/raid1/www/Hosts/bankrupt/TCRLA_Public/210406.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, April 6, 2021, Vol. 22, No. 63
Headlines
A R G E N T I N A
ARGENTINA: Crisis Pushes Poverty Rate Up to 42%
NACION SEGUROS: Fitch Ups IFS Rating to CCC, Then Withdraws Rating
B A R B A D O S
BARBADOS: New Minimum Wage Takes Effect
B E R M U D A
NABORS INDUSTRIES: Egan-Jones Keeps CCC- Senior Unsecured Ratings
B R A Z I L
BRAZIL: Manufacturing Expansion Sector Slowed to 9Mo Low in March
BRAZIL: Oil Reserves Drop 6.7% in 2020, ANP Says
PETROLEO BRASILEIRO: Egan-Jones Keeps B- Senior Unsecured Ratings
C H I L E
AUTOMOTORES GILDEMEISTER: Fitch Lowers LT IDRs to 'C'
G U A T E M A L A
ENERGUATE TRUST: Fitch Affirms LT IDRs, USD330MM Bond Rating to BB‒
M E X I C O
MEXICO: Welcoming Tourist Wave Despite Fears of New Covid Spike
P U E R T O R I C O
ALAMO STRATEGIC: Files for Chapter 11 Bankruptcy Protection
S U R I N A M E
SURINAME: Fitch Downgrades LT Foreign-Currency IDR to 'RD'
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Crisis Pushes Poverty Rate Up to 42%
-----------------------------------------------
Buenos Aires Times reports that Argentina's poverty rate rose to 42
percent in the second half of 2020, pushed higher by the country's
three-year recession and the coronavirus crisis.
The figure, released by the INDEC national statistics bureau, means
that some 19 million people in Argentina are considered poor,
according to Buenos Aires Times. It is the country's highest rate
since 2004, emphasizing the dramatic impact of the global
coronavirus pandemic, the report notes.
The number of citizens living beneath the poverty line rose 1.1
percentage points from the first half of 2020. Gross domestic
product nosedived 9.9 percent in 2020, the worst annual decline
since the historic collapse in 2002, driven by strict lockdown
measures, the report discloses.
According to the bureau's calculations, based on a study of 31
large cities across the country, more than 4.7 million people or
10.5 percent of the population were living in extreme poverty at
the end of last year, the report relays. Approximately 31.6
percent of households -- or some 12 million people -- were below
the poverty line, unable to afford a basket of basic food and
essential items, concluded INDEC, the report discloses.
Poverty is defined as the inability to afford a basket of basic
food and services valued at some US$600 for a family of four.
People who cannot afford a basic basket of only food -- about
US$250 for a family -- are classified as indigent, the report
relays.
Runaway inflation, a severe economic collapse amid the coronavirus
pandemic, rising unemployment and the shuttering of thousands of
firms in urban centres had a strong impact on the population's
economic wellbeing, INDEC found, the report notes.
Around three million people slipped into poverty compared to the
previous year, with the rate rising 1.1 percent from the 40.9
percent rate registered at the end of the Mauricio Macri
administration's time in office, the report says.
Year-on-year the comparison is even more devastating: a 6.5
percentage point rise from 2019 to 2020, the report discloses.
The spike in poverty has exacerbated inequalities. In wealthier
Buenos Aires City, 16 percent of residents live in poverty, while
in the Conurbano, the densely populated ring that surrounds Buenos
Aires City, 51 percent are considered poor, with 15.2 percent
classified as destitute, the report relays.
The most impoverished region in Argentina in the second half of
2020 was Gran Resistencia in Chaco Province, where 53.6 percent
were considered poor, the report notes. Concodia, in Entre Rios
Province recorded a rate of 49.5 percent.
Sounding the alarm, INDEC warned that poverty was unfairly
afflicting the country's youngest citizens, the report relays.
According to the bureau, 57.7 percent of children aged under 14,
some 6.3 million people, are now considered poor, the report notes.
"The highest growth in relation to the previous semester was
observed in this group with an increase of 1.4 pp [percentage
points]; and in the group [aged] from 30 to 64, with a rise of 1.0
pp. The total percentage of poor people for the groups aged 15 to
29 years and from 30 to 64 years was 49.2 percent and 37.2 percent,
respectively," read the report, Buenos Aires Times discloses.
Reacting to the report, Labour Minister Claudio Moroni described
its findings as "a disaster."
"What we have to see is the way out. And the I think the way out is
to have a developmental model that creates employment," he added.
Argentina spent heavily on Covid welfare programmes, printing an
estimated 1.7 trillion pesos (US$18.5 billion) to cover pandemic
aid, according to Bloomberg, Buenos Aires Times notes.
Moroni said the government's welfare payments "serve for situations
like this," though he stressed "they are not an exit mechanism [out
of poverty," Buenos Aires Times relays.
The head of the labor portfolio said the country had suffered "we
had a loss of formal employment of almost four points" last year,
but that things would improve in the coming months. Buenos Aires
Times notes.
"January 2021 was the first month of month-on-month growth in
formal employment," he stressed, adding that informal employment
"fell during the pandemic, but is now recovering a lot," he added.
Argentina's highest-ever poverty rate of 58 percent was recorded at
the end of 2002, during the 2001-2002 economic crisis, Buenos Aires
Times adds.
About Argentina
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.
NACION SEGUROS: Fitch Ups IFS Rating to CCC, Then Withdraws Rating
------------------------------------------------------------------
Fitch Ratings has upgraded the Insurer Financial Strength (IFS)
ratings of Nacion Seguros S.A. (Nacion Seguros), Nacion Reaseguros
S.A. (Nacion RE) and Nacion Seguros de Retiro S.A. (Nacion Retiro)
to 'CCC' from 'CC' and simultaneously withdrawn the ratings.
The companies' ratings are based on a group approach given Fitch's
opinion of the strategic importance to their ultimate parent, Banco
de la Nacion Argentina (BNA). The upgrade reflects Fitch's updated
view of the operating environment for Argentinian financial
institutions following the upgrade of Argentina's Long-Term Issuer
Default Rating (IDR) to 'CCC' from 'CC'.
Fitch has chosen to withdraw Nacion's rating due to commercial
reasons. Accordingly, Fitch will no longer provide ratings or
analytical coverage of the company.
KEY RATING DRIVERS
Fitch considers the three Nacion insurance companies core
subsidiaries of BNA. The latter is a large state-owned bank whose
liabilities are guaranteed by the Argentinian government.
Fitch currently rates Argentina's Foreign-Currency Long-Term IDR at
'CCC'. Argentina's rating reflects continuing weakness in debt
repayment capacity following its September 2020 bond
restructurings, and acute political uncertainty that clouds
prospects for an improvement. In Fitch's view, these entities'
ratings are constrained by the low IDRs of Argentina and the
still-volatile economic and operating environment.
Although Fitch does not rate BNA, the insurance subsidiaries are
rated based on a group approach where the rating fully reflects the
strengths and weaknesses of the group members. The insurance
companies benefit from the bank's large distribution channels,
brand recognition and leadership position in the Argentinian
banking industry.
RATING SENSITIVITIES
Rating sensitivities do not apply as the ratings have been
withdrawn.
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
Nacion Seguros has an ESG Relevance Score of '4' for Governance
Structure due to exposure to board independence and effectiveness,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors. The parent, BNA,
is not rated by Fitch, and therefore does not have an ESG Relevance
Score. Following the rating withdrawals, Fitch will no longer be
providing the associated ESG Relevance Scores for Nacion Seguros.
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.
===============
B A R B A D O S
===============
BARBADOS: New Minimum Wage Takes Effect
---------------------------------------
RJR News reports that Barbados's new minimum wage took effect
despite concerns expressed by the private sector that the timing is
wrong.
Prime Minister Mia Mottley told a press briefing that the planned
increase from BDS$6.25 to BDS$8.50 per hour would proceed,
according to RJR News.
Ms. Mottley said the government was spending significant sums in
both grants and loans to support the tourism sector and others in
society, and those at the very edge of the margin could not be left
out, the report notes.
The Barbados Private Sector Association had called for the
government to delay the implementation until January next year, to
give businesses a chance to bounce back from the losses caused by
the ongoing COVID-19 pandemic, the report adds.
About Barbados
Barbados is an eastern Caribbean island and an independent British
Commonwealth nation. Standard & Poor's credit rating for Barbados
stands at B- with stable outlook (January 2020). Moody's credit
rating for Barbados was last set at Caa1 with stable outlook (July
2019).
=============
B E R M U D A
=============
NABORS INDUSTRIES: Egan-Jones Keeps CCC- Senior Unsecured Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company, on March 22, 2021, maintained its
'CCC-' foreign currency and local currency senior unsecured ratings
on debt issued by Nabors Industries Ltd. EJR also maintained its
'C' rating on commercial paper issued by the Company.
Headquartered in Hamilton, Bermuda, Nabors Industries Ltd., is a
land drilling contractor, and also performs well servicing and
workovers.
===========
B R A Z I L
===========
BRAZIL: Manufacturing Expansion Sector Slowed to 9Mo Low in March
-----------------------------------------------------------------
Rio Times Online reports that the pace of expansion in Brazil's
manufacturing sector slowed sharply in March, to its slowest since
June last year, a survey of purchasing managers' activity showed,
due to the COVID-19 pandemic resurgence and new lockdown
restrictions.
The rampant second wave of the virus and its record numbers of new
cases and fatalities triggered a decline in new orders, forcing
companies to lower production, employment and their forecasts for
the coming year, IHS Markit's latest purchasing managers index
(PMI) report showed, according to Rio Times Online.
The headline PMI fell to 52.8 in March, the report relays.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
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.
BRAZIL: Oil Reserves Drop 6.7% in 2020, ANP Says
------------------------------------------------
The Rio Times reports that Brazil's proven reserves (1P) of oil
fell 6.7% in 2020, compared to 2019. According to data from the
National Agency of Petroleum, Natural Gas and Biofuels (ANP), 11.89
billion barrels were declared last year.
The ANP points out that the impacts of the Covid-19 pandemic on the
development of oil and gas exploration and production projects, and
the record production registered in 2020, help explain the drop in
reserves, notes the report.
In general, the volume of reserves is negatively impacted by
production during the year and positively impacted by additional
reserves from new development, says The Rio Times.
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.
PETROLEO BRASILEIRO: Egan-Jones Keeps B- Senior Unsecured Ratings
-----------------------------------------------------------------
Egan-Jones Ratings Company, on March 22, 2021, maintained its 'B-'
foreign currency and local currency senior unsecured ratings on
debt issued by Petroleo Brasileiro S.A. EJR also maintained its 'B'
rating on commercial paper issued by the Company.
Headquartered in Rio de Janeiro, State of Rio de Janeiro, Brazil,
Petroleo Brasileiro S.A. - Petrobras explores for and produces oil
and natural gas.
=========
C H I L E
=========
AUTOMOTORES GILDEMEISTER: Fitch Lowers LT IDRs to 'C'
-----------------------------------------------------
Fitch Ratings has downgraded Automotores Gildemeister S.p.A.'s (AG)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
to 'C' from 'CC'. AG's senior secured notes were affirmed at
'C'/'RR5', which reflects its below average recovery prospects.
The downgrades to 'C' follow AG's announcement that it will
initiate a reorganization and restructuring of their debt under a
Pre-packaged Chapter 11 protection framework in the U.S. This
process will result in material changes in the terms and conditions
of its debt. The company's IDR will be downgraded to 'D' once the
Chapter 11 is filed. Once the company exits the administration
proceedings, Fitch will assess its strategy and restructured
financial profile and re-rate AG accordingly.
KEY RATING DRIVERS
Voluntary Reorganization Proceedings: AG announced on April 1, 2021
that it will file for bankruptcy protection from its creditors in
light of the effects of the coronavirus on its already deteriorated
business profile. The company will soon file a pre-packaged plan of
reorganization in order to restructure its debt obligations under
Chapter 11 of the U.S. Bankruptcy Code, which means that the
company already has commitment from the necessary bondholders to
approve the restructuring, and it does not require unanimous
consent. To this end, AG has called an extraordinary shareholders'
meeting for April 9. The company expects to file for reorganization
in the U.S. during the first half of April.
High Credit Risk: AG's restructuring process comes from its
continued high leverage and weak liquidity profile. The company
faced a sharp decline in the sales of units in 2020 due to the
pandemic, with uncertainty on the speed of recovery going forward.
The company will need to grow EBITDA and successfully execute its
asset disposal plan to improve financial flexibility and leverage
profile after the restructuring process. In recent years, the
industry exhibited aggressive and opportunistic behavior by new
entrants, with historical top players losing market share in these
markets due to a lack of major barriers to entry.
Pandemic Impact: AG sold 57,324 units in 2019, a 14% decline from
2018 levels. By 2020, Fitch expects a drop in the number of units
sold of approximately 30%. Due to declining sales, Fitch expects AG
to exhibit negative EBIT margins in 2020.
AG has an ESG Relevance Score of '5' for Management Strategy due to
its track record of recurring operational and debt restructuring
processes during the past years, due to challenges the company has
faced in implementing its strategy and maintaining competitive
positions within its key markets. AG's below-average execution of
its strategy has contributed to a materially weaker operational
performance and unsustainable capital structure.
AG also has an ESG Relevance Score of '5' for Group Structure due
to the strong influence on AG's owners on its management, which has
resulted in decisions related to the company's operational and
financial strategies that have been made to the detriment of its
creditors. Both the ESG Relevance Score of '5' for Management
Strategy and Governance Structure have resulted in the company
entering into a debt restructuring process for a second time during
the last five years.
DERIVATION SUMMARY
AG announced that will be filling for Chapter 11 in 2Q21. This was
after two debt exchange offers completed by the company during the
last five years. AG presents high leverage, negative FCF generation
and tight financial flexibility. AG benefits from its exclusive
agreement to distribute Hyundai cars in Peru and Chile. The ratings
factor in AG's high business risk. The automotive retail industry
is sensitive to adverse economic conditions and to the volatility
of consumer demand, which is influenced by consumer confidence,
discretionary spending, interest rates, credit availability and FX
currency rates. AG also faces intense competition from other car
manufacturers and distributors.
Fitch does not have direct rated peers for the company. AG's
closest peers in other sectors include Brazilian fleet and car
rental industry leaders, Localiza Rent a Car S.A. (BB/Negative) and
JSL S.A (BB-/Stable), which is considered to have less volatile
industry risk. Both companies enjoy higher profitability and scale
than AG. No country ceiling, parent/subsidiary or operating
environment aspects have an impact on AG's IDR.
KEY ASSUMPTIONS
-- Revenues decline by 30% in 2020;
-- Negative EBITDA in 2020;
-- 2021 units sales at levels of around 90% of 2019 levels.
KEY RECOVERY RATING ASSUMPTIONS
Fitch has performed a going-concern recovery analysis for AG based
on the assumption that the company would be reorganized rather than
liquidated. Key going-concern assumptions include the following:
-- AG would have a going-concern EBITDA of about USD16 million.
The going-concern EBITDA estimate reflects Fitch's view of a
sustainable, post-reorganization EBITDA level upon which Fitch
bases the valuation of the company.
-- A distressed multiple of 5.7x due to the exposure to the auto
industry sector and the company's position as the sole
distributor of the Hyundai brands in Peru and Chile. The
recovery performed under this scenario resulted in a recovery
rating of 'RR5' for the secured notes due in 2025.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch will rate AG following its exit from the administration
proceedings based on its new strategy and financial profile.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- If the senior notes enter into default before the company
files for Chapter 11, the IDR will be downgraded to 'RD'. The
filing of Chapter 11 will result in the IDR being downgraded
to 'D'.
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.
ESG CONSIDERATIONS
AG has an ESG Relevance Score of '5' for Management Strategy due to
its track record of recurring operational and debt restructuring
processes during the past years, due to challenges the company has
faced in implementing its strategy and maintaining competitive
positions within its key markets. AG's below-average execution of
its strategy has contributed to a materially weaker operational
performance and unsustainable capital structure.
AG also has an ESG Relevance Score of '5' for Group Structure due
to the strong influence on AG's owners on its management, which has
resulted in decisions related to the company's operational and
financial strategies that have been made to the detriment of its
creditors. Both the ESG Relevance Score of '5' for Management
Strategy and Governance Structure have resulted in the company
entering into a debt restructuring process for a second time during
the last five years.
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.
=================
G U A T E M A L A
=================
ENERGUATE TRUST: Fitch Affirms LT IDRs, USD330MM Bond Rating to BB‒
---------------------------------------------------------------------
Fitch Ratings affirmed ENERGUATE Trust's Long-Term Local and
Foreign-Currency Issuer Default Ratings (IDRs) at 'BB‒' and the
rating for its USD330 million bond due in 2027 at 'BB‒'. The
Outlook for the IDRs is Stable.
Energuate's ratings reflect the combined operations of the
distribution companies, Distribuidora de Electricidad del Oriente
S.A. and Distribuidora de Electricidad del Occidente S.A., and
primarily reflect its strong linkage to the government of Guatemala
(BB‒/Stable) due to the company's high dependence on government
subsidies for cash flow generation. During 2020, 87% of the
company's EBITDA originated from subsidies, compared with 70% in
2019, due to additional support from the government during the
coronavirus pandemic.
Additionally, the ratings reflect the company's natural monopoly in
its concession area, partially offset by its small size in
socioeconomically unstable regions. This creates a challenging
environment to maximize profitability and operational efficiency.
KEY RATING DRIVERS
High Government Counterparty Risk: Historically, government
subsidies have comprised a large portion of Energuate's cash flow.
At certain months during the pandemic, the government raised its
subsidy eligibility to consumption of up to 300kWh from the usual
88kWh. This measure increased the participation of subsidies to
USD120.7 million or 87% on EBITDA from USD88.0 million or 70% in
2019, which is considered material and supportive of the linkage
with the government.
VAD Tariff Increase Supports Cash Flow: The Ministry of Energy and
Mines and the National Electric Energy Commission reviewed the
value added from distribution (VAD) tariff to USD247 million
effective May 2020 as a follow up from the five-year tariff review
in June 2019. Energuate's gross margin is mainly dictated by the
VAD charges, as energy, capacity and transmission components of the
regulated tariffs are pass-through. The VAD charge tariffs are set
to cover operating expenses, capex and the cost of capital of a
model-efficient distribution company. The tariff is revised every
five years with semi-annual adjustments for inflation and local
currency exchange rates against the U.S. dollar.
Challenging Structural Inefficiencies: The strained socioeconomic
condition of rural Guatemala has several operational consequences
for Energuate, including high energy theft, violent crime that
prevents regular maintenance of its network and an underdeveloped
formal economy, resulting in reduced collection rates. In an
attempt to address some of these challenges, Energuate expects to
maintain its internally funded capex for the foreseeable future.
Pursuing technological improvements to reduce energy theft and
improve response times when it occurs will receive particular
emphasis.
Leverage Trending Downward: Fitch expects Energuate's gross
leverage to decline to 2.0x-2.5x in the medium term from its
current 3.1x due to VAD improvement and scheduled amortization of
its USD120 million local loan. Leverage decreased to 3.1x in 2020
from 4.1x in 2018 due to growth in energy sales and reduced
operating expenses. Fitch expects the company to continue investing
in anti-theft initiatives, although improvements in energy losses
may prove to be challenging. Fitch estimates a 1% energy loss
reduction translates to an additional USD5 million of EBITDA.
Geographic Factors Discourage Competition: Energuate's concessions
include 20 of 22 departments in Guatemala - all except metropolitan
Guatemala City and Sacatepéquez. This mitigates risks related to
the non-exclusivity of the concession. The companies operated
71,768km of distribution lines delivering 3,447GWh of electricity
in 2020 across an area of approximately 91,316sq km. The company
has two million regulated customers, and its concession area
encompasses 12 million people, or 73% of Guatemala's population.
Given low population density and the high investment requirements
to reach new clients, material competition is unlikely.
Strategic Cost Savings Initiatives: Energuate energy losses
increased to 20.1% in 2020 from 19.4% in 2019. The deterioration
reflects customer cut off prohibition and lower demand for tolls
and major customers during the pandemic. The applied tariff
compensates for 15% of energy losses, and anything above that level
is the company's loss. The company plans to continue installing
anti-theft distribution lines to reduce energy losses to around
18.1% by 2024. Naturally occurring losses are higher than the
typical electricity distribution company due to the distances
electricity travels between customers in less-populated rural
areas. In 2020, Energuate economic losses due to conflict zones,
primarily in the western region, was at 73 thousand users and is
expected to decline to 58 thousand users in 2021.
Strategic Importance to Its Parent: As part of Nautilus Inkia
Holdings SCS's portfolio of Latin American assets, Energuate adds
material cash flows and business diversification to its
consolidated profile. During 2020, Fitch estimates Energuate
represented around 24% of the group's EBITDA. Energuate is a
significant component of Inkia's assets that provides a subordinate
guarantee to Inkia's USD600 million 2027 bond. I Squared Capital's
acquisition of Inkia in 2017 reduces the likelihood of
opportunistic cash extraction from Energuate as it executes key
investments to improve operational sustainability. Additionally,
Energuate's parent company plans to adjust its dividends in light
of changes to projected cash flow.
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.
DERIVATION SUMMARY
Energuate's profitability continues to compare favorably with
regional peers, including AES El Salvador Trust II (AES SLV;
B-/Negative) and Elektra Noreste, S.A. (ENSA; BBB/Stable). Its
EBITDA margin improved to 22.4% in 2020, higher than that of peers,
which tend to have EBITDA margins of 13%‒14%. Energuate's
leverage improved to 3.1x in 20120 and is higher but comparable to
the 3.4x for AES SLV and 3.1x for ENSA. The distribution model
generally supports higher leverage than other industries, and
Energuate's deleveraging trajectory is in line with the 'BB'
category. Similar to AES SLV, Energuate derives a material
component of its cash flow from government subsidies. In contrast
to the Salvadoran government, the government of Guatemala has
maintained a strict 30-day payment cycle. Nevertheless, an
increasingly fraught political environment exposes Energuate to
government counterparty risk as its central rating sensitivity.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Average energy losses of 19% in the next four years;
-- Approximately 58,000 new customers per year;
-- Inflation of around 3%, in line with historical figures;
-- Minimal FX fluctuation, reflecting Guatemala's managed float;
-- Dividends paid on cash averaging USD60 million in the next
four years;
-- Average capex of around USD51 million annually through the
medium term.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Considering Energuate's geographically limited operations and
fundamental exposure to macroeconomic conditions, an upgrade
is unlikely barring a positive rating action on the sovereign
in combination with sustained debt/EBITDA below 3.5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade to Guatemala's sovereign rating;
-- A significant weakening in the country's electricity
regulation system, either regarding tariff adjustments or a
material change in subsidies received by Energuate;
-- Weaker operational results due to higher than expected energy
losses and lower than anticipated tariff increase in 2024;
-- A downgrade of Energuate's parent, Inkia, coupled with
significant interference in Energuate's capital structure;
-- Sustained debt/EBITDA of 5.5x or greater.
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: Energuate's liquidity is supported by stable
cash flow generation, comfortable amortization profile and
committed credit lines. Its main financial obligation is a USD330
million bond due in 2027. The company also has local
currency-denominated outstanding loans of USD105 million. As of
December 2020, the company maintained committed credit facilities
of USD40 million, of which USD40 million was available, and
available uncommitted facilities of USD30 million to cover
potential liquidity shortfalls should trade collections lag.
Energuate plans to adjust dividends to shareholders to match future
cash flow. Fitch expects the company's 2027 bond to be rolled over
upon maturity.
===========
M E X I C O
===========
MEXICO: Welcoming Tourist Wave Despite Fears of New Covid Spike
---------------------------------------------------------------
San Diego Union Tribune reports that tourist destinations in
Quintana Roo, on Mexico's Caribbean coast, are operating at 60
percent of their capacity but expect to welcome at least 600,000
tourists within the next two weeks of vacation despite fears of a
new spike in the Covid-19 pandemic.
The arrival of national and international travelers has alerted
local authorities, who are keeping the open-door policy in place
with an eye toward reactivating the economy despite acknowledging
the up to 200 percent increase in confirmed coronavirus cases in
towns like Isla Mujeres and Felipe Carrillo Puerto, according to
San Diego Union Tribune.
In the face of this scenario, the state government announced
"sanitary bubbles" in zones like Cancun, the Riviera Maya, and
Tulum, promising that there will be spaces free of Covid-19 to
provide security for visitors bearing a Covid-free certificate for
tourist service providers, the report notes.
But this program, which was launched last year, has only attracted
250 companies out of more than 2,000 establishments, the report
discloses.
Mexico is the No. 3 country in terms of Covid-19 deaths with more
than 201,000 fatalities, along with 2.2 million confirmed cases,
the report relays.
But it was also the third-most-visited country in the world in
2020, when its tourist GDP contracted by 28 percent, although it
welcomed more international tourists than other nations because of
its lax restrictive measures which never included suspending
flights, implementing quarantines, or obligatory testing, the
report notes.
Proof of this is the controversy surrounding the 44 Argentine
students who tested positive for Covid-19 upon arriving back in
their country in mid-March after vacationing in Cancun, where they
underwent fake testing to show they were "Covid-free" at two
unlicensed laboratories, the report discloses.
Mexican authorities have promised to review all negative-Covid
certificates but so far they have only closed the two labs
identified in the Argentine case, the report relays.
In an interview with EFE, Javier Aranda, the executive director of
the Hotel Association of Cancun, Isla Mujeres, and Puerto Morelos,
said that they are working to raise awareness among visitors, the
report notes.
"If we look at the experience in the case of the Argentine
tourists, there are young people who sometimes . . . are not aware
that they should be a little more careful," he said, notes the
report.
He added that adhering to the safety precautions is the
"responsibility of the people who come here."
"Even when you continue these protocols, and even when they are
followed with commitment and responsibility, no company can
guarantee 100 immunity," he said, the report adds.
Mexico's main tourist destination is also facing the negative
repercussions on the tourist trade of a recent shootout in a bar
that left one person dead and three wounded, a reminder that the
security crisis is still ongoing, the report notes.
Despite the active threat of the pandemic, local businessmen are
hoping to boost the economy after the annualized 8.2 percent drop
in GDP last year, the report relays.
The private sector is hoping for seven million tourists at
different Mexican tourist destinations who will spend some 26.5
billion pesos (about $1.325 billion), according to the
Cocanaco-Servytur national chambers of commerce, services, and
tourism, the report relays.
"We're going to be talking about more than 100,000 people each day,
and that's going to be within the first few days, and at the peak,
we're talking about almost 105,000 people, a little more on the
Thursday through Sunday of Holy Week," Aranda said, notes the
report.
On Gaviota Azul beach, located in Punta Cancun, EFE found examples
of people who had lost their regular livelihoods, like the members
of the Salvaje Banda Vakeros musical band who before the pandemic
performed at social events but now just play on the public streets
for the contributions they can get, the report relays.
Health authorities in Quintana Roo will begin an anti-Covid
vaccination campaign for elderly adults and plan to administer
13,000 doses, adds the report.
=====================
P U E R T O R I C O
=====================
ALAMO STRATEGIC: Files for Chapter 11 Bankruptcy Protection
-----------------------------------------------------------
Jessica Corso of San Antonio Business Journal reports that the San
Antonio company, Alamo Strategic Manufacturing Inc., that sells
gear to the U.S. military has filed for bankruptcy protection,
citing its inability to "service cumbersome debt obligations."
Alamo Strategic Manufacturing Inc. has been awarded at least two
military contracts since being founded in 2018 -- one for producing
knee and elbow pads and one for making cold-weather gloves,
according to U.S. Department of Defense records. The two contracts
total about $16 million.
The company informed a San Antonio federal court that it intends to
reorganize around $2 million in debt under Chapter 11 of the
Bankruptcy Code. The company told the court it had about $11,000
in cash on hand and over $700,000 in inventory but that it "is
unable to service cumbersome debt obligations and now seeks
relief from the bankruptcy court."
"The debtor intends to file a plan of reorganization that maximizes
the value of its assets and business for the benefit of creditors,"
the court filing said.
The filing didn't give details on why Alamo Strategies is
struggling to pay its bills, and the company didn't respond to
requests for comment.
Operating out of an office downtown and employing five people,
Alamo Strategic outsources the production of the gloves and pads to
factories in other parts of the U.S. Among its largest debt holders
are manufacturing facilities in New York state and Puerto Rico.
About Alamo Strategic
Alamo Strategic Manufacturing is company that sells military gear.
It is located in 700 N. Saint Mary's St. Suite 700 an Antonio, TX
78205.
The company filed for Chapter 11 bankruptcy protection (Bankr. W.D.
Tex. Case No. 21-50373) on March 31, 2021. The petition was signed
by CEO Rene H. Sosa. It estimated assets of between $0 to $50,000
and liabilities of between $1 million and $10 million.
The case is handled by Honorable Judge Craig A. Gargotta,
LANGLEY & BANACK, INC., led by Allen M. DeBard, is the Debtor's
counsel.
===============
S U R I N A M E
===============
SURINAME: Fitch Downgrades LT Foreign-Currency IDR to 'RD'
----------------------------------------------------------
Fitch Ratings has downgraded Suriname's Long-Term Foreign Currency
Issuer Default Rating (IDR) to 'RD' from 'C'. Suriname's Short-Term
Foreign Currency IDR is affirmed at 'C'.
The two issue ratings on Suriname's USD550 million notes due 2026
and USD125 million notes due 2023 on which the government has
defaulted were downgraded to 'D' from 'C' and then withdrawn for
the following reason: Bankruptcy of the rated entity, debt
restructuring or issue/tranche default.
KEY RATING DRIVERS
The downgrade of Suriname's IDR to 'RD' reflects the non-payment of
USD49.8 million of rescheduled external debt service on Suriname's
2023 and 2026 notes due March 31. This marks an event of default
under Fitch's criteria with respect to the sovereign's IDR as well
as the issue ratings of the affected securities (Global 2023 and
2026 notes).
Another USD25.4 million semi-annual interest payment is due April
26 on the Suriname 2026 notes. Altogether USD75.3 million total
debt service is due on Suriname's global bonds within the next 30
days.
The government of Suriname continues to negotiate with creditors
for a comprehensive restructuring of its external bonds, which has
been a protracted process. The national authorities are
concurrently pursuing a funded IMF program, but did not reach an
agreement in time to trigger an extension of the debt service
payment date by one month, as set out in the second consent
solicitation terms agreed in December 2020. In response to the
government of Suriname's consent solicitation issued March 17, the
third since June 2020, noteholders highlighted concerns that have
limited negotiation progress, and on March 31, the government of
Suriname extended the consent solicitation response deadline to
April 8.
As a consent solicitation would result in a further standstill of
debt service amid the broader debt restructuring process rather
than normalize payments to bondholders, Fitch expects the Long-Term
Foreign Currency IDR to remain at 'RD' even if creditors agree to
it. Should Suriname reach an agreement with noteholders resulting
in a comprehensive bond restructuring that supports Suriname's
near-term payment capacity, this would constitute a "distressed
debt exchange" (DDE) under Fitch's Sovereign Rating Criteria, and
would result in the upgrade of the sovereign's ratings out of 'RD'
to a level consistent with its credit fundamentals on a
forward-looking basis.
ESG - Governance: Suriname has an ESG Relevance Score of '5' for
both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption, as
is the case for all sovereigns. These scores reflect the high
weight that the World Bank Governance Indicators (WBGI) have in
Fitch's proprietary Sovereign Rating Model. Suriname has a medium
WBGI ranking at the 43rd percentile, reflecting a recent track
record of peaceful political transitions, a moderate level of
rights for participation in the political process, moderate
institutional capacity, established rule of law but a high level of
corruption.
ESG - Creditor Rights: Suriname has an ESG Relevance Score of '5'
for Creditor Rights as willingness to service and repay debt is
highly relevant to the rating and is a key rating driver with a
high weight, as evident in Suriname's protracted debt default and
restructuring process during 2020-2021.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Completion of a commercial debt restructuring that Fitch
judges to have normalized relations with the international
financial community.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Due to the rating being in Restricted Default, negative
actions are not applicable.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
In accordance with its rating criteria, Fitch's sovereign rating
committee has not utilized the SRM and QO to explain the ratings in
this instance. Ratings of 'CCC' and below are instead guided by the
rating definitions.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a Long-Term Foreign Currency IDR. Fitch's QO is a
forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating, reflecting
factors within Fitch's criteria that are not fully quantifiable
and/or not fully reflected in the SRM.
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.
KEY ASSUMPTIONS
Fitch expects the global economy to evolve in line with Fitch's
Global Economic Outlook forecasts.
DATA LIMITATIONS
-- The government of Suriname has exhibited recent material lags
in the publication of the central government operational,
finance accounts, and debt statistics after September 2020.
Fitch collects available, but incomplete, financial and debt
information from periodic government presentations. The data
used was deemed sufficient for Fitch's rating purposes.
ESG CONSIDERATIONS
Suriname has an ESG Relevance Score of '5' for Political Stability
and Rights as World Bank Governance Indicators have the highest
weight in Fitch's SRM and are highly relevant to the rating and a
key rating driver with a high weight.
Suriname has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGI have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and are a key rating driver with a
high weight.
Suriname has an ESG Relevance Score of '5' for Creditor Rights as
willingness to service and repay debt is highly relevant to the
rating and is a key rating driver with a high weight, as evident in
Suriname's protracted debt default and restructuring process during
2020-2021.
Suriname has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
WBGI is relevant to the rating and a rating driver.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, is a score of '3'. This means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity(ies), either due to their nature or to the way in which
they are being managed by the entity(ies).
*********
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 * * *