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/raid1/www/Hosts/bankrupt/TCRLA_Public/200916.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, September 16, 2020, Vol. 21, No. 186 Headlines A R G E N T I N A ARGENTINA: DBRS Hikes Foreign Currency Issuer Rating to CCC AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes BANCO HIPOTECARIO: Fitch Affirms 'CC' IDR on Debt Exchange B E R M U D A BERMUDA: Sees Just 42 Visitors for Second Quarter B O L I V I A BANCO UNION: S&P Affirms 'B+/B' Issuer Credit Ratings B R A Z I L BRAZIL: Economy Outshines Mexico in Surprise Role Reversal OI SA: TIM, Telefonica and Claro Get Preferential Status in Bid C H I L E LATAM AIRLINES: Appoints New Chief Commercial Officer D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Construction Plunge 19.5% in 1st Half Year DOMINICAN REPUBLIC: SMEs Have Access to US$84.7MM as Capital M E X I C O CEMEX SAB: Fitch Rates $1BB Secured Notes Due 2030 'BB-' CEMEX SAB: S&P Rates New Senior Secured Notes Due 2030 'BB' - - - - - ================= A R G E N T I N A ================= ARGENTINA: DBRS Hikes Foreign Currency Issuer Rating to CCC ----------------------------------------------------------- DBRS, Inc. upgraded the Republic of Argentina's Long-Term Foreign Currency - Issuer Rating to CCC from Selective Default (SD) and Short-Term Foreign Currency - Issuer Rating to R-5 from SD. DBRS Morningstar also upgraded the Republic of Argentina's Long-term Local Currency - Issuer Ratings to CCC (high) from CC and confirmed the Short-Term Local Currency - Issuer Rating at R-5. The trend on all Issuer Ratings is Stable. In addition, DBRS Morningstar has discontinued and withdrawn ratings on all of the Republic's bonds that were eligible for restructuring. KEY RATING CONSIDERATIONS The upgrade follows the closing of two debt restructuring agreements between the Argentine government and private creditors. The first restructuring involved $65 billion in foreign-law bonds. The deal achieved the requisite participation necessary to trigger the collective action clauses and finalize the restructuring on 99% on the aggregate principal outstanding of eligible bonds. In coordination with the deal on foreign-law bonds, the Argentine government concluded a deal to restructure $41 billion in foreign currency local-law bonds in a manner that broadly preserved equal treatment across creditors. Ninety-nine percent of outstanding aggregate principal of eligible securities under Argentine law participated in the exchange. Give the high level of participation, DBRS Morningstar is withdrawing its ratings on all securities that were eligible as part of the exchange. The issuer ratings will apply to all new securities. Collective action clauses were not triggered in the USD Par 2038 Bonds II and III and the Euro Par 2038 Bonds II and III. Although DBRS Morningstar has withdrawn ratings on these and other securities that were eligible for restructuring, a failure to pay or settle the remaining untendered bonds could make it more difficult to restore market access and finance the fiscal deficit. The debt restructurings conclude a prolonged default and provide the government with substantial principal and interest payment relief over the next four years. This improvement in the near-term financing outlook is reflected in a one-category uplift in the "Debt and Liquidity" building block assessment relative to our last review on July 13, 2020. Notwithstanding the successful conclusion of the debt restructuring process, the CCC / CCC (high) ratings reflect the ongoing and significant economic and policy-related challenges facing Argentina. The economy is being badly battered by the coronavirus shock. The IMF projects GDP growth of -9.9% for 2020, making Argentina one of the hardest hit economies in the region. While a rebound in activity appears to be underway, the pace of recovery is highly uncertain due to the spread of the virus and the potential for further weakness in global demand. Argentina is also seeking a new agreement with the International Monetary Fund (IMF) to replace the canceled 2018 Stand-by Agreement. Obligations to the IMF amount to $44 billion, with major repayments coming due in 2022 and 2023. Striking a deal could allow Argentina to rollover its maturing debt with the IMF; however, Argentina would likely need to commit to a macroeconomic program that aims to lower inflation through tighter fiscal and monetary policies. Without multilateral support, we consider the probability of a successful macroeconomic adjustment to be low. The Fernandez administration has not yet outlined a clear plan to address the country's macroeconomic imbalances and poor medium-term growth prospects. Argentina has not grown over the last eight years - a direct result of fiscal and monetary policy weaknesses that have deterred investment. Fiscal consolidation remains a major political challenge, exacerbated by the ongoing pandemic. Inflation is high and risks are tilted to the upside, as the central bank is the primary source of financing for the government’s widening fiscal deficit. At the same time, reserve levels are low and declining. The imposition of capital controls could provide some short-term relief for the currency but will likely end up damaging prospects for a strong and durable recovery over time. Moreover, the government debt-to-GDP ratio will still be high after the debt restructuring, thereby leaving public finances vulnerable to market shocks. With limited reserves and a large share of public debt denominated in foreign currency, the sustainability of public debt will depend on the implementation of a credible macroeconomic plan that restores market confidence. DBRS Morningstar rates the Long-Term Foreign Currency - Issuer Rating one notch lower than the Long-Term Local Currency - Issuer Rating to reflect additional risks that stem from Argentina's limited access to foreign exchange and the high share of government debt denominated in foreign currency. RATING DRIVERS The ratings could be upgraded if the government implements a credible macroeconomic program that durably lowers inflation and puts fiscal accounts on a sustainable path. Reforms that increase investment and productivity growth would also be credit positive. The ratings could be downgraded if the government fails to reach a restructuring agreement with the IMF and faces difficulties financing fiscal deficits. ESG CONSIDERATIONS Human Capital & Human Rights (S), Bribery, Corruption & Political Risks (G), and Governance & Transparency (G) were among key drivers behind this rating action. Similar to many emerging market peers, per capita GDP is relatively low, at US$9.7k (US$20.1k on a PPP basis). According to World Bank Governance Indicators, Argentina ranks in the 54th percentile for Control of Corruption, the 67th percentile for Voice & Accountability, the 46th percentile for Rule of Law, and the 55th percentile for Government Effectiveness. These considerations have been taken into account within the following Building Blocks: Fiscal Management & Policy, Economic Structure & Performance, and Political Environment. Notes: All figures are in USD unless otherwise noted. Public finance statistics reported on a general government basis unless specified. AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes ------------------------------------------------------------------- Fitch Ratings has affirmed the 'B' rating on Autopistas del Sol, S.A.'s (AdS) international notes. The Rating Outlook is Negative. Fitch has also maintained the 'AA(cri)' national scale rating on AdS' local notes on Rating Watch Negative. The notes are supported by the cash flow generation of the Costa Rican toll road known as Ruta 27 (the project). RATING RATIONALE The Negative Outlook on its 'B' rating continues to reflect Fitch's view on Costa Rica's sovereign credit risk, the toll road's exposure to the country's economic conditions and the links to the sovereign credit quality through the minimum revenue guarantee (MRG). The Rating Watch Negative (RWN) on the local scale 'AA(cri)' rating continues to reflect concerns related to traffic declines in 2020 with respect to 2019 and depressed economic activity caused by the recent coronavirus pandemic which could worsen due to the completion of the improvement construction works on the competing road. All this, depending on its severity and duration, could have a significant impact on the transaction's liquidity and credit quality relative to other rated issuers and issuances in Costa Rica. The RWN will be resolved once Fitch has increased visibility with respect to the severity of the coronavirus pandemic impact on traffic volumes, the shape of the recovery and the likely effect on project's traffic volume of the competing route once the improvement works are concluded. The issuer's ability to manage operating expenses (Opex) and capital expenditures (Capex) to preserve liquidity will be closely monitored. KEY RATING DRIVERS The ratings reflect the asset's history of stable traffic and revenue profile, supported by an adequate toll adjustment mechanism. Mostly used by commuters, the project may face significant competition in the short- to medium-term once the main competing road is substantially improved and if its tariff is significantly lower than that of the project. Toll rates are adjusted quarterly to exchange rate and annually to reflect changes in the U.S. Consumer Price Index (CPI). The ratings also reflect a fully amortizing senior debt with a fixed interest rate and a net present value (NPV) cash trap mechanism that prevents an early termination of the concession before the debt is fully repaid. Fitch's Rating Case considers a traffic decrease of 27% in 2020 compared to 2019 levels, and a compounded annual growth rate (CAGR) of 1.1% from 2021 to 2030, reflecting, among other factors, that the competing route would not be tolled. Under these assumptions, the minimum and average debt service coverage ratios (DSCR) are 0.9x and 1.1x, respectively, which remain in line with Fitch's criteria guidance for the assigned rating. It is expected that the shortfall in the coverage ratios is covered by the reserve accounts available within the structure. Under this scenario, Fitch expects the project to receive MRG payments from 2025 onwards, which amounts in average 13% of annual revenues. The outbreak of coronavirus and related government containment measures worldwide create an uncertain global environment for the transportation sector. While issuer's performance data through most recently available data may not have indicated impairment, material changes in revenue and cost profile are occurring across the transportation sector and will continue to evolve as economic activity and government restrictions respond to the ongoing situation. Fitch's ratings are forward-looking in nature, and Fitch will monitor developments in the sector as a result of the virus outbreak as it relates to severity and duration, and incorporate revised base and rating case qualitative and quantitative inputs based on expectations for future performance and assessment of key risks. Mostly Commuter Traffic Base [Revenue Risk - Volume: Midrange] Light vehicles account for approximately 90% of all users, which have proved to be the most stable and resilient traffic base. The road is used by commuters on workdays and by residents of San Jose traveling to the beaches on the weekends. It could face significant competition once major improvements to the existing and congested San Jose-San Ramon Route are made, with the expectation that the road does not have tolls or is materially cheaper than the project. The concession agreement provides a MRG that compensates the issuer if revenue is below certain thresholds, alleviating this risk to a certain extent. Adequate Rate Adjustment Mechanism [Revenue Risk - Price: Midrange] Toll rates are adjusted quarterly to reflect changes in the Costa Rican Colon (CRC) to USD exchange rate, and also annually to reflect changes in the U.S. CPI. Tolls may be adjusted prior to the next adjustment date if the U.S. CPI or the CRC/USD exchange rate varies by more than 5%. Historically, tariffs have been updated appropriately. Suitable Capital Improvement Program [Infrastructure Development & Renewal: Midrange] The brownfield asset is operated by an experienced global company with a higher-than-average expense profile due to the geographical attributes of the project. The majority of the investments required by the concession have been made. The concession requires lane expansions when congestion exceeds 70% of the ideal saturation flow, which triggers the need for further investments. However, the project would only be required by the grantor to perform these investments to the extent they do not represent a breach in the debt coverage ratios assumed by the issuer in the financing documents. Structural Protections Against Shortened Concession [Debt Structure: Midrange] Debt is senior secured, pari passu, fixed-rate and fully amortizing. The debt is denominated in USD. Nonetheless, no significant exchange rate risk exists due to the tariff adjustment provisions set forth in the concession and to the fact that CRC-denominated toll revenues will be converted to USD daily. The structure includes an NPV cash trap mechanism to prepay debt if revenue outperforms the base case revenue indicated in the issuer's financial model, which largely mitigates the risk of the concession maturing before the debt is fully repaid. Typical project finance features include a six-month debt service reserve account (DSRA), three-month O&M Reserve Account (OMRA), six-month backward and forward-looking 1.20x distribution trigger, as well as limitations on investments and additional debt. Financial Summary Under Fitch's revised Rating Case, the project yields a minimum and average DSCR of 0.9x and 1.1x, respectively. Considering this scenario, the concession will last until its final maturity date in July 2033 and will receive MRG payments from 2025 onwards, which amounts, on average, 13% of annual revenues. The metrics are in line with Fitch's applicable criteria for the assigned rating. PEER GROUP Comparable projects in the region include Tranjamaican Highway (TJH; BB-/Stable) in Jamaica. AdS and TJH are similar projects since they both are strong commuting assets within their respective country's capital cities. They also share all attributes at the midrange level. TJH's average DSCR of 2.0x is strong for the rating category, however the rating is constrained by Jamaica's country ceiling at 'BB-', while AdS' average DSCR is lower at 1.1x commensurate with the current rating. RATING SENSITIVITIES Factors that could, individually or collectively, lead to a positive rating action/upgrade: -- The Negative Outlook on the international rating could be revised to Stable following a corresponding rating action on Costa Rica's sovereign ratings along with observed traffic levels in line with Fitch's expectations and the maintenance of adequate levels of liquidity; -- The Negative Watch on the local rating may be removed if observed traffic levels in the coming months are in line with Fitch's expectations and adequate levels of liquidity are maintained. Factors that could, individually or collectively, lead to a negative rating action/downgrade: -- Negative rating action on Costa Rica's sovereign ratings could trigger a corresponding negative action on the rated notes; -- Traffic reduction higher than 30% in 2020 along with a lower than expected recovery and/or a greater than predicted traffic loss due to the completion of works in the competing route; -- A deterioration of the liquidity available for debt service. TRANSACTION SUMMARY The asset serves as a connection between the city of San Jose and its metropolitan area with Puerto Caldera, along the Pacific coast. The asset is operated by Globalvia, one of the world leaders in infrastructure concession management, which manages 28 concessions in seven countries. The company was established in 2007 by FCC Group and Bankia Group. In March 2016, Globalvia was acquired by pension funds OPSEU Pension Plant Trust Fund (40%), PGGM N.V. (40%) and Universities Superannuation Scheme Ltd (20%). CREDIT UPDATE As of July 2020, the weighted annual average daily traffic (WAADT) of Ruta 27 decreased by 29% compared to the same period of 2019. The traffic decrease is higher than the 24% expected by Fitch under its rating case. As per the concessionaire, the traffic declines are attributed to the measures taken by the government of Costa Rica to contain the coronavirus pandemic since March 2020. For this same period, the revenues were USD33.7 million, similar to the USD35.0 million expected by Fitch in its rating case. The MRG was not triggered, and there were no revenues shared with the government, as per Fitch's expectations. During 1H20, toll revenues were USD8.1 million, lower than Fitch's expectations at USD12.6 million, mainly due to lower major maintenance costs. As of June 2020, actual DSCR was 0.89x, almost in line with Fitch's rating case DSCR of 0.92x. The CFADS shortfall to comply with debt service was covered with USD0.7 million available excess cash, and USD1.5 million released from the overfunded OMRA. FINANCIAL ANALYSIS Fitch has revised its traffic assumptions to reflect actual traffic as of July 2020, as well as the extended quarantine measures announced by the government until September 2020. The agency has also changed its assumption of traffic decline from August to December to 23% from 14% compared to the same 2019 period. As a result, Fitch's Rating Case assumes an overall traffic decline of 27% in 2020. In 2021, Fitch assumes a traffic recovery of roughly 80% from 2019 levels, which considers the negative impact from the competing route that will complete the improvement construction works in 2021, among other factors. Starting in 2022, traffic compounded annual growth rate (CAGR) is assumed at 0.5% from 2022 to 2030. U.S. inflation is forecasted at 0.5% for 2020, 0.7% for 2021, 1.2% for 2022 and 2.0% afterward. O&M and major maintenance expenses were projected following the issuer's budget plus 7.5% for every year. This scenario resulted in a minimum and average DSCR of 0.9x and 1.1x, respectively. Under this scenario, MRG will be received from 2025 onwards. In addition, the project is expected to make use of the available liquidity in 2020 to comply with its debt service obligations. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. ESG CONSIDERATIONS The highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity(ies), either due to their nature or to the way in which they are being managed by the entity(ies). BANCO HIPOTECARIO: Fitch Affirms 'CC' IDR on Debt Exchange ---------------------------------------------------------- Fitch Ratings has affirmed Banco Hipotecario's Issuer Default Rating (IDR) at 'CC' following the bank's announced offer to exchange its USD 280 million series 29 9.75% notes due on Nov. 30, 2020 for new notes with extended maturities and cash. The affirmation reflects Fitch's view that the transaction does not constitute a distressed debt exchange (DDE). The transaction contemplates exchanging any and all of the company's USD 280 million aggregate principal amount of outstanding 9.75% series 29 notes due on Nov. 30, 2020 for newly issued 9.75% series-4 notes due in 2025, and cash. The issuer will exchange a USD 1,000 principal number of existing notes for USD 650 of new senior unsecured amortizing 9.75% notes due 2025 and USD 350 in cash payment if the bondholder subscribes before the early participation date. After that date, the offer changes to USD 850 of new notes and USD 150 cash payment. The transaction doesn't include any early tender premium. The bank would pay the accrued interest on the settlement date. Fitch does not view this transaction as a distressed debt exchange per its criteria, which would require both a material reduction in terms as well as the avoidance of bankruptcy, similar insolvency or a traditional payment default. Although the restructuring helps Hipotecario avoid a traditional payment default, Fitch does not view the restructuring as a material reduction in terms compared to the original contractual terms due to the cash payment up front and the amortization of principal, which sufficiently compensates for the maturity extension. KEY RATING DRIVERS The bank's ratings are still highly influenced by the operating environment, which remains highly challenging. Asset quality continues to be pressured by the steep recession, which has been exacerbated by a long lockdown due to the coronavirus pandemic. Similarly, profitability has been pressured by very low loan growth, rising costs due to continued high inflation, and increasing credit costs. Fitch believes the exchange offer will alleviate near-term refinancing risks and provide Hipotecario with some leeway to avoid default. However, despite successfully improving its funding profile in recent years and its strong liquidity position at end-June 2020, the bank remains heavily reliant on wholesale funding which will continue to be under pressure by Argentinean issuers' limited market access. SENIOR DEBT The 'CC'/'RR4' rating on Hipotecario's medium-term notes reflects that these are senior unsecured obligations ranking pari passu with other senior unsecured indebtedness, and therefore, aligned with the bank's Foreign Currency (FC) IDR of 'CC'. The notes are denominated in ARS but settled in USD at the prevailing exchange rate. Fitch considers the bank's FC IDR as the appropriate anchor for this issue rating, given the transfer and convertibility risk associated with settlement in foreign currency notwithstanding that the issuer will not incur material currency risk. The notes' Recovery Rating of 'RR4' reflects the average expected recovery in case of bank liquidation. SUPPORT RATING AND SUPPORT RATING FLOOR The Support Rating of '5' and the Support Rating Floor of 'NF' reflect that, although possible, external support for Banco Hipotecario cannot be relied upon given the sovereign's track record for providing support. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The IDRs and VR of Banco Hipotecario could benefit from the success of the debt exchange in relieving liquidity pressures. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- An unsuccessful debt exchange, which would result in increased refinancing risks, would put pressure on the bank's IDRs and VR. -- Any policy announcements or a deterioration in the local operating environment that would be detrimental to the bank's ability to service its obligations, including a tightening of capital controls, would be negative for creditworthiness. SUPPORT RATING AND SUPPORT RATING FLOOR Changes in the SRs and SRFs of Banco Hipotecario are unlikely in the foreseeable future. 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. RATING ACTIONS Banco Hipotecario S.A. LT IDR; CC Affirmed; previously CC ST IDR; C Affirmed; previously C LC LT IDR; CC Affirmed; previously CC LC ST IDR; C Affirmed; previously C Viability; cc Affirmed; previously cc Support; 5 Affirmed; previously 5 Support Floor; NF Affirmed; previously NF senior unsecured; LTCC Affirmed; previously RR4CC ============= B E R M U D A ============= BERMUDA: Sees Just 42 Visitors for Second Quarter ------------------------------------------------- RJR News reports that Bermuda's tourism officials are counting the cost of the COVID-19 pandemic after just 42 people visited the island in the second quarter of the year. Spending plunged to US$70,000 compared to US$98 million in the corresponding period last year, according to RJR News. Officials say third-quarter figures will improve although the recovery will be slow, the report notes. Bermuda's airport was closed to scheduled services for nearly 15 weeks from March 20, the report relays. ============= B O L I V I A ============= BANCO UNION: S&P Affirms 'B+/B' Issuer Credit Ratings ----------------------------------------------------- S&P Global Ratings affirmed its 'B+' long- and 'B' short-term issuer credit ratings on Banco Mercantil Santa Cruz S.A. (BMSC) and Banco Union S.A. The outlooks on the long-term ratings are still stable. S&P said, "As result, we have revised the BICRA group score on Bolivia to '9' from '8'. However the anchor, which is the starting point in assigning a rating on a Bolivia-based bank, remained unchanged at 'b+'. "Therefore, we're keeping the stand-alone credit profiles (SACPs) on domestic lenders, BMSC and Banco Union, at 'bb-'. In addition, we're affirming the ratings on the banks, which are limited by the Bolivia sovereign rating, currently at 'B+'. Outlook on the ratings remains stable. "We believe that liquidity pressures on the Bolivian banking system have exacerbated due to the government's recent decision to allow borrowers to postpone loan payments until December 2020 in efforts to preserve the population's cash holdings amid lockdowns. Additionally, political instability amid the current presidential election could generate some deposit volatility, as was the case during the past elections in October 2019. This also adds risks to the banking system-wide funding and liquidity. As a result, we've revised the industry risk in our BICRA to '8' from '7', and the overall group score to '9' from '8'. However, the anchor to rate Bolivian banks remains unchanged at 'b+'. Our BICRA revision doesn't immediately affect the credit profiles of domestic banks, BMSC and Banco Union. "Ratings on the banks continue to be limited by the rating on Bolivia (B+/Stable/B) because we don't believe that they could withstand a sovereign default scenario, given their large risk exposure to the country in the form of loans and securities. "Currently, BMSC and Banco Union's individual credit fundamentals remain unchanged in our view--their SACPs are still 'bb-'. However, we will continue monitoring the banks' credit profiles as the COVID-19 outbreak and global credit stress play out. Particularly, the continued economic paralysis because of the pandemic could impair the Bolivian banks' business growth, widen credit losses, and pressure their capitalization. Moreover, stress on the banks' cash flows as result of the debt moratorium policies, along with a potential scenario of volatile deposits during the last quarter amid the presidential elections, could jeopardize the liquidity of domestic financial institutions. However, we believe that the stable deposits base and current levels of liquidity of Banco Union and BMSC will enable them to withstand those shocks better than smaller and less liquid financial institutions." =========== B R A Z I L =========== BRAZIL: Economy Outshines Mexico in Surprise Role Reversal ---------------------------------------------------------- Reuters reports that the divergence between Latin America's two largest economies, Brazil and Mexico, is widening as the region's most prominent left- and right-wing leaders adopt stridently different fiscal responses to the COVID-19 pandemic. Their approaches, however, are not what would be expected - and investors are adapting accordingly, Reuters relay. The right-wing administration of President Jair Bolsonaro - which came to office last year pledging to lower public spending and cut Brazil's debt - has opened the taps and spent billions on unemployment benefits, the report relays. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). Fitch's credit rating for Brazil was last reported at BB- with negative outlook (May 2020). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). As reported in the Troubled Company Reporter-Latin America, Fitch Ratings' outlook revision in May 2020 for Brazil to negative reflects the deterioration of Brazil's economic and fiscal outlook, and downside risks to both given renewed political uncertainty, including tensions between the executive and congress, and uncertainty over the duration and intensity of the coronavirus pandemic. OI SA: TIM, Telefonica and Claro Get Preferential Status in Bid --------------------------------------------------------------- Carolina Mandl at Reuters reports that TIM Participacoes, Telefonica Brasil and America Movil's Claro won the right to match any other higher bid for the mobile assets of Oi SA, the companies said in a securities filing. Such a purchase agreement is known as "stalking horse" and acts as an opening offer that other interested bidders must surpass if they plan to buy the assets, according to Reuters. The telecoms trio has been in exclusive talks with Oi since Aug. 7, after presenting a joint 16.5 billion reais (US$3.11 billion) bid for the company's cellular operations, including a long-term contract for the use of its fiber network valued at 819 million reais, the report notes. Oi plans to auction that unit by year-end, the report relays. Oi, which filed for bankruptcy protection in 2016, is selling a series of assets to raise funds to repay creditors, the report says. It will hold a creditor assembly to approve its amended plan, including the sale of its mobile assets, the report adds. About Oi SA Headquartered in Rio de Janeiro, and operating almost exclusively within Brazil, the Oi Group provides services like fixed-line data transmission and network usage for phones, internet, and cable, Wi-Fi hot-spots in public areas, and mobile phone and data services, and employs approximately 142,000 direct and indirect employees. On June 20, 2016, pursuant to Brazilian Law No. 11.101/05 (the 'Brazilian Bankruptcy Law'), Oi S.A. and certain of its subsidiaries filed for recuperao judicial (judicial reorganization) in Brazil. On June 21, 2016, OI SA and its affiliates Telemar Norte Leste S.A. and Oi Brasil Holdings Cooperatief U.A. commenced Chapter 15 proceedings (Bankr. S.D.N.Y. Lead Case No. 16-11791). Ojas N. Shah, as foreign representative, signed the petitions. Coop and PTIF are also subject to proceedings in the Netherlands. The Chapter 15 cases are assigned to Judge Sean H. Lane. In the Chapter 15 cases, the Debtors are represented by John K. Cunningham, Esq., and Mark P. Franke, Esq., at White & Case LLP, in New York; and Jason N. Zakia, Esq., Richard S. Kebrdle, Esq., and Laura L. Femino, Esq., at White & Case LLP, in Miami, Florida. On July 22, 2016, the New York Court recognized the Brazilian Proceedings as foreign main proceedings with respect to the Chapter 15 Debtors, and granted certain additional related relief. As reported in the Troubled Company Reporter-Latin America on May 28, 2020, Fitch Ratings has downgraded Oi S.A's ratings, including the Long-Term Foreign Currency Issuer Default Rating to 'CCC+' from 'B-', the LT Local Currency IDR to 'CCC+' from 'B-', the National LT Rating to 'B(bra)'/Stable' from 'BB-(bra')/Stable, and the 2025 notes to 'CCC+'/'RR4' from 'B-'/'RR4'. The Rating Outlook on the international ratings has been removed. ========= C H I L E ========= LATAM AIRLINES: Appoints New Chief Commercial Officer ----------------------------------------------------- With more than 30 years of experience in the airline industry, Marty St. George will assume the role of Chief Commercial Officer at LATAM Airlines Group on October 1, 2020. The executive, who holds a Civil Engineering degree from Massachusetts Institute of Technology (MIT), has had a long career in aviation, holding prominent positions in airlines such as United Airlines and US Airways. Most recently, St. George worked at JetBlue Airways for thirteen years, latterly serving as Chief Commercial Officer with responsibility for all revenue-generating activities, including the development of its first premium offering. He was also interim Chief Commercial Officer for Norwegian Air Shuttle ASA, working on their recent fleet, pricing and network restructuring program. Born in the United States, St. George has worked in marketing, pricing, network management, customer experience, product, alliances, frequent flyer loyalty programs and e-commerce. St. George will lead LATAM's commercial team, with responsibility for areas including sales, marketing, network development, alliances, LATAM Pass and cargo. About LATAM Airlines LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. LATAM Airlines Group S.A. is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM Airlines Group S.A. and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as general bankruptcy counsel; FTI Consulting as restructuring advisor; and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. Prime Clerk LLC is the claims agent. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Construction Plunge 19.5% in 1st Half Year -------------------------------------------------------------- Dominican Today reports that the pandemic sparked a 19.5% plunge in the construction sector in the Dominican Republic during the first half, being the second activity, only behind hotels, bars and restaurants, which posted the greatest collapse, according to the Central Bank's latest report on the economy. For the president of the Dominican Confederation of Small and Medium Construction Companies (Copymecon), Eliseo Cristopher, although he does not refute the indicators, affirms that they do not represent the real situation that MSMEs in the sector are suffering, according to Dominican Today. "At the national level, the construction sector has really had a huge decline. The sector is very depressed. The issue of the pandemic has affected us a lot, it has hit us very hard," said Cristopher, the report notes. He said that a part of the small and medium-sized construction companies has gone bankrupt, as a result of the effects of the coronavirus on the sector, the report relates. The business leader said that in May and June the sector was "activated a lot" but noted that it was due to public construction, which was stopped after the May 16 elections, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Standard & Poor's credit rating for Dominican Republic stands at BB- with negative outlook (April 2020). Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). DOMINICAN REPUBLIC: SMEs Have Access to US$84.7MM as Capital ------------------------------------------------------------ Dominican Today reports that in support of small and medium-sized companies in the Dominican Republic, the State bank Banreservas began its Expo Loan SMEs 2020, throughout September with an interest rate of 8% and special financing conditions. As part of the facilities the financial institution has RD$5.0 billion (US$84.7 million) for small and medium-sized companies that require capital to recover from the economic impact caused by the crisis, according to Dominican Today. Credit applications can be processed through the Banreservas website or at any of its commercial offices, the report notes. "Expo Loan SMEs is part of the comprehensive proposal Fomenta Pymes Banreservas, which includes financial solutions and special benefits that help meet the growth needs of small and medium-sized national companies," said Banreservas in a statement, the report discloses. 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 =========== CEMEX SAB: Fitch Rates $1BB Secured Notes Due 2030 'BB-' -------------------------------------------------------- Fitch Ratings has assigned a 'BB-' rating to CEMEX S.A.B. de C.V.'s USD1 billion senior secured notes due 2030. Proceeds from the notes will be used for general corporate purposes, including debt repayment. The notes' guarantors are CEMEX Concretos, S.A. de C.V., CEMEX Espana, S.A., New Sunward Holding B.V, Cemex Asia B.V., CEMEX Corp., CEMEX Finance LLC, Cemex Africa & Middle East Investments B.V., CEMEX France Gestion (S.A.S.), Cemex Research Group AG and CEMEX UK. CEMEX's ratings reflect its diversified business position as a large global integrated cement producer with top market shares in several markets. Fitch expects the construction downturn in CEMEX's markets to extend into 2021. The extent of demand recovery over the next two years, which materially improves CEMEX's EBITDA and allows its net leverage to strengthen below 5.0x, is difficult to determine. This recovery is dependent on business confidence and household income improving beyond the economic stimulus provided by the government in several markets. KEY RATING DRIVERS Difficult Mexican Market: Cement consumption in Mexico (BBB-/Stable) was weak entering the coronavirus pandemic, declining 7% in 2019, after a severe weakening in construction activity in 2019 was triggered by a drop in business confidence and permitting delays. Investment has fallen steeply in 2020, and there is limited visibility as to how much traction it can gain over the next two years, dampening demand in industrial and commercial segments. High unemployment and depressed household incomes are not encouraging for a sustainable recovery in self construction. U.S. Market Increasingly Pressured: Fitch expects the coming years to continue to be challenging, with the value of construction spending contracting on an extension of the backlog in commercial and industrial construction, due to delays and disruption. Lower residential demand is also likely, given low employment and consumer confidence that remains below pre-pandemic levels. A recovery in 2021 and possibly 2022 will be tempered by a contraction in commercial construction activity as the backlog fades, and as the lag effect of a slowdown in residential housing starts. Public construction is projected to remain stable for the remainder of 2020 but activity could slow in 2021 due to lower fuel taxes and the stretched budgets of state and local governments. The volatility of state and federal spending on highway construction is a risk, particularly during periods without long-term highway bills in place. Weak EBITDA Generation: CEMEX's cash flow was weak prior to the pandemic, with EBITDA declining to USD2.1 billion in 2019, from USD2.5 billion in 2017 and 2018. Steep volume declines in Mexico accounted for about USD250 million of this drop. Fitch does not anticipate CEMEX's EBITDA to strengthen meaningfully in the next two to three years, as cement demand in Mexico is not projected to rise materially, and U.S. demand could decline. High Leverage: Fitch expects EBITDA to hover around USD1.8 billion in 2021. This figure excludes IFRS-16 effects, which represented about USD350 million of EBITDA reported by CEMEX in 2019. Fitch's base case incorporates expectations of net debt/EBITDA remaining at around 5.0x through 2021 and beginning to decline in 2022. However, there is meaningful uncertainty surrounding the extent of the recovery in demand in most of CEMEX's markets, and earnings gains could drag. Foreign Currency Exposure: CEMEX employs hedging instruments to mitigate currency risk in costs and revenue. The company has historically been successful in maintaining U.S. dollar prices after steep currency depreciation in Mexico, its main market. However, sharp price increases during 2015-2017 and, more recently, a market rejection to absorb prices in line with inflation in 2018-2019, suggest that prices measured in U.S. dollars could lag for a number of years. Strong Business Position: CEMEX is one of the world's largest cement producers, selling 63 million metric tons of cement during 2019. The company is the leading cement producer in Mexico and one of the top producers in the U.S. CEMEX also has a large global presence in ready-mix and aggregates, with 2019 sales of 50 million cubic meters of ready-mix and 135 million metric tons of aggregates. CEMEX's main geographic markets, in terms of EBITDA, include Mexico at 37%, Central and South America at 15%, the U.S. at 24%, Europe at 16%, and Asia, the Middle East and Africa at 8%. DERIVATION SUMMARY CEMEX's ratings reflect its diversified business position across several large markets, notably Mexico, the U.S. and some European countries; its vertical integration and economies of scale; and positive FCF generation. The company is the leading cement producer in Mexico and one of the top producers in the U.S. and the largest in Spain (A-/Stable). CEMEX's closest peers are large global cement producers, such as LafargeHolcim Ltd (BBB/Stable), which CEMEX competes with in several markets. LafargeHolcim has broader geographic diversification, with operations spanning Europe at 25% of EBITDA, North America at 25%, the Middle East and Africa at 12%, Latin America at 16% and Asia at 27%. Latin America is CEMEX's largest region, representing about 50% of EBITDA, of which about 35% is generated in Mexico. The U.S. represented about 25% of CEMEX's EBITDA, with the remainder from Europe at about 15% and, to a lesser extent, Israel (A+/Stable) and the Philippines (BBB/Stable). CEMEX's broader geographic diversification and larger scale compare well with regional building materials companies, such as Martin Marietta Materials, Inc. (BBB/Negative) and cement producers Votorantim Cimentos S.A. (VCSA; BBB-/Negative) and InterCement Participacoes S.A. (C). VCSA, which has a dominant position in Brazil and operations in the U.S., Canada and throughout the world, is not a direct peer, as the rating is tied to Votorantim S.A. (BBB-/Negative), which includes mining, utilities and financial services subsidiaries. Martin Marrietta is focused in the U.S. and the Caribbean. InterCement's portfolio is weighted heavily toward volatile emerging market countries, such as Brazil (BB-/Negative), Argentina (CCC) and Mozambique (CCC), which creates cash flow uncertainty and higher exposure to foreign currency risk, when compared with CEMEX. From a financial perspective, CEMEX's ratings reflect its weaker credit metrics when compared with higher rated global peers. Fitch projects net leverage at around 5.0x in 2021, which is high for a 'BB-' cement company with a global presence. CEMEX's global scale, business position and funding access are all positive factors, as is the company's record of reducing debt. Fitch projects CEMEX's FFO fixed-charge coverage below 3.0x, which is lower than the 3.5x that is typical for a 'BB' category building materials issuer. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer Include -- Mexican cement sales volumes decline mid-single digits in 2020, then recover by low-single digits in 2021 and 2022. -- U.S. cement sales volumes decline by low-single digits in 2020 and in 2021. -- EBITDA of around USD1.8 billion through 2021 and USD2.0 billion in 2022. -- Capex declines to USD400 million in 2020, then rises to about USD800 million in 2020 and 2021. -- No dividends over the long term. -- Net equity buybacks of approximately USD200 million. -- An exchange rate of the Mexican peso to the U.S. dollar at around MXN22/USD1 or lower. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: -- Net debt/EBITDA below 4.0x. -- Rising cement demand in Mexico and the U.S. significantly strengthens EBITDA expectations. -- A strengthening of CEMEX's business position in markets outside Mexico that leads to expectations of higher operating cash flow generation. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: -- A weakening of operating cash flow and FCF expectations so that net debt/EBITDA is forecast above 5.0x after 2022. -- Expectations of a pronounced deterioration of Mexico's economic environment that weakens EBITDA prospects. LIQUIDITY AND DEBT STRUCTURE Sound Liquidity: CEMEX reacted to the pandemic by drawing USD1.5 billion in March and April 2020 under its committed credit facility and other credit lines and by raising USD1 billion from seven-year notes in June 2020. The funds were used to bolster the company's cash position, which stood at USD2.8 billion as of 2Q20. This compares with debt amortization of only USD400 million in 2020 and USD700 million in 2021. The company expects to use the proceeds of both transactions to refinance debt, including the repayment of its committed credit facility, which would remain available to support liquidity. Satisfactory banking relationships allow CEMEX to modify the terms of the financial covenants of its syndicated credit agreement. ESG CONSIDERATIONS The highest level of Environmental, Social and Governance (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). CEMEX SAB: S&P Rates New Senior Secured Notes Due 2030 'BB' ----------------------------------------------------------- S&P Global Ratings assigned its 'BB' issue-level and '3' recovery ratings to CEMEX S.A.B. de C.V.'s (global scale: BB/Negative/--; national scale: mxA/Negative/mxA-1) proposed senior secured notes due 2030. The recovery rating of '3' indicates that bondholders can expect a meaningful (50%-70%) recovery in the event of a payment default. S&P expects the company to use the net proceeds for general corporate purposes, including the repayment of other debt, in accordance with the 2017 Credit Agreement. The notes will be secured by a first-priority security interest over all the shares of Cemex Operaciones Mexico S.A. de C.V., Cemex Innovation Holding Ltd. (formerly CEMEX TRADEMARKS HOLDING Ltd.), New Sunward Holding B.V., and CEMEX Espana S.A. (together, the collateral) and all proceeds of such collateral. CEMEX's main subsidiaries will unconditionally guarantee the notes under the same terms as all of the company's other senior capital market debt. Issue Ratings - Recovery Analysis Key analytical factors -- S&P's recovery rating on CEMEX's various senior secured debt remains unchanged at '3', and reflects our expectation for meaningful recovery prospect (50%-70%, rounded estimate of 60%) in the event of a payment default. Therefore, the issue-level ratings on the senior secured debt remain at the same level as the issuer credit rating. -- S&P's issue-level rating on CEMEX's perpetual notes remains 'BB-', reflecting the deferability feature on coupon payments for this instrument. -- S&P's simulated default scenario assumes a payment default in 2022 due to a sharp decline in cement demand, associated with continued weakness in residential and non-residential construction activities in the company's core markets, resulting in lower cash flows. In addition, in this scenario, CEMEX would face restrictions in accessing the debt capital markets to refinance its debt maturities for that year. -- S&P has valued CEMEX on a going concern basis, given its belief that the company would continue to have a viable business model in an event of default because of its leading market position in the regions where it operates. Simulated default assumptions -- Simulated year of default: 2022 -- EBITDA at emergence: About $1.3 billion -- Implied enterprise value multiple: 6.0x -- Jurisdiction: Mexico Simplified waterfall -- Gross enterprise value at default: about $7.6 billion -- Administrative costs: about $379 million -- Net enterprise value: about $5.2 billion -- Senior secured debt: about $11.4 billion -- Recovery expectations: 50%-70% (rounded estimate 60%) Ratings List New Rating CEMEX S.A.B. de C.V. Senior Secured BB Recovery Rating 3(60%) ********* 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. 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