/raid1/www/Hosts/bankrupt/TCRLA_Public/201013.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

          Tuesday, October 13, 2020, Vol. 21, No. 205

                           Headlines



B R A Z I L

BANCO ORIGINAL: S&P Affirms 'B' ICR, Outlook Negative
COMPANHIA SIDERURGICA: S&P Alters Outlook to Pos. & Affirms B- ICR
NAVIOS SOUTH: S&P Lowers ICR to 'B-' on Parent Refinancing Risk
OI SA: S&P Lowers ICR to 'SD' on Amended Reorganization Plan
USIMINAS: S&P Alters Outlook to Stable & Affirms 'B+' ICR



C H I L E

LATAM AIRLINES: Wins Shorter Plan Exclusivity Extension


C O L O M B I A

AVIANCA HOLDINGS: Bankruptcy Court Approves Financing Plan


D O M I N I C A N   R E P U B L I C

DOMINICAN REPUBLIC: President Gets Plan to Relaunch Tobacco Sector
DOMINICAN REPUBLIC: Support From Barrick, Et. Al to Exceed $25BB


P A N A M A

PANAMA: IDB OKs 2 Loans to Boost Social Inclusion & Fiscal Mgmt.


P U E R T O   R I C O

PETCO ANIMAL: Moody's Alters Outlook on Caa1 CFR to Positive

                           - - - - -


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B R A Z I L
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BANCO ORIGINAL: S&P Affirms 'B' ICR, Outlook Negative
-----------------------------------------------------
S&P Global Ratings affirmed its global scale 'B' and national scale
'brA-/brA-2' issuer credit ratings (ICR) on Banco Original S.A. The
outlook remains negative. S&P also revised the bank's stand-alone
credit profile (SACP) to 'b-' from 'b'. However, the ICR is one
notch higher than the SACP because S&P adjusted it by one notch.

Banco Original's capital position continues to shrink amid weaker
financial results due to temporary accounting effects and expansion
investments in its retail business.

S&P said, "However, we expect the bank to maintain a capital buffer
at least 100 basis points (bps) higher than minimum requirements in
the next few quarters. We consider that J&F Investimentos S.A.
(J&F; not rated) will continue to be supportive given its relevant
stake in both Banco Original and PicPay and as seen in previous
capital injections and related-party issuances.

"In our view, the bank is broadening its digital services, which
will likely continue to hurt operational performance but improve
business diversification in the medium to long term.

"We're affirming the ratings although we revised Banco Original's
capital position to weak from moderate, given that we expect the
bank to be under temporary accounting stress and as it transitions
to a more diversified business model amid high investments in its
digital services and retail business. Historically, shareholders
have supported regulatory capital requirements and we believe
incentives remain in place. In addition, we believe the risk of
weak and volatile bottom-line results are in line with digital
peers and are incorporated in the current rating category.
Therefore, we apply a one notch upward adjustment that supports the
'B' ICR."


COMPANHIA SIDERURGICA: S&P Alters Outlook to Pos. & Affirms B- ICR
------------------------------------------------------------------
S&P Global Ratings, on Oct. 9, 2020, revised its global scale
rating outlook to positive from negative on Brazilian iron ore and
steel producer, Companhia Siderurgica Nacional (CSN). In addition,
S&P affirmed its 'B-' global ratings on CSN. S&P also raised its
national scale ratings to 'brBBB+' from 'brBBB-'. The national
scale rating outlook is now positive as well. At the same time, S&P
affirmed its 'B-' issue-level ratings on CSN Islands XII Corp.'s
senior unsecured notes. The issue-level ratings remain at the same
level as the long-term issuer credit rating, along with the
recovery rating of '4', given the expected average recovery of 40%
(rounded estimate).

The positive outlook reflects S&P's expectation of significant
deleveraging in the next 12-18 months, maintaining debt to EBITDA
below 5x and funds from operations (FFO) to debt above 12%. Such
metrics could stem from cash raised through the IPO or assets
sales, amid consistently favorable fundamentals for iron ore
prices, and sustained recovery in steel and cement businesses.

Iron ore prices above $100 per ton, a gradual recovery in flat
steel demand, and the depreciation of the Brazilian real, which is
raising the company's export profits and allowing price adjustments
in the domestic market, will boost CSN's results in 2020. S&P
estimates a record adjusted EBITDA close to R$8 billion for this
year, but to slip in the next few years following the iron ore
price curve. The company will also post robust free operating cash
flow (FOCF) due to lower capex and strong working capital release,
used mostly to pay down debt.

The higher EBITDA will be partly offset by a weaker domestic
currency increasing the company's dollar-denominated debt, with
debt to EBITDA remaining at about 5.0x at the end of 2020 and in
2021. However, a structural deleveraging, with reduction of gross
debt, would depend on asset sales and/or the IPO, in S&P's opinion.
S&P makes several adjustments to the company's reported financials,
such as:

-- S&P's debt metrics include Transnordestina's debt, pension
adjustments, iron ore prepayments, leasing obligations, asset
retirement obligations and tax installments, which add about R$6.7
billion to CSN's debt as of June 30, 2020.

-- S&P's adjusted EBITDA excludes the proportional contribution
from MRS Logistica S.A. and some non-recurrent factors such as
asset sales, the PIS/Cofins recognition, and the fair value
adjustments of Usinas Siderurgicas de Minas Gerais S.A.'s shares.

CSN announced that its board approved the IPO of its mining
subsidiary. The proceeds of the IPO would be used to fund a
sizeable capex plan to increase iron ore output to more than 100 MT
in the next decade from currently 33 MT, but also to reduce nominal
debt at the parent company, potentially bringing its adjusted debt
to EBITDA to below 5.0x on a consistent basis.


NAVIOS SOUTH: S&P Lowers ICR to 'B-' on Parent Refinancing Risk
---------------------------------------------------------------
S&P Global Ratings lowered its issuer credit and issue-level
ratings on its subsidiary, Navios South American Inc. (Navios
Logistics), to 'B-' from 'B'.

The stable outlook reflects Navios Logistics' stronger stand-alone
credit profile than the one of the group. It also incorporates our
expectations that the company will continue to benefit from
improved liquidity and capital structure after its July 2020 debt
refinancing, which significantly extended the debt maturity
profile.

Dry bulk shipping and logistics company, Navios Holdings, faces a
mounting refinancing risk -- especially for its $305 million 11.25%
senior secured notes that are subject to a springing maturity in
September 2021 and $477 million 7.375% first priority ship mortgage
notes due January 2022 -- exacerbated by its weak liquidity and
constrained access to capital markets. S&P said, "As we have seen
in the past, we believe that Navios Holdings could impair its
subsidiary's liquidity and leverage (subject to certain limitation
under the indenture of the senior secured notes due 2025), which
prompted us to downgrade the latter."

Navios Logistics announced on Aug. 18, 2020, that it had filed a
registration request with the Brazilian Securities Commission in
connection with a potential public offering of Brazilian Depositary
Receipts. The structure and timing of the offering are still
uncertain and subject to market conditions. However, if successful,
it could provide some funding for Navios Logistics' investment plan
and/or pay down debt.


OI SA: S&P Lowers ICR to 'SD' on Amended Reorganization Plan
------------------------------------------------------------
S&P Global Ratings, on Oct. 9, 2020, lowered its global scale and
national scale issuer credit ratings on Brazil-based telecom
operator Oi S.A. to 'SD' from 'CC' and 'brCC', respectively. The
'CCC-' issue-level rating is unchanged because the amendment didn't
affect terms and conditions for this debt.

The downgrade follows Oi's announcement that the seventh Corporate
Court of the Capital District of the state of Rio de Janeiro
ratified the amendment to its JRP. The latter was also approved by
the majority of its credit holders on Sept. 8, 2020, and includes
the company's prepayment of debt owed to banks and ECAS with a 55%
discount, which we assess as equivalent to default.

S&P will reassess Oi's credit profile during the next few days to
reflect the resulting debt structure, and the issuer's
forward-looking capacity and willingness to service that debt,
which among other factors includes macroeconomic prospects, the
company's operating performance, its access to markets and
potential proceeds from asset sales.


USIMINAS: S&P Alters Outlook to Stable & Affirms 'B+' ICR
---------------------------------------------------------
S&P Global Ratings, on Oct. 9, 2020, revised its global and
national scale rating outlook on Brazilian integrated steelmaker
Usinas Siderurgicas de Minas Gerais S.A. (Usiminas) to stable from
negative. S&P also affirmed its 'B+' global sale and 'brAA'
national scale issuer credit ratings. S&P also affirmed the
issue-level rating on the company's senior unsecured debt at
'brAA', with a recovery rating of '3', reflecting its expectation
of a recovery of 55% (rounded estimate).

The stable outlook reflects S&P's view that the company's metrics
in 2020 will remain largely unscathed as the strong performance of
the mining segment compensates for the drop in the steel segment's
EBITDA, while Usiminas maintains robust liquidity.

The pandemic-induced downturn in the auto sector caused Usiminas'
earnings to fall sharply in the second quarter of 2020, given its
high exposure (about one-third of volumes) to this sector. However,
the surge in iron ore prices in the past few months and
normalization in output increased dramatically this segment's
EBITDA, which will surpass that of the company's steel segment for
the first time in fiscal 2020.

S&P estimates that the company's adjusted gross debt to EBITDA will
tick up to close to 3.5x by the end of 2020. This is because the
higher EBITDA will be offset by the effect of the Brazilian real's
depreciation on Usiminas' dollar-denominated debt. In addition, the
company quickly adjust its production amid COVID-19 uncertainties
by shutting down two blast furnaces in April, reducing capex, and
optimizing working capital, which will result in positive free
operating cash flow (FOCF) in 2020.

Usiminas has no significant debt maturing until 2023, which
provides a liquidity cushion if market conditions worsen again.
Moreover, the company has received the proceeds from the legal
settlement with Usiminas PrevidĂȘncia (its pension fund), totaling
about R$400 million, strengthening its cash position.




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LATAM AIRLINES: Wins Shorter Plan Exclusivity Extension
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The Honorable James L. Garrity, Jr., of the U.S. Bankruptcy Court
for the Southern District of New York extended the periods within
which LATAM Airlines Group S.A. and its debtor-affiliates have the
exclusive right to file a Chapter 11 plan through and including
January 29, 2021, and to solicit acceptances of the plan through
and including March 23, 2021.

In their Motion, the Debtors requested to extend their exclusivity
periods to file a plan and solicit acceptances, through and
including March 22 and May 21, 2021, respectively.

With the extension, the Debtors are given the opportunity to
conduct the analysis of the claims filed against the estates in
order to have a clear picture of the amounts and classifications
that creditors intend to assert for their claims and the volume of
claim objections.  Absent the extension, the Debtors cannot take
steps to actually contest claims or make meaningful progress on
negotiations of a plan of reorganization since both will take
additional time depending on the amount and classifications
asserted in the proofs of claim filed as well as the nature of
claims objections the Debtors will pursue.

The continued exclusivity will permit the Debtors to avoid the
business disruptions that would result from the development of
competing reorganization plans and will benefit all stakeholders,
including the Debtors, their creditors, and other parties in
interest since it will allow all stakeholders to continue making
progress toward a consensual, value-maximizing restructuring.

                      About LATAM Airlines

LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise.   

LATAM Airlines Group S.A. is the largest passenger airline in South
America. Before the onset of the COVID-19 pandemic, LATAM offered
passenger transport services to 145 different destinations in 26
countries, including domestic flights in Argentina, Brazil, Chile,
Colombia, Ecuador, and Peru, and international services within
Latin America as well as to Europe, the United States, the
Caribbean, Oceania, Asia, and Africa.

LATAM Airlines Group S.A. and its 28 affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25,
2020. Affiliates in Chile, Peru, Colombia, Ecuador, and the United
States are part of the Chapter 11 filing.

The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.

The Honorable James L. Garrity, Jr., is the case judge. The Debtors
tapped Cleary Gottlieb Steen & Hamilton LLP as general bankruptcy
counsel; FTI Consulting as restructuring advisor; and Togut, Segal
& Segal LLP, and Claro & Cia in Chile as special counsel. Prime
Clerk LLC is the claims agent.




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AVIANCA HOLDINGS: Bankruptcy Court Approves Financing Plan
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Marcelo Rochabrun at Reuters report that Colombian airline Avianca
Holdings said that a U.S. bankruptcy court approved a proposed
financing plan of over $2 billion to help the carrier exit Chapter
11 restructuring.

The airline filed for bankruptcy protection in May, pushed over the
edge by the coronavirus pandemic, but it had been struggling in
recent years, according to Reuters.

Avianca -- https://aviancaholdings.com/ -- is the commercial brand
for the collection of passenger airlines and cargo airlines under
the umbrella company Avianca Holdings S.A. Avianca has been flying
uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca
serves 76 destinations in 27 countries within the Americas and
Europe.

Avianca Holdings S.A. and its affiliates sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. S.D. N.Y. Lead Case No.
20-11133) on May 10, 2020. At the time of the filing, Debtors.
disclosed $7,273,900,000 in assets and $7,268,700,000 in
liabilities.  

Judge Martin Glenn oversees the cases.

The Debtors tapped Milbank LLP as general bankruptcy counsel;
Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon
Abogados S.A.S. as restructuring counsel; Smith Gambrell and
Russell, LLP as aviation counsel; Seabury Securities LLC as
financial restructuring advisor and investment banker; FTI
Consulting, Inc. as financial restructuring advisor; and Kurtzman
Carson Consultants LLC as claims and noticing agent.

The U.S. Trustee for Region 2 appointed a committee of unsecured
creditors in Debtor's bankruptcy cases on May 22, 2020.




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D O M I N I C A N   R E P U B L I C
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DOMINICAN REPUBLIC: President Gets Plan to Relaunch Tobacco Sector
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Dominican Today reports that the Minister of Industry, Commerce and
Mipymes (MICM), Victor-Ito-Bisono, delivered to President Luis
Abinader the work plan proposed by the commission for the
relaunching of tobacco industry created last September 12 by the
President.

"This work plan has been the result of four weeks of hard work,
where dialogue and consensus between government and representatives
of the tobacco industry have prevailed for the benefit of the new
momentum that this sector needs," said Bisono, according to
Dominican Today.

Likewise, the minister, appointed as Coordinator of the Commission,
also emphasized that "with this plan, we aim to correct structural
distortions affecting the country's tobacco sector," the report
notes.

                        About The Plan

The plan delivered to the President focuses on nine areas of work
on which the measures and actions to relaunch the tobacco industry
in the country will revolve, the report relays.   The program
covers proposals on financing, infrastructure, training, taxes,
tobacco culture, international trade, productive chains,
anti-smoking regulations, and eradication of illicit trade, the
report discloses.

Among the plan's objectives is to increase the competitiveness of
Dominican cigars in other markets, declare tobacco and cigars as
cultural heritage of the Dominican Republic, and eliminate
distortions in the local market, the report says.

The document also expresses the need to confront counterfeiting in
the sector by strengthening INTABACO and the articulation of
actions by the authorities against the illicit trade, the report
notes.

                    Members of the Commission

In addition to Minister Victor-Ito-Bisono, head of the MICM, the
commission for the relaunch of this industry includes the Ministers
of Foreign Affairs, Interior and Police,  Agriculture, Public
Works, the Director of Intabaco, the Governor of Santiago, the
Director of the Export-Import Center, and the Manager of the Banco
Agricola, Fernando Duran, the report relays.

Upon forming the commission, President Abinader identified the need
to unify criteria that will lead to actions that will consolidate
the tobacco industry and promote its re-launching to increase
exports and create new jobs, through coordinated support from
various government agencies, 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: Support From Barrick, Et. Al to Exceed $25BB
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Dominican Today reports that Barrick Gold's support for the
Dominican Republic government to ensure that there are no new taxes
will be an advance of some US$47 million in royalties by 2020,
independent of the payment of its regular taxes.

But the biggest support will come in 2021, when, according to the
two agreements made with the mining company, the government, and
the country's financial institutions, the amount of the advance
will exceed RD$25.7 billion, according to Dominican Today.

The Dominican gold is exported by the mining company to
Switzerland, India, the United States, and Canada, the latter
country where it is refined, the report notes.  The practice of
asking for tax advances from large corporations is not new, the
report relays.  In the quarter of this year, Barrick made an
advance to the Dominican Government, to face the Covid-19
coronavirus pandemic, the report discloses.

Years ago, the late ex-president Joaquin Balaguer came to ask for
advances from the Shell fuel company and it is also known that he
did so with the large local businessmen to avoid foreign debt, the
report says.

                          Mining Taxes

In the Dominican Republic, mining operations are subject to income
tax, the tax on mining profits (PUN), the minimum annual tax (IMA),
which applies to royalties, the net mining refining tax (RNF), and
capital gains tax, the report relays.  During the period 2012-2018,
the Dominican State collected income from these five taxes applied
to mine operations in the amount of RD$65.8 billion, the report
says.

A capital gain operation of RD$3.15 billion was recorded in the
reference period, due to the fact that in 2014 the operations of
the previous year were accounted for when the mining company began
to exploit and export gold, the report discloses.  The advance of
royalties (economic consideration paid by the company to the State
for the exploitation of metallic and non-metallic mineral
resources) is contemplated in Law 146-71 on Mining, the report
says.

                      Price for the Sale of Gold

This is a minimum tax on the sales price and is credited towards
the payment of income tax for a given year, the report relays.  The
operation pointed out by the President is an advance tax that
should not be confused with the negotiation of contractual terms,
since it is an agreement in which Barrick Pueblo Viejo will advance
this year the royalty that corresponds to it in 2021, the report
discloses.  This provision was adopted jointly by the parties, the
report says.  For 2021, the agreement with Barrick is for an
advance of the royalties in the amount of US$95 million (RD$5,700
million), which will contribute with an improvement of the
budgetary year of that year, the report notes.

With the financial intermediation entities, the Government reached
an agreement so that in 2021 they will be advanced the equivalent
of RD$20 billion, in addition to the payment of their normal taxes,
the report notes.

With these two agreements, the government of President Abinader was
able to manage to send an addendum to the Congress of the Republic,
where the proposal of new taxes, included in the draft Budget,
would be discussed, and which had been widely rejected by the
population, because it would affect the middle class more, the
report discloses.

                             In Points

                            Production

Last year, the mine processed 8.6 million tons, with a movement of
50 to 55 million tons, the report notes.

                            Extension

Barrick Pueblo Viejo Mining Company plans to extend the life of the
mine by more than 15 years, the report relays.

                           Investment

It expects to reach a real foreign direct investment of more than
US$3 billion by 2020-2045, 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).




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PANAMA: IDB OKs 2 Loans to Boost Social Inclusion & Fiscal Mgmt.
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The Inter-American Development Bank has approved two loans for
Panama that are designed to help it make progress in the social
inclusion of people with disabilities on one hand and also enhance
the efficiency of its tax administration.

Including people with disability

The IDB approved a plan for Panama that supports inclusion of
people with disabilities by improving the coverage and quality of
health care and education and services that increase their
autonomy.

The loan will increase the efficiency of systems for identifying
and certifying people with disabilities. It will also allow for an
expansion of early diagnosis and rehab services, and improve the
quality of education for students dealing with disabilities.
Altogether, students with disabilities at 477 schools in rural
areas of Panama will benefit from the loan.

An estimated eight percent of Panama's population has a disability
of some sort. The incidence is higher in rural areas than in urban
ones, greater among women than men, and affects those over age 65
in particular. People with disabilities suffer higher rates of
poverty because they are less present in the work force and earn
less, and due to the costs associated with their personal
assistance, transport, health and technical support.  In Panama,
households with at least one person with a disability have a
greater possiblity of being in the bottom two income quintiles
compared to those with no one who is disabled.

The IDB loan, which will be administered by the National Disability
Secretariat,  (SENADIS), is for $40 million and has a reimbursement
period of 15 years, a grace period of five and a half years and an
interest rate pegged to the Libor.

Digital transformation of the tax administration

Panama will invest in the digital transformation of its tax
administration through an IDB loan that will help the country
improve its tax revenue through more efficient inspection and
collection and a reduction in costs associated with fulfilling tax
obligations.

This project is part of the efforts that the General Directorate of
Revenue ((DGI in Spanish) began to make in late 2019 to modernize
its administration in a comprehensive way, in coordination with the
IDB and the International Monetary Fund.  With IDB support, areas
were identified to improve administration in the registry of tax
payers, their division into tax brackets, risk profiles, management
of tax assessment and collection, customer service and other
issues.

The project calls for a thorough and systemic modernization of the
DGI. The operation will boost the governance and human resource
management model so that it can utilize efficiencies that will be
gained through the use of digital tools for tax administration in
the following areas: strengthening tax oversight, facilitation of
compliance including  measures for comprehensive management of tax
risk, taxpayer service and the extension of  electronic billing.
Changes to the business model will be complemented by the
modernization of technological infrastructure, improved planning
and strategic management of information technologies and
information security.

This $40 million loan is over 15 years, with a reimbursement period
of five years, a grace period of five and a half years and interest
rate pegged to the LIBOR.




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PETCO ANIMAL: Moody's Alters Outlook on Caa1 CFR to Positive
------------------------------------------------------------
Moody's Investors Service changed the outlook for Petco Animal
Supplies, Inc.'s (Petco) to positive. Moody's also affirmed the
company's corporate family rating and probability of default rating
at Caa1 and Caa1-PD. Additionally, Moody's affirmed the company's
senior secured term loan at B3.

"Petco's operating performance has been above expectations in the
first half of 2020 despite the disruption caused by the coronavirus
pandemic, demonstrating the resilience of the pet products
business," Moody's Vice President Mickey Chadha stated. "The
positive outlook reflects that Fitch expects momentum to continue
over the next 12 months due to the growth in pet ownership and
Petco's increasing e-commerce penetration coupled with the
improving services business", Chadha further stated.

Affirmations:

Issuer: Petco Animal Supplies, Inc.

Corporate Family Rating, Affirmed Caa1

Probability of Default Rating, Affirmed Caa1-PD

Senior Secured Bank Credit Facility, Affirmed B3 (LGD3)

Outlook Actions:

Issuer: Petco Animal Supplies, Inc.

Outlook, Changed to Positive from Negative

RATINGS RATIONALE

Petco's Caa1 corporate family rating reflects its high financial
leverage that stems from the acquisition of the company by the CVC
Capital Partners Advisory (U.S.) and Canada Pension Plan Investment
Board in January 2016. Lease-adjusted debt/EBITDA remains high at
about 5.5 times for the twelve-month period ended August 1, 2020,
and interest coverage is modest with EBIT/interest at 1.0 times. On
a funded debt to reported EBITDA basis leverage is higher at about
7.0 times. Moody's expects credit metrics to improve modestly in
the next 12 months as same store sales continue to be positive and
margins improve due to the change in sales mix. Traffic will
continue to be pressured as consumers consolidate trips to the
store however transaction size will remain high and will offset the
weak traffic trend. As a result, Moody's expects debt/EBITDA and
EBIT/interest in the next 12 months to improve towards 5.0 times
and over 1.0 times respectively. The company is owned by a private
equity sponsor, which inherently has certain risks specifically as
it relates to the high likelihood of a shareholder friendly
financial policy that can lead to the maintenance of a highly
leveraged capital structure. The rating also acknowledges that
while Petco's market presence is substantial, the competitive
landscape is getting tougher as consumers are increasingly shopping
online at company's like Chewy (owned by Petsmart) and Amazon and
the mass channel which includes supermarkets, Walmart, and Target
continues to price aggressively. These channels have seen increased
sales during the coronavirus related disruptions. Petco's ratings
are supported by its good liquidity, well-known brand, broad
national footprint. The pet products industry also remains
relatively recession-resilient, driven by factors such as the
replenishment nature of consumables and services and increased pet
ownership.

The positive outlook reflects Moody's expectation that Petco's same
store sales growth will continue, credit metrics will improve and
the company will continue to generate free cash flow in the next 12
months.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Petco's ratings could be upgraded if the company's operating
performance continues to improve with same store sales and
profitability growth being sustained while maintaining good
liquidity including refinancing debt well in advance of its
maturity and financial policies that are focused on improving
credit metrics. Specific metrics include maintaining lease-adjusted
debt/EBITDA below 6.0 times and maintaining EBIT/interest expense
over 1.25 times even after any refinancing of its debt.

Petco's ratings could be downgraded if operating trends are
reversed, financial policies become more aggressive, or if
liquidity erodes. Specifically, ratings can be lowered if operating
margins or free cash flow deteriorates or company does not
refinance its debt well in advance of maturities. Quantitatively, a
downgrade could occur if lease-adjusted debt/EBITDA is sustained
above 7.0 times or if EBIT/interest expense remains below 1.0
time.

Petco Holdings, Inc. is a national specialty retailer of premium
pet consumables, supplies and companion animals and services with
1,474 retail locations in 50 states, the District of Columbia and
Puerto Rico as of Aug 1, 2020. The Company also offers an expanded
range of consumables and supplies through its www.petco.com,
www.unleashed.com and www.drsfostersmith.com websites. Revenue
exceeded $4.5 billion for the latest twelve-month period ended
August 1, 2020. The company is owned by CVC Capital Partners
Advisory (U.S.) and Canada Pension Plan Investment Board.

The principal methodology used in these ratings was Retail Industry
published in May 2018.



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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
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USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
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Chapman, Editors.

Copyright 2020.  All rights reserved.  ISSN 1529-2746.

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