/raid1/www/Hosts/bankrupt/TCRLA_Public/201130.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 30, 2020, Vol. 21, No. 239
Headlines
B R A Z I L
CCR SA: Moody's Assigns Ba2 Rating to BRL960MM Debt Issuance
OI SA: Gov't. Forgives $1.3 Billion in Debts Owed by Firm
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Establishes Index to Make Prices Transparent
DOMINICAN REPUBLIC: South Region's First Beltway Will Cost US$38.3M
H O N D U R A S
HONDURAS: Seeks International Help to Rebuild after Hurricanes
J A M A I C A
JAMAICA: All JSE Indices Declined in July-September Quarter
JAMAICA: Interest Rates Rising Again
M E X I C O
AGUAS DEL MUNICIPIO: Moody's Downgrades Issuer Ratings to Ba3
DURANGO MUNICIPALITY: Moody's Downgrades Issuer Ratings to Ba3
TOLUCA MUNICIPALITY: Moody's Downgrades Issuer Rating to Ba3
P U E R T O R I C O
PUERTO RICO AQUEDUCT: Fitch Ups Rating on $3.1B Rev. Bonds to CCC
V E N E Z U E L A
PETROLEO DE VENEZUELA: Direct Oil Shipments to China Resume
- - - - -
===========
B R A Z I L
===========
CCR SA: Moody's Assigns Ba2 Rating to BRL960MM Debt Issuance
------------------------------------------------------------
Moody's America Latina Ltda. assigned a Ba2 global scale rating and
a Aa2.br national scale rating to CCR S.A. (CCR)'s planned issuance
of BRL960 million senior unsecured debentures (14th issuance),
comprising a BRL480 million tranche (1st series) with final
maturity 2026 and a BRL480 million tranche (2nd series) with final
maturity in 2028. CCR's Ba2/Aa1.br corporate family ratings (CFR)
are unaffected by this rating action. The outlook remains stable.
RATINGS RATIONALE
The debenture's ratings incorporate its view of CCR's strong credit
quality resulting from a diversified portfolio of transportation
concessions, located in the country's most developed economic
regions. The ratings also consider the overall mature nature of its
concessions' agreements, with a solid operating track record that
supports relatively stable and predictable cash flows. As a holding
company, CCR largely depends on regular dividends up streamed by
its operating subsidiaries to meet its obligations, equity
investment commitments and potential cash requirements related to
its guarantees. Therefore, the debenture's ratings on the national
scale stand one notch lower than CCR corporate family rating,
reflecting Moody's view of structural subordination, which is based
on the relative indebtedness at the holding compared to that of its
operating companies and expected cash availability to service the
debt. The global scale rating is constrained by the sovereign
rating (Government of Brazil, Ba2 stable) given the company's
regional operational profile with regulated revenues that are
highly correlated to the country's GDP.
The proposed debentures will have cross default provisions with
other outstanding debt from the company among other acceleration
clauses such as change in control, bankruptcy and restriction on
dividends distribution above the minimum if consolidated financial
Net debt to adjusted EBITDA is higher than 4.5x, to be verified
annually. Proceeds from the 1st series of this issuance will be
used to strengthen the company's cash position ahead of refinancing
needs in the first quarter of 2021. The 2nd series will be issued
in the form of infrastructure debentures pursuant to law 12.431,
with proceeds to be used for reimbursement of development capital
and expenses related to the project Sistema Metroviario de Salvador
e Lauro de Freitas, located in the metropolitan area of the
Municipality of Salvador, in the State of Bahia, through the
integration between the bus and subway networks, which consists of
two subway lines with an initial extension of 32 kilometers, with
the possibility of expanding 5 kilometers for Line 1 and 3
kilometers for Line 2, according to the concession contract No.
01/2013 which is held by Companhia Metro da Bahia, a full
subsidiary of CCR.
The stable outlook takes into consideration the sharp traffic
deterioration observed in 2020 as a result of the coronavirus
outbreak and economic contraction, along with Moody's assumption
that demand will gradually recover in the next 12-18 months,
supported by the ease in social distancing measures and business
closures. Other factors related to the economic downturn that could
also pressure traffic performance include rising unemployment and
the failure of government measures to boost consumer confidence, or
a significant second wave of contagion leading to renewed social
distancing measures. Nonetheless, Moody's considers CCR has
flexibility to manage liquidity in the event of a prolonged
downturn. The stable outlook relates to Moody's expectation that
CCR's credit metrics will remain strong with adequate liquidity to
support investment requirements and debt service. The leniency
agreements performed by the company reduce but do not eliminate
potential future investigations that while unexpected, could have
material adverse consequences for the company's credit profile.
Also, the outlook does not incorporate any concession life
reduction from the ongoing regulatory disputes on contract
amendments from 2006 for some of its main concessionaires.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The debenture's national scale ratings could be upgraded if CCR
demonstrates sustained better-than-expected operational
performance, lower indebtedness at the holding level and higher
cash coverage. On the global scale, a positive rating action
depends on a similar action on Brazil's sovereign rating. A
positive rating action would also consider the concession and
regulatory frameworks in which CCR operates and the normal course
of its businesses.
On the other hand, negative pressure on CCR's senior unsecured debt
ratings would increase with Moody's perception of reduced
flexibility in the holding's ability to regularly upstream cash
from its operating subsidiaries, as a result of traffic/passenger
performance below its expectations, higher leverage driven by new
investments or lower liquidity cushion combined with more
restrictive access to the debt markets. Negative rating action on
the debentures could also result from a material increase in the
proportion of debt outstanding at the holding level combined with
sustained lower cash availability to service the its debt. A
deterioration in the sovereign's credit quality could also exert
downward pressure on CCR's ratings. Downward pressure could arise
from a significant and sustained downturn in the company's
consolidated credit metrics, such that:
-- funds from operations/debt falls below 12% (15.8% as of LTM
September 2020)
-- DSCR ratio stays below 1.3x (1.4x as of LTM September 2020)
for an extended period
Headquartered in Sao Paulo, Brazil, CCR is the holding company of
one of Brazil's largest infrastructure concession groups managing
and operating a toll road network of 3,959 km through twelve
different concessionaires with maturities ranging from 2021 up to
2050. CCR also participates in other urban mobility, airport
concessions and infrastructure services in the Americas. CCR is
controlled by the Andrade Group, Mover Group and Soares Penido
Group Concessoes Group with a combined participation of 44.8%; the
remaining 55.2% of shares are free float. According to Moody's
standard adjustments, in the last twelve months ended September
2020 the company generated BRL9.0 billion in net revenues
(excluding construction revenues) and EBITDA of BRL5.3 billion,
resulting in Net Debt to EBITDA of 3.9x and FFO to Debt of 15.8%,
respectively.
The principal methodology used in these ratings was Privately
Managed Toll Roads published in October 2017.
OI SA: Gov't. Forgives $1.3 Billion in Debts Owed by Firm
---------------------------------------------------------
Ricardo Brito at Reuters report that Brazil's government will
pardon about half of the roughly BRL14 billion ($2.6 billion) in
debt owed to it by Brazilian telecom firm Oi SA, the country's
solicitor general said.
Oi, which has been working to emerge from bankruptcy protection for
years, had accumulated gargantuan fines tied to quality of services
and other regulatory demands, making telecoms regulator Anatel one
of the company's biggest creditors, according to Reuters.
The settlement, with the remainder of Oi's government debt payable
in installments, puts an end to 1,700 ongoing court cases between
Oi and Anatel, said the solicitor general, known as AGU for its
Portuguese initials, the report notes.
About Oi SA
Headquartered in Rio de Janeiro, and operating almost exclusively
within Brazil, the Oi Group provides services like fixed-line data
transmission and network usage for phones, internet, and cable,
Wi-Fi hot-spots in public areas, and mobile phone and data
services, and employs approximately 142,000 direct and indirect
employees.
On June 20, 2016, pursuant to Brazilian Law No. 11.101/05 (the
'Brazilian Bankruptcy Law'), Oi S.A. and certain of its
subsidiaries filed for recuperao judicial (judicial
reorganization)
in Brazil.
On June 21, 2016, OI SA and its affiliates Telemar Norte Leste
S.A. and Oi Brasil Holdings Cooperatief U.A. commenced Chapter 15
proceedings (Bankr. S.D.N.Y. Lead Case No. 16-11791). Ojas N.
Shah, as foreign representative, signed the petitions.
Coop and PTIF are also subject to proceedings in the Netherlands.
The Chapter 15 cases are assigned to Judge Sean H. Lane.
In the Chapter 15 cases, the Debtors are represented by John K.
Cunningham, Esq., and Mark P. Franke, Esq., at White & Case LLP,
in New York; and Jason N. Zakia, Esq., Richard S. Kebrdle, Esq.,
and Laura L. Femino, Esq., at White & Case LLP, in Miami, Florida.
On July 22, 2016, the New York Court recognized the Brazilian
Proceedings as foreign main proceedings with respect to the
Chapter 15 Debtors, and granted certain additional related relief.
As reported in the Troubled Company Reporter-Latin America on
Oct. 20, 2020, S&P Global Ratings raised its global and national
scale issuer credit ratings on Brazil-based telecom operator Oi
S.A. to 'CCC+' and 'brBB', respectively, from 'SD' to reflect the
completion of the JRP amendment and the ongoing risk of a
conventional default.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Establishes Index to Make Prices Transparent
----------------------------------------------------------------
Dominican Today reports that the Ministry of Agriculture published
an announcement in the media, showing a price index for
agricultural products.
In this regard, the Public Relations Department of the state entity
told Listin Diario that this information is intended to make the
cost of some items transparent, according to Dominican Today.
The director of Communications of the ministry, Erick Montilla,
indicated that because there is some misinformation in the
distribution chain, the authorities have wanted to take to the
citizens through a price list, the value suggested by the
authorities, the report notes.
"We want to know what the recommended price is after an analysis by
Agriculture of how that product should arrive after passing through
the distribution chain. This will serve the population in case it
finds a higher cost in formal stores and thus have a defense," said
Montilla. He added that the price index's objective is for
citizens to defend themselves and for the agricultural authorities
to offer the actual price of the items, the report relays.
"It is not that we want a product that leaves the farm at RD$10 to
reach the grocery store at that price, but neither do we want it to
reach RD$50. That is why we are giving an estimate," explained
Montilla, 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).
DOMINICAN REPUBLIC: South Region's First Beltway Will Cost US$38.3M
-------------------------------------------------------------------
Dominican Today reports that the Public Works Ministry began the
construction for the Bani beltway at a cost of RD$2.2 billion
(US$38.3 million), "which will contribute to the economic, social
and tourism development of the provinces of the South Region."
Public Works Minister Deligne Ascencion said the beltway is set to
be completed before yearend 2021, "since it reinforces the
guarantees that the Government is committed to the interests of the
citizens, and that it will give continuity to the works that the
Dominican population has demanded for many years," according to
Dominican Today.
He guaranteed that the work will not stop due to a lack of
resources, since the funds are contemplated in the 2021 Budget, the
report notes.
He added that the Bani beltway will be approximately 19.60
kilometers in length, 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).
===============
H O N D U R A S
===============
HONDURAS: Seeks International Help to Rebuild after Hurricanes
--------------------------------------------------------------
The Latin American Herald reports that Honduras needs "external
funds" to restore vital infrastructure after being battered by two
hurricanes in the space of two weeks, an official of the country's
investment-promotion agency said.
It will require a minimum of 12 billion lempiras ($487 million) to
address the damage done by Hurricanes Eta and Iota, Invest-H
Commissioner Gustavo Boquin said, according to The Latin American
Herald.
The storms destroyed 45 bridges across the Central American nation
and left 55 others damaged, along with hundreds of kilometers of
roadway, he said, the report note.
"This is a never-before-seen catastrophe," he aded.
Invest-H's $182.5 million annual budget is insufficient to cope
with the emergency, meaning that Honduras must obtain financing
from abroad in the form of aid or loans, Boquin said, the report
relay.
More than 3.5 million of the country's 9.6 million inhabitants have
been affected by the powerful storms and the devastation of basic
infrastructure has crippled the coffee sector, producers of
Honduras' chief export, the report discloses.
All but 39 of 224 municipalities where the bean is grown are
effectively isolated as the roads serving those areas are
impassable, according to the Honduran Coffee Institute (Ihcafe),
the report relays.
Flooding has slashed coffee output by up to 7.17 million kg (15.8
million lbs.) and rendered as much as 4,199 hectares (10,370 acres)
of land unsuitable for cultivation in the next growing season,
Ihcafe said, the report relays.
Boquin said that Invest-H will prioritize road repair in the
coffee-growing areas, "taking into account that if the production
fails, $1 billion in exports are jeopardized," the report notes.
"The first package of 1,400km (870mi) is identified, for which
companies have begun to mobilize equipment to begin immediately
with the repair, while attention will start with the second package
of 1,600 (km)," he added.
More than a week after Iota lashed Honduras with high winds and
torrential rains, thousands of people are still in shelters while
thousands more wait for help in communities cut off by flooding,
the report discloses.
In the northern city of San Pedro Sula, the country's business hub,
Ramon Villeda Morales International Airport remains closed, the
report relays.
The Consultative Council, created in the wake of the hurricanes to
advise the government on reconstruction, said that it will function
with complete independence and that it wants to hear from all
sectors of society, the report says.
"The Council will not administer funds or projects, will not award
contracts or make financial assignations," the body said in a
statement obtained by the news agency.
Comprised of former officials and civil servants, the Council said
it will formulate a proposal for reconstruction based on a detailed
damage appraisal carried out by experts from the UN Economic
Commission for Latin America and the Caribbean, the report relays.
Resources will be used in a "transparent, efficient, sustainable"
manner in pursuit of "measurable results" that improve "the
conditions of life and well-being in Honduras," the Council added.
=============
J A M A I C A
=============
JAMAICA: All JSE Indices Declined in July-September Quarter
-----------------------------------------------------------
RJR News reports that the Bank of Jamaica (BOJ) says that all the
Jamaica Stock Exchange (JSE) indices recorded declines during the
July to September quarter.
It ranged between -3.3 per cent and -0.9 per cent, according to RJR
News .
The central bank's quarterly monetary policy report shows that the
JSE Main Index decreased by 0.9 per cent versus an increase of 1.2
per cent during the previous quarter, the report notes.
It says the weak performance in the equities market for the July to
September quarter, largely reflected low investor interest due to
continued uncertainty about the prospects for the economy, given
the COVID-19 pandemic, the report relays.
This uncertainty was also reflected in the continued depreciation
in the Jamaican dollar to the US currency, the report discloses.
Returns on foreign currency investments were higher than returns on
the stock market, the report relays.
Returns on foreign currency investments yielded quarterly returns
of 2.5 per cent for the review quarter, while equities offered a
return of minus 0.9 per cent, the report notes.
Notwithstanding the decline in the JSE Main Index, the results for
stock market activity indicators were mixed during the July to
September quarter, the report says.
The value and number of transactions increased by 0.8 per cent and
2 per cent, respectively, the report discloses.
However, the volume of transactions decreased by 4.2 per cent for
the quarter, relative to an increase of 16.2 per cent in the June
quarter, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica
is an upper-middle income country with an economy heavily
dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
Standard & Poor's credit rating for Jamaica stands at B+ with
negative outlook (April 2020). Moody's credit rating for Jamaica
was last set at B2 with stable outlook (December 2019). Fitch's
credit rating for Jamaica was last reported at B+ with stable
outlook (April 2020).
As reported in the Troubled Company Reporter-Latin America,
Fitch's
revision of Jamaica's outlook in April 2020 to Stable from
Positive
reflects the shock to Jamaica from the coronavirus pandemic, which
is expected to lead to a sharp contraction in its main sources of
foreign currency revenues: tourism, remittances and alumina
exports.
JAMAICA: Interest Rates Rising Again
------------------------------------
Jamaica Oberver reports that interest rates are on the rise again
based on the latest Quarterly Credit Conditions Survey Report
published by the Bank of Jamaica (BOJ).
The survey showed that for the June review, quarter interest rates
on new local currency loans rose by approximately 23 basis points
(bps) to 15.83 per cent, relative to the previous March quarter.
This reflected a growth of 30 bps in rates for business loans,
while there was a decline of 2 bps in the rates for personal loans,
according to Jamaica Oberver .
Basis points refer to a common unit of measure for interest rates
and other percentages in finance. Respondents to the survey, which
are mostly financial institutions, pointed to higher interest rates
on business loans, which were primarily reflected in loans to micro
and large-sized firms, the report notes.
In the latest Quarterly Credit Condition Survey Report, respondents
indicated that the higher rates reflected their attempt to manage
risk. Similarly, the average indicative interest rate on new
foreign currency loans rose by 10 bps to 7.42 per cent, which
reflected higher rates to medium and large-sized businesses, the
report discloses.
Reducing Interest Rates for September Quarter
For the September 2020 quarter, lenders reported that they plan to
reduce interest rates on new local currency loans by 105 bps to
14.78 per cent and further reduce rates by 2 bps to 14.76 per cent
for the December 2020 quarter. The reduced rates are expected to be
applied to loans to micro and medium-sized businesses, the report
notes.
For foreign currency loans, respondents indicated their intention
to increase loan rates in the September 2020 quarter by 47 bps to
7.89 per cent and will carry through to the December 2020 quarter.
The increase is expected to affect mainly small, medium and
large-sized businesses, the report discloses.
Decline in Credit Availability
The report showed that there was an overall decline in the
availability of credit to borrowers during the June 2020 quarter.
This was evidenced by a contraction in the Credit Supply Index
(CSI), which went down to 98.3 points, Jamaica Observer relays.
This contraction was evident in the supply of credit to businesses
but there was also no growth in the supply to individuals.
According to the BOJ report, "the contraction in the supply of
local currency credit made available to businesses was reflected in
all industries. Some lenders indicated that the increased risk
posed by the COVID-19 pandemic forced them to reduce available
credit," the report notes.
Lenders indicated that they plan to increase credit availability
for the September and December 2020 quarters. The allocation of
credit to businesses for the June 2020 quarter declined relative to
personal loans, the report discloses.
In relation to the business portfolio, there was an increase in the
share allocated to large-sized firms. Notably, large businesses
continued to account for the largest share of the portfolio at end
June, the report says.
Growth in Credit Demand Declined
The growth in credit demand, as measured by the Credit Demand Index
(CDI), declined for the June 2020 quarter, relative to the March
2020 quarter. The CDI for the quarter was 91.0 points relative to
92.3 points in the previous quarter, the report notes.
The decline in credit demand reflected a significant fall-off in
demand for personal loans, while demand by businesses increased.
The increased demand by businesses was in part due to challenges
with cash flow as well as increased loan promotion as many lenders
advertised various business support products, mainly to micro-sized
firms which were the main drivers for the increased demand, the
report says.
The acceleration in the growth in credit demand by businesses in
the review quarter was reflected in an increase in the growth in
demand for local currency loans particularly evident in agriculture
& fishing, construction, tourism, distribution, professional &
other services and entertainment, the report relays.
In contrast, there was a deceleration in the demand for foreign
currency loans, which was mostly evident in the agriculture &
fishing, mining & quarrying, transport, tourism, professional &
other services, electricity, gas & water and entertainment
industries. For the September and December 2020 quarters, lenders
surveyed indicated that they expected an increase in the overall
demand for credit, particularly by individuals and to a lesser
extent by micro, small and medium-sized businesses, the report
notes.
This reflected respondents' optimism regarding the country's
economic recovery as well as an expected uptick in the demand
because of the holiday period, the report adds.
The BOJ's Credit Conductions Survey Report is conducted online on a
quarterly basis among commercial banks, building societies, bear
banks, credit unions and development banks. It is designed to
elicit qualitative information on changes in the demand and supply
of credit to various types of businesses as well as individuals,
the report relays.
The report explores the main factors underpinning these reported
changes, including price and non-price lending terms and other
credit market developments, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica
is an upper-middle income country with an economy heavily
dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
Standard & Poor's credit rating for Jamaica stands at B+ with
negative outlook (April 2020). Moody's credit rating for Jamaica
was last set at B2 with stable outlook (December 2019). Fitch's
credit rating for Jamaica was last reported at B+ with stable
outlook (April 2020).
As reported in the Troubled Company Reporter-Latin America,
Fitch's
revision of Jamaica's outlook in April 2020 to Stable from
Positive
reflects the shock to Jamaica from the coronavirus pandemic, which
is expected to lead to a sharp contraction in its main sources of
foreign currency revenues: tourism, remittances and alumina
exports.
===========
M E X I C O
===========
AGUAS DEL MUNICIPIO: Moody's Downgrades Issuer Ratings to Ba3
-------------------------------------------------------------
Moody's de Mexico S.A. de C.V. downgraded the issuer ratings for
Aguas del Municipio de Durango (AMD) to Ba3/Baa1.mx from Ba2/A2.mx
and maintained a negative outlook.
RATINGS RATIONALE
The rating action to downgrade AMD's issuer ratings and to maintain
the negative outlook follows the downgrade of the Municipality of
Durango's issuer ratings to Ba3/Baa1.mx and the maintenance of the
negative outlook.
AMD has strong operating and financial linkages with the
Municipality of Durango as it has a clear public mandate to provide
essential water and sewage services. Long-term debt of AMD is
guaranteed by the municipality, and a potential default would
greatly damage the support provider's reputation. Moody's believes
that the municipality of Durango would act in a timely manner to
address any liquidity pressures that the water company may face. As
such the credit quality of AMD reflects that of the Municipality of
Durango.
AMD's liquidity has been significantly low, registering an average
of 0.07 times (x) the cash to current liabilities from 2017-19. To
cover the liquidity needs, the entity has been making a recurrent
use of short-term debt since 2017 for MXN 12 million. Moody's
expects that AMD will continue to rely in short-term debt in 2021,
exerting additional negative pressure in its liquidity, the one
Moody's projects to be of 0.03x the cash to current liabilities in
2020-21, given the higher financing requirements expected. The
company's total debt is low at 7.6% of total revenues, and Moody's
expects it will maintain similar levels in 2020-21, around 6% of
total revenues.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook for AMD reflects the negative outlook assigned
to its supporting government.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Environmental considerations are not material to AMD's credit
profile. AMD is exposed to climatic phenomena such as prolonged
periods of drought; however, these risks are not material for the
ratings given the strategic role that the utility plays and the
support from the Municipality of Durango.
Social risks are not material to AMD's credit profile, given the
strategic role that the water company plays and the support from
the Municipality of Durango. The water company is responsible for
the basic service of supplying drinking water and sewerage and
sanitation, and receives financial support from the municipality of
Durango. Additionally, Moody's sees the coronavirus pandemic as a
social risk due to the substantial implications for health and
public safety and the risk of a further spread of the outbreak in
the municipality.
Corporate governance considerations are material to AMD's credit
profile, and capture the close institutional, operational and
financial ties between the water company and the municipality of
Durango, in conjunction with weak financial results and a tight
liquidity reflecting weaker AMD's financial flexibility.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the strong linkages between the AMD and its support provider,
and upgrade or downgrade of the Municipality of Durango would
likely lead to an upgrade or downgrade of the water utility.
Additionally, given the weakening liquidity of Durango, should
evidence arise that it will be unable to support AMD in a period of
acute liquidity pressure, the strength of the relationship between
Durango and AMD could weaken. This could result in a decoupling of
AMD's rating from that of Durango.
The methodologies used in these ratings were Regional and Local
Governments published in January 2018.
DURANGO MUNICIPALITY: Moody's Downgrades Issuer Ratings to Ba3
--------------------------------------------------------------
Moody's de Mexico S.A. de C.V. downgraded the issuer ratings for
the Municipality of Durango to Ba3/Baa1.mx from Ba2/A2.mx,
downgraded its baseline credit assessment (BCA) to ba3 from ba2 and
maintained a negative outlook.
RATINGS RATIONALE
The downgrade of the BCA to ba3 from ba2 and issuer ratings to
Ba3/Baa1.mx from Ba2/A2.mx reflect the continued deterioration in
the municipality's liquidity, in conjunction with the increased use
of short-term debt and weaker gross operating and cash financing
balances. Moreover, the municipality's financial profile is
constrained by large financial contingencies related to the
termination of a PPP contract that the municipality acquired in
2018 to change the public lighting which results in an elevated
debt burden (58.7% of operating revenues in 2019).
Over 2018-19 the municipality's liquidity registered a significant
deterioration, averaging 0.35 times (x) cash to current liabilities
across both years but reaching a historical minimum of 0.20x at the
end of 2019. This contrasts with the average of 1.34x registered
from 2015-17. In Moody's opinion, the draw on liquidity reflects a
weakening in management practices, which will be further challenged
in the current operating environment. In addition, Moody's expects
that the liquidity will remain tight in 2020-21, at an average of
0.29x, as a result of weaker gross operating and cash financing
balances expected to arise in the coronavirus pandemic environment.
To cover its liquidity needs, the municipality has contracted a
short-term loan for of MXN 50 million in 2020, an amount that
Moody's expects Durango will acquire again in 2021 due to continued
weak operating balances.
Moreover, the municipality terminated a PPP acquired in 2018 to
change the public lighting. Although the municipality is currently
negotiating the terms and conditions of this PPP, the termination
of the concession would cost around MXN 1.2 billion or 51% of
operating revenues. Moody's considers that if the municipality
fails to achieve a favorable agreement regarding the public
lighting concession, a higher payment could result in further
deterioration of liquidity.
For 2020-21 Moody's expects that Durango's gross operating and cash
financing balances will deteriorate as the result of lower own
source revenues collection as well as lower federal transfers, to
average levels of 0.7% of operating revenues and -0.1% of total
revenues respectively.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook reflects the elevated risk that, given the
difficult operating environment resulting from the coronavirus
pandemic, operating results could be lower than currently
forecasted resulting in further deterioration of liquidity or an
increase in short-term debt.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Environmental considerations are not material to Durango's ratings.
Despite a certain exposure to natural disasters, the federal
government has a history of support which minimizes credit
impacts.
Social considerations are not material to Durango's ratings.
Durango is the capital city of the state of Durango and provides an
adequate supply of services to its inhabitants. Their
marginalization index is very low, based on the CONAPO. However,
under Moody's ESG assessment, the covid-19 pandemic is considered
as a social risk due to the substantial implications in terms of
employment, health as well as in the own source revenues
collection.
Governance considerations are material to Durango's ratings. The
institutional framework is in line with other Mexican RLGs (Mexican
Financial Discipline Law and the National Accounting Harmonization
Council). However, the municipality has historically evidence weak
governance, especially in terms of transparency, disclosure and
management. These weaknesses are already captured in Durango's
current ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlook, the ratings could experience additional
downward pressure if the municipality's liquidity continues to
deteriorate and their reliance on short-term debt increases.
Additionally, should the municipality achieve a termination
agreement with the provider of public lighting services that is
less favorable than current expectations, downward pressure could
arise. In contrast, the ratings outlook could be stabilized if the
liquidity of the municipality improves and the municipality reaches
a favorable agreement regarding the public lighting concession.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2018.
TOLUCA MUNICIPALITY: Moody's Downgrades Issuer Rating to Ba3
------------------------------------------------------------
Moody's de Mexico S.A. de C.V. downgraded the issuer ratings for
the Municipality of Toluca to Ba3/Baa1.mx from Ba2/A2.mx,
downgraded its baseline credit assessment (BCA) to ba3 from ba2 and
maintained a negative outlook.
RATINGS RATIONALE
The downgrade of the BCA to ba3 and issuer ratings to Ba3/Baa1.mx
reflect the municipality's sharply deteriorating liquidity position
and its growing dependence on short-term debt amid a significant
weakening in operating performance.
Toluca's ratio of cash/current liabilities dropped to 0.17x in 2019
from 0.66x the previous year, and remains weak at 0.2x as of
September 2020, versus 1.9x in the same month a year earlier.
Liquidity pressure is being driven by operating deficits and has
resulted in the use of short-term debt to cover liquidity needs for
the first time in years. Toluca will have to liquidate all
short-term loans by September 2021, three months before a change of
administration, in compliance with the Financial Discipline Law for
States and Municipalities, which will likely put added pressure on
its cash position. Moody's projects Toluca's ratio of cash/current
liabilities will remain very low, between 0.14x and 0.15x in 2020
and 2021, providing a very small cushion to absorb shocks.
Toluca reported its first negative gross operating balance in 2019
in more than five years as operating spending jumped a high 26%,
driven in part by security spending to expand its police force and
its fleet of police patrols. Spending pressures have not abated in
2020 with operating costs continuing to climb in 2020 despite a 9%
drop in own-source revenue in the first nine months of the year.
The municipality aims to reduce security spending in 2021 to
contain its deficit, though revenue pressures will persist as
non-earmarked transfers (participations), which account for 55% of
the municipality's operating revenue, are forecast to decline next
year. In addition, the municipality recently signed an agreement to
settle past-due payments to the state pension system (ISSEMYM) and
is covering debts for the municipal water company. These payments
will further limit financial flexibility.
Moody's estimates Toluca will report widening gross operating
deficits of between 7-9% of operating revenue in 2020 and 2021.
Nonetheless, overall debt levels will remain low. Toluca recently
made the final payment on its previous balance of long-term debt,
and doesn't currently have concrete plans to contract new long-term
loans during 2020 and 2021.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook reflects expectations that widening operating
deficits will continue to pressure liquidity, and that the
municipality's cash position will likely decline further in 2021 as
it will be required to pay off all short-term loans.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
If Toluca implements cost controls and substantially grows its
own-source revenue, resulting in balanced operating results that
support a strengthening of liquidity, the outlook could be
stabilized. Conversely, if the deterioration in liquidity is
greater than expected, especially if cash balances fall below
short-term debt balances, the ratings could be further downgraded.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Environmental considerations are not material to Toluca's ratings.
Social considerations are material to Toluca's ratings. The
municipality has faced rising levels of violence and security
spending remains a source of financial pressure. In addition, the
coronavirus outbreak is a social risk given its significant public
health implications, though the pandemic response is generally
funded by the state and federal governments.
Governance considerations are material to Toluca's ratings. The
municipality generally complies with the institutional framework
determined by national legislation for all state and municipal
governments. However, Toluca's deteriorating operating balances,
declining liquidity and dependence on short-term borrowing reflect
poor planning and budget management.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2018.
=====================
P U E R T O R I C O
=====================
PUERTO RICO AQUEDUCT: Fitch Ups Rating on $3.1B Rev. Bonds to CCC
-----------------------------------------------------------------
Fitch Ratings has upgraded the following Puerto Rico Aqueduct and
Sewer Authority (PRASA) bonds to 'CCC' from 'CC':
-- Approximately $3.1 billion in outstanding senior lien revenue
bonds, series A, B, 2012A and 2012B (the senior lien bonds);
-- Approximately $285 million in outstanding revenue refunding
bonds, series 2008A and 2008B (guaranteed by the Commonwealth of
Puerto Rico) (the 2008 subordinate lien bonds).
Fitch has also assigned an Issuer Default Rating (IDR) to PRASA of
'RD'.
ANALYTICAL CONCLUSION
The upgrade to 'CCC' from 'CC' on the bonds reflects PRASA's
ongoing improvement in eliminating forecast deficits in its latest
certified financial plan dated June 29, 2020 (the CFP), but also
the deeply speculative-grade rating factors that default remains a
real possibility. The CFP now includes the savings of around $40
million per year resulting from the reprogramming of the federal
state revolving fund (SRF) loans and Rural Development, Rural
Utilities Service program (RUS) bonds completed on July 26, 2019,
as well as additional revenues from PRASA's latest rate action
effective at the beginning of the fiscal year.
The 'RD' IDR reflects the water and sewer system's (the system)
strained financial profile that has resulted in a restricted
default in repayment of PRASA's obligations related to the PFC
Superaqueduct commonwealth supported obligations (the PFC
obligations, $163 million outstanding) and GDB Debt Recovery
Authority loan (the GDB loan, which was recently settled), although
non-payment for these obligations is not considered an event of
default under the master agreement of trust (MAT). The ratings also
factor in asymmetric additive risks as a result of PRASA's
relationship with the Commonwealth of Puerto Rico (the
commonwealth) whereby PRASA's operations historically have been
subject to negative impacts as well as from lack of transparency
given the delays in PRASA's filing of its fiscal 2018 and 2019
financial statements and accompanying operational disclosures.
The system's financial profile, assessed at 'bb' (Fitch's lowest
assessment level), is characterized by elevated leverage
(represented as net adjusted debt to adjusted funds available for
debt service) with a neutral liquidity profile. Leverage was 13.6x
in fiscal 2017 (the latest available audited information), but
trended downward to an estimated 10.6x for fiscal 2020 based on
information provided by PRASA in its public disclosures. PRASA's
CFP continues to identify significant financial needs over the next
five fiscal years (through fiscal 2025) to balance operations,
although the gap has narrowed somewhat over the last few years from
over $1.8 billion in the August 2018 revised financial plan (the
2018 RFP) to the current $1.7 billion. Further, identified
initiatives for PRASA to pursue in the CFP essentially closes the
gap of financial needs, whereas the prior financial plans pointed
to significant deficits even with identified initiatives, including
the 2018 RFP's ending financial need of over $645 million.
To address the currently identified projected financial shortfall,
PRASA has listed 11 specific areas that affect both income and
expenses. Based on these initiatives, PRASA's currently identified
adjusted financial need amounts to $96 million, of which available
monies in PRASA's current expense fund is expected to be sufficient
to meet the shortfall. The primary components of PRASA's currently
identified initiatives include a continuation of moderate annual
rate increases, expected to generate $908 million in additional
revenues over the forecast horizon, and $421 million in new federal
funds for capital, which include a combination of grants and loans
from the SRF program and RD loans. The nine remaining initiatives
range in total impact from $3 million to $55 million.
Importantly, PRASA has indicated in the CFP that it intends to pay
the senior lien and 2008 subordinate bonds according to their
stated terms. Consequently, the CFP does not contemplate the need
for any additional debt restructuring beyond the reprogramming of
the SRF loans and RD bonds that occurred in 2019. Fitch notes,
however, that the CFP does not include any monies for repayment of
obligations related to the PFC obligations or GDB loan, which are
considered in Fitch's analysis of the IDR given their inclusion on
PRASA's balance sheet even though failure to pay does not
constitute an event of default under the MAT; PRASA made a $20.5
million payment on Nov. 20, 2020 to settle all claims related to
the GDB loan.
Apart from the improvement in the financial projections over the
last few years, PRASA's cash balances have trended higher as well.
Cash balances as of Sept. 30, 2020 were a sound $809 million
compared with just $324 million at Nov. 30, 2017. Finally, PRASA's
financial position may improve further based on negotiations
currently underway to refund most of the senior lien and 2008
subordinate bonds for interest savings. The transaction, which is
expected to be privately placed, is anticipated to provide level
savings without extension of the debt maturity.
Fitch does not notch between the senior lien bonds and the 2008
subordinate bonds as it does not believe there is a meaningful
difference in the probability of payment default between the senior
lien bonds and the 2008 subordinate bonds given around 95% of
PRASA's debt obligations are senior lien in nature.
CREDIT PROFILE
PRASA provides water service to almost the entirety of the
commonwealth, but provides sewer service to only around 60% of the
population. The service area population is around 3.2 million
residents, and PRASA also serves a significant number of annual
visitors to the island (around 5.2 million in 2019). Due to the
size and topography, the island is divided into five service
territories, each of which is managed by an executive director.
There are no growth pressures. Concentration has also been
limited.
Overall, PRASA operates a fragmented and largely localized supply
of water sources, treatment plants, and collection and delivery
systems that have been developed on a community level and with
irregular funding over the decades. Illustrating the complexity of
system assets, which is much greater than other comparable U.S.
utilities of its size, PRASA owns and operates over 110 water
treatment plants, over 50 wastewater treatment plants, around 3,800
ancillary facilities (ie storage tanks, pump stations and wells),
eight regulated dams and over 20,000 miles of pipelines.
System operations are subject to federal regulatory laws
administered by the U.S. Environmental Protection Agency (EPA) as
well as local statutes administered by various commonwealth
agencies. Over the past several decades, PRASA has been cited for
numerous regulatory violations, the extent of which has led to
millions of dollars in fines as well as various consent decrees and
a settlement agreement (collectively, the CDs) between PRASA and
regulators. The CDs stipulate strict milestones for completion of
numerous projects and processes related to essentially all aspects
of the authority's operations and outline penalties in the event of
non-performance. PRASA currently estimates that the total costs of
compliance with the CDs (including costs since inception and
projected through fiscal 2026) will be over $1.7 billion.
KEY RATING DRIVERS
Revenue Defensibility 'bb'
Struggling Service Area and High Rates
Revenues are derived from PRASA's exclusive right to provide water
and sewer service to the island. However, service area
characteristics are weak and utility costs are high for an
exceedingly large percent of the population.
Operating Risks 'bbb'
Low Operating Costs, Sizeable Capital Needs with Execution
Difficulty
Historical production costs have been low and asset life cycle has
been moderate. However, identified capital needs are large and
execution of projects has been hampered, particularly due to
PRASA's historic reliance on borrowed resources and limited access
to capital in recent years. Consequently, there is an asymmetric
risk factor with regards to the ultimate capital costs and
perceived difficulties in ensuring sufficiency of service.
Financial Profile 'bb'
Elevated Leverage, Neutral Liquidity
System leverage levels are high, although leverage has declined
somewhat over the last few years based on publicly available
information. The liquidity profile is considered neutral to the
assessment.
ASYMMETRIC ADDITIVE RISK CONSIDERATIONS
Asymmetric additive risks exist as a result of the commonwealth's
historic influence of PRASA, which have negatively affected PRASA's
operations. In addition, published audited financial results have
been delayed, although public disclosures provide a good deal of
clarity as to PRASA's current position.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Improvement in the IDR as the bond ratings are limited to no
more than three notches above the IDR pursuant to Fitch's
criteria;
-- Publication of late financial audits and ongoing timely
release of financial audits that validate unaudited figures and
point to PRASA's ability to continue as a going concern;
-- An actual and projected leverage ratio closer to 5.0x on a
sustained basis in Fitch's base and stress case, assuming stability
in the revenue defensibility and operating risks assessment;
-- Improvement in capital funding and execution could lead to an
upward revision of the Operating Risks assessment;
-- Improvement to the service area characteristics could lead to
an upward revision of the Revenue Defensibility assessment.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Expanding forecasted shortfalls in PRASA's financial
projections;
-- Restructuring or failure to pay senior lien and series 2008A
and 2008B revenue refunding bonds according to their stated terms.
SECURITY
The senior lien bonds are secured by a gross lien of all authority
revenues related to PRASA's system, as defined in the MAT, senior
to all other debt or expenses of PRASA.
The 2008 subordinate bonds are payable from system revenues
subordinate to all PRASA obligations except commonwealth supported
obligations and obligations payable from surplus revenues. The 2008
subordinate bonds are further secured by a guaranty of the
commonwealth. Currently, the commonwealth guaranty provides no
rating enhancement.
REVENUE DEFENSIBILITY
Revenue defensibility is very weak, assessed at 'bb'. All revenues
are derived from services or business lines exhibiting monopolistic
characteristics and PRASA's board has the independent legal ability
to increase service rates without external approval. However, the
service territory has experienced weak demographic trends over the
last several years. While the customer count was stable through
fiscal 2017 (the last available information), median household
income is currently around one-third that of the U.S. and poverty
rates are over 3x the national norm. Employment has also been
strained by continuous annual declines in the labor force and
persistently high unemployment that has typically been over 2x the
national rate, although the September 2020 unemployment rate of
9.3% was only a few degrees higher than the 7.7% U.S. figure.
Monthly user charges in fiscal 2017 totaled around $53 (assuming
Fitch's standard usage of 7,500 gallons per month [gpm] of water
and 6,000 gpm of sewer flows), considered unaffordable for over 60%
of the population. However, PRASA reports that the average
residential consumption is only around 3,700 gallons of water per
month, which would result in a combined monthly water and sewer
charge of around $24. PRASA has implemented steady annual increases
for fiscals 2018-2021 of between 2.5%-4.5% depending on customer
class, which have added some additional pressure to ratepayers
although Fitch does not expect that affordability metrics are
significantly changed from fiscal 2017 levels. Additional steady
annual rate increases are expected at the 2.5%-4.5% levels through
the CFP's fiscal 2025 horizon, including an additional rate
adjustment already approved by the board for fiscal 2022.
OPERATING RISKS
PRASA's operating risks profile is assessed at 'bbb', with an
operating cost burden significantly below $6,500 per million
gallons (mg) of combined water production/sewer flows and a life
cycle ratio consistently below 45%. However, PRASA's long-term
capital needs to meet regulatory mandates and address other ongoing
capital needs are extensive in order to maintain the system
reliability and resiliency, which results in an asymmetric
operating risk factor.
The system's operating cost burden was very low at $3,744 per mg in
fiscal 2017, although more recent figures are not available. The
system's life cycle ratio was a moderate 38% in fiscal 2017.
However, capital spending has been severely curtailed over the last
few years as a result of PRASA's inability to access capital
markets at reasonable rates and reportedly averaged just $81
million per year from fiscal 2016-2019, well below the $400 million
average from fiscals 2005-2016.
PRASA's capital improvement program for fiscals 2020-2025 totals
$1.7 billion (almost $285 million per year) and includes $441
million in repairs associated with Hurricane Maria, $435 million
regulatory-related improvements (including costs associated with
the CDs) and $487 in renewal and replacement. Funding sources are
expected to be derived primarily from pay-go amounts and FEMA
reimbursements, with approximately 30% derived from new SRF and RD
loans. Beyond fiscal 2025, Fitch expects capital needs to remain
significantly high. Consequently, because of the level of ongoing
needs relative to PRASA's capacity to generate such capital and
execute the construction in order to maintain system reliability
and resiliency, an asymmetric factor exists that limits the
operating risks key rating driver assessment to 'bbb'.
FINANCIAL PROFILE
The financial profile is assessed at 'bb', Fitch's lowest
assessment. Net leverage ranged from 11.2x-16.3x from fiscals
2014-2017 and was 13.6x in fiscal 2017. The liquidity profile is
assessed as neutral, with fiscal 2017 coverage of full obligations
at 1.1x and the liquidity cushion equal to 159 days.
Fitch Analytical Stress Test (FAST)
The five-year forward look provided by FAST considers the potential
trend of key ratios in a base case and a stress case. The stress
case is designed to impose capital costs 10% above expected levels
and evaluate potential variability in projected key ratios. Because
PRASA's latest published financial audit is for fiscal 2017, fiscal
2018 serves as the first year of the FAST although years 1-3 of the
FAST (fiscals 2018-2020) are complete. To construct the FAST, Fitch
used the following assumptions: (a) fiscal 2018 results were
extrapolated from the 2018 RFP; (b) fiscals 2019-2020 results were
derived from fourth quarter budget to actual results for those
years; (c) fiscal 2021-2022 results were derived from the CFP and
included all proposed measures with the exception of pension
reforms and Christmas bonus elimination, based on discussions with
PRASA; (d) ending cash balances for fiscals 2018-2020 were based on
PRASA's monthly cash balance reports, excluding construction fund
balances; (e) certain assumptions were made with regards to debt
service costs and the allocation between principal and interest as
derived from the 2018 RFP, the fiscal 2019-2020 fourth quarter
results and the CFP; and (f) fiscal 2021 included a cash reduction
related to the $20.5 million agreed payment for resolution of the
GDB loan.
Using on these assumption, the base case points to leverage of
between 10.6x-11.0x for fiscals 2020-2022. The stress case points
to slightly higher leverage ranging from 10.7x-11.1x for fiscals
2020-2022. COFO in each of these years is expected at around 1.4x.
As PRASA's CFP forecast accounted for potential effects of the
coronavirus pandemic in fiscals 2021-2022, Fitch did not consider
an additional sensitized scenario specifically incorporating
pandemic-related risks.
ASYMMETRIC ADDITIVE RISK CONSIDERATIONS
PRASA's rating is negatively affected as a result of its historical
relationship with the commonwealth given the commonwealth has
influenced PRASA's implementation of rate actions in the past and
has also enacted laws over time that have negatively affected both
PRASA's revenue collections and cost structure. In addition,
PRASA's rating is negatively affected due to information quality
given the lack of publication of the fiscal 2018-2019 audits and
the accompanying filing related to operating information.
SOURCES OF INFORMATION
In addition to the sources of information identified in Fitch's
applicable criteria specified, this action was informed by
information from Lumesis.
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
PRASA has an ESG Relevance Score of 4 for water use in operations;
water utilities' financial targets for water quality, leakage, and
usage due to a high unbilled water rate, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
PRASA has an ESG Relevance Score of 4 for exposure to extreme
weather events (e.g. risk of drought and flooding) due to hurricane
and drought effects, which has a negative impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
PRASA has an ESG Relevance Score of 4 for "product affordability
and access" due to a high utility charges, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
PRASA has an ESG Relevance Score of 4 for "complexity, transparency
and related-party transactions" due to its relationship with the
Commonwealth of Puerto Rico and its instrumentalities, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
PRASA has an ESG Relevance Score of 4 for "quality and timing of
financial disclosure" due its delay in annual financial and
operating information, 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.
=================
V E N E Z U E L A
=================
PETROLEO DE VENEZUELA: Direct Oil Shipments to China Resume
-----------------------------------------------------------
Luc Cohen and Marianna Parraga at Reuters report that Venezuela has
resumed direct shipments of oil to China after U.S. sanctions sent
the trade underground for more than a year, according to Refinitiv
Eikon vessel-tracking data and internal documents from state
company Petroleos de Venezuela (PDVSA).
Chinese state companies China National Petroleum Corp (CNPC) and
PetroChina -- long among PDVSA's top customers -- stopped loading
crude and fuel at Venezuelan ports in August 2019 after Washington
extended its sanctions on PDVSA to include any companies trading
with the Venezuelan state firm, according to Reuters.
The report relays that imposition of the sanctions was part of a
push by the Trump administration to oust Venezuelan President
Nicolas Maduro, but they failed to completely halt the South
American nation's oil exports or to loosen Maduro's grip on power.
PDVSA's customers instead boosted shipments to Malaysia, where
transfers of cargoes between vessels at sea have allowed most of
Venezuela's crude to continue flowing to China after changing hands
and using trade intermediaries, the report discloses.
PDVSA, CNPC, PetroChina and Venezuela's oil ministry did not reply
to requests for comment.
Venezuela
Venezuela, officially the Bolivarian Republic of Venezuela, is a
country on the northern coast of South America, consisting of a
continental landmass and a large number of small islands and islets
in the Caribbean sea. The capital is the city of Caracas.
Hugo Chavez was president to Venezuela from 1999 to 2013. The
Chavez presidency was plagued with challenges, which included a
2002 coup d'etat, a 2002 national strike and a 2004 recall
referendum. Nicolas Maduro was elected president in 2013 after the
death of Chavez. Maduro won a second term at the May 2018
Venezuela elections, but this result has been challenged by
countries including Argentina, Chile, Colombia, Brazil, Canada,
Germany, France and the United States who deemed it fraudulent and
moved to recognize Juan Guaido as president.
The presidencies of Chavez and Maduro have challenged Venezuela
with a socioeconomic and political crisis. It is marked by
hyperinflation, climbing hunger, poverty, disease, crime and death
rates, social unrest, corruption and emigration from the country.
S&P Global Ratings, in May 2019, removed its long- and short-term
local currency sovereign credit ratings on Venezuela from
CreditWatch with negative implications and affirmed them at
'CCC-/C'. The outlook on the long-term local currency rating is
negative. At the same time, S&P affirmed its 'SD/D' long- and
short-term foreign currency sovereign credit ratings on Venezuela.
Moody's credit rating (long term foreign and domestic issuer
ratings) for Venezuela was last set at C with stable outlook in
March 2018. Meanwhile, Fitch's long term issuer default rating for
Venezuela was last in 2017 at RD and country ceiling was CC. Fitch,
on June 27, 2019, affirmed then withdrew the ratings due to the
imposition of U.S. sanctions on Venezuela.
*********
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 * * *