/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/201110.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, November 10, 2020, Vol. 21, No. 225 Headlines B R A Z I L BRAZIL: Inflation Hikes to 0.86% in October COMPANHIA SIDERURGICA: Fitch Hikes Issuer Default Ratings to B+ C O L O M B I A BANCO GNB: Fitch Withdraws BB-(EXP) Rating on Tier 2 Notes D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Food Production Aims to Meet Holyday Demand DOMINICAN REPUBLIC: Public Debt Soars to US$43.1BB in First 9 Mos. DOMINICAN REPUBLIC: UMPIH Warns That Price of Bread Could Rise J A M A I C A ACCESS FINANCIAL: Profit Down by 78% M E X I C O METROFINANCIERA SAPI 08U: Fitch Affirms Csf Local Currency Rating MEXICO: Population in Working Poverty Up to 48% at June, IMF Says S U R I N A M E REPUBLIC OF SURINAME: S&P Cuts FC Sovereign Credit Rating to 'SD' T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Faces Lawsuit Over Brown Sugar Imports V E N E Z U E L A EL PALITO: Refinery Resurrected for 20th Time This Year - - - - - =========== B R A Z I L =========== BRAZIL: Inflation Hikes to 0.86% in October ------------------------------------------- Rio Times Online reports that the Extended National Consumer Price Index (IPCA) has recorded a 2.22 percent increase in the year to date, and 3.92 percent over the past 12 months. The IPCA is the reference for the Brazilian inflation-targeting system. The October increase was driven by foods such as rice (13.36 percent) and soybean oil (17.44 percent), and by airline tickets (39.83 percent), according to Rio Times Online. Rio Times Online relays that inflation in Brazil spikes to 0.86 Percent in October, the highest for month since 2002. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). Fitch's credit rating for Brazil was last reported at BB- with negative outlook (May 2020). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). As reported in the Troubled Company Reporter-Latin America, Fitch Ratings' outlook revision in May 2020 for Brazil to negative reflects the deterioration of Brazil's economic and fiscal outlook, and downside risks to both given renewed political uncertainty, including tensions between the executive and congress, and uncertainty over the duration and intensity of the coronavirus pandemic. COMPANHIA SIDERURGICA: Fitch Hikes Issuer Default Ratings to B+ --------------------------------------------------------------- Fitch Ratings has upgraded Companhia Siderurgica Nacional's (CSN) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B+' from 'B' and its National Scale ratings to 'A-(bra)' from 'BBB-(bra)'. Fitch has also upgraded the senior unsecured notes of CSN Islands XI Corp, CSN Islands XII Corp, and CSN Resources that are all guaranteed by CSN to 'B+'/'RR4' from 'B'/'RR4'. In addition, Fitch has revised the Rating Outlook to Positive from Stable. CSN's ratings continue to reflect the company's solid iron ore business and strong Brazilian flat steel market position, as well as the cost competitiveness of these businesses. These strengths are balanced against a capital structure that relies heavily upon short- to medium-term bank debt. The rating upgrades are driven by material reduction in the company's net debt since the end of 2018. Elevated iron ore due to supply disruption has led to the generation of more than USD1 billion of free cash during 2019 and 2020, which has resulted in net debt declining to USD5.5 billion as of Sep 30, 2020 from USD6.6 billion at the end of 2018. The Outlook revision to Positive from Stable reflects Fitch's expectation that the company will continue to deleverage its capital structure during the next 12 to 18 months. CSN announced on Oct. 19, 2020 that it had filed a registration request for a primary and secondary offering with the Brazilian Securities Commission (CVM) for its iron ore subsidiary, CSN Mineracao (CMIN). Proceeds from this offering, if successful, could reduce debt by an additional USD1.0 billion. KEY RATING DRIVERS Strong FCF: Fitch is projecting CSN will generate BRL7.4 billion of EBITDA and BRL4.0 of FCF during 2020 after spending BRL1.5 billion on capex, which is a drop from BRL2.2 billion of investments in 2019. Challenges faced by CSN due to the coronavirus pandemic were more than offset by elevated iron ore prices that resulted from supply constrains caused by production disruptions and delays in unloading at ports in China. Fitch forecasts 30 million tons of iron ore production for CSN and sale of an addition 6 million tons of iron ore bought from third parties and uses iron ore prices of USD100/ton in its base case. These volumes are 7% below comparable 2019 figures due to adverse weather faced by the company in the first half of 2020 that disrupted operations. Manageable Steel Environment: CSN's consolidated steel sales volumes were flat relative to 2019 volumes during the first nine months of 2020 despite a challenging second quarter. Sales volumes increased by 27% during 3Q20 after falling by 10% during 2Q20; the rebound was primarily due to a 50% sales recovery in Brazil. CSN, along with several other Brazilian steel producers, had responded to the pandemic by closing plants earlier in the year. This led to a market where supply and demand were relatively balanced and prices remained healthy. Manageable Debt Burden: CSN has lowered its Fitch calculated net debt to USD5.5 billion from USD6.7 billion at the end of 2018 due to strong FCF generation. As of Sept. 30, 2020, the company had BRL39.1 billion (USD7 billion) of Fitch adjusted total debt and BRL8.5 billion (USD1.5 billion) of cash and marketable securities. Fitch's debt figure includes BRL2.9 billion of advances received from Glencore for a 33-million-ton iron ore supply contract and excludes lease related debt from its adjustments. Fitch is projecting that CSN will end 2020 with a net debt/EBITDA ratio of 3.9x. This ratio is projected to rise to 4.2x during 2021 due to a drop in iron ore prices to USD75/ton; the impact of this drop in prices is partially offset by stronger results from CSN's steel division. Short-Term Debt Concentration: CSN has about 50% of its debt falling due by the end of 2023. Approximately 70% of the debt falling due during this time frame is with Brazilian banks. Caixa Economica and Banco do Brasil are CSN's largest lenders; Bradesco and Santander are also key lenders. Fitch expects CSN to gradually reduce its exposure to the banks over the next 12 to 18 months and for the banks to continue to rollover the remaining debt. Bradesco and Banco do Brasil have also lent money to CSN's controlling shareholder. CSN Mineracao Listing: CSN has filed a registration request for a primary and secondary offering of the common shares of its iron ore subsidiary, CSN Mineracao, with the Comissao de Valores Mobiliarios (CVM). Proceeds from this offering, if successful, would be used for a mix of growth capex at the subsidiary and for debt reduction by CSN. The potential listing of this subsidiary follows efforts by CSN during the past few years to expedite its deleveraging through the sale of assets. DERIVATION SUMMARY CSN's 'B+'/Positive rating reflects its solid business position; this strength is balanced by material levels of short- to medium-term debt. The high concentration of near-term debt makes the company vulnerable to a downturn in its operating cash flow due to lower iron ore prices. The volatility of the Brazilian economy and its impact on the company's steel business is an additional credit consideration. CSN's more integrated business profile and diversified portfolio of assets compare well with Usinas Siderurgicas de Minas Gerais S.A.'s (Usiminas; BB-/Stable). Both issuers are highly exposed to the local steel industry in Brazil. CSN and Usiminas show weaker business positions than Brazilian steel producer Gerdau S.A (Gerdau; BBB-/Stable), which has a diversified footprint of operations with important operating cash flow generated from its assets abroad, mainly in U.S., and flexible business model (mini-mills) that allow it to better withstand economic and commodities cycles. Among the three business steel producers, Gerdau has consistently maintained the strongest balance sheet, most manageable debt amortization schedule, and has consistently made efforts to improve its capital structure through assets sales or equity issuances. Gross debt levels at CSN remain high relative to Gerdau and Usiminas. CSN also has a more challenging debt amortization schedule than either Usiminas or Gerdau. CSN's 1st quartile position on the hot rolled coil steel cost curve compares similarly to global peers such as PAO Severstal (BBB/Stable), as the company benefits from its vertical integration and the weak BRL. CSN and Severstal both benefit from a significant share of high value-added products that make up their sales. CSN exhibits much weaker credit metrics when compared with Severstal, and its significant refinancing risks reflect the differential between its rating and its global peer. KEY ASSUMPTIONS -- Benchmark iron ore prices average USD100/ton in 2020, USD75/ton in 2021 and USD60/ton in 2022; -- Iron ore volumes drop by 7% in 2020, rebound by 5% in 2021 and remain flat in 2022; -- Steel volumes fall by 2% in 220 and then increase by 7% in 2021 and 3% in 2022. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Successful completion of the IPO and the application of a substantial portion of the funding for debt relief; -- Additional asset sales in order to support gross debt reduction; -- Improved debt amortization schedule; -- Sustained adjusted total debt/EBITDA ratio below 4.5x and/or adjusted net debt/EBITDA ratio below 3.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Inability or unwillingness to reduce gross debt levels with cash proceeds from asset sale; -- Sustained adjusted total debt/EBITDA ratio above 5.5x and/or adjusted net debt/EBITDA ratio above 4.5x; -- Adverse regulatory changes in Brazil's mining industry. LIQUIDITY AND DEBT STRUCTURE CSN had BRL39.1 billion (USD7 billion) of Fitch adjusted total debt as of Sep. 30, 2020. Fitch's debt figure includes BRL2.9 billion of advances received from Glencore for a 33-million-ton iron ore supply contract and excludes lease related debt from its adjustments. Capital markets debt represents 52% of the Fitch adjusted debt total, while banks account for 41% of debt and the Glencore advance represents the final 7% of debt. Including the Glencore debt, approximately 90% of the company's debt is denominated in U.S. dollars or euros. At the end of September, CSN had BRL8.5 billion of cash and marketable securities and BRL4.7 billion of debt due during 2020 and 2021. Only BRL135 million of this near-term debt is related to capital market debt, the balance is comprised of bank debt. In addition to these bank and capital markets obligations, CSN has to make payments of about USD150 million per year for the next five years, according to terms of the cash advance it received from Glencore for its iron ore supply agreement. Caixa Economica and Banco do Brasil are CSN's largest lenders; Bradesco and Santander are also important lenders. Bradesco and Banco do Brasil also lent money to CSN's controlling shareholder, which makes them reliant to a degree upon CSN's continued success and dividend distributions. 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 CSN has an ESG Relevance score of '4' for Financial Transparency due to below-average disclosure of cash and debt positions at its material ore joint venture, which has a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. CSN's previous ESG Relevance score of '5' for Governance Structure has been lowered to 4. The key person risk and limited board independence through a single powerful shareholder continues to have a negative impact on the credit profile, and is relevant to the rating in conjunction with other factors. Relevance scores of '4' have a negative impact on CSN's credit profile and are relevant to its ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3' - 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. =============== C O L O M B I A =============== BANCO GNB: Fitch Withdraws BB-(EXP) Rating on Tier 2 Notes ---------------------------------------------------------- Fitch Ratings has withdrawn Banco GNB Sudameris' 'BB-' expected rating as its forthcoming debt issuance is no longer expected to convert to a final rating. The expected rating was originally assigned on May 6, 2020 on a forthcoming U.S. dollar denominated Tier 2 note. The bank's other ratings remain unchanged. At present, the bank's Long-Term Issuer Default Rating (IDR) is 'BB+'/Negative Outlook. The forthcoming debt issuance is no longer expected to convert to a final rating. KEY RATING DRIVERS N.A. 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 GNB has an ESG Relevance Score of 4 for governance structure due to key person risk, which 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: Food Production Aims to Meet Holyday Demand --------------------------------------------------------------- Dominican Today reports that Agriculture Minister Limber Cruz said President Luis Abinader ordered an increase in staple food production to meet national demand and guarantee food security for all Dominicans. Cruz said the president ordered measures in the short and medium term to increase the productivity of rice, eggs, chickens, green bananas and other products of high demand, according to Dominican Today. Cruz said that since last month, chicken production has increased by 16 percent, "with the intention that this traditional meat is not lacking on Dominican holyday dinners," the report relays. Cruz indicated that they are working to fulfill the established export commitments, the report notes. Also in the injection of resources to the field and a program of massive plantings throughout the country, but in an organized manner to avoid overproduction, the report discloses. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. 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: Public Debt Soars to US$43.1BB in First 9 Mos. ------------------------------------------------------------------ Dominican Today reports that in the Dominican Republic, the debt level of the non-financial public sector (NFPS) -- which includes government debt operations, except for the Central Bank -- has soared to US$43.1 billion in the first nine months, or 54.8% of GDP. Official data from the Ministry of Finance indicate that it's an increase of US$7.1 billion compared to the end of last year, 19.9% more in nine months, according to Dominican Today. The consolidated debt as of September, which includes the commitments also assumed by the Central Bank, has yet to be published, the report notes. The coronavirus crisis has led the Dominican Government to issue much more debt than it had planned as a way to solve the sharp drop in tax collections and the rise in public spending on health, the report relays. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Standard & Poor's credit rating for Dominican Republic stands at BB- with negative outlook (April 2020). Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). DOMINICAN REPUBLIC: UMPIH Warns That Price of Bread Could Rise -------------------------------------------------------------- Dominican Today reports that the price of bread could increase since some ingredients for its production have increased by more than 15%, as reported by the Union of Small and Medium Industrial Flour (Umpih). So they asked the authorities to meet with producers and seek a solution to avoid a rise, according to Dominican Today. According to the president of Umpih, Aaron Dinzey, the price of a sack of flour rose by around RD$200, while fat, sugar, and packaging also increased, the report notes. He said that bread is free of the Tax on the Transfer of Industrialized Goods and Services (Itbis), but with the exception of flour and water, all other ingredients are taxed at 16% and 18%, increasing the cost of production, the report relays. "Until 2012, there were standards where ingredients for the manufacture of bread were exempt from taxes, but these standards were no longer applied from that year. The materials are recorded with taxes, but the bread producer cannot transfer that Itbis to the final product because it is a tax-free product," he added. Dinzey said that bread producers do not want to increase the price, so he reiterated the call to authorities to meet with producers and seek a solution, the report notes. "We want to continue producing. We do not want to increase the price of bread. Ingredients should not be subjected to Itbis because bread is an exempt product. The rules say that in a product exempt from tax, the raw material should also be, but in our case, it is the opposite," he reiterated, the report relays. Closed bakeries. Speaking about the effects of the pandemic on the sector, Aron Dinzey said that because of the covid-19, there are 167 bakeries closed, which has caused the loss of about six thousand direct jobs, the report notes. "This is from March 19th that the pandemic started in the Dominican Republic," Dinzey added. 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). ============= J A M A I C A ============= ACCESS FINANCIAL: Profit Down by 78% ------------------------------------ Durrant Pate at Jamaica Observer reports that micro lender Access Financial Services Group suffered a heavy downturn in profits during the first half of its financial year, plummeting by 78 per cent. The company only managed to record consolidated net profit of $62 million for the six-month ended September 30, 2020, which is way below the $280 million recorded for similar period in 2019, according to Jamaica Observer. This is a continuation of the poor financial performance of some micro financers, whose profits have declined in the last two quarters, as the negative effects of COVID-19 penetrate micro credit market, the report notes. Micro Lenders Hit Hard by Covid-19 It is latest half-yearly review, Access Financial blamed COVID-19 for its poor financial performance, which severely affected its bottom line, as it did another micro lender, Lasco Financial Services, which just reported a revenue fall off of $37.8 million in its second quarter ended September 30 to earn $617.7 million, the report notes. The 5.7 per cent revenue decline was largely due to the fall in earnings from its subsidiary loan company, which its revenues going down 34.4 per cent to $152.2 million, the report relays. In spite of the negative performance in the last six months, Access Financial says it continues to manage the effect of the global pandemic with its customers to resume economic activity, the report discloses. Due in part to its successful "Back to School" marketing campaigns in both Jamaica and Florida; loan disbursements have shown improvement during the second quarter. The campaign sought to digitally equip Access Financial customers' children for the new learning environment, the report says. Loans And Advances Down Marginally Loans and advances were down 11 per cent year-over-year to $3.9 billion, due to the lower level of disbursements, caused by COVID 19. Net operating income for the half year period amounted to $887 million, a decrease of $224 million or 20 per cent compared to the corresponding period last year, the report relays. However, there was an increase in net operating income of $27 million or 6 per cent over the last quarter, as customers increased their level of borrowings, the report notes. The increase over the last quarter was due in part to the group's successful execution a number of delinquency management strategies to collect on outstanding bad debts, the report relays. On the negative side, net interest income and net fee and commission income was lower year-over-year based on the reduction in disbursements for the period but stable quarter over quarter. Operating expenses for the six-month period was $805 million, slightly lower than $825 million recorded in the prior year, the report says. Increasing Operational Efficiency Excluding the allowance for loan losses, operating expenses for the period decreased by $13 million or 2 per cent year over year, due to the implementation of measures to increase operational efficiency. Cash and cash equivalents amounted to $683 million for the period under review, reflecting higher than normal levels to manage liquidity risk during the pandemic, the report relays. Allowance for credit losses increased over the last quarter due to higher delinquency levels stemming from the impact of COVID-19, albeit slightly improved when compared to the prior year, the report discloses. The 78 per cent decline in net profits to $62 million resulted in earnings per share for the period of $0.22 compared to $1.02 for the prior year, the report says. 11% Reduction in Loans and Advances Regarding loans and advances, the news wasn't good, as this segment of the business registered an 11% decline year-over-year to $3.9 billion. The decline since March of this year was 13 per cent, as a result of the lower level of disbursements during the year, the report relays. On the matter of loan delinquency, Access Financial told shareholders in its half year report that, "we continue to monitor our delinquency levels which have improved quarter over quarter, as some customers have resumed meeting their loan commitments, the report discloses. We have also seen an improvement in the results from our collections strategies implemented during the quarter," the report relates. Total assets as at September 30, 2020 amounted to $5.47 billion, compared to the restated amount of $5.31 billion as at September 30, 2019, the report relays. Total liabilities increased by $25 million or 1 per cent year over year to $3.19 billion as at September 30, 2020 and declined by $356 million or 10 per cent since June 30, 2020, the report says. Access reports that during the quarter funds were used to settle the maturity of its J$200 million corporate bond in August 2020 and US$1 million Senior Secured Notes, the report adds. =========== M E X I C O =========== METROFINANCIERA SAPI 08U: Fitch Affirms Csf Local Currency Rating ----------------------------------------------------------------- Fitch Ratings has taken the following actions on Metrofinanciera, S.A.P.I. de C.V., SOFOM E.R.(Metro) residential mortgage backed securities (RMBS): MTROCB 07U -- Local Currency long-term rating affirmed at 'CCsf'; -- National Scale long-term rating affirmed at 'CC(mex)vra'. MTROCB 08U -- Local Currency long-term rating affirmed at 'Csf'; -- National Scale long-term rating affirmed at 'C(mex)vra'. METROCB 06U -- National Scale long-term rating affirmed at 'CC(mex)vra'. MTROFCB 08 -- National Scale long-term rating affirmed at 'AA(mex)vra'; Outlook Stable. METROCB 04U -- National Scale long-term rating affirmed at 'AAA(mex)vra'; Outlook Stable. KEY RATING DRIVERS Coronavirus Economic Impact: Fitch has made assumptions about the spread of the coronavirus and the economic impact of the related containment measures. As per the Baseline Scenario and Fitch's latest global economic outlook (GEO), the Mexican economy is assumed to slide into a severe recession with a GDP negative growth of -10.8% in 2020 and an expected recovery in 2021 of 4.4% GDP growth due to the macroeconomic disruptions caused by the coronavirus pandemic. As a downside (sensitivity) scenario in the Rating Sensitivities section, Fitch takes into consideration a more severe and prolonged period of stress with recovery to pre-crisis GDP levels delayed until around the middle of the decade. Transaction Coronavirus-Related Impact: The measures put in place to limit the spread of the virus are affecting Mexican's economy, with many businesses temporarily shut down with little or no income. Fitch expects these measures to affect the performance of RMBS transactions with higher than expected defaults and slower monetization of unproductive assets. Fitch recently increased its base case assumption and applied an increase of 1.37x to Mexican UDI loans. However, the maximum stress for a 'AAA(mex)' rating is maintained in consistency with Fitch's rating through-the-cycle approach. Contained Operational Risk: Fitch views Metrofinanciera's servicing and reporting capabilities as adequate and perceives they have not been affected by coronavirus disruptions as of this date. The coronavirus containment measures have impacted REO dynamics over the last two quarters as well as the cash flows generated by loans in payment holiday (PH); however, the exposure to PH remains low for all rated transactions. Fitch considers Metrofinanciera's recovery processes as optimal, which could support an improvement in the short to medium term and will closely follow the performance of REO recoveries over the next months. Metrofinanciera's servicer rating was affirmed at 'AAFC3-(mex) with Stable Outlook on Oct. 9, 2020. Operational risk is also reduced since collections are directly deposited into the issuer trusts' accounts. Low Exposure to Coronavirus Relief Programs Metrofinanciera implemented relief programs that consisted in the deferral of a fixed number of monthly rents to performing borrowers that applied and met predefined requirements. While Fitch observes the exposure in the portfolios remains low and deferrals will end on November 2020, the agency highlights the need to maintain a close surveillance of borrowers to avoid transitions to defaults amid the potential implementation of restructures. MTROCB 07U Compromised Liquidity: The single waterfall of payments continues to support timely interest payments despite the negative trend in the notes' credit protection. Over the last 12 months, the portfolio has generated sufficient cash flows to cover on average 2.6 times (x) the scheduled monthly coupon payments. As of September 2020, OC (excl. +180 days defaults) is -167.4% and outstanding bond balance is 26.8% (September 2019: -132.7% and 28.7%) respectively. The deteriorated credit protection reflects the high dependency to the recovery of defaulted assets and REO sales. The transaction does not support stresses associated with Fitch's expected scenario. Deteriorated Asset Quality: As of August 2020, defaulted loans (+180 days) represent 11.7% of the original balance of the portfolio (August 2019: 11.9%). The portion of +180 days defaulted loans represents 54.6% of the portfolio as of the same date. Asset quality improvements will continue being dependent on the recovery of unproductive assets through the sale and repossession of REOs. Fitch observes asset quality has remained relatively stable despite coronavirus disruptions, which reflects the high seasoning and low current loan-to-value ratio (CLTV) (52.1% as of September 2020) of the securitized portfolio. Based on information provided by the servicer, approximately 3.2% (34 out of 1,058 outstanding loans) of the loans requested this benefit. Fitch considers the exposure is immaterial and does not expect significant deviations from the observed asset performance resulting from this strategy. MTROCB 08U Compromised Liquidity: The single waterfall of payments continues to support timely interest payments despite the deteriorated credit protection. However, Fitch observes the transaction continues being highly dependent on recovery proceeds to meet the defined payment obligations. The liquidity risk exposure is reflected in the interest coverage ratio (ICR), which have averaged 1.4x the scheduled coupon payments over the last 12 months. As of September 2020, overcollateralization (OC; excl. +180 days defaults) is -247.3% and the outstanding bond balance is 38.1% (September 2019: -193.9% and 39.1%). The transaction does not support stresses associated with Fitch's expected scenario. Deteriorated Asset Quality: Asset performance has been stable since last review. As of August 2020, defaulted loans (+180 days) represent 9.8% of the original balance of the portfolio (August 2019: 9.4%). Fitch observes asset quality has remained stabled despite coronavirus stresses and considers it is due to the high seasoning and the relatively low CLTV (September 2020: 54.5%) of the portfolio. However, asset quality continues being deteriorated with +180 days defaulted loans representing approximately 48.6% of the portfolio as of August 2020. Fitch expects Metrofinanciera to maintain and improve its special servicing activities to work on the recovery of defaulted loans. Asset quality improvements will continue being dependent on the recovery of unproductive assets through the sale and repossession of REOs. RATING SENSITIVITIES MTROCB 07U Factors that could, individually or collectively, lead to positive rating action/upgrade: -- There is limited room for an upgrade given the deteriorated asset quality and the under collateralization of the notes. The rating could be increase if recoveries increase consistently and sufficiently to support a significant CE increase to positive levels. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The ratings could be downgraded if short-term liquidity risk increases or if Metro's servicing abilities are perceived as inferior to the historically observed by Fitch. MTROCB 08U Factors that could, individually or collectively, lead to positive rating action/upgrade: -- There is limited room for an upgrade given the deteriorated asset quality and the under collateralization of the notes. The rating could be increase if recoveries increase consistently and sufficiently to support a significant CE increase to positive levels. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The ratings could be downgraded due to a shortfall on interest payments. MEXICO: Population in Working Poverty Up to 48% at June, IMF Says ----------------------------------------------------------------- The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mexico on November 2, 2020. Mexico has been hit hard by COVID-19. Official statistics indicate that over 85,000 lives have been lost. About 12 million workers lost their jobs, many of whom came from the informal sector, out of which around 4 million have not returned to the workforce. The share of the population in working poverty jumped from 36 to 48 percent, as of June. Output is expected to decline by 9 percent in 2020, the steepest contraction since the Great Depression. It is expected to recover modestly going forward. Although inflation has edged up on account of exchange rate passthrough and supply disruptions, it is projected to decline gradually as domestic demand remains suppressed by labor market dislocation, wealth effects, and concerns about the path of the pandemic. The authorities responded to the pandemic by increasing health spending and supporting households and firms. They provided loans, reallocated some expenditure items, front-loaded spending for social pension payments to the elderly and disabled, and accelerated procurement processes and VAT refunds, among other actions. The authorities also implemented tax policy measures and introduced tax administration measures to increase tax collections. Monetary policy started easing last year and accelerated following the pandemic for cuts totaling 400 basis points, reducing the policy rate to 4.25 percent. The central bank also expanded several facilities, with access up to 3.3 percent of GDP, to support market functioning and credit provision. The flexible exchange rate has facilitated absorption of shocks. Comfortable international reserves, access to the U.S. Federal Reserve swap line, and the IMF's Flexible Credit Line have bolstered the ability to withstand external stress. Executive Board Assessment Executive Directors generally agreed with the thrust of the staff appraisal. They commended the authorities for taking timely action to mitigate the impact of the pandemic on peoples' health and the economy, and for maintaining very strong policies and institutional policy frameworks. They noted that the economic recovery is expected to be gradual and that, against the backdrop of considerable risks and uncertainty over the evolution of the pandemic, the large social and economic costs are likely to persist. Directors emphasized the importance of limiting the damage from the pandemic, promoting a robust recovery, and pursuing strong, durable, and inclusive growth. Continued close engagement and dialogue between the authorities and staff on policy options will be important. Most Directors recommended a further temporary, well-communicated, and targeted near-term fiscal support, with due consideration of the country's circumstances and safeguarding medium-term fiscal sustainability. A few of these Directors cautioned that limited fiscal support could lead to greater pressure on public finances through a deeper economic contraction. A few other Directors, however, saw the authorities' stance as prudent, given the uncertain path of the pandemic. Directors generally saw the need for announcement of a credible medium-term tax reform - to be implemented once the recovery is underway—to bolster the space for providing near-term support, close fiscal gaps, lower public debt, and finance needed investment and social spending. A number of Directors suggested that the tax reform plans should be announced once a firm recovery is in place. Directors welcomed the authorities' recent steps to improve tax administration. They recommended broadening the tax base, raising subnational taxes, and reducing VAT gaps while strengthening social safety nets. They also welcomed the authorities' pension reform proposal, while urging them to consider complementary measures to mitigate labor market informality. Directors emphasized further reprioritizing public spending to promote inclusive growth by strengthening social protection and increasing public investment. They urged the authorities to revisit Pemex's business strategy and further reform its governance. Directors considered that the actions of the central bank have supported the functioning of financial markets and the economy. They noted that the flexible exchange rate has facilitated the absorption of shocks, while comfortable international reserves, access to the U.S. Federal Reserve swap line, and the Fund's Flexible Credit Line have bolstered the ability to withstand external stress. A number of Directors considered that there may be scope for further monetary policy support, while safeguarding financial stability. Many other Directors, however, supported a more cautious approach, given increased inflation and the potential tradeoffs. Directors recommended continued close monitoring of risks in the banking sector and upholding minimum regulatory and supervisory standards while using the inherent flexibility of the framework. Directors emphasized that steadfast implementation of structural reforms is key to delivering lasting improvements in investment and productivity and to reaping the benefits of the USMCA trade agreement. They urged the authorities to forcefully tackle labor market informality, advance governance and AML/CFT efforts, enhance public investment efficiency, improve access to credit, and leverage private involvement in the energy sector. Directors also encouraged consideration of a nationwide unemployment benefits system. =============== S U R I N A M E =============== REPUBLIC OF SURINAME: S&P Cuts FC Sovereign Credit Rating to 'SD' ----------------------------------------------------------------- S&P Global Ratings, on Nov. 6, 2020, lowered its long-term foreign currency sovereign credit rating on the Republic of Suriname to 'SD' from 'CCC' and its issue-level rating on the US$550 million bond due in October 2026 to 'D' from 'CCC'. At the same time, S&P Global Ratings lowered its long-term local currency sovereign credit rating and its unsecured issue-level rating on the country's US$125 million bond due in December 2023 to 'CC' from 'CCC'. S&P Global Ratings lowered its short-term foreign currency sovereign rating to 'SD' from 'C' and affirmed its short-term local currency sovereign rating at 'C'. As well, S&P Global Ratings affirmed its 'CCC' transfer and convertibility assessment. The outlook on the local currency sovereign credit rating is negative. Outlook The negative outlook reflects our opinion that Suriname could default again on its local and foreign currency debt within the next six to 12 months. S&P could lower the local currency sovereign credit rating to 'SD' if Suriname fails to make debt service payments on its local currency debt or executes a standstill agreement or distressed restructuring with bondholders. Upon completion of any bond restructuring, S&P will assign new foreign and local currency sovereign credit ratings that reflect Suriname's post-exchange creditworthiness. Rationale On Oct. 26, 2020, Suriname failed to make coupon payment on its US$550 million 9.25% bonds due in October 2026. S&P does not believe that the government will make the payment within 30 days after the due date. On Oct. 30 2020, the government announced its proposed standstill on foreign currency denominated debt service payments and that it will begin discussions with bondholders with the aim of making Suriname's foreign currency denominated debt obligations sustainable. S&P said, "Therefore, in accordance with our S & P Global Ratings Definitions, published Aug. 7, 2020, we lowered our long-term foreign currency sovereign credit rating to 'SD' and our issue-level rating on Suriname's October 2026 bond to 'D'. We expect to assign a new foreign currency sovereign credit rating and an issue-level rating to the October 2026 bond, likely in the 'CCC' category that reflects Suriname's post-exchange creditworthiness." Ratings List Downgraded To From Suriname Senior Unsecured CC CCC Senior Unsecured D CCC Downgraded; CreditWatch/Outlook Action To From Suriname Sovereign Credit Rating Foreign Currency SD/SD CCC/Stable/C Downgraded; CreditWatch/Outlook Action; Ratings Affirmed To From Suriname Sovereign Credit Rating Local Currency CC/Negative/C CCC/Stable/C Ratings Affirmed Suriname Transfer & Convertibility Assessment Local Currency CCC ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Faces Lawsuit Over Brown Sugar Imports --------------------------------------------------------- Trinidad Express reports that Caribbean Community (Caricom) member state, Belize, has initiated a lawsuit against Trinidad and Tobago and St Kitts and Nevis, claiming that the two countries have breached the Revised Treaty of Chaguaramas by failing to apply the Common External Tariff (CET) of 40 per cent on imports of brown sugar from Guatamela and Honduras. The CET is a single tariff rate agreed to by all members of the Caricom on imports of a product from outside the Community. Goods imported from third countries are subject to the duties listed in the CET but goods imported from Caricom countries, certified to be of Caricom origin do not generally attract these import duties, according to Trinidad Express. These Caricom origin goods enjoy duty-free status. In an originating application registered by the Caribbean Court of Justice on October 2, Belize is seeking a declaration that both T&T and St Kitts/Nevis breached Article 82 of the Revised Treaty of Chaguaramas, the report notes. Belize, as well, is seeking a declaration that T&T imported 3,000 metric tonnes of brown sugar from Guatemala and Honduras in 2019 in violation of Article 83 of the Revised Treaty of Chaguaramas and the revised procedures for the suspension of the CET, the report relays. The Central American country claims St Kitts and Nevis imported 1,000 metric tonnes in 2019 and is seeking a similar declaration against the twin-island federation, the report discloses. Belize is also seeking a declaration that the Caricom Secretariat, contrary to Article 83(8) of the Revised Treaty of Chaguaramas, failed to continuously review the CET on brown sugar and failed to assess the lack of implementation of the CET on production and trade within the region, the report notes. Belize is also seeking a declaration that Caricom failed to secure the uniform implementation throughout the Community of the CET on brown sugar, the report says. In addition, Belize is seeking an order directing the Secretary General of the Caricom "to urgently complete the monitoring mechanism that is designed to monitor the requests for imports of sugar into the Caribbean Single Market, and to place the same before the Council for Trade and Economic Development for its consideration and approval," the report notes. Caricom's only Central American member, as well, wants the CCJ to order the Caricom Secretariat "to report on the adoption of the said monitoring mechanism to this Court within three months from the date hereof," the report discloses. Belize is also seeking an order that both T&T and St Kitts and Nevis pay it damages and that the two countries plus Caricom pay its costs, the report relays. Speaking in Belize last month, the country's Agriculture Minister, Godwin Hulse, said Belize lost significant sales of its brown sugar because importers in T&T and St Kitts and Nevis purchased the commodity from outside of Caricom market, without paying the required CET, the report says. Hulse said the country produced enough brown sugar to easily supply the region's needs, the report notes. In an e-mail responding to reports of the action taken by Belize, Trade Minister, Paula Gopee-Scoon said: "It was brought to the attention of Government officials who were in attendance at a regional meeting that Belize has filed documents to commence legal action against the Republic of Trinidad and Tobago and the Federation of St Kitts and Nevis before the Caribbean Court of Justice, the report discloses. "Belize is claiming that imports of brown sugar from Guatemala and Honduras into Trinidad and Tobago and St Kitts and Nevis have received treatment in contravention of the Revised Treaty of Chaguaramas, through the circumvention of the Common External Tariff, the report relays. "In pursuit of its claim, Belize would be required to serve the requisite documents on the Honourable Attorney General of Trinidad and Tobago, the report notes. The Ministry of Trade and Industry is not yet in receipt of the originating application and its attachments. As such, the full details of the matter are not before us at this point. Once further details are received, the Government of Trinidad and Tobago will address the matter through the relevant channels, the report discloses. "The Government of Trinidad and Tobago remains steadfast in ensuring continued compliance with the Revised Treaty of Chaguaramas," the report says. In a statement in Parliament on December 12, 2018, Prime Minister Keith Rowley said: Caricom is the major outlet for Trinidad and Tobago's manufactured products and is responsible for maintaining thousands of associated jobs and preservation of investments within Trinidad and Tobago. Caricom is our market and we must do everything reasonable to protect its existence, its health and its growth," the report notes. The statement from the prime minister came days after he hosted a special meeting of Caricom heads of government aimed at accelerating the implementation of the Caricom Single Market and Economy (CSME). ================= V E N E Z U E L A ================= EL PALITO: Refinery Resurrected for 20th Time This Year ------------------------------------------------------- The Latin American Herald reports that Venezuela keeps coping with a severe fuel and domestic gas crisis, and the delicate situation at its refineries is not helping at all. After being down due to a fire in mid-October, workers at El Palito in Carabobo state put a lot of effort to bring back to life once more the refinery despite the bad conditions of its fluid catalytic cracking unit (FCC), three people familiar with the matter told Reuters, according to The Latin American Herald. The 146,000 barrel-per-day (bpd) El Palito has stopped and restarted operations at least 20 times since April of this year and is now producing 35,000 bpd of gasoline, the sources said, the report notes. The report discloses that works have been carried out, which has implied herculean efforts to stabilize the FCC unit "producing irregular vibrations," according to testimonies compiled by local newspaper El Pitazo. El Pitazo also reported that the refinery started producing domestic gas already, the report discloses. According to a report by local daily TalCual, union leader Ivan Freites claimed that, according to data compiled by oil workers nationwide on the operation conditions of Venezuela's refineries, only Cardon (part of the Paraguaná Refinery Complex in Falcon state) has managed to restart several of its plants with no major issues this year, the report relays. "In 300 days of 2020, the catalytic and naphtha reforming units from Cardon, the only producing gasoline at present, have been up and running for only 90 days. However, that is no indication that they have produced what the country needs during that time. About 20,000 bpd have been produced during that period, while the country needs 100,000 bpd," Freites was quoted as saying, the report relays. ********* 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 * * *