/raid1/www/Hosts/bankrupt/TCRLA_Public/201102.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, November 2, 2020, Vol. 21, No. 219
Headlines
A R G E N T I N A
GAUCHO GROUP: Reports $1.5-Mil. Net Loss for Quarter Ended June 30
IRSA INVERSIONES: Fitch Lowers LT Issuer Default Ratings to C
B E R M U D A
RENAISSANCE FINANCIAL: S&P Affirms 'B-/B' ICRs, Outlook Stable
B R A Z I L
CEMIG: Fitch Affirms BB- Issuer Default Ratings, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Pays RD$150-Mil. to Agricultural Producers
[*] DOMINICAN REPUBLIC: Sector Unveils Plan to Relaunch Free Zones
M E X I C O
MUNICIPALITY OF TUXPAN: Moody's Withdraws Ba2 on MXN220-Mil. Loan
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: In Social & Economic Crisis, Businessman Says
V E N E Z U E L A
VENEZUELA: Maduro Acknowledges Gasoline Reserves to Last 20 Days
X X X X X X X X
[*] BOND PRICING: For the Week Oct. 26 to Oct. 30, 2020
- - - - -
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A R G E N T I N A
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GAUCHO GROUP: Reports $1.5-Mil. Net Loss for Quarter Ended June 30
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Gaucho Group Holdings, Inc., filed its quarterly report on Form
10-Q, disclosing a net loss of $1,506,237 on $117,332 of sales for
the three months ended June 30, 2020, compared to a net loss of
$1,993,018 on $268,733 of sales for the same period in 2019.
At June 30, 2020, the Company had total assets of $5,622,341, total
liabilities of $7,815,865, and $11,204,348 in total stockholders'
deficiency.
The Company said, "We have generated significant losses which have
resulted in a total accumulated deficit of approximately $90
million, raising substantial doubt that we will be able to continue
operations as a going concern. In the audit opinion for our
financial statements as of and for the year ended December 31,
2019, our independent auditors included an explanatory paragraph
expressing substantial doubt about our ability to continue as a
going concern based upon our accumulated deficit and our working
capital deficit as of December 31, 2019, and our need to raise
additional funds to meet our obligations and sustain our
operations. Our ability to execute our business plan is dependent
upon our generating cash flow and obtaining additional debt or
equity capital sufficient to fund operations. If we are able to
obtain additional debt or equity capital (of which there can be no
assurance), we hope to acquire additional management as well as
increase the marketing of our products and continue the development
of our real estate holdings.
"Our business strategy may not be successful in addressing these
issues and there can be no assurance that we will be able to obtain
any additional capital. If we cannot execute our business plan on
a timely basis (including acquiring additional capital), our
stockholders may lose their entire investment in us, because we may
have to delay vendor payments and/or initiate cost reductions and
possibly sell certain company assets, which would have a material
adverse effect on our business, financial condition and results of
operations, and we could ultimately be forced to discontinue our
operations, liquidate and/or seek reorganization under the U.S.
bankruptcy code. The conditions outlined above indicate that there
is substantial doubt about our ability to continue as a going
concern within one year after the financial statement issuance
date."
A copy of the Form 10-Q is available at:
https://is.gd/Z1AllX
Gaucho Group Holdings, Inc., through its subsidiaries, invests in,
develops, and operates real estate projects in Argentina. The
company was formerly known as Algodon Group, Inc., and changed its
name to Gaucho Group Holdings, Inc. in March 2019. Gaucho Group
was founded in 1999 and is headquartered in New York, New York.
IRSA INVERSIONES: Fitch Lowers LT Issuer Default Ratings to C
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Fitch Ratings has downgraded IRSA Inversiones y Representaciones
S.A.'s (IRSA) Long-Term Local and Foreign Currency Issuer Default
Ratings (IDRs) to 'C' from 'B-'. The downgrades follow IRSA's
announced launch of a tender offer to exchange its USD181 million
local unsecured notes due in November 2020 for new unsecured notes
due in 2023, which Fitch considers a distressed debt exchange (DDE)
as per its DDE criteria. If the proposed tender offer is
successfully completed, the IDR will be downgraded to Restricted
Default (RD). Subsequently, Fitch will re-rate IRSA's IDRs to a
level that is consistent with the company's post-exchange capital
structure and risk profile, which would likely be within a low
speculative rating range.
Fitch has also downgraded IRSA Propiedades Comerciales S.A.'s (IRSA
PC) Long-Term Foreign and Local Currency IDRs to 'CCC' from 'B-',
and IRSA PC's unsecured notes to 'CCC'/'RR4' from 'B-'/'RR4'. The
downgrades reflect the strong parent-subsidiary linkages between
IRSA and IRSA PC, exposure to Argentina's challenging macro and
business environment, as well as the sharp deterioration in
operational performance of the company's real estate portfolio
driven by the pandemic and deteriorating economy.
KEY RATING DRIVERS
Exchange Offer Qualifies as DDE: In Fitch's opinion, the offering
imposes to bondholders of existing notes, a material reduction in
terms of the existing 2020 notes, as the exchange will extend the
maturity date and eliminate certain events of default included in
the existing 2020 senior notes indenture for the bonds that are not
tendered. The proposed amendments require the affirmative vote of
holders of more than 90% of the outstanding aggregate principal
amount of the existing notes, under the existing notes indenture.
In addition, Fitch views IRSA's proposed exchange offer is
conducted to avoid a payment default as a result of FX restrictions
recently imposed. Argentina's current capital controls restrict
access to the foreign exchange market to obtain U.S. dollars for
the payment of debt maturities. On Sept. 15, 2020, the BCRA
announced new capital controls requiring entities with
hard-currency international debt and hard currency local bonds
maturing (principal only) between Oct. 15, 2020 and March 31, 2021
will be required to present a plan to the BCRA that assumes only up
to 40% of the principal will be settled in cash, accessing the
official exchange market of Argentina, and the remaining 60% will
need to be restructured with an average maturity of greater than
two years.
Strong Parent-Subsidiary Linkage: Fitch views the rating linkage
between IRSA PC and its parent company, IRSA, as strong as IRSA PC
is operationally integral to its parent company. The ratings for
both entities are viewed as closely related, with IRSA PC
considered as having a stronger credit profile. Inversiones y
Representaciones S.A. owns 80.7% of IRSA PC. The parent-subsidiary
strategic and operational linkages between the aforementioned
entities are strong based on the entities' common management team
and the decision-making process. IRSA PC's upstream dividends
represent a relevant part of IRSA's cash flow generation, which
reinforces the strong credit linkage.
On Oct 26, 2020, IRSA PC announced it will distribute a cash
dividend of ARS 9.7bn (USD 124.1 million). The payment will be
effective in four installments of ARS 2.4 billion each (USD31
million), the first of which will be paid during November 2020. The
three other installments will be paid during January, March and May
of 2021. IRSA owns 80.7% in IRSA PC and it will receive
approximately USD 100 million from IRSA PC 's approved cash
dividends. These proceeds will be used to liquidate intercompany
loans between these entities.
Sharp Decline in Operational Performance: The pandemic crisis led
to the temporary closure of shopping malls in Argentina since March
2020, only essential businesses remained open during this period.
Recently Argentinean government authorized malls reopening. As a
result of pandemic related restrictions on the malls' activities,
the company experienced a sharp drop in revenue during the quarter
ended on June 30, 2020. The company's quarterly revenues from malls
activities declined 84% when compared to the same quarter of last
year. As of June 30, 2020, the company' malls portfolio was
approximately 93.2% occupied versus 94.7% as of June 30, 2019.
The operational performance of the company's offices segment
remained more stable, the company's office segment revenues for the
quarter ended in June 30, 2020 declined 13.6% when compared with
the same quarter of last year. The company's total adjusted EBITDA
for LTM June 2020 was USD 90 million, and represented a decline of
35% over LTM June 2019. The malls and office segments generated
approximately 67% and 33% of the company's total adjusted EBITDA
during LTM June 2020.
Deterioration in Financial Leverage: Capital controls are impairing
Argentina corporates' capacity to access international markets,
execute liability management processes and service its debt. In
this context, IRSA requires executing important debt refinancing
activity during 2020. The company's capacity to execute required
liability management is highly dependent on the market conditions
and access to hard currency during 2020.
As of June 30, 2020, IRSA PC had cash and cash equivalents of about
USD155 million, the company maintains part of its cash position in
offshores accounts. The company's net debt/EBITDA ratio reached
deterioration during 2020 as a result of the national lockdown
effect on commercial & malls activity and local currency
devaluation versus the dollar. IRSA's net leverage ratio was 8.3x
at June 30, 2020. It reflects LTM EBITDA, total debt, and cash
levels of USD 98 million, USD879.4 million, and USD67 million,
respectively. For IRSA's total consolidated debt, USD 324 million
is allocated under IRSA and USD 565 million is under IRSA P.C. as
of June 30, 2020. IRSA PC paid-off USD140 million unsecured notes
last Sept. 2020. Further, the company's property value is estimated
at USD1.7 billion as of June 30, 2020, resulting in the company's
net loan to value at around 49%.
Debt Related to Operations outside Argentina Non-recourse: IRSA
gained control of the Israeli conglomerate IDB Development
Corporation Ltd. (IDBD) during October 2015. On Sept. 27, 2020, The
District Court of Tel-Aviv said IRSA 's IDBD is insolvent and
issued an order for the initiation of liquidation proceedings.
IRSA's management has indicated it will deconsolidate Israel-based
subsidiary IDBD from its financial reporting. The debt of IDBD is
non-recourse to IRSA and Fitch excludes its debt from the credit
metrics calculation of IRSA.
Recovery Analysis Assumptions: The recovery analysis assumes that
IRSA PC would be reorganized as a going-concern in bankruptcy
rather than liquidated, Fitch has assumed a 10% administrative
claim. The GC EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which Fitch
bases the enterprise valuation. An EV multiple of 6x EBITDA is
applied to the GC EBITDA to calculate a post-reorganization
enterprise value. The choice of this multiple considered the
following factors: similar public companies trade at EBITDA
multiples in the 12x-15x range, Fitch used a multiple of 6x to
estimate a value for IRSA PC because this company benefits from
dominant market share, unique brands, higher barriers to entry, or
undervalued assets. It also factors in Argentina's operating
environment. The recovery performed under this scenario resulted in
a recovery level of 'RR3'. The bonds are capped at 'RR4'. Fitch
does not notch bonds above a company's Foreign Currency IDR when
the gap between its Foreign Currency IDR and Local Currency IDR is
less than two notches, as outlined in Fitch's "Country-Specific
Treatment of Recovery Ratings Criteria."
DERIVATION SUMMARY
In addition to the tender offer, IRSA and IRSA PC's ratings are
primarily driven by the combined high leverage and tight financial
flexibility. The ratings also factor in the strong
parent-subsidiary linkage between IRSA PC and its parent company,
Inversiones y Representaciones S.A., IRSA PC is viewed as
operationally integral to its parent company.
KEY ASSUMPTIONS
Fitch's Key Assumptions within the Rating Case for the Issuer
Include
- The proposed tender offer for IRSA's unsecured notes is
completed as expected.
RATING SENSITIVITIES
The completion of the proposed exchange offer will lead to a
downgrade of IRSA's Long-term IDRs to 'RD'. The IDR would be
subsequently upgraded to a rating level reflecting the post-DDE
credit profile.
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
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.
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B E R M U D A
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RENAISSANCE FINANCIAL: S&P Affirms 'B-/B' ICRs, Outlook Stable
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S&P Global Ratings affirmed its 'B-/B' long- and short-term issuer
credit ratings on Renaissance Financial Holdings Ltd. (RFHL). The
outlook is stable.
S&P said, "The affirmation reflects our view that RFHL's credit
profile remains vulnerable to weakened global economic conditions
due to the pandemic and increased capital market volatility. RFHL
is primarily an institutional broker, with strong positions in
equities and derivatives on Russian capital markets as well as in
some African markets. The firm's operating revenue is volatile
because of high sensitivity to investors' interest in emerging and
frontier markets.
"We expect the firm's capitalization, as measured by our
risk-adjusted capital ratio (RAC), to weaken to about 8%-10% in
2020-2021 from 11.3% at year-end 2019, due to an increase in market
risk charges, reflecting higher volatility in Russian and global
capital markets. In addition, the firm's profitability, as measured
by three-year average core earnings to risk-weighted assets of
about 70 basis points in 2017-2019, is lower than peers' and weighs
on its capacity to cover unexpected losses and support internal
capital generation.
"We view as positive that RFHL has been supervised on a
consolidated basis by Cyprus regulator CySec since year-end 2019.
As an EU member, Cyprus has implemented the EU's Markets in
Financial Instruments Directive (MiFID II) financial regulation for
securities firms. We view regulation of securities firms in Cyprus
by CySec as more prudent than that conducted by the Russian
regulator. Therefore, we revised the anchor, or our starting point
for the rating on RFHL, to 'b+' from 'b', the latter is applied to
Russian securities firms.
"Nevertheless, RFHL's still-high exposure to its shareholder Onexim
weighs on its risk position. As of end-September 2020, loans and
receivables to the shareholder, net of provisions, progressively
reduced to $526.8 million (about 1.2x total adjusted capital) from
$1,478 million at year-end 2015. The shareholder has indicated
willingness to further reduce its debt to RFHL, and we expect that
exposure to the shareholder will continue to gradually decline in
2021.
"We view RFHL's funding as credit negative, given the company's
relatively low gross stable funding ratio (GSFR) and high reliance
on short-term collateralized funding, which represented about 45%
of its total liabilities as of mid-2020. In our view, RFHL does not
have sufficient long-term sources to fund its exposure to related
parties and its proprietary position, which may become less liquid
in case of market stress. This asset-liability mismatch is
reflected in RFHL's GSFR, which stood at 39% as of mid-2020, and
remains lower than that of peers. At the same time, Onexim
demonstrated a good track record of support, which significantly
mitigated RFHL's liquidity risks in the past.
"The stable outlook on RFHL reflects our expectation that, over the
next 12 months, RFHL will maintain a moderate risk appetite and
sufficient capital buffers to face weakened macroeconomic
conditions and increased capital market volatility. This, together
with the expected funding support from its shareholder Onexim,
should enable the firm to avoid default over the next 12 months.
"We could lower our ratings on RFHL in the next 12 months if RFHL's
liquidity deteriorated, and we saw a lower likelihood of the
company receiving ongoing support from Onexim. A material increase
in risk appetite or significant pressure on the capital buffer--for
example, due to very high market risk--may also prompt us to
downgrade RFHL.
"We are unlikely to upgrade the holding over the next 12 months,
because it would require improvements in both its capitalization
and risk position. We usually rate nonoperating holding companies
two notches below the group credit profile (GCP). Thus, an upgrade
of the holding would require us to revise the GCP upward by
multiple notches."
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B R A Z I L
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CEMIG: Fitch Affirms BB- Issuer Default Ratings, Outlook Stable
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Fitch Ratings affirmed Companhia Energetica de Minas Gerais (Cemig)
and its wholly owned subsidiaries Cemig Distribuicao S.A. (Cemig D)
and Cemig Geracao e Transmissao S.A.'s (Cemig GT) Foreign and Local
Currency Issuer Default Ratings (IDRs) at 'BB-'. Fitch also
affirmed Cemig GT's USD1.5 billion Eurobond issuance at 'BB-' and
upgraded the Long-Term National Scale Rating for the three
entities, as well as for Cemig GT's local third debentures
issuance, to 'AA-(bra)' from 'A+(bra)'. The Rating Outlook for the
corporate ratings is Stable.
The upgrade on the National Scale ratings reflects Cemig group's
strengthening of its credit profile within the 'BB-' IDR level.
Cemig presented a decreasing financial leverage due to positive
operating performance and cash flow generation in its energy
distribution business. Fitch expects the consolidated net adjusted
debt/adjusted EBITDA to remain in the range of 3.0x-4.0x in the
coming years, which is strong for current IDR.
The ratings for Cemig and its subsidiaries reflect the group's
large scale in the Brazilian power sector, with the asset and
segment diversification on its operations adding to business risk
dilution. As a concern, Cemig has the challenge to anticipate the
refinance of Cemig GT's Eurobond due in 2024 in order to avoid a
strong debt maturity concentration and reduce foreign currency
exposure. The group also faces uncertainty related to the
expiration of its Emborcacao and Nova Ponte hydroelectric plants
concessions, currently expected for 2025, which account for about
50% of Cemig GT's commercial capacity. The analysis incorporates
Cemig's political risk as a state-owned company, as well as the
moderate regulatory risk for the Brazilian power sector and the
hydrological risk inherent to its activity, currently above
average.
As per as Fitch's Parent and Subsidiary Linkage Rating Criteria,
the agency equalizes Cemig, Cemig D and Cemig GT's ratings based on
the strong legal and operational linkages among them, considering
the subsidiaries stronger than the holding company. The legal ties
include Cemig as guarantor for Cemig GT's Eurobond issuance and the
existence of cross-default clauses. Debt financial covenants are
also measured on a consolidated basis, with centralized strategy
and cash management.
The Stable Outlook reflects Fitch's expectation of manageable
impacts from the coronavirus pandemic in the energy generation and
distribution segments and that the company will be able to manage
the expected negative free cash flow (FCF) starting in 2021, while
keeping an adequate financial profile.
KEY RATING DRIVERS
Favorable Business Profile: Cemig's ratings benefit from its asset
diversification and operation in different segments within the
power sector, which lowers business risk. The group is one of
Brazil's largest integrated electric utilities, distributing
electricity to 8.6 million users and operating 6.1GW of generation
installed capacity and 9,800 km of transmission lines. This
diversification adds to cash flow stability. Fitch expects Cemig's
distribution segment to represent 62% of revenues and 50% of EBITDA
by YE 2020, while generation and transmission should account for
45% of EBITDA.
Manageable Coronavirus Impacts: Fitch considers that the impacts of
the coronavirus pandemic coming from Cemig D over-contracted energy
to meet previous expected demand, delinquency increase and
postponement of tariff readjustment will be fully covered by
federal government support through the called "Conta Covid." Based
on Cemig group's data, the regulator considers impacts of BRL1.8
billion, which represents 8%, 47% and 88% of the group's net
revenues, EBITDA and cash flow from operations (CFFO) of BRL24.2
billion, BRL4.2 billion and BRL2.0 billion, respectively, reported
in 2019. Cemig D will have the right to get up to BRL1.4 billion
from the Conta Covid, being BRL1.3 billion already received after
June 2020. No material impacts are expected in the generation
segment.
Moderate Leverage: Fitch expects Cemig's consolidated adjusted net
leverage to remain at the range of 3.0x- 4.0x in the coming years,
which is strong for the current ratings, with 3.2x in 2020 and 3.6x
in 2021. Consolidated net leverage, excluding off-balance-sheet
from guarantees to nonconsolidated investments, is expected to be
below 3.0x in 2020. During the last twelve months (LTM) ended on
June 30, 2020, Cemig's consolidated net adjusted leverage declined
to 3.3x from 3.7x in 2019, while net leverage without guarantees
fell to 2.4x from 2.9x in 2019. Fitch's adjusted debt for Cemig
includes guarantees of BRL4.6 billion to nonconsolidated companies
and adjusted EBITDA includes dividends received of BRL324 million.
Manageable Negative FCF from 2021 on: Fitch expects Cemig to report
positive FCF of BRL650 million-BRL700 million in 2020 and negative
FCF over the following three years. FCF in 2020 will benefit from
the anticipation of regulatory assets' recovery, with a cash inflow
of the balance of BRL926 million reported at the end of June 2020
over the second half of 2020 through the Conta Covid. After this
one-time relief support in 2020, FCF will reduce over the next
three years as a result of more aggressive capex plan, mainly
focused in Cemig D to reinforce its asset base to be recognized in
the next tariff review in 2023. The agency expects a consolidated
EBITDA of BRL4.0 billion-BRL4.3 billion in 2020-2023, which should
cover average annual capex of about BRL1.9 billion and a 50%
dividend payout.
Favorable Generation Segment: Fitch considers Cemig's robust and
predictable generation segment performance as key for its
consolidated credit profile. Cemig GT's expected average annual
EBITDA of BRL1.9 billion during 2020-2023 would represent a
significant contribution for the group, despite the reduced margin
of 30% resulted from a relevant energy purchase exposure. The
flexibility offered to client volumes during the more severe months
of the pandemic should be compensated in the second semester. The
company should be able to manage its portfolio in terms of
uncontracted energy and third-party energy purchases to limit its
exposure to the hydrologic risk, with the base case scenario
considering a Generation Scaling Factor (GSF) of 0.84x in 2020 and
2021. Fitch's base case scenario considers an average sales price
of BRL219/MWh in 2020-2021, with annual energy sales of 3.4GWh per
year.
Satisfactory Performance in Distribution: Cemig D captured the
positive output of the last tariff review, which bolstered the
company's EBITDA to BRL2.2 billion for the LTM ended on June 30,
2020 from BRL2.1 billion in 2019, even with the negative impacts
from the pandemic in the second quarter coming from a consumption
reduction of 6% against the same period of 2019. Cemig D's improved
EBITDA also benefited from selling, general and administrative
expenses savings. Fitch's base-case scenario incorporates a
consumption recovery starting on the second semester of 2020, with
annual decrease of 5.2% in 2020 and an average 2.7% increase in
demand throughout its concession area during 2021-2023 period.
Fitch does not anticipate the achievement of the regulatory EBITDA
of BRL2.5 billion during the same period, which will depend of
further reduction in personal expenses and energy losses, not
incorporated in the base case scenario.
Reduced Business Risk: Fitch considers Brazilian electricity sector
risk lower than the average risk of other sectors in the country.
Risks vary among segments, with the credit profile of distribution
companies linked to volatility on demand, ability to control
manageable costs and secure positive results in periodic tariff
reviews. In the short-term, the recognition from the regulatory
body of the expected over-contracted energy in the coming years as
an involuntary exposure is crucial, allowing the company to pass
the entire energy purchase cost to tariff. Cemig GT's generation is
not significantly exposed to meaningful concession expiration until
July 2025. In 2020-2024, long-term contracts with defined prices
provide some cash flow predictability.
Challenges Before 2024: Fitch concerns are mainly at Cemig GT
level. The issuer's Eurobonds represent 40% of total consolidated
debt and ends in 2024, causing a high debt maturity profile
concentration. The Eurobonds also bring FX exposure, as the
company's hedge instrument is capped at BRL5 per USD1, below the
current level. Cemig also has to address the renewal of three
generation concessions, which represent 53% of Cemig GT assured
energy (3% maturing in November 2024 and 50% in July 2025).
Positively, the group still has time to manage these exposures.
DERIVATION SUMMARY
Cemig's IDRs are lower than other electric energy groups in Latin
America such as Enel Americas S.A. (Enel Americas: A-/Stable), Enel
Chile S.A (Enel Chile: A-/Stable), Empresas Publicas de Medellin
S.A. E.S.P. (EPM: BBB-/RWN), Grupo Energia Bogota S.A. E.S.P. (GEB:
BBB/Stable) and AES Gener S.A. (AES Gener: BBB-/Stable). Excluding
Enel Americas, a player with higher geography diversification and
present in different countries in the region, Cemig's business
profile is as strong as these other peers, considering the high
representativeness of regulated business and some diversification
in terms of assets and segments. However, Cemig's operating
environment risk is higher, reflecting its location in Brazil
(BB-/Negative), while its peers are more exposed to investment
grade countries, mainly Chile (A-/Stable) and Colombia
(BBB-/Negative).
Compared to Brazilian peers in the power sector, Cemig's credit
profile is weaker than Engie Brasil S.A. (Engie Brasil) and
Transmissora Alianca de Energia Eletrica S.A. (Taesa), both rated
with Local-Currency and Foreign-Currency IDRs of 'BBB-' and 'BB',
respectively, due to higher business risk coming from its
distribution segment and typically worst operational performance as
a state-owned company. In addition, Cemig's financial profile shows
higher leverage and weaker liquidity ratios than the other two
entities. Taesa operates in the highly predictable transmission
segment, while Engie Brasil is the largest private player in the
generation segment.
Compared to Brazilian peers in National Scale, Cemig's credit
profile is weaker than Companhia Paranaense de Energia (Copel:
AA+(bra)/Positive) and Centrais Eletricas de Santa Catarina
(Celesc: AA(bra)/Stable). All of them are state-owned companies and
carry political risk. In comparison with Copel, which has a similar
business profile, this company has greater relevance in the
generation segment in the consolidated results, lower financial
leverage and more robust liquidity position. The agency considers
that the stronger financial profile of Celesc, benefiting from a
conservative leverage ratio and less intense investment plan,
justifies the higher rating, despite of its high exposure to the
distribution segment.
KEY ASSUMPTIONS
- Cemig D energy demand reduction of 5.2% in 2020 and average
annual growth of 2.7% in 2021-2023;
- Collection of BRL1.4 billion related to regulatory assets in
2020 through Conta Covid;
- Cemig D's non-manageable costs fully passed through tariffs;
- Average annual consolidated capex of BRL1.9 billion during
2020-2023;
- SAAG put option exercised and paid in cash in 2021 in the
amount of BRL535 million;
- Dividend payout of 50% of net income.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Consolidated net adjusted leverage remaining below 4.0x on a
sustainable basis, while maintaining an adequate liquidity profile,
combined with a reduction of the debt concentration in 2024 and
favorable outcome for the renewal of the Emborcacao and Nova Ponte
concessions.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Deterioration of liquidity and reduction in financial
flexibility;
- Net adjusted leverage higher than 5.0x on a sustainable basis;
- Significant operational issues in its mains subsidiaries Cemig
D and Cemig GT;
- Loss or costly renewal of generation concessions, depending on
the financial structure.
LIQUIDITY AND DEBT STRUCTURE
Improved Liquidity: Cemig strengthened its liquidity position in
2020, benefited by the return of judicial deposits in the amount of
BRL1.4 billion in February to its cash and the positive operating
results. It reported robust strong short-term debt coverage ratio
of 1.4x as of June 30, 2020, with BRL3.5 billion in cash and
equivalents and BRL2.4 billion in debt maturing in the next 12
months, compared to 0.5x-0.7x at the end of the last three years.
Cemig is also reinforcing its liquidity position during the second
half of 2020 through the BRL1.4 billion of Conta Covid and with the
concluded refinancing of the BRL850 million debt in its subsidiary
Companhia de Gas de Minas Gerais (Gasmig).
The improved financial profile should benefit the group's access to
bank credit facilities and the capital markets, which will be
important along with the robust cash to support its investment plan
and liability management. Fitch considers that Cemig needs to
solidify its liquidity profile and capital structure in
anticipation of the challenges that will face in the coming years.
On June 30, 2020, Cemig group's total adjusted debt amounted to
BRL17 billion, including off-balance-sheet debt of BRL4.6 billion,
with the balance mainly consisting of Cemig GT's Eurobonds of
BRL8.3 billion and debentures of BRL6.5 billion.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch excluded construction costs from Cemig's net revenues and
costs.
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
CEMIG has an ESG Relevance Score of '4' for Governance Structure
due to ownership concentration, as a majority government-owned
entity and due to the inherent governance risks, that arise with a
dominant state shareholder. This has a negative impact on the
credit profile 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: Pays RD$150-Mil. to Agricultural Producers
--------------------------------------------------------------
Dominican Today reports that Dominican Republic's agricultural
sector delivered RD$150 million to producers in the province of
Valverde, intending to support 50% of the cost of insurance to each
producer who requires it, a commitment that President Luis Abinader
is fulfilling.
The Minister of Agriculture, Limber Cruz, and the general
administrator of the Banco Agricola, Fernando Duran, led a tour,
through four provinces of the Northwest Line, bringing solutions to
the agricultural and livestock sector, according to Dominican
Today.
The payment, which benefits 800 producers, was made through the
agricultural insurance company AGRODOSA for debt accumulated from
2018 until August this year, the report notes.
Minister Cruz announced that the entire agricultural team would be
in the areas of Valverde, Monte Cristi, Dajabon, and Santiago
Rodriguez, bringing hope and the government's helping hand, the
report relays.
He explained that they were working in compliance with the
government's seven development axes that include production,
financing, infrastructure and water, commercialization, training,
and sanitation and safety, the report notes.
Among the services offered free of charge, he cited that the
Ministry of Agriculture has prepared 40,000 tasks for crops in this
region in the first 70 days of government, equivalent to 30 percent
more than last year, the report says.
During the tour, in addition to the funds, the officials delivered
5,000 thousand silo bags, 20,000 bales, planting material such as
seedlings and banana strains, the report discloses.
They also delivered cassava cuttings, sweet potato, and seeds of
vegetables and minor crops, the report says.
The provincial governor of Valverde, Daisy Aquino, and the senators
of Monte Cristi, Ramon Antonio Pimentel Arias, (Moreno Arias), and
Valverde, Eddy Nolasco, participated. Also, Congressman Jose Lopez
Chavez, among others, the report notes.
In addition to Valverde, the tour included visits to livestock and
farmers in Dajabon and Monte Cristi. The incumbents will visit the
province of Santiago Rodriguez, the report relays.
Dynamizing Production
The administrator of the Banco Agricola said that the payments to
producers will allow them to boost production and that they are in
addition to the RD$5,000 million announced by President Abinader
for the promotion of national agriculture, the report relays.
On his side, Jose Favelo, administrator of Agrodosa, expressed that
as a result of administrative savings and accumulated adjustments
in the entity, they allowed the saving of 50 million pesos, added
to the government's departure to settle debts until August 30 this
year, the report discloses.
While the Dominican Consul in New York, Eligio Jaquez, said that
the government's goal is to achieve that the products of the
country are commercialized in the United States to increase the
economy of Creole farmers, the report relays.
For that purpose, he added that there are frequent meetings with
native traders who reside in the U.S. city since the arrival of the
government, 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: Sector Unveils Plan to Relaunch Free Zones
------------------------------------------------------------------
Dominican Today reports that Dominican authorities, together with
executives of the country's free zones, presented the plan to
relaunch the sector, made up of five pillars: investment promotion,
zero bureaucracy, promotion of productive chains, education and
stronger infrastructure.
"The ministry, as responsible for formulating public policies for
the free trade zone sector, and jointly with the National Council
of Export Free Zones and the Dominican Free Zones Association, have
formulated the plan for the relaunch of the sector," said Industry
and Commerce minister Victor Bisono.
He said the first pillar, investment promotion, aims to maximize
the use of opportunities arising from the new international
economic environment.
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
===========
MUNICIPALITY OF TUXPAN: Moody's Withdraws Ba2 on MXN220-Mil. Loan
-----------------------------------------------------------------
Moody's de Mexico has withdrawn the Ba2 (Global Scale, local
currency) and A2.mx (Mexico National Scale) ratings of the MXN220
million (original face value) enhanced loan of the Municipality of
Tuxpan (Veracruz) with a maturity of 15 years.
RATINGS RATIONALE
The ratings have been withdrawn following the prepayment of the
loan by the Municipality of Tuxpan in March 2020.
The methodologies used in these ratings were Enhanced Municipal and
State Loans in Mexico Methodology published in May 2019, and
Regional and Local Governments published in January 2018.
The period covered in the financial information used to determine
Municipality of Tuxpan's rating is between 1/1/2015 and 12/31/2019
(source: Financial Statements of the Municipality of Tuxpan).
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: In Social & Economic Crisis, Businessman Says
----------------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that Businessman
Peter George said Trinidad & Tobago is now in a social and economic
crisis because of the Covid-19 measures and if Government continues
to hold on to grab-and-go services, several businesses will crash.
George, chief executive officer of the Trent Restaurant Group which
includes Trotters, Buzo, Amara and Blue Star Diner, said he was
disappointed when Prime Minister Dr Keith Rowley did not announce
the re-opening of the economy, according to Trinidad Express.
"I have a thousand workers and they are in unbelievable financial
pain. After eight months of this pandemic this is no longer a
medical crisis, this is a social and economic crisis," he added.
Bleak Christmas
George complained on the I95.5FM morning talk show that he now has
no choice but to retrench people and close some of his businesses,
the report relays.
"I really thought they were going to reopen but now after eight
months of constraints, I unfortunately have to close some of my
operations and send staff home, because I now have to look for the
economic continuity of my business," the report notes.
George said he was at his breaking point and the Government was not
listening to other sectors, the report discloses.
He felt there was a lot this country could learn from regional
neighbors, the report says.
"All these islands are open, they are not booming, but the economic
wheels are turning. But in Trinidad and Tobago, we continue to
throw a cold blanket on the problem, waiting for cases to come
down," George added.
Also speaking to the Express outside MovieTowne at Invaders Bay,
Port of Spain, Stephen Aboud, owner of Pharmaco Ltd, said he
believed Government lacked innovation, the report discloses.
Aboud said the economy could have been open a long time ago as
proper regulations just need to be put in place to prevent the
spread of the virus, the report says.
He said when the economy opens back up, businesses are not going to
be the same, the report relates.
"Everyone knows that this Christmas is going to be bleak as far as
business is concerned. It is going to take two years for things to
normalize again," the report notes.
Aboud advised Government to pay more attention to domestic tourism
to help the economy, the report adds.
=================
V E N E Z U E L A
=================
VENEZUELA: Maduro Acknowledges Gasoline Reserves to Last 20 Days
----------------------------------------------------------------
The Latin American Herald reports that Venezuela's leftist
incumbent Nicolas Maduro said on videoconference that the nation's
gasoline reserves will only last 20 days, but that his government
is working hard to extend them to 30 days.
"Venezuela has gasoline reserves for 20 days, but we have
accumulated some and we will make it to 30 days. We have achieved
this because we are producing 30% of what the country consumes," he
said, according to The Latin American Herald.
He made it clear that the fuel crisis has the US as the main
culprit as a result of its "persecution" against the country. "They
stole from us 3 million barrels on the high seas in August alone,
all with the support of Juan Guaido," the report relates.
Maduro pointed out that the fuel has not come "only from Iran, but
from many regions. The intention is to regularize the internal
market, but the most important thing is to guarantee national
production," the report discloses.
"Now it is the distribution with efficient levels what we have to
deal with here until we can regularize the entire country," the
report relays.
Lastly, Maduro made allegations of a terrorist attack against the
Amuay refinery in Falcon state, the report notes.
La Manana, a Falcon-based newspaper, had reported that the incident
was triggered by an "event" in the refinery's alkylation unit from
plant No.4, the report discloses.
However, the manager of the Amuay refinery and a trade union member
in the place told Argus Media that the 100,000 barrels-per-day
(bpd) distillation unit, whose capacity by design is 635,000 bpd,
was in recirculation mode when the explosion occurred, the report
relays.
The trade union member, whose name was not disclosed, said that the
incident might have been caused by a water leak that triggered the
explosion, the report notes. Meanwhile, the manager described the
damages as "considerable" and that an investigation is still
ongoing, the report adds.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Oct. 26 to Oct. 30, 2020
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
KrisEnergy Ltd 4.0 40.4 6/9/2022 SG SGD
Corp Universidad de Co 5.9 64.2 11/10/2021 CL CLP
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
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
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
YPF SA 16.5 67.3 5/9/2022 AR ARS
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
SACI Falabella 2.3 50.6 7/15/2020 CL CLP
Odebrecht Finance Ltd 7.0 16.5 4/21/2020 KY USD
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
USJ Acucar e Alcool SA 9.9 74.0 11/9/2019 BR USD
China Huiyuan Juice Gr 6.5 46.6 8/16/2020 CN 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
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Plaza SA 3.5 38.3 8/15/2020 CL CLP
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
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
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 * * *