/raid1/www/Hosts/bankrupt/TCRLA_Public/200824.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
Monday, August 24, 2020, Vol. 21, No. 169
Headlines
A R G E N T I N A
ARGENTINA: Freezes TV, Internet and Mobile Phone Prices Until 2021
CHACO PROVINCE: Fitch Downgrades LT IDRs to C
CHUBUT PROVINCE: Fitch Affirms CC LT IDRs
NEUQUEN PROVINCE: Fitch Downgrades LT IDRs to C
YPF SA: Fitch Affirms LT IDRs at CCC
B R A Z I L
BRAZIL: GDP Monitor Points to 8.7% GDP Drop in Q2 Compared to Q1
ECO SECURITIZADORA: Moody's Rates 161st Series Cert. Caa2
ECO SECURITIZADORA: Moody's Rates 1st Series Agribusiness Cert Caa2
C H I L E
LATAM AIRLINES: Clashes with Creditors, Pushes for $9.8MM DIP Fee
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Confidence and Investment Climate Improve
DOMINICAN REPUBLIC: To Enforce Restrictions to Prevent Covid-19
H O N D U R A S
INVERSIONES ATLANTIDA: S&P Alters Outlook to Neg. & Affirms B+ ICR
J A M A I C A
BANK OF JAMAICA: Decides to Hold Policy Interest Rate at 0.5%
P E R U
PERU: Economy Slumps Amid Pandemic
P U E R T O R I C O
PONCE REAL: Selling Two Ponce Properties for $160K
X X X X X X X X
[*] BOND PRICING: For the Week Aug. 17 to Aug. 21, 2020
- - - - -
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A R G E N T I N A
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ARGENTINA: Freezes TV, Internet and Mobile Phone Prices Until 2021
------------------------------------------------------------------
Buenos Aires Times reports that the government announced that it is
extending a price freeze for TV, Internet and mobile service until
the end of the year, deeming them "essential public services."
Announcing the move in a series of tweets, President Alberto
Fernandez said that Internet service, Pay TV and fixed and mobile
telephone lines would be reclassified for public good, according to
Buenos Aires Times.
"Through a DNU [decree of necessity and urgency] that will be
published tonight, the national government will declare mobile and
fixed telephony, internet services and pay TV as essential public
services," read a statement from the Presidency, the report notes.
With this decision "we guarantee access to the same [services] for
everyone," proclaimed Fernandez on Twitter, the report relays.
The freeze means providers won't be able to raise prices going
forward without government approval, according to a statement sent
after-hours, the report relates. Prices on those items had been
frozen since May, with the ban set to expire at the end of the
month, the report notes.
The move marks the government's latest measure to contain prices
amid inflation running at 42 percent annually and an economic
contraction deepened by a nationwide lockdown aimed at curbing the
spread of Covid-19, the report relays. Argentina has already
frozen prices on 2,000 consumer goods it also deems essential, the
report notes.
"In this way we are recovering regulatory tools that the previous
government [led by former president Mauricio Macri, 2015-2019] took
away from the State. The right of users and consumers is a
constitutionally recognised right. Henceforth, there can be no
increase without the prior state approval," the Peronist leader
tweeted, the report discloses. "Education, access to knowledge,
culture and communication are basic rights that we must preserve.
That is why we have ordered that from now on there are inclusive
plans of basic, universal and compulsory provision for those who
have the least."
"As we face the restrictions the pandemic imposes on us, nobody
should have to give up part of their income to cover price hikes on
those services," said Fernandez, notes the report. "We're
guaranteeing access for everyone."
According to official sources, firms will not be allowed to raise
prices "without prior authorisation" from the State. "Inclusive
universal and compulsory basic benefit plans" will also be launched
for the most vulnerable sectors, 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.
CHACO PROVINCE: Fitch Downgrades LT IDRs to C
---------------------------------------------
Fitch Ratings has downgraded the Province of Chaco's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDR)s to 'C'
from 'CCC'. In addition, Fitch has downgraded the province's 9.375%
senior secured notes for USD250 million due in 2024 to 'C' from
'CCC'. The bonds are rated at the same level of the province's
IDRs. Chaco's Stand-Alone Credit Profile (SCP) has also been
lowered to 'c' from 'ccc'. Fitch has relied on its rating
definitions to position the province's ratings and SCP.
The downgrades follow Chaco's non-payment of its 9.375% senior
unsecured notes debt service due 2024, specifically a semi-annual
interest payment due in Aug, 18, 2020 of USD11.7 million. On Aug.
14, 2020, the province issued a formal notice stating its
intentions to miss interest payments and propose new agreements to
its bondholders, as a result of the negative macroeconomic context
heightened by the coronavirus pandemic. Chaco is in its 30-day cure
period stipulated in the bond's indenture.
The province issued this senior unsecured note of USD250 million,
authorized by Law 7782 of 2016. The U.S. denominated note accrues a
fixed interest rate of 9.375% payable on a semiannual basis. The
notes are governed by the law of the state of New York. As
stipulated by the note's indenture, the province is now currently
in its 30-day cure period to fully comply with its financial
obligations. Failure to cure the missed interest payment before the
30-day cure period expires would be considered an event of default
in the transaction documents and by Fitch.
Fitch also reviewed the province's key risk factors and debt
sustainability fundamentals, and the rating actions taken reflect
Chaco's insufficient liquidity to cover 2020 debt service. The
latter is best suited with Fitch's 'C' rating definition. The
province's use of the cure period reflects its intention to
initiate negotiations with its creditors to reach an agreement
regarding the note's current terms. The province faces pressures in
public health due to the coronavirus pandemic, and resulting
current economic crisis, which has limited its fiscal capacity.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
Chaco's 'Vulnerable' Risk Profile reflects a 'Weaker' evaluation
according to Fitch's six key risk factors, and the country's
structural weaknesses in which Argentine LRGs operate. Fitch's
factors include the vulnerable macroeconomic context, the ongoing
sovereign debt restructuring process, and the province's recent
near default event.
Revenue Robustness: 'Weaker'
Similar to Argentine peers, Chaco's revenue structure relies highly
on federal transfers from the federal co-participation tax-sharing
regime, with current transfers representing around 85% of its total
revenues, according to year-end preliminary figures. The 'Weak'
assessment considers the complex and imbalanced fiscal framework
and that the federal transfers come from a 'RD' sovereign
counterparty with negative economic growth prospects, currently
under economic recession. In 2018, national GDP dropped 2.5% in
real terms, a further 2.2% in 2019, and is expected to drop more
than 11% during 2020. Weak and volatile national economic
performance is also factored into Fitch's revenue robustness Key
Rating Factor assessment.
Co-participation transfers are a very important determinant of
subnational fiscal performance and a source of secure revenue, as
of YE 2019 transfers of national origin represented around 53.7% of
consolidated provincial operating revenues. For 2020,
co-participation transfers show an accumulated 14.6% inter-annual
real term drop from January-June relative to the same period of
2019. At the time, the nation's future economic prospects are
uncertain until it resolves its debt situation; therefore,
predictability of the amount of transfers is also clouded,
especially the re-taking of additional fiscal consolidation
agreements or new fiscal reform initiatives.
Revenue Adjustability: 'Weaker'
Fitch believes that local revenue adjustability is low, and is
challenged by the country's large and distortive tax burden. The
volatile, weak, and negative macroeconomic environment also limits
Argentine LRGs' ability to increase tax rates and expand tax bases
to boost their local operating revenues. Structurally high
inflation also constantly erodes real-term revenue growth and
affects affordability.
Provincial jurisdictions have legal autonomy to set tax rates on
local revenues that mainly consist of turnover taxes (Ingresos
Brutos) and stamps. For Chaco, local taxes represented around 12.3%
of total revenues at YE 2019, reflecting low fiscal autonomy and a
reliance on federal automatic transfers from the co-participation
regime. Additional taxation for Argentine LRGs is limited, due to
the jurisdictions' 2017 legal pledge. The fiscal pact between the
nation and provinces requires a gradual harmonization to lower
maximum tax rates on turnover tax rates to partially relieve the
country's high tax burden. Amendments to the pact have been made
due to macroeconomic vulnerabilities in an attempt to alleviate
provincial finances. However, local revenues are still affected in
real terms, due to the negative macroeconomic environment and
structurally high inflation.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities,
including healthcare, education, water, transportation, and other
services. The country's fiscal regime is structurally imbalanced
regarding revenue-expenditure decentralization. In addition, during
2020, spending decentralization could continue to rise in the
current context of sovereign debt distress, transferring more
expenditure responsibilities and fiscal pressure to subnational
governments, coupled with higher expenditure pressures in
healthcare due to the coronavirus pandemic. During 2020, Argentine
LRGs faced important real term revenue drops, and as a result,
operating expenditure (opex) will grow at a higher rate than
operating revenues. Therefore, operating balances will decrease
across the portfolio.
Since 2018, the province has recomposed its margins from negative
territory towards a positive operating balance of 8.5% and 8.6% of
operating revenues in 2018 and 2019, respectively. As of March
2020, before the coronavirus pandemic, Chaco had stable margins.
However, considering the current macroeconomic context and the
province's current refinancing risk levels, Fitch estimates a low
operating balance of 1.8%. The Province of Chaco is among the 13
provinces that did not transfer their pension schemes to the
nation, thus it is responsible for any shortfall pension deficit
funding, which represents an additional expenditure burden and
risk.
Another weakness is Argentina's structurally high inflation, which
pressures expenditures. The lagged effect that inflation tends to
have on expenditures because of real-term wage recomposition
expectations, compounds the weakness of expenditure predictability,
or sustainability in Fitch criteria terminology. Currency
depreciation also negatively affects expenditure costs, such as
capex projects.
Expenditure Adjustability: 'Weaker'
According to YE 2019 preliminary data, Chaco's share of operating
expenditure/ total expenditure was around 85%, with staff expenses
representing a rigid 42% of total expenses. Chaco's leeway or
flexibility to cut expenses is viewed as weak relative to
international peers, considering that only a low average 12.4% of
the province's total expenditure corresponds to capex. Similar to
other Argentine peers, the province has very high infrastructure
needs; therefore, increasing capex does not translate into economic
growth due to the important infrastructure lag, which also reflects
minimal flexibility to adjust capex.
Liabilities and Liquidity Robustness: 'Weaker'
Chaco's debt is comprised of a balanced combination of local (59%)
and external market (41%) liabilities. At YE 2019, long-term debt
totaled ARS39 billion, with an increase of around 60% relative to
2018 due to currency depreciation and debt with the nation. Debt
sustainability metrics are assessed at very weak levels, the
increased burden of debt service payments follows the sharp peso
depreciations of 50% in 2018 and 37% in 2019 versus the U.S.
dollar. Amid sharp currency depreciation, debt and liquidity
management becomes challenging.
Unhedged foreign currency debt exposure is an important structural
weakness considered in this Key Rating assessment, as is capital
market discipline, which is currently heightened by a distressed
'RD' rated sovereign in the process of restructuring its debt. This
curtails external market access to LRGs. Chaco's capital maturities
are pushed towards 2022-2024 when the senior unsecured bond begins
its capital balloon payments.
For 2020 the province is currently working towards debt and
liquidity management, as reflected in its recent announcement of an
intended debt negotiation.
Liabilities and Liquidity Flexibility: 'Weaker'
For liquidity, Argentine provinces rely mainly on their own
unrestricted cash. The national framework in place regarding
liquidity support and funding available to subnationals is
perceived as weak by Fitch, as there are no emergency-support
liquidity mechanisms, and considering that a sovereign's external
market access affects the entity's refinancing capacity. At YE
2019, according to preliminary data Chaco's unrestricted cash
totalled ARS3.8 billion with a 3.2x liquidity coverage ratio;
however, for 2020 Fitch estimated it at 0.08x, reflecting a high
risk of liquidity being insufficient to cover 2020 debt service
payments.
Debt sustainability: 'b' category
Due to the projected negative operating balance for 2020, Chaco's
primary metric of payback (net adjusted debt/operating balance) is
expected to be between 18 and 25 years, resulting in a 'b' debt
sustainability score. Its secondary metric of actual debt service
coverage ratio (ADSCR) is expected below 1x for 2020 and at the 'b'
level. The weak debt metrics resulted in a 'b' debt sustainability
score.
Chaco is located in the northeast region of Argentina and has
improving socioeconomic indicators. Chaco has an estimated
population of around 1.3 million, less than 3% of Argentina's
population. The regional economy is influenced by the service
sector, which employs 85,000 people, and is the main employer.
Soybeans are the most important commodity, followed by sunflower
seeds, despite a historical prevalence of cotton production from
public policies, especially through guaranteed loans with reduced
rates to producers.
ESG Considerations
The Province of Chaco has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact the weak regulatory framework and
national policies of the sovereign have over the province.
The Province of Chaco has an ESG Relevance Score of '4' for
Creditor Rights, which reflects the breach of legal documentation
stating the full debt service payments, affecting its willingness
to pay evaluation.
DERIVATION SUMMARY
Chaco has a 'Vulnerable' Risk Profile and a 'b' debt sustainability
score. Due to the province's missed payment, and according to
Fitch's rating definitions, Fitch positions the ratings at 'C'.
KEY ASSUMPTIONS
Fitch's rating case scenario is a "through-the-cycle" scenario,
which incorporates a combination of revenue, cost and financial
risk stresses. It is based on the 2015-2019 figures and 2020
projected ratios.
The key assumptions for Fitch's rating case scenario include:
-- 25.6% yoy increase in operating revenue, including a real term
decrease in taxes and federal transfers in 2020;
-- 35% yoy increase in operating expenditure;
-- Net capital balance of around minus ARS1.1 billion in 2020;
-- Cost of debt considers non-cash debt movements due to currency
depreciation with an exchange rate of ARS88.2 per USD.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Curing of the missed interest payment coupled with better debt
sustainability metrics;
-- Chaco's ratings are constrained by Argentina's Country
Ceiling.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Failure to cure the missed interest payment from the province
at expiration of the grace period.
ESG CONSIDERATIONS
The Province of Chaco has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact the weak regulatory framework and
national policies of the sovereign have over the province.
The Province of Chaco has an ESG Relevance Score of '4' for
Creditor Rights, which reflects the breach of legal documentation
stating the full debt service payments, affecting its willingness
to pay evaluation.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
CHUBUT PROVINCE: Fitch Affirms CC LT IDRs
-----------------------------------------
Fitch Ratings has affirmed Province of Chubut's Long-Term Foreign-
and Local-Currency Issuer Default Ratings (IDRs) at 'CC'. The IDRs
of Argentina are at 'RD'. Fitch also affirms the 'CC' ratings for
Chubut's 7.75% senior secured notes for USD650.0 million due 2026.
Fitch relied on its rating definitions to position the province's
ratings. The 'CC' rating level indicates a default of some kind
appears probable whereas a 'C' rating indicates a default or
default-like process has begun. Tight financial conditions and less
liquidity driven by growing expenditures amid an economic lockdown
due to the coronavirus pandemic will make restructuring of their
debt challenging.
The ratings reflect Chubut's standalone credit profile (SCP) of
'cc' resulting from a combination of 'Vulnerable' risk profile and
a 'cc' debt sustainability assessment. The positioning of the SCP
captures a very stressful macroeconomic environment that weights
the primary and secondary debt sustainability metrics toward YE
2020.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
Province of Chubut's 'Vulnerable' risk profile reflects its
'Weaker' assessment on all the province's six key risk factors in a
combination with an 'RD' on Argentina's sovereign rating. Argentine
Local and Regional Governments (LRGs) operate in a context of a
weak institutional revenue framework and sustainability, high
expenditure structures, and tight liquidity and FX debt risks;
further worsened by macroeconomic recession, high inflation, sharp
currency depreciation and market uncertainty.
Revenue Robustness: 'Weaker'
The 'Weaker' assessment of Chubut's revenue robustness reflects the
evolving nature of the national fiscal framework, its moderate
dependence on a weak sovereign counterparty for a portion of its
total revenue (five-year average 41.0%) and uncertain revenue
growth prospects amid a macroeconomic environment defined by high
inflation, negative GDP growth, and a lingering economic downturn
due to the coronavirus. Its wealth metrics are moderately above the
national average, which materially lags behind international
peers.
Operating revenue is mostly made up of taxes (2019: 20.9% of
revenue) and oil and gas royalties (2019: 27.2%), the growth
prospects of which are constrained by a weak economic environment,
low oil prices, and disruptions caused by the coronavirus pandemic.
Federal non-earmarked transfers (coparticipaciones) have grown in
nominal terms but declined in real terms due to high inflation, but
still account for a share of 38.3% of operating revenue.
This revenue structure highlights a moderate fiscal autonomy and
reliance on cyclical oil and gas royalties and co-participations.
These transfers are sourced from the federal government, which, in
Fitch's view, will be largely impacted by the pandemic lockdown,
impairing revenue sustainability. As of July 2020,
co-participations to Chubut are decreasing at 14.2% in real terms
yoy.
Revenue Adjustability: 'Weaker'
The Province of Chubut's ability to generate additional revenue in
response to possible economic downturns is limited. The province
has formal tax-setting authority over several local taxes and fees
that accounted for about 29.3% of total revenue in 2019. Its
ability to raise revenue is constrained by the moderate income of
residents by international standards and social-political
sensitivity to tax increases. However, income metrics are distorted
by a high economic dependence on non-renewable resources.
Fitch considers that local revenue adjustability is low and is
challenged by the country's large and distortive tax burden. The
negative macroeconomic environment also limits the province's
ability to increase tax rates and expand tax bases to boost their
local operating revenues. Structurally high inflation also
constantly erodes real-term revenue growth and affects
affordability. In this regard, Fitch believes that tax revenues are
expected to grow slower than inflation.
Expenditure Sustainability: 'Weaker'
The province's expenditure framework is unbalanced, leading to its
'Weaker' assessment of its sustainability. Spending during the last
five years has been influenced by high inflation and reallocation
of spending responsibilities. Currently, Chubut is largely
responsible for education, healthcare, transportation and other
services that are counter-cyclical in nature.
The country's fiscal regime is structurally imbalanced regarding
revenue-expenditure decentralization, and since the nation's
standby agreement with the IMF, the federal government transferred
some additional expenditure responsibilities to the provinces by
cutting current and capital transfers, as well as subsidies in the
transport and electricity sector. In Fitch's view, spending
decentralization could continue to rise in the current context of
sovereign debt distress, adding more expenditure and fiscal
pressure to subnational governments.
Chubut's operating margins benefited from increased oil royalty
revenues in 2018. However, for 2019 the increased was moderate at
33% in nominal terms. The province's prudent fiscal policies and
expenditure controls are hindered by Argentina's structurally high
inflation that pressures expenditures. The lagging effect that
inflation tends to have on outlays because of real-term wage
recomposition expectations compounds the weakness of expenditure
predictability, or sustainability in Fitch criteria terminology.
Currency depreciation further negatively affects costs, such as
capex projects.
Expenditure Adjustability: 'Weaker'
Fitch views leeway or flexibility to cut expenses for the province
as weak relative to international peers, considering only an
average of around 15.5% of consolidated provincial total
expenditures corresponded to capex from 2015-2019, decreasing
toward 9.5% at YE 2019. Compared with international peers, Chubut
has a high share of operating expenditure to total expenditure, at
around 82.6% during 2019. Staff expenses represented a rigid 80.5%
of operating expenditure, deemed high relative to international
peers, and triggered by a high inflation environment.
Chubut has no contingent liabilities related to pension
obligations. The province did not transfer its pension scheme to
the nation. The province pension system functions on a
pay-as-you-go basis and carries a structural deficit. The annual
pension deficit has been partially mitigated by funding transfers
from the National Administration of Social Security (ANSES) since
2016. If Social Security Institution financial performance is
included, the province's operating balance for 2019 would be 2.1%
versus. 2.8%.
Liabilities and Liquidity Robustness: 'Weaker'
On the prudential regulation front, national rules on debt and
liquidity management have a weaker track record of enforcement
compared with regional peers, such as Brazil, Colombia or Mexico.
Compliance with the Federal Fiscal Responsibility Law that limits
debt service to less than 15% of net current revenues carries no
stringent consequences if breached, and adherence to the law is
optional. Also, limited local capital markets led LRGs to issue
debt in foreign currency, causing this structural reliance on
external markets for financing, because local currency options
generally carry higher financial costs and shorter terms due to the
high-inflation environment.
Direct debt increased by about 59.4% in 2019 because of currency
depreciation, totaling around ARS58.3 billion. In the current
environment of high inflation and currency depreciation, an
important rating risk is that approximately 84.8% of Chubut's
direct debt is denominated in foreign currency, mainly in US
dollars. On a positive note, 80.4% of its total debt has a fixed
interest rate. Nonetheless, the province faces debt-capital
payments peaks in 2021 for an estimated ARS14.0 billion. There were
no external issuances from provinces in 2019 due to market
volatility and vulnerability. Foreign currency debt was used to
finance capex outlays and refinance debt.
Since the external market shutdown in 2018, Chubut faces scarcer
financing sources to cover fiscal imbalances and debt services, in
an environment of structurally weak liquidity and sovereign
distresses. Capital market discipline is hindered by a protracted
macroeconomic downturn (recession, high inflation and sharp
currency depreciation in the past decade), and currently heightened
by a distressed 'RD' rated sovereign that is in the process of
restructuring its debt, thus curtailing external market access to
the province.
Amid sharp currency depreciation (50% in 2018 and 37% in 2019
versus the U.S. dollar) debt and liquidity management becomes
challenging. Fitch believes that deteriorating operating balances
have hampered debt service coverage ratios, even when Bocade
(USD650 million, 7.75%, due 2026) and Bopro (USD50.0 million,
8.875%, due 2023) payments are secured by oil and gas royalties, as
Bocade's grace period ended, and will start amortizing on Oct. 26,
2020 (USD27.0 million/ARS1.97 billion). The province continues to
remain current in their debt obligations as has been the case to
date despite the sovereign default.
Chubut has weak debt metrics. Its direct debt represented a high
35.4x of its operating balance in 2019. As of July 2020, oil
royalties covered 0.70x the debt service for Bocade, below the
minimum required royalties' coverage of 1.35x. A trigger event has
been activated by the Trustee. Chubut has 180 consecutive days to
cure this event. In the meantime, excess collections will be
retained and used as it is stipulated in the transaction documents.
Fitch will monitor how this event unfolds.
The process of sovereign debt renegotiation is also influencing
subnational-level debt policy decisions; as such, on Aug. 6, 2020,
the local congress of Chubut approved Law II No. 255 to reinstate
sustainability to the FC long term debt; the law covers both senior
secured bonds Bocade and Bopro. Sovereign market access will
ultimately determine subnational access. Fitch will closely monitor
this process so as to assess any potential credit event that could
trigger an exchange offer as defined in its Distressed Debt
Exchange Rating Criteria.
Liabilities and Liquidity Flexibility: 'Weaker'
Fitch perceives the Argentine national framework in place regarding
liquidity support and funding available to subnationals as
'Weaker', as there are no formal emergency liquidity support
mechanisms established or bail-out mechanisms. The national
government can support Chubut in the form of a friendly creditor,
such as the availability of some programs and loans to provinces
from federal trust funds, and also through co-participation
advancements. However, the current macroeconomic environment
constrains the predictability, size and timing of this support. The
Argentine government's 'RD' ratings also drive the assessment of
such support to 'Weaker', considering counterparty risk.
The current context of national capital controls is an additional
weakness captured in the liquidity flexibility assessment, as the
imposition of exchange regulations could affect LRGs' ability to
fulfill their financial obligations amid sovereign debt distress.
At YE 2019, Chubut's liquidity metrics weakened to 2.6% of total
revenue. The economic lockdown triggered by coronavirus and lower
than expected oil prices have hindered operating balance,
increasing payables, and deteriorating Chubut's liquidity metrics
leading to delays in commercial payments and salaries.
Debt sustainability: 'b' category
Fitch classifies Province of Chubut as a type B LRG, as it covers
debt service from cash flow on an annual basis.
In line with its LRG criteria, for an entity with base case
financial profile indicating an SCP of 'b' or below, the base case
analysis alone may be sufficient to evaluate the risk of default
and transition for the debt. Therefore, in the case of Chubut,
Fitch's base case is the rating case which already incorporates a
very stressful scenario. Considering the current adverse economic
scenario, sovereign debt distress situation, and economic and
fiscal uncertainty, Fitch is only projecting a rating case for the
year-end 2020. Debt sustainability metrics are analyzed to evaluate
the Province of Chubuts' specific debt repayment capacity and
liquidity position.
It is worth mentioning that in circumstances other than those
previously referred, Fitch's rating case will incorporate a
negative shock from the coronavirus pandemic to the city's economy
and fiscal accounts for the next five years.
Therefore, under Fitch's rating case the debt payback ratio (net
adjusted debt/operating balance) - the primary metric of debt
sustainability for type B LRGs - will fall above 25x towards YE
2020, which corresponds to 'b' assessment. The actual debt service
coverage ratio (operating balance-to-debt service, ADSCR) will
weaken at below 1.0x in its rating case, which leads us to a final
'b' debt sustainability. A negative operating balance underpins
debt sustainability score.
Chubut is located in the Patagonian region of Argentina, where
socioeconomic indicators tend to be better than the national
average. Chubut's economy is based on services. The province is in
a strategic geographic position and is the country's largest
oil-producing province.
DERIVATION SUMMARY
Chubut's 'cc' SCP reflects a combination of a 'Vulnerable' risk
profile and an 'b' debt sustainability assessment. However, due to
the currently low sovereign rating levels Fitch positions the
ratings according to Fitch's rating definitions to scale to 'C'
from 'CCC' ratings. Fitch has relied on its rating definitions to
position the province's ratings and SCP. The positioning of the SCP
also factors in national and international peer comparison. No
other factors affect the rating.
KEY ASSUMPTIONS
Quantitative assumptions - issuer-specific
In line with its LRG criteria, for an entity with base case
financial profile indicating an SCP of 'b' or below, the base case
analysis alone may be sufficient to evaluate the risk of default
and transition for the debt. Therefore, in the case of Chubut,
Fitch's base case is the rating case which already incorporates a
very stressful scenario. It is based on 2015-2019 figures and on
updated figures as of 1H2020.
The key assumptions for the scenario include:
- 14.8% yoy increase in operating revenue, including a real term
decrease in taxes and federal transfers in 2020
- 43.4% yoy increase in operating expenditure
- net capital balance of around minus ARS9.1 billion in 2020;
- Cost of debt considers non-cash debt movements due to currency
depreciation, assuming an exchange rate of 88.2 for 2020.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- ADSCR improving to above 1.0x on a sustained basis due to
higher revenues fueled by better economic prospects along with a
containment in the expenditure front. Chubut ratings are
constrained by the Sovereign Country Ceiling.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- If the Province of Chubut enters into a grace period, cure
period, or any formal announcement by the province or their agent
of a potential exchange offer that is assessed under its
'Distressed Debt Exchange Rating 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).
NEUQUEN PROVINCE: Fitch Downgrades LT IDRs to C
-----------------------------------------------
Fitch Ratings has downgraded Province of Neuquen's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) to 'C'
from 'CCC'. In addition, Fitch has downgraded Neuquen's TICADE
Series I, 8.625% senior secured bond for USD348.69 million due May
12, 2028 to 'C' from 'CCC' and TIDENEU, 7.5% senior unsecured bond
for USD366 million due April 27, 2025 to 'C' from 'CCC'. The bonds
are rated at the same level of Neuquen's IDRs. Neuquen's Standalone
Credit Profile (SCP) was also lowered to 'c' from 'ccc'. Fitch has
relied on its rating definitions to position the province's ratings
and SCP.
The action reflects Fitch's expectations that Neuquen's liquidity
is insufficient to cover its 2020 debt service and financing needs,
and reflects the recent consent solicitation process launched by
the province on Aug. 10, 2020 to amend the province's TICADE and
TIDENEU debt terms and conditions in a context of financial and
debt distress, thus classifying as a distressed debt exchange (DDE)
debt restructuring proposal with probability of execution in the
near term. The province's proposed debt restructuring to its notes'
indentures stem from important liquidity pressures driven by an
important real-term revenue drop due to the coronavirus pandemic
and current economic crisis and 2020 global oil shock, limiting its
fiscal capacity.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
Neuquen's Vulnerable Risk Profile reflects a 'Weaker' evaluation on
the six key risk factors (KRFs), considering the country's
structural weaknesses in which Argentine local and regional
governments (LRGs) operate.
Revenue Robustness: 'Weaker'
The 'Weak' revenue robustness assessment considers both the
province's local revenue dependency on the hydrocarbon sector
(highly cyclical economic activity) and the country's complex and
imbalanced fiscal framework for LRGs. Relative to other argentine
peers, Neuquen has a lower reliance on federal transfers from the
federal co-participation tax-sharing regime, with current transfers
representing around 23.5% of total revenues being mostly automatic
transfers from the co-participation scheme, according to YE 2019
preliminary figures.
Such federal transfers come from a Restricted Default (RD)
sovereign counterparty with negative economic growth prospects
currently under economic recession. In 2018 national GDP dropped
2.5% in real terms, a further 2.2% in 2019, and is expected to drop
more than 11% during 2020. Weak and volatile national economic
performance is also factored into Fitch's revenue robustness KRF
assessment. Overall, for 2020, co-participation transfers show an
accumulated 11% inter-annual real-term drop from January to June
relative to the same period 2019. At the time there is uncertainty
of the nation's future economic prospects until its debt distress
situation resolves, and therefore predictability of transfers is
also clouded, especially the re-taking of additional fiscal
consolidation agreements or new fiscal reform initiatives.
Revenue Adjustability: 'Weaker'
Fitch believes that local revenue adjustability is low, and
challenged by the country's large and distortive tax burden. The
volatile, weak, and negative macroeconomic environment also limits
LRG's ability to increase tax rates and expand tax bases to boost
their local operating revenues. Structurally high inflation also
constantly erodes real-term revenue growth and affects
affordability.
Hydrocarbon royalties are an important component of Neuquen's local
and total revenues, at YE 2019 according to preliminary figures,
these accounted for 28.4% of the province's total revenues and
local tax revenues represented 31.6% of total revenues.
Hydrocarbon royalties are linked to the U.S. dollar and payable
monthly in Argentine pesos. However, the hydrocarbon market in
Argentina is subject to federal government interference, regulatory
uncertainty and external price shocks. Commodity-based revenues add
cyclicality and volatility to the financial performance of Neuquen.
The volatility of these revenues due to exogenous determinants,
such as market conditions and national regulation is thus an
important weakness considered in the KRF assessment. The revenue
impact of an expected decline in the hydrocarbon sector activity
would be difficult to compensate by increases in local taxes, as
Neuquen's tax revenues are also highly concentrated in oil and gas
sector economic activity levels.
According to January-June 2020 data, hydrocarbon royalties show a
19.9% real-term drop, driven by 2020 lower global international
prices and economic activity levels. Local taxes that are linked to
sectorial activity also show a similar real-term decline in the
same period. Although the national government intervened in the
sector through Decree No. 488 of May 18, 2020 by determining a
minimum local market price subsidy at USD45/bbl until Dec. 31, 2020
that would have an effect since June, however Fitch expects a
nominal and real term decline during 2020 in the province's
hydrocarbon royalty revenues.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities,
including healthcare, education, water, transportation and other
services. The country's fiscal regime is structurally imbalanced
regarding revenue-expenditure decentralization, and during 2020,
spending decentralization could continue to rise in the current
context of sovereign debt distress, transferring more expenditure
responsibilities and fiscal pressure to subnational governments,
coupled with higher expenditure pressures in healthcare due to the
coronavirus pandemic. During 2020 argentine LRGs are facing
important real term revenue drops and in consequence operating
expenditure (opex) will grow at a higher rate than operating
revenues, therefore operating balances will decrease across the
portfolio.
According to preliminary figures at YE 2019, Neuquen's operating
balance decreased to 8.8% of its operating revenues from 13.8% in
2018. During January-June 2020, Neuquen's opex grew above operating
revenues in nominal and in real terms (40.7% versus 20.4%
respectively), decreasing the operating balance toward negative
values to a -4.5% versus a 10.6% margin in the same period of 2019.
Due to the important economic impact for 2020, Fitch estimates a
-14% operating balance reflected in the province's worsened
liquidity and higher credit risks. Also, the Province of Neuquen is
among the provinces that did not transfer their pension schemes to
the nation, thus the province is responsible for any shortfall
pension deficit funding that represents an additional expenditure
burden and risk.
Another weakness is Argentina's structurally high inflation
pressures expenditures. The lag effect that inflation tends to
exert on expenditures because of real-term wage recomposition
expectations compounds the weakness of expenditure predictability,
or sustainability in Fitch criteria terminology. Currency
depreciation also negatively affects expenditure costs, such as
capex projects.
Expenditure Adjustability: 'Weaker'
According to YE 2019 preliminary data, Neuquen's share of operating
expenditure/total expenditure was of around 84.3%, with staff
expenses representing a rigid 57% of total expenses, which is
deemed high relative to international peers. Neuquen's leeway or
flexibility to cut expenses is viewed as weak relative to
international peers, considering that only a low 2015-2019 average
10.9% of the province's total expenditure corresponds to capex.
Similar to other Argentine peers, the province has very high
infrastructure needs. Due to the high level of infrastructure
needs, increasing capex does not translate into economic growth due
to the important infrastructure lag, which also reflects that there
is not much flexibility to adjust capex.
Liabilities and Liquidity Robustness: 'Weaker'
Neuquen's debt is mainly composed of its issuances in the external
market: At YE 2019 debt totaled ARS75.4 billion, with an increase
of around 57.8% relative to 2019, mainly due to currency
depreciation, as around 87% of total debt is denominated in foreign
currency, unhedged.
Debt sustainability metrics are already assessed at very weak
levels, the increased burden of debt service payments follows the
sharp peso depreciations of 50% in 2018 and 37% in 2019 versus the
U.S. dollar. Amid sharp currency depreciation, debt and liquidity
management becomes challenging. Unhedged foreign currency debt
exposure is an important structural weakness considered in this KRF
assessment, as is capital market discipline that is currently
heightened by a distressed 'RD' rated sovereign that is in the
process of restructuring its debt, thus curtailing external market
access to LRGs.
Neuquen's fiscal burden ratio was of 62.8% in YE 2019, and the
province's short to medium-term debt capital maturities pressure
the entity's debt service coverage levels which averaged 0.3x the
operating balance during 2015-2019 and are projected to be negative
0.9x during 2020, thus reflecting the province's high refinancing
risk under a current context of curtailed external market access.
Regarding Neuquen's TICADE notes, these are secured with
hydrocarbon royalties, which are payable in pesos but linked to the
U.S. dollar. However, these revenues are being negatively affected
by the 2020 economic and hydrocarbon price shock. TICADE begun its
quarterly capital amortizations during May 12, 2020 and presented
lower coverage levels of around 1.4x and in Aug. 12, 2020 of 1.11x,
below the required 1.35x due to the impact of lower hydrocarbon
royalties. A trigger event has been activated by the Trustee and
the province has 180 consecutive days to cure the event, Fitch will
monitor how this topic unfolds. TICADE's current outstanding amount
is USD327.7 million and the next quarterly payment is due Nov.12,
2020. TIDENEU's outstanding is of USD366 million, the bond has an
upcoming semi-annual interest payment due on Oct. 27, 2020 for
USD13.725 million. TIDENEU has three equal balloon capital
amortizations due until April 27, 2023, April 27, 2024, and April
27, 2024.
Neuquen's recent Consent Solicitation announced on Aug. 10, 2020
includes the TICADE and TIDENEU bonds and in general terms requests
a postponement of principal maturities as well as a reduction in
accrued interests, characteristics of a DDE according to Fitch's
Distressed Debt Exchange Criteria.
Liabilities and Liquidity Flexibility: 'Weaker'
For liquidity, Argentine provinces rely mainly on their own
unrestricted cash. The national framework in place regarding
liquidity support and funding available to subnationals is
perceived by Fitch as weak, as there are no emergency-support
liquidity mechanisms and considering that sovereign's external
market access affects the entity's refinancing capacity.
At YE 2019 according to preliminary data Neuquen's unrestricted
cash totaled ARS3.9 billion with a 1.6x liquidity coverage ratio.
However, for 2020, Fitch estimated a -0.7x ratio, reflecting a high
risk of liquidity being insufficient to cover 2020 debt service
payments. For cash imbalances, Neuquen has been active in the local
market and during July 2020 managed to refinance short-term
Treasury bill maturities for the coming months; however, the entity
still faces a very tight liquidity position relative to its overall
debt servicing.
Debt Sustainability: b' category
Due to the projected negative operating balance for 2020, Neuquen's
primary metric of payback (net adjusted debt/operating balance) is
expected to be above 25 years, resulting in a 'b' score, and its
secondary metric of actual debt service coverage ratio (ADSCR) is
expected to be below 1x for 2020 also in the 'b' level. Both weak
debt metrics resulted in a 'b' debt sustainability score.
Neuquen is located in the southwestern region of Argentina at the
northern end of the region known as the Patagonia and borders
western Chile. The province's economy is highly concentrated in the
hydrocarbon sector, contributing to around 30% of national oil
production (second after Chubut) and 55% of gas production.
ESG Considerations:
Neuquen has an ESG Relevance Score of '4' for Rule of Law,
Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact the weak regulatory framework and
national policies of the sovereign have over the province.
DERIVATION SUMMARY
Neuquen has a Vulnerable Risk Profile and a 'b' debt sustainability
score. However, Fitch has relied on its rating definitions to
position the province's ratings at 'C' and its SCP at 'c'.
KEY ASSUMPTIONS
Fitch's rating case scenario is a "through-the-cycle" scenario,
which incorporates a combination of revenue, cost and financial
risk stresses. It is based on the 2015-2019 figures and 2020
projected ratios. The key assumptions for Fitch's rating case
scenario include:
-- 17.4% yoy increase in operating revenue, including a real-term
decrease in royalties, taxes and federal transfers in 2020;
-- 47% yoy increase in operating expenditure;
-- Net capital balance of around minus ARS10.7 billion in 2020;
-- Cost of debt considers non-cash debt movements due to currency
depreciation with an exchange rate of ARS88.2 per U.S. dollar.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An improved fiscal performance and liquidity position that improve
Neuquen's debt sustainability metrics could have a positive impact
in its ratings. However, the rating will likely remain low, given
high country risks and Argentina's 'CCC' Country Ceiling.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The completion of a debt exchange proposal involving a material
reduction in terms and taken to avoid a traditional payment default
(DDE) would negatively impact Neuquen's ratings toward 'RD' at the
point of execution.
ESG CONSIDERATIONS
Neuquen, Province of: Rule of Law, Institutional & Regulatory
Quality, Control of Corruption: 4
Neuquen has an ESG Relevance Score of '4' for Rule of Law,
Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact the weak regulatory framework and
national policies of the sovereign have over the province.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
YPF SA: Fitch Affirms LT IDRs at CCC
------------------------------------
Fitch Ratings has affirmed the Long-Term Foreign and Local Currency
Issuer Default Ratings (IDRs) of YPF S.A. (YPF) at 'CCC'. Fitch has
also affirmed the company's long-term international senior
unsecured bonds at 'CCC'/'RR4'. Fitch assessed a Standalone Credit
Profile of YPF of 'bb', and withdraws its 'CCC'/'RR4' rating on
YPF's local note USD78.4 million, 1.5x Series XII bond due June 12,
2022, as Fitch no longer rates local issuances in Argentina.
YPF continues to be rated in line with Fitch's Government Related
Entities (GRE) criteria. Nonetheless, the Argentine sovereign
rating is 'RD' following the failure of the authorities to pay
interest due on three sovereign bonds within the stipulated 30-day
grace period that expired on May 22, 2020. The sovereign continues
to finalize its negotiation with creditors for a comprehensive
restructuring of its external bonds. Fitch believes that YPF's
ratings are in line with the country ceiling of Argentina, which at
'CCC' means that default is a real possibility.
YPF is majority owned by the government, and the company is
strategically important to the country. YPF's dominant market share
in the supply of liquid fuels in Argentina, coupled with its large
hydrocarbon production footprint in the country, could expose the
company to government intervention through pricing policies or
investment strategies. Argentina exerts strong control over YPF
through energy regulations and/or its 51% economic interest in the
company. Furthermore, Fitch believes Argentina would have strong
incentives to support the company under a distress situation as a
result of the strong socio-political and financial implications of
a default.
The ratings were withdrawn with the following reason: Other.
KEY RATING DRIVERS
Links to Sovereign: YPF has a close linkage to the Republic of
Argentina from the company's ownership structure as well as recent
government interventions. Argentina controls the company through
its 51% stake, the presence of provincial government officials on
the board of directors and various regulations. In addition, the
republic sometimes governs the company's strategy and business
decisions. The Argentine government has a history of significant
interference in the oil and gas sector. For example, via Decree No.
1277, the government set regulations related to investment levels
in the oil and gas sector and domestic price reference points. In
2019, it issued Decree 566/19, which negatively affected YPF's cash
flows. Although YPF is a leading energy company in Argentina,
government policies continue to present challenges, inhibiting its
business strategy.
Moderate Leverage: Fitch believes YPF has a moderate leverage
profile mostly explained by a high total debt/1P and weak
EBITDA/interest expense ratio in 2020, which is expected to improve
over the rated horizon. Fitch estimates YPF's total debt/EBITDA
will be 3.0x in 2020 and improve to below 2.0x over the rated
horizon, in line with a 'bb' Standalone Credit Profile (SCP), but
YPF's total debt/1P is high, estimated to be USD8.00 per boe, and
consistent with the 'b' category. Furthermore, Fitch estimates
YPF's EBITDA to interest expense will be 2.6x in 2020 and improve
to an average 4.0x thereafter.
High Production Cost Profile: Fitch's rating case assumes
production will remain flat averaging 515,000boed over the rated
horizon. YPF's cost of production is slightly lower than the
guaranteed price under Barril Criollo in 2020 and Fitch's assumed
Brent price for 2021 of USD48.00boe. Fitch estimates YPF's
half-cycle costs of USD26.5boe and full-cycle cost of USD41.5boe,
which are both high and above average for players in the region.
The company's high cost is mostly attributed to higher than average
lifting cost of USD13.5boe and high interest cost per barrel of
USD5.0boe in 2019, estimated by Fitch. The company's full-cycle
break-even implied prices were above weighted average realization
prices for oil and gas, primarily as a result of decreasing
domestic gas prices and high level of gas production, which
accounts for approximately 49% of total production during 2019
(Crude oil production comprised 44% and natural gas liquids 7%).
Volatile Operating Environment: The volatile economic environment
in Argentina has inhibited YPF from implementing its business
strategy - i.e. unconventional development in Vaca Muerta. The
quarantine due to the coronavirus outbreak has further stressed the
company, as demand for fuels has decreased, gasoline volumes
dropped by 70% and diesel by 34%, jet fuel 95%, with a total demand
decrease of 50% in April 2020, compared with the previous year.
Volumes appear to have recovered but remain below historical
averages. Fitch estimates Argentina's real GDP will contract by
11.2% in 2020 - after negative average growth rate over the last
three years. Inflation is expected to average 47% between 2020 and
2022, and government debt/GDP ratio is estimated to be 102% in 2020
and 105% in 2021 - with a majority of government debt being
external 75%-80% over the same time frame.
Increased Capital Controls: YPF has maintained a strong liquidity
profile, but Fitch believes the recently announced capital control
measures - requiring entities with assets abroad to first use those
resources to service international obligations before turning to
Argentina's official currency markets - poses significant risks to
corporates in Argentina including YPF. This measure will pressure
liquidity, as corporates will tap into their international reserves
to comply while simultaneously accumulating cash in Argentina,
which Fitch expects will be more balanced between Argentine pesos
and U.S. dollar. This will expose corporates to greater FX risk
overtime, as their interest expense and debt are predominately in
U.S. dollars.
DERIVATION SUMMARY
YPF's linkage to the sovereign is similar in nature to its Latin
American national oil companies (NOCs) peers, namely PEMEX
(BB-/Negative), Petrobras (BB-/Negative) and Ecopetrol
(BBB-/Negative), and government-owned entities ENAP (A/Negative),
and Petroperu (BBB+/Stable). These companies all have strong
linkage to their respective sovereigns given their strategic
importance to each country and the potentially significant negative
social and financial implication a default could have at a national
level.
YPF's upstream business closest peers are Pemex, Petrobras and
Ecopetrol. YPF's total production averaged 514,000boed, and the
reserve life was 5.7 years, most comparable with Ecopetrol with a
2019 production of 725,000boed and a reserve life of 7.8 years, but
less than Petrobras' production of 2.6 million boed and a reserve
life of 10 years and Pemex's production at 2.8 million boed and a
reserve life of 9.5 years.
YPF has a strong capital structure reporting a gross leverage ratio
defined as total debt/EBITDA of 2.4x in 2019 and total debt/1P of
USD7.67 per boe compared with Ecopetrol at 1.1x in 2019 and USD5.80
total debt/1P, Petrobras at 2.3x and USD6.60 per boe and Pemex at
6.2x and USD14.70 per boe.
Unlike its peers ENAP, Petrobras, Pemex and Petroperu, YPF is not
the sole provider of refined fuels in Argentina. In 2019, the
company had nearly a 60% market share. YPF is an integrated energy
company, similar to Petrobras and Pemex, offering the company more
financial flexibility, while ENAP is predominately a refining
company that sells to marketers. Historically, YPF has operated
autonomously with periodic controls of fuel prices and crude, which
are currently in effect. Similar to Pemex and Petrobras, YPF has
administered an import-parity pricing policy, but is evidence of
government intervention with Decree 466/19 and other price controls
in 2018 to tame inflation, which is projected to be 50% in 2020.
Until recently, YPF has had success in tightening the spread
between import parity and local prices.
When compared with downstream-focused entities ENAP and Petroperu,
YPF has a lower total debt/EBITDA ratio of 2.4x in 2019 compared
with ENAP at 6.7x and Petroperu at 18.0x. Petroperu's elevated
leverage is explained by its investment plan to increase capacity
by 2021, while ENAP has maintained a higher leverage profile for an
extended period of time, but the company is highly strategic for
the Chilean governments, and thus it rating is aligned as a
result.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Average gross production of 515,000boe from 2020-2023;
- YPF will be able to increase domestic prices in pesos somewhat
but not enough to fully reflect the impact from the recent peso
depreciation and international hydrocarbon price increase;
- Criollo barrel of USD45/bbl in place for 2020 and applied
Fitch's price deck thereafter;
- Natural gas prices decrease to USD2.70/MMBTU in 2020,
USD3.00/MMBTU in 2021, USD3.25/MMBTU in 2022 and USD3.57/MMBTU in
2023;
- Capex cut to be FCF positive over the rated horizon due to
refinancing risk;
- Downstream sales volume follow Real GDP forecasts;
- USD111 million of net proceeds associated with the sale of 11%
stake in Bandurria Sur to Equinor and Shell; and a 50% stake in
offshore area CAN_100 to Equinor in 2Q20;
- Fitch ARS/USD forecasts for year average and end of period
during 2020 - 2022;
- Refinancing of all maturing debt during the rated horizon at a
rate of 10%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Foreign Currency (FC) IDR is capped by the country ceiling of
Argentina and thus an upgrade can only occur if there is an upgrade
of the country ceiling of Argentina.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The country ceiling of Argentina is currently at the lowest
level (CCC) allowed under Fitch's sovereign criteria; therefore, a
downgrade of FC and Local Currency IDR would reflect Fitch's belief
that a default of some kind appears probable or a default or
default-like process has begun for the corporate, which will be
represented by 'CC' or 'C' rating.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: YPF reported USD1.3 billion in cash and cash
equivalents in 2Q20. Per Fitch's estimates, this covers roughly one
year of interest expense. The company's debt maturity profile has
improved after the completion of its exchange offer for its USD1.0
billion international note due 2021, where the company received
nearly a 60% acceptance of the offer. Fitch assumes the company
will continue to roll-over all its maturities over the rated
horizon. Lastly, the company's liquidity continues to be challenged
by the capital controls that require companies to utilize their own
U.S. dollar reserves to service U.S. dollar-denominated debt and
imports before accessing the official FX market in Argentina. This
is expected to weaken its flexibility and heighten its risk to peso
devaluation.
ESG CONSIDERATIONS
YPF S.A.: Governance Structure: '4'
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of '3' - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
===========
B R A Z I L
===========
BRAZIL: GDP Monitor Points to 8.7% GDP Drop in Q2 Compared to Q1
----------------------------------------------------------------
Arkady Petrov at Rio Times Online reports that the Brazilian Gross
Domestic Product (GDP) dropped by 8.7 percent in Q2 compared to Q1,
according to the GDP Monitor, calculated by the Brazilian Institute
of Economics of the Getulio Vargas Foundation (Ibre/FGV).
According to the Getulio Vargas Foundation (FGV), the contraction
is the largest second quarter drop in Brazilian history, the report
notes.
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
As reported in the Troubled Company Reporter-Latin America on May
8, 2020, Fitch Ratings affirmed Brazil's Long-Term Foreign Currency
Issuer Default Rating at 'BB-' and has revised the Rating Outlook
to Negative. The Outlook revision to Negative reflects the
deterioration of Brazil's economic and fiscal outlook, and downside
risks to both given renewed political uncertainty, including
tensions between the executive and congress, and uncertainty over
the duration and intensity of the coronavirus pandemic.
On April 10, 2020, the TCR-LA reported that S&P Global Ratings
revised on April 6, 2020, its outlook on its long-term ratings on
Brazil to stable from positive. At the same time, S&P affirmed its
'BB-/B' long- and short-term foreign and local currency sovereign
credit ratings. S&P also affirmed its 'brAAA' national scale rating
and its transfer and convertibility assessment of 'BB+'. The
outlook on the national scale rating remains stable.
ECO SECURITIZADORA: Moody's Rates 161st Series Cert. Caa2
---------------------------------------------------------
Moody's America Latina assigned definitive ratings of Caa2 (sf)
(Global Scale, Local Currency) and Caa2.br (sf) (Brazilian National
Scale) to the 161st series of the 1st issuance of agribusiness
certificates issued by Eco Securitizadora de Direitos Creditorios
do Agronegocio S.A. (Eco Securitizadora). The certificates are
backed by unsecured debentures rated Caa2 (Global Scale, Local
Currency) and Caa2.br (National Scale) issued by S.A. Usina
Coruripe Acucar e Alcool (Coruripe, Caa1, long-term Global Scale,
Local Currency; and B3.br, Brazilian National Scale).
Issuer: Eco Securitizadora de Direitos Creditorios do Agronegocio
S.A.
161st series of the 1st issuance, rated Caa2 (sf) (Global Scale,
Local Currency) / Caa2.br(sf) (Brazilian National Scale)
RATINGS RATIONALE
The Caa2 (sf) (Global Scale, Local Currency) and Caa2.br (sf)
(Brazilian National Scale) ratings assigned to the CRAs are reflect
primarily the willingness and ability of Coruripe to honor the
remaining payments defined in the transaction documents, which is
reflected by the Caa2 (Global Scale, Local Currency) and Caa2.br
(Brazilian National Scale) ratings of the underlying unsecured
debentures backing the CRAs issuances. Any change in the ratings of
the underlying debentures will lead to a change in the ratings of
the CRAs. In addition, Coruripe is responsible for covering all
transaction expenses.
The 161st series of the CRAs pay a floating interest rate
equivalent to DI rate (cumulative daily average accrual of
interbank deposits) plus a spread of 200 bps. Interest is paid on a
quarterly basis, followed by payments of the scheduled remaining
principal according to the transaction documents.
The definitive ratings on the CRAs are based on a number of
factors, among them the following:
- The willingness and ability of Coruripe to make payments on the
underlying debentures.
- Pass through structure: the payment schedule of the CRAs
replicate the scheduled cash flow of the underlying debentures,
with a one-day lag, which allows adequate timing to make payments
on the CRAs. The CRAs make payments that mirror the payments to be
made by the underlying debentures. Also, the coupon is calculated
considering the same interest rate and accrual period.
- The events of default (EOD) on the CRAs mirror those of the
underlying debentures. Therefore, mitigating the risk of having an
EOD on the certificates while the underlying assets are current.
- Coruripe pays the CRAs expenses: Coruripe is ultimately
responsible, under the transaction documents, for all CRAs
expenses.
- No commingling risk: Coruripe makes the payments due on
underlying debentures directly to the respective account of the
CRAs held at Banco Bradesco S.A. (Ba2 long-term bank deposit
rating, Global Scale, Local Currency; and Aa1.br, Brazilian
National Scale).
- Segregated assets: The CRAs benefit from a fiduciary regime
("regime fiduciArio") whereby the assets backing the CRAs are
segregated. These segregated assets are destined exclusively for
payments on the CRAs as well as certain fees and expenses, and is
be segregated from all of the other assets on the issuer's balance
sheet. However, the transaction is subject to residual legal risk
because Eco Securitizadora agribusiness credits can be affected by
the securitization company's tax, labor and pension creditors.
Founded in 1925 and headquartered in Coruripe, State of Alagoas,
Usina Coruripe is a sugar and ethanol producer and electricity
cogenerator with five crushing units, one in the State of Alagoas
and other four in the State of Minas Gerais. In the 2019/2020
harvest, the company generated BRL 2.4 billion in revenues. The
company currently has the largest plant in the Northeast region of
Brazil with 3,000-ton capacity.
Coruripe's ratings also incorporate its scale as one of the 10
largest sugar-ethanol groups in Brazil with a crushing capacity of
15.0 million tons of sugarcane per harvest and a very high capacity
utilization, over 97%. The ratings also reflect its cluster
organization with ample access to sugarcane and logistic
infrastructure and its geographic diversification that provides
some protection against weather and other localized event risks,
while allowing for a more stable production throughout the year,
because of different harvest periods. Historic high capacity
utilization and low land lease costs are among the elements that
contribute for Usina Coruripe's competitive production costs.
Coruripe's has a more flexible cost structure to reduce cost
volatility since the price paid to sugarcane providers is linked to
the company's selling prices instead of a general price index --
such as Consecana.
Coruripe ratings reflect a weak liquidity profile despite the
recently announced debt extension. By extending debt maturities
relating to a total of BRL1.7 billion in bank debt to 5 yearly
amortizations instead of 3 yearly amortizations the company reduced
its imminent refinancing risk and improves its debt amortization
schedule. In March 2020, end of the 2019/2020 harvest year,
Coruripe had BRL605 million in cash, compared to BRL316 million in
the end of the prior harvest. Proforma to the debt extensions
Coruripe will have around BRL843 million in maturities for the
2020/2021 harvest, of which an estimated BRL455 million relating to
working capital and export finance lines which Moody's expected to
be rolled over. Before the announced debt extension, the
amortization schedule, in the 2020/2021 harvest, amounted to BRL1.3
billion.
Eco Securitizadora was established in 2009 and is headquartered in
Sao Paulo. The securitization company specializes in designing and
structuring CRAs to assist companies in the agribusiness sector.
Eco Securitizadora is audited by KPMG Auditores Independentes and
since the beginning of its operations, the securitization company
has issued BRL 21.7 billion of CRAs.
Factors that would lead to an upgrade or downgrade of the ratings:
Any changes in the unsecured ratings of the underlying debentures
will lead to a change in the ratings on the CRAs.
The principal methodology used in these ratings was "Moody's
Approach to Rating Repackaged Securities" published in June 2020.
ECO SECURITIZADORA: Moody's Rates 1st Series Agribusiness Cert Caa2
-------------------------------------------------------------------
Moody's America Latina assigned definitive ratings of Caa2 (sf)
(Global Scale, Local Currency) and Caa2.br (sf) (Brazilian National
Scale) to the 1st series of agribusiness certificates and Caa3 (sf)
(Global Scale, Local Currency) and Caa3.br (sf) (Brazilian National
Scale) to the 2nd series of agribusiness certificates issued by Eco
Securitizadora de Direitos Creditorios do Agronegocio S.A. (Eco
Securitizadora). The 1st series of CRA is backed by the 1st series
of debentures rated Caa2 (Global Scale, Local Currency) and Caa2.br
(Brazilian National Scale) and the 2nd series of CRA is backed by
the 2nd series of debentures rated Caa3 (Global Scale, Local
Currency) and Caa3.br (Brazilian National Scale). Both debentures
were issued by S.A. Usina Coruripe Acucar e Alcool (Coruripe, Caa1,
long-term Global Scale, Local Currency; and B3.br, Brazilian
National Scale).
Issuer: Eco Securitizadora de Direitos Creditorios do Agronegocio
S.A.
1st series of the 7th issuance, assigned definitive ratings of Caa2
(sf) (Global Scale, Local Currency) / Caa2.br (sf) (Brazilian
National Scale).
2nd series of the 7th issuance, assigned definitive ratings of Caa3
(sf) (Global Scale, Local Currency) / Caa3.br (sf) (Brazilian
National Scale)
RATINGS RATIONALE
The Caa2 (sf) (Global Scale, Local Currency) and Caa2.br (sf)
(Brazilian National Scale) ratings assigned to the 1st series of
CRAs and the Caa3 (sf) (Global Scale, Local Currency) and Caa3.br
(sf) (Brazilian National Scale) ratings assigned to the 2nd series
of CRAs reflect primarily the willingness and ability of Coruripe
to honor the remaining payments defined in the transaction
documents, which is reflected by the Caa2 (Global Scale, Local
Currency) and Caa2.br (Brazilian National Scale) ratings of the 1st
series of debentures, and the Caa3 (Global Scale, Local Currency)
and Caa3.br (Brazilian National Scale) ratings of the 2nd series of
debentures, each of which backing the 1st and 2nd series of CRAs,
respectively. Further, the 2nd series of debentures is subordinated
to the 1st series of debentures in the hierarchy to receive any
proceeds triggered by a default event and is therefore rated one
notch below. Any change in the ratings of the underlying debentures
will lead to a change in the ratings of the CRAs. In addition,
Coruripe is responsible for covering all transaction expenses.
The 1st series of CRAs pay a floating interest rate equivalent to
DI rate (cumulative daily average accrual of interbank deposits)
plus a spread of 300 bps. Interest is paid on a monthly basis,
followed by payments of the scheduled remaining principal according
to the transaction documents.
The 2nd series of CRAs pay a floating interest rate equivalent to
DI rate (cumulative daily average accrual of interbank deposits)
plus a spread of 900 bps. Interest is paid on a monthly basis,
followed by payments of the scheduled remaining principal according
to the transaction documents.
The definitive ratings on the CRAs are based on a number of
factors, among them the following:
- The willingness and ability of Coruripe to make payments on the
underlying debentures.
- Pass through structure: the payment schedule of each series of
the CRAs replicate the scheduled cash flow of the underlying
debentures, with a one-day lag, which allows adequate timing to
make payments on the CRAs. The CRAs make payments that mirror the
payments to be made by the underlying debentures. Also, the coupon
is calculated considering the same interest rate and accrual
period.
- The events of default (EOD) on the CRAs mirror those of the
underlying debentures. Therefore, mitigating the risk of having an
EOD on the certificates while the underlying assets are current.
Further, in case early amortization is triggered due to an EOD, the
debentures' waterfall switches to sequential and, therefore, the
1st series of debentures is fully amortized first followed by the
2nd series of debentures. The waterfall of payments is mirrored in
the CRAs with the 1st series fully amortizing first followed by the
2nd series of CRA.
- Coruripe pays the CRAs expenses: Coruripe is ultimately
responsible, under the transaction documents, for all CRAs
expenses.
- No commingling risk: Coruripe makes the payments due on the two
series of debentures directly to the respective account of the CRAs
held at Banco Bradesco S.A. (Ba2 long-term bank deposit rating,
Global Scale, Local Currency; and Aa1.br, Brazilian National
Scale).
- Segregated assets: The CRAs benefit from a fiduciary regime
("regime fiduciArio") whereby the assets backing each series of
CRAs are segregated. These segregated assets are destined
exclusively for payments on the CRAs as well as certain fees and
expenses, and will be segregated from all of the other assets on
the issuer's balance sheet. However, the transaction is subject to
residual legal risk because Eco Securitizadora agribusiness credits
can be affected by the securitization company's tax, labor and
pension creditors.
Founded in 1925 and headquartered in Coruripe, State of Alagoas,
Usina Coruripe is a sugar and ethanol producer and electricity
cogenerator with five crushing units, one in the State of Alagoas
and other four in the State of Minas Gerais. In the 2019/2020
harvest, the company generated BRL 2.4 billion in revenues. The
company currently has the largest plant in the Northeast region of
Brazil with 3,000-ton capacity.
Coruripe's ratings also incorporate its scale as one of the 10
largest sugar-ethanol groups in Brazil with a crushing capacity of
15.0 million tons of sugarcane per harvest and a very high capacity
utilization, over 97%. The ratings also reflect its cluster
organization with ample access to sugarcane and logistic
infrastructure and its geographic diversification that provides
some protection against weather and other localized event risks,
while allowing for a more stable production throughout the year,
because of different harvest periods. Historic high capacity
utilization and low land lease costs are among the elements that
contribute for Usina Coruripe's competitive production costs.
Coruripe's has a more flexible cost structure to reduce cost
volatility since the price paid to sugarcane providers is linked to
the company's selling prices instead of a general price index --
such as Consecana.
Coruripe ratings reflect a weak liquidity profile despite the
recently announced debt extension. By extending debt maturities
relating to a total of BRL1.7 billion in bank debt to 5 yearly
amortizations instead of 3 yearly amortizations the company reduced
its imminent refinancing risk and improves its debt amortization
schedule. In March 2020, end of the 2019/2020 harvest year,
Coruripe had BRL605 million in cash, compared to BRL316 million in
the end of the prior harvest. Proforma to the debt extensions
Coruripe will have around BRL843 million in maturities for the
2020/2021 harvest, of which an estimated BRL455 million relating to
working capital and export finance lines which Moody's expected to
be rolled over. Before the announced debt extension, the
amortization schedule, in the 2020/2021 harvest, amounted to BRL1.3
billion.
Eco Securitizadora was established in 2009 and is headquartered in
Sao Paulo. The securitization company specializes in designing and
structuring CRAs to assist companies in the agribusiness sector.
Eco Securitizadora is audited by KPMG Auditores Independentes and
since the beginning of its operations, the securitization company
has issued BRL 21.7 billion of CRAs.
Factors that would lead to an upgrade or downgrade of the ratings:
Any changes in the unsecured ratings of the underlying debentures
will lead to a change in the ratings on the CRAs.
The principal methodology used in these ratings was "Moody's
Approach to Rating Repackaged Securities" published in June 2020.
=========
C H I L E
=========
LATAM AIRLINES: Clashes with Creditors, Pushes for $9.8MM DIP Fee
-----------------------------------------------------------------
Law360 reports that LATAM Airlines Group clashed with creditors on
July 15, 2020, as it told a New York bankruptcy judge that a
"modest" $9.75 million breakup fee is needed to secure a $1.3
billion debtor-in-possession financing package. At a hearing via
telephone, LATAM told U.S. Bankruptcy Judge James Garrity Jr. that
the fee is a small but necessary price to pay for a needed
financial package, while unsecured creditors and bondholders
argued
that the fee brings no benefits to the company and could chill
attempts to seek alternative financing.
About LATAM Airlines
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise.
LATAM Airlines Group S.A. is the largest passenger airline in South
America. Before the onset of the COVID-19 pandemic, LATAM offered
passenger transport services to 145 different destinations in 26
countries, including domestic flights in Argentina, Brazil, Chile,
Colombia, Ecuador and Peru, and international services within Latin
America as well as to Europe, the United States, the Caribbean,
Oceania, Asia and Africa.
LATAM Airlines Group S.A. and its 28 affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25,
2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United
States are part of the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as general
bankruptcy counsel; FTI Consulting as restructuring advisor; and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. Prime Clerk LLC is the claims agent.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Confidence and Investment Climate Improve
-------------------------------------------------------------
Dominican Today reports that confidence in the current environment
and industrialists' prospects improves in the evaluation of
indicators in the April-June 2020 quarter compared to the first
quarter of January-March. However, the numbers are below the
results obtained at the end of 2019.
The Business Climate Index (ICE) increased in the April-June 2020
quarter, from 38.1 in the January-March 2020 quarter to 44.0 in the
last quarter, according to Dominican Today. This index measures
entrepreneurs' perceptions about the environment in which they
carry out their business, establishing the extent to which they
feel more or less optimistic, the report notes.
The Industrial Confidence Index (ICI) went from 40.3 in
January-March 2020 to 49.8 in the quarter April-June 2020, the
report relays. It measures the perceptions that industrialists
have regarding the behavior of sales, production, and inventories
in the industries, thus indicating the existing probabilities of
industrialists increasing or decreasing their production in the
short term, the report notes. Both indices are produced by the
Association of Industries (AIRD), the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
DOMINICAN REPUBLIC: To Enforce Restrictions to Prevent Covid-19
---------------------------------------------------------------
Dominican Today reports that the Ministry of the Interior and
Police will be drastic with establishments that sell alcohol that
fails to comply with the provisions established to stop the spread
of the coronavirus, without exceptions, said the head of this
portfolio, Jesus Antonio Vasquez.
The authorities will act "drastically and millimetrically with
this," and they will "take measures in the coming days on the
disorder with which that department is operating," the official
said in statements to the press, according to Dominican Today.
In this sense, he announced that he would increase the number of
police patrols in the streets to guarantee that the curfew is
heeded, without giving favor to anyone, the report notes.
"The authorities of the Ministry of the Interior and Police are
going to comply with what the mandate established by law says, and
that is that there will be no privileged hours or privileges for
anyone or any commercial establishment," he said, the report
relays.
He also called on the population to respect the protocols announced
by the Health authorities to deal with COVID-19, "we have to
continue to insist on being a better citizen," he said, the report
discloses.
The vice president of the country, Raquel Pena, detailed the
measures included in a plan created by the new Government to
strengthen measures against the disease, the report says.
According to the initiative, to the health budget this year, which
amounts to 51,000 million pesos, 15,000 million pesos will be added
until December to face the pandemic, the report says.
PCR diagnostic tests, of which an average of 3,000 a day, will be
increased to 7,000, said Pena, who specified that work is being
done on the qualification of ten public laboratories, the report
notes. At the same time, another seven from the private sector are
ready to do this type of analysis, the report discloses.
Concerning the curfew that has been in force since July 21 and
whose schedule varies depending on the days of the week and the
boundaries, he noted that "it remains in effect under the same
conditions, reinforcing military and police surveillance for the
compliance with it," the report relays.
The Dominican Republic added 12 new deaths and 1,004 more
infections of COVID-19 in the last 24 hours, the Ministry of Public
Health reported, the report notes.
The Dominican Republic registers 1,501 deaths and 88,127
coronavirus infections, the first case of which in the country was
reported on March 1, 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).
===============
H O N D U R A S
===============
INVERSIONES ATLANTIDA: S&P Alters Outlook to Neg. & Affirms B+ ICR
------------------------------------------------------------------
S&P Global Ratings revised its outlook on Honduran financial group,
Inversiones Atlantida (Invatlan), to negative from stable. In
addition, S&P affirmed its long-term 'B+' issuer credit rating
(ICR) on the company and its 'B+' issue-level rating on Invatlan's
current senior unsecured bonds.
S&P also affirmed its global scale 'BB-' long- and 'B' short-term
ICRs on Banco Atlantida, which is the group's core subsidiary. The
outlook on the bank's global scale ratings is still stable.
Rationale
The outlook revision stems mainly from an increase in the group's
double leverage ratio consistently above 120% in the past 12
months. In our view, the rise in this ratio reflects a more
vulnerable credit risk profile due to a higher dependence on
liquidity upstream from its subsidiaries to meet the group's
financial obligations and to finance its diversification plan. S&P
said "Additionally, despite our expectation that Banco Atlantida
will maintain its leading market position in Honduras and its
resiliency to the economic turmoil, we expect lower profitability
for all Invatlan's subsidiaries, which could pressure group's
dividend inflows."
Furthermore, the rating on Invatlan incorporates its status as a
non-operating holding company (NOHC). Therefore, the rating is one
notch below the credit quality of group's consolidated operating
subsidiaries (group credit profile or GCP of 'bb-'). The one-notch
difference reflects the NOHC's dependence on Banco Atlantida's and
other subsidiaries dividend upstream to service its debt and other
financial obligations. Nonetheless, the group has increased
recently its double leverage ratio due to leverage investments in
entities out of Honduras, which has resulted on a higher dependency
on liquidity upstream. If this metric remains constantly above 120%
for the next 12 months, it would translate into one additional
notch of subordination from its GCP, lowering the rating of
Invatlan.
=============
J A M A I C A
=============
BANK OF JAMAICA: Decides to Hold Policy Interest Rate at 0.5%
-------------------------------------------------------------
RJR News reports that the Bank of Jamaica (BOJ) has decided to hold
the policy interest rate at 0.5 per cent per annum.
The BOJ says the decision is aimed at ensuring that the annual
price increase in consumer goods and services remains within the 4
to 6 per cent inflation target, according to RJR News.
The Central Bank expects inflation to average 4.6 per cent over the
next eight quarters, the report notes.
That's slightly higher than its previously forecast average of 4.4
per cent, the report relays.
BOJ says the revised inflation outlook is primarily influenced by
higher agriculture and processed food prices, increased energy
costs, as well as a rise in some regulated prices, the report
adds.
As reported in the Troubled Company Reporter-Latin America, S&P
Global Ratings revised on April 16, 2020 its outlook on Jamaica to
negative from stable. At the same time, S&P affirmed its 'B+'
long-term foreign and local currency sovereign credit ratings, its
'B' short-term foreign and local currency sovereign credit ratings
on the country, and its 'BB-' transfer and convertibility
assessment.
The TCR-LA also reported that Fitch Ratings, in April 2020,
revised Jamaica's Outlook to Stable from Positive. The Long-Term
Foreign-Currency Issuer Default Rating is affirmed at B+. The
Outlook change reflects the shock to Jamaica from the coronavirus
pandemic, which is expected to lead to a sharp contraction in its
main sources of foreign currency revenues: tourism, remittances and
alumina exports.
=======
P E R U
=======
PERU: Economy Slumps Amid Pandemic
----------------------------------
Agence France-Presse reports that Peru's year-on-year GDP fell by
30 percent in the second quarter of 2020 as it was badly affected
by coronavirus containment measures, the government said.
In Peru, mandatory confinement was in place throughout the whole of
the second quarter and was only lifted in the majority of the
country on July 1, the report relates.
The worst-hit areas were mining, down 20.9 percent, processing
(-44.5) and services (-28.3), the state statistics and information
institute said, the report discloses.
In the first quarter, GDP had fallen by 3.5 percent, although that
was due to a 16 percent fall in March when the health emergency
began, the report relates.
The statistics institute said GDP was down 17 percent in the first
six months of 2020, putting the Peruvian economy into recession,
the report says.
Peru's economy had been robustly growing until the coronavirus
pandemic struck, paralyzing the economy for more than 100 days and
reducing it to 44 percent of its capacity, the report relays.
The Central Bank expects GDP to fall by 12.5 percent in 2020
compared to growth of two percent in 2019 and four percent the year
before, the report notes.
Peru is one of the country's worst affected by the pandemic in
Latin America, with 26,800 deaths and more than 550,000 cases, the
report notes.
=====================
P U E R T O R I C O
=====================
PONCE REAL: Selling Two Ponce Properties for $160K
--------------------------------------------------
Ponce Real Estate Corp. asks the U.S. Bankruptcy Court for the
District of Puerto Rico to authorize the private sale of the real
properties located (i) at 72 Vives St., Ponce, Puerto Rico, (lot
3,370), for $110,000, and (ii) at 74 Vives St., Ponce, Puerto Rico,
(lot 13,170), for $50,000 to Pedro Antonio Gonzalez and Cassandra
Lee Aponte.
There is a promissory note recorded against the property. The Note
was paid off but Eurobank ceased to exist, the Note will be
cancelled through ordinary means through the process for "lost
notes" as known in Spanish as "Pagaré extraviado."
There are real estate property taxes owed to CRIM in the
approximate amount of $1,644 as of July 1, 2020 for Property 1 and
the amount of $20,371 as of July 1, 2020 for Property 2.
In addition, closing costs are estimated to be approximately $1,252
for Property 1 and $816.50 for Property 2. Notarial Fees and
stamps for the purchase deed will be paid at closing by the
Purchaser.
Unless a party in interest files a written objection within 21 days
from the date of the Notice, the Debtor will complete the sale and
adjudicate it upon the terms set forth in the Motion. All sales
are made "as is, where is," without warranty of any kind, and free
and clear of liens and encumbrance. All risk of loss will pass to
the Buyer upon consummation of the sale.
Payment of the Sale Price and execution of the closing deeds will
be made as soon as practicable from the entry of the order
approving the sale of the Properties. Failure to pay the full
price as provided herein will entitle the Debtor to void the sale.
A copy of the Offer is available at https://tinyurl.com/y5kcstvj
from PacerMonitor.com free of charge.
About Ponce Real Estate Corp.
Ponce Real Estate Corp. as registered in the Department of State
of Puerto Rico on February 11, 1955, under registry number 4514, as
a domestic for-profit-corporation, operating the business of owning
to lease real estate properties for commercial and/or residential
purposes. Its principal place of business is located at 49 Mendez
Vigo Street, Ponce, Puerto Rico 00730, which is property of PRE.
Mr. Francisco I. Vilarino Rodriguez a/k/a Frank Vilarino is the
sole owner and president.
Ponce Real Estate Corp. sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D. P.R. Case No. 18-06805) on Nov. 24,
2018.
At the time of the filing, the Debtor was estimated to have assets
of $1 million to $10 million and liabilities of the same range.
The Debtor tapped EMG Despacho Legal, CRL as its legal counsel,
and Tamarez CPA, LLC as its accountant.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Aug. 17 to Aug. 21, 2020
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Empresa Provincial de 12.5 0.0 1/29/2020 AR USD
Odebrecht Finance Ltd 7.0 17.0 4/21/2020 KY USD
SACI Falabella 2.3 50.6 7/15/2020 CL CLP
Empresa de Transporte 4.3 30.9 7/15/2020 CL CLP
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Energetica de Pern 6.2 1.1 1/15/2022 BR BRL
Banco Macro SA 17.5 65.2 5/8/2022 AR ARS
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
Enel Americas SA 5.8 32.7 6/15/2022 CL CLP
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD
Corp Universidad de Co 5.9 64.2 11/10/2021 CL CLP
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Polarcus Ltd 5.6 71.8 7/1/2022 AE USD
MIE Holdings Corp 7.5 56.4 4/25/2019 HK USD
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Banco Security SA 3.0 27.4 6/1/2021 CL CLP
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
KrisEnergy Ltd 4.0 40.4 6/9/2022 SG SGD
Plaza SA 3.5 38.3 8/15/2020 CL CLP
Banco Security SA 3.0 5.6 7/1/2019 CL CLP
Yida China Holdings Lt 7.0 74.3 4/19/2020 CN USD
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Provincia del Chubut A 4.5 2208 3/30/2021 AR USD
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Empresa Electrica de l 2.5 63.8 5/15/2021 CL CLP
Sociedad Austral de El 3.0 17.0 9/20/2019 CL CLP
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Esval SA 3.5 49.9 2/15/2026 CL CLP
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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.
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contact Peter A. Chapman at 215-945-7000.
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