/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210113.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 Wednesday, January 13, 2021, Vol. 22, No. 4 Headlines A N T I G U A A N D B A R B U D A STANFORD INT'L: Swiss Hand Over Remaining $150MM to US A R G E N T I N A CHUBUT PROVINCE: Moody's Affirms Ca Issuer & Sr. Sec. Debt Ratings B R A Z I L ALAGOAS STATE: Fitch Assigns BB- Long-Term IDRs, Outlook Negative FS AGRISOLUTIONS: $50MM Notes Add-on No Impact on Moody's B1 Rating ITAU UNIBANCO: Fitch Assigns B+(EXP) Rating to Tier 2 Notes JBS SA: Responds to Slavery Allegations on Brazil's Cattle Ranches MARFRIG GLOBAL: Fitch Assigns BB Rating to USD1BB Sr. Unsec. Notes C A Y M A N I S L A N D S ITAU UNIBANCO: Moody's Rates New USD Tier 2 Sub. Notes 'B1(hyb)' C H I L E WOM S.A.: Fitch Rates USD300MM-USD450MM Unsec. Notes BB- WOM S.A.: Moody's Gives B1 Rating to Up to $450MM Sr. Unsec. Notes D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: To Absorb Higher Fuel Prices for 2nd Week [*] DOMINICAN REPUBLIC: To Grow 4.8% in 2021 & 4.5% in 2022 J A M A I C A JAMAICA: On Track to Recover Despite Concern on New COVID Variant P U E R T O R I C O BED BATH: To Close Puerto Rico Stores Next Month V E N E Z U E L A PETROLEO BRASILEIRO: Fuel Import Group to File Antitrust Complaint - - - - - ===================================== A N T I G U A A N D B A R B U D A ===================================== STANFORD INT'L: Swiss Hand Over Remaining $150MM to US ------------------------------------------------------ John Miller and Silke Koltrowitz at Reuters report that Switzerland will return $150 million from blocked Swiss bank accounts by the end of the year to the United States to be given to victims of convicted Ponzi scheme con artist Robert Allen Stanford, the Federal Ministry of Justice said. Stanford, a former Texas financier known primarily by his middle name, was convicted of fraud by a Houston jury in 2012 in what prosecutors called a $7.2 billion fraud that lasted two decades and which was eclipsed in size only by the Ponzi scheme run by Bernie Madoff, according to Reuters. About $50 million had previously been returned, the justice ministry said, the report notes. In October, the Swiss criminal court had rejected appeals against the seizure of the assets, paving the way for the remaining $150 million to be returned by the end of December, the ministry said,, the report relays. Stanford, now serving a 110-year prison term, had stashed millions from his Antigua-based Stanford International Bank at the Swiss arm of French bank Societe Generale, which he tapped regularly to fund a fleet of private jets and a 100-foot yacht, according to U.S. District Court filings from 2012, the report recalls. "The release (of the blocked funds) became possible after the American financier Allen Stanford's fraud conviction became permanent," the Swiss justice ministry said in a statement, the report says. According to a 2012 sentencing memorandum, U.S. federal prosecutors said Stanford was a "ruthless predator" who routed $116 million in . . . proceeds "through a Swiss slush fund he controlled at Societe Generale," the report discloses. Societe Generale spent years fighting allegations that it had not adequately upheld its anti-money laundering obligations in accepting Stanford's money, Swiss court filings show, the report relates. About Stanford Group The Stanford Financial Group was a privately held international group of financial services companies controlled by Allen Stanford, until it was seized by United States (U.S.) authorities in early 2009. Domiciled in Antigua, Stanford International Bank Limited -- http://www.stanfordinternationalbank.com/-- is a member of Stanford Private Wealth Management, a global financial services network with US$51 billion in deposits and assets under management or advisement. Stanford Private Wealth Management served more than 70,000 clients in 140 countries. On Feb. 16, 2009, the United States District Court for the Northern District of Texas, Dallas Division, signed an order appointing Ralph Janvey as receiver for all the assets and records of Stanford International Bank, Ltd., Stanford Group Company, Stanford Capital Management, LLC, Robert Allen Stanford, James M. Davis and Laura Pendergest-Holt and of all entities they own or control. The February 16 order, as amended March 12, 2009, directs the Receiver to, among other things, take control and possession of and to operate the Receivership Estate, and to perform all acts necessary to conserve, hold, manage and preserve the value of the Receivership Estate. The case in district court was Securities and Exchange Commission v. Securities Investor Protection Corp., 11-mc-00678, U.S. District Court, District of Columbia (Washington). The U.S. Securities and Exchange Commission charged before the U.S. District Court in Dallas, Texas, Mr. Stanford and three of his companies for orchestrating a fraudulent, multi-billion dollar investment scheme centering on an US$8 billion Certificate of Deposit program. A criminal case was pursued against him before the U.S. District Court in Houston, Texas. Mr. Stanford pleaded not guilty to 21 charges of multi-billion dollar fraud, money-laundering and obstruction of justice. Assistant Attorney General Lanny Breuer, as cited by Agence France-Presse News, said in a 57-page indictment that Mr. Stanford could face up to 250 years in prison if convicted on all charges. Mr. Stanford surrendered to U.S. authorities after a warrant was issued for his arrest on the criminal charges. ================= A R G E N T I N A ================= CHUBUT PROVINCE: Moody's Affirms Ca Issuer & Sr. Sec. Debt Ratings ------------------------------------------------------------------ Moody's Investors Service affirmed the Ca issuer and senior secured debt ratings of the Province of Chubut. The baseline credit assessment is affirmed at ca. At the same time, the outlook has been changed to stable from negative following the restructuring of Chubut's $650 million notes. On December 16, the province of Chubut announced that it had reached the necessary consent to modify the terms of its notes due 2026. The agreement reached with bondholders entails a maturity extension to 2030 and a change in the coupon rate from a fixed 7.75% to a step-up schedule that starts at 7.24% until October 2021 and rises to 7.75% thereafter. RATINGS RATIONALE The affirmation of the ca baseline credit assessment and Ca issuer and debt ratings acknowledges the perennial idiosyncratic risks of the Province of Chubut, such as a track record of weak operating and financial results, tight liquidity, inflexible expenditure and high leverage. Since 2015, the Province of Chubut's financial performance has significantly deteriorated, mainly because of a very sharp rise in current expenses. In 2019, for instance, the province posted a gross operating deficit of 4.0% of current revenue, and a cash financing deficit of 11.5% total revenue, mainly caused by the growth in current expenses and by the lower dynamism of current revenue, which compared with the year earlier grew by 75% and 46%, respectively. As a result of the deterioration in the province's fiscal results, coupled with the severe local-currency depreciation in 2018 and 2019, Chubut increased its debt levels significantly to 75% of operating revenue in 2019 from 18% in 2014. At the same time, the ratings capture the very close economic and financial linkages that exist between Argentina's sovereign and sub-sovereign governments which, currently, ties Chubut's rating very closely to that of Argentina. Moody's notes that Argentina faces a series of macroeconomic challenges that include a weak economy now in its third year of recession, persistently high inflation bolstered by central bank funding of fiscal deficits, and heightened pressures on the exchange rate and international reserves. In Moody's opinion, until the fundamental macroeconomic problems that continue to weigh on the sovereign credit profile are addressed, capital market access will remain limited for the Argentine sub-sovereign governments leading to the elevated credit risks of Chubut. The Ca rating also takes into consideration that despite the restructuring of the $650 million notes the risk of future debt restructuring remains high because of Chubut's persistent idiosyncratic risks, the restricted market access and a challenging operating environment. While the restructuring materially eases the scheduled debt repayment for 2021 and 2022, Chubut will face debt repayments nearly equal to those faced before the restructuring by 2023, with repayments now exceeding pre-restructuring payments in 2024. RATING ACTION Province of Chubut: foreign currency issuer rating affirmed at Ca and foreign currency senior secured debt ratings affirmed at Ca, Outlook Stable from negative. RATIONALE FOR THE STABLE OUTLOOK The outlook change to stable from negative captures Moody's expectation that economic and financial pressure faced by the province will not differ materially over the next 12-18 months and therefore lead to fiscal pressure consistent with recent results. At the same time, the stable outlook incorporates Moody's expectation that bondholders will not face losses exceeding that captured in the Ca rating (a range of 35 - 65%). FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given the strong macroeconomic and financial linkages between Argentine Sub-sovereigns and the Government of Argentina, which currently carries a stable outlook, Moody's does not expect upward pressures in the near to medium term for the Province of Chubut. Nevertheless, Moody's would consider an upgrade if financing conditions stabilize and the anticipated losses to private creditors in future debt restructurings are less than currently forecast. Alternatively, a downgrade in Argentina's bond ratings and/or further systemic deterioration could exert downward pressure on the ratings. Increased idiosyncratic risks could also translate into a downgrade. Moody's would also downgrade the ratings in the event a debt restructuring results in losses greater than those reflected in the current ratings. The principal methodology used in these ratings was Regional and Local Governments published in January 2018. =========== B R A Z I L =========== ALAGOAS STATE: Fitch Assigns BB- Long-Term IDRs, Outlook Negative ----------------------------------------------------------------- Fitch Ratings has assigned the Brazilian State of Alagoas Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BB-' with a Negative Rating Outlook and Short-Term Foreign and Local Currency IDRs of 'B'. Fitch has also assigned Alagoas a National Long-Term Rating of 'AA(bra)' with Stable Outlook and assigned a National Short-Term Rating of 'F1+(bra)'. The agency assessed the state's Standalone Credit Profile (SCP) at 'b+'. Fitch has assessed the risk profile of the State of Alagoas as Weaker, reflecting a combination of four key risk factors (KRF) at Weaker and two at Midrange. The State of Alagoas' ratings reflect the combination of a weaker risk profile and 'a' debt sustainability under Fitch's rating case scenario. Alagoas' IDRs benefit from an uplift from the state's SCP of 'b+' considering the support derived from the fact that the Federal Government is a relevant creditor of the state. Intergovernmental debt represented around 70% of total debt, as of December 2019. KEY RATING DRIVERS Risk profile: Weaker Fitch has assessed the State of Alagoas´ risk profile at Weaker, reflecting the blend of four weaker and two midrange attributes on the six key risk factors, which in combination with the sovereign rating of 'BB-' resulted in a weaker profile assessment. Revenues Robustness: Weaker Brazilian states have a revenue source mostly based on tax collections and federal transfers. The State of Alagoas' proprietary revenues represented a below-average 37.9% of operating revenues in 2019, showing the State's dependency on federal transfers, which leads this factor to weaker. Revenue Adjustability: Weaker Brazilian states and municipalities have a low capacity level for revenue increase in response to downturn. There is low affordability of additional taxation given that tax tariffs are close to the constitutional national ceiling. Like other Brazilian states, Alagoas has a fairly concentrated tax base, in which the 10 largest taxpayers are responsible for around 40% of total tax collections in 2019. Expenditure Sustainability: Midrange Responsibilities for states are moderately countercyclical since the state is engaged in healthcare, education and law enforcement. The State of Alagoas presents weak control over expenditure growth prospects, considering that personnel expenditures account for more than 60% of total expenditures and also consider pension payments. However, Alagoas' operating expenditure has been increasing lower than operating revenues in the last years. Also, Alagoas does not present aggressive off-loading of investments and borrowings, also corroborating the midrange assessment. Expenditure Adjustability: Weaker Brazilian local governments suffer from a fairly rigid cost structure. As per the Brazilian Constitution, there is low affordability of expenditure reduction especially in salaries. As a result, whenever there is an unpredictable reduction in revenues, operating expenditure does not follow automatically. In addition, there is high share of inflexible costs since there is more than 90% share of mandatory and committed expenditures. Liabilities and Liquidity Robustness: Weaker There is a moderate national framework for debt and liquidity management since there are prudential borrowing limits and restrictions on loan types. The federal government guarantees all U.S. dollar-denominated debt of the states. For states, there is material off-balance sheet risk stemming from the pension system, which has been compromising around 30% of personnel expenditures on average, leading this factor to weaker. The State of Alagoas reported 36% of pension expenditure to total personnel expenditures in December 2019. Liabilities and Liquidity Flexibility: Midrange There is a framework of providing emergency liquidity support from the federal government via the granting of extended maturity over the prevalent federal debt portion. Alagoas counts with satisfactory liquidity levels since reported short-term financial obligations represent less than 75% of free cash positions, as calculated by the Brazilian national treasury. Debt Sustainability: Fitch assesses Alagoas' debt sustainability at 'a'. Fitch's rating case forward-looking scenario indicates a payback ratio (net direct risk to operating balance), which is the primary metric of debt sustainability assessment, to reach levels between 5x and 9x in 2024, corroborating with the 'aa' assessment. An override was applied considering the debt service coverage ratio (DSCR) to reach levels between 1.2x and 1.5x. The State of Alagoas is classified by Fitch as a type B LRG, which is required to cover debt service from cash flow on an annual basis. Alagoas is home to 3.3 million people, equal to approximately 1.6% of the Brazilian population, with below average socioeconomic indicators. Its revenue sources are mainly composed of transfers from the Federal Government in addition to taxes. The main spending responsibilities cover education, healthcare and law enforcement. According to budgetary regulation, Alagoas has the right to borrow on domestic market and externally, subject to Federal Government approval. Prolonged coronavirus-related effects and a much slower economic recovery lasting until 2025 would pressure tax receipts. Should the issuer be unable to proactively reduce expenditures or supplement weaker receipts from increased central government transfers, this may lead to a downgrade. The State of Alagoas has a "Human Development, Health and Education" score of '4' due to its below-average socio-economic indicators. 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. DERIVATION SUMMARY Alagoas' IDRs benefit from an uplift from the state's SCP of 'b+' considering the support derived from the fact that the Federal Government is a relevant creditor of the State. The SCP of 'b+' reflects a combination of a 'Weaker' risk profile assessment and adequate debt metrics, which resulted in an 'a' debt sustainability assessment. The SCP also factors in rated peers' positioning, thus leading to a one-notch uplift. Fitch does not apply any asymmetric risk for Alagoas. Fitch distinguishes debt owed to the federal government offers the state greater flexibility in its terms compared with traditional debt. All debt types are included in the debt sustainability metrics that produce the SCP. As a result, Fitch calculates a supplementary ratio excluding intergovernmental debt, known as the enhanced debt sustainability ratio. This is used to estimate the uplift between the SCP and IDR, which is limited by the Sovereign's IDR. KEY ASSUMPTIONS Fitch´s rating case scenario is a through-the-cycle scenario, which incorporates a combination of revenue, cost and financial risk stresses. It´s based on the 2014-2019 figures and 2020-2024 projected ratios. The key assumptions for the scenario include: -- Income tax, fees and fines and other operating revenues linked to inflation; -- Transfers linked to nominal GDP growth; -- Operating expenditures also linked to inflation; -- Long-term debt increase based on estimates of new credits – Fitch is considering BRL 2.2 billion of new debt until 2024; -- Cost of debt based on increase of historical average cost of debt; -- Capex: Overall results generated by the Debt Sustainability Tool adjusted to capex, assuming that the state would invest the remain overall result. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- An upgrade of Brazil's IDRs could positively affect the State of Alagoas' IDRs; -- A positive rating action on Alagoas' SCP could result from an improvement of its operating balance, with a payback ratio lower than 5x or an actual DSCR higher than 2x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade of Brazil's IDRs (BB-/Negative) would negatively affect State of Alagoas' IDRs; -- Alagoas' IDRs could be downgraded if its operating balance deteriorates, triggering an enhanced payback ratio higher than 5x and/or enhanced DSCR lower than 1x in Fitch's forward looking scenario. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch reports tax revenues net of constitutional transfers (2014-2017) and also excludes inter-budgetary charges and expenses related to pensions (2014-2018). Those adjustments are performed to reflect the latest accounting method adopted by Alagoas in the year of 2019, assuring consistency across the years. ESG CONSIDERATIONS The State of Alagoas has a "Human Development, Health and Education" score of '4' due to its below-average socio-economic indicators. 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. 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. FS AGRISOLUTIONS: $50MM Notes Add-on No Impact on Moody's B1 Rating ------------------------------------------------------------------- Moody's Investors Service comments that FS Agrisolutions Industria de Biocombustiveis ("FS")'s corporate family rating, senior secured rating and stable outlook remain unchanged following the company's announcement that it has reopened its 10.0% senior notes due 2025. This transaction will add-on $50 million to the original $550 million notes issued in December 2020 by FS Luxembourg S.a r.l unconditionally and irrevocably guaranteed by FS. The notes will have the same terms and conditions as the initial notes. The transaction will have no material effect on FS leverage, as net proceeds will be used mainly for liability management and general corporate purposes, while the add-on will further improve its debt maturity profile. FS B1 rating incorporates its scale among the six largest ethanol producers in Brazil, being the largest on corn feedstock. FS is a low-cost producer with favorable access to corn feedstock and located in a region with a high demand for animal nutrition, co-product from the ethanol production process. The company is also low-carbon footprint producer benefiting from a sustained demand growth for biofuels. Additionally, with the ramp-up of new installed capacity in the current and next harvests Moody's expects FS to generate a Moody's adjusted EBITDA between BRL900 million and BRL1.1 billion between March 2021 and March 2022, which will reduce leverage and increase free cash flow with lower capex levels. Constraining the rating is FS's high exposure to ethanol and corn markets dynamics and the consequent susceptibility to sharp price volatility, event risks, weather imbalances, and global trade flows. The exposure to corn price volatility as an input is partially mitigated by its animal nutrition business, since the price of the dried distillers grains is directly correlated to those of corn and soymeal, the two most widely used inputs for animal feed. Although both corn and ethanol prices are ultimately linked to US dollar and international oil prices, the company is also exposed to exchange rate volatility and timing mismatch on its proposed dollar denominated debt. The company indicated that it will mitigate 50% of the FX exposure over the principal amount of the bond via the use of currency derivatives. The ratings also incorporate the early maturity stage of the firm, with ramp-up still underway, and an over-leveraged capital structure from recent and ongoing investments to reach the target production capacity by harvest-end 2020-21, March 2021. Concentration of production in two plants and in a single region exacerbates commodity risks. FS liquidity has improved after the $550 million senior secured notes issuance in December 2020, since maturities were pushed further to 2025-26 leaving FS with minimal debt maturities in the next 4 harvests. The notes are secured on a first priority basis by collateral including the real estate property and equipment of Lucas do Rio Verde and Sorriso units, which pro forma to the add-on will represent the large majority of FS total debt. Moody's do expect FS to maintain a certain amount of short-term lines relating to working capital needs during the harvest. As of September 2020, the company had a cash and restricted cash positions of BRL499 million and BRL251 million, respectively. Cash balance will fluctuate during the harvest, but Moody's expects the cash and restricted cash balance to cover all short-term maturities at the end of each harvest. During peak working capital periods, Moody's expect inventory levels to increase and FS has a minimal cash target to cover at least the following three months of debt obligations, general, sales and administrative expenses. At the same time, working capital needs will fluctuate between BRL600 million to BRL900 million during the harvest, once FS is operating near full capacity. The stable outlook incorporates Moody's expectation that FS will be able to increase EBITDA consistently in the next 2 harvests bringing leverage down to around 4.0x in March 2021, 3.3x in March 2022, and production capacity of 1.1 billion liters in 2020-21 and 1.4 billion liters after that. The stable outlook also incorporates our expectation that the company will maintain an adequate leverage as it engages in new expansion projects. Ratings are constrained by the concentration and single line commodity exposure of the business (corn ethanol and relating co-products). An upgraded would require an increased diversification of the business reducing geographic and commodity risk exposure coupled with a robust financial position with consistent positive free cash flow, adequate leverage and liquidity profile. Quantitatively this would require Debt /EBITDA to remain below 3.5x, Retained Cash Flow/Debt to remain above 15% and EBITDA/Interest Expense to be sustained above 2.5x. A downgrade could result from an inability to reduce leverage or a deterioration of liquidity profile, including the deployment of large investments that compromise short-term credit metrics. Quantitatively this would be the case if Debt /EBITDA is sustained above 4.5x, Retained Cash Flow/Debt remains below 5% or EBITDA/Interest Expense remains below 1.5x. Headquartered in Lucas do Rio Verde, state of Mato Grosso, Brazil, FS is one of the six largest ethanol producers in Brazil. The company started operations in 2017 with 265 million liters of corn ethanol capacity and presently has a 1.1 billion liters capacity into its two plants in Lucas do Rio Verde and Sorriso, both cities in MT. The company also commercializes co-products generated in the production process, including DDG, wetcake, corn oil for livestock feed, and electricity. FS is a limited liability company and was established as a joint-venture between US based Summit Agricultural Group with a 75% stake and Brazilian agricultural holding company, Tapajos S.A. In the last twelve months ended in September 2020, FS generated net revenue of BRL2.0 billion ($427 million, converted using the average rate for the period), with a Moody's adjusted EBITDA margin of 35.9%. ITAU UNIBANCO: Fitch Assigns B+(EXP) Rating to Tier 2 Notes ----------------------------------------------------------- Fitch Ratings has assigned an expected rating of 'B+(EXP)' to Itau Unibanco Holding S.A.'s (IUH) Tier 2 subordinated notes. The size of this issuance through IUH's Grand Cayman Branch is yet to be determined. The notes have a 10-year tenor, but may be redeemed in whole at the option of the Issuer on the fifth anniversary of the issuance. Interest rate frequency will be semi-annual. The net proceeds of the Tier 2 subordinated notes will be used to finance or refinance, in whole or in part, sustainable projects. According to the draft terms, the notes are U.S. dollar subordinated liabilities, have no coupon flexibility, coupons must be paid and cannot be deferred; and are subject to permanent partial or full write-off upon the occurrence of a non-viability event (NVE) as determined by the Brazilian regulator or if IUH's Common Equity Tier 1 (CET1) capital falls below 4.5% of its risk-weighted assets. The final rating is subject to the receipt of final documentation conforming to information already received by Fitch. KEY RATING DRIVERS The notes are rated two notches below IUH's Viability Rating (VR) of 'bb'. The notching is driven by the subordinated status and the expected high loss severity of the notes. No notching for non-performance is applied, because there is no coupon flexibility (i.e., coupons must be paid as they are not deferrable and the write-off trigger is close to the point of non-viability. As a result, Fitch believes that the incremental non-performance risk is not material from a rating perspective. IUH expects that these securities qualify as Tier 2 (T2) regulatory capital in accordance with Resolution 4192, subject to the Central Bank of Brazil's approval. RATING SENSITIVITIES As the notes are two notches below IUH's anchor, their rating is primarily sensitive to a change in the VR. The two-notch difference will likely be maintained under most circumstances, in the event of a change in IUH's ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. JBS SA: Responds to Slavery Allegations on Brazil's Cattle Ranches ------------------------------------------------------------------ The Cattle Site reports that Brazilian meatpackers must clean up their supply chains, labour experts said on January 5, after an investigation showed six firms bought cattle from ranches that used slave labour. According to reporting by the Thomson Reuters Foundation, meat processing giant JBS was found to have bought cattle from two ranches that later ended up on Brazil's "dirty list" of companies that employed slave labour, the anti-slavery rights group Reporter Brasil said, the report notes. JBS said it banned the two firms once they were on the dirty list, but it was unfair to expect JBS to stop working with any ranches facing allegations of slave labour from inspectors as those companies also had the right to defend their actions, the report discloses. "Reporter Brasil is demanding JBS . . . block producers based only on inspections (which) . . . would be a disregard for that producer's right of defense before public authorities", JBS told the Thomson Reuters Foundation in a statement obtained by the news agency. In Brazil, employers whose workers have been rescued by labor inspectors are allowed to defend themselves in front of a panel, which is part of the economy ministry, and to appeal against charges of slavery, the report notes. The firm is only added to the dirty list -- one of Brazil's most powerful anti-slavery tools, currently with 114 names on it -- if found guilty by the panel, the report discloses. Brazil exports billions of dollars of beef every year and its meat processing industry has repeatedly come under fire for poor working conditions, the report relays. Under Brazilian law, forced labor is defined as a form of modern-day slavery that includes degrading work conditions and long hours that pose a risk to workers' health or life and violate their dignity, the report notes. Blacklisted businesses cannot receive state loans and have restrictions placed on their sales, the report discloses. The list is also used by private banks to gauge credit risk and by international buyers concerned about their supply chains, the report says. Meatpackers cannot rely only on the dirty list to ensure clean supply chains, said Xavier Plassat, who heads the Pastoral Land Commission anti-slavery campaign, the report relays. He said the list only included the names of those "unlucky enough to get caught" by labor inspectors and that slavery in the meat industry was widespread, the report discloses. Other firms named in the Reporter Brasil investigation were third parties to slavery -- buying cattle from ranches that bought their cattle from blacklisted ranches, the report notes. "The monitoring by meatpackers . . . does not take into account those who supply their suppliers," said Plassat. "Slave labour is still invisible." Legally it is difficult to make meatpackers responsible for buying cattle raised by slave labour, said Brazil's leading anti-slavery labour prosecutor, Lys Sobral Cardoso, the report relays. "We need to map the entire supply chain and then build a legal argument to make those at the top responsible," said Cardoso. "It's still something we are discussing how to do," the report adds. As reported in the Troubled Company Reporter-Latin America on Oct. 19, 2020, S&P Global Ratings, on Oct. 15, 2020, raised its long-term issuer credit ratings on JBS S.A. (JBS) and JBS USA Lux S.A. (JBS USA) to 'BB+' from 'BB'. S&P also affirmed its national scale rating on JBS at 'brAAA'. S&P also raised its senior unsecured debt ratings on JBS and JBS USA to 'BB+' from 'BB' and the senior secured debt ratings on JBS USA to 'BBB' from 'BBB-'. The recovery expectations remain unchanged. MARFRIG GLOBAL: Fitch Assigns BB Rating to USD1BB Sr. Unsec. Notes ------------------------------------------------------------------ Fitch Ratings assigned a 'BB' rating to the proposed issuance of global notes of about USD1 billion by MARB BondCo PLC, a wholly owned subsidiary of Marfrig Global Foods S.A. (Marfrig). The proposed senior unsecured global notes will mature in 2028. The notes will be unconditionally and irrevocably guaranteed by Marfrig Global Foods S.A., Marfrig Holdings (Europe) B.V., Marfrig Overseas Limited and NBM US Holdings, Inc. Proceeds will be used to refinance existing debt (including existing bonds). KEY RATING DRIVERS Robust Business Position: Marfrig's ratings incorporate the company's strong market position and geographic diversification in the volatile protein commodity industry. The company is a pure beef player with a processing capacity of 30,100 head of cattle per day. Marfrig owns about 82% of National Beef, the fourth-largest beef processor in the United States with approximately 14% of the fed steer and heifer processing capacity in the U.S. (over 3.7 million head/year). In South America, Marfrig is one of the region's leading beef producers, with a primary processing capacity of more than 17,000 heads of cattle per day and an annual production capacity of 122,000 tons of beef patties. Strong Capital Structure: Fitch expects Marfrig's adjusted net debt/EBITDA ratio to be 2x (around 2.5x range in 2021) and gross leverage to be 3.1x in 2020. Fitch projects that Marfrig's EBITDA will grow to BRL9.3 billion in 2020 from BRL4.9 billion in 2019, and that it will generate about BRL2.9 billion of FCF (including dividends paid to minority shareholders in National Beef). 2020 was a strong year for the company due to high cattle availability in the U.S. and capacity constraints. Demand is expected to continue to be strong in 2021, however, prices for cattle in the U.S. have risen in the past few months as capacity constraints ease. The confluence of these factors should result in strong margins in 2021, albeit below 2020's record levels. Geographical Diversification: Marfrig's exposure to the volatile beef segment of the protein sector is partially mitigated by its geographic diversification into the two largest beef producing markets. Fitch estimates that National Beef represented about 80% of the group's EBITDA during 2020 with the remaining coming from the company's South American operations. Sales from National Beef are primarily made in the U.S., which reduces the company's exposure to risks related to trade tariffs, quotas and bans. Exports represented 62% of South American revenues, of which about 50% come from shipments to China and Hong Kong. The company has 13 accredited plants for exporting to China. Marfrig's geographic diversification also helps to decrease risks related to disease, cattle cycles and currency fluctuation. This geographical diversification enables the groups to mitigate cattle cycles, sanitary, social, deforestation in the Amazon Biome and other environmental risks due to the complexity in the monitoring of the supply chain. Favorable Beef Demand: Marfrig's competitive advantages stem from its large scale of operations, access to exports markets from Brazil and the U.S., and long-term relationships with farmers, customers and distributors. Global beef fundamentals are expected to remain positive in the next couple of years for South American and U.S. producers due to increased demand and good cattle availability. U.S. beef production is forecast to be flat in 2021, according to the USDA. In exports, South America is poised to remain a top supplier to Asia as pork production will be hindered by disease issues. DERIVATION SUMMARY Marfrig's ratings reflect its solid business profile and geographic diversification as a pure play in the beef industry with a large presence in South America (notably Brazil) and in the U.S. with National Beef. Marfrig is well positioned to compete in the global protein industry due to its size and geographic diversification. The business' size compares favorably with its regional peer Minerva S.A. (BB/Stable), which is mainly a beef processor in South America. JBS S.A. (BB+/Stable) and Tyson Foods (BBB/Negative) enjoy a higher level of scale of operations, stronger FCF, and higher product and geographical diversification than Marfrig. KEY ASSUMPTIONS -- Sales are driven by better prices and strong exports markets as well as the lower Real against the U.S. dollar; -- Adjusted EBITDA of about BRL9.3 billion in 2020; -- Net leverage of about 2x as of YE 2020. RATING SENSITIVITIES Factors that could, individually or collectively, lead to a positive rating action/upgrade: --- Sustainable and positive FCF; --- Substantial decrease in gross and net leverage to below 3.5x and 2.5x, respectively, on a sustained basis. Factors that could, individually or collectively, lead to a negative rating action/downgrade: --- Negative FCF on a sustained basis; --- Gross leverage above 4.5x and net leverage above 3.5x on a sustainable basis. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: As of Sept. 30, 2020, Marfrig had BRL9.7 billion of cash and cash equivalents compared with BRL4.6 billion of short-term debt. The short-term debt is mainly related to trade finance lines. Marfrig's average debt term stood at 4.1 years and its long-term liabilities corresponded to 83% of the total debt. ESG CONSIDERATIONS Marfrig Global Foods S.A.: Governance Structure: 4 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. =========================== C A Y M A N I S L A N D S =========================== ITAU UNIBANCO: Moody's Rates New USD Tier 2 Sub. Notes 'B1(hyb)' ---------------------------------------------------------------- Moody's Investors Service has assigned a B1(hyb) rating to the proposed USD-denominated contractual non-viability Tier 2 subordinated notes to be issued by Itau Unibanco Holding S.A. (Cayman Islands) (IUH Cayman), the Cayman Islands branch under its $100 billion Global Medium-term Note Program. The notes will be due in 2031 with a call option in five years. The capital security notes are Basel III-compliant, and their terms and conditions have been defined so as to qualify the notes for treatment as Tier 2 capital pursuant to Brazilian regulation. The proceeds of IUH Cayman's notes will be used to fund eligible sustainable projects. Assignment: Issuer: Itau Unibanco Holding S.A. (Cayman Islands) Foreign Currency Subordinated Debt Rating, assigned B1(hyb) RATINGS RATIONALE The B1(hyb) rating assigned to the new Tier 2 subordinated notes is positioned two notches below the ba2 adjusted baseline credit assessment (adjusted BCA) of Itau Unibanco S.A. (IU), in line with Moody's standard notching guidance for contractual non-viability subordinated debt with a full or partial principal write-down triggered at or close to the point of non-viability. IUH is the holding company of IU, which contributes 99% to the holding's earnings. As such, debt obligations at the holding company incorporate their structural subordination to IU's senior debt obligations, which are rated (P)Ba2. According to the terms, the principal on these notes will be fully or partially written-down in the event that IUH's common equity Tier 1 ratio falls below 4.5%, the bank receives a capital injection from government funds, the Central Bank of Brazil makes a discretionary determination that a write-down is necessary, or the Central Bank of Brazil intervenes in the bank or establishes a special administrative regime at IUH or IU. The B1(hyb) assigned to IUH's new contractual non-viability Tier 2 notes reflects the higher probability of default related to the potential write-down of principal and/or interest payment in the event of the bank's failure. As with IUH's other ratings, the rating on the notes does not incorporate any uplift from either affiliate or government support. This is because the purpose of the subordinated notes is to provide loss absorption and improve the ability of authorities to conduct a smooth resolution of troubled banks. For this reason, Moody's views government support for these instruments as unlikely and the agency therefore attributes only a low probability to a scenario where the government would support this debt class. The B1(hyb) rating is positioned one notch below the Ba3 rating assigned to IUH Cayman's existing plain vanilla Tier 2 subordinated debt due between 2021 and 2029. Those outstanding debts were issued under Basel II rules, and unlike the new notes, do not have a contractual provision for equity conversion or principal write down. IU's baseline credit assessment and adjusted BCA of ba2 takes into account the bank's strong earnings recurrence that results from well-established positions in diversified businesses, ensuring internal capital replenishment to support growth, as well as its stable funding and liquidity. For the first nine months of 2020, IUH's net income to tangible assets was 0.72%, lower than 1.48% in the 12-month prior, reflecting lower business volumes, record low interest rates and sizable loan loss provisions that resulted from the weak credit conditions triggered by the coronavirus pandemic. A recovering economy and increasing mobility in Brazil particularly in Q3 2020 have helped business volumes rebound boosting fee revenues and loan growth. Itau's problem loan ratio as of September 2020 declined to 2.6% of total loans, from 3.5% at the end of 2019, aided by loan deferrals and income support programs, but asset quality may yet deteriorate over the next quarters as these measures expire. However, IU has built a conservative reserve buffer that accounted for 7.3% of total loans as of September 2020, which will help mitigate the expected increase in credit losses. A lower dividend payout in 2020 will help restore IU's capitalization ratio that was reduced by the effect of FX volatility and hedges of its investments abroad. As of September 2020, Moody's tangible common equity ratio declined to 5.7% of risk weighted assets, from 9.4% at the end of 2019. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The ratings of the Tier 2 notes are notched from IU's adjusted BCA. As such, the ratings of the securities will move in tandem with IU's adjusted BCA, which does not incorporate any affiliate support. At this juncture, upward pressure is unlikely because the bank´s BCA, which is the anchor credit risk assessment for the instrument rating, is currently at the same level as the Ba2 Brazil's sovereign rating, which carries a stable outlook. IU's BCA could be upgraded if Brazil's sovereign rating is upgraded, and if the bank maintains strong asset quality, capital and profitability metrics supporting a continued strengthening in its loss-absorbing capital buffers. Conversely, the rating assigned to the Tier 2 notes would face downward pressure if Brazil's sovereign rating is downgraded or if IU's asset quality, capital and profitability weaken materially. PRINCIPAL METHODOLOGY The principal methodology used in this rating was Banks Methodology published in November 2019. Itau Unibanco Holding S.A. is headquartered in Sao Paulo, and is the bank-holding company of Itau Unibanco financial conglomerate. IUH had consolidated assets in the amount of BRL2,110.1 billion ($374.4 billion) and shareholders' equity of BRL130.6 billion ($23.2 billion) as of 30 September 2020. ========= C H I L E ========= WOM S.A.: Fitch Rates USD300MM-USD450MM Unsec. Notes BB- -------------------------------------------------------- Fitch Ratings has assigned a rating of 'BB-' to WOM S.A.'s proposed USD300 million-USD450 million unsecured notes. The notes will be issued out of Kenbourne Invest S.A., a financing vehicle incorporated in Luxembourg that issued the group's existing unsecured USD510 million 6.875% notes due 2024. The new notes will rank equally to the existing notes, and will be fully guaranteed by WOM and its parent companies, including WOM Holdings SpA, among other entities in the corporate structure. Fitch expects that the proceeds will be primarily used to purchase mobile spectrum, to refinance the company's CLP120 billion (USD150 million) term loan due 2024, and for general corporate purposes. Fitch expects that, as a result of the transaction, net debt/EBITDA will temporarily exceed the negative sensitivity of 4.0x in 2021, before declining to 3.5x-4.0x by YE 2022. Inability to delever, due to competitive pressures or shareholder distributions, would be negative for the ratings. KEY RATING DRIVERS Additional Growth Expected: The network investments should contribute to growing revenues and margins, which should enable the company to delever over the medium term. Fitch forecasts WOM to grow revenues from CLP570 billion in 2020 to CLP670 billion in 2023, as the company improves post-paid migration and lowers churn. Fitch also forecasts EBITDA margins rising from 21% (CLP120 billion) to 28% (CLP190 billion) over the rating horizon, due to improvements in scale, as well as incremental EBITDA margin expansion as the company reduces network rentals. Temporary Increase in Leverage: On a pro forma basis, the transaction is expected to increase net debt by USD150 million-USD300 million, or around 0.9x -1.8x net leverage, from 3.5x as of Sept. 30, 2020. Fitch forecasts that WOM's fiscal 2021 net leverage will be around 4.6x-4.7x. Improvement in operating cash flow should contribute to the company's net leverage ratio declining to around 3.6x by 2023. The deleveraging expectation fits with the company's historical leverage trajectory, which declined from 5.4x in 2018 to 4.3x in 2019 and 3.5x in 2020. Increasing Cash Flows: Fitch forecasts FCF to approach neutral by fiscal 2023, as operating cash flows grow with EBITDA. Fitch expects that the company will obtain new spectrum and that the company will receive significant government subsidies for its fiber optic build out. Fitch does not anticipate that WOM will upstream significant cash to its parent in the near term; longer term, Fitch expects the company to distribute excess cash to shareholders. Improved Market Share, Small Scale: Since WOM launched in mid-2015, the company scaled rapidly, achieving approximately 6.7 million customers, almost half of which are post-paid. The company took market share from larger incumbents through its disruptive marketing campaign and attractive pricing. Fitch expects the company's market share to grow in the medium term to approximately 25% from 22%. The ratings are tempered by the company's relatively small scale as the third largest mobile operator in Chile by subscribers and revenues. Compared to each of its major domestic competitors, as well as 'BB-' regional peers, WOM lacks service diversification. Management Track Record: WOM has a credible deleveraging trajectory, backed by its strong growth, and experienced management team and shareholder. Novator has experience running telecommunications ventures in both developed and developing markets, and executed its growth strategy while demonstrating a path to profitability. Fitch views sister company P4 Sp. Zo.o (Play), originally rated 'B+' in 2014, as illustrative. Play achieved rapid growth as the fourth player in the Polish market, before achieving market leadership, while successfully deleveraging, and maintain net leverage in the mid-3.0x range. Competitive Telecom Market: The Chilean telecom market remains very competitive, as incumbent operators had to cut prices and improve service to defend market share, pressuring margins and cash flows. Fitch expects industry-wide mobile ARPUs to remain pressured, although WOM's value proposition and lower blended ARPUs should mitigate these concerns to a degree. The market is relatively mature, although the ongoing migration from prepaid to post-paid, and the attendant growth in data consumption, present opportunities. DERIVATION SUMMARY WOM's ratings reflect the company's short but impressive track record in Chile, as well as Fitch's expectation that the company will deleverage moderately, in line with sister company P4 Sp. Zo.o. Compared with Chilean rival Telefonica Moviles Chile S.A., WOM has much higher leverage, as well as less scale and service diversification. Compared to mobile leader Entel, WOM is expected to carry higher net leverage over the medium as a result of the dividend recapitalization. Like WOM, ENTEL entered a new market, causing subscriber attrition and price competition, although WOM was quicker to generate positive EBITDA and deleverage organically. Chilean fixed line provider VTR Finance NV (VTR, BB-/Stable) is similar to WOM in scale, although VTR has a stronger market position in the more stable fixed-line segment. Both companies are owned by experienced international operators that are expected to maintain moderately high amounts of leverage and upstream excess cash over the long term. VTR has a history of maintaining net leverage around 4.0x and a longer history of positive pre-dividend FCF, although its ratings ultimately constrained by the financial policies of Liberty Latin America Limited (LLA, NR). KEY ASSUMPTIONS -- Revenues of CLP570 billion in 2020, growing to CLP670 billion by 2023; -- EBITDA margins growing from approximately 21% to 28% as the company benefits from increased scale and lower network rentals; -- Elevated capex in 2021 due to acquisition of spectrum and necessary investments, falling to 15% over the rating horizon; -- For the projections, Fitch has assumed total net issuance of USD300 million. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Deleveraging toward 3.0x net debt/EBITDA on a sustained basis, with consistent growth in EBITDA and pre-dividend FCF supported by improved competitive position and scale. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- Substantial deterioration in ARPUs and/or stagnation in competitive position, resulting in net debt/EBITDA sustained above 4.0x. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE WOM has adequate liquidity, aided by its improving operating cash flow and a committed revolving credit facility. As of Sept. 30, 2020, the company had CLP105 billion in cash and equivalents, mostly in USD, against CLP16 billion in short-term debt. The company's CLP120 billion term loan amortizes in three installments from 2022-2024, while the company's existing notes are due in 2024. Pro forma for the larger transaction, the company's debt will entirely consist of USD notes, in the amount of USD960 million. In February 2020, the company re-opened its 2024 bond for an additional USD60 million. In May, the company tapped its revolving credit facility for CLP20 billion, which it subsequently repaid. The revolving credit facility supports the company's adequate liquidity. WOM S.A.: Moody's Gives B1 Rating to Up to $450MM Sr. Unsec. Notes ------------------------------------------------------------------ Moody's Investors Service assigned a B1 rating to the proposed senior unsecured notes of up to USD450 million due in up to 7 years to be issued by Kenbourne Invest S.A. and unconditionally guaranteed by WOM S.A. At the same time Moody's affirmed WOM's B1 corporate family rating and the B1 rating of Kenbourne Invest S.A.'s existing 2024 notes. The rating outlook is stable. Proceeds will be used for the acquisition of spectrum, capex related to the spectrum acquisition, liability management and other general corporate purposes. The rating of the proposed notes assumes that the issuance will be successfully completed and that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date. It also assumes that these agreements are legally valid, binding and enforceable. Ratings Assigned: Issuer: Kenbourne Invest S.A. Up to USD450 million senior unsecured notes due in up to 7 years unconditionally guaranteed by WOM S.A.: B1 Ratings Affirmed: Issuer: WOM S.A. Corporate Family Rating: B1 Issuer: Kenbourne Invest S.A. USD510 million 5-year senior unsecured notes unconditionally guaranteed by WOM S.A.: B1 Outlook Actions: Issuer: WOM S.A. Outlook: Remains Stable Issuer: Kenbourne Invest S.A. Outlook: Remains Stable RATINGS RATIONALE WOM S.A.'s B1 corporate family rating reflects its relatively new but already well-established position in the competitive mobile services market of Chile. The rating also takes into consideration WOM's network with nationwide coverage, strong brand recognition and cost-efficient structure, which support its profitability and cash generation. Chile, Government of's (A1 negative) stable operating and regulatory environments are also incorporated into the B1 ratings. The country has the highest GDP per capita in Latin America, leading to high average revenue per user, and one of the highest mobile penetration rates in the region, offering good opportunity for growth in telecommunications services. WOM's ratings are constrained by its modest revenue size compared with that of its global and local peers, intense competition in the Chilean telecom market and its relatively high leverage. Moreover, the company has only a recent track record of stronger profitability, with positive EBITDA achieved for the first time in the fourth quarter of 2017, although it is continuously improving. Accordingly, the B1 ratings also factor in the execution risks in WOM's plan to continue expanding its market share in the competitive Chilean market to extract economies of scale and reduce leverage. Mitigating the risks are WOM's conservative financial policies that include maximum leverage and minimum cash levels as well as restriction in dividend payments focusing on debt repayment and deleveraging of the balance sheet. WOM's controlling shareholder, Novator, is an investment firm with around EUR3.0 billion of assets under management with focus on telecoms, including incumbents and challengers. Novator has know-how and proven track record in investing in emerging markets telecom companies such as Play Communications S.A. ("Play" Ba3 developing), the largest mobile operator in Poland. Novator acquired WOM (formerly Nextel Chile) in 2015 and invested USD400 million in cash into the company over the subsequent three years. Moody's expects to see continued implicit support from the shareholder. WOM's small scale relative to its global peers and short track record are partly mitigated by the solid position it has built over the past few years, reaching a 22% market share as of the end of September 2020, with around 6.5 million subscribers, from a 2% market share as of year-end 2015. WOM has been leading subscriber net additions, with a focus on postpaid subscribers, who on average generate significantly higher ARPU and have lower churn rates than prepaid subscribers. WOM's postpaid subscriber base represented 47% of the company's subscriber base as of September 2020. Moody's views the spectrum auction that WOM is planning to participate as key for the company's continuous success in gaining market share, increase profitability while providing high quality services to its clients. Considering planned liquidity events, WOM will have a good liquidity profile, but leverage measured by gross debt to EBITDA will increase above our initial expectations reaching around 5.1 times in the end of the 1Q'2021 and decrease with the continuous improvement in the EBITDA generation to reach 4.3x in the end of 2021 and 3.8x in the end of 2022. Accordingly, Moody's expects the company to end 2021 with around CLP200 billion (approximately USD280 million) in cash and a comfortable debt maturity profile, with no significant maturities until 2024. Additionally, the company has an undrawn revolving credit facility of USD50 million that could be used in a liquidity stress scenario. WOM has a maximum net leverage target of 3.0 times. The stable outlook reflects Moody's expectations that WOM will sustain its positive momentum because of its high levels of customer satisfaction and increased data usage in Chile, resulting in strong net additions to its subscriber base. The stable outlook also incorporates Moody's assumption that the increase in leverage because of the proposed debt issuance will be temporary and that WOM will maintain its liquidity at adequate levels while keeping committed to its below 3.0x net leverage target. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure on WOM's rating would arise if the company is able to reduce debt levels while posting sustained improvements in profitability and revenue growth. Quantitatively, an upgrade would be considered if the company reduces leverage below 3.75 times while maintaining an EBITDA margin higher than 30%, and positive free cash flow on a sustained basis. The rating could be downgraded if the company's credit metrics deteriorate because of weaker than expected performance. Quantitatively ratings could be downgraded if leverage increases to a level higher than 4.50 times for a prolonged time. Higher-than-expected shareholder remuneration that pressures liquidity and free cash flow generation, leaving no room for gross debt reduction over time, would be also viewed negatively. The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. WOM, domiciled in Santiago, Chile, is a mobile telecommunications services provider, serving around 6.5 million clients across its business segments, including mobile voice, data services and mobile broadband. WOM was launched in 2015 after the acquisition and rebranding of Nextel Chile S.A. by its controlling shareholder Novator Partners LLP, and became a well-established company in the Chilean mobile market. WOM had CLP573 billion in revenue and CLP142 billion in Moody's adjusted EBITDA for the 12 months that ended September 2020. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: To Absorb Higher Fuel Prices for 2nd Week ------------------------------------------------------------- Dominican Today reports that the Dominican government warned that it would increase fuel prices given the international market outlook. For two consecutive weeks, through the Ministry of Industry, Commerce, and Mipymes (MICM), the Government assumed in full or in part the cost of the increase in fuel prices. For the week of January 2-8, 2021, fuel prices did not vary, with the State assuming commitments to importers amounting to RD$68 million, the report discloses. However, for the week that begins, January 9 to 15, the government informed that it would absorb a part of the increase in fuel prices "to avoid an impact on the citizen's pocket," the report relays. "In the referred week, the State will not transfer to the population a total of RD$63,110,189, which will allow for cutting the increase, for example, of LPG, from 7.43 pesos to only 3.00 pesos. And that premium gasoline, instead of going up by 5.62 pesos, only goes up by 2.80 pesos," informed the vice-minister of internal commerce of the MICM, Ramon Perez Fermin, the report discloses. Perez Fermin assured: "Although we would like this to be total and the population would not suffer the price increases, the responsibility, transparency, and sustainability of the finances are non-negotiable," the report says Regular gasoline will be sold for RD$206.70 and premium for RD$220.00, varying by RD$ 2.80 per gallon each, the report notes. Regular gasoline will be sold at RD$168.10 and premium at RD$180.40, modifying its value to RD$0.30 and RD$0.60 per gallon, the report discloses. Liquefied petroleum gas will be dispensed at RD$125.70 per gallon for a variation of RD$3.00, the report relays. Finally, natural gas maintains its price of RD$28.97 per cubic meter, 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, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. 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: To Grow 4.8% in 2021 & 4.5% in 2022 ----------------------------------------------------------- Dominican Today reports that after a negative year-end of -6.7% of its GDP in 2020, the economy of the Dominican Republic will reach growth of 4.8% in 2021 and 4.5% in 2022, well above the growth projected for the region by 3.7% for this year and from a large part of the Latin American countries. The information is contained in the regional chapter of the World Bank's World Economic Outlook report, released by the multilateral financial agency, notes the report. The Latin American and Caribbean region has been severely affected by the pandemic, both from a health point of view and from an economic perspective, the report says. It indicates that five of the 10 emerging market and developing economies with the highest per capita death rate from this disease are located in the region, notes Dominican Today. "It is estimated that the regional economy contracted 6.9% last year due to the fact that households and companies exhibited risk-averse behavior and measures to control the pandemic limited activities in the formal sector," the report says. Formal employment, hours worked and earnings have declined sharply, the report discloses. Women and youth, who have a high level of participation in the sectors most disturbed by the pandemic, such as hotels, restaurants and personal services, have been disproportionately affected by job losses, as have low-income households, 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, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. 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 ============= JAMAICA: On Track to Recover Despite Concern on New COVID Variant ----------------------------------------------------------------- RRJ News reports that Keith Duncan, Chairman of the Economic Program Oversight Committee (EPOC), said despite uncertainties caused by the new variant of COVID-19, the local economy is still on track to recover this year. Mr. Duncan says the forecast is for the economic rebound to continue into 2022, according to RJR News. The Jamaican economy contracted by 10.7 per cent in the September 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). Fitch's credit rating for Jamaica was last reported at B+ with stable outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). 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. ===================== P U E R T O R I C O ===================== BED BATH: To Close Puerto Rico Stores Next Month ------------------------------------------------ USA Today reports that Bed Bath & Beyond had previously shared its plans for widespread closures in July 2020 and launched its downsizing efforts by eliminating 63 stores in September 2020. In the second week of January 2021, Bed Bath & Beyond leadership lined up the next 43 stores that are closing, as part of the company's plan to liquidate 200 brick and mortar locations by 2022. The Bed Bath & Beyond branches that are closing next -- by Feb. 2021, to be exact -- are located in 19 states and Puerto Rico. The Bed Bath & Beyond closures come as part of a broader plan to trim an expansive and expensive real estate portfolio, and invest more heavily in digital sales. According to CNBC, the company's executives believe that downsizing will "generate annual cost savings of between $250 million and $350 million, excluding related one-time expenses." The 200 stores slated to close reportedly brought in roughly $1 billion in annual net sales in the 2019 fiscal year, meaning the company will need to reroute a portion of those dollars to online sales or remaining stores, which may come as a challenge. While Bed Bath & Beyond's digital sales rose 77 percent during the pandemic, the company has also more recently taken a hit in trading. On Jan. 7, 2021, reports swirled about the company's falling stocks, which were down more than 13 percent in premarket trading. This came after leadership announced a five percent decline in sales for their third quarter, due largely to planned store closures and the sale of other assets like Cost Plus World Market. Representatives also acknowledged that "fourth-quarter sales are expected to be lower than a year earlier by a double-digit percentage," according to CNBC. About Bed Bath & Beyond Bed Bath & Beyond Incorporated is an American chain of domestic merchandise retail stores. Bed Bath & Beyond operates many stores in the United States, Canada, and Mexico. Bed Bath & Beyond was founded in 1971. It is currently part of the S&P 500 and Global 1200 Indices. The company is based in Union, New Jersey. ================= V E N E Z U E L A ================= PETROLEO BRASILEIRO: Fuel Import Group to File Antitrust Complaint ------------------------------------------------------------------ Rio Times Online reports that a Brazilian association of private fuel importers known as Abicom plans to file a complaint against the pricing policy of state-controlled oil firm Petroleo Brasileiro SA, the head of the group said in a note on January 8. Abicom's president Sergio Araujo said Petrobras, as the firm is known, is selling gasoline and diesel below international prices, which would violate a commitment made by the company with regulators, according to Rio Times Online. Petrobras did not immediately respond to a request to comment. About Petrobras Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian Petroleum Corporation - Petrobras) is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. Petrobras control significant oil and energy assets in 16 countries in Africa, the Americas, Europe and Asia. But, Brazil represents majority of its production. The Brazilian government directly owns 54% of Petrobras' common shares with voting rights, while the Brazilian Development Bank and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control 5%, bringing the State's direct and indirect ownership to 64%. A corruption scandal was uncovered in 2014 that involved Petrobras. The scandal related to money laundering that involved Petrobras executives. The executives were alleged to get received kickbacks from overpriced contracts, to the tune of about $3 billion in total. S&P Global Ratings revised outlook on Petrobras to stable and affirmed 'BB-' foreign currency and local currency credit ratings on April 7, 2020. Fitch revised outlook on Petrobras to negative and affirmed 'BB-' long term foreign currency and local currency credit ratings on May 7, 2020. Moody's Investors Service affirmed the 'Ba2' long term foreign currency credit rating of Petrobras on August 23, 2019. Outlook is stable. ********* 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 2021. 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 * * *