/raid1/www/Hosts/bankrupt/TCRLA_Public/201126.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
Thursday, November 26, 2020, Vol. 21, No. 237
Headlines
B E R M U D A
NABORS INDUSTRIES: Has $146.7MM Net Loss for the Sept. 30 Quarter
B R A Z I L
BRAZIL: Airlines Should Recover 80% of Capacity in December
BRAZIL: Private Banks Close 1,000 Branches in Pandemic
BRF SA: S&P Alters Outlook to Positive, Affirms 'BB-' ICR
MARFRIG GLOBAL: Moody's Upgrades CFR to Ba3, Outlook Stable
C H I L E
LATAM AIRLINES: PwC Chile Raises Going Concern Doubt
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: MEPyD Says Investments Must be Territorialized
DOMINICAN REPUBLIC: Saves RD$16B by Cutting 'Hidden Payrolls'
M E X I C O
MEXARREND S.A.P.I.: S&P Affirms 'B' ICR, Outlook Stable
SISTEMA DE TRANSPORTE: Moody's Withdraws Ba2 Issuer Rating
S U R I N A M E
SURINAME: Seeks to Defer Payments on $675 Million in Debt
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B E R M U D A
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NABORS INDUSTRIES: Has $146.7MM Net Loss for the Sept. 30 Quarter
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Nabors Industries Ltd. filed its quarterly report on Form 10-Q,
disclosing a net loss of $146,660,000 on $437,610,000 of total
revenues and other income for the three months ended Sept. 30,
2020, compared to a net loss of $99,631,000 on $756,639,000 of
total revenues and other income for the same period in 2019.
At Sept. 30, 2020, the Company had total assets of $5,817,308,000,
total liabilities of $4,019,058,000, and $1,359,764,000 in total
equity.
The Company said, "Our 2018 Revolving Credit Facility contains
certain covenants including, prior to Amendment No. 4 to the
facility ("Amendment No. 4"), a financial covenant requiring Nabors
to maintain net funded debt as defined in the credit facility at no
greater than 5.5 times our EBITDA over the trailing twelve months
(referred to herein as the "leverage ratio covenant").
"On September 24, 2020, we entered into Amendment No. 4 which
removed the leverage ratio covenant and replaced it with a new
covenant to maintain "minimum liquidity" (as defined in Amendment
No. 4) of not less than US$160 million. In exchange for relief
from the leverage ratio covenant, Amendment No. 4 provides the
lenders with a first lien security interest in certain drilling
rigs located in the U.S. and Canada.
"Through the date hereof we have been in compliance with all
applicable covenants under the 2018 Revolving Credit Facility.
However, the drilling and drilling related services environment,
and the impact it has had on our operations and cash flows, had
made our ability to continue to comply with the leverage ratio
covenant, had it not been amended or otherwise waived, increasingly
uncertain if these conditions were to continue into 2021, and based
on our forecasts in place as of the end of the second quarter of
2020, we believed it was possible that we would have been in
violation of the leverage ratio covenant at some point in 2021.
Failure to comply with this covenant, would have resulted in an
event of default under the 2018 Revolving Credit Facility and the
acceleration of the outstanding balance, which raised substantial
doubt about the Company's ability to continue as a going concern
throughout the twelve month period following the issuance of our
prior quarter's financial statements as of and for the three and
six months ended June 30, 2020."
A copy of the Form 10-Q is available at:
https://bit.ly/36VVtqV
Nabors Industries Ltd. provides drilling and drilling-related
services for land-based and offshore oil and natural gas wells. It
operates through five segments: U.S. Drilling, Canada Drilling,
International Drilling, Drilling Solutions, and Rig Technologies.
Nabors Industries Ltd. was founded in 1952 and is headquartered in
Hamilton, Bermuda.
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B R A Z I L
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BRAZIL: Airlines Should Recover 80% of Capacity in December
-----------------------------------------------------------
Oliver Mason at Rio Times Online reports that the air sector should
operate at 80 percent of its capacity in December compared to the
same month last year, in a pre-pandemic scenario. The projection
was presented by Brazil National Secretary.
During the social isolation period caused by the pandemic, airlines
reduced their activities by 93 percent, according to Rio Times
Online.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
Fitch Ratings affirmed on November 23, 2020, Brazil's Long-Term
Foreign Currency Issuer Default Rating at 'BB-' with a Negative
Outlook. 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). 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' negative outlook this November 2020 for Brazil reflects
the severe deterioration in fiscal deficit and public debt burden
during 2020 and persisting uncertainty regarding fiscal
consolidation prospects. Fitch expects the economy to recover
from 2021; however, uncertainty around political and policy
developments, combined with a resurgence in global coronavirus
infections, continue to cloud the outlook.
BRAZIL: Private Banks Close 1,000 Branches in Pandemic
------------------------------------------------------
Richard Mann at Rio Times Online reports that with the increase in
digital practices because of the pandemic, a trend has gained
momentum among the country's three largest private banks: the
closure of bank branches.
In 2020 alone, around 1,000 in-person service points of Itau
Unibanco, Bradesco and Santander have shut their doors, resulting
in the dismissal of 11,000 employees, according to Rio Times
Online.
This is a sharp increase over last year, when these same banks
closed 430 branches and closed 7,000 jobs, the report notes.
The goal is to cut costs and readjust the service to customer
demands, the report relays.
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.
Fitch Ratings affirmed on November 23, 2020, Brazil's Long-Term
Foreign Currency Issuer Default Rating at 'BB-' with a Negative
Outlook. 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). 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' negative outlook this November 2020 for Brazil reflects
the severe deterioration in fiscal deficit and public debt burden
during 2020 and persisting uncertainty regarding fiscal
consolidation prospects. Fitch expects the economy to recover
from 2021; however, uncertainty around political and policy
developments, combined with a resurgence in global coronavirus
infections, continue to cloud the outlook.
BRF SA: S&P Alters Outlook to Positive, Affirms 'BB-' ICR
---------------------------------------------------------
On Nov. 24, 2020, S&P Global Ratings revised its outlook on BRF
S.A. to positive from stable and affirmed its 'BB-' global scale
issuer credit and issue-level ratings and 'brAA+' national scale
issuer credit rating.
The positive outlook reflects that S&P could upgrade BRF in the
next 12 months if it is able to sustain EBITDA margins of 13%-15%,
even as grain prices rise, and if it continues to reduce leverage
despite higher capital expenditures in 2021, leading to debt to
EBITDA close to 3.0x and funds from operations (FFO) to debt above
20%, consistently.
BRF's strong branded portfolio mix benefited this year from the
increasing in-house consumption in Brazil amid the COVID-19
outbreak, offsetting the decline in the food service segment,
one-off expenses to adjust its operations to the pandemic, and
volatile export market margins. Despite still strong export volume
and margins to Asia in 2020 and expected for 2021, direct export
operations to other regions, such as to the Middle East and Africa,
will remain volatile.
BRF has also been able to quickly adjust prices to cope with grain
price inflation, along with a more conservative hedging strategy to
soften the higher cost impact. S&P forecasts consolidated EBITDA
margins in the 13%-15% range in 2020 and 2021, leading to debt to
EBITDA of 3.0x-3.5x in 2020 and close to 3.0x in 2021, and FFO to
debt consistently above 20%.
Along with stronger credit metrics, BRF's management has also
significantly improved the company's capital structure and
liquidity with the $800 million (or about R$4.4 billion) 30-year
notes and R$2.2 billion local debentures issuances, boosting
liquidity and extending its debt maturities. In our view, this will
allow BRF to better withstand commodity volatility and also to
resume expansion capex in 2021, reaching about R$4.0 billion-R$4.5
billion, according to our estimates, after almost three years of
close to maintenance level of capex of R$1.5 billion-R$2.0 billion.
Higher capex will cover higher cost of biological assets, increase
of its processed portfolio, industrial and supply efficiency
projects, and initial capex on its greenfield project in Saudi
Arabia.
In the next couple of years, S&P still expects protein trade to
benefit from ASF's impact on China's pork production. Nonetheless,
increasing supply of poultry and structural change in grain prices
should make export margins more volatile for the sector. China's
increasing poultry and large-scale pork production, replacing the
traditional backyard system, has boosted grain demand for animal
feed in the country. BRF has been able to quickly adjust prices in
domestic market, increase the valued-added products in its
portfolio, and expand export market access to cope with this
scenario.
In addition, FX depreciation has boosted export revenues, partially
offsetting the negative impact it had on foreign currency debt and
the higher costs of grain. The company also implemented a more
conservative inventory strategy with higher storage capacity that
should help it to manage cost structure and sustain margins.
Nonetheless, its ability to adjust prices and its hedging strategy
will be key to sustain cash flow.
MARFRIG GLOBAL: Moody's Upgrades CFR to Ba3, Outlook Stable
-----------------------------------------------------------
Moody's Investors Service upgraded Marfrig Global Foods S.A.
corporate family rating (CFR) to Ba3 from B1. The outlook remains
stable.
Ratings actions:
Issuer: Marfrig Global Foods S.A.
LT Corporate Family Rating: upgrade to Ba3 from B1
The outlook is stable
RATINGS RATIONALE
Marfrig's upgrade to Ba3 reflects the company's strong operational
performance and improvement in credit metrics over the past couple
of years, positive industry perspectives and adequate liquidity,
which increases its ability to weather the volatility of the beef
business. Marfrig's business profile allows it to benefit from
different market dynamics, while National Beef's large scale and
focus on the US domestic market help reduce margin volatility with
a mix of high value-added products and access to different export
markets.
The upgrade incorporates the expectation that, despite the
concentration in the beef segment, Marfrig will be able to maintain
steadier operating performance overtime. Accordingly, the company
is well-positioned to capture the positive fundamentals of the US
market and the growth in exports from South America, while higher
participation of processed foods in its mix and continuous focus on
productivity and cost-cutting will support margins.
The Ba3 rating is supported by Marfrig's scale as the second
largest beef producer globally, its good geographic footprint and
diversification in terms of raw material sourcing, which reduce
weather-related risks and animal diseases. These strengths are
balanced against the company's narrow focus in the cyclical beef
industry, which is characterized by volatile earnings. Marfrig's
credit profile is also constrained by its high debt levels, and
historically high leverage, measured by Moody's adjusted
debt/EBITDA, which reached levels above 8x in years prior to 2018,
and above 4.5x in 2018-19. Moody's expects Marfrig to maintain
leverage around current levels (3.1x in the twelve months ended
September 2020) in the next 12 to 18 months, supported by some
reduction in debt levels and liability management initiatives that
will reduce funding costs and allow for improvements in interest
coverage.
Protein producers in Brazil face increasing scrutiny of major
stakeholders related to cattle raising linked to deforestation of
the Amazon and other biomes in the country, wildfires and illegal
labor. This increases the risk of boycotts (from investors, banks
and consumers) and higher costs associated to stricter requirements
and initiatives related to cattle traceability, as well as higher
funding costs associated to those risks. As a response to these
demands, Marfrig launched this year a 10-year initiative called
"Marfrig Verde +", focusing on the traceability of cattle and
aiming at monitoring the entire cattle supply chain by 2030 both in
the Amazon and in the Cerrado biomes in Brazil. This plan is a
public commitment against deforestation throughout the company's
entire supply chain and reaffirms the 2009-Public Livestock
Commitment, through which Marfrig achieved zero deforestation in
its chain of direct suppliers. The plan's most important milestones
include the definition of specific standards and requirements for
indirect suppliers by 2022, the elimination of deforestation among
indirect suppliers in the Amazon biome by 2025 and in the Cerrado
biome by 2030. The ability to execute the plan and achieve the
targets outlined will be relevant considerations for Marfrig's
credit profile.
The stable outlook reflects its expectations that Marfrig will
present steady credit metrics in the next 12 to 18 months and
maintain an adequate liquidity cushion to weather the volatility of
the business. The outlook also incorporates its expectations that
the company will gradually reduce gross debt levels and will manage
capital spending and dividend distribution in a prudent manner,
avoiding compromising its leverage and cash flow.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upward rating movement would require Marfrig to maintain a
strong liquidity position and reduce debt levels, with leverage,
measured by Moody's total adjusted debt/EBITDA sustained below 3.0x
and interest coverage, measured by EBITA/interest expense,
improving towards at least 4.5x. An upgrade would also require
improvements in operating performance, with CFO/Debt reaching at
least 20%, and a resilient performance regardless of the underlying
cattle cycle, macroeconomic environment, and consumption and trade
patterns in key markets, in particular in the US.
Marfrig's ratings could be downgraded if the company's operating
performance weakens, its financial policy becomes more aggressive
or its liquidity deteriorates. Quantitatively, the ratings could be
downgraded if total debt/EBITDA trends towards 4x over the next
12-18 months, EBITA/interest expense falls below 3x or CFO/debt
stays below 15%. All credit metrics incorporate its standard
adjustments.
The principal methodology used in this rating was Protein and
Agriculture published in May 2019.
Marfrig Global Foods S.A. (Marfrig), headquartered in Sao Paulo,
Brazil, is the second-largest beef producer globally, with
consolidated revenue of BRL63.4 billion (around $12.5 billion) in
the 12 months ended September 2020. The company has a large scale
and is diversified in terms of operating production facilities,
with a total cattle slaughtering capacity of 31,200 heads per day
and lamb slaughtering capacity of 6,500 heads per day (including
100% capacity of National Beef) through its slaughtering plants
(including one lamb slaughtering unit) and processing facilities
located in Brazil, Argentina, Uruguay and the US. In June 2018,
Marfrig acquired the control of National Beef (through a 51%
stake), headquartered in Kansas City, Missouri, and, in November
2019, Marfrig increased its equity stake in National Beef to
81.73%.
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C H I L E
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LATAM AIRLINES: PwC Chile Raises Going Concern Doubt
----------------------------------------------------
LATAM Airlines Group S.A. filed its Form 6-K, disclosing a net loss
of $573,885,000 on $405,000,000 of revenue for the three months
ended Sept. 30, 2020, compared to a net income of $87,022,000 on
$2,591,988,000 of revenue for the same period in 2019.
At Sept. 30, 2020, the Company had total assets of $14,962,890,000,
total liabilities of $16,440,303,000, and $1,477,413,000 in total
deficit.
The audit report of PwC Chile dated November 6, 2020, states that
the Company's operations have been impacted by the COVID-19
pandemic and that the Company has stated substantial doubt exists
about its ability to continue as a going concern.
A copy of the Form 6-K is available at:
https://bit.ly/38WGJKS
LATAM Airlines Group S.A.'s main business is the air transport of
passengers and cargo, both in the domestic markets of Chile, Peru,
Colombia, Ecuador and Brazil, as well as in a series of regional
and international routes in America, Europe and Oceania. These
businesses are developed directly or by its subsidiaries in
Ecuador, Peru, Brazil, Colombia, Argentina and Paraguay. In
addition, the Company has subsidiaries that operate in the cargo
business in Chile, Brazil and Colombia. The Company is based in
Santiago, Chile.
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D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: MEPyD Says Investments Must be Territorialized
------------------------------------------------------------------
Dominican Today reports that the Economy Ministry (MEPyD) promotes
actions so that the planning of public investment projects is
formulated in the territory, aimed at satisfying the needs of the
population.
The information was offered by Economy Ministry Public Investment
director, Martin Francos, who considered that planning in the
Dominican Republic is among its challenges that most impacts the
territory, according to Dominican Today.
Francos is an economist specialized in applied macroeconomics and
financial economics, with wide experience in the area of public
finance, the report notes.
His career serves as the basis for facing the challenges posed by
the General Directorate of Public Investment, where public
investment projects prepared by non-financial public sector
institutions are approved and included in the National Budget, 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: Saves RD$16B by Cutting 'Hidden Payrolls'
-------------------------------------------------------------
Dominican Today reports that President Luis Abinader assured that
in the first 90 days of his administration, the State has saved
around RD$16 billion by reducing superfluous expenses and cutting
the "mini-payrolls," or people who get a paycheck but don't work.
His speech to render accounts for the first 100 days of management
was different from the previous, and featured a scenario in which
the president answered questions from citizens moving among them,
according to Dominican Today.
The adoption of the economic guidelines in launch of the new free
zone policy was promoted by the government with the simplification
of processes and procedures for the installation of new companies
of this type in the country, including in La Vega, San Pedro de
Macoris and las Americas, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis
Rodolfo Abinader Corona is the current president of the nation.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Standard & Poor's credit rating for Dominican Republic stands at
BB- with negative outlook (April 2020). Moody's credit rating for
Dominican Republic was last set at Ba3 with stable outlook (July
2017). Fitch's credit rating for Dominican Republic was last
reported at BB- with negative outlook (May 8, 2020).
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M E X I C O
===========
MEXARREND S.A.P.I.: S&P Affirms 'B' ICR, Outlook Stable
-------------------------------------------------------
S&P Global Ratings affirmed its 'B' global scale issuer credit
rating on Mexarrend S.A.P.I. de C.V. S&P also affirmed its
'mxBB+/mxB' national scale issuer credit ratings on the company.
The outlook on the ratings on both scales remains stable. At the
same time, S&P affirmed its 'B' issue-level rating on the company's
senior unsecured notes.
Rationale
The ratings on Mexarrend incorporate its position as one of the
largest independent leasing companies in the Mexican market,
coupled with its relatively stable operating revenue base, despite
the pandemic-induced economic shock. S&P said, "The ratings also
reflect our expectation of a modest internal capital generation,
and loan growth of about 7% for 2020 and 20% for 2021, which will
result in a RAC ratio of 8.6% on average for both years. The
ratings also point to Mexarrend's relatively high loan customer
concentration, which could erode easily asset quality metrics. Our
funding assessment of Mexarrend takes into consideration
significant concentration in a single issuance maturing in 2024.
However, we expect Mexarrend to gradually expand and diversify its
funding sources, and to diminish its refinancing risk in the next
12-18 months. Likewise, we believe the recenty approved loan from
the International Development Finance Corporation (DFC), along with
a larger number of funding sources, will allow the company to
achieve its future growth plans, while maintaining adequate
liquidity levels. Finally, Mexarrend's stand-alone credit profile
(SACP) remains at 'b'."
SISTEMA DE TRANSPORTE: Moody's Withdraws Ba2 Issuer Rating
----------------------------------------------------------
Moody's de Mexico S.A. de C.V withdrawn the Ba2 (Global Scale,
local currency) and A2.mx (Mexico's National Scale) issuer ratings
of Sistema de Transporte Colectivo Metrorrey. Moody's has also
withdrawn the negative outlook.
At the same time, Moody's withdrew the Ba1/A1.mx debt ratings of
Metrorrey's enhanced loan of MXN 1.4 billion (original face value)
from Banorte with an original maturity of 19 years. Metrorrey has
pledged 60.34% of its operating revenue and the State of Nuevo
León (Ba2/A2.mx negative) pledged 3.1% of the remaining revenue of
its debt paying trust (F/4584, Monex as trustee).
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
The methodologies used in these ratings were Enhanced Municipal and
State Loans in Mexico Methodology published in May 2019.
===============
S U R I N A M E
===============
SURINAME: Seeks to Defer Payments on $675 Million in Debt
---------------------------------------------------------
Tom Arnold at Reuters reports that Suriname's government has asked
creditors for a payment deferral on its two bonds, which total $675
million in size, in what analysts said could be a prelude to a
broader debt restructuring.
The government of the South American nation announced the launch of
a consent solicitation for its two bonds, due in 2023 and 2026, in
a statement, according to Reuters. The consent solicitation
expires on Nov. 23.
The move had been expected after Suriname said late last month that
it wanted to make use of a 30-day grace period on its dollar-bond
coupon payments due on Oct. 26 to talk to creditors about its debt
sustainability issues, the report notes.
"Assuming Suriname obtains the approval for the requests specified
in the consent solicitation, there will be a deferral of certain
interest and principal payments otherwise falling due in 2020," the
government said in the statement obtained by the news agency.
The debt service suspension will give the government breathing
space to work towards an agreement with the International Monetary
Fund on a funding program, initiate debt relief talks with certain
foreign currency creditors and help preserve foreign currency to
manage the fallout from the COVID-19 crisis, it said, the report
relays.
"The standstill buys time for the authorities to secure an IMF
program, but is likely a prelude to a more comprehensive
restructuring," Stuart Culverhouse, head of sovereign and fixed
income research at Tellimer, wrote in a note, the report discloses.
*********
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
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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.
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