/raid1/www/Hosts/bankrupt/TCRLA_Public/200911.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, September 11, 2020, Vol. 21, No. 183
Headlines
A R G E N T I N A
BANCO HIPOTECARIO: S&P Downgrades Rating to 'CC', Outlook Negative
B R A Z I L
MAGAZINE INCORPORACOES: Chapter 15 Case Summary
PETRO RIO: Moody's Assigns B2 CFR, Outlook Stable
PETRO RIO: S&P Assigns Preliminary 'B' ICR, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Car Dealers Suffer 'Most Violent Drop'
E C U A D O R
BANCO PROCREDIT: Fitch Upgrades LT IDR to B-
EMPRESA PUBLICA: Fitch Hikes Senior Unsecured Notes to B-
J A M A I C A
JAMAICA: Options to Address Challenges Due to COVID-19 Discussed
M E X I C O
GRUPO AEROMEXICO: Receives Initial $100 Million of DIP Financing
P U E R T O R I C O
PUERTO DEL REY: Marina PDR Wins Summary Judgment vs Master Link
V E N E Z U E L A
PETROLEOS DE VENEZUELA: Oil Exports Rise in Aug. on Sales to India
- - - - -
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A R G E N T I N A
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BANCO HIPOTECARIO: S&P Downgrades Rating to 'CC', Outlook Negative
------------------------------------------------------------------
On Sept. 9, 2020, S&P Global Ratings downgraded Banco Hipotecario
to 'CC' from 'CCC', and lowered the issue-level rating to 'CC' from
'CCC'. The outlook is negative.
Argentina-based bank Banco Hipotecario announced an exchange offer
for its outstanding $279.8 million series 29 9.75% notes due on
Nov. 30, 2020.
S&P said, "The downgrade of Banco Hipotecario reflects our view of
the exchange offer as tantamount to a default. In our opinion,
there's a realistic possibility of a conventional default of Banco
Hipotecario's November 2020 notes if the exchange offer isn't
accepted. Banco Hipotecario has built up significant liquidity to
face its maturity, but not enough to meet in full its financial
bullet maturity in November 2020 without refinancing a portion of
the bond amid the currently volatile economic conditions."
For each $1,000 principal amount of the outstanding notes, the
offer includes 65% of the new senior unsecured amortizing 9.75%
notes due 2025 and 35% in cash payment if the bondholder subscribed
before the early participation date. After that date, the offer
changes to 85% of new bonds and 15% cash payment. The transaction
doesn't include any early tender premium. The bank would pay the
accrued interest on the settlement date. In S&P's view, the
exchange offer doesn't provide sufficient compensation to
bondholders for the extension of the maturity.
The negative outlook reflects the probability of a further
downgrade in the next month if the exchange offer materializes
under the currently analyzed terms and conditions, which S&P deems
as distressed.
===========
B R A Z I L
===========
MAGAZINE INCORPORACOES: Chapter 15 Case Summary
-----------------------------------------------
Chapter 15 Debtor: Magazine Incorporacoes S.A., et al.
Avenida Carlos Gomes, 141, conj. 311
Bairro Auxiliadora
Porto Alegre - RS, 90480
Brazil
Chapter 15 Petition Date: September 8, 2020
Court: United States Bankruptcy Court
Southern District of Florida
Chapter 15 Case No.: 20-19746
Judge: Hon. Laurel M. Isicoff
Foreign Representative: Medeiros & Medeiros Administracao
Judicial
Av. Dr. Nilo Pecanha 2900/701
Chac das Pedras, T. Comercial Iguatemi
Porto Alegre - RS 91330
Brazil
Foreign Proceeding: Business, Corporate Reorganization &
Bankruptcy Court - Rio Grande do Sul
Foreign
Representatives'
Counsel: Leyza Blanco, Esq.
SEQUOR LAW P.A.
1111 Brickell Avenue, Suite 1250
Miami, FL 33131
Tel: (305) 372-8282
Email: lblanco@sequorlaw.com
Estimated Assets: Unknown
Estimated Debts: Unknown
A full-text copy of the Chapter 15 petition is available for free
at PacerMonitor.com at:
https://www.pacermonitor.com/view/U77JXWY/Magazine_Incorporacoes_SA_et_al__flsbke-20-19746__0001.0.pdf?mcid=tGE4TAMA
PETRO RIO: Moody's Assigns B2 CFR, Outlook Stable
-------------------------------------------------
Moody's Investors Service assigned a B2 Corporate Family Rating to
Petro Rio S.A. (PetroRio) and a B2 rating to PetroRio Luxembourg
S.a.r.l. (PetroRioLux, wholly owned subsidiary) proposed 5-yr $450
million senior secured notes. Proceeds from the notes will be used
to refinance the existing debt and for general corporate purposes.
The outlook on the ratings is stable.
This is the first time that Moody's assigns ratings to PetroRio.
Assignments:
Issuer: Petro Rio S.A.
Corporate Family Rating, Assigned B2
Issuer: PetroRio Luxembourg S.a.r.l.
Gtd. Senior Secured Notes, Assigned B2
Outlook Actions:
Issuer: Petro Rio S.A.
Outlook, Assigned Stable
Issuer: PetroRio Luxembourg S.a.r.l.
Outlook, Assigned Stable
RATINGS RATIONALE
The B2 ratings on PetroRio and on PetroRioLux's proposed guaranteed
senior notes are supported by PetroRio's small asset base and size
of crude oil production; its high operating risk due to geographic
concentration and the mature nature of its oil and gas assets; and
the high risk related to the dependence on acquisitions of oil and
gas assets to sustain production or grow. These challenges are
mitigated by PetroRio's high operating margin, which supports low
debt leverage and high interest coverage ratios for its rating
category; high capital spending flexibility; favorable regulatory
environment; and the fact that the company's capital is listed in
the Brazilian stock exchange, which tends to strengthen corporate
governance.
The company's operating risk is high, about 55% of its production
is concentrated in one oil field, Frade, and all of its producing
fields are mature and have high annual production decline rates,
currently at close to 20%. However, PetroRio's Moody's-adjusted
EBITDA margin is solid at an average of 47% in 2017-20 and its
breakeven price for barrel of crude in 2020-22 will be at $22-18,
below its price estimate for the barrel of Brent crude, which is
currently at $35 for 2020 and $40 for 2021, and includes a range of
$45-$65 for the medium term. Strong operating margins will help
PetroRio maintain low debt leverage at above 50% RCF/debt in
2021-22 and high interest coverage at around 9 times in the same
period.
The company's growth strategy is based on the acquisition and
development of mature oil fields with potential to benefit from
operating efficiency initiatives and with a target ROI of about
15-20%. Acquisition opportunities so far have risen from assets
sold from time to time by Petroleo Brasileiro S.A. -- PETROBRAS
(Petrobras, Ba2 stable), the Brazilian National Oil Company.
Proforma for the proposed transaction, PetroRio has adequate
liquidity. As of June 30, 2020, the company had $61 million in cash
(plus $50 million in restricted cash to be released upon debt
repayment after this bond issuance) to cover capital spending,
operating expenses, and other obligations in the following 18
months. Furthermore, PetroRio's hedging strategy in the first half
of 2020 was successful and increased protection of the company's
cash flow during March-May, when the supply and demand shock from
geopolitical issues and the coronavirus pandemic was at its peak
level so far. PetroRio does not have committed credit facilities
and the company's alternate liquidity is limited since its asset
base is small and it is largely encumbered.
The stable outlook on the ratings is based on Moody's view that
PetroRio's credit profile will not materially change in the next 12
to 18 months given expectations of relatively stable oil and gas
prices and the company's commitment to reduce leverage further
before it makes another large acquisition; Moody's understands that
PetroRio's maximum net debt/EBITDA target ratio is 2.5x, including
in times of recent asset acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
PetroRio's B2 ratings could be upgraded if the company (1)
increases its production to 50,000 barrels of oil equivalent per
day (boe/d), (2) increases its reserve size efficiently, with
minimal deterioration in financial metric; (3) maintains and E&P
debt/proved developed reserves below $8.0, (4) with no
deterioration in liquidity profile.
PetroRio's B2 ratings could be downgraded if (1) retained cash flow
(cash from operations before working capital requirements less
dividends) to total debt ratio declines below 15%, with limited
prospects of a quick turnaround; (2) if interest coverage, measured
as EBITDA/interest expense, falls below 2.0x, with limited
prospects of a quick turnaround and (3) a deterioration of the
company's liquidity profile.
The principal methodology used in these ratings was Independent
Exploration and Production Industry published in May 2017.
PetroRio is an independent oil and natural gas production company
focused on producing assets, mainly in the Campos basin, in Rio de
Janeiro, Brazil. Its portfolio of assets encompasses production,
development and appraisal properties in four operating fields, both
onshore and offshore. As of June 30, 2020, its total assets
amounted to $1.2 billion and produced 23 thousand barrels of oil
equivalent per day. The company had 114 mmboe of proved reserves as
of April 30, 2020.
PETRO RIO: S&P Assigns Preliminary 'B' ICR, Outlook Stable
----------------------------------------------------------
On Sept. 9, 2020, S&P Global Ratings assigned its preliminary 'B'
long-term issuer credit rating on Brazil-based oil and gas
exploration and production company Petro Rio S.A. The outlook is
stable.
In addition, S&P assigned a preliminary 'B+' issue-level rating and
a recovery rating of '2' to the company's proposed senior secured
notes, given the substantial recovery expectation on its notes
(70%-90%).
The final ratings are conditional on the successful notes issuance,
including the proposed terms. Consequently, the preliminary ratings
shouldn't be viewed as evidence of a final rating.
The stable outlook incorporates S&P's expectation that Petro Rio's
recent acquisitions and investment plans should boost cash flow
generation in 2021, reducing debt to EBITDA to below 3.0x.
Accordingly, the preliminary rating should not be construed as
evidence of the final rating. If the notes are not placed within
the next 90 days, or if conditions are materially different from
the assumptions S&P considered, it may withdraw or revise its
ratings. Factors that could influence a revision include, but are
not limited to, the utilization of bond proceeds, maturity, size,
financial and other covenants, security, and ranking.
PetroRio Luxembourg, a wholly-owned subsidiary of Petro Rio, will
issue the notes, which will be unconditionally and irrevocably
guaranteed by Petro Rio and most of its operating subsidiaries.
S&P said, "We view Petro Rio as a small player, with expected
EBITDA of about R$800 million in 2020 and increasing to R$1.6
billion-R$1.8 billion in 2021 considering the company's latest
acquisitions and successful implementation of its planned
investments. The expected increase in cash flow generation supports
our view that absent any significant additional acquisition, the
company will be able to reduce its debt to EBITDA to below 3.0x in
2021 from the forecasted 4.0x-4.5x in 2020. The rating also
incorporates our expectation of a comfortable liquidity position
assuming the successful placement of the proposed notes.
This already considers the increase in production and reserves
through recent acquisitions. Considering pro-forma figures, with
80% stake in Tubarao Martelo field and 100% in Frade field, pending
regulators' approval, the company's total production would be
33,400 barrels of oil equivalent (boe) per day as of May 2020, a
relevant increase compared with the start of 2019. S&P said, "Even
considering an increase to close to 40,000 boe per day over the
next few years, given the revitalization campaigns and tieback
between Polvo and TBMT, we still see Petro Rio's business as small
when compared to global peers." In addition, its production
concentration in mainly three fields--all in the same basin--and
limited product diversification, with oil representing more than
90% of total production, currently limit the rating.
In 2020, Petro Rio acquired 80% of working interest in Tubarao
Martelo Field and an FPSO, which followed its acquisition of Frade
last year. Those transactions more than doubled Petro Rio's 1P
reserves from last year, and provided the company with growth
opportunities, such as the tieback between Polvo and TBMT. On the
other hand, those acquisitions increased its leverage, with
projected gross debt to EBITDA increasing to 4.0x-4.5x by the end
of 2020 from 3.2x in 2019. Petro Rio's expected production
increases and its capacity to increase efficiency and reduce
operating expenditures (opex) should drop leverage in 2021 to below
3.0x. However, since the company operates mature fields with
volumes expected to decline over time, we believe it will pursue
additional acquisitions in the next few years, likely making
leverage more volatile.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Car Dealers Suffer 'Most Violent Drop'
----------------------------------------------------------
Dominican Today reports that the pandemic has impacted the sales of
new and used vehicles in the Dominican Republic, which has placed
the sector in survival mode.
"The impact of the pandemic in the Dominican Republic has
practically halved new vehicle sales in the country compared to
last year," said Vehicle Manufacturers Dealers Association
(Acofave) president Enrique Fernandez, according to Dominican
Today.
He said between January-August 2019, over 51,350 plates had been
issued in the country and in that same period of 2020 only 29,479
were issued, the report notes.
"This year only 43% of what was sold in 2019 was sold, which means
that sales fell by 57%. That is the most violent drop we have seen
from one year to the next. This did not happen even in 2008," he
added.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
=============
E C U A D O R
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BANCO PROCREDIT: Fitch Upgrades LT IDR to B-
--------------------------------------------
Fitch Ratings has taken actions on the ratings of four Ecuadorian
Banks following the recent upgrade of Ecuador's Long-Term Foreign
Currency Issuer Default Rating (IDR) to 'B-' from 'RD'. The upgrade
of Ecuador's rating to 'B-' reflects the completion of a distressed
debt exchange (DDE) that Fitch deems to have cured the default
event initiated by the 'consent solicitation' in April.
Fitch Ratings has upgraded the Long-Term Issuer Default Ratings
(IDRs) to 'B-' from 'CC' and assigned a Negative Outlook to Banco
Pichincha C.A. y Subsidiarias (Pichincha) and Banco Guayaquil,
S.A.(Guayaquil). The Viability Ratings (VRs) were also upgraded to
'b-' from 'cc' and the Short-Term Issuer Default Ratings to 'B'
from ' C'.
The Negative Outlook on Pichincha and Guayaquil reflects the
increased downside risks from the economic implications of the
Coronavirus pandemic, reflected in the Negative Outlook for the
operating environment score, and given the VRs or standalone
creditworthiness, drive the IDRs of these two banks. Fitch believes
the deep recession of at least 9.7% in 2020, will result in asset
quality deterioration and will weigh on profitability.
Banco de la Produccion S.A. y Subsidiarias (Produbanco)'s VR and
Long-Term IDRs were also upgraded to 'b-' and 'B-' and placed on
Rating Watch Negative (RWN). The RWN reflects the heightened risks
of capital and leverage pressures amid the pandemic due to further
stress on earnings and asset quality despite lower credit growth.
As of June 2020, its Fitch Core Capital stood below Fitch's
downside sensitivity of 9% and given the expected impact on
profitability together with its dividend payment policy, Fitch
believes the bank needs to prove its capacity to return to levels
above 9% consistently. Fitch will resolve the RWN once it has
assessed 1Q 2021 capitalization metrics and the impact of lower
profitability along with its dividend payment policy.
Fitch has also upgraded Banco ProCredit S.A.'s (ProCredit Ecuador)
IDR to 'B-' from 'CCC-' and assigned a Stable Outlook. The Stable
Outlook on ProCredit's support driven IDRs reflect the Stable
Outlook on the Sovereign as the parent, ProCredit Holding AG & Co.
KGaA's (PCH) is rated several categories above (BBB/Stable). The
Viability Rating (VR) was also upgraded to 'ccc+' from 'cc' and the
Short-Term Issuer Default Ratings to 'B' from ' C'.
KEY RATING DRIVERS
IDRs AND VRs - Pichincha, Guayaquil and Produbanco.
Fitch believes Ecuador's sovereign rating and broader operating
environment considerations highly influence the VRs of Pichincha,
Guayaquil and Produbanco, given the impact of the deep economic
challenges on the banking system's financial performance. The
worsening economic conditions also consider the impact of the
coronavirus pandemic, which will negatively affect the banks'
financial performance, and result in lower profitability, and
rising non-performing loans due to lower payment capacity of some
debtors amid the crisis. VRs are also highly influenced by these
banks' company profile due to their strong local competitive
positions and diversified business models.
The VR also factors in the adequate liquidity levels, conservative
loan loss reserves coverage along with still moderate NPLs ratio
and credit deferrals, although loans under current conditions are
still unseasoned. Produbanco's VR is particularly sensitive to
lower than peer capitalization as Fitch Core Capital (FCC) to risk
weighted assets (RWA) stood at 8.8% as of June 2020 (December 2019:
9.4%) which provides lower capacity to absorb unexpected losses;
and Fitch considers it a high importance factor for the bank
specially under the current challenging operating conditions.
IDRs AND VRs - ProCredit Ecuador
ProCredit Ecuador's IDRs are driven by Fitch's view of the
potential support it would receive from its parent, PCH, if
required. Fitch's assessment of support is still constrained by
Ecuador's rating (B-/Stable) and the transfer and convertibility
risks captured by the country ceiling rated 'B-'.
ProCredit VR continues to capture weak earnings which limit its
capacity to absorb losses through profits and pressures of the
operating environment. Operating losses since 2016 have been
marginally offset by recoveries given the still insufficient
business scale for the operating expenses and pressure from loan
impairment charges.
SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch affirmed Pichincha and Guayaquil's Support Rating (SR) at '5'
and Support Rating Floor (SRF) at 'NF', reflecting that despite the
banks' important market shares and local franchises, Fitch believes
that sovereign external support cannot be relied upon due to
Ecuador's limited funding flexibility as well as the lack of a
lender of last resort.
Produbanco's Support Rating (SR) of '5' reflects Fitch's view of
possible external support from its majority shareholder Promerica
Financial Corporation (PFC; 62.2% ownership); nevertheless, this
cannot be relied upon, due to the relatively large size of the
subsidiary.
ProCredit Ecuador's Support Rating (SR) is also constrained by
Ecuador's sovereign rating, as reflected in the country ceiling. As
per Fitch's criteria, ProCredit Ecuador's IDR of 'B-' corresponds
to a support rating of '5'.
Pichincha, Produbanco, Banco Guayaquil S.A. and ProCredit have an
ESG Relevance Score of 4 for Governance Structure due to a track
record of a decreasing but still higher government intervention
reflected in its regulatory framework. This has a negative impact
on the credit profile in conjunction with other factors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/downgrade:
Produbanco
IDRs and VR
-- Fitch will resolve the RWN and the VR and IDR could be
downgraded if the bank's FCC to Risk Weighted Assets is not
restored or on track to be restored to the previous levels above
9%, because of the expected reduction in its internal capital
generation and/or dividend payments;
-- These ratings are also sensitive to changes in the sovereign
rating, or further deterioration on the local operating
environment.
SUPPORT RATING
-- There is no room for downgrade in the SRs.
Pichincha, Guayaquil
IDRs and VR
-- IDRs are sensitive to changes in the sovereign rating, or
further deterioration on the local operating environment;
-- IDRs and VRs could be downgraded if the disruption to economic
activity due to the coronavirus pandemic, results in a relevant
deterioration in asset quality or profitability that leads to a
sustained decrease in the Fitch core capital to risk-weighted
assets ratio below 9%.
SUPPORT RATING
-- There is no room for downgrade in the SRs.
ProCredit Ecuador
IDRs, SR and VR
-- ProCredit Ecuador's IDR and SR are sensitive to changes in the
sovereign rating and Country Ceiling. IDRs and SR could also be
downgraded if PCH's propensity or ability to support materially
weakens;
-- The VR could be downgraded in the event of a sharp
deterioration of profitability metrics that would significantly
reduce capital metrics.
Factors that could, individually or collectively, lead to negative
rating action/upgrade:
Produbanco
IDRs and VR
-- Fitch could remove the RWN if the FCC is restored and
sustained at levels above 9%. However, the Outlook would likely be
aligned with the negative outlook of the operating environment;
-- The RWN could be resolved and the Outlook could be revised to
Stable following a revision of the operating environment to Stable
along with FCC consistently above 10% and a manageable impact on
asset quality metrics;
-- Produbanco's support rating has limited upgrade potential over
the rating horizon given its size and relevance relative to PFC.
Pichincha, Guayaquil
IDRs and VR
-- The IDRs have limited upside potential given the Negative
Rating Outlook;
-- The Outlook could be revised to Stable following a revision of
the operating environment to Stable along with a manageable impact
on FCC and asset quality metrics due to the economic recession.
SUPPORT RATING
-- Ecuador's propensity or ability to provide timely support to
Pichincha and Guayaquil is not likely to change given the
sovereign's low sub-investment-grade IDR. As such, the SR and SRF
have no upgrade potential.
ProCredit Ecuador
IDRs, SR and VR
-- ProCredit Ecuador's IDR and SR could be upgraded in the event
of an upgrade in the Country Ceiling and sovereign rating;
-- The VR has limited upside potential as reflected by the
negative trend in the operating environment. An upgrade of the
bank's VR would also require sustainable profit generation.
SUMMARY OF FINANCIAL ADJUSTMENTS
Prepaid Expenses and Deferred Payments were included as other
intangibles and deducted from the FCC.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Procredit's IDRs are driven by ProCredit Holding's ratings
(BBB/Stable).
ESG CONSIDERATIONS
Pichincha, Produbanco, Banco Guayaquil S.A. and ProCredit have an
ESG Relevance Score of 4 for Governance Structure due to a track
record of a decreasing but still higher government intervention
reflected in its regulatory framework. This has a negative impact
on the credit profile in conjunction with other factors. 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.
RATING ACTIONS
Banco Pichincha C.A. y Subsidiarias
LT IDR; B- Upgrade; previously CC
ST IDR; B Upgrade; previously C
Viability; b- Upgrade; previously cc
Support; 5 Affirmed; previously 5
Support Floor; NF Affirmed; previously NF
Banco de la Produccion S.A. Produbanco y Subsidiarias
LT IDR; B- Upgrade; previously CC
ST IDR; B Upgrade; previously C
Viability; b- Upgrade; previously cc
Support; 5 Affirmed; previously 5
Banco Guayaquil, S.A.
LT IDR; B- Upgrade; previously CC
ST IDR; B Upgrade; previously C
Viability; b- Upgrade; previously cc
Support; 5 Affirmed; previously 5
Support Floor; NF Affirmed; previously NF
Banco ProCredit S.A.
LT IDR; B- Upgrade; previously CCC-
ST IDR; B Upgrade; previously C
Viability; ccc+ Upgrade; previously cc
Support; 5 Affirmed; previously 5
EMPRESA PUBLICA: Fitch Hikes Senior Unsecured Notes to B-
---------------------------------------------------------
Fitch Ratings has upgraded the senior unsecured notes issued by
Empresa Publica de Exploracion y Explotacion de Hidrocarburos
Petroamazonas EP (PetroAmazonas) due in December 2021 to 'B-'/'RR4'
from 'C'/'RR4'.
The upgrade of PetroAmazonas' senior unsecured notes rating reflect
the upgrade of the Republic of Ecuador on Sept. 3, 2020 after the
completion of a 'distressed debt exchange' (DDE) that Fitch deems
to have cured the default event initiated by the 'consent
solicitation' in April.
The notes are fully covered by a sovereign guarantee, which
constitutes a general, direct, unsecured, unsubordinated and
unconditional obligation of the sovereign. The guarantee is backed
by the full faith and credit of the Republic of Ecuador and ranks
equally in terms of priority with other sovereign debt. This
linkage reflects PetroAmazonas' importance to the government of
Ecuador as the main supplier of the country's energy supply and a
large contributor of U.S. dollar-linked revenues.
KEY RATING DRIVERS
PetroAmazonas' senior unsecured notes rating reflect those of
Republic of Ecuador as a guarantor.
The upgrade of Ecuador's rating to 'B-' reflects the completion of
a 'distressed debt exchange' (DDE) that Fitch deems to have cured
the default event initiated by the 'consent solicitation' in April.
The Outlook is Stable. Despite deep economic challenges and
political uncertainty, the DDE has helped support near-term
repayment capacity both by greatly reducing near-term debt service
and paving the way for a new 27-month USD6.5 billion Extended Fund
Facility (EFF) with the IMF. Fitch expects any government will have
incentives to honor the debt deal following upcoming elections in
2021, but election risks pose significant uncertainty around
commitments under the EFF and appetite for reforms and fiscal
adjustment. The ratings assigned to the new bonds are 'B-', in line
with the Long-Term Foreign Currency IDR.
The 'B-' rating is constrained by risks to liquidity and debt
sustainability that persist despite the relief offered by the debt
deal. The sovereign may remain challenged to meet its financing
needs, particularly as support from the IMF - expected to be front
loaded - tails off. Political risks surrounding the 2021 elections
and the economic fallout from the coronavirus crisis may complicate
the economic recovery and fiscal adjustment needed to ensure debt
sustainability and recover market access. The rating is also
constrained by a weak external liquidity position, which heightens
vulnerabilities in the context of commodity dependence and
dollarization, and a weak repayment record that offsets support
from high per capita income.
On Aug. 31, 2020, the Ecuadorian authorities completed an exchange
of 10 sovereign bonds for four new ones, after having received
acceptance of their offer from bondholders (98%) well above the
thresholds set in the collective action clauses (CACs). The deal
postpones amortization payments to 2026, includes a 10% principal
haircut, reduces interest payments via a 25% reduction in the
effective terminal coupon rate (to 6.9%) with gradual step-ups
through 2029, and includes a USD1 billion zero-coupon bond for
past-due interest (PDI). Concurrently, the authorities have
obtained staff-level approval from the IMF for the new USD6.5
billion EFF, which replaces an EFF canceled in May due to missed
targets. The EFF still requires approval by the IMF board, and full
details on its terms and disbursement schedule are not yet
available.
DERIVATION SUMMARY
The rating of PetroAmazonas' notes linkage to the sovereign is
similar in nature to its peers YPF S.A. (CCC), Petroleo Brasileiro
S.A. (Petrobras, BB-/Stable), Ecopetrol S.A. (BBB-/Negative),
Petroleos Mexicanos (BB-/Stable), Petroleos del Peru - Petroperu
S.A. (BBB+/Stable) and Empresa Nacional del Petroleo (ENAP,
A/Negative). These companies all have strong linkage to their
respective sovereigns given their strategic importance to each
country and the potentially significant negative sociopolitical and
financial implications their financial distress would have for
their countries.
The 'B-'/'RR4' rating on PetroAmazonas's notes reflects its close
linkage with the sovereign rating of Ecuador due to its strategic
importance to the country as one of the largest suppliers of crude
oil. Ecuador depends on oil exports as a significant source of hard
currency for the country, which historically has represented 50% of
the country's exports. The sovereign linkage is further evidenced
by the sovereign guarantee provided to PetroAmazonas to cover its
debt obligations under the notes.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within the Agency's Rating Case for the
Issuer
-- Senior unsecured notes fully guaranteed by the Republic of
Ecuador in 2020;
-- Approved budget and consequent government transfers will be
enough to cover operating expenses, capex investments and debt
service payments.
KEY RECOVERY RATING ASSUMPTIONS
-- The recovery analysis assumes that the value of PetroAmazonas
would be assessed under a going concern approach;
-- Fitch has assumed a 10% administrative claim.
Recovery Rating is limited to 'B-'/'RR4' due to the 'RR4' soft cap
for Ecuador.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to a
positive rating action/upgrade:
-- An upgrade of the sovereign.
Factors that could, individually or collectively, lead to a
positive rating action/upgrade: on Ecuador:
-- Public Finances: Fiscal consolidation contributing to primary
surpluses that support a sustained reduction in government
financing needs and a downward trajectory for general government
debt/GDP;
-- Macro: Increased confidence in policymaking and reforms that
could support stronger medium-term economic growth prospects;
-- External Finances: Sustained build-up in central bank reserves
that would bolster the underpinnings of the dollarization regime.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade:
-- A downgrade of the sovereign.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade: on Ecuador:
-- Structural: Evidence of deterioration in political willingness
to honor sovereign debt obligations in the coming years;
-- Public Finances: Emergence of liquidity stress that could
compromise sovereign debt repayment capacity in the coming years,
including evidence of increased rollover risk in local debt
securities.
LIQUIDITY AND DEBT STRUCTURE
Not applicable.
SUMMARY OF FINANCIAL ADJUSTMENTS
-- The company does not report any revenues on their financial
statements. The Republic of Ecuador has not defined an income model
in order to compensate Petroamazonas directly for is production
efforts. Instead, the majority of Petroamazonas' operations are
funded through an annual contribution from the Ministry of Finance
in an amount equal to the General Budget approved by Petroamazonas'
board of directors. During a specific year, PAM may receive only a
portion of the approved budget in cash. Given that this is the main
source of income for the company, Fitch adjusted revenues to
reflect these contributions as revenues.
=============
J A M A I C A
=============
JAMAICA: Options to Address Challenges Due to COVID-19 Discussed
-----------------------------------------------------------------
RJR News reports that Jamaica co-convened a UN High-Level Meeting
of finance ministers to discuss options to address the economic
challenges arising from the coronavirus pandemic.
In a statement, the United Nations said the Ministers of Finance
provided their views on a menu of policy options, according to RJR
News.
It said these options will be refined and presented to world
leaders at a follow-on High-Level Meeting of Heads of State and
Government on September 29, the report notes.
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.
===========
M E X I C O
===========
GRUPO AEROMEXICO: Receives Initial $100 Million of DIP Financing
----------------------------------------------------------------
Daina Beth Solomon at Reuters reports that Aeromexico said it has
received the initial $100 million payment of debtor-in-possession
(DIP) financing as it undergoes Chapter 11 bankruptcy proceedings.
The Mexican airline has been approved for DIP financing of up to $1
billion, according to Reuters.
Aeromexico Chief Executive Andres Conesa said in a statement the
disbursement is an "important step" for supporting operations
during the company's restructuring, the report adds.
About Aeromexico
Grupo Aeromexico, S.A.B. de C.V. -- https://www.aeromexico.com/ --
is a holding company whose subsidiaries are engaged in commercial
aviation in Mexico and the promotion of passenger loyalty
programs.
Aeromexico, Mexico's global airline, has its main hub at Terminal 2
at the Mexico City International Airport. Its destinations network
features the United States, Canada, Central America, South America,
Asia and Europe.
Grupo Aeromexico and three of its subsidiaries sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 20-11563) on June 30,
2020. In the petitions signed by CFO Ricardo Javier Sanchez Baker,
the Debtors reported consolidated assets and liabilities of $1
billion to $10 billion.
Timothy Graulich, Esq., of Davis Polk and Wardell LLP, serves as
counsel to the Debtors.
=====================
P U E R T O R I C O
=====================
PUERTO DEL REY: Marina PDR Wins Summary Judgment vs Master Link
---------------------------------------------------------------
District Judge Raul M. Arias-Marxuach denies the Defendant's motion
for summary judgment and grants the Plaintiff's motion for partial
summary judgment in the case captioned Marina PDR
Operations, LLC, Plaintiff, v. Master Link Corp., Inc.; M/V Master
Link I, in rem Defendants, Civil No. 17-1307 (RAM) (D.P.R.).
On August 30, 2017, Plaintiff Marina PDR Operations, LLC filed a
Third Amended Complaint against Defendants Master Link Corp. and
M/V MASTER LINK I, in rem. Marina PDR is the operator of the Puerto
Rico Del Rey Marina in Fajardo, Puerto Rico, providing wet slip and
land storage for vessels of various sizes. ML's business consists
of providing repair and maintenance services to vessels. ML had a
contract with the Commonwealth of Puerto Rico's Maritime
Transportation Authority, a public corporation which was "created
to provide ocean transportation of cargo and passengers between
mainland Puerto Rico and the municipalities of Vieques and
Culebra." The contract, which expired on Nov. 4, 2012, was a Puerto
Rico General Services Administration ("GSA") contract for repair
services for M/V FAJARDO II. ML also had a contract with the
marina's previous owner Puerto del Rey, Inc. ("PDR") for the repair
of MASTER LINK I.
Per the Complaint, ML allegedly breached both contracts. Thus,
Marina PDR claimed ML owes it $115,292.04 in unpaid fees and taxes
for FAJARDO II and MASTER LINK I. In the alternative, Marina PDR
requested that MTA be held liable for $78,311.85 for overdue
payments because it is the owner of FAJARDO II and original
signatory to a Boat Space License Agreement ("BSLA") with the
marina's previous owner PDR. On June 26, 2018, Plaintiff and MTA
filed a Settlement Agreement dismissing the claim against the
latter. Partial judgment was entered accordingly.
On Nov. 15, 2018, ML filed a Motion for Summary Judgment ("MSJ")
and a Statement of Material Facts in Support of Defendant's Motion
for Summary Judgment. It alleges that: 1) Marina PDR lacks standing
to sue; 2) ML did not become indebted to Marina PDR under the
contract between MTA and PDR concerning FAJARDO II because the
assumption of debt and novation doctrines are inapplicable, and 3)
Marina PDR cannot recover twice on the same claim. Plaintiff
opposed the MSJ and propounded additional facts. Plaintiff's
Opposition to MSJ is currently unopposed.
On Nov. 15, 2018, Marina PDR filed a Motion for Partial Summary
Judgment and Memorandum of Law in Support Thereof ("PMSJ") and a
Statement of Uncontested Material Facts in Support of Motion for
Summary Judgment ("PSUMF"). It alleges that partial summary
judgment is proper because there is no genuine issue regarding the
amount due by ML for the storage of MASTER LINK I. ML opposed the
same and Marina PDR replied.
In his analysis, Judge Arias-Marxuach states that Defendant bears
the burden of proof on a novation claim, an affirmative defense
pursuant to Fed. R. Civ. P. 8(c)(1). ML did not plead novation as
an affirmative defense in its answer to the Complaint. Typically,
this would amount to waiver of the defense. But, there are
exceptions such as "where [1] the defendant asserts it [the
defense] without undue delay and the plaintiff is not unfairly
prejudiced by any delay," or where "[2] the circumstances
necessary
to establish entitlement to the affirmative defense did not obtain
at the time the answer was filed." Here, Plaintiff was not
prejudiced by a failure to plead the defense because novation was
addressed in ML's Motion to Dismiss the Second Amended Complaint,
and which was later incorporated by reference into ML'S Motion to
Dismiss Third Amended Complaint. Further, this occurred before the
discovery deadline and both parties briefed the novation issue in
their respective summary judgment motions. Hence, ML can proceed
with the novation defense.
There are two types of novation: modificatory and extinctive. In
the first type, "a modificatory novation simply modifies [either
the object or principle condition of an agreement], but does not
extinguish, the original agreement." Notably, "novation is never
presumed" and must be proved "without any trace of doubt." It is
always "established by the parties' intention," as determined
case-by-case.
Puerto Rico jurisprudence recognizes two subtypes of extinctive
novation: express or tacit. The first occurs when the parties
expressly state their intent to create a new agreement. The second
occurs when there is a total incompatibility between the old and
the new agreement. Under the first subtype, extinctive novation
occurs "even when the contractual condition modified is of
secondary importance, as long as that is what the parties
intended[,] and they have conclusively stated that the prior
contract is canceled and substituted by another." In the second
subtype, the new contract and the original one must be incompatible
"in all points." The change "must be so radical in nature as to
make the new and old agreements unable to coexist and to make them
mutually excludable." Changes "that are mainly quantitative in
nature do not extinguish" the contract's main obligation, "which
remains in effect with all its supplementary and accessory
guarantees."
ML did not raise a novation defense for ML-PDR BSLA for MASTER LINK
I in its MSJ. Instead, it only mentions novation to argue why ML
did not become a debtor under the MTA-PDR BSLA for FAJARDO II. ML
did bring forth the defense in its Opposition to PSMUF, where it
alleges that the ML-PDR BSLA was "novated by the parties when they
agreed to a lower monthly charge." This allegedly occurred when the
parties agreed that the "discount [of $6,114.32] on storage fees
was for past and future invoices for the storage of the barge."
Marina PDR denied that the discount was a novation. It explains
that the "discount was offered as a deal on September 2014 [...]
[for] Master Link to be able to pay the minimum amount owed at the
time promptly, since it owed almost $14,285.79 at the time to
PDR."
Thus, it should not be considered an intent to change the terms of
the ML-PDR BSLA. Plaintiff also avers that no invoice after 2014
includes a discount, which should also indicate that Marina PDR did
not intend to change the storage rate set in the BSLA.
The Court agrees with Marina PDR. First, ML does not state whether
it is relying on an extinctive or modificatory novation. Second, it
fails to: (1) provide evidence of an intent to extinguish the
ML-PDR BSLA; (2) prove an incompatibility between the BSLA and a
new agreement, if one exists at all; or (3) proffer sufficient
evidence of a modification of the ML-PDR BSLA. The District of
Puerto Rico has held that "[t]he party raising the affirmative
defense of novation has the duty to proffer sufficient competent
evidence of novation, specifically, evidence of the contracting
parties' express intention or incompatibility of the two
agreements." ML did neither here. For example, in Ceramic
Enterprises, Inc. v. Dexion Inc. the District of Puerto Rico held
that extinctive novation did not occur since "[c]hanges in the
price, duration, and square footage terms of the lease are not so
material as to extinguish the Lease in favor of a new and separate
lease." Here, therefore, the discount seems to be a mere
"quantitative change" which did not extinguish the terms of the
BSLA.
Lastly, the Court observes that the original ML-PDR BSLA stated
that "[r]ates may be changed from time to time at Marina's [then
PDR's] sole discretion." Hence, any change by PDR to the storage
and repair rates, whether a discount or otherwise, would not
necessarily novate an existing BSLA. In RentPath, LLC v. CarData
Consultants Inc., the District of Georgia held that the original
contract between the parties showed that "the parties understood
basic modifications to the service price would not create an
entirely new agreement." This because the service agreement in
question stated "that fees 'may be amended from time to time[.]'"
Thus, even when viewing the facts in the light most favorable to ML
and drawing all reasonable inferences in its favor, the novation
theory is inapplicable.
ML posits that the ML-PDR BSLA is not authenticated and is
inadmissible at the summary judgment stage, thus denial of the PMSJ
is proper. Conversely, Plaintiff avers that the BSLA was properly
authenticated via Ms. Marinés Camacho's unsworn statement filed
alongside the PMSUF. The Court agrees with Plaintiff. Moreover, it
sees no need to address the authenticity of the BSLA given that ML
filed the same exhibit as an exhibit to its SMUF.
In referencing the ML-PDR BSLA in its MSJ and SMUF, ML is
essentially adopting and authenticating it -- the same BSLA it now
declares inadmissible with regards to the PMSJ and PSMUF. Judge
Ariash-Marxuach says the Defendant cannot have it both ways. The
Court overrules ML's objection to admission of the ML-PDR BSLA. The
District of Wisconsin reached a similar ruling in Daud v. Nat'l
Multiple Sclerosis Society when it overruled the defendant's
objection regarding the inadmissibility of an exhibit filed
alongside a summary judgment motion. The District Court held that
"Defendant cannot utilize an exhibit to support one of its facts,
ostensibly representing the exhibit is admissible, but also argue
Plaintiff cannot use the same exhibit to support of one of her
facts because it is purportedly inadmissible." The Court thus
grants Plaintiff's Motion for Partial Summary Judgment.
A copy of the Court's Opinion and Order dated July 29, 2020 is
available at https://bit.ly/3h0cyDK from Leagle.com.
About Puerto del Rey
Puerto del Rey, Inc., a/k/a Marina Puerto Del Rey, filed a
petition for Chapter 11 protection (Bankr. D.P.R. Case No.
12-10295) on Dec. 28, 2012, in Old San Juan, Puerto Rico, owing
$43 million to secured lender First Bank Puerto Rico Inc. The
22-acre facility in Fajardo, Puerto Rico, has 918 wet slips and
dry storage for 600 boats. Bankruptcy was designed to forestall
creditors from attaching assets. In its amended schedules, the
Debtor disclosed $99.9 million in assets and $44.6 million in
liabilities as of the Petition Date.
The Charles A. Cuprill, PSC Law Offices, in San Juan, Puerto Rico,
represents the Debtor as counsel.
=================
V E N E Z U E L A
=================
PETROLEOS DE VENEZUELA: Oil Exports Rise in Aug. on Sales to India
------------------------------------------------------------------
Marianna Parraga and Mircely Guanipa at Reuters report that
Venezuela's oil exports recovered slightly in August after two
months at historic lows, boosted by increased sales to India,
according to internal documents from state-run oil firm PDVSA and
Refinitiv Eikon data.
Overall exports of crude and fuel rose to 437,600 barrels per day
(bpd) in August, according to the data, more than the roughly
400,000 bpd in June and July, which were the lowest levels since
the 1940s for the nation, according to Reuters.
But the increase registered in both exports and imports could be
short-lived if Washington moves in the coming weeks to remove
exemptions to sanctions that have facilitated Venezuela-related oil
trade, the report notes.
The United States plans to tighten sanctions after blacklisting
clients and tanker owners working with PDVSA earlier this year, the
report relays. But a handful of customers keep receiving
Venezuelan crude under authorizations granted by Washington to
exchange the oil for fuel, so no cash payments go to President
Nicolas Maduro's government, the report says.
In July, India's Reliance Industries resumed loading Venezuelan
crude under a swap deal permitted by the U.S. Treasury Department
after a three-month pause, the report discloses.
The authorization allowed Reliance to re-emerge as the largest
buyer of Venezuelan crude by taking 216,000 barrels per day (bpd)
last month, almost half of total exports, according to the data,
the report says.
The second-largest destination for Venezuela's oil in August was
Cuba with almost 66,000 bpd of crude and refined products, followed
by Europe with 65,000 bpd, the report notes. The South American
nation, which boasts some of the largest crude reserves on the
planet, shipped a total of 17 cargoes last month, the data showed,
the report relays.
Fuel imports by the OPEC-member nation increased in August to
53,160 bpd of mainly diesel and gasoil delivered through swaps,
according to the data, the report says.
PDVSA did not reply to a request for comment.
PDVSA has in recent months boosted its ship-to-ship operations near
the Amuay bay to load tankers at sea, rather than in Jose, its main
terminal for oil exports, the report notes. The number of vessels
doing so-called dark voyages to Venezuela--turning satellite
transponders off during the loading operation--has also increased,
according to the Eikon data, the report adds.
About PDVSA
Founded in 1976, Petroleos de Venezuela, S.A. (PDVSA) is the
Venezuelan state-owned oil and natural gas company, which engages
in exploration, production, refining and exporting oil as well as
exploration and production of natural gas. It employs around
70,000 people and reported $48 billion in revenues in 2016.
As reported in Troubled Company Reporter-Latin America on June 3,
2019, Moody's Investors Service withdrew all the ratings of
Petroleos de Venezuela, S.A. including the senior unsecured and
senior secured ratings due to insufficient information. At the
time of withdrawal, the ratings were C and the outlook was stable.
Citgo Petroleum Corporation (CITGO) is Venezuela's main foreign
asset. CITGO is majority-owned by PDVSA. CITGO is a United
States-based refiner, transporter and marketer of transportation
fuels, lubricants, petrochemicals and other industrial products.
However, CITGO formally cut ties with PDVSA at about February 2019
after U.S. sanctions were imposed on PDVSA. The sanctions are
designed to curb oil revenues to the administration of President
Nicolas Maduro and support for the Juan Guaido-headed party.
*********
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 * * *