/raid1/www/Hosts/bankrupt/TCRLA_Public/210318.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, March 18, 2021, Vol. 22, No. 50
Headlines
A R G E N T I N A
ARGENTINA: Gov't. Temporarily Suspends Exports to Reduce Food Price
TELECOM ARGENTINA: S&P Affirms CCC+ Issuer Rating, Off Watch Neg.
B R A Z I L
BRAZIL: Annual Inflation Tops 5% for First Time in Over Four Years
C O L O M B I A
AVIANCA HOLDINGS: Forced to Suspend Routes Over Travel Restrictions
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Nontransparent Materials Prices Affects Program
DOMINICAN REPUBLIC: Wages Lag Behind Inflation for Two Decades
G U A T E M A L A
GUATEMALA: Gets $70MM-IDB Loan to Implement Digital Transformation
J A M A I C A
JAMAICA: Receives US$75MM IDB Loan to Strengthen COVID-19 Response
M E X I C O
AXTEL SAB: Fitch Upgrades LT IDRs to 'BB', Alters Outlook to Stable
P U E R T O R I C O
STONEMOR INC: To Release Q4, Full Year Results on March 23
VAQUERIA ORTIZ: May 11 Plan Confirmation Hearing Set
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A R G E N T I N A
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ARGENTINA: Gov't. Temporarily Suspends Exports to Reduce Food Price
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globalinsolvency.com reports that Argentine farmer Javier Rotondo
says he should be reaping a historic bounty with grain prices
surging to their highest level in years, The Wall Street Journal
reported.
Instead, he reduced his corn crop by 20% after authorities
temporarily suspended exports to reduce food prices, one of several
measures by Argentina's leftist government that economists say are
suffocating business, according to globalinsolvency.com.
Mr. Rotondo expects to take on debt to pay a new wealth tax, and he
is bracing for price controls after President Alberto Fernandez
recently warned ranchers that rising beef prices won't be
tolerated, the report notes.
"There's a lot of uncertainty. They are implementing crazy policies
that don't make much sense," Mr. Rotondo said from his farm in the
central Cordoba province, the report relays. "There will be less
investments, less production, and that'll be very negative," he
added.
Three years into a grinding recession, Argentina's economy is in
the worst shape it has been since a 2001 debt default that led to
rioting and deaths in the streets, the report notes. For Mr.
Fernandez, the solution is to kick-start the economy and tax a
prosperous farm sector and wealthy individuals, while avoiding
austerity measures such as cutbacks to billions of dollars a year
in subsidies, the report adds.
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8, 2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
TELECOM ARGENTINA: S&P Affirms CCC+ Issuer Rating, Off Watch Neg.
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On March 15, 2021, S&P Global Ratings removed Telecom Argentina
S.A. from CreditWatch with negative implications and assigned a
stable outlook. At the same time, S&P raised its stand-alone credit
profile (SACP) to 'b' from 'ccc+'. S&P also affirmed its 'CCC+'
issuer and senior unsecured ratings on the company because
Argentina's 'CCC+' transfer and convertibility assessment (T&C)
limits the ratings on Telecom.
The stable outlook reflects better visibility regarding the
company's ability to access Argentina's official FX market to pay
the outstanding amount on its 2021 notes in June and its
expectation that it will maintain sound operating cash flow and
relatively low leverage.
On Feb. 26, 2021, the BCRA issued resolution A7230, which is a
continuation of A7106 from October 2020 and extends exchange
controls for corporations and encourages companies to refinance
their debt. The new resolution also includes two amendments, one of
which allows corporates that refinanced their hard currency debt
obligations last year in compliance with resolution A7106 (that
required companies to refinance at least 60% of hard currency
outstanding principal while extending maturity by a minimum of two
years) to access MULC in order to repay the remaining 40% of their
outstanding principal. This amendment applies to all refinancing or
exchanges done in 2020.
S&P considers that this amendment applies to the exchange Telecom
completed on its 2021 senior unsecured notes in June 2020, and thus
the company should be able to access the MULC to repay the
outstanding amount on the notes (about $104 million), which
amortize on June 15, 2021. The company has completed additional
refinancing in the past six months and holds a sufficient cash
position to service the amortization. Furthermore, Telecom has no
other upcoming amortization that the BCRA resolution could affect
during 2021, and the next relevant hard currency amortizations
would occur only in the second half of 2022.
In 2020, Telecom's revenues grew below inflation but EBITDA margin
remained strong at about 34%, which combined with conservative
capital expenditures (capex) resulted in positive free cash flow
generation and low leverage, with an adjusted gross debt-to-EBITDA
ratio of 2.1x. Amid some economic recovery, S&P expects the mobile
postpaid and broadband subscriber base to grow in 2021 after a weak
2020, but considering regulatory restrictions to adjust prices, we
still expect the company's revenues to grow slightly below
inflation in 2021.
S&P said, "At the same time, as long as price adjustment limits
remain in place, we expect the company to maintain financial
discipline, capex linked to operating cash flow generation, and
strict cost controls while EBITDA margin stays healthy at above
30%. We expect Telecom to maintain low leverage for the rating
level, with gross debt to EBITDA between 2.0x and 2.5x in 2021 and
about 2.0x in 2022. We forecast ample operating cash flow to fund
its capex needs through 2022, but that will depend on additional
refinancing in 2021 and 2022." However, despite market constraints
for all Argentine companies, Telecom has maintained some financial
flexibility and completed refinancing and accessed fresh funds in
the past six months (multilateral agencies refinancing, domestic
issuance, and a loan with China Development Bank [A+/Stable/A-1]).
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B R A Z I L
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BRAZIL: Annual Inflation Tops 5% for First Time in Over Four Years
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Rio Times Online reports that annual inflation in Brazil rose above
5% in February for the first time in more than four years, official
figures showed on March 11, above analysts' expectations and driven
largely by as a strong rise in transportation costs.
Coming less than a week before the Central Bank's next policy
decision, the figures are likely to cause the first increase in
Brazil's benchmark interest rate since 2015, according to Rio Times
Online.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
S&P Global Ratings affirmed on December 14, 2020, its 'BB-/B'
long-and short-term foreign and local currency sovereign credit
ratings on Brazil. The outlook on the long-term ratings remains
stable.
Fitch Ratings' credit rating for Brazil stands at 'BB-' with a
negative outlook (November 2020). Moody's credit rating for Brazil
was last set at Ba2 with stable outlook (April 2018). DBRS's
credit
rating for Brazil is BB (low) with stable outlook (March 2018).
As reported in the Troubled Company Reporter-Latin America, S&P
Global Ratings' stable outlook assumes that timely implementation
of fiscal adjustment and modest economic recovery will help
preserve market confidence and adequate funding conditions for the
government in local markets in the next two years, despite a
sustained increase in the debt burden.
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C O L O M B I A
===============
AVIANCA HOLDINGS: Forced to Suspend Routes Over Travel Restrictions
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Daniel Martinez Garbuno at simpleflying.com reports that Avianca
Holding temporarily suspended 25 international routes since March 1
due to the new COVID-19 travel restrictions in many countries.
The South American carrier closed 12 international routes from
Bogota, four from San Salvador, four from Quito, three from
Guatemala, and one from Cali and Medellin, according to
simpleflying.com. Let's investigate further.
What is Avianca suspending?
In a statement, Avianca said:
"Due to the new travel restrictions in some countries and the
uncertainty from our travelers in the current COVID-19 environment,
we have adjusted our schedules," the report notes.
Starting on March 1, Avianca suspended 25 international routes.
These are as follows.
From Bogota, Colombia:
Barcelona
London
Curazao
San Juan (Puerto Rico)
La Paz (Bolivia)
Santa Cruz de la Sierra (Bolivia)
Rio de Janeiro
Asuncion (Paraguay)
Montevideo (Uruguay)
Fort Lauderdale
Orlando
Panama
From San Salvador, El Salvador:
Newark
Dallas
Toronto
San José (Costa Rica)
Houston
Mexico City
From Quito, Ecuador
San Pedro Sula (Honduras)
Miami
From Guatemala:
Tegucigalpa
Bogota
Los Angeles
From Cali and Medellin, Colombia:
Madrid
What does this mean for Avianca's future?
The South American carrier said that it will look carefully at each
market to see when it will restart these routes, the report relays.
For instance, it expects that some routes may be reopened before
the first quarter ends but will not operate others until April and
June, the report notes.
In January 2021, Avianca transported 7.67 million passengers on all
its routes, the report recalls. This number was an increase from
the 7.61 million it had in December 202, the report discloses.
Nevertheless, the international market suffered a decrease, going
from 2.09 million at the end of last year to 1.91 million, the
report says.
The new travel restrictions worldwide came at a time when Avianca
was taking off after months of inactivity, the report relays.
Avianca was fully grounded between April and August, restarting
operations in September, when it transported 1.65 million
passengers, the report notes.
On January 27, Avianca said that it was operating 94 routes,
increasing by 77% in the last three months, the report relays. It
had 34 international routes from Colombia, offering up to 28,000
seats across Latin America, North America, and Europe, the report
notes.
Nevertheless, the new COVID-19 variants have put a halt to the
recovery, the report relays. The US, for instance, has required
international travelers to present a negative PCR result test
before boarding up their flights, the report discloses. These
restrictions hampered demand.
Avianca's Latest Developments and Challenges
Avianca is one of the three South American carriers that filed for
a Chapter 11 bankruptcy in the US in 2020, the report relays. The
airline is currently under this process and advancing at a good
pace, the report notes.
Nevertheless, the COVID-19 pandemic deeply affected Avianca's
plans, the report discloses. In 2020, the airline transported 7.9
million passengers, the report recalls. The year prior, it
transported 30.53 million passengers, so that's a 74% decrease on a
year-to-year basis!
This year will be an exciting one in the Colombian aviation market,
the report relays. Avianca and LATAM will face the toughest
challenge in their history, the report notes. In front of them,
they have up-and-coming airlines such as Viva Air and Wingo and
startups like Ultra Air and Starblue Airlines, the report relays.
In particular, Viva Air seems to be the biggest rival for the
Colombian legacies, the report discloses. Following the footsteps
of Latin American low-cost giants like Azul, and Volaris, Viva Air
is decentralizing the Colombian aviation market, disrupting the
international connectivity, and seizing the opportunity the current
crisis is creating, the report says.
Meanwhile, Avianca, like LATAM and Grupo Aeromexico, will have to
reinvent itself, particularly in the domestic market, to compete
better in the post-COVID world, the report adds.
About Avianca
Avianca -- https://aviancaholdings.com/ -- is the commercial brand
for the collection of passenger airlines and cargo airlines under
the umbrella company Avianca Holdings S.A. Avianca has been flying
uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca
serves 76 destinations in 27 countries within the Americas and
Europe.
Avianca Holdings S.A. and its affiliates sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. S.D. N.Y. Lead Case No.
20-11133) on May 10, 2020. At the time of the filing, Debtors
disclosed $7,273,900,000 in assets and $7,268,700,000 in
liabilities.
Judge Martin Glenn oversees the cases.
The Debtors tapped Milbank LLP as general bankruptcy counsel;
Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon
Abogados S.A.S. as restructuring counsel; Smith Gambrell and
Russell, LLP as aviation counsel; Seabury Securities LLC as
financial restructuring advisor and investment banker; FTI
Consulting, Inc. as financial restructuring advisor; and Kurtzman
Carson Consultants LLC as claims and noticing agent.
The U.S. Trustee for Region 2 appointed a committee of unsecured
creditors in Debtors' bankruptcy cases on May 22, 2020.
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Nontransparent Materials Prices Affects Program
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Dominican Today reports that the president of the Hardware
Association, Arturo Castillo, assured that if the Government does
not make the prices of construction materials transparent, the
Programa Nacional de Viviendas Familia Feliz will be affected since
its costs will increase, which will no longer be affordable for the
population that the State intends to help.
The representatives of the hardware dealers regretted that if the
Government intended that the program would provide 11,000 new
houses to the country, with these increases, there would only be
6,000 houses, according to Dominican Today.
Castillo, while giving a press conference, indicated that the
private sector housing projects are also having serious problems
because the apartments that are in the final phase of construction
and that will be delivered in the next few months to their
purchasers, would lead the builders to bankruptcy because people
have already paid their down payments, while they budgeted at the
beginning of the work an amount that has now been exceeded, the
report relays.
"We ask the government to sit down with the local industry and make
prices transparent," said Castillo, adding that there have been
factors that have influenced the rise of construction materials,
but not at current levels, the report notes.
"There was a rise in the dollar premium, but the dollar is already
down, so it is less of a factor. Then, China's freight exclusively
reflects an 11% increase, and internationally, the raw material has
increased between 7 and 8%. If we add a raw material coming from
China plus the freight, we are talking about an increase that
should represent 19%, but we have seen how products manufactured in
the country for construction have increased between 200 and 300%,
and there is a very high component," commented Castillo, the report
relays.
The president of the ironmongers was accompanied by the president
of the Dominican Confederation of Micro, Small, and Medium
Construction Companies (Copymecon), Eliseo Cristopher; the
president of the Dominican Federation of Traders (FDC), Ivan
García, as well as other builders of apartment projects, the
report discloses.
The head of the FDC said that there is a "semi-paralysis" in the
sales of the hardware sector because, with the increases of the
suppliers in the last 60 days, they have been reduced by 50%
compared to December 2020, the report relays.
"If before one told homeowners that it was going to cost them a
million and now one raises RD$500,000 more, well, construction and
sales are paralyzed. Even materials used for reconstruction, such
as wood, increased from RD$54 per foot to RD$118 two days ago,"
said Garcia, 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.
Fitch Ratings on Jan. 18, assigned a 'BB-' rating to Dominican
Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041.
Concurrently, the Dominican Republic reopened its 2030 4.5% notes
for an additional USD1.0 billion, which Fitch rates 'BB-', raising
the total outstanding amount of the 2030 notes to USD2.0 billion.
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: Wages Lag Behind Inflation for Two Decades
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Dominican Today reports that the wage level in the country, for two
decades, has lagged behind inflation, which has caused the
deterioration of its participation in income generation, because it
has not advanced as average productivity has.
Former Minister of Economy, Isidoro Santana, pointed out that the
lag in salaries was attenuated a bit with some readjustments in the
past decade, but that the average salary levels have not yet
recovered as existed before the Baninter bank crash in 2003,
according to Dominican Today.
He said the situation merits a long-term policy of salary recovery,
because "the salary does not recover suddenly, from one day to the
next and much less in a circumstance like the current ones," the
report relays.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
The Troubled Company Reporter-Latin America reported in April 2019
that the Dominican Today related that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings on Jan. 18, assigned a 'BB-' rating to Dominican
Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041.
Concurrently, the Dominican Republic reopened its 2030 4.5% notes
for an additional USD1.0 billion, which Fitch rates 'BB-', raising
the total outstanding amount of the 2030 notes to USD2.0 billion.
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).
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G U A T E M A L A
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GUATEMALA: Gets $70MM-IDB Loan to Implement Digital Transformation
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Guatemala will advance towards digital transformation and citizens'
access to fixed and mobile broadband connectivity with help from
the Inter-American Development Bank (IDB).
With a $70 million investment -- $45 million from the Bank's
ordinary capital and $25 million from the Korea Infrastructure
Development Cofinancing Facility for Latin America and the
Caribbean (KIF)–, the program will boost the country's
institutional and operational capacity, paving the way for the
development of a digital agenda and enhanced connectivity by
improving conditions for the adoption of digital infrastructure
solutions.
One of the operation's main goals is to expand and equip access
networks, connecting more than 3,200 public sites through existing
infrastructure and the outfitting of necessary telecommunications
equipment. It will also install a state-run datacenter in
accordance with good practices for broadband network security and
efficiency, and implement a private cloud for the state, which will
store and process public data that will be used to develop
platforms for public service delivery.
In addition, it will finance the development of digital training
sessions on the use of the technology and equipment for the public
facilities connected to the network, with the goal of training
trainers who will then conduct courses and workshops to help civil
servants and officials as well as public users develop digital
skills. The program will give special attention to the country's
cultural diversity, with a strong emphasis on giving priority to
women in the digital training process and on producing content in
indigenous languages.
In order to strengthen the institutional framework and operational
capacity for developing the digital agenda, a new management
structure for the Office of the Deputy Minister of Communications,
Infrastructure and Housing will be designed to identify new
departments whose goals will include ensuring successful
implementation of the digital agenda and the sustainability of the
public telecommunications policy.
The program's beneficiaries will be schools and public agencies
connected to the network as well as students and members of the
general public who make use of access to digital services at the
connected public facilities in the departments of Quiché, Alta
Verapaz, San Marcos, and Huehuetenango. The operation is expected
to help boost annual GDP by 0.5 percent and bring about $29 million
worth of savings and increased public service efficiency.
As reported in the Troubled Company Reporter-Latin America on
Dec. 9, 2020, Fitch Ratings has affirmed Guatemala's Long-Term
Foreign-Currency (LT FC) Issuer Default Ratings (IDR) at 'BB-' and
removed the Rating Watch Negative (RWN), upgraded the issue rating
on the Eurobond due 2026 to 'BB-' from 'C' and affirmed all other
ratings. The Rating Outlook is Stable.
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J A M A I C A
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JAMAICA: Receives US$75MM IDB Loan to Strengthen COVID-19 Response
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Jamaica will get a US$75 million loan from the Inter-American
Development Bank (IDB) to strengthen the efficiency and
effectiveness of public policy and fiscal management in response to
the health and economic crisis caused by COVID-19.
The loan, the first of two policy-based loans, will promote the
availability and timely execution of public resources to respond to
the health crisis caused by COVID-19. It will strengthen the
countercyclical effect of fiscal policy through the introduction of
temporary measures to protect the income of vulnerable households
and increase liquidity for businesses during the crisis.
In addition, the loan will promote economic and fiscal recovery in
the post-pandemic period.
"This loan comes at a crucial moment in Jamaica's fight against
COVID-19 as the country begins the process of vaccinating its
population to save lives, but also as it prepares to ramp up
economic activity in the face of the economic fallout in 2020,"
said IDB Country Representative and Manager of the Caribbean
Department, Therese Turner-Jones. "I am hopeful that these
resources will help with both the health and recovery of the
country."
Jamaica, like other Caribbean countries, has been hit hard by the
pandemic as nearly a third of its output and employment are linked
to the tourism sector. The IDB loan will help finance cash
transfers to employees, grants to low-income informal workers,
vulnerable groups and the unemployed, and provide student loan
relief. It will support small business grant programs, especially
in the tourism sector.
The IDB loan will also support measures to strengthen fiscal
institutions to improve efficiency and transparency of public
investment as well as the formulation of strategies and public
policy responses to limit the economic fallout of the crisis and
bolster subsequent economic and fiscal recovery efforts.
The IDB loan has a 20-year maturity and 5.5-year grace period and
its interest rate is LIBOR-based.
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.
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M E X I C O
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AXTEL SAB: Fitch Upgrades LT IDRs to 'BB', Alters Outlook to Stable
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Fitch Ratings has upgraded all of Axtel, S.A.B de C.V.'s (Axtel)
ratings, including the Long-Term (LT) Foreign Currency (FC) Issuer
Default Rating (IDR) to 'BB' from 'BB-', the Local Currency (LC)
IDR to 'BB' from 'BB-', the National Long-Term Rating to 'A(mex)'
from 'A-(mex)', and 2024 USD senior unsecured notes to 'BB from
'BB-'. The Rating Outlook has been revised to Stable from
Positive.
The upgrades reflect the company's stable operational performance
in the enterprise and government telecommunications segment in
Mexico, as well as the company's steady deleveraging via asset
sales. Axtel has cut its gross debt from MXN20 billion to MXN14
billion since 2017. The ratings are tempered by Axtel's relatively
small operating scale.
Axtel has reorganized itself into a service unit (Alestra) and an
infrastructure unit (Axtel Networks) and has been exploring a sale
of both businesses. Fitch does not include a sale of either unit in
its base case, due to the uncertainties surrounding valuation and
timing. Fitch expects proceeds from a sale would be used to pay
down Axtel's debt, including the USD500 million notes due 2024.
KEY RATING DRIVERS
Improving Financial Structure: Fitch expects Axtel's leverage
metrics to continue improving, due to stable profitability and
moderate levels of capex. Net / Debt to EBITDA is projected to fall
below 2.5x in 2022, consistent with Fitch's rating sensitivity and
expectations. Over the last four years, Axtel has divested non-core
assets and used proceeds to pay down debt, with gross debt
declining from MXN20.3 billion at YE2017 to MXN14.6 billion as of
YE2020. In 2018 and 2019, Axtel sold its residential fiber business
for a total of MXN5.9 billion to Grupo Televisa S.A.B.
(BBB+/Stable) and Megacable S.A.B. de C.V. (NR). In 2020, Axtel
sold three data centers to Equinix, Inc. (BBB-/Positive) for MXN3.4
billion (USD175 million).
Growing Profitability, Cash Flows: Axtel consistently generates
EBITDA margins in the mid 30% range, and Fitch expects these to
grow over the next few years as the company's infrastructure
business grows. Combined with relatively stable cash taxes and
declining interest payments, Fitch expects operating cash flows to
grow over the rating horizon. Fitch expects capital intensity to
range from 15%-17% over the rating horizon, which should enable the
company to generate consistently positive free cash flow.
Sticky Consumers, Steady Revenues: Axtel's ratings benefit from its
relatively steady cash flows in both services and infrastructure.
The business model supports stable cash flow due to the recurrent
nature of this business and the relatively high costs to switch to
another provider. The company has changed its reporting segments
over the last few years, but historically, enterprise (telecom +
IT) accounted for 80%-85% of service revenues, and telecom spending
(enterprise + government) accounts for a similar percentage. There
is a secular decline in voice revenues, but Fitch expects growth in
managed networks and data to more than offset this decline.
The services unit is the main customer for the infrastructure unit,
which accounts for ~20% of revenues, after intercompany
eliminations. Fitch expects that the company's core telecom and IT
services business to resume low-single digit growth in 2021. The
infrastructure business is expected to grow at faster rates, though
the overall prospects are unclear, given the changing competitive
environment.
Small Scale in Competitive Market: Axtel operates in a competitive
landscape that will constrain its ratings to the 'BB' category. In
fixed enterprise telecom services, Axtel is the No. 2 participant,
with approximately 20% market share, competing with Telefonos de
Mexico S.A.B. de C.V. (Telmex, A-/Stable), which has a market share
above 60%. Axtel's market share is smaller in IT services, but the
competitive position is more balanced, given the fragmented nature
of that segment.
Strategic Refocusing: Axtel has completed the functional separation
of its business into a services unit (Alestra) and an
infrastructure unit (Axtel Networks). The infrastructure unit will
provide connectivity and internet services to wholesale customers.
A neutral infrastructure provider can aggregate wholesale telecom
demand, providing a cost-effective solution to carriers, which face
pressure to profitably expand network coverage and capacity. As
carriers plan for 5G deployment, Axtel hopes to capitalize on
increased demand for fiber to the tower.
Axtel has been exploring a sale of one or both units since last
year; Fitch does not include any sale in its base case. Fitch
expects that, were a sale to occur, Axtel would likely prepay its
debt, including the USD notes, with the remainder going to Alfa. If
the company is sold piecemeal, Fitch expects Axtel Networks would
carry higher debt and leverage, supported by the stability of the
infrastructure model.
Linkages with Alfa: Fitch rates Axtel on a stand-alone basis and
does not give any uplift due to parent/subsidiary linkages with
parent Alfa S.A.B. de C.V. (BBB-/Stable). Therefore, Axtel's
ratings are unaffected by Alfa's plans to spin off multiple units.
DERIVATION SUMMARY
Axtel's ratings are not influenced by Mexico's Country Ceiling
(BBB+) or operating environment scores. Fitch rates Axtel on a
standalone basis, and does not give any uplift due to
parent/subsidiary linkages with Alfa S.A.B. de C.V. (Alfa,
BBB-/Stable).
Axtel has lower financial leverage compared with WOM S.A.
(BB-/Stable), following the latter's dividend recapitalization.
Axtel and WOM are relatively undiversified carriers, both
service-wise and geographically. WOM benefits from the relative
health of the Chilean operating environment, as well as the more
balanced market, while Axtel's revenues are exposed to the slowing
Mexican economy.
Axtel has less service and geographical diversification than Cable
& Wireless Communications Limited (CWC, BB-/Stable), which offsets
the positive rating impact from Axtel's stronger capital structure.
CWC has a much stronger market position, as it operates primarily
in a series of duopoly markets, which supports stronger EBITDA
margins than Axtel's. CWC also benefits from its large scale, with
a B2B services and infrastructure division that generates 70% more
revenue than Axtel.
Relative to CWC's sister company, VTR Finance BV (BB-/Stable),
Axtel has a more comparable business position, given the two
companies' scale, fixed-line telecom focus, and lack of geographic,
product and service diversification. However, VTR has a much
stronger competitive position as a leader in the Chilean broadband
and pay-TV market. Axtel benefits from lower leverage than VTR.
Axtel's business profile could be considered similar to Empresa de
Telecomunicaciones de Bogota (ETB, BB+/Stable), in that both are
small scale undiversified fixed-line providers. ETB benefits from
lower net leverage (below 1.5x). Both companies are undergoing
transitions, as ETB attempts to reorient its product portfolio
around fiber-based solutions.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Revenues of MXN12.5 billion in 2021, growing 2%-4% thereafter.
-- EBITDA margins of 33%-37%, improving as the Axtel Networks
grows faster than Alestra.
-- Stable working capital, with cash taxes of MXN50 million-
MXN100 million.
-- Capex of USD99 million in 2021, and 15%-17% capital intensity
thereafter.
-- No dividends.
-- The sale of one or both units are not included in Fitch's base
case.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Debt / EBITDA of below 2.0x, supported by stable and growing
EBITDA margins and cash flow.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Debt / EBITDA above 3.5, due to weaker than expected operating
performance and higher than expected capex pushing down cash
flows.
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 Dec. 31, 2020, Axtel had readily
available cash and equivalents of MXN3.1 billion, against short
term debt of MXN1.6 billion. The company paid down its short-term
debt facilities in 1Q2021, partly using the remaining cash from the
2020 data center sale. Axtel's liquidity is supported by a
manageable amortization schedule and a revolving credit facility.
Improving cash flow generation as capex moderates and asset sale
proceeds reducing debt support the company's financial
flexibility.
SUMMARY OF FINANCIAL ADJUSTMENTS
-- Lease adjustments;
-- Reclassified certain operating expenses and working capital
items.
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.
=====================
P U E R T O R I C O
=====================
STONEMOR INC: To Release Q4, Full Year Results on March 23
----------------------------------------------------------
StoneMor Inc. expects to release full 2020 fourth quarter and full
year financial results on March 23, 2021 after the market
closes. In connection with this announcement, StoneMor plans to
hold a conference call to discuss its results later that day at
4:30 p.m. eastern time.
This conference call can be accessed by calling (877) 308-6987. No
reservation number is necessary; however, due to the on-going
pandemic, it is advised that interested parties access the call-in
number 5 to 10 minutes prior to the scheduled start time to avoid
delays. StoneMor will also host a live webcast of this conference
call. Investors may access the live webcast via the Investors page
of the StoneMor website www.stonemor.com under Events &
Presentations.
Joe Redling, StoneMor's president and chief executive officer said,
"Fourth quarter 2020 proved to be another strong quarter that
capped an exceptional year for StoneMor. I'm very proud of the way
our team has weathered the pandemic and the large disruptions to
our business brought about by Covid-19. These coronavirus related
aberrations began in the first quarter where a strong start to the
year was overshadowed by sudden and immediate lockdowns. Since
April, our team has regrouped and recalibrated, pulling together
some of the best performance in Company history."
"It's important to note that all of this happened while we were
initiating and executing on multiple turnaround initiatives and
strategic objectives. Some select examples include divesting most
of our west coast operations (with the handful remaining expected
to be completed in 2021), executing large corporate overhead cost
reduction initiatives and outsourcing most of our maintenance
operations. Through the aforementioned examples (plus many more
not listed), we were able to delever our balance sheet, increase
sales, and materially decrease costs. We now have a sustainable
and strong foundation that is built to last and will provide a
platform for StoneMor to build upon in the years to come."
"During the fourth quarter, we experienced double digit
year-over-year growth in cemetery sales production, marking a full
year of consecutive quarterly cemetery sales production growth
versus the prior year, and we see that momentum continuing into the
first quarter of 2021. We look forward to sharing more financial
information in a few weeks when we release our fourth quarter and
full 2020 financial results."
Jeff DiGiovanni, StoneMor's senior vice president and chief
financial officer, said, "With the continued strong performance on
both sales production and our cost reduction initiatives, along
with the current capital market conditions, we have begun exploring
refinancing options that would make sense for the Company and its
future.". "We expect that any refinancing would reduce interest
rates, while providing capital, financial flexibility and
opportunities for the growth phase of our transformation process."
About StoneMor Inc.
StoneMor Inc. (http://www.stonemor.com),headquartered in Bensalem,
Pennsylvania, is an owner and operator of cemeteries and funeral
homes in the United States, with 318 cemeteries and 88 funeral
homes in 27 states and Puerto Rico. StoneMor's cemetery products
and services, which are sold on both a pre-need (before death) and
at-need (at death) basis, include: burial lots, lawn and mausoleum
crypts, burial vaults, caskets, memorials, and all services which
provide for the installation of this merchandise.
The Company reported a net loss of $151.94 million for the year
ended Dec. 31, 2019, compared to a net loss of $72.70 million for
the year ended Dec. 31, 2018. As of Sept. 30, 2020, the Company
had $1.62 billion in total assets, $1.71 billion in total
liabilities, and a total owners' equity of ($87.21 million).
VAQUERIA ORTIZ: May 11 Plan Confirmation Hearing Set
----------------------------------------------------
On Dec. 7, 2020, debtor Vaqueria Ortiz Rodriguez Inc. filed with
the U.S. Bankruptcy Court for the District of Puerto Rico a
Disclosure Statement referring to a Plan.
On March 9, 2021, Judge Enrique S. Lamoutte approved the
Disclosure
Statement and ordered that:
* May 11, 2021, at 10:00 a.m. is the hearing for the
consideration of confirmation of the Plan and of such objections as
may be made to the confirmation of the Plan.
* Objections to claims must be filed 45 days prior to the
hearing on confirmation.
* Acceptances or rejections of the Plan may be filed in
writing by the holders of all claims on/or before 14 days prior to
the date of the hearing on confirmation of the Plan.
* Any objection to confirmation of the Plan will be filed
on/or before 21 days prior to the date of the hearing on
confirmation of the Plan.
A full-text copy of the order dated March 9, 2021, is available at
https://bit.ly/3vpRcat from PacerMonitor.com at no charge.
Attorney for the Debtor:
Homel A. Mercado Justiniano
Calle Ramirez Silva
Ensanche Martinez
Mayaguez, PR 00680
Tel: (787) 831-3577/ 805-2945
Fax: (787) 805-7350
E-mail: hmjlaw2@gmail.com
About Vaqueria Ortiz Rodriguez
Vaqueria Ortiz Rodriguez, Inc., is a Dairy Farm that has been
established for more than 15 years in the north town of Arecibo,
Puerto Rico. It operates a raw milk dairy farm who sells its
production to Suiza Dairy Corp.
Vaqueria Ortiz Rodriguez previously sought bankruptcy protection
(Bankr. D.P.R. Case No. 16-00063) on Jan. 11, 2016.
Vaqueria Ortiz Rodriguez again sought protection under Chapter 11
of the Bankruptcy Code (Bankr. D.P.R. Case No. 19-01386) on March
14, 2019. In the petition signed by Carlos Horacio Ortiz Colon,
president, the Debtor disclosed $1,674,040 in assets and $3,686,701
in liabilities. The case is assigned to Judge Enrique S. Lamoutte
Inclan. Homel Mercado Justiniano, Esq., is the Debtor's counsel.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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