong asset portfolio and no exposure to concession renewals over
the short-to-medium term. The issuer is one of the largest private
power transmission companies in Brazil; it has 11,098km of
transmission lines across the country, with 1,823km under
construction, considering its stake in each project. Taesa's
concessions will not begin to expire until 2030 and will occur on a
staggered basis over the following years.
Predictable and Robust Revenues: Fitch believes Taesa will be able
to compensate expected revenue and EBITDA reductions coming from
part of its current portfolio through new projects and
acquisitions. Concessions for transmission assets granted prior to
2006 include a 50%-PAR reduction once the concession completes 15
years of operation. Considering the company's proportional
consolidated PAR of BRL2.2 billion from operational assets in the
LTM ended in June 30, 2020, the expected gradual revenue decline of
BRL231 million until 2023 corresponds to 11% of total. On the other
hand, the acquisition of three concessions in 2020 and the six new
projects still under development should add BRL677 million to
company's revenue until 2022.
Due to different timing of PAR reductions and starting contribution
from new assets and acquisitions, Fitch expects EBITDA, calculated
through regulatory accounting, to remain flat at around BRL1.2
billion in 2020. For 2021-2022, Fitch expects EBITDA to increase to
BRL1.4 billion, given that new projects will be fully operational.
EBITDA margins are high, ranging between 82% and 84%,
characteristic of transmission companies in Brazil.
Negative FCF on Investment Cycle: Based on regulatory accounting
rules and consolidated companies, Fitch forecasts Taesa's FCF to be
negative at around BRL900 million in 2020 and return to positive at
BRL88 million in 2021. The negative FCF this year reflects higher
investments of BRL1.1 billion related to new projects and a strong
dividend payout ratio. CFFO should remain robust, with BRL1.1
billion in 2020, reflecting high business margins and low interest
rates. CFFO and FCF in accordance with IFRS accounting rules were
BRL937 million and negative in BRL518 million, respectively, for
the LTM ended June 30, 2020.
Leverage to Remain Low: Taesa has managed low consolidated leverage
despite substantial dividend payments and significant acquisitions
in recent years. Fitch expects consolidated adjusted net financial
leverage will peak in 2020 at 4.3x, given higher investments
expected for the year. In the absence of new significant
acquisitions or greenfield projects, Fitch expects adjusted net
leverage below 3.5x beginning in 2021.
For the LTM ended June 30, 2020, the company reported adjusted
total debt/EBITDA and net debt/EBITDA of 5.3x and 3.8x,
respectively, considering regulatory accounting, and 5.1x and 3.1x
excluding the effects of the acquisition of three new transmission
lines occurred in 1Q20, which had a small contribution on the LTM
EBITDA. Fitch includes off balance sheet debt related to guarantees
provided as well as dividends received on those ratios, both from
non-consolidated companies.
DERIVATION SUMMARY
Taesa's financial profile is stronger than Latin American peers
Interconexion Electrica S.A. E.S.P. (ISA; LC and FC IDRs
'BBB+'/Negative) and Transelec S.A. (Transelec; LC and FC IDRs
'BBB'/Stable), and Consorcio Transmantaro S.A. (CTM; LC and FC IDRs
'BBB'/Stable). All of them have low business risk profiles,
predictable revenues and robust cash flow generation, which is a
characteristic of power transmission companies operating in a
regulated industry. The main differentiation in the IDRs of Taesa
and those companies is the country where they generate their main
revenues and the location of assets. While its peers are located in
investment-grade countries, Taesa's ratings are negatively affected
by Brazil's country ceiling of 'BB'.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the Taesa
include:
-- PARs adjusted considering inflation and, in some cases, 50%
reduction when the 15th operational year is completed;
-- Operational expenses adjusted by inflation;
-- Dividends corresponding to 95% of net income calculated
through regulatory accounting rules;
-- Minimum cash of BRL400 million;
-- No relevant acquisition financed by debt.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- A positive rating action for the company's FC and LC IDRs
would be associated to an upgrade on Brazil's sovereign rating;
-- Upgrade not applicable to the National Scale rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Deterioration in Taesa's consolidated financial profile, with
adjusted net leverage going above 3.5x on a sustainable basis;
-- FFO net leverage above 4.0x on a sustainable basis;
-- Investments in projects with risks significantly higher than
existing ones and weak financial structures;
-- A more challenging scenario for the power sector in Brazil;
-- Negative rating actions on Brazil's sovereign rating may also
pressure Taesa's IDRs.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch expects Taesa to maintain an adequate
liquidity position compared with short-term debt, and to maintain
ample access to bank credit lines and capital markets to mitigate
expected negative FCF in 2020. By June 30, 2020, consolidated cash
and marketable securities amounted to BRL2.2 billion, as per
Fitch's calculations, compared with short-term debt of BRL917
million, representing a coverage of 2.4x. The BRL900 million raised
in April 2020 through three debt instruments, with final maturity
in 2022, supported the strong liquidity position at the end of the
semester. Nevertheless, Fitch believes the strong
cash-to-short-term debt ratio will return to the 0.5x-1.0x range
after scheduled outflows associated to capex under development.
Taesa's consolidated debt is characterized by a manageable maturity
profile and no foreign exchange risk. As of June 30, 2020, the
group's total adjusted debt was BRL7.8 billion, considering its
proportional stake guarantee in debt of non-consolidated
subsidiaries - BRL968 million. Its BRL6.8 billion consolidated on
balance sheet debt mainly consisted of BRL4.3 billion in
debentures.
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).
=========
C H I L E
=========
LATAM AIRLINES: S&P Withdraws D Issuer Credit Rating
----------------------------------------------------
S&P Global Ratings withdrew its 'D' issuer credit rating on
Chile-based airline Latam Airlines Group S.A. at the company's
request. S&P also withdrew its 'D' issue-level rating on Latam's
senior unsecured notes. S&P had lowered its ratings on the issuer
and the rating on its senior unsecured notes to 'D' on May 27,
2020, following Latam Airlines' filing for voluntary reorganization
under Chapter 11 of the Bankruptcy Code in the U.S.
S&P said, "We will continue to rate Latam's EETC series, now on an
unsolicited basis, as long as we have access to sufficient
information of reliable quality to support our analysis and ongoing
surveillance, because we believe there is significant market
interest in these unsolicited ratings.
"At this point, we're keeping our ratings on Latam's EETC-1 series
unchanged. The ratings on the Class A certificates remains 'CCC+',
Class B 'CCC-', and Class C at 'D'. However, we could withdraw
these ratings if we encounter difficulties in obtaining timely and
satisfactory quality of information to maintain our ratings on the
securities in accordance with our applicable criteria and
policies."
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Accumulated Inflation to July is 2.32%
----------------------------------------------------------
Dominican Today reports that the Dominican Central Bank said prices
rose 1.88% in July compared to June 2020, accumulating an inflation
of 2.32% in the January period -July 2020.
"With this result, interannual inflation, measured from July 2019
to July 2020, reached 4.35%, falling within the target range
established in the monetary program of 4.0% ± 1.0%," according to
Dominican Today.
It said that core inflation registered an interannual rate of
4.14%, the report notes.
"It should be noted that the underlying inflation indicator
isolates the variations in the prices of some agricultural goods
that tend to be volatile, as well as of alcoholic beverages,
tobacco, fuels, and managed and transport services, thus allowing
the extraction of signals clearer for the conduct of monetary
policy," the report relays.
It adds that the groups with the greatest contribution to the
growth of the CPI in July 2020 were Food and Non-Alcoholic
Beverages, varying 2.98%, followed by Transportation (3.75%),
Furniture and Household Items (1.54%) and Housing (0.77%), the
report relays. "To a lesser extent, the variations of the
Restaurants and Hotels (0.84%) and Health (1.02%) groups had an
impact," the bank added.
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: Crisis Closed 20% of Casinos
------------------------------------------------
Dominican Today reports that the Dominican Casinos Association said
that the cessation of operations of establishments last March due
to the pandemic has caused the closure of 20% of the casinos.
However, they assure that the 56 casinos operating in the country
have the safety and hygiene protocols ready to reopen as Covid-Free
establishments on August 24, according to the date established by
the authorities in the economic "de-escalation," according to
Dominican Today.
David Moniz, president of the Association that groups the gambling
establishments, affirmed that after almost 5 months closed, "we
will show that in this time we have prepared protocols that we have
been perfecting and considering every day to the smallest detail,
and we will show that we have conditioned our premises to adapt to
the best and most innovative safety and hygiene measures that
guarantee Covid-free in any of our establishments," the report
notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
DOMINICAN REPUBLIC: Exports Fell 7.97% During First Half
--------------------------------------------------------
Dominican Today reports that total exports from the Dominican
Republic fell 7.97% during the first semester of 2020, compared to
the same period of 2019.
The data is contained in the Trade Magazine published by the
Customs Directorate, which indicates that during the first half of
this year total exports reached US$4.5 billion, about US$390.22
million less than in the same period of 2019, when the activity
reached US$4.9 billion, according to Dominican Today.
The document indicates that for the period of January-June 2020,
57.20% of exports belonged to the free zone regime, 39.04% to the
national regime, 3.56% to temporary admission and the remaining
0.21% to re-export, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
===========
M E X I C O
===========
SIXSIGMA NETWORKS: Moody's Confirms B2 CFR, Outlook Negative
------------------------------------------------------------
Moody's Investors Service has confirmed SixSigma Networks Mexico,
S.A. de C.V.'s B2 corporate family rating and the B2 senior
unsecured rating on its global notes due 2025. The outlook is
negative. This action concludes the review for downgrade started on
March 27, 2020.
RATINGS RATIONALE
"Its action mainly reflects our view that, although the coronavirus
pandemic continues to pose risks for KIO, its effect in operating
metrics will be milder than what Moody's anticipated at the outset
of the virus outbreak" said Sandra Beltran, VP Senior Analyst of
Moody's. However, KIO's credit profile also incorporates weak
liquidity given high cash burn and short-term maturities related
with bank debt. Moreover, the negative outlook incorporates its
concerns around KIO's cash collection over the following months as
well as its exposure to contracts with government entities.
Accordingly, the Mexican government is KIO's main counterparty,
accounting for close to 50% of its revenues, which exposes the
company to increased risks of payment delays and of delays in
public contracts renewals.
Moody's forecasts real GDP to contract by 7% in 2020, but there are
substantial downside risks, with growth potentially contracting
between 1-3 percentage points more in the event of a weaker
recovery in the second half of the year, or if lock-down measures
are reinstated. While Moody's expects positive quarter-on-quarter
growth in the third quarter, it will be driven by net exports as
domestic demand remains subdued in 2020. Export-oriented and larger
firms will be among the better performers in terms of the immediate
recovery, supported by the US economic reopening. KIO will
indirectly benefit from such trends as a high percentage of its
revenues are related with blue chip corporate accounts.
In 2021, domestic demand will pick up as labor indicators recover
and families increase consumption. It also expects more fiscal
impulse given the fact that 2021 is an election year. However,
investment will remain sluggish and re-hiring decisions will likely
continue to be delayed. As a result, there will not be a strong
rebound in 2021. Moody's expects real GDP growth of 2.2% in 2021.
KIO's B2 ratings continue to reflect its position as the leading
independent data center operator in Mexico, offering a wide range
of IT solutions for private and public customers. The company is
well positioned to compete for large contracts to provide solutions
to firms and government related entities. Moreover, the mission
critical nature of most of the services it provides reduces the
probability of large cancellations.
On the other hand, the ratings incorporate KIO's weak liquidity and
revenue concentration in Mexico, with a particularly large exposure
to the Government of Mexico. Additionally, the rating takes into
consideration the strong competition, relatively high capital
intensity and large working capital movements, which constrain free
cash flow generation, and the company's still weak operating
margin.
As of the end of 2019, KIO's cash position of MXN1 billion was well
below the MXN2.8 million in short-term debt maturities. Since the
outset of the pandemic, KIO has been able to roll over bank debt
amounting some MXN1.2 billion. Additionally, it expects working
capital to improve towards the end of the year supported by close
to MXN 1.6 billion to be collected.
Collections will be mostly related with public sector accounts
which tend to accelerate payments by the end of the year. Liquidity
is supported by MXN360 million available under uncommitted credit
lines related to signed projects with maturities in line with
contract tenors. Furthermore, the company has track record of
support from controlling shareholder, Tresalia Capital.
The negative outlook reflects KIO's high refinancing risk that
continues to be high despite recent debt refinance. From an
operating perspective, the fluid situation of the coronavirus
crisis continues to pose challenges, particularly amid a weaker
than anticipated economic recovery in the second half of the year,
or if lock-down measures are reinstated. KIO also faces risks
related to delays in collections under such an environment, that
could result in a rapid cash burn.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ratings are unlikely to be upgraded in the short term. Positive
rating pressure would not arise until the coronavirus outbreak is
brought under control. At this point Moody's would evaluate the
balance sheet and liquidity strength of the company and positive
rating pressure would require evidence that the company is capable
of substantially recovering its financial metrics and restoring
liquidity capacity within a 1-2-year time horizon.
Moody's could downgrade KIO in case its liquidity deteriorates
further than expected, with collections weakening from current
levels as a result of the coronavirus outbreak, particularly if not
matched by additional sources of liquidity.
The principal methodology used in these ratings was Communications
Infrastructure Industry published in September 2017.
Headquartered in Mexico City, SixSigma Networks Mexico, S.A. de
C.V. provides managed IT infrastructure services to government and
corporate customers, primarily in Mexico. The company was founded
in 2002 and since then has been engaged in managed IT
infrastructure service solutions, critical connectivity,
collocation and cloud computing. The company is privately owned,
controlled by Tresalia Capital, the Aramburuzabala family office.
=================
V E N E Z U E L A
=================
VENEZUELA: Devastating Oil Spill Reaches National Park
------------------------------------------------------
Carlos Camacho at The Latin American Herald reports that at least
four separate oil spills have taken place in Venezuela in the last
two weeks, with one of them reaching the beautiful Morrocoy
national park, just as the gasoline shortage in this oil-rich
country deepens.
The embattled Nicolas Maduro regime admitted what has for days been
unofficially reported: eight of Morrocoy's eleven keys and small
islands have been hit by the spill, according to The Latin American
Herald.
Josue Lorca, the Deputy Minister for "Eco-socialism", claimed that
more than 10 kilometers of beaches had been cleaned by some 1,200
workers and volunteers, the report notes.
The report relays that Lorca also said that workers have been
cleaning the beaches for at least eight days, but it was only over
the weekend when pictures of clean-up ops began emerging in
government media.
Cover Up Before Clean Up
The Maduro Regime run state oil firm PDVSA began cleaning up
operations in affected, oil-slick beaches, after failing to contain
the spill at sea with booms and other barriers, the report notes.
"It took them two weeks to tend to that oil spill," according to
local media RunRunes, the report says.
National Assembly President Juan Guaido said an overflowing
by-products trench at the El Palito refinery was the reason for the
spill. But oil industry sources say ship-to-ship siphoning of oil
meant for Cuba could also be the cause, the report relays.
The OAS Commissioner for the crisis of Venezuelan migrants and
refugees, David Smolansky, questioned the alleged repairs of El
Palito Refinery with which the dictatorship justified the transfer
of Venezuelan gold to Iran after an oil spill occurred that has
caused irreparable damage to the Morrocoy National Park ecosystem,
the report notes.
"Hadn't the Iranians had been called to do some 'repair work' at
the El Palito refinery paid for with the gold of all Venezuelans?"
Smolansky asked, calling it an "ecocide." "Well, it seems they
took the gold and left the oil spill in Morrocoy," the report
notes.
By August 3, the spill hitting Morrocoy was an international
scandal, the report notes. However, PDVSA only responded on August
8th. During that time frame, similar, smaller events took place at
other locations, the report relays. By August 5, it was said to
cover 4 kilometers, but now the slick is estimated as covering an
area of about 68 kilometers, the report notes.
Geographically, the spill is very visible even by satellite,
affecting the Caribbean coast of Central Venezuela from Tucacas, a
once pristine beach in Falcon, to Puerto Cabello, a major port city
in Carabobo state, the report discloses.
Oil export and refining operations, already severely impacted by an
acute drop in production, will suffer because of the spill, as
ships cannot sail through an oil slick for security reasons. Falcon
and Carabobo are home to some of the largest oil refineries in the
Western Hemisphere, such as CRP and El Palito, the report notes.
Vessel-locating service Tanker Trackers was amongst the first to
alert about the seriousness of the situation, as state media
continued to ignore the spill: the stain was covering an area of
more than 68 square kilometers in what experts are already calling
the biggest such oil incident in Venezuelan history, the report
notes.
Meanwhile, while oil was spilling, subsidized gasoline at Bs 5,000
a liter (that's two cents, US) is no longer available in most gas
stations, so motorists have to go to "international" gas stations
and pay prices of $0.50 a liter if they want to fill up, the report
relays.
And while spills are routine for state oil company
PDVSA--particularly under the administration of Maduro and his
mentor and predecessor Hugo Chavez--the latest disasters were no
ordinary spills: they soiled a beloved national park which was only
reachable by boat, the report notes.
Meanwhile, the Maduro Regime continues to ship oil and fuel to Cuba
even as Venezuela goes without--and for which the Iranians were
paid tens of millions in gold, the report adds.
Venezuela
Venezuela, officially the Bolivarian Republic of Venezuela, is a
country on the northern coast of South America, consisting of a
continental landmass and a large number of small islands and islets
in the Caribbean sea. The capital is the city of Caracas.
Hugo Chavez was president to Venezuela from 1999 to 2013. The
Chavez presidency was plagued with challenges, which included a
2002 coup d'etat, a 2002 national strike and a 2004 recall
referendum. Nicolas Maduro was elected president in 2013 after the
death of Chavez. Maduro won a second term at the May 2018
Venezuela elections, but this result has been challenged by
countries including Argentina, Chile, Colombia, Brazil, Canada,
Germany, France and the United States who deemed it fraudulent and
moved to recognize Juan Guaido as president.
The presidencies of Chavez and Maduro have challenged Venezuela
with a socioeconomic and political crisis. It is marked by
hyperinflation, climbing hunger, poverty, disease, crime and death
rates, social unrest, corruption and emigration from the country.
S&P Global Ratings, in May 2019, removed its long- and short-term
local currency sovereign credit ratings on Venezuela from
CreditWatch with negative implications and affirmed them at
'CCC-/C'. The outlook on the long-term local currency rating is
negative. At the same time, S&P affirmed its 'SD/D' long- and
short-term foreign currency sovereign credit ratings on Venezuela.
Moody's credit rating (long term foreign and domestic issuer
ratings) for Venezuela was last set at C with stable outlook in
March 2018. Meanwhile, Fitch's long term issuer default rating for
Venezuela was last in 2017 at RD and country ceiling was CC. Fitch,
on June 27, 2019, affirmed then withdrew the ratings due to the
imposition of U.S. sanctions on Venezuela.
*********
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 * * *