/raid1/www/Hosts/bankrupt/TCRLA_Public/200828.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, August 28, 2020, Vol. 21, No. 173
Headlines
A R G E N T I N A
ARGENTINA: Economy Extends Rebound From Pandemic Lows
ARGENTINA: Gov't. Formally Opens Debt Rescheduling Talks with IMF
ARGENTINA: Workers Struggle to get by on Delivery Jobs, State Aid
B R A Z I L
BRADESCO SEGUROS: Fitch Affirms 'BB' IFS Rating, Outlook Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Higher Food Prices Add to Pandemic Woes
M E X I C O
BANCO FAMSA: Failure Shows 'Huge Risk' After AMLO Guts Regulator
OFFSHORE DRILLING: Fitch Cuts LT IDRs to C on Exchange Offer
P U E R T O R I C O
FACEBANK INTERNATIONAL: DBRS Confirms BB LongTerm Issuer Rating
T R I N I D A D A N D T O B A G O
TRADITIONS BAR: Owner Sees Restaurant Not Surviving in 2nd Shutdown
TRINIDAD & TOBAGO: Signs 2 Loan Deals to Improve Housing Conditions
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Economy Extends Rebound From Pandemic Lows
-----------------------------------------------------
Buenos Aires Times reports that Argentina's economy continued to
show early signs of recovery in June after a strict Covid-19
lockdown brought commerce to a dramatic halt by April.
Economic activity rose 7.4 percent in June from May, below
economists expectations of a 10 percent monthly jump, the report
notes. Activity was down 12.3 percent from a year earlier,
according to government data published by the INDEC national
statistics bureau, according to Buenos Aires Times.
It's the second straight month of improving data, though the
economy is far from out of the woods, the report relays.
Argentina's government tightened its lockdown again in July after
loosening some quarantine restrictions in June, the report notes.
President Alberto Fernandez also hasn't laid out a broad plan to
get the economy out of a recession stretching into its third year,
nor the end of a quarantine that began March 20 and currently lasts
until August 30, the report discloses.
Argentina's economy is forecast to contract 12.5 percent this year,
on pace for the worst one-year decline on record, along with
inflation above 40 percent and double-digit unemployment, the
report adds.
About Argentina
Argentina is a country located mostly in the southern half of
South America. It's capital is Buenos Aires. Alberto Angel
Fernandez is the current president of Argentina after winning the
October 2019 general election. He succeeded Mauricio Macri in the
position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
As reported by the Troubled Company Reporter - Latin America on
April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating to 'CC' from 'RD' and
Short-Term Foreign Currency IDR to 'C' from 'RD'.
The TCR-LA reported on April 13, 2020, that S&P Global Ratings
also lowered its long- and short-term foreign currency sovereign
credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also
affirmed the local currency sovereign credit ratings at 'SD/SD'.
There is no outlook on 'SD' ratings.
On April 9, the TCR-LA reported that Moody's Investors Service
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
ARGENTINA: Gov't. Formally Opens Debt Rescheduling Talks with IMF
-----------------------------------------------------------------
Buenos Aires Times reports that the government formally opened
consultations with the International Monetary Fund on Wednesday,
Aug. 26, to agree new terms on the repayment of a US$57-billion
bailout agreed in 2018.
President Alberto Fernandez spoke with IMF chief Kristalina
Georgieva "to begin negotiations aimed at reaching a new
understanding with the organisation," the Casa Rosada said in a
statement, notes the report.
"This morning I had an extensive talk with the head of the IMF, and
we agreed that slowly, but surely, we will get to work to sort out
the disorder we inherited from the previous government and the
Fund," said the Argentine leader, BA times relates. "To achieve
certainties, we must put the accounts in order. We will put the
accounts with international organisations in order. My conversation
with Kristalina Georgieva encourages me to think that we will do so
with a common logic: that of not putting Argentina on hold and not
causing more suffering to those who have suffered so much."
In a statement later released by the Fund in response, Georgieva
said the Peronist leader had "notified me of the request by his
government to start discussions on a new IMF-supported programme,"
the report relates.
After talks she described as "very constructive and positive," she
said "we stand ready to play our role."
"We look forward to deepening our dialogue on how we can best
support the government's efforts to manage the impact of the
pandemic, jumpstart growth and job creation, and reduce poverty and
unemployment while strengthening macroeconomic stability for the
benefit of all Argentines," she added, notes the BA Times.
According to the report, Fernandez told Georgieva of the need "to
work together with the IMF to sort out the disorder that we
inherited from the previous government" of his predecessor in the
Pink House, Mauricio Macri.
The president put repayments to the Washington-based lender on hold
and renounced outstanding tranches of the bailout when he assumed
the presidency last December, saying Argentina already had enough
debt. In total, Argentina has received US$44 billion from the Fund,
says the Times.
Argentina "to a great extent, has already put its accounts in order
with its creditors and will start working today to do so with the
international credit organisations, especially the IMF," the report
quoted Fernandez as saying in a statement.
Earlier this month, the government reached a deal with three major
creditor groups to restructure a US$66-billion debt after months of
strained negotiations and missed deadlines. The deadline to join
the debt swap proposal, which received strong backing from the IMF,
is next Friday, with results due the following week, BA Times
says.
The bonds represent roughly a fifth of the country's US$324 billion
debt, which amounts to around 90 percent of GDP.
Later Wednesday, Economy Minister Martin Guzman and Central Bank
Chief Miguel Pesce formally sent a letter to the IMF, inviting a
mission team from the Fund to visit the country soon to begin talks
and carry out "an accurate assessment of the challenges" facing
Argentina. Repayments to the IMF are due to begin in September
2021, adds the report.
About Argentina
Argentina is a country located mostly in the southern half of
South America. It's capital is Buenos Aires. Alberto Angel
Fernandez is the current president of Argentina after winning the
October 2019 general election. He succeeded Mauricio Macri in the
position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019 according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
As reported by the Troubled Company Reporter - Latin America on
April 14, 2020, Fitch Ratings upgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating to 'CC' from 'RD' and
Short-Term Foreign Currency IDR to 'C' from 'RD'.
The TCR-LA reported on April 13, 2020, that S&P Global Ratings
also lowered its long- and short-term foreign currency sovereign
credit ratings on Argentina to 'SD/SD' from 'CCC-/C'. S&P also
affirmed the local currency sovereign credit ratings at 'SD/SD'.
There is no outlook on 'SD' ratings.
On April 9, the TCR-LA reported that Moody's Investors Service
downgraded the Government of Argentina's foreign-currency and
local-currency long-term issuer and senior unsecured ratings to Ca
from Caa2.
ARGENTINA: Workers Struggle to get by on Delivery Jobs, State Aid
-----------------------------------------------------------------
Agence France-Presse reports that restaurant employees,
dog-walkers, garbage recyclers, construction workers and many more
Argentines found themselves unemployed overnight when the
coronavirus pandemic arrived in Argentina. Many have had no other
recourse than working for low-paid home delivery services or
relying on state subsidies in order to survive, according to Agence
France-Presse.
"The main alternative for precarious jobs was state aid but
everybody's situation got worse. Many of the formally employed
suffered wage cuts while others saw how their companies closed
down," said Ezequiel Barbenza, a professor at Universidad del
Salvador, the report notes.
Gustavo, 23, worked at "El patio de los lecheros," a popular
night-time and weekend spot where food trucks parked up and served
customers. When the lockdown began in late March, its owners
decided to switch to using the Glovo app to offer home delivery,
the report relays.
"But that only lasted a month. It didn't work out because El patio
de los lecheros was all about the atmosphere rather than the food,"
recalls Gustavo, who asked for his surname to be withheld, the
report notes.
"Out of 180 employees, barely 20 had a formal contact. We were left
empty-handed," he added.
This young Venezuelan, who arrived here last year after fleeing the
crisis in his homeland, then switched to delivery jobs for the
Rappi app.
"Getting another job was very difficult. Delivery is the simplest
option for an immigrant," he concluded.
'Few Barriers'
Home delivery platforms are booming in the midst of the pandemic
with increased demand for the service and people lining up to do
the work, the report notes.
"It's the kind of work which was declared an essential activity in
the quarantine," explains Javier Madariaga, an economic researcher
at the CIPPEC (Centro de Implementacion de Politicas Publicas para
la Equidad y el Crecimiento) think tank and an advisor of the
Inter-American Development Bank (IDB, or BID in its Spanish
acronym), the report relays.
"These apps have very few barriers to entry. There is no selection
process to define the most suitable candidate--with minimal working
capital [a mobile telephone, a data plan and a bicycle] you can
start earning immediately," he indicated.
A study directed by Madariaga in 2018 established that in Buenos
Aires, 80 percent of work from delivery apps was performed by
recently arrived Venezuelans, the report notes. Now it is
estimated to be half and half between immigrants and locals for an
activity whose workers are considered self-employed with no social
security, the report relays.
"For immigrants it's the first option while for Argentines it's the
last. But they'll take it if they lose salaried employment,"
concludes the economist, the report relays.
'No Work Here'
Julia, 52, a domestic service employee, stopped working at the
start of the lockdown, the report notes. Her husband and her son
are both construction workers and both have been jobless for the
last five months too, the report relays. Julia continues to be
paid by the house where she worked twice a week but not by the
office where she was an informal cleaner. It since has closed
down, the report relays.
She has twice received the IFE (Ingreso Familiar de Emergencia)
emergency family benefit of 10,000 pesos, introduced by President
Alberto Fernandez's government to help informal workers.
Living in Merlo in Greater Buenos Aires, none of the family has
tried to seek some other activity.
"To work you have to go to the capital but we have no way of using
public transport," says Julia, referring to the sanitary
restrictions.
"There's no work here in the province," she explained.
Unemployment was 10.4 percent in the first quarter of this year but
hundreds of thousands of jobs are estimated to have been lost since
then.
A IDB report forecasts that the crisis occasioned by Covid-19 could
trigger the loss of up to 17 million formal jobs in Latin America,
the report notes.
'Very Big Universe'
Barbenza maintains that the pandemic has highlighted the scale of
precarious employment in Argentina, the report relays.
"IFE was initially aimed at around three million people, 12 million
registered and nine million were selected. This reveals a very big
universe of precarious employment" in a country of 44 million
inhabitants, he pointed out.
Barbenza stresses that this precarious nature has deepened in both
urban and rural employment with family agriculture suffering
especially in the latter, the report notes.
"The pandemic accentuated an already worldwide trend with increased
wealth but little job creation, especially quality employment," he
concluded.
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.
===========
B R A Z I L
===========
BRADESCO SEGUROS: Fitch Affirms 'BB' IFS Rating, Outlook Negative
-----------------------------------------------------------------
Fitch Ratings has affirmed Bradesco Seguros S.A.'s (Bradesco
Seguros) Insurer Financial Strength (IFS) at 'BB' with a Negative
Outlook. The National IFS rating of Bradesco Seguros has also been
affirmed at 'AAA(bra)' and the Outlook for this rating remains
Stable. The rating reflects the company's strategic importance to
its parent Banco Bradesco, of which is a core subsidiary.
KEY RATING DRIVERS
Bradesco Seguros' ratings are aligned with those of its parent,
Banco Bradesco S.A. (Bradesco; Local Currency Long-Term IDR
BB/Negative). The Outlook for Bradesco Seguros' IFS rating mirrors
that of its parent's Long-Term Local Currency IDR, which, in turn
remains one notch above Brazil's sovereign rating (Long-Term Local
Currency IDR BB-/Negative).
Fitch views Bradesco Seguros as a 'core subsidiary' of Bradesco,
and therefore its ratings are equalized with those of its parent.
This is based on the strategic importance of its Bradesco Seguros
insurance operations which complement the main retail banking
activities, common branding and high contribution of Bradesco
Seguros to group profits. The insurance company has consistently
contributed about 30% of the bank's consolidated earnings
historically.
The ratings also reflect the company's leading position in the
Brazilian insurance market, consistent performance through the
cycles, diversified revenue base, strong distribution capacity
underpinned by Bradesco's wide agency network and comfortable
liquidity and capitalization ratios.
At year-end 2019, life and pension segments remained the largest
contributors to net earnings (50%), followed by P/C (26%), health
(16%) and saving bonds (8%).
The company's operating and asset leverage ratios remain strong
when compared with Fitch's international life insurer company
benchmark ranges. At the end of 2019, the indicators were 3.0x and
14.3x, respectively. A gradual increase in security revaluation
reserves, solid earnings and modest growth have supported
capitalization since 2016, despite a gradual increase in dividend
payouts.
Bradesco Seguros maintained solid profitability through the cycles.
Its ROAE averaged 27% between 2017 and 2019. The operating result
improved, due to the improvement in customer retention levels and
an evolution in underwriting processes, as well as the continuous
improvement in acquisition costs and administrative efficiency.
However, the proportion of financial results in relation to earned
premiums fell slightly, following the movement of interest rates.
In 2019 Bradesco Seguros' investment portfolio remained
concentrated on Brazilian government securities, which made up 91%
of the total exposure. The company's liquidity remains adequate,
with all the regulatory minimum liquidity ratios comfortably met.
In applying Fitch's insurance criteria regarding the impact of
ownership on Bradesco Seguros' ratings, Fitch considered how the
ratings would theoretically be impacted under Fitch's bank support
criteria. Fitch's insurance criteria is principles-based regarding
ownership, and the referenced bank criteria was used to help inform
Fitch's judgment in applying those principles.
The agency believes that the financial impact of the coronavirus
will test the resilience of Bradesco Seguros' standalone financial
profile, as the quality and profitability of its assets will likely
deteriorate. However, since Bradesco Seguros ratings are directly
linked to those of Banco Bradesco, any deterioration in the bank's
credit profile due to the impact of the coronavirus would be most
influential on the insurance company ratings. The Negative Outlook
on the ratings of Banco Bradesco, and in turn Bradesco Seguros,
reflect a deteriorating and challenging operating environment for
Brazilian banks, in part influenced by coronavirus-related
uncertainty.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Bradesco Seguros' ratings are linked to that of Banco Bradesco.
Therefore, any negative change in the bank's ratings would affect
the insurer's ratings, as would a change in its willingness to
provide support, which Fitch considers highly unlikely.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Bradesco Seguros' IFS rating has limited upside potential, as they
are equalized to those of Banco Bradesco, whose ratings capture
constraints from its operating environment. Over the medium term,
the ratings could benefit from stabilization and eventual
improvement of Fitch's assessment of the operating environment for
Brazilian banks.
For the national scale rating, this sensitivity is not applicable,
given that the National IFS rating of Bradesco Seguros was affirmed
at 'AAA(bra)'.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Higher Food Prices Add to Pandemic Woes
-----------------------------------------------------------
Dominican Today reports that adding to the uncertainty among
Dominicans due to the COVID-19 pandemic are the price increases on
more than 100 foods so far this year.
The 10 products that have increased their prices the most so far
this year are sour orange, avocado, squash, orange, fresh chicken,
red beans, potatoes, black beans, yams and chayote, with increases
ranging from 10% to 50% in just seven months, according to
Dominican Today.
According to the Dominican Central Bank's most recent publication
the consumer prices rose 1.88% in July compared to June 2020,
locating the accumulated inflation for the January-July period of
2020 at 2.32%, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
===========
M E X I C O
===========
BANCO FAMSA: Failure Shows 'Huge Risk' After AMLO Guts Regulator
----------------------------------------------------------------
Michael O'Boyle at Bloomberg News reports that the collapse of
Mexican lender Banco Famsa is spurring concern about risks for the
banking system just as the country sinks into its deepest recession
in almost a century under the watch of a financial regulator that's
been hobbled by austerity.
Banco Famsa will need a bailout of almost $1 billion to make
depositors whole. Its failure is fueling worries among former
officials that the watchdog known as the CNBV could miss warning
signs at other lenders after a wave of resignations followed
President Andres Manuel Lopez Obrador's drive to cut costs,
according to Bloomberg News.
The threat to banks has grown amid Mexico's pandemic-driven
recession and the widely predicted coming increase in loan defaults
and late payments, Bloomberg News notes. But the CNBV seems to be
pulling back, Bloomberg News relays. Last year, the number of
sanctions on financial institutions dropped by half from 2018,
according to data compiled by Bloomberg. That's a signal that
points to weaker supervision over the sector just as it needs it
most, according to Carlos Ramirez, who led the country's pension
regulator during the prior administration and sat on the CNBV's
board, Bloomberg News relays.
"They are running a huge risk," Ramirez, who now works as a
political risk consultant in Mexico City, said in an interview.
"The weakening of the institution could lead to a deeper problem,'
he added.
Half a dozen former regulators, who asked not to be identified when
criticizing the government, said the CNBV had lost much of its core
team of upper-level technocrats since late 2018 and replaced them
with less-experienced hires, Bloomberg News says.
The CNBV confirmed it had seen turnover of about one-fifth of its
workers since the start of last year, but said there has been no
meaningful impact on its operations and that the reduction in
sanctions in 2019 stemmed from technical issues that had also
reduced sanctions in 2018, Bloomberg News recalls. It said that
top-level jobs had been filled by distinguished candidates.
That exodus came after Lopez Obrador took office in late 2018. As
part of efforts to fight waste and corruption, he set salary caps
in all areas of the government and then signed a 10-year ban on
regulators working in the sector they supervised, Bloomberg News
notes.
No one predicts that the loss of experienced workers at the CNBV is
going to lead to anything like the Tequila Crisis of the mid-1990s,
when a currency crash sparked a series of bank failures and
government bailouts, Bloomberg News discloses. And in fact,
Mexico's biggest lenders are among the best capitalized in Latin
America, Bloomberg News notes.
But the weakened regulator may be slow to spot frauds in the
system, police money laundering risks or discover if banks are
hiding losses before it's too late, critics said, Bloomberg News
relays.
"The CNBV lost a lot of talent and capacity for oversight," said
Enrique Diaz-Infante, a financial sector analyst at the Centro de
Estudios Espinosa Yglesias think tank in Mexico City. "We will
probably end up with some troubled banks that the authority lacks
the ability to detect in time,' Bloomberg News notes.
Before regulators shut it down in June, Banco Famsa's main business
was offering loans to clients to buy furniture and appliances from
its parent company, the retailer Grupo Famsa, Bloomberg News notes.
After starting a probe early last year, the CNBV said it found
related-party loans going back to 2016 that were above legal limits
set by regulators, Bloomberg News relates. The company failed to
adequately address the issue, leaving its capital dangerously low
even before the pandemic took hold, Juan Pablo Graf, who took over
in March as the head of the CNBV, told journalists on June 30,
Bloomberg News notes.
No one has been accused of wrongdoing. Graf said that
investigations continue.
Officials at Famsa, which has filed for Mexican insolvency
proceedings, didn't answer phone calls or respond to emailed
requests for comment. Rescuing Famsa account holders will cost at
least 21 billion pesos ($950 million), or more than one-third of
the reserves of the banking deposit insurance agency, Bloomberg
News discloses. Its depleted coffers are worrying amid an expected
increase in business and personal bankruptcies stemming from what
economists forecast will be Mexico's deepest economic crisis since
the Great Depression, worsened by Lopez Obrador's refusal to
provide major support to companies or the unemployed, Bloomberg
News relays. "The government has not been willing to put up fiscal
aid in a significant amount, so the economic downturn is expected
to be more pronounced and many businesses could go broke," said
Arturo Langa, a banking analyst at Itau BBA.
So far, the government's support for banks has come in the form of
looser accounting rules that allow auditors to avoid classifying
loan payments deferred for up to six months as non-performing. That
means official government data on bad loans isn't reflecting
reality yet. It won't be clear until closer to the end of the year
which lenders are suffering the most.
Banco de Mexico Governor Alejandro Diaz de Leon said in an
interview with El Financiero that banks entered the crisis with
solid levels of capital and liquidity, but warned they need to make
sure they had enough of a buffer on hand to protect against higher
default rates once payment deferrals end, Bloomberg News notes.
While major Mexican banks are strong enough to weather the coming
storm, smaller lenders and credit unions could be vulnerable, said
Gilberto Garcia, who covers the industry for Barclays Plc. "It all
depends on what sort of recession we face," Garcia said. "The
weaker ones will have a very tough time," he added.
OFFSHORE DRILLING: Fitch Cuts LT IDRs to C on Exchange Offer
------------------------------------------------------------
Fitch Ratings downgraded Offshore Drilling Holding, S.A.'s (ODH)
Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs)
to 'C' from 'CC'. Fitch also downgraded the company's USD950
million senior secured notes due Sept. 20, 2020 to 'C'/'RR4' from
'CC'/'RR4'.
The downgrade reflects ODH's ongoing negotiation with its
bondholders' representatives regarding a potential restructuring of
the company's capital structure, as disclosed on Aug. 11, 2020. The
company received a proposal for potential restructuring from
noteholders on July 21, 2020, which was countered with revised
terms. Negotiations are still ongoing and an agreement could be
reached before the notes mature on Sept. 20, 2020.
Fitch views the potential restructuring a distressed debt exchange
(DDE) as per the DDE criteria. Fitch believes the offering imposes
a material reduction from the original terms of the outstanding
2020 notes to bondholders of existing notes, as the exchange
applies a material haircut to current notes and is being conducted
to avoid default. The proposed amendments require the affirmative
vote of holders of more than 90% of the outstanding aggregate
principal amount of the existing notes.
If the proposed tender offer is successfully completed, the IDR
will be downgraded to Restricted Default (RD). Subsequently, Fitch
will revise ODH's IDRs to a level that is consistent with the
company's post-exchange capital structure and risk profile, which
would likely be within a low speculative rating range. Upon
completion, any remaining existing bonds will likely be upgraded to
levels below the new notes due to lower levels of credit protection
and priority. In the event the exchange offer is not successful,
Fitch believes ODH will not be able to service its principal
payment due on Sept. 20, 2020.
KEY RATING DRIVERS
Material Haircut Proposed:
ODH's counter proposal indicates a potential sharp cut to the terms
of ODH's notes, resulting in low recovery prospects. The terms of
ODH's proposal indicate 31.5% recovery for the notes exchanged to
new secured notes due 2024 and 2027. The initial proposal by ODH's
noteholders also suggested a similar level of steep haircut,
indicating a 50% recovery for the notes.
Default Unavoidable Absent Restructuring:
ODH's current capital structure is unsustainable, and the company
faces an imminent default risk given sizable short-term debt
maturities. Based on the company's liquidity projection as of March
31, 2020, the company is forecast to consume most of its cash to
meet its debt service obligation, in line with Fitch's projection.
As of March 31, 2016, the company's cash balance amounted to USD7
million.
Impaired Business Position:
ODH's cash flow generation has been severely affected by the
culmination of the contracts for its drilling rigs and the
company's limited ability to enter into new contracts resulting
from the downturn in the oil and gas industry and deep-water
exploration. Two of the company's drilling rigs are uncontracted
and non-operating.
DERIVATION SUMMARY
ODH's business risk is similar with peers in the deteriorated
drilling services environment such as Precision Drilling
Corporation (B+/Negative) and China-based Anton Oilfield Services
Group (B/Stable).
ODH is rated multiple notches below Precision as Precision has a
leading market share in Canada with approximately 31% of active
rigs in key Canadian basins, and Fitch estimates it has the
fourth-largest market share in the U.S. Fitch expects Precision to
continue generating FCF leading to its leverage ratio rising
materially due to much lower EBITDA as a result of its operations
concentration in the North American market, where drilling activity
has dropped more significantly.
Anton is also rated multiple notches above ODH. Anton's EBITDA
decline will be limited due to its resilient Chinese operations.
Leverage is expected to rise, but it will remain below downgrade
trigger
KEY ASSUMPTIONS
KEY RECOVERY RATING ASSUMPTIONS
-- The recovery analysis assumes that ODH would be considered a
going-concern in bankruptcy and that the company would be
reorganized rather than liquidated;
-- Fitch has assumed 10% of value is allocated for administrative
claims.
Going-Concern Approach
-- An Enterprise Value multiple of 5x is used to calculate a
post-reorganization valuation and reflects a midcycle multiple.
-- Most of ODH's debt is secured with different collateral
packages. The USD950 million notes are secured by interest in
Centenario, Bicentenario and La Muralla. Bank loans are secured by
jack-ups.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
-- Fitch believes that a default on the company's debt
obligations in the near term is imminent. Ratings could be further
downgraded to 'RD' if the company experiences an uncured payment
default on its material financial obligations, such as its bonds or
loans, or executes a distressed debt exchange.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
-- A ratings upgrade is considered unlikely prior to the
potential restructuring.
LIQUIDITY AND DEBT STRUCTURE
Under ODH's recent proposal, noteholders would exchange up to USD50
million of the senior secured notes due in 2020 at par for a 5%
coupon first-lien note maturing in 2024, and up to USD897.7 million
of the 2020 notes for USD250 million for a 7.5% coupon second-lien
notes maturing in 2027. Additionally, ODH will issue USD30 million
of the first-lien notes in exchange for new money to be exchanged
for three tranches of USD10 million each.
Both offers should be issued by a new subsidiary, Grupo R Offshore
(GRO). The new subsidiary will receive Muralla IV, Bicentenario and
Centenario, as well as a floating charge over all other GRO assets
as collateral.
As stated in the most recent offer, the parent can redeem the
second-lien notes at any time at 80% of their nominal value before
December 2025, and 100% thereafter. The first-lien notes are
callable at make-whole prices. The notes also limit any additional
first- or second-lien indebtedness.
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).
=====================
P U E R T O R I C O
=====================
FACEBANK INTERNATIONAL: DBRS Confirms BB LongTerm Issuer Rating
---------------------------------------------------------------
DBRS, Inc. confirmed the ratings of FACEBANK International
Corporation, including the Company's Long-Term Issuer Rating of BB.
The trend for all ratings is Stable. The Intrinsic Assessment (IA)
for the Company is BB and the Support Assessment is SA3.
KEY RATING CONSIDERATIONS
Established in 2006, FACEBANK operates as an International Bank
Entity (IBE) under the laws of the Commonwealth of Puerto Rico. The
IBE charter offers a tax-efficient platform for the bank to provide
U.S. dollar deposit and payment services to foreign customers.
Through its Florida-based mortgage subsidiary, Florida Home Trust,
the Company provides residential mortgage loans in select Florida
counties largely to foreign nationals. We note that FACEBANK has no
lending or securities exposure to Puerto Rico.
Importantly, the Company maintains an online connection with the
Federal Reserve Bank of New York, which allows it to efficiently
clear deposits for its customers, saving both time and expense. We
view this as a competitive advantage for FACEBANK, as it is the
only IBE with this connectivity, which is contingent on the Company
maintaining strong BSA/AML and corporate governance practices.
FACEBANK has shown improving and strong profitability metrics
driven by a high net interest margin (NIM), supported by low
funding costs and an above average return on its residential
mortgage loan portfolio, its primary loan category. This portfolio
has performed well during the Company's operating history, with low
levels of non-accrual loans and charge-offs. However, the portfolio
has grown during a period of sound Florida real estate fundamentals
and has not been tested in a downturn.
Additionally, the Company maintains about 29% of its balance sheet
in liquid assets including a large percentage in low credit risk
U.S. government securities. The ratings are underpinned by
FACEBANK's liquid balance sheet, profitable operating niche and
conservative loan underwriting. Constraining the ratings are the
Company's short operating history, heightened operational risk
surrounding BSA/AML compliance given its customer base, as well as
limited scale and diversity.
RATING DRIVERS
Increased franchise scale and a greater diversity of earnings would
result in a ratings upgrade. Conversely, an increased risk
appetite, sustained asset quality deterioration or BSA/AML
compliance issues would result in a downgrade of ratings.
RATING RATIONALE
Over its limited operating history, FACEBANK has built a profitable
banking franchise, helping its international customers transact
business in the U.S. Instead of branches, the Company facilitates
its deposit gathering through an arrangement with Business
Development Facilitators (BDF). These BDFs, professionals located
primarily in South America, partner with the Company by referring
customers with a need for a U.S. dollar account to FACEBANK,
sharing in the profits from this customer relationship. This
arrangement, using BDFs that are vetted and largely well known to
FACEBANK's board of directors, helps keep operating costs low.
Additionally, the Company gathers deposits from its lending
business, requiring a deposit account for its loan customers, as
well as the maintenance of escrow deposits. These sources result in
a relatively stable and low-cost deposit base. The Company's cost
of funds in 1H20 was just 21 basis points. This, along with a
higher than average yield on its residential mortgage portfolio,
helps to support the Company's solid NIM and overall earnings.
Profitability is also aided by wire transfer fees, as well as the
IBE charter, which allows the Company to operate essentially tax
exempt.
FACEBANK's primary loan product is residential mortgages in Florida
to foreign nationals. While this poses additional risks, the
Company mitigates these risks with full underwriting and
conservative loan-to-value (LTV) ratios, including a maximum LTV of
70% dependent on the type of property and borrower. Given the
current environment, the Company has enacted a temporary
forbearance program, which has been adopted by about 10% of its
mortgage customers. However, a stable Florida housing market and
low LTV ratio on these properties should provide the Company with
ample downside protection.
The Company is not subject to regulatory capital requirements,
although risk-based capital levels are calculated by management.
DBRS Morningstar views FACEBANK's capital levels as adequate given
its capital generation, well-secured loan portfolio and risk
management practices. As a privately-held institution, FACEBANK's
sources of additional capital are limited, although management has
indicated that the Company's ownership does have the wherewithal to
inject additional capital, if needed. Since 2012, internal capital
generation has been growing and is sufficient to fund balance sheet
growth.
Notes: All figures are in U.S. dollars unless otherwise noted.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRADITIONS BAR: Owner Sees Restaurant Not Surviving in 2nd Shutdown
-------------------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that as food shops
and restaurants at the Pigeon Point Beach Facility are bracing for
slow sales with the closure of the country's beaches for the next
28 days, owner and chef at Traditions Bar and Restaurant Curtis
Lincoln does not believe the business can survive as a takeaway and
curbside service will not make sense.
"While it may seem like it's just 28 days as opposed to the
lockdown that was implemented for three months in March, owners
still have bills and other overhead expenses, so I cannot see my
business surviving," Lincoln added, notes the report.
Prime Minister Dr Keith Rowley announced the closure of the beaches
and rivers and only takeaway services at bars and restaurants for
28 days, due to the rise in COVID-19 cases, according to Trinidad
Express.
Owner of Caribbean Kitchen, Rony Arnold, told the Express that the
measures taken by the Government were necessary as the numbers seem
to be rising daily and Covid-19 must get under some kind of control
soon, the report notes.
It will be tough, because even though the Division of Tourism,
Culture and Transportation said food shops and restaurants will
remain open and curbside only will be allowed, the beaches are
closed, so persons will not just come this way for food. "I am
hoping that my business can withstand this 28 days," Arnold said,
the report notes.
Two staff members at Pigeon Point said they fully agreed with the
Government's stance as it was alarming that the numbers on the
island were increasing. They made appeal for people to adhere to
the measures in order to curb the community spread, the report
notes.
Life guard Aimswell Mapp noted that while he would miss his duties
on the beach, the restrictions were necessary. He said he preferred
the additional measures were in place instead of the virus
spreading on the beaches, the report discloses.
The Downtown Owners and Merchants Association called on the
business community at large to observe the full extent all of the
guidelines that are being imposed at this time, the report relays.
"Trinidad and Tobago is among many countries internationally
experiencing a rapid second wave of viral infections and we have to
take responsibility of the need for prudence and sacrifice lest we
expose the lives of the population and ourselves to greater peril
and the danger of death,' DOMA said, the report notes.
The association urged downtown business operators to adhere to the
rules of masks, distancing, sanitizing and limited congregating,
the report adds.
TRINIDAD & TOBAGO: Signs 2 Loan Deals to Improve Housing Conditions
-------------------------------------------------------------------
The Government of Trinidad and Tobago signed two loan agreements
with a combined total of US$150 million with the Inter-American
Development Bank (IDB) to improve housing conditions, invest in
urban transformation and respond to the impact of COVID-19.
A US$50 million investment loan will support the enhancement of
living conditions for low-income households and invest in urban
spaces as part of a strategy to foster more sustainable
development.
The Urban Upgrading and Revitalization Program is expected to
directly enhance the living conditions of at least 4,000
households, support urban renewal on both islands, utilize
green-building technologies for utility savings and address the
medium-term housing and urban development needs of the country.
Another element will see low-income households being linked with
potential private finance opportunities to better their housing
conditions.
The Program will be executed by the Ministry of Housing and Urban
Development's Programme Monitoring, Coordinating and Evaluation
Unit and will support their commitment to reduce the qualitative
and quantitative housing deficits and revitalize urban centres.
The second loan is a policy-based loan valued at US$100 million
titled Programme to Strengthen Fiscal Policy and Management in
Response to the Health and Economic Crisis Caused by COVID-19 In
Trinidad and Tobago.
This intervention will aid the Government's ongoing efforts by
supporting their health response to the pandemic through additional
hiring of health personnel and purchasing of medical equipment;
strengthening fiscal policy measures to protect vulnerable
households and increase liquidity for businesses; and promoting
economic and fiscal recovery in the post-pandemic period.
This second operation will be executed by the Ministry of Planning
and Development who will have close coordination with the Ministry
of Finance and other relevant ministries and agencies in relation
to the policy measures under the loan.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2020. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *