/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210528.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 Friday, May 28, 2021, Vol. 22, No. 101 Headlines B E R M U D A SEADRILL LIMITED: Taps Katten as Counsel for Independent Directors SEADRILL LIMITED: Weil Gotshal Updates on RigCo Lenders B R A Z I L BANCO PAN: S&P Hikes Global Scale ICR to 'BB-' Amid Banco BTG Deal LATAM AIRLINES: Azul SA Interested to Buy Brazil Ops, Source Says VALE SA: Selects Nextracker to Supply Smart Solar Trackers [*] BRAZIL: Machinery & Equipment Sector's Turnover Up 72% in April M E X I C O BANCO DEL BAJIO: Fitch Affirms 'BB+' IDRs, Outlook Negative GRUPO AXO: Fitch Assigns FirstTime 'BB' LT IDRs, Outlook Negative T R I N I D A D A N D T O B A G O ASSOCIATED BRANDS: Closes Charles Candy Plant Due to Covid VENEZUELA: 93% of Industrial Sector Runs Out of Diesel, Union Says - - - - - ============= B E R M U D A ============= SEADRILL LIMITED: Taps Katten as Counsel for Independent Directors ------------------------------------------------------------------ Seadrill Limited and its affiliates seek approval from the U.S. Bankruptcy Court for the Southern District of Texas to employ Katten Muchin Rosenman, LLP as legal counsel to Steven Panagos and Jeffrey Stein who are both independent directors of the Debtors' board of directors. The firm will render legal services to the independent directors with respect to the Debtors' governance process and the disinterestedness of the Debtors' board, and will take all actions necessary for the independent directors to fulfill their fiduciary duties in connection with the Debtors' Chapter 11 cases. Katten will be paid at these rates: Partners $895 to $1,685 per hour Of Counsel $695 to $1,370 per hour Associates $495 to $930 per hour Paraprofessionals $200 to $620 per hour The firm will also be reimbursed for out-of-pocket expenses incurred. In accordance with Appendix B-Guidelines for reviewing fee applications filed by attorneys in larger Chapter 11 cases, Katten disclosed the following: Question: Did you agree to any variations from, or alternatives to, your standard or customary billing arrangements for this engagement? Response: No. Question: Do any of the professionals included in this engagement vary their rate based on the geographic location of the bankruptcy case? Response: No. Question: If you represented the client in the 12 months prepetition, disclose your billing rates and material financial terms for the prepetition engagement, including any adjustments during the 12 months prepetition. If your billing rates and material financial terms have changed postpetition, explain the difference and the reasons for the difference. Response: Not applicable. Question: Has your client approved your prospective budget and staffing plan, and, if so for what budget period? Response: The firm in conjunction with the independent directors, have developed a budget and staffing plan for these Chapter 11 cases for the period from May 1 to Oct. 31, 2021. Steven Reisman, Esq., a partner at Katten, disclosed in a court filing that the firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Steven J. Reisman, Esq. Katten Muchin Rosenman LLP 575 Madison Avenue New York, NY 10022 Tel: (212) 940-8800 Email: sreisman@katten.com About Seadrill Ltd. Seadrill Limited (OSE:SDRL, OTCQX:SDRLF) -- http://www.seapdrill.com/-- is a deepwater drilling contractor providing drilling services to the oil and gas industry. As of March 31, 2018, it had a fleet of over 35 offshore drilling units that include 12 semi-submersible rigs, 7 drillships, and 16 jack-up rigs. On Sept. 12, 2017, Seadrill Limited sought Chapter 11 protection after reaching terms of a reorganization plan that would restructure $8 billion of funded debt. It emerged from bankruptcy in July 2018. Demand for exploration and drilling has fallen further during the COVID-19 pandemic as oil firms seek to preserve cash, idling more rigs and leading to additional overcapacity among companies serving the industry. In June 2020, Seadrill wrote down the value of its rigs by $1.2 billion and said it planned to scrap 10 rigs. Seadrill said it is in talks with lenders on a restructuring of its $5.7 billion bank debt. Seadrill Partners LLC, a limited liability company formed by deep-water drilling contractor Seadrill Ltd. to own, operate and acquire offshore drilling rigs, along with its affiliates, sought Chapter 11 protection (Bankr. S.D. Tex. Lead Case No. 20-35740) on Dec. 1, 2020, after its parent company swept one of its bank accounts to pay disputed management fees. Mohsin Y. Meghji, authorized signatory, signed the petitions. On Feb. 7, 2021, Seadrill GCC Operations Ltd., Asia Offshore Drilling Limited, Asia Offshore Rig 1 Limited, Asia Offshore Rig 2 Limited, and Asia Offshore Rig 3 Limited sought Chapter 11 protection. Seadrill GCC estimated $100 million to $500 million in assets and liabilities as of the bankruptcy filing. Additionally, on Feb. 10, 2021, Seadrill Limited and 114 affiliated debtors each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the Court. The lead case is In re Seadrill Limited (Bankr. S.D. Tex. Case No. 21-30427). Seadrill Limited disclosed $7.291 billion in assets against $7.193 billion in liabilities as of the bankruptcy filing. In the new Chapter 11 cases, Kirkland & Ellis LLP is counsel for the Debtors. Houlihan Lokey, Inc., is the financial advisor. Alvarez & Marsal North America, LLC, is the restructuring advisor. The law firm of Jackson Walker L.L.P. is co-bankruptcy counsel. The law firm of Slaughter and May is co-corporate counsel. Advokatfirmaet Thommessen AS is serving as Norwegian counsel. Conyers Dill & Pearman is serving as Bermuda counsel. Prime Clerk LLC is the claims agent. SEADRILL LIMITED: Weil Gotshal Updates on RigCo Lenders ------------------------------------------------------- In the Chapter 11 cases of Seadrill Limited, et al., the law firm of Weil, Gotshal & Manges LLP submitted a supplemental verified statement under Rule 2019 of the Federal Rules of Bankruptcy Procedure, to disclose an updated list of Ad Hoc Group of RigCo Lenders. The Ad Hoc Group holding financial indebtedness arising under the following agreements: (a) $1.35 Billion 4 UDW Facility Credit Agreement; (b) $450 Million Eminence Facility Credit Agreement; (c) AOD Facility Credit Agreement; (d) $950 Million Eclipse/Carina Facility Credit Agreement; (e) Tellus Credit Agreement; (f) $1.50 Billion ECA II Facility Credit Agreement; (g) $2.0 Billion NADL Facility Credit Agreement; (h) $1.4 Billion Sevan Facility Credit Agreement; (i) $450 Million Jackup Facility Credit Agreement; and (j) $440 Million Telesto Facility Credit Agreement. On February 12, 2021, Counsel filed with the Court in these chapter 11 cases the Verified Statement Regarding Ad Hoc Group of Lenders Pursuant to Bankruptcy Rule 2019 (ECF No. 105). Pursuant to Bankruptcy Rule 2019(d), this Supplemental Verified Statement supplements the information provided in the Initial Verified Statement. As of May 21, 2021, members of the Ad Hoc Group and their disclosable economic interests are: Deutsche Bank AG Winchester House 1 Great Winchester Street London EC2N 2DB United Kingdom * Amount under $450 Million Eminence Facility Credit Agreement: $52,941,160 * Amount under $2.0 Billion NADL Facility Credit Agreement: $106,785,995 * Amount under Tellus Credit Agreement: $15,611,112 * Amount under AOD Facility Credit Agreement: $26,249,551 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $67,947,619 * Amount under $1.35 Billion 4 UDW Facility Credit Agreement: $100,625,000 * Amount under $1.50 Billion ECA II Facility Credit Agreement: $10,714,289 * Amount under $950 Million Eclipse/Carina Facility Credit Agreement: $32,286,016 * Amount under $450 Million Jackup Facility Credit Agreement: $14,398,825 * Amount under $440 Million Telesto Facility Agreement: $3,202,941 Bybrook Capital LLP Pollen House 10-12 Cork Street London W1S 3NP United Kingdom * Amount under $450 Million Eminence Facility Credit Agreement: $61,411,745 * Amount under $2.0 Billion NADL Facility Credit Agreement: $168,643,445 * Amount under $440 Million Telesto Facility Agreement: $3,521,765 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $58,016,964 * Amount under $1.35 Billion 4 UDW Facility Credit Agreement: $78,224,999 * Amount under $950 Million Eclipse/Carina Facility Credit Agreement: $42,495,027 * Amount under $450 Million Jackup Facility Credit Agreement: $14,177,306 Attestor Capital LLP 7 Seymour Street London W1H 7JW United Kingdom * Amount under $450 Million Eminence Facility Credit Agreement: $10,588,232 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $18,005,952 * Amount under $1.35 Billion 4 UDW Facility Credit Agreement: $37,333,333 * Amount under $1.50 Billion ECA II Facility Credit Agreement: $21,428,952 * Amount under $950 Million Eclipse/Carina Facility Credit Agreement: $5,000,000 Alcentra Asset Management Ltd. 160 Queen Victoria Street London EC4V 4LA United Kingdom 200 Park Avenue 7th Floor New York, NY 10166 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $5,054,652 Capital Management LLP 7-8 Stratford Place London W1C 1AY United Kingdom * Amount under AOD Facility Credit Agreement: $12,448,523 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $4,000,000 Cross Ocean Partners Management LP and/or Cross Ocean Adviser LLP 20 Horseneck Lane Greenwich, CT 06830 * Amount under Telesto Facility Agreement: $3,202,941 * Amount under Tellus Credit Agreement: $2,694,445 * Amount under AOD Facility Credit Agreement: $41,170,666 * Amount under $1.35 Billion 4 UDW Facility Credit Agreement: $28,000,000 Taconic Capital Partners 55 Grosvenor Street, 4th Floor London W1K 3HY United Kingdom 280 Park Avenue, 5th Floor New York, NY 10017 * Amount under Tellus Credit Agreement: $2,138,889 * Amount under $950 Million Eclipse/Carina Facility Credit Agreement: $5,000,000 * Amount under $1.35 Billion 4 UDW Facility Credit Agreement: $18,666,667 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $27,008,928 Littlejohn & Co., LLC 8 Sound Shore Drive Greenwich, CT 06830 * Amount under $1.4 Billion Sevan Facility Credit Agreement: $6,700,000 * Amount under $950 Million Eclipse/Carina Facility Credit Agreement: $6,400,000 * Amount under $450 Million Jackup Facility Credit Agreement: $5,658,305 Counsel for Ad Hoc Group of RigCo Lenders can be reached at: WEIL, GOTSHAL & MANGES LLP Alfredo R. Perez, Esq. 700 Louisiana Street, Suite 1700 Houston, TX 77002 Telephone: (713) 546-5000 Facsimile: (713) 224-9511 E-mail: Alfredo.Perez@weil.com WEIL, GOTSHAL & MANGES LLP Matthew S. Barr, Esq. Sunny Singh, Esq. David J. Cohen, Esq. 767 Fifth Avenue New York, NY 10153 Telephone: (212) 310-8000 Facsimile: (212) 310-8007 E-mail: Matt.Barr@weil.com Sunny.Singh@weil.com DavidJ.Cohen@weil.com - and - WEIL, GOTSHAL & MANGES LLP Paul R. Genender, Esq. 200 Crescent Court, Suite 300 Dallas, TX 75201 Telephone: (214) 746-7700 Facsimile: (214) 746-7777 E-mail: Paul.Genender@weil.com A copy of the Rule 2019 filing, downloaded from PacerMonitor.com, is available at https://bit.ly/3wrIY1q About Seadrill Ltd. Seadrill Limited (OSE:SDRL, OTCQX:SDRLF) -- http://www.seapdrill.com/-- is a deepwater drilling contractor providing drilling services to the oil and gas industry. As of March 31, 2018, it had a fleet of over 35 offshore drilling units that include 12 semi-submersible rigs, 7 drillships, and 16 jack-up rigs. On Sept. 12, 2017, Seadrill Limited sought Chapter 11 protection after reaching terms of a reorganization plan that would restructure $8 billion of funded debt. It emerged from bankruptcy in July 2018. Demand for exploration and drilling has fallen further during the COVID-19 pandemic as oil firms seek to preserve cash, idling more rigs and leading to additional overcapacity among companies serving the industry. In June 2020, Seadrill wrote down the value of its rigs by $1.2 billion and said it planned to scrap 10 rigs. Seadrill said it is in talks with lenders on a restructuring of its $5.7 billion bank debt. Seadrill Partners LLC, a limited liability company formed by deep-water drilling contractor Seadrill Ltd. to own, operate and acquire offshore drilling rigs, along with its affiliates, sought Chapter 11 protection (Bankr. S.D. Tex. Lead Case No. 20-35740) on Dec. 1, 2020, after its parent company swept one of its bank accounts to pay disputed management fees. Mohsin Y. Meghji, authorized signatory, signed the petitions. On Feb. 7, 2021, Seadrill GCC Operations Ltd., Asia Offshore Drilling Limited, Asia Offshore Rig 1 Limited, Asia Offshore Rig 2 Limited, and Asia Offshore Rig 3 Limited sought Chapter 11 protection. Seadrill GCC estimated $100 million to $500 million in assets and liabilities as of the bankruptcy filing. Additionally, on Feb. 10, 2021, Seadrill Limited and 114 affiliated debtors each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code with the Court. The lead case is In re Seadrill Limited (Bankr. S.D. Tex. Case No. 21-30427). Seadrill Limited disclosed $7.291 billion in assets against $7.193 billion in liabilities as of the bankruptcy filing. In the new Chapter 11 cases, Kirkland & Ellis LLP is counsel for the Debtors. Houlihan Lokey, Inc., is the financial advisor. Alvarez & Marsal North America, LLC, is the restructuring advisor. The law firm of Jackson Walker L.L.P. is co-bankruptcy counsel. The law firm of Slaughter and May is co-corporate counsel. Advokatfirmaet Thommessen AS is serving as Norwegian counsel. Conyers Dill & Pearman is serving as Bermuda counsel. Prime Clerk LLC is the claims agent. =========== B R A Z I L =========== BANCO PAN: S&P Hikes Global Scale ICR to 'BB-' Amid Banco BTG Deal ------------------------------------------------------------------ S&P Global Ratings removed its ratings on Banco Pan S.A. from CreditWatch positive and raised its global scale issuer credit rating on Banco Pan to 'BB-' from 'B+'. S&P also raised its long-term national scale issuer rating to 'brAA+' from 'brAA'. The outlook for all ratings is stable. On May 19, 2021, regulatory authorities approved Banco BTG Pactual S.A.'s (BB-/Stable/B) acquisition of a full controlling stake in Banco Pan. On the transaction's conclusion, BTG Pactual owns 71.7% of Banco Pan's shares and fully consolidates the subsidiary under its structure. S&P's rating action follows the announcement that regulatory authorities approved the transaction in which Banco BTG Pactual agreed to buy all of Caixa Economica Federal's (CEF) stake in Banco Pan for R$3.7 billion. Prior to the deal, BTG Pactual was Banco Pan's controlling shareholder. Now, after acquiring Caixa's 49.2% voting stake, it has consolidated its control with 71.7% of Banco Pan's shares. Since the regulatory authorities approved the transaction, Banco Pan is now part of the conglomerate, with its capitalization viewed on a consolidated basis for regulatory purposes. As a result, S&P revised its assessment of Banco Pan's subsidiary status to core to its parent from strategically important. The acquisition underscores S&P's understanding of the expanding importance of Banco Pan to BTG Pactual. The subsidiary makes up a large part of the parent's ongoing strategy, and complements BTG's current wholesale and investment banking businesses, offering lending and digital banking facilities for the lower-income retail segment. LATAM AIRLINES: Azul SA Interested to Buy Brazil Ops, Source Says ----------------------------------------------------------------- Marcelo Rochabrun at Reuters reports that Brazilian airline Azul SA has approached Chile's bankrupt LATAM Airlines Group with the aim of buying its Brazilian operation, a source familiar with the situation told Reuters. Azul's shares rose more than 9% in Sao Paulo on the news, while LATAM's shares in Santiago, where the airline is listed, were down 20%, according to Reuters. LATAM filed for bankruptcy protection a year ago and, while it has secured new liquidity in that process, it has yet to present a formal restructuring plan, the report notes. Azul, controlled by JetBlue Airways Corp founder David Neeleman, said in a securities filing that it was ready to lead a wave of consolidation in the Brazilian airline industry, which has been devastated by the COVID-19 pandemic, the report relays. The report discloses that the newspaper Valor Economico also said Azul was trying to lure LATAM and talking to its aircraft lessors. A LATAM spokeswoman said the airline had not received any offer from Azul, that talks were not in progress and that LATAM had no intention of selling any of its parts, the report relays. In addition to extensive international routes, LATAM has domestic operations, not just in Brazil but also in Chile, Peru, Ecuador and Colombia, the report says. During the pandemic, Azul and LATAM developed a codeshare program to avoid competing in Brazil as the market shrank, which was blessed by regulators, the report notes. That program suddenly ended, which Azul said was a reaction to its consolidation plans, the report discloses. Industry analysts had said throughout 2020 that Azul might try to buy LATAM in Brazil, the report relays. The two airlines divide Brazil's market with a third carrier, Gol Linhas Aereas Inteligentes, the report adds. About LATAM Airlines Group LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. It is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as bankruptcy counsel, FTI Consulting as restructuring advisor, Lee Brock Camargo Advogados as local Brazilian litigation counsel, and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. T he Boston Consulting Group, Inc., and The Boston Consulting Group UK LLP serve as the Debtors' strategic advisors. Prime Clerk LLC is the claims agent. The official committee of unsecured creditors formed in the case tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters Jureller Southard & Stevens, LLP as conflicts counsel, UBS Securities LLC as investment banker, and Conway MacKenzie, LLC as financial advisor. Ferro Castro Neves Daltro & Gomide Advogados, is the committee's Brazilian counsel. The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as counsel. VALE SA: Selects Nextracker to Supply Smart Solar Trackers ---------------------------------------------------------- Vale S.A., one of the largest mining companies in the world, has chosen Nextracker to supply its NX Horizon(TM) bifacially optimized smart solar trackers for the Sol de Cerrado solar project in Minas Gerais, Brazil. The 766 megawatt (MWp) solar complex, which will be one of the largest in Brazil, will help power Vale's mining operations in the Jaíba area of Minas Gerais and will be interconnected to the regional transmission grid. Initial construction will begin later this year, with the project scheduled for completion in 2022. The project will play a major role in Vale's efforts to achieve its corporate sustainability goals. Once operational, the Sol de Cerrado solar project will provide 13 percent of the company's total energy needs in Brazil and offset GHG Protocol Scope 2 emissions by up to 136,407 tons of CO2/ year. The company plans to produce 100 percent of the energy needed for its Brazilian operations by 2025 and reach carbon neutrality across its global footprint by 2050. "Our decision was based on Nextracker's proven performance after a thorough due diligence process," said Marco Braga, Vale's Global Procurement Director. "We are very confident of Nextracker's experience and the reliability of its products to support Vale in solving the challenges of this important project." Nextracker's regional office in Brazil will support the project with engineering, commissioning, and asset management services as well as advanced data analytics for preventive maintenance. Installation crews will attend Nextracker's PowerworX Academy installer training program to learn best practices on site and at the company's training center in Sorocaba, São Paulo. "Vale's Sol de Cerrado project is yet another example of how the mining industry is embracing renewables as a reliable source of generation to power operations and offset greenhouse gas emissions," said Alejo Lopez, Nextracker vice president of sales for Latin America. "We look forward to working closely with Vale and deploying our smart solar trackers and software to maximize plant performance while minimizing operational costs for the 30-year-plus lifetime of the plant." The Sol de Cerrado project is the second major Brazilian market win for Nextracker this year and the latest addition to its growing portfolio in the country. The company also recently secured a contract to supply its bifacially optimized trackers to the 830 MW Janaúba solar project in Minas Gerais and is mining industry's solar tracker of choice in Australia. Brazil is one of the fastest-growing solar markets in the Latin American region, due in part to its high irradiation levels and solar-friendly policies. The country has 7.4 gigawatts of cumulative solar installations to date. Minas Gerais is the top Brazilian state for solar power capacity in the nation. Vale S.A. is a Brazilian multinational corporation engaged in metals and mining and one of the largest logistics operators in Brazil. As reported in the Troubled Company Reporter-Latin America in September 2019, Moody's Investors Service affirmed Vale S.A.'s Ba1 senior unsecured ratings and the ratings on the debt issues of Vale Overseas Limited, fully and unconditionally guaranteed by Vale S.A. Moody's also affirmed the Ba2 senior unsecured ratings of Vale Canada Ltd. The outlook changed to stable from negative. At the same time, Moody's America Latina Ltda. affirmed Vale's Ba1/Aaa.br corporate family rating and the Ba1/Aaa.br ratings on its senior unsecured notes. The outlook changed to stable from negative. [*] BRAZIL: Machinery & Equipment Sector's Turnover Up 72% in April ------------------------------------------------------------------- Rio Times Online reports that the Brazilian machine and equipment industry's turnover increased 72.2% in April compared to the same month last year, totaling R$16.6 (US$3.12) billion in 2021. Brazil's machinery and equipment sector's turnover up 72% in April In the past 12 months, sector sales totaled R$179 billion, an increase of 18.1%. The data were released today, May 26, by the Brazilian Association of Machinery and Equipment Industry (ABIMAQ), according to Rio Times Online. In the first 4 months of the year, the industry's revenue increased by 37.4% compared to the same period in 2020. The revenue from January to April totaled over R$62 billion, the report notes. "The road machinery sector has grown tremendously, and it has nothing to do with the pandemic. The infrastructure sector as a whole is growing, and the one that grew most was agriculture," said Jose Velloso, president of ABIMAQ, the report adds. 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. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. 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). =========== M E X I C O =========== BANCO DEL BAJIO: Fitch Affirms 'BB+' IDRs, Outlook Negative ----------------------------------------------------------- Fitch Ratings has affirmed Banco del Bajio S.A. Institucion de Banca Multiple's (BanBajio) Viability Rating (VR) at 'bb+' and its Long- and Short-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+' and 'B', respectively. Fitch also affirmed BanBajio's Support Rating (SR) and Support Rating Floor (SRF) at '4' and 'B+'. The Rating Outlook on the Long-Term ratings is Negative. Fitch has also affirmed BanBajio's and Financiera Bajio, S.A. de C.V. Sofom E.R.'s (FinBajio) Long- and Short-Term National scale ratings at 'AA(mex)' and 'F1+(mex)', respectively. The Outlook on the Long-Term ratings is Negative. BanBajio´s senior unsecured debt was also affirmed at 'AA(mex)'. KEY RATING DRIVERS IDRs, VR and National Ratings BanBajio's IDRs are driven by its VR which is highly influenced by the operating environment (OE), assessed by Fitch at 'bb+' with a negative trend. Despite BanBajio´s strong regional franchise with a consolidated business model focused on commercial clients, and specialized in SMEs and agribusiness, its moderate size also highly influences the ratings. Although the bank's good company profile has helped it weather the crisis, the Negative Outlook remains to reflect the persistence of downside OE risks due to the pandemic. The Negative Outlook also incorporates BanBajio´s relatively high international ratings with respect to the sovereign's IDRs (BBB-) and Fitch´s assessment of the OE, reflecting its view that the relativities in case of a sovereign/OE downgrade should be maintained due to its nature as a mid-sized and less-diversified bank. The ratings also factor in the bank's controlled asset quality and increased reserve coverage, sustained earning generation that underpins its good capitalization, and an appropriate funding and liquidity profile. The bank's asset quality has been characterized by lower NPL ratios than peers. Although NPLs' metrics deteriorated due to its exposure to sensitive segments (SMEs) and some industries particularly affected by the crisis (restaurants, construction and transport), the bank implemented preventive measures to contain deterioration, which combined with good levels of collateral, mitigate credit losses to some extent. As of March 2021, NPLs accounted for 1.1% of gross loans and 1.8% of gross loans including charge-offs. This compared favorably with the industry averages of 2.6% and 5%. BanBajio also increased its loan loss allowances to a high 207.4% of NPLs to face loan deterioration. Fitch does not rule out additional asset quality pressures given the still uncertain OE. However, the agency expects this deterioration to be manageable for the bank and its delinquency metrics will remain at levels consistent with the current rating. BanBajio's profitability metric declined to 2.5% at 1Q21 and 2.3% at YE20 compared with its pre-pandemic three-year average of 4.0%. A tighter net interest margin and prudential loan loss reserves to address any potential loan portfolio deterioration pressured the bank's earnings generation. BanBajio´s NIM ratio decreased to 4.0% at 1Q21 from the four-year average of 5.4%. Low interest rates and excess liquidity will continue to pressure net interest income, while additional credit costs are not ruled out. However, other non-interest income could improve and help the bank's earnings generation. Fitch expects the OE to continue to challenge the bank´s earnings, although this is expected to remain commensurate to the rating category. BanBajio´s improved capitalization measures as of 1Q21 provide sufficient loss absorption capacity and demonstrate the bank's capacity to generate internal capital despite lower earnings. The bank´s common equity Tier 1 (CET1) to risk-weighted assets (RWAs) ratio increased to 17.2% at 1Q21, from the four-year average of 16.2%. Fitch expects the bank's capitalization ratios to revert to historical levels as dividend payments resume and loan growth picks up. However, the agency also expects BanBajio´s capitalization to remain at reasonable levels and comparable with similarly rated local and international peers (mid-sized commercial banks). In Fitch's opinion, the bank´s funding and liquidity profile has benefitted from its growing deposit franchise as well as its reasonable diversification of funding sources. BanBajio´s funding and liquidity measures, as assessed by the loans-to-deposits ratio and LCR, remained adequate in 1Q21, supported by excess liquidity and deposit growth. As of March 2021, the loan to deposit ratio and LCR were 113.6% and 136.2%, respectively, levels that are similar to peers. BanBajio´s funding sources from development banks helps match term gaps between assets and liabilities. Additionally, the bank's level of liquid assets (cash and equivalents plus trading and available for sale securities) that covered 21.2% of deposits and short-term funding, also support the bank's profile. SR and SRF BanBajio's SR of '4' reflects Fitch's opinion of a moderate probability of sovereign support in case of need, given the bank's mid-size franchise and moderate market share of core customer deposits in the Mexican OE. At 1Q21, the market-share in deposits was around 3.0%. The SRF of 'B+' provides a floor for the bank's Long-Term IDRs as long as Fitch's assessment of the support factors does not change. Senior Debt Ratings BanBajio's senior unsecured national debt ratings are aligned with the bank's national scale ratings, as the likelihood of default is the same as the bank's ratings. FinBajio The national ratings of FinBajio are aligned with BanBajio's national ratings, based on Fitch's institutional support assessment that the subsidiary is core to the bank's strategy due to its relevant role in providing core products such as factoring and leasing, which complement the bank´s offering. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: BanBajio's IDRs, VR and National Ratings -- A material deterioration of the bank's financial performance that leads to a sustained decline in BanBajio's CET1 ratio below 13% and operating profit to RWAs ratio below 2%; -- Increased risks that pressure Fitch's assessment of the OE. SR and SRF -- These ratings could be downgraded if Fitch believes that the government's propensity to support the bank has declined, for example, due to a material loss in the market share of retail customer deposits. Senior Debt -- Any negative action on the bank's senior unsecured national debt ratings would mirror a negative action on BanBajio's IDRs. FinBajio -- Any negative action on FinBajio's national ratings would mirror a negative action on BanBajio's ratings. A modification of the entity's strategic importance to the bank could also affect FinBajio's ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: BanBajio's IDRs, VR and National Ratings -- The Negative Outlook could be revised to Stable if the impact of the pandemic on the bank's credit profile is well contained, which will also depend on BanBajio's ability to confront current challenges; -- The current Negative Outlook makes an upgrade highly unlikely in the near term; -- Over the medium term, an upgraded would depend on the confluence of an improvement of the OE and the financial profile of the bank. Specifically, if the bank significantly enhances its franchise while continuing to diversify its business model and maintain a healthy financial profile. SR and SRF -- Upside potential for BanBajio's SR and SRF is limited and can only occur over time with a material gain in the bank's systemic importance. Senior Debt -- An upgrade of the bank's senior unsecured national debt ratings would mirror any positive action on BanBajio's ratings. FinBajio's National Ratings -- Any positive movement in FinBajio's national ratings would mirror a positive action on BanBajio's national ratings. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. SUMMARY OF FINANCIAL ADJUSTMENTS Prepaid expenses and other deferred assets were classified as intangibles and deducted from total equity to reflect its low loss absorption capacity. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Financiera Bajio´s ratings are driven by BanBajio´s ratings. 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. GRUPO AXO: Fitch Assigns FirstTime 'BB' LT IDRs, Outlook Negative ----------------------------------------------------------------- Fitch Ratings has assigned first time Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) of 'BB' to Grupo Axo S.A.P.I. de C.V. (Axo). The Rating Outlook is Negative. Fitch has also assigned a 'BB' to Axo's proposed USD325 million senior unsecured notes. Proceeds will be used entirely to refinance existing debt. Fitch currently rates Axo's National Long-Term Rating 'A(mex)' with a Negative Outlook and its National Scale Short-Term Rating at 'F1(mex)'. The ratings reflect the company's business position as one of the main apparel operators in Mexico, supported by a diversified portfolio of well-known brands divided into four business segments: full-price, athletics, off-price and digital. The ratings also consider the company's long-term relationships with suppliers and real estate developers as well as its track record and understanding of its market. Axo's ratings also reflect its growth strategy through acquisitions funded with a combination of debt and equity capital increases. The Negative Outlook reflects the uncertainty regarding additional mobility restriction measures from the government to contain the pandemic and consumer discretionary spending concerns, which may delay deleveraging to levels that are commensurate with the rating by 2022-2023. Axo's total adjusted debt/EBITDAR is expected to be still high during 2021 and to gradually trend toward 4.0x by 2022-2023, assuming a sustained revenue and profitability recovery. A more prolonged or severe downturn could lead to negative actions. KEY RATING DRIVERS Leverage Weakened by the Pandemic: Non-food and specialty retailers were severely affected by the disruption of the coronavirus pandemic due to their reliance on physical stores to generate sales. The timing of vaccine deployment, economic environment and pressure on household incomes may continue affecting discretionary spending and impact the recovery speed of apparel and specialty retailers' revenues during 2021. Axo's consolidated revenues in 2020 declined 2.4% compared with the previous year, with EBITDA down almost 45% from 2019 (pre-IFRS 16). The digital segment mostly offset a significant decline in traditional business revenues (-28% in 2020). Fitch expects Axo's revenues and profitability to start recovering in 2021 with adjusted leverage moving toward low-4.0x in 2022-2023, depending on the speed of the recovery. CFFO to Strengthen: Fitch expects Axo's cash flow from operations (CFFO) to strengthen and present more stability in the upcoming years. During 2020, the company executed initiatives to mitigate the effects of the challenging operating environment on its financial profile. Some of these initiatives included capex reduction, operating efficiencies and inventory management, which resulted in a positive FCF during 2020. Axo's FCF could be negative in 2021 as the company is expected to recover gradually; this will be partially mitigated by effective working capital management and capex reductions. Starting in 2022 and going forward, Axo's CFFO will be above MXN800 million, with an average capex of MXN700 million per year during 2021-2024. Axo's FCF is expected to become neutral to positive starting 2022. Strong Brand Portfolio: Axo is one of the main operators of apparel, accessories and personal care products in Mexico operating 19 brands. It has the exclusive rights to commercialize internationally recognized brands products in the country. Its ample brand portfolio has allowed Axo to achieve economies of scale in logistics and has given it a competitive advantage with shopping mall developers compared with peers. The company has been diversifying its revenues in terms of brands. As of December 2020, the most important brand in its portfolio represented less than 15% of consolidated revenues, while in 2014 a single brand represented close to 50% of total revenues. Balanced Format Diversification: Axo maintains a diversified revenue base, which mitigates any downturn or secular trend affecting a specific segment. Full price and digital are expected to account close of a third of 2021 consolidated revenues each, off-price close to 20% and the rest by athletics. The company commercializes different product categories and operates various store formats to service different socioeconomic segments. This mitigates risks associated to a specific brand, product category and store format. During 2020, most of Axo's physical stores were affected by the mandatory lockdowns imposed by the government. However, Privalia, its off-price marketplace, showed outstanding results and grew nearly 45% in revenues, being the most resilient format for Axo during the pandemic. Acquisitions Credit Neutral: Axo's portfolio has evolved via acquisitions and strategic partnerships, which have strengthened the business and diversified operating cash flows by getting access to markets with significant growth potential. Despite being funded with a mix of debt and equity, some of these transactions have put some pressure on credit metrics during the first year of being acquired. Multibrand acquisition in 2015 increased Axo's market to the lower-middle segments of the population and added the off-price channel. Tennix acquisition in 2018 allowed Axo to increase its product offering by adding up the athletic category. In addition, Privalia's acquisition in 2019 strengthened Axo's omnichannel strategy, provided an innovative sales channel and allowed Axo to have a closer look of its customers. DERIVATION SUMMARY Axo is one of the most important apparel retailers in Mexico with a diversified portfolio of recognized brands. Axo has less scale and is less geographically diversified than peers such as Capri Holdings Ltd. (Capri) [BB+/Stable], Levi's Strauss (BB/Negative) and Tapestry Inc. (Tapestry; BB/Stable), whose operations are spread around the globe. However, Axo's revenues are more diversified in terms of brands, product categories and store formats than the rest of its peers. Similar to Capri and Tapestry, Axo has made acquisitions in recent years seeking to reduce its reliance on a few brands and diversify into other product categories and segments of the population. However, different from Capri and Tapestry, Axo's acquisitions have presented better operating performances and have reinforced Axo's market share in Mexico. Retailers' adjusted leverage metrics were impacted in 2020 by the significant disruption caused by the pandemic related measures. Deleverage for Axo is reliant on a sustained profitability recovery that will result in gross adjusted leverage close to 4x by 2022-2023. Fitch expects adjusted leverage to be around the low-4x for Tapestry and close to the mid-3.0x for Levi's in the coming quarters. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Revenue growth of 23% in 2021, 26% in 2022 and 11.2% in average per year during 2023 and 2024; -- EBITDAR margin (pre IFRS 16) of 17.1% in average per year during 2021-2024; -- No dividends received from minority interests; -- Dividend payments to minority interests of MXN86.4 million on average per year starting 2021; -- CFO above MXN600 million per year starting 2022; -- Capex of MXN734 million per year in average for 2021 to 2024; -- Average dividend payments of MXN75 million per year starting 2022; -- FCF neutral to positive for the next four years; -- Hypothetical acquisition in 2022. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Negative Outlook could be revised to Stable if there is more visibility in the company's ability to improve operating results and present an adjusted debt/EBITDAR trending below 4.5x in the next 12-18 months, absent liquidity concerns; -- An upgrade could occur from a combination of consistently positive FCF generation, adjusted Leverage below 3.5x on a sustained basis, and a strong liquidity profile. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to refinance its short-term debt in the coming months; -- Further contingency measures that affect Axo's financial performance beyond Fitch's expectations; -- Adjusted leverage consistently higher than 4.5x; -- Significant decline in market share; -- M&A activity funded entirely with debt; -- Sustained negative FCF that is not partially or fully compensated with equity contributions; -- Weakened liquidity and financial flexibility. 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 March 31, 2021, the company had MXN3.0 billion in available cash and short-term maturities for MXN2.4 billion. The company is in the process of issuing up to USD325 million (approx. MXN6.6 billion) of senior notes to refinance debt maturities due between 2021 and 2023, which if successful will improve the company's liquidity position. As of March 31, 2021, Axo's total debt was MXN8.0 billion, composed mainly of issuances in the local market and a Club Deal due in 2023. SUMMARY OF FINANCIAL ADJUSTMENTS -- Financial statements were adjusted to revert IFRS 16 effect. -- Dividends paid to minorities from JVs were excluded from EBITDA; dividends received from associated companies were added to EBITDA. 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. ===================================== T R I N I D A D A N D T O B A G O ===================================== ASSOCIATED BRANDS: Closes Charles Candy Plant Due to Covid ---------------------------------------------------------- Trinidad Express reports that snacks and chocolate maker Associated Brands Industries Ltd has closed its Charles Candy plant after an employee died of Covid-19 and a number of other staff members contracted the virus. In a published statement, deputy chairman and group chief executive Nicholas Lok Jack confirmed the employee's death from Covid-19 and "some positive cases", following which the Charles Candy plant was closed, according to Trinidad Express. All Charles Candy employees were tested. "Subsequently, a decision was taken to close the plant for a period, during which time the facility was thoroughly cleaned and disinfected," the statement said obtained by the news agency. All affected staff members were quarantined and reported to the health authorities and contact-tracing exercises conducted, the report notes. "All Charles employees will be tested again prior to the resumption of our operations," the statement said, the report relays. The group said since the onset of Covid-19 in March 2020, through its 15 facilities around the globe, it implemented a detailed set of Covid-19 guidelines, the report says. The group has also made arrangements for the transportation of staff to minimise exposure in public and immediate testing of any employee who is a suspected Covid case or primary/secondary contact at a private medical facility, among other measures, the report adds. Founded in 1974, Associated Brands manufactures snack foods, chocolate confectionery, biscuits and breakfast cereals in the Caribbean. It owns brands like Sunshine Snacks, Charles Candy, Devon Biscuits and Sunshine and Universal Cereals. The company currently distributes its products to more than 20 countries, reaching as far as Taiwan and Ireland. VENEZUELA: 93% of Industrial Sector Runs Out of Diesel, Union Says ------------------------------------------------------------------ The Latin American Herald reports that a survey on the impact of diesel shortages amid the COVID-19 pandemic carried out by the Venezuelan Confederation of Industrialists (Conindustria), the trade union of the industrial sector of Venezuela, showed that 93% of the companies that make up the sector have either run out of diesel already or only have reserves likely to last just for a couple of weeks. The survey, which makes up 60% of the country's sectoral chambers and 40% of regional chambers, also showed that all these companies had to turn to alternative ways to get the highly coveted fuel at unregulated prices on the black market, according to The Latin American Herald. Adan Celis, president of Conindustria, called the situation "dramatic" as he claimed that the country once boasted inventories that lasted over two months years ago, the report notes. Celis also pointed out that companies registered an average of 14 workdays a month between February and April of this year, representing 74% of workdays due to the intermittent schemes increasingly disrupting business continuity, the report relays. As for the main services that were disrupted during this period, 56% of the industrialists surveyed responded that they have suffered the brunt of diesel shortages every day, while 19% reported daily outages affecting all production stages, the report discloses. Celis laid stress on the need of privatizing the oil industry to recover production and on the urgency that the government grants producers the necessary permits to import all the fuel they require to continue operating while the fuel supply issue is resolved, the report says. Diesel is key to the transport of industrial goods from production lines to consumption zones and the transport of many of the raw materials received by the industry from production centers. Venezuela Venezuela, officially the Bolivarian Republic of Venezuela, is a country on the northern coast of South America, consisting of a continental landmass and a large number of small islands and islets in the Caribbean sea. The capital is the city of Caracas. Hugo Chavez was president to Venezuela from 1999 to 2013. The Chavez presidency was plagued with challenges, which included a 2002 coup d'etat, a 2002 national strike and a 2004 recall referendum. Nicolas Maduro was elected president in 2013 after the death of Chavez. Maduro won a second term at the May 2018 Venezuela elections, but this result has been challenged by countries including Argentina, Chile, Colombia, Brazil, Canada, Germany, France and the United States who deemed it fraudulent and moved to recognize Juan Guaido as president. The presidencies of Chavez and Maduro have challenged Venezuela with a socioeconomic and political crisis. It is marked by hyperinflation, climbing hunger, poverty, disease, crime and death rates, social unrest, corruption and emigration from the country. S&P Global Ratings, in May 2019, removed its long- and short-term local currency sovereign credit ratings on Venezuela from CreditWatch with negative implications and affirmed them at 'CCC-/C'. The outlook on the long-term local currency rating is negative. At the same time, S&P affirmed its 'SD/D' long- and short-term foreign currency sovereign credit ratings on Venezuela. Moody's credit rating (long term foreign and domestic issuer ratings) for Venezuela was last set at C with stable outlook in March 2018. Meanwhile, Fitch's long term issuer default rating for Venezuela was last in 2017 at RD and country ceiling was CC. Fitch, on June 27, 2019, affirmed then withdrew the ratings due to the imposition of U.S. sanctions on Venezuela. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 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 * * *