/raid1/www/Hosts/bankrupt/TCRLA_Public/201012.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, October 12, 2020, Vol. 21, No. 204
Headlines
B A R B A D O S
BARBADOS: IDB Approves US$80MM to Strengthen Risk Management
B O L I V I A
BCP BOLIVIA: Fitch Lowers LongTerm IDRs to B, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: CMD Blames Government for Covid Rebound
DOMINICAN REPUBLIC: World Bank Expects Economy to Fall -4.3%
M E X I C O
PETROLEOS MEXICANOS: Fitch Rates New USD1-Bil. Unsec. Debt 'BB-'
PETROLEOS MEXICANOS: Moody's Rates New 2025 Unsec. Notes 'Ba2'
TRUST 2400-CMBS GICSA: Fitch Keeps 'BB+' on A-2 Notes on Watch Neg.
P A N A M A
AES PANAMA: S&P Withdraws 'BB' LongTerm Issuer Credit Rating
T R I N I D A D A N D T O B A G O
TRINIDAD AND TOBAGO: Plans to Liberalize Petroleum Fuel Market
X X X X X X X X
LATAM: Barbados, Anguilla Added to EU Tax Blacklist
[*] BOND PRICING: For the Week Oct. 5 to Oct. 9, 2020
- - - - -
===============
B A R B A D O S
===============
BARBADOS: IDB Approves US$80MM to Strengthen Risk Management
------------------------------------------------------------
Barbados will significantly strengthen its financial risk
management of natural disasters and extreme climate events with a
US$80 million contingent loan approved by the Inter-American
Development Bank (IDB) that provides a stable, cost-effective, and
quick access instrument to cover immediate extraordinary public
expenditures during emergencies caused by severe or catastrophic
natural disasters.
Barbados, as most small island developing states, is vulnerable to
severe natural disasters and climate change. More than half of its
residents live in zones of high risk from natural hazards, and
about fourth-fifth of the country's Gross Domestic Product is
generated in exposed areas.
The country has historically been impacted to tropical cyclones and
their associated effects, such as flooding and storm surges that
put a large proportion of the population, residential and
commercial buildings and productive infrastructure at high risk, as
the country's coastal zone is densely populated, and the economy is
driven by beach tourism.
This program will provide parametric coverage for hurricanes and
excess rainfall associated to cyclonic systems, based on the
intensity and affected population, thus helping Barbados build
financial resilience to disaster and climate risks. The
beneficiaries are the entire population of the country, in general,
and the affected population that receives emergency assistance
under the coverage.
In addition, the program will promote improvements in the country's
comprehensive natural disaster risk management, including its
response and preparedness capacity to natural disasters.
The IDB contingent financing of US$80 million has an amortization
period of 25 years, a five and half grace period and an interest
based on LIBOR.
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 O L I V I A
=============
BCP BOLIVIA: Fitch Lowers LongTerm IDRs to B, Outlook Stable
------------------------------------------------------------
Fitch Ratings has downgraded Banco de Credito de Bolivia S.A.'s
(BCP Bolivia) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) to 'B' from 'B+', with a Stable Outlook. Banco
Fassil S.A.'s (Fassil) Local and Foreign Currency IDRs were also
downgraded to 'B-' from 'B'; the Rating Outlook remains Negative.
BCP and Fassil's Viability Rating (VR) were also downgraded to 'b-'
from 'b'.
The downgrade follows the recent downgrade of Bolivia's Long-Term
Foreign Currency IDR to 'B' from 'B+'. The downgrade of Bolivia's
ratings reflects deterioration in the country's growth prospects
and public finances amid acute political tensions, which are likely
to complicate smooth policy adjustments to contain macroeconomic
risks after upcoming elections. The Long-Term sovereign Rating
Outlook is Stable and reflects Fitch's view that continuing
economic policy tensions and political/social risks are captured in
the lower rating.
The Stable Outlook on BCP Bolivia's support driven IDRs, reflect
the Stable Outlook on the Sovereign as the parent, Credicorp Ltd.
is rated several notches above (BBB+/Negative).
The Negative Outlook on Fassil reflects the increased downside
risks from the economic implications of the coronavirus pandemic,
reflected in the Negative Outlook for the operating environment
score. Fitch believes the weaker economic conditions reflected in
the expected contraction of the economy by at least 7.5% in 2020,
will result in asset quality deterioration and weigh on
profitability and capitalization.
KEY RATING DRIVERS
IDRs AND VR
Fitch believes Bolivia's sovereign rating and broader operating
environment considerations such as the highly regulated and
interventionist framework highly influence the VRs of BCP and
Fassil, given the impact of the deep economic challenges on the
banking system's financial performance. The worsening economic
conditions also consider the impact of the coronavirus pandemic,
which will negatively affect the banks' financial performance, and
result in lower profitability, rising non-performing loans due to
lower payment capacity of some debtors amid the crisis, and further
capitalization pressures.
BCP's IDRs, reflect the support it would receive from its parent,
Credicorp Ltd, if required. Fitch believes there is a high degree
of integration between BCP Bolivia and its parent. Nevertheless,
the IDRs are constrained by Bolivia's Country Ceiling of 'B',
which, according to Fitch's criteria, captures transfer and
convertibility risks. Aside from the operating environment, BCP
Bolivia's VR is highly influenced by the bank's company profile,
which reflects the its solid franchise the benefits of belonging to
the Credicorp group. The VR also considers as a high importance
factor the pressured profitability which will likely deteriorate in
the near term.
Fassil's VR, or standalone creditworthiness, drives its IDRs. Aside
from the operating environment, Fassil's ratings are highly
influenced by its company profile and weak capitalization. Fassil's
VR is particularly sensitive to lower than peer capitalization as
Fitch Core Capital (FCC) to risk weighted assets (RWA) stood at
7.4% as of June 2020 (December 2019: 7.6%), which provides lower
capacity to absorb unexpected losses specially under the current
challenging operating conditions. Furthermore, despite the capital
injection of Bs 70 million in early August, the total regulatory
capital ratio remains low at 10.4%, well below the banking system
average. The bank is in the process of a regulatory approval of a
capital injection of about Bs 85.9 million, which is expected to
provide some additional loss absorption capacity given the low
internal capital generation of the entity.
SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch affirmed BCP Bolivia's Support Rating (SR) at '4', reflecting
a limited probability of support due to uncertainties about
Credicorp's ability or propensity to provide support.
Fassil's SR and Support Rating Floor (SRF) are rated '5' and 'NF',
respectively. In Fitch's view, sovereign support cannot be relied
upon for Fassil, as it is not considered a systemically important
bank
BCP Bolivia and Fassil have an ESG Relevance Score of 4 for
Governance Structure due to their exposure to high government
intervention reflected in the mandatory allocation of more than
half their loan portfolio on specific sectors, which has a negative
impact on the credit profile of the banks and is relevant to the
ratings in conjunction with other factors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
BCP
-- BCP's VR could be negatively affected if the bank's operating
profit to risk weighted assets is consistently negative or near to
zero, if its FCC ratio falls below 7%, or from a relevant
deterioration of its access to funding or its liquidity profile.
-- IDRs and VR are also sensitive to changes in the sovereign
rating, or further deterioration on the local operating
environment. Negative rating actions on the bank's IDR will mirror
those of the sovereign as its ratings are constrained by the
Country Ceiling. IDRs are also sensitive to a change in Fitch views
about the parent's willingness to support the bank.
-- Should Bolivia's sovereign rating be downgraded, the SR will
also be downgraded.
Fassil
-- Sustained negative or near-to-zero results as well as
additional pressures on FCC to RWA metrics to below 7% could also
underpin a downgrade. A relevant deterioration of its access to
funding or its liquidity profile could also have a negative effect
on ratings.
-- IDRs and VR are also sensitive to changes in the sovereign
rating, or further deterioration on the local operating
environment.
-- There is no room for a downgrade of the SR or SRF.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
BCP
-- Rating actions on the bank's IDRs would mirror those of the
sovereign as BCP Bolivia's IDRs are constrained by the Country
Ceiling.
-- BCP's VR upside potential is limited given the sovereign's
current rating and unstable operating environment. Over the medium
term, ratings could be upgraded by the confluence of improvements
in the operating environment and the financial profile of the
bank;
-- BCP Bolivia's support rating is constrained and an upgrade
could occur if there is an upgrade of the sovereign rating, which
is not likely as its Outlook is currently Stable.
Fassil
-- The Outlook could be revised to Stable following a revision of
the operating environment factor to Stable along with a manageable
impact on FCC, profitability and asset quality metrics due to the
economic recession, which sustains its financial profile consistent
with its current rating.
-- Fassil's ratings upside potential is limited given the
sovereign's rating and unstable operating environment.
-- Upside potential for Fassil's SR and SRF is limited by its
company profile.
"In accordance with Fitch Ratings' policies, the issuer appealed
and provided additional information to Fitch Ratings that resulted
in a Rating action that is different than the original Rating
committee outcome."
SUMMARY OF FINANCIAL ADJUSTMENTS
Goodwill, Prepaid Expenses and Deferred Payments were included as
other intangibles and deducted from the FCC.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BCP Bolivia's IDRs are directly linked to Credicorp Ltd's ratings
(BBB+/Negative).
ESG CONSIDERATIONS
BCP Bolivia and Fassil have an ESG Relevance Score of 4 for
Governance Structure due to their exposure to high government
intervention reflected in the mandatory allocation of more than
half their loan portfolio on specific sectors, which has a negative
impact on the credit profile of the banks and is relevant to the
ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: CMD Blames Government for Covid Rebound
-----------------------------------------------------------
Dominican Today reports that the resurgence of coronavirus cases in
the Dominican Republic is due to the government's incorrect action
to modify the state of emergency, sending a subliminal message to
the population that the pandemic's situation had improved.
This is according to Waldo Ariel Suero, president of the Dominican
Medical Association (CMD), the report notes. He said that the
guild had warned the authorities that a resurgence of the
coronavirus and subsequent overwhelming of the health system could
occur when the cases and admissions had dropped, according to
Dominican Today.
He said it was the wrong attitude because they wanted to reactivate
the economy, but with the spread of the disease, what they are
doing is deactivating it instead, the report relates.
With this modification to the state of emergency, in which the
curfew was from 7:00 pm and was re-established from 9:00 pm, the
CMD president understands that there was "a lack of respect for
proper social distancing measures. We now have what we saw coming,
although the resurgence is not immediately established because we
have to give it 10 to 15 days after the incubation of the disease
to know its full scope," the report relays.
He said that just during the long weekend, for the Day of the
Virgin of Mercy, a hotel was packed with people without distancing
or protection measures, the report discloses.
The CMD proposed a meeting to take the measures of various locales
and gather a more complete knowledge of the population. While "many
know the measures, few apply them with proper precaution and care,"
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. 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).
DOMINICAN REPUBLIC: World Bank Expects Economy to Fall -4.3%
------------------------------------------------------------
Dominican Today reports that the World Bank has once again worsened
its forecast for Latin America and the Caribbean economies, going
from an estimated 7.2% contraction in June to the current 7.9%.
The latest report on the region's macroeconomic outlook reveals
that globally, with more than 33% of deaths globally, Latin America
and the Caribbean are currently the regions hardest hit by the
Covid-19 pandemic, according to Dominican Today. Both in terms of
health, and the economy, in a context where Latin American
economies are affected by a drop in external demand, more
significant economic uncertainty, a collapse in tourism, and the
consequences of months of confinement, the report notes.
"Our region is bearing the brunt of the economic and health impact
of Covid-19 around the world, something that demands greater
clarity on how to combat the pandemic and get back on track for a
rapid recovery," notes World Bank Vice President for Latin America
and the Caribbean Carlos Felipe Jaramillo, the report relays.
Among the hardest-hit economies, several Caribbean islands stand
out for their dependence on tourism, such as Saint Lucia (-18%),
Belize (-17.3%), Bahamas (-14.5%), Suriname (-13%), as well as the
case of Mexico (-10%), also highly dependent on tourism activity,
the report notes.
On the other hand, the forecasts for the region's major economies
show significant drops, although of very different magnitude
depending on the country, the report relays. Thus, Brazil will
contract by 5.4%, Argentina will collapse by 12.3%, Colombia will
fall by 7.2%, and Chile will contract by 6.3%, the report
discloses.
With regard to the smallest falls, those of Haiti (-3.1%), Paraguay
(-3.2%), Uruguay (-4%) and the Dominican Republic (-4.3%) all fall
below 5%, unlike Costa Rica (-5.4%), Bolivia (-7.3%) or Ecuador
(-11%), the report relays.
Guyana is the only country with an optimistic growth projection of
23.2%, given the country's discoveries of oil fields, the report
discloses.
In addition to the impact of the pandemic, there have been several
years of slow growth in the region, dropping by 0.2 percent in 2019
and growing by 1.4 percent in 2018 and 1 percent in 2017, as well
as little progress in terms of social indicators and a wave of
social unrest in many countries in the region, such as Chile, the
report notes.
On the other hand, containment measures were disproportionately
distributed given the high rate of informality in the region,
estimated at over 50%. For this reason, the World Bank reaffirms
the need for policies that aim to promote formalization, although
without penalizing the "much-needed" creation of jobs, the report
says.
To this end, it suggests that detailed social records would help
cash transfers reach more people living on a daily basis, the
report relays.
The agency also anticipates that the pandemic will continue for a
long time, so health systems should consider reforms to improve
effectiveness and reduce costs to governments and individuals, the
report notes. Governments will also need to find ways to resume
fiscal consolidation after a period of high spending on economic
stimulus and emergency social transfers, the report discloses.
4% Growth Forecast For 2021
The outlook for next year points to a recovery of 4% of GDP in the
region, which improves the previous forecast of 2.8% since,
"despite the gloomy outlook, there are signs that the impact could
be less severe than initially feared," the report relays.
Among the factors explaining this improvement, world trade in goods
is returning to pre-crisis levels, and commodity prices have held
up relatively well, the report discloses. Also, remittances are
generally higher than a year ago, and few countries cannot access
international financial markets, the report says.
However, the estimated growth for countries in 2021 is far from
covering the drop they will face this year, the report notes.
The countries with the most significant economic recovery will be
Saint Lucia (8.1%), Peru (7.6%), Belize (7.4%), and Guyana (7.8%),
all with growth rates above 7%, the report relays.
The most moderate recoveries will be those of Suriname (1.5%),
Haiti (1.1%), and Nicaragua (1.1%), while the region's leading
economies, Brazil (3%), Chile (4.2%), Colombia (4.5%), Argentina
(5.5%) and Mexico (3.7%) will all grow at below 6%, the report
notes.
On the other hand, the forecast for 2022 in the region is 2.8%
growth, the report relays.
The World Bank highlights the importance of the stimulus packages
carried out by the various governments, which were generally robust
despite fiscal restrictions, and that a large part of the
additional resources went to social transfers, the report
discloses. "The multiplier effect of these transfers on economic
activity is significant," the institution states, 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. 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).
===========
M E X I C O
===========
PETROLEOS MEXICANOS: Fitch Rates New USD1-Bil. Unsec. Debt 'BB-'
----------------------------------------------------------------
Fitch Ratings has assigned a long-term rating of 'BB-' to Petroleos
Mexicanos' (PEMEX) proposed senior unsecured debt issuance of USD1
billion. The notes will mature in 2025, and the company expects to
use the proceed from the issuance for capex, working capital needs
and to refinance existing debt.
PEMEX's ratings reflect the continued deterioration of the
company's Standalone Credit Profile (SCP) to 'ccc -'. The SCP
deterioration reflects the company's limited flexibility to
navigate the oil and gas downturn given its elevated tax burden,
high leverage, rising per-barrel lifting costs and high investment
needs to maintain production and replenish reserves.
Fitch estimates PEMEX's FCF will be approximately negative USD15
billion per year during 2020 and 2021. For the first six months of
2020, PEMEX reported approximately USD7 billion of negative FCF,
consistent with Fitch's initial assumption. With the current
Mexican crude basket price of approximately USD37/barrel (bbl),
PEMEX's upstream business can cover operational and financial
half-cycle costs of more than USD25/bbl. The upstream business does
not generate sufficient cash flow to cover before-tax full-cycle
costs, including capex, of approximately USD60/bbl. Fitch believes
the company will need significant government support in the near
term.
The moderate linkage between PEMEX's ratings and those of the
sovereign reflects the delay and uncertainty of significant support
from the government due to PEMEX's financial difficulties resulting
from the decline in oil prices. PEMEX's Stable Outlook reflects
that of Mexico.
KEY RATING DRIVERS
Deteriorating Credit Quality: PEMEX's SCP would be in line with a
Long-Term Issuer Default Rating of 'CCC‒' if it were not owned by
the state and if the government did not provide financial support.
PEMEX's SCP continues to deteriorate as a result of its high tax
burden and low flexibility to navigate lower oil prices. The
company's SCP reflects PEMEX's elevated leverage and low cash flow
from operations, which limit its ability to support sustainable
upstream capex that would result in consistently stable production
and 100% reserve-replacement ratios.
As of LTM ended June 30, 2020, PEMEX reported a Fitch-defined
lease-adjusted EBITDA before net pension expenses of USD9.6 billion
and negative FFO of approximately USD5.8 billion, while total
financial debt amounted to USD106.6 billion, translating to total
debt/EBITDA of approximately 11.7x.
Transfers Weaken SCP: PEMEX's deteriorating SCP is primarily the
result of excessive distributions to the government. The company's
contributions to Mexico averaged approximately 10% of government
revenues, or roughly USD22 billion, in 2019. Transfers from PEMEX
to the government remain high relative to the company's cash flows,
and transfers were more than 30% of sales during the past five
years, or approximately 80%‒100% of adjusted EBITDA. As a result,
the company's balance sheet steadily weakened. PEMEX's debt lacks
an explicit guarantee from the Mexican government.
Weak Government Support: Fitch believes Mexico's support for PEMEX
weakened due to the delay in implementing measures to alleviate the
company's credit quality deterioration. This weak support
assessment also reflects the high level of transfers from the
company to the government. PEMEX's ratings continue to reflect
Fitch's belief that the government might provide more meaningful
support if necessary.
Fitch estimates total support for PEMEX in 2019 amounted to USD9.8
billion, while transfers from PEMEX to the government amounted to
USD22 billion. Mexico announced capital injections and tax
reductions for 2020 totaling approximately USD6.7 billion, or up to
approximately MXN156 billion. During the first half of 2020, PEMEX
received approximately USD4.5 billion of support from Mexico in the
form of capital contributions and tax reductions.
Moderate Government Linkage: Fitch's assessment of the strength of
the PEMEX-government linkage is moderate as a result of the
company's SCP deterioration and delay of proactive and meaningful
government support. Nevertheless, Fitch expects the government to
ensure that PEMEX maintains a robust liquidity position to service
debt, which supports the material rating uplift from the SCP.
Fitch assesses the government support for PEMEX as weak and the
government incentives subfactors as moderate. Fitch views Mexico's
ownership and control of PEMEX as very strong. This assessment
results in a three-notching differential between PEMEX's ratings
and those of Mexico. PEMEX's linkage to the Mexican government
results from incentives to support the company, given the
sociopolitical and financial consequences of a default for the
country. PEMEX is Mexico's largest company and one of the
government's major sources of funds, with material contributions to
government revenues.
Strategic Importance for Energy Security: The sovereign linkage
stems from the company's strategic importance in supplying liquid
fuels to Mexico. A financial crisis at the oil company would have
very significant sociopolitical consequences for Mexico, as it
could potentially disrupt the country's liquid fuel supply. Mexico
is a net importer of liquid fuels as a result of continued
production declines.
The country relies on PEMEX for virtually all the supply of
gasoline and diesel, approximately two-thirds of which comes from
imports. Financial distress at PEMEX could also have very severe
financial consequences for the Mexican government and other
government-related entities, especially regarding their access to
funding.
Weak Post-Tax Credit Metrics: PEMEX's credit-protection metrics are
weak due to high transfers to the federal government, high
indebtedness and negative FFO. As of LTM ended June 30, 2020, PEMEX
reported a Fitch-calculated FFO of approximately negative USD5.8
billion and negative FCF of USD11.3 billion. PEMEX's total
debt/proven reserves (1P) remain unchanged from 2019 at
approximately USD15/barrel of oil equivalent (boe), up from
USD9.2/boe in 2015. Fitch estimates PEMEX's FCF will be negative
USD15 billion per year during 2020 -2022, under the price deck and
before government injections.
Continued Upstream Underinvestment: Fitch expects production to
marginally decline from 2019's average before continuing its
stabilization trend, as the company ramps up investments in
exploration and production. Hydrocarbon reserves are likely to
continue declining over the medium term, due to lower oil and gas
prices and reductions to planned capex to preserve liquidity. Fitch
estimates PEMEX's projected capex will likely be insufficient to
sustainably replenish 100% of its reserves.
Although PEMEX reported relatively flat production throughout 2019,
yoy crude oil production was down in 2019 by approximately 7.4%,
compared with the 2018 average. Average production for the first
six months of 2020 was relatively flat, although it declined from
May to July as part of Mexico's agreement with OPEC to curtail
production by 100,000bbl per day, weather related issues, as well
as operational issues at Maloob, its largest field. Fitch estimates
PEMEX will require annual capex of approximately USD13 billion
-USD18 billion to replenish 100% of reserves. This is based on a
finding, development and acquisition cost estimate of USD13/boe
-USD18/boe.
ESG - Governance: Fitch considers PEMEX's corporate governance
weak, given the continued high level of government interference in
the company's strategy, financing and management with changes in
administration. PEMEX is also exposed to social and community
relationship issues, as it has been affected by pipeline ruptures.
PEMEX has an Environmental, Social and Governance (ESG) Relevance
Score of '4' for Community Relations & Social Access, as oil and
gas production companies are typically exposed to social and
community relationship issues in their area of influence. PEMEX has
an ESG Relevance Score of '4' for Governance Structure, resulting
from its nature as a majority government-owned entity and the
inherent governance risk that arises with a dominant state
shareholder.
DERIVATION SUMMARY
PEMEX's linkage to the sovereign compares unfavorably with that of
Petroleos Brasileiro S.A. (Petrobras; BB -/Negative), Ecopetrol
S.A. (BBB -/Negative), Empresa Nacional del Petroleo (ENAP;
A/Negative) and Petroleos del Peru - Petroperu S.A. (BBB+/Stable).
All of PEMEX's regional peers have strong linkages to their
sovereigns due to strong government support. Fitch believes
governments in the region, except for Mexico, have implemented
different measures to ensure the SCPs of their respective national
oil and gas companies remain viable in the long term. PEMEX's
ratings continue to reflect its close, albeit deteriorating,
linkage to the Mexican government due to its fiscal and strategic
importance.
PEMEX's ratings also reflect the company's competitive pretax cost
structure, national and export-oriented profile, sizable
hydrocarbon reserves and strong domestic market position. The
ratings are constrained by PEMEX's substantial tax burden, high
leverage, significant unfunded pension liabilities, large capital
investment requirements, negative equity and exposure to political
interference risk.
Fitch views PEMEX's SCP as commensurate with a 'ccc-' rating, which
is 10 notches below Petrobras' and Ecopetrol's SCPs of 'bbb'. The
differences are primarily due to PEMEX's weaker capital structure
and increasing debt and leverage trajectory. PEMEX's SCP reflects
the company's burdensome transfers to Mexico's federal government,
its large and increasing financial debt balance when compared with
1P, elevated FFO-adjusted leverage and its decreasing production
and reserves trend. In comparison, Ecopetrol and Petrobras have
significantly strengthened their capital structures and maintained
stable operating profiles.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
Include:
-- Average West Texas Intermediate crude prices of USD42/bbl in
2021 and trending toward USD50/bbl in the long term.
-- Upstream capex moderately increases.
-- Production marginally declines in 2020 before continuing its
stabilization trend.
-- PEMEX will receive necessary support from the government to
ensure adequate liquidity and debt service payments.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
-- An upgrade of Mexico's sovereign ratings.
-- An irrevocable guarantee from Mexico's government to
sustainably cover more than 75% of PEMEX's debt.
-- A material capitalization, coupled with a material reduction
of PEMEX's taxes, with a business plan that results in neutral to
positive FCF through the cycle while implementing sustainable
upstream capex that is sufficient to replace 100% of reserves and
stabilize production profitably.
-- A sustainable FFO-adjusted leverage below 5.0x.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
-- A downgrade of Mexico's sovereign rating.
-- A sustained deterioration of PEMEX's financial flexibility,
coupled with government inaction to support liquidity, potentially
resulting from continued negative FCF or a material reduction of
the company's cash on hand, credit facilities and restricted
capital markets access.
LIQUIDITY AND DEBT STRUCTURE
Moderate Liquidity: PEMEX's liquidity position deteriorated
recently as a result of negative FCF, which resulted in a
relatively low cash position and reduced availability of its lines
of credit. As of June 30, 2020, PEMEX reported total cash and
equivalents of approximately USD1.6 billion andUSD4.6 billion
available on its more than USD9 billion lines of credit. This
liquidity compares unfavorably with the expected negative FCF of
approximately USD8 billion during the second half of 2020.
Fitch expects PEMEX will require material external funding during
2020 and 2021, given expected negative FCF resulting from its high
tax burden compounded with low hydrocarbon prices. Absent capital
increases from the Mexican government, PEMEX is likely to continue
funding its negative FCF with debt and potentially further erode
liquidity.
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
PEMEX's ratings are directly linked to the sovereign rating.
ESG CONSIDERATIONS
PEMEX has an ESG Relevance Score of '4' for Community Relations &
Social Access, as oil and gas production companies are typically
exposed to social and community relationship issues in their area
of influence, which has a negative impact on the credit profile and
is relevant to the ratings in conjunction with other factors.
PEMEX has an ESG Relevance Score of '4' for Governance Structure,
resulting from its nature as a majority government-owned entity and
the inherent governance risk that arises with a dominant state
shareholder, which has a negative impact on the credit profile and
is relevant to the ratings in conjunction with other factors.
Except for the matters discussed, 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).
PETROLEOS MEXICANOS: Moody's Rates New 2025 Unsec. Notes 'Ba2'
--------------------------------------------------------------
Moody's Investors Service assigned a Ba2 rating to Petroleos
Mexicanos' (PEMEX) proposed notes maturing in 2025. The company
will use the proceeds for general corporate purposes, including
refinancing existing indebtedness. The company's existing ratings,
including its Ba2 Corporate Family Rating (CFR), and negative
outlook are unchanged. The notes will be jointly and severally
guaranteed by the company's operating subsidiaries, Pemex
Exploracion y Produccion, Pemex Transformacion Industrial and Pemex
Logistica.
Assignments:
Issuer: Petroleos Mexicanos
Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba2
RATINGS RATIONALE
PEMEX's Ba2 CFR takes into consideration Moody's joint default
analysis, which includes the rating agency's assumptions of very
high government support in case of need and very high default
correlation between PEMEX and the Government of Mexico (Baa1
negative), resulting in six notches of uplift from the company's
caa2 Baseline Credit Assessment (BCA). Since 2016, the government
has supported PEMEX in various ways, including capital injections,
tax reductions and early redemption of notes receivable from the
government. The reduction in taxes in 2020 of around $2.9 billion
was a demonstration of the government's support for PEMEX.
PEMEX's caa2 BCA, which reflects its standalone credit strength,
incorporates the company's high vulnerability to low commodity
prices given its excessive debt burden and weak liquidity position.
PEMEX's cash flow generation and credit metrics will remain weak in
the foreseeable future as the company grapples with low oil prices,
high debt maturities, and underinvestment in exploration and
production in favor of an expansion of its refining business, which
has generated losses for several years.
The negative rating outlook on PEMEX's Ba2 ratings coincides with
the negative outlook on Mexico's Baa1 rating given the importance
of the sovereign's credit strength and ongoing support to PEMEX's
ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A downgrade of Mexico's Baa1 rating would likely result in a
downgrade of PEMEX's rating. In order for Moody's to consider an
affirmation of PEMEX's Ba2 rating following a sovereign downgrade,
the company's BCA would have to substantially improve. Factors that
could drive a higher BCA would be the ability of the company to
strengthen its liquidity position and ideally internally fund
sufficient capital reinvestment to fully replace reserves and
deliver modest production growth, and generate free cash flow for
debt reduction. Because PEMEX's ratings are highly dependent on
support from the government of Mexico, a change in assumptions
about government support and its timeliness could lead to a
downgrade of PEMEX's ratings.
A lowering of the BCA could also lead to a downgrade of PEMEX's
ratings. Factors that could lead to a lower BCA include material
increase in net debt, an operating performance worse than
forecasted, reserves decline and decreases in reserves life.
An upgrade is unlikely given the negative outlook for Mexico's Baa1
rating and Moody's expectations for continued negative free cash
flow at PEMEX.
The methodologies used in this rating were Integrated Oil and Gas
Methodology published in September 2019, and Government-Related
Issuers Methodology published in February 2020.
Founded in 1938, PEMEX is Mexico's national oil company, with fully
integrated operations in oil and gas exploration and production,
refining, distribution and retail marketing, as well as
petrochemicals. PEMEX is also a leading crude oil exporter, around
60% of its crude is exported to various countries, mainly to the US
and Asia. In the twelve months ended June 30, 2020 the company
produced an average of 1,725 thousand barrels per day of crude oil
and condensates (excluding partners).
TRUST 2400-CMBS GICSA: Fitch Keeps 'BB+' on A-2 Notes on Watch Neg.
-------------------------------------------------------------------
Fitch Ratings has maintained the Rating Watch Negative (RWN) on
both national and international ratings assigned to the notes
issued by Banco Actinver, S.A., Institucion de Banca Multiple, and
Grupo Financiero Actinver, acting as trustee under the Fideicomiso
Irrevocable y Traslativo de Dominio Numero 2400 (Trust 2400 - CMBS
GICSA).
RATING ACTIONS
Trust 2400 (Sponsored by GICSA)
Class A-1 MXN XS2094574584; LT BBB-sf Rating Watch Maintained;
previously BBB-sf
Class A-1 MXN XS2094574584; Natl LTAAA(mex)vra Rating Watch
Maintained; previously AAA(mex)vra
Class A-1 USD 89835RAA2; LT BBB-sf Rating Watch Maintained;
previously BBB-sf
Class A-1 USD 89835RAA2; Natl LTAAA(mex)vra Rating Watch
Maintained; previously AAA(mex)vra
Class A-2 MXN XS2094576282; LT BB+sf Rating Watch Maintained;
previously BB+sf
Class A-2 MXN XS2094576282; Natl LTAA(mex)vra Rating Watch
Maintained; previously AA(mex)vra
KEY RATING DRIVERS
Probing Period on Asset Performance Continues: Fitch continues to
actively monitor collections and the evolution of available
liquidity reserves. Fitch acknowledges that the degree of
uncertainty on delinquency levels in the foreseeable future
remains. However, the property manager continues to apply a
tailor-made approach with tenants, given the different geographic
locations and property specifications of the securitized pool. As a
result, the RWN on the notes will be maintained and reviewed within
the next six months in order to assess risks arising from ongoing
pandemic-related containment efforts and the resulting economic
impacts, and their effects on collection levels and liquidity
reserve replenishments.
Fitch believes the transaction is exposed to a certain degree of
operational risk, in part due to the impact of containment
measures, increasing the complexity commonly observed during the
first months of a transaction (when counterparties get accustomed
with their roles and responsibilities) and counterparty-specific
developments. The latter has taken longer and results in reduced
visibility on cash flow. The Negative Watch on the ratings also
reflect these risks. Fitch has maintained active communication with
all parties involved and continues to monitor how operational risks
are managed.
Property Cash Flow Impacted by Coronavirus: Lower consumer
confidence, a fall in consumer demand for discretionary goods and
services, and lower consumer disposable income due to higher
unemployment and economic hardship are reducing collections. Fitch
expects recovery on these variables will be gradual. Fitch's new
baseline scenario considers the temporary impact from the
coronavirus and expects cash flows to gradually recover within the
next 18-24 months.
Fitch recovery estimates reflect a two-stage recovery path
beginning with expected collections from June 2020 that gradually
recover towards the new baseline net cash flow (MXN1,223 million)
in the next 15-18 months. Ultimately, cash flows recover towards
the agency's initial net cash flow (Fitch NCF) of MXN1,467 million
(adjusted for the MXN/USD exchange rate) 20-24 months from now.
Fitch debt service coverage ratios (DSCRs) are 1.30x for the A-1
notes and 1.21x for the A-2 notes, while Fitch loan-to-values (LTV)
are 69% and 74%, respectively. Fitch considered lower DSCR and
higher LTV attachment points when assigning ratings to account for
portfolios with multiple sources of income, geographic and tenant
diversity and high quality, as well as the principal subordination
on the A-2 tranche.
Portfolio Quality and Diversification Drive Fitch's Cap Rates:
Fitch believes the securitized properties remain high quality, with
multiple sources of income and locations in dominant or relevant
domestic real estate markets. The portfolio consists of stabilized
properties (about 40% of the portfolio measured by fixed rents as
of February 2020) and an in ramp-up retail component focused on
entertainment (60% of fixed rents). Office buildings have shown
stable U.S. dollar cash flow generating capacity, together with
high occupancy rates and consistent renovation ratios. Fitch
maintains the long-term cap rate of 9.9% to estimate property value
(Fitch Property Value).
Amortization of Interim Loan Mitigates Increases in Leverage: The
transaction will not disburse the interim loan, as it has been
fully amortized. As a result, no additional A-1 and A-2 notes would
be issued, and net leverage would not be expected to increase in
the future for this reason. This may prove to be positive, if the
portfolio is able to reach stabilization in the following years,
according to Fitch.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Cash flow resilience and recovery to expected levels in both
retail and office buildings resulting from higher-than estimated
occupancy rates and/or increases in rent income that offsets
vacancy rates may point towards a Stable Outlook, if operational
and liquidity risks are mitigated.
-- The agency's recalibration of long-term cash flow assumptions,
which translates into higher DSCRs and lower LTVs could also lead
to a Stable Outlook, if operational and liquidity risks are
mitigated.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A consistent use of reserves accompanied by increased stresses
on collections that affect the transactions ability to replenish
them to its target amount, may cause a multi-notch downgrade in the
rating.
-- An increase in delinquency on collections, even if occupancy
rates are stable, that increases pressure on debt service coverage,
or a decrease in remaining terms due to contract terminations.
-- An extension on containment measures that lead to partial or
total, voluntary, or mandatory closure that reduces improvements
recently seen on stabilization of tenant payments.
-- Lower than estimated occupancy rates and/or rent increases may
result in single or multi-notch downgrades depending on the degree
to which the properties are impacted.
-- The agency adjusted the recovery path on its downside
scenario, which reflects a severe and prolonged economic downturn,
assuming Fitch NCF is adjusted to reflect an overall occupancy rate
of 68% with no variable rent revenue and a 30-month gradual
recovery with limited rent increases during this period. Average
DSCRs in this scenario are 1.07x and about 1x for A-1 and A-2
notes, respectively.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
The data used for the development of the rating included the
following information from the following sources:
-- Management calls via phone conference with the
sponsor/property manager during the first 3 quarters of the year.
-- Email communication with the Master Servicer, Primary
Servicer/Sponsor and Trustee.
-- Officers Certificate from the Manager 2Q20
-- Certificate from the Issuer Trust 2Q20
-- Bank Account statements from January-August 2020
===========
P A N A M A
===========
AES PANAMA: S&P Withdraws 'BB' LongTerm Issuer Credit Rating
------------------------------------------------------------
S&P Global Ratings withdrew, at the issuer's request, its 'BB'
long-term issuer credit rating on AES Panama S.R.L. and its 'BB'
issue-level rating on the company's $375 million senior unsecured
notes due 2022 after it has been prepaid. At the time of the
withdrawal, the negative outlook on the rating reflected a
one-in-three chance of a downgrade in the next 6-12 months if the
company's credit metrics deteriorate in 2020 or if liquidity
weakens because of higher working capital needs due to a prolonged
economic downturn in Panama caused by COVID-19.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD AND TOBAGO: Plans to Liberalize Petroleum Fuel Market
--------------------------------------------------------------
RJR News reports that Trinidad and Tobago government has announced
plans to liberalize the liquid petroleum fuel market.
Finance Minister Colm Imbert told Parliament, the government
believes that citizens should always benefit from the wealth of the
country, according to RJR News.
Mr. Imbert said the new deregulated market will bring to an end 46
years of fuel subsidies and the high social expenditure of TT$25
billion in the last 15 years, the report notes.
===============
X X X X X X X X
===============
LATAM: Barbados, Anguilla Added to EU Tax Blacklist
---------------------------------------------------
RJR News reports that Barbados and Anguilla were added to the
European Union's list of non-cooperative jurisdictions for tax
purposes, while the Cayman Islands was removed.
The Council of the European Union says the countries were
blacklisted after reviews by Global Forum on Transparency and
Exchange of Information for Tax Purposes downgraded their ratings,
according to RJR News.
Barbados was rated non-compliant and Anguilla partially compliant,
the report notes.
Barbados Prime Minister Mia Mottley has written to German
Chancellor Angela Merkel and the European Union stating that the
blacklisting of the country is wrong and disproportionate, the
report discloses.
[*] BOND PRICING: For the Week Oct. 5 to Oct. 9, 2020
-----------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
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
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
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
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
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 * * *