/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/200928.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, September 28, 2020, Vol. 21, No. 194 Headlines A R G E N T I N A ARGENTINA: Inverted Yield Curve Flashes Default Risk ARGENTINA: Jobless Rate Hits 16-Year High Amid Pandemic, Lockdown LA RIOJA: S&P Lowers ICR to 'SD' on Missed Interest Payment B A R B A D O S BARBADOS: Club Resort to Cut Dozens of Jobs B R A Z I L BRAZIL: Unlikely to Feel Impact of New US$2-Tril. Banking Scandal C H I L E AUTOMOTORES GILDEMEISTER: Moody's Cuts CFR to Caa3, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Exports From Free Zones Fell 9.33% in 1st Half E L S A L V A D O R BANCO AGRICOLA: Fitch Affirms 'B' LongTerm IDR, Outlook Negative BANCO DAVIVIENDA: Fitch Affirms 'B' LongTerm IDR, Outlook Negative INVERSIONES CREDIQ: Fitch Affirms B LongTerm IDR, Outlook Negative M E X I C O GRUPO KALTEX: S&P Affirms 'CCC' ICR, Outlook Negative V E N E Z U E L A PETROLEOS DE VENEZUELA: Customers Schedule Last Oil Cargoes X X X X X X X X [*] BOND PRICING: For the Week Sept. 21 to Sept. 25, 2020 - - - - - ================= A R G E N T I N A ================= ARGENTINA: Inverted Yield Curve Flashes Default Risk ---------------------------------------------------- Jorgelina Do Rosario and Sydney Maki at Bloomberg News report that less than a month after Argentina's $65 billion debt restructuring, bond prices show growing concern the government may struggle to pay its obligations. The country's yield curve has inverted in the week since officials announced foreign-exchange restrictions to help conserve cash, according to Bloomberg News. Investors perceived the move as an act of desperation instead of a workable solution to stem the drain in foreign reserves, and prices for short-term bonds dropped, Bloomberg News discloses. Angst is growing just over three weeks after creditors reached a deal to cut interest rates and push back maturities, with the promise that the restructuring would stabilize Argentina's finances after the country's third default of the past 20 years, Bloomberg News says. "This reflects the already very high perceived chance of another default down the road," said Pablo Waldman, head of strategy at StoneX Argentina, Bloomberg News relates. "Sophisticated traders are shorting the more liquid short end of the curve to hedge their exposure to longer-dated and harder-to-sell securities," he added. Longer-term yields have fallen below shorter-term yields on Argentina's dollar bonds issued both locally and abroad, Bloomberg News says. That's the opposite of how yield curves look in most countries, where securities with a longer time horizon are perceived to carry more risk, Bloomberg News relates. In Argentina, international bonds maturing in 2030 are trading with a 15% yield to convention, while those due in 2041 trade at a 13.6% yield, according to data compiled by Bloomberg. The extra yield investors demand to hold the sovereign debt over U.S. Treasuries widened 40 basis points on Sept. 23 to 1,393 basis points, above the threshold for the bonds to be considered distressed, JPMorgan Chase & Co data show, Bloomberg News notes. The latest leg down for the notes came after the government expanded restrictions on buying dollars in a bid to conserve cash. Net international reserves have dropped to about $5.5 billion, according to estimates by Portfolio Personal Inversiones, with the economy is in its third year of recession, Bloomberg News discloses. Investors are concerned reserves could be tapped out by the time payments come due, according to Alejo Costa, chief Argentina strategist at BTG Pactual in Buenos Aires, Bloomberg News says. He estimates a 90% chance of default over the next decade, Bloomberg News relates. "That's the problem with unsustainable policies," he said. "The country can still adjust its policies, but so far nothing indicates the government will do so in the short term," he added. About Argentina Argentina is a country located mostly in the southern half of South America. It's capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019 according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. Standard & Poor's credit rating for Argentina stands at CCC+ with stable outlook, which was a rating upgrade issued on Sept. 8, 2020. Fitch's credit rating for Argentina was last reported at CCC with n/a outlook, a rating upgrade from CC on Sept. 11, 2020. DBRS' credit rating for Argentina is CCC with n/a outlook, a rating upgrade on Sept. 11, 2020. Moody's credit rating for Argentina was last set at Ca, a rating downgrade from Caa2 on April 4, 2020, with a negative outlook. As reported by The Troubled Company Reporter - Latin American, DBRS noted that the recent upgrade in Argentina's ratings (September 2020) 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. DBRS added that the debt restructurings conclude a prolonged default and provide the government with substantial principal and interest payment relief over the next four years. DBRS further relayed that 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. ARGENTINA: Jobless Rate Hits 16-Year High Amid Pandemic, Lockdown ----------------------------------------------------------------- Jorge Iorio at Reuters report that Argentina's unemployment rate jumped to 13.1% in the second quarter of the year as the country was swiped by the coronavirus pandemic, the official statistics agency said, the highest since 2004 and up from 10.4% in the previous quarter. Argentina imposed a strict lockdown in mid-March, hitting an already shaky economy in recession since 2018 and leaving many businesses struggling to survive. The country now has over 650,000 confirmed cases of COVID-19, according to Reuters. "The (unemployment) numbers largely reflect the impact on labor market dynamics from the COVID-19 pandemic and from the restrictions on certain activities and movement," Argentina's INDEC statistics body said in a report, Reuters relays. The agency said the sectors hardest hit included construction, hotels and restaurants and domestic services, the report notes. The South American grains producer, which is just emerging from default on its foreign debt, needs to revive its economy and get people back to work to stave off a sharp increase in poverty and to refill depleted government coffers, Reuters discloses. About Argentina Argentina is a country located mostly in the southern half of South America. It's capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019 according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. Standard & Poor's credit rating for Argentina stands at CCC+ with stable outlook, which was a rating upgrade issued on Sept. 8, 2020. Fitch's credit rating for Argentina was last reported at CCC with n/a outlook, a rating upgrade from CC on Sept. 11, 2020. DBRS' credit rating for Argentina is CCC with n/a outlook, a rating upgrade on Sept. 11, 2020. Moody's credit rating for Argentina was last set at Ca, a rating downgrade from Caa2 on April 4, 2020, with a negative outlook. As reported by The Troubled Company Reporter - Latin American, DBRS noted that the recent upgrade in Argentina's ratings (September 2020) 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. DBRS added that the debt restructurings conclude a prolonged default and provide the government with substantial principal and interest payment relief over the next four years. DBRS further relayed that 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. LA RIOJA: S&P Lowers ICR to 'SD' on Missed Interest Payment ----------------------------------------------------------- S&P Global Ratings lowered its issuer credit rating on the province of La Rioja to 'SD' from 'CC'. S&P also lowered the issue rating on the province's 2025 bond to 'D' from 'CC'. Outlook S&P doesn't assign outlooks to 'SD' or 'D' ratings because they express a condition and not a forward-looking opinion of default probability. Upside scenario S&P will raise its ratings on the province following the resolution of the debt restructuring. Post-restructuring ratings tend to be in the 'CCC' or low 'B' categories, reflecting the resulting debt structure, and the forward-looking issuer's capacity and willingness to service that debt, which, among other factors, depended on the Argentine macroeconomic prospects and potential access to markets. However, the 'CCC+' transfer and convertibility assessment of Argentina constitutes a rating cap for Argentine subsovereigns. Rationale S&P lowered its issuer credit rating to 'SD' following the missed interest payment on the 2025 bond during its grace period. The $14.1 million interest payment was due Aug. 24 and the 30-calendar day grace period expired on Sept. 23. The severe economic recession is straining La Rioja's finances and liquidity Argentina's economic woes have eroded La Rioja's once solid fiscal profile; the province's operating margin was less than 1% in 2018-2019, down from a surplus that exceeded 5% of operating revenues in 2015-2017. Amid deepening economic recession following the prolonged national lockdown, the province balanced its first semester budget thanks to transitory measures. At the beginning of the year, La Rioja received national government transfers corresponding to 2019. In addition, it benefited from restraints on spending due to the suspension of public servants' salary increases amid the lockdown. However, the impact of the exceptional transfers will likely fade in the coming months, while pressure to increase payroll has resumed as real wages have shrunk significantly given Argentina's high inflation. Moreover, health-related spending will likely increase; the province is currently facing a severe second wave of COVID-19. Our base case assumes an operating surplus of 1.7% on average in 2020-2021 and a deficit after capital expenditures of 5.2% of total revenues. At the same time, the province is facing significant delays in operating the wind energy plant at full capacity, for which it used the proceeds of its international bond to construct. While the plant is operating partially, revenue from it is lower than the province's initial expectations. La Rioja revised its estimates, which now indicate that even by reaching full capacity, the project's expected cash flow would not be sufficient to service the current terms and conditions of the international bond as originally expected. The 2025 bond constitutes the bulk of the province's debt service, with $29 million annual interest payments equivalent to 4% of operating revenues, which has so far be manageable although increasingly challenging. The province's debt profile becomes even heftier in 2022-2025 when the $300 million bond starts amortizing in four tranches. Amid rising pressures, including tightening foreign exchange controls imposed by the central bank, and uncertain access to markets, La Rioja is undergoing negotiations to restructure its foreign law bond. Limited growth prospects, weak debt payment culture, and a volatile institutional framework will weigh on the post default rating La Rioja has one of the lowest GDPs per capita in Argentina. S&P estimates it at $3,300 for 2020--less than half of our estimate for the national level of $8,300. This structural weakness results in ongoing spending pressures to improve social conditions while the low-income level and limited growth prospects restrict the province's ability to increase its own source revenues. An already weak economy took a hit from the pandemic and the strict lockdown imposed by the national government. S&P expects a 12.5% contraction in real GDP this year and a 4.8% rebound in 2021. The subdued recovery in 2021 reflects the need to restore investor confidence to bolster investment and household purchasing power. Volatile macroeconomic conditions including persistently high inflation have resulted in a very short-term planning horizon, which focuses on the balance of revenues and expenses. In addition, liquidity and debt management practices have been informal, and the recent default signals a weak payment culture, along with the management's nonprioritization of timely debt payment amid stressful circumstances. La Rioja's is now the sixth rated Argentine province to enter into default, following the provinces of Buenos Aires, Mendoza, Rio Negro, Salta, and Entre Rios. Macroeconomic distortions and inconsistencies are significant, and the financial government's capacity to support local and regional governments (LRGs) is limited and sometimes related to political alignment. S&P assesses the institutional framework for Argentina's LRGs as volatile and underfunded. This reflects its view of the sovereign's very weak institutional predictability and volatile intergovernmental system that has been subject to various modifications to fiscal regulations and lack of consistency over the years, jeopardizing LRGs' financial planning, and consequently, their credit quality. In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List Downgraded To From La Rioja (Province of) Senior Unsecured D CC Downgraded; CreditWatch/Outlook Action To From La Rioja (Province of) Issuer Credit Rating SD/-- CC/Negative/-- =============== B A R B A D O S =============== BARBADOS: Club Resort to Cut Dozens of Jobs ------------------------------------------- Dozens of tourism workers at one of Barbados' all-inclusive adults-only resort are to lose their jobs. The Club Barbados Resort and Spa has reportedly informed employees in a statement that it was making their positions redundant as the hotel continues to buckle under the pressure from the COVID-19 pandemic. Human Resource Director Donna Harper-Nicholls said the COVID-19 pandemic and the measures being implemented to combat it are continuing to have a significant and unprecedented negative impact on the global tourism industry. As reported in the Troubled Company Reporter-Latin America on April 23, 2020, S&P Global Ratings affirmed its 'B-/B' long- and short-term sovereign credit ratings on Barbados, and its 'B-' issue-level ratings on Barbados' debt. In addition, S&P Global Ratings affirmed its 'B-' transfer and convertibility assessment. The outlook is stable. =========== B R A Z I L =========== BRAZIL: Unlikely to Feel Impact of New US$2-Tril. Banking Scandal ----------------------------------------------------------------- Richard Mann at Rio Times Online reports that with strict rules, Brazil should not be impacted, at least for now, by the new banking scandal involving giants like HSBC and Deutsche Bank in illegal transactions worth US$2 trillion (R$10 trillion), according to a Brazilian Central Bank source. However, a potential strengthening of global standards to prevent money laundering could have repercussions here, as has occurred in recent years, according to Rio Times Online. 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. ========= C H I L E ========= AUTOMOTORES GILDEMEISTER: Moody's Cuts CFR to Caa3, Outlook Stable ------------------------------------------------------------------ Moody's Investors Service, downgraded Automotores Gildemeister S.A. 's Corporate Family Rating (CFR) to Caa3 from Caa2 and its senior unsecured notes ratings to Ca from Caa3. The outlook is stable. Downgrades: Issuer: Automotores Gildemeister S.A. Corporate Family Rating, Downgraded to Caa3 from Caa2 Senior Unsecured Regular Bond/Debenture, Downgraded to Ca from Caa3 Gtd Senior Unsecured Regular Bond/Debenture, Downgraded to Ca from Caa3 Outlook Actions: Issuer: Automotores Gildemeister S.A. Outlook, Remains Stable RATINGS RATIONALE The downgrade of AG's CFR and senior unsecured notes ratings reflects its view of (1) the company's weak liquidity profile and overall capital structure, which in turn weakens AG financial flexibility and ability to service debt obligations due in the next 12 months; (2) the uncertainty over the speed of the recovery of AG's operations in the automobile retail industry in Chile and Peru, AG's main markets; and, (3) the senior unsecured notes subordination to the company's senior secured debt. The Ca rating of the senior unsecured notes stands one notch below AG's Caa3 CFR and reflects the subordination of these unsecured notes to the company's other existing secured debt, that represents the bulk of AG's indebtedness. The stable outlook reflects Moody's belief that the company will be able to strengthen its revenue base as light vehicle sales in Chile and Peru gradually resume in the next 12 to 18 months. The stable outlook also reflects its view that possible losses for senior unsecured creditors will not be greater than those associated with a Ca rating. The Caa3 CFR also incorporates AG's solid market position as one of the leading automotive distributors and retailers in Chile (54% of revenues for the last twelve months ended June 2020) and Peru (41% of revenues for the last twelve months ended June 2020) and its expectations that the company's business plan will enable the company to recover both revenue and market share in those countries. AG's Caa3 rating considers its high dependence on the Hyundai brand as well as the cyclical nature of the automotive industry and light vehicle sales, which is easily affected by changes in consumer preferences and product mix. AG's credit metrics and liquidity position are weak and have deteriorated as of the last twelve months ended June 2020. In the second-quarter of 2020, AG's automobile sales were severely affected by the coronavirus lockdowns in Chile and Peru. In the April -- May period sales were down by around 70% in Chile, with almost no sales in Peru. But sales have begun to recover as lockdowns became more flexible in those countries since June-July, and by August 2020 sales were down by around 40% in Chile and just over 10% in Peru. However, because economic activity will only gradually recover in both countries through 2021, AG's automobile sales are unlikely to recover to 2018-2019 levels until 2022. The speed of the recovery, however, could be aided by the company's plan to increase focus on Hyundai's best-selling vehicles in Chile and Peru. AG was quick to take action to lower expenses and preserve cash in the second quarter of 2020 when the lockdown started by closing unnecessary dealerships, reducing personnel, and refinancing borrowings, among other actions, and was able to maintain its cash position relative to December 2019. As of June 30, 2020, AG held around $42 million in cash and equivalents, which represents 20% of the short-term debt. Most of this short-term debt maturities, however, are related to loans and lines of credits with financial institutions that the company has been able to even through the worst of the pandemic. In 2021, AG will face the maturity of $9.6 million in 2021 senior secured notes; $22.5 million in 2021 senior unsecured notes; and $60 million of the first amortization of its 2025 senior secured notes. Additionally, the company will face around $40 million in interest expenses. As of the lats twelve months ended June 2020, debt to EBITDA ratio as adjusted by Moody's was at 164.1x, up from 33.4x as of December 2019, and debt to book capitalization was 102.6%, up from 91.6%; interest coverage as measured by EBITDA to interest expense was down to 0.1x, from 0.4x as of December 2019. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A negative action on AG's ratings or outlook could be taken if liquidity worsens, with potential losses for creditors higher than its current estimates. A positive action on the ratings or the outlook could be considered if the company improves its liquidity position and overall debt profile. It would also require an improvement in credit metrics, with leverage reduction and strengthening of its operating performance and cash position, to mitigate the effects of any potential future industry downturn. COMPANY PROFILE Headquartered in Santiago, Chile, AG is one of the largest car importers and distributors in Chile and Peru operating a network of company-owned and franchised vehicle dealerships. Its principal car brand is Hyundai, for which it is the sole importer in both of its markets. For the last twelve months ended June 30, 2020 AG reported consolidated net revenues of $770 million, of which 95.2% correspond to sales in Chile and Peru, its key markets. The principal methodology used in these ratings was Retail Industry published in May 2018. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Exports From Free Zones Fell 9.33% in 1st Half ------------------------------------------------------------------ Dominican Today reports that exports from the free zones show fell 9.33% between January-July 2020 when compared to the same period of 2019. In the first half, exports from the sector reached US$3.1 billion. According to the Trade Magazine published by Customs, 47.32% of these exports correspond to consumer goods, 37.73% to capital goods and the remaining 14.95% to raw materials, the report notes. Consumer goods exports fell -US$467.58 million between January and July 2020, from US$1.95 billion in 2019 to US$1.5 billion in 2020, the report discloses. Likewise, capital goods posted a positive absolute variation of US$144.7 million when placed at US$1.2 billion during the first half of 2020, when in 2019 it was US$1.1 billion, the report says. Raw material exports went from US$468.34 million between January-July 2019 to US$468.7 million, an absolute variation of US$0.36 million in the same period of 2020, the report relays. 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. Luis Rodolfo Abinader Corona is the current president of the nation. 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 L S A L V A D O R ===================== BANCO AGRICOLA: Fitch Affirms 'B' LongTerm IDR, Outlook Negative ---------------------------------------------------------------- Fitch Ratings has affirmed Banco Agricola, S.A.'s Long-Term Issuer Default Rating (IDR) at 'B' with a Negative Rating Outlook and its Viability Rating (VR) at 'b-'. In addition, Fitch has affirmed the bank's national long-term ratings in El Salvador - of the bank and its local holding company, Inversiones Financieras Banco Agricola, S.A. (IFBA), at 'AAA(slv)' with a Stable Rating Outlook. KEY RATING DRIVERS AGRICOLA IDRS, SUPPORT RATINGS, NATIONAL RATINGS AND SENIOR DEBT Agricola's IDRs, Support Ratings (SR) and national and senior debt ratings reflect Fitch Ratings' appreciation of the ability and propensity of its ultimate parent, Bancolombia S.A. (Bancolombia; 'BBB-'/Negative), to provide support to Agricola if it were required. Fitch's assessment of Bancolombia's ability to support Agricola is highly influenced by El Salvador's sovereign ratings that constrain Agricola's IDRs, as is reflected in the country ceiling. Agricola is rated five notches below Bancolombia's IDRs. El Salvador's country ceiling of 'B', which, according to Fitch's criteria, captures transfer and convertibility risks, constrains the bank's ratings to a lower level than would be possible based solely on Bancolombia's ability and propensity to provide support. Therefore, in this case there could be limitations on the subsidiary's ability to use parent support. The Negative Rating Outlook on Agricola's IDR is in line with the Negative Rating Outlook on El Salvador's sovereign rating. In addition, Fitch's support opinion is moderately influenced by the relevant role Agricola plays on its parent's regional strategy. Bancolombia is the largest bank in Colombia, with a significant footprint in Central America (CA), and Agricola is one of the largest subsidiaries of Bancolombia in CA. The bank's SR reflects Fitch's opinion of a limited probability of support because of the heightened risks in the operating environment. The bank's SR is based on Fitch's opinion of Bancolombia's ability and propensity to support Agricola, if needed. Agricola's support rating is also constrained by El Salvador's sovereign rating, as reflected in the country ceiling. As per Fitch's criteria, Agricola's IDR of 'B' corresponds to a support rating of '4'. Agricola's national ratings are at the highest level of the national ratings scale given the relative credit strength of the shareholder compared to other rated issuers in El Salvador. Agricola's senior secured and unsecured debt National Scale Ratings are at the same level as the issuer's national ratings. In Fitch's opinion, their debt issuances' likelihood of default is the same as that of Agricola. Fitch believes that foreign banks' subsidiaries in El Salvador may be affected by reduced support due to the negative impact of the international contingency caused by the coronavirus pandemic on the business and financial profiles of their parent companies. Although most foreign bank subsidiaries operating in El Salvador are relatively small compared to the group to which they belong, which facilitates support if necessary, Fitch will closely monitor the parent companies' abilities to support their subsidiaries. VIABILITY RATING Agricola's VR of 'b-' is highly influenced by El Salvador's challenging operating environment, which, in Fitch's view, imposes pressures on the financial and company profiles of the bank, given the economic slowdown caused by the international health emergency. Fitch expects the deteriorating operating conditions due to the coronavirus pandemic will pressure asset quality and weigh on the bank's earnings due to lower loan growth and higher credit costs over the medium term. Agricola's VR also reflects, with high importance, its company profile characterized by a leading franchise in the local market due to a strong market share, at close to 27% of total loans and total deposits as of June 2020, as well as leadership in most product lines and its diversified business model. As a result of the measures implemented to mitigate the effects of the coronavirus pandemic, economic dynamics have decreased and unemployment has increased. This, in Fitch's opinion, will drive lower growth of the loanbook than in previous years, asset quality deterioration and lower profits starting at YE20 and lasting throughout 2021, mainly because the regulator recently extended the payment deferral programs for all banks until March 2021. Fitch believes the extended measures will still limit the visibility of the true underlying asset quality of the bank. Fitch believes Agricola entered the crisis with good asset quality, although, like its peers, this has been favored by the relief measures executed. The nonperforming loans (NPL) to gross loans ratio stood at 1.4% as of June 2020 (system: 1.6%). Meanwhile, the reserve coverage of NPL increased to 220% (system: 162%), comparing well above almost all of the closest local peers and some regional peers, as Agricola made additional prudent loan loss allowances following Bancolombia's policies. Loan concentration is moderate, as the 20 largest exposures account for 1.7x of Fitch Core Capital (FCC). In Fitch's opinion, the challenging economic conditions will pressure Agricola's asset quality once the relief measures end; however, unlike what some other peers could face, it is expected that Agricola's more conservative risk appetite, reflected in its current lending practices, may limit this additional pressure. During 1H20, Agricola's profitability faced significant pressures. Operating profits to risk-weighted assets (RWA) decreased to 2.1% due to lower business volumes and higher prudential provisions despite low funding costs and operational efficiency. Compared to its closest local peers, Fitch expects Agricola's profitability to be pressured, although it should be more resilient given its leading franchise, diversified business model and continuous controls on operating expenses. Agricola's capitalization is at its lowest historical level. As of June 2020, the bank's FCC-to-RWA metric decreased to 12.7%, mainly due to recurrent dividend payments to its parent that were particularly higher in 2020 and, to a lesser extent, its moderate asset growth. Agricola's regulatory capital adequacy ratio of 13.2%, also at its historical minimum, stood below that of the system (14.6%); however, the prudential constitution of voluntary reserves will allow the bank to mitigate unexpected loan deterioration. Fitch expects that the bank's capital position is likely to remain relatively stable for the remainder of 2020 due to low asset growth and the expected support from Bancolombia, if necessary. Agricola has an increasing and diversified funding structure compared to local peers, driven mostly by its leading franchise in deposits and alternative funding sources supported by synergies with its parent. Its loans to customer deposits ratio decreased to 92% at June 2020, supported by relatively higher and consistent growth in deposits. Fitch considers that Agricola's refinancing risk is partially mitigated by its reasonable liquidity levels and ample access to alternative types of funding. However, given Agricola's solid franchise in deposits at a relatively low cost and expected low loan growth, these alternatives are not currently considered by the management. INVERSIONES FINANCIERAS BANCO AGRICOLA IFBA's (Agricola's immediate regulated holding company) national ratings also reflect Fitch's appreciation of its ultimate shareholder ability and propensity to provide support, if needed. The 'AAA(slv)' rating shows the relative credit strength of the shareholder, which is rated several notches above El Salvador's sovereign rating, relative to other issuers rated in El Salvador. The consolidated financial profile of the group mirrors the financial performance of Agricola, which accounted for 91% of its assets and 51% of its equity as of June 2020. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Agricola's ratings remain highly sensitive to changes in El Salvador's sovereign ratings and Country Ceiling. Negative changes in the bank's IDR and SR would mirror negative changes in El Salvador's sovereign ratings and Country Ceiling. -- Any perception by Fitch of reduced strategic importance of Agricola to its parent company may trigger a downgrade of its IDRs, SR and National Ratings. -- Agricola's IDRs could be downgraded by a multi-notch downgrade of Bancolombia's IDRs. -- A prolonged and severe economic disruption due to the coronavirus pandemic could lead to a lower operating environment score for Salvadoran banks, which would pressure Agricola's VR. Downgrades in Agricola's VR could also come from material deterioration in the bank's financial profile that results in sustained operating losses and an FCC-to-RWA ratio consistently below 10%. -- Agricola's senior secured and unsecured debt National Ratings would be downgraded in the event of negative rating actions on the bank's National Ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Negative Rating Outlook on Agricola's IDR indicates that positive actions in the bank's ratings are highly unlikely for the foreseeable future. However, over the medium term, Agricola's IDR, SR and VR could be upgraded in the event of an upgrade of El Salvador´s sovereign rating and Country Ceiling. -- The upside potential of the VR is limited due to the worsening operating environment as a result of the economic disruption from the coronavirus pandemic. The VR could only be upgraded over the medium term by an improvement of the operating environment accompanied by consistent financial metrics while maintaining it strong company profile. -- The national scale ratings of Agricola and IFBA are at their highest levels on the national rating scale and therefore have no upside potential. SUMMARY OF FINANCIAL ADJUSTMENTS Pre-paid expenses were reclassified as intangibles and deducted from the bank's total equity. 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 Banco Agricola's ratings and Inversiones Financieras Banco Agricola's national ratings are linked to Bancolombia's ratings. 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 entities, due to either their nature or the way in which they are being managed by the entities. BANCO DAVIVIENDA: Fitch Affirms 'B' LongTerm IDR, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has affirmed Banco Davivienda Salvadoreno, S.A.'s (Davivienda Sal) Long-Term Issuer Default Rating (IDR) at 'B' and Short-Term IDR at 'B'. The Rating Outlook on the Long-Term IDR is Negative. Fitch has also affirmed the bank's Viability Rating (VR) at 'b-', the Support Rating at '4' and its national ratings at 'AAA(slv)' with a Stable Rating Outlook and 'F1+(slv)'. At the same time, Fitch affirmed the national ratings of its holding company, Inversiones Financieras Davivienda, S.A. (IF Davivienda), at 'AAA(slv)' with a Stable Rating Outlook and 'F1+(slv)'. KEY RATING DRIVERS Davivienda Sal IDRs, Support Rating, National Ratings and Senior Debt Davivienda Sal's IDRs, Support Rating (SR) and national and senior debt ratings are based on Fitch's appreciation of the potential support it would receive from its parent, Banco Davivienda, S.A. (Davivienda), if needed. Davivienda's Long-Term Foreign Currency IDR of 'BBB-', with a Negative Rating Outlook, shows its ability to provide support. Fitch's assessment of the shareholder's ability to provide support is highly influenced by El Salvador's sovereign ratings that constrain Davivienda Sal's IDRs, as reflected in the Country Ceiling, resulting in Davivienda Sal being rated five notches lower Davivienda's IDRs. El Salvador's Country Ceiling of 'B', which, according to Fitch's criteria, captures transfer and convertibility risks, constrains the bank's ratings to a lower level than would be possible based solely on Davivienda's ability and propensity to provide support. Therefore, in this case there could be limitations on the subsidiary's ability to use parent support. However, in Fitch's opinion, Davivienda's strong ability and commitment to its subsidiary is sufficient to allow Davivienda Sal to be rated above the sovereign rating. The Negative Rating Outlook on Davivienda Sal's IDR is in line with the Negative Rating Outlook on El Salvador's sovereign rating. In its support analysis, the agency also considers moderately the huge reputational risk that the bank's default would constitute to its owner, as well as its key role in Davivienda's diversification strategy in Central America. Also, Fitch factors in Davivienda Sal's manageable size for its shareholder, since it accounted for about 7.7% of Davivienda' total assets as of June 2020. It is worth mentioning that Davivienda Sal still faces a legal contingency that began last year, which has not yet been resolved by the Constitutional Chamber. The bank already has the committed resources to face this; therefore, if this would result in an unfavorable outcome, Fitch believes it would not significantly affect the bank's operations or financial performance. Also, the agency considers that the entity would have the support of its parent, if necessary. The bank's SR of '4' corresponds with its IDR of 'B', according to Fitch criteria, and it reflects the agency's opinion of the limited probability of support due to the significant uncertainty of the challenging environment resulting from the coronavirus pandemic. The institution's SR is driven by Davivienda's ability and propensity to provide support to it, if required. Also, the rating is capped by the sovereign rating, as reflected in the Country Ceiling. Davivienda Sal's national ratings are at the highest level of the national ratings scale given the relative credit strength of the shareholder compared to other rated issuers in El Salvador. Meanwhile, Davivienda Sal's senior unsecured and secured debt national ratings are at the same level as the issuer's national ratings. In Fitch's opinion, their debt issuances' likelihood of default is the same as that of Davivienda Sal. Fitch believes foreign bank subsidiaries in El Salvador may be affected by reduced support due to the negative impact of the international contingency caused by the coronavirus pandemic on the business and financial profiles of their parent companies. However, most foreign bank subsidiaries operating in El Salvador are relatively small compared to the group in which they belong, which facilitates support, if necessary. Fitch will closely monitor the parent companies' ability to support their subsidiaries. VIABILITY RATING Davivienda Sal's VR is highly influenced by El Salvador's challenging operating environment, which in Fitch's view, imposes pressures upon the financial and company profiles of the bank given the economic slowdown caused by the international health emergency. Fitch expects the deteriorating operating conditions due to the coronavirus pandemic to pressure asset quality and weigh on the bank's earnings due to lower loan growth and higher credit costs over the medium term. Davivienda Sal's VR also reflects, with high importance, its company profile characterized by a solid local franchise as the second-largest player by assets in the Salvadorian banking system, with a market share of 14.7% as of June 2020 and a relative business diversification. As a result of the measures implemented to mitigate the effects of the coronavirus pandemic, economic dynamics have decreased and unemployment has increased, which, in Fitch's opinion, will drive lower growth of the loan book than in previous years and asset quality deterioration starting at YE20 and lasting through 2021, mainly because of payment deferral programs extended until March 2021. Fitch anticipates that the bank's asset quality will be stressed due to the impact from the pandemic, although the extended deferred payment measures will still limit visibility on the magnitude of the loan portfolio's real deterioration. Davivienda Sal entered the crisis with good asset quality, although recently masked by a high percentage of its loan portfolio falling under relief measures as of June 2020. As of the same date, its nonperforming loans (NPL)-to-gross loans ratio stood at 1.8% (system: 1.6%); while reserve coverage of NPLs increased as Davivienda Sal made additional prudential loan loss allowances following Davivienda's policies and to mitigate, as far as possible, the impact of the current crisis on delinquency. In Fitch's opinion, the challenging economic conditions will pressure Davivienda Sal's asset quality once the relief measures end; however, unlike what some other peers could face, it is expected that Davivienda Sal's more conservative risk appetite, reflected in its current lending practices, may limit this additional pressure. Davivienda Sal's profitability remains modest and below some peers and the system. The agency estimates that the bank will remain under pressure and face a possible further decrease in profitability in light of the prevailing challenging operating environment and higher loan-impairment charges. As of June 2020, its operating profits-to-risk-weighted assets (RWA) ratio was 0.8% (industry: 1.3%), lower than its 0.9% ratio of 2019, affected by lower business growth and higher prudential credit provisions. Fitch considers that the bank benefits from its parent's support, if needed, to maintain its capital levels, which comply with internal and regulatory requirements, and to provide adequate loss-absorption capacity to face the impacts of the health crisis. The Fitch Core Capital (FCC)-to-RWA metric continued its downward trend, moving from 13.6% in 2019 to 12.9% at 1H20, one of the lowest among banks of similar size in El Salvador and the industry (14.8%). In Fitch's view, Davivienda Sal's funding structure places it in an adequate position to face the crisis and to be diversified and favored from its strong deposit franchise, which drives an adequate loan-to-deposits ratio that improved slightly to 102.1% as of June 2020 from 105.8% in 2019. Fitch considers that Davivienda Sal's refinancing risk is partially mitigated by its reasonable liquidity levels, coupled with its good access to other funding alternatives and parent support, if needed. Davivienda Sal's current liquidity position provides good coverage of its debt maturities over the next 12 months. IF Davivienda IF Davivienda's national rating of 'AAA(slv)' also reflects Fitch's appreciation of the ability and propensity of its parent, Davivienda, to support it, along with the relative strength of its shareholder, whose IDRs are several notches above El Salvador's sovereign rating, with respect to other rated issuers in the country. The consolidated financial profile of the group mirrors the financial performance of Davivienda Sal, which accounted for 95.5% of its assets and 83.8% of its equity as of June 2020. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Davivienda Sal's ratings remain sensitive to changes in El Salvador's sovereign ratings and Country Ceiling. Negative changes in the bank's IDR and SR would mirror negative movements in El Salvador's sovereign ratings and Country Ceiling. -- A prolonged and severe economic disruption due to the coronavirus pandemic could lead to a lower operating environment score for Salvadoran banks, which would pressure Davivienda Sal's VR. Downgrades in Davivienda Sal's VR could also come from a material deterioration in the bank's financial profile that results in sustained operating losses and an FCC-to-RWA ratio that is consistently below 10%. -- Any perception by Fitch of reduced strategic importance of Davivienda Sal to its parent company may trigger a downgrade of its IDRs, SR and national ratings. This perception may also trigger a downgrade of IF Davivienda's national ratings. -- Davivienda Sal's IDRs could be downgraded by a multi-notch downgrade of Davivienda's IDRs. -- The debt issuances' ratings are aligned with the bank's national ratings; therefore, any negative change in the bank's ratings would be reflected in the issuances. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Negative Rating Outlook on Davivienda Sal's IDR indicates that positive actions on the bank's ratings are highly unlikely in the foreseeable future. However, over the medium term, Davivienda Sal's IDR, SR and VR could be upgraded in the event of an upgrade to El Salvador´s sovereign rating and Country Ceiling. -- The upside potential of the VR is limited due to the worsening operating environment as a result of the economic disruption from the coronavirus pandemic. The VR could only be upgraded over the medium term as a result of improvement within the operating environment accompanied by improvement in Davivienda Sal's financial metrics while maintaining it good company profile. -- The Rating Outlook is Stable, as Fitch does not anticipate any changes in Davivienda Sal's and IF Davivienda's national ratings. These ratings are at the highest level of the national rating scale and therefore have no upside potential. SUMMARY OF FINANCIAL ADJUSTMENTS Prepaid expenses were reclassified as intangibles and deducted from total equity to reflect their low absorption capacity. 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 Banco Davivienda Salvadoreno's and Inversiones Financieras Davivienda's ratings are based on Fitch's appreciation of the potential support they would receive from their parent, Banco Davivienda, S.A. (Davivienda), if needed. Davivienda's Long-Term Foreign Currency IDR of 'BBB-', with a Negative Rating Outlook, shows its ability to provide support. 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). INVERSIONES CREDIQ: Fitch Affirms B LongTerm IDR, Outlook Negative ------------------------------------------------------------------ Fitch Ratings has affirmed Inversiones CrediQ Business S.A.'s (ICQB) Long-Term and Short-Term Issuer Default Ratings (IDRs) at 'B'. The Rating Outlook on the Long-Term IDR is Negative. KEY RATING DRIVERS ISSUER DEFAULT RATING ICQB's ratings are highly influenced by its company profile, which is characterized by its modest franchise in the financial system, albeit with a considerable presence in vehicle financing by being a captive company of Grupo Q Holdings, Inc. (GrupoQ), one of the largest automobile dealers in the Central American region. Fitch believes that, for the foreseeable future, the business benefits gained from being a part of this group will continue. The ratings also reflect ICQB's adequate asset quality but with sensitivity to the increasing risks of the challenging operating environment. Fitch also considers with higher importance the challenges ICQB will have in maintaining its relatively diversified funding, adequate liquidity position and continued refinancing of its consolidated and unconsolidated liabilities. The Negative Rating Outlook reflects the pressures the challenging operating environment exerts on the entity's financial profile; specifically, on asset quality and profitability given its focus on automotive financing, which Fitch believes is more impacted by the current crisis. ICQB maintains an adequate loan portfolio quality considering its business model (retail-oriented) that is highly sensitive to a deteriorated operating environment. However, Fitch expects asset quality to deteriorate as the coronavirus pandemic will continue to weigh heavily on economic activity, challenging credit growth and the borrower's repayment capacity. Automobile loan refinance activity has increased, as debtor support measures are running out in the different countries where ICBQ operates, leading to a delay in the recognition of nonperforming loans (NPLs) and posing greater challenges to the company. Therefore, the effects could last until 2021. As of June 2020, loans under relief programs represented 65% of the total portfolio, a situation that influences in the still-moderate records of NPLs. As of June 2020, ICBQ's 90-day NPLs represented 2.6% of total loans (2019: 2.4%), with provisions coverage of 73.7% and 144% when considering the constitution of so-called COVID reserves for unexpected impairments. ICQB's funding structure is based primarily on wholesale funding that will be challenged during the current crisis. Favorably, ICBQ has a relatively well-diversified financing structure with good access to a number of credit facilities in the different geographies where it operates. Also, the reasonable levels of liquidity (21.3% of short-term debt as of June 2020) and unsecured debt to total debt (31.8% as of June 2020) could help to counter the refinancing risk of the company. However, Fitch believes the current crisis has increased pressure on covenants compliance, mainly from asset quality growing pressures and the risk of waiver negotiations with funders. Also, refinancing could be challenged as ICQB is highly dependent on income flows from its operating subsidiaries to repay the loan contracted to purchase Grupo Altra's shares due to its operating subsidiaries in Costa Rica, El Salvador and Honduras also having challenges in their financial performance. Fitch estimates that ICQB's profitability will be tested over the midterm; despite being sound in previous years, it will be threatened by the possible contraction of income and fees and by an increase in provision expenses related to the deterioration of its portfolio and lower business growth a result of the economic downturn. The entity has a long track record (more than five years) of its pre-tax profits over average assets exceeding 4% and a high ability to absorb an unexpected deterioration of its portfolio before incurring operating losses. ICQB has exhibited adequate and stable capitalization and leverage metrics supported by consistent income generation. Its capital ratios are generally in line with its risk appetite and keep a reasonable capacity to absorb unforeseen losses. As of June 2020, its tangible leverage ratio (debt to tangible equity) was 4.8x. Fitch estimates that decreasing internal capital generation in conjunction with committed dividend payments will be manageable for ICQB. However, the challenges that the operating environment is exerting on the different geographies where ICQB has a presence are still a downside risk on leverage metrics. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- ICQB's IDRs could be downgraded due to a sharp deterioration in asset quality that pressures the entity's profitability and capitalization metrics, subsequently increasing its debt-to-tangible equity ratio above 7x. -- ICQB's ratings could be downgraded should Fitch perceive a weakening of its funding and liquidity profile in the form of increased refinancing risks that do not guarantee a normality of operations. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- It is highly unlikely that the ratings will be upgraded in the short-to-medium term given the deteriorating and more challenging operating environment. However, the Rating Outlook could be revised to Stable if Fitch assesses that the entity's financial and business profile shows resilience to the economic and financial consequences related to the pandemic. SUMMARY OF FINANCIAL ADJUSTMENTS Prepaid expenses and other deferred assets were reclassified as intangible assets. Impaired loans were adjusted to reflect only loans that are overdue by 90 days or more, to be consistent with Fitch's criteria and global industry practices. 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 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, due to either their nature or the way in which they are being managed by the entity. =========== M E X I C O =========== GRUPO KALTEX: S&P Affirms 'CCC' ICR, Outlook Negative ----------------------------------------------------- S&P Global Ratings, on Sept. 24, 2020, affirmed its 'CCC' issuer credit and issue-level ratings on Mexico-based textile and apparel company, Grupo Kaltex, S.A. de C.V. (Kaltex). The recovery rating on the company's senior secured notes remains at '3'. At the same time, S&P removed all ratings from the CreditWatch listing with negative implications, where it placed them on April 6, 2020. The negative outlook on Kaltex reflects S&P's view that the default risk remains elevated in the next 12 months, given its tight liquidity in the midst of a complex macroeconomic environment triggered by the COVID-19 pandemic, with slowed consumption amid challenging economic conditions and an uncertain recovery path. The unprecedented containment measures in Kaltex's key markets to counter the COVID-19 outbreak significantly eroded its sales in the second quarter. However, the company has been taking measures to preserve its cash balance, including significantly reducing operating expenses (such as all non-essential expenses and some labor), using more efficient inventory management, and cutting its capital expenditures (capex) to minimum levels. The company also benefited from lower raw material prices during the pandemic. With these actions, Kaltex ended June with MXN291 million in cash on its balance sheet, a higher level than in the same period last year. S&P said, "Moreover, although we expect a lengthy recovery in business conditions, since the end of June, Kaltex reactivated all its operations, and we now expect a gradual recovery in sales while it maintains its disciplined financial measures to enhance its cash position toward the end of the third quarter. In addition, we expect the company to use its factoring program to discount some of its receivables to boost its cash balance. Therefore, we expect Kaltex to be in a position to meet its semiannual coupon payments due Oct. 11, 2020, on its $320 million senior secured notes due 2022 for about $14 million." Mexico, the U.S., Colombia, and Nicaragua have mostly lifted lockdown measures and stores have reopened. S&P said, "Thus, we now expect a lengthy but gradual recovery in Kaltex's key markets, which should support higher sales, quarter over quarter, and higher cash flows toward the end of the year, particularly considering that historically manufacturing and commercialization of linens and clothing perform better in the fourth quarter given the winter season in Kaltex's markets. However, we believe that the company remains exposed to several external downside risks which might undermine its operating and financial performance beyond our current expectation if they materialize, which is key because Kaltex's liquidity remains tight in light of its significant short term financial obligations." These risks include slower-than-expected recovery in sales amid the ongoing global recession this year due to COVID-19, and a drop in household consumption. Additionally, the risk of a second wave of infections and subsequent lockdown measures would have a material effect on the industry and on Kaltex's operations, EBITDA, cash flow, and liquidity. S&P said, "Our 'CCC' rating on Kaltex reflects the higher liquidity and refinancing risks, in the next 6-12 months, in relation to its semiannual coupon payments on its notes and to its short-term bank loans if the company is unable to roll over or amortizes them in the upcoming months. Despite some covenant relief granted by lenders last year, we believe Kaltex will continue breaching its leverage and interest coverage financial maintenance covenants at the end of 2020. We expect the company to maintain closed discussions with its creditors to extend the waivers when necessary. "We believe that without an unforeseen positive development, including favorable business, financial, and economic conditions to meet its short-term financial commitments, the probability of Kaltex's default is still high in the next 12 months, particularly considering next year's semiannual coupon payments in April and October. "In addition, the date for Kaltex's $320 million senior secured notes due April 2022 is approaching and will pose a significant refinancing risk for the company. Kaltex is still in talks to shed certain non-core assets in order to reduce its debt obligations, but we don't expect this to occur before beginning of next year." Environmental, social and governance (ESG) credit factors for this credit rating change: -- Consumer-related factors. ================= V E N E Z U E L A ================= PETROLEOS DE VENEZUELA: Customers Schedule Last Oil Cargoes ----------------------------------------------------------- Marianna Parraga and Nidhi Verma at Reuters report a handful of long-term customers of Venezuela's Petroleos de Venezuela, S.A. (PDVSA) have begun winding down oil trade with the state-run company by scheduling the last cargoes to depart from the sanctioned country ahead of a U.S. deadline, five sources close to the decisions told Reuters. The U.S. government has given the firms - which include Spain's Repsol REP.MC, Italy's Eni ENI.MI, India's Reliance Industries RELI.NS and Thailand's Tipco Asphalt TASCO.BK - deadlines ranging between October and November for ending exemptions to the sanctions allowing some companies still to receive Venezuelan oil, the sources said, according to Reuters. With U.S. elections looming in November, the Trump administration is seeking to raise the heat on Venezuelan President Nicolas Maduro, whose 2018 re-election was not recognized by most Western nations, the report discloses. Repsol, which since late 2018 had been receiving crude under a swap deal with PDVSA authorized by the U.S. Treasury Department allowing the Spanish company to cash pending debt, received its most recent cargo of Venezuelan oil this month on tanker Delta Ios, according to PDVSA's exports schedules, the report relays. The company does not plan to charter a new vessel to pick up Venezuelan crude after October, a company source said, the report notes. In response to Reuters' questions, a Repsol spokesman said the firm "abides by the international norms in force and will keep on abiding, the report relays" Eni, currently receiving crude under a similar swap deal, plans to take a Venezuelan oil cargo later this month on tanker Delta Captain and probably another in October before temporarily ending trade, according to PDVSA's documents and a company source, the report says. A spokesperson for Eni declined to comment on specific cargoes, but said the company "is operating and will operate in full compliance with applicable sanctions regulations and in continuous dialogue with the relevant authorities," the report discloses. Thailand's Tipco Asphalt has three more cargoes of Venezuelan heavy crude scheduled to load through October, all of them bound for its Kemaman refinery in Malaysia, according to the documents and a company source, the report notes. Tipco Asphalt said in a letter to Thailand's stock exchange this month that the U.S. State Department had contacted the firm in August asking it to wind down procurement of Venezuelan oil by the end of November, warning the company that it could be subject to U.S. sanctions in the event of non-compliance, the report notes. Tipco added that it was "taking steps to comply with such request," including a temporary shutdown of its Kemaman refinery until finding alternative oil supplies, the report discloses. The company did not immediately respond to an emailed request for further comment. And Reliance Industries, which in July received a temporary U.S. authorization to swap Venezuelan oil for diesel for the OPEC-member nation, has received some 4 million barrels of Venezuelan crude so far this month and plans to import almost 5 million barrels more in the coming weeks, the PDVSA documents showed, the report says. A source close to Reliance's plans said the firm will halt imports of Venezuelan oil in November and also shipments of diesel to the nation after a cargo currently on its way, the report relays. The pause would last for at least two months and a decision on whether to resume the trade would be taken after the U.S. election, the report says. Reliance and PDVSA did not reply to requests for comment. New Allies As PDVSA's pool of traditional customers has shrunk since last year due to sanctions, sales to mostly unknown or inexperienced firms accused by Washington of acting as shell companies have partially replaced them, the report relays. A large portion of the crude taken by these firms ends up in China, the report discloses. Venezuela has also received help from Iran this year as trade between the two sanctioned nations has deepened, the report notes. A large tanker that delivered Iranian condensate to PDVSA earlier this month is now loading Venezuelan crude for Iran's national oil company, the report relays. It is yet unknown if Washington will resume authorizing PDVSA's customers to take Venezuelan oil under swap deals, the report says. The U.S. Treasury Department declined to comment. U.S. special envoy for Venezuela and Iran, Elliott Abrams, told Reuters that sanctions are "increasingly effective in denying revenue" to Maduro's administration, the report notes. "Around the globe, leading companies are abiding by our sanctions, and acting responsibly and transparently. We appreciate their cooperation," he added. Even though scheduled cargoes of Venezuelan crude for Repsol, Eni, Tipco and Reliance are expected to finish soon once authorizations granted by Washington expire, the exchanged fuels most of these companies are delivering to PDVSA have continued arriving in Venezuelan ports, the documents also showed, the report relays. Venezuela expects the arrival this month of about 820,000 barrels of Iranian gasoline on tankers Forest, Faxon and Fortune, currently crossing the Atlantic Ocean, 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. =============== X X X X X X X X =============== [*] BOND PRICING: For the Week Sept. 21 to Sept. 25, 2020 --------------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Corp Universidad de Co 5.9 64.2 11/10/2021 CL CLP City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD Banco Security SA 3.0 27.4 6/1/2021 CL CLP Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD KrisEnergy Ltd 4.0 40.4 6/9/2022 SG SGD Noble Holding Internat 5.3 60.5 3/15/2042 KY USD AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD Enel Americas SA 5.8 32.7 6/15/2022 CL CLP Empresa Provincial de 12.5 0.0 1/29/2020 AR USD Odebrecht Finance Ltd 7.0 17.0 4/21/2020 KY USD SACI Falabella 2.3 50.6 7/15/2020 CL CLP Sylph Ltd 2.4 65.1 9/25/2036 KY USD Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD Noble Holding Internat 6.2 62.2 8/1/2040 KY USD Empresa Electrica de l 2.5 63.8 5/15/2021 CL CLP Sociedad Austral de El 3.0 17.0 9/20/2019 CL CLP Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD Plaza SA 3.5 38.3 8/15/2020 CL CLP Banco Security SA 3.0 5.6 7/1/2019 CL CLP Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD Polarcus Ltd 5.6 71.8 7/1/2022 AE USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD Fospar S/A 6.5 1.2 5/15/2026 BR BRL China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD YPF SA 16.5 67.3 5/9/2022 AR ARS MIE Holdings Corp 7.5 56.4 4/25/2019 HK USD Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD Banco Macro SA 17.5 65.2 5/8/2022 AR ARS Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD MIE Holdings Corp 7.5 56.2 4/25/2019 HK USD mpresa de Transporte 4.3 30.9 7/15/2020 CL CLP Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Automotores Gildemeist 8.3 54.2 5/24/2021 CL USD Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Cia Energetica de Pern 6.2 1.1 1/15/2022 BR BRL Yida China Holdings Lt 7.0 74.3 4/19/2020 CN USD Noble Holding Internat 6.1 62.0 3/1/2041 KY USD USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD YPF SA 16.5 67.3 5/9/2022 AR ARS Provincia del Chubut A 4.5 2208 3/30/2021 AR USD Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Embotelladora Andina S 3.5 37.9 8/16/2020 CL CLP USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD YPF SA 16.5 67.3 5/9/2022 AR ARS Banco Macro SA 17.5 65.2 5/8/2022 AR ARS Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP Esval SA 3.5 49.9 2/15/2026 CL CLP ********* 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 * * *