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/raid1/www/Hosts/bankrupt/TCRLA_Public/210601.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, June 1, 2021, Vol. 22, No. 103 Headlines B R A Z I L BRAZIL: Unemployment Rate Reaches 14.7%, Highest Level Since 2012 GOL FINANCE: Moody's Affirms B2 Rating on $500MM Sr. Secured Notes PETRO RIO: S&P Assigns 'B+' Issuer Credit Rating, Outlook Stable TUPY SA: S&P Alters Outlook to Stable & Affirms 'BB' LT ICR USJ-ACUCAR E ALCOOL: Discloses Results of Offer for 2021 Notes D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Staple Prices Soar 36.91%, Conacerd Says [*] DOMINICAN REPUBLIC: No Agreement No Canal, Official Warns Haiti M E X I C O OPERADORA DE SERVICIOS MEGA: S&P Affirms 'BB-' ICR, Outlook Neg. P U E R T O R I C O PUERTO RICO: PREPA Goes Private to Save Island SEARS HOLDING: Buyer Not Liable for Warranty Lawsuit, Says Judge T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: TTCSI Calls for Intervention to Cut Job Losses - - - - - =========== B R A Z I L =========== BRAZIL: Unemployment Rate Reaches 14.7%, Highest Level Since 2012 ----------------------------------------------------------------- Rio Times Online reports that unemployment in Brazil reached 14.7% between January and March this year, equivalent to 14.8 million people looking for work, the highest level recorded in the country since 2012, the government reported on May 27. The unemployment rate in the first quarter of the year increased 0.8 percentage points compared to the last three months of 2020, when it stood at 13.9%, according to data released by the state-run Brazilian Institute of Geography and Statistics (IBGE), according to Rio Times Online. IBGE pointed out that the increase in the unemployed population observed between January and March is an "expected" effect, the report notes. The rate tends to increase at the beginning of each year, after the dismissal of people hired at the end of the previous year, 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. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. 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. 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). GOL FINANCE: Moody's Affirms B2 Rating on $500MM Sr. Secured Notes ------------------------------------------------------------------ Moody's Investors Service has affirmed the B2 rating of the $500 million senior secured notes due 2026 issued by Gol Finance (LuxCo) and unconditionally guaranteed by Gol Linhas Aereas Inteligentes S.A. (Gol) (B3, stable). The notes were originally issued in December 2020 and upsized in May 2021. Previously the rating of these notes was incorrectly associated with Gol Finance (domiciled in the Cayman Islands), another fully-owned subsidiary of Gol. This has been corrected, and the rating and rating history for these senior secured notes will be displayed under Gol Finance (LuxCo) going forward. Gol's B3 corporate family rating (CFR) and the Caa1 rating of the senior unsecured notes issued by Gol Finance and Gol Equity Finance remain unchanged. The outlook for all ratings is stable. Rating affirmed: Issuer: Gol Finance (LuxCo) $500 million senior secured notes due 2026: B2 Outlook: stable RATINGS RATIONALE Gol's B3 CFR reflects the company's strong operating performance during 2020 versus Moody's expectation at the beginning of the coronavirus outbreak. The B3 rating also reflects a lower risk of default in the short term, especially after the repayment of the term loan guaranteed by Delta and the successful refinancing of other debt instruments such as working capital facilities and local market debentures that resulted in a more comfortable debt amortization profile. Gol's ability to reduce costs through agreements reached with employees and lessors that resulted in lower than anticipated cash burn is also reflected in the B3 rating. Gol's B3 rating is primarily constrained by the uncertainties ahead of the airline industry as a result of the coronavirus pandemic that could lead to slower economic recovery or another round of restrictions for travel and tourism reducing the speed of the rebound in the industry. Despite the recovery observed in the Brazilian market during the second half of 2020, Moody's still see signs of resistance in the capital markets when offering new funding to the airlines that is translated in structures with stronger collateral packages and higher interest. The ability to raise liquidity and control cash burn will still be a key aspect in Gol's ratings assessment. The senior secured notes are rated B2, one notch above Gol's CFR, primarily reflecting the current pool of collateral that comprises a first priority security interest in Gol's intellectual property including patents, trademarks, brand names, trade dress, know how, copyrights' secrets, domain names, and social media accounts. The collateral package also includes Gol's aircraft spare parts located in Brazil, including rotable, repairable and expendable parts. Moody's understands that the notes rank at least on a pari passu basis with Gol's other secured debt instruments that account for around 60% of the company's indebtedness. Gol's secured notes program has a loan-to-value (LTV) ratio of around 42% and collateral coverage of around 2.4x, within the established limits of maximum LTV of 65% and minimum coverage of 1.5x. The program includes other eligible collateral that can be added to the existing security package if needed, such as spare engines, flight simulators, first or second lien on incremental aircraft purchases, non-credit card backed receivables and a first lien on Smiles Fidelidade S.A. (Smiles)'s revenues, intellectual property and brand. Gol's senior unsecured notes are rated Caa1, one notch below Gol's CFR, reflecting the effective subordination of unsecured creditors, which rank below the company's existing and future secured claims. The stable outlook reflects Moody's expectations that Gol will experience a strong recovery in demand going forward while keeping its conservativeness observed so far during the pandemic towards liquidity, costs and capacity management. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The ratings could be upgraded if risks and uncertainties are reduced significantly, and passenger demand begins a sustainable recovery towards pre-coronavirus levels. An upgrade would also require Gol to maintain an adequate liquidity profile, with cash consistently above 20% of revenues, and an improvement in key metrics, with Moody's-adjusted debt / EBITDA declining to below 6.0x and interest coverage (measured by (funds from operations + interest) / interest) sustainably above 3.0x. Gol's ratings could be downgraded if the pace of recovery of passenger demand is slower than Moody's expects or if liquidity concerns increase, translating into an increased expectation of a default in the company's financial obligations. A downgrade could also occur if the company is unable to strengthen credit metrics through the recovery phase. The principal methodology used in this rating was Passenger Airline Industry published in April 2018. Founded in 2000 and based in Sao Paulo, Brazil, Gol is the largest low-cost carrier in Latin America, offering over 750 daily passenger flights to connect Brazil's major cities and various destinations in South America, North America and the Caribbean, along with cargo and charter flight services. After the conclusion of the incorporation, Gol will own 100% of Smiles, a loyalty program company with more than 18.5 million participants that allows members to accumulate miles and redeem tickets in more than 900 destinations around the world and offer non-ticket reward products and services. In the twelve months ended March 2021, Gol reported consolidated net revenues of BRL4.8 billion. PETRO RIO: S&P Assigns 'B+' Issuer Credit Rating, Outlook Stable ---------------------------------------------------------------- S&P Global Ratings, on May 27, 2021, assigned its 'B+' long-term issuer credit rating to Brazil-based oil and gas exploration and production company Petro Rio S.A. and 'BB-' issue rating to its proposed senior secured notes. The '2' recovery rating on the notes indicates its expectation of substantial recovery (70%-90%) in case of a default. The stable outlook reflects S&P's expectation that Petro Rio will maintain gross debt to EBITDA consistently below 3.0x while continuing to invest in production growth. Petro Rio raised R$2 billion of cash with the follow-on. It will use the proceeds to pay for recently acquired fields (Wahoo and Itaipu) and additional working interests on Frade, totaling about $136 million. In addition, the company's capital expenditures (capex) plan includes investments on ongoing revitalization processes and tiebacks that should total about R$865 million in 2021 and R$1.6 billion in 2022. S&P also considers that the company will use part of the proceeds, combined with operating cash flows, for potential new acquisitions, since it operates mature fields with volumes expected to decline over time. S&P said, "Considering the completion of the tieback between TBMT and Polvo in the second half of 2021, and the consolidation of the remaining 30% of Frade's working interest in February 2021, we expect production to reach about 37,000 barrels of oil equivalent (boe) per day, from about 26,600 boe per day in 2020. Some gains of scale and efficiency, combined with our expectation of higher oil prices, should allow EBITDA margins to improve to about 65% in 2021 and 65%-70% in 2022, from 62% in 2020. As a result, we forecast leverage below 2.0x, but expected new acquisitions and volatile oil prices could pressure it in the next few years." This assessment already considers Petro Rio's increase in production and reserves through recent acquisitions. Considering pro forma figures, with 80% stake in Tubarao Martelo field and 100% in Frade field, the company's total production was 32,700 boe per day as of March 2021, a relevant increase compared with the start of 2019. Even considering an increase to close to 40,000 boe per day in the next few years -- given the revitalization campaigns and tieback between Polvo and TBMT - S&P still views Petro Rio's business as smaller in scale than global peers. In addition, its production concentration in three main fields -- all in the same basin -- and limited product diversification, with oil representing more than 90% of total production, limit the rating. TUPY SA: S&P Alters Outlook to Stable & Affirms 'BB' LT ICR ----------------------------------------------------------- S&P Global Ratings, on May 27, 2021, revised the outlook on Brazil-based auto supplier Tupy S.A. to stable from negative and affirmed the 'BB' long-term global scale and 'brAAA' national scale issuer credit ratings. S&P said, "At the same time, we affirmed our 'BB' issue-level rating on Tupy's senior unsecured notes due 2031. The recovery rating remains at '3' (65%). "The stable outlook reflects our view that Tupy's production volumes will continue recovering, given company's exposure to resilient segments and price adjustments due to the weaker real and pass-through of raw material costs, allowing the company to post gross debt to EBITDA below 2.0x and free operating cash flow (FOCF) of R$200 million - R$300 million in 2021. "Last year, we forecasted Tupy's debt to EBITDA of 4.2x in 2020 (but the ratio dropped to 3.7x at year-end) as we assumed production volumes falling more drastically amid lockdowns and economic volatility in the main regions where the company operates. However, the industry to recovered faster than we expected and the company's sales picked up in the second half of last year. During 2020, Tupy shifted production among its plants as well reduced costs to increase EBITDA margins beyond our expectations. "We now expect significant revenue growth in 2021, resulting from the combination of higher volumes, weaker real, and higher prices because the company's contracts have a pass-through clause for raw materials. Therefore, we now expect Tupy's gross debt to EBITDA drop below 2.0x and discretionary cash flows to debt of more than 10% in the next 12-18 months." In April, the company received the approval from Brazilian anti-trust agency, Conselho Administrativo de Defesa Economica, for the proposed acquisition of Teksid's Brazilian business. European authorities already provided the approval, while those in Mexico and the U.S. have yet to do so. As S&P doesn't have clarity on final terms and conditions of the proposed deal, it's not incorporating it in its base-case scenario projections. The acquisition's potential amount is EUR210 million. The transaction could improve Tupy's market position because the combined entity would significantly raise the company's scale (almost doubling revenues) and margins, given synergies from Teksid's Brazilian operations. Still, depending on final terms, the acquisition could have an impact on S&P's base-case projected scenario, temporarily increasing the leverage metric to about 3.0x. S&P said, "We expect Tupy to continue benefiting from its comfortable liquidity, given its high cash position and limited short-term debt. The company issued the $375 million unsecured notes due 2031 earlier this year. Tupy used the proceeds to repurchase its 2024 notes, extending maturity profile and reducing its interest costs. Tupy won't distribute dividends in 2021, and we expect the company to gradually reduce its currently higher-than-historical cash position while it pursue growth opportunities. Nevertheless, we expect it to maintain a prudent liquidity position with significant cushion for the next 24 months." USJ-ACUCAR E ALCOOL: Discloses Results of Offer for 2021 Notes -------------------------------------------------------------- U.S.J. - Acucar e Alcool S.A. (the "Company") disclosed the expiration and results of its previously announced private offer to exchange (the "Exchange Offer") any and all of its outstanding (i) 9.875% Senior Notes due 2019 (the "2019 Notes") and (ii) 9.875%/12.00% Senior Secured PIK Toggle Notes due 2021 (the "2021 Notes" and, together with the 2019 Notes, the "Existing Notes") for its newly issued 9.875%/10.500% Senior Secured PIK Notes Due 2023 (the "New Notes") and, in the case of 2019 Notes only, New Notes and cash, and its concurrent solicitation of consents (the "Consent Solicitation" and, together with the Exchange Offer, the "Exchange Offer and Consent Solicitation") to (i) certain proposed amendments to the indenture governing the 2021 Notes, which would eliminate substantially all of the restrictive covenants and certain events of default and related provisions under such indenture and (ii) termination of the security agreements and release the security interests in the collateral securing the 2021 Notes (collectively, the "Proposed Amendments"). As of the expiration of the Exchange Offer and Consent Solicitation at 11:59 p.m., New York City time, on May 21, 2019, Eligible Holders (as defined below) had validly tendered and delivered consents with respect to (i) U.S.$20,359,000 in aggregate principal amount of the 2019 Notes, representing 69.95% in aggregate principal amount of the outstanding 2019 Notes; and (ii) U.S.$243,413,485 in aggregate principal amount of the 2021 Notes, representing 98.10% in aggregate principal amount of the outstanding 2021 Notes. The Company has accepted for exchange, and will promptly pay the applicable consideration for all of the Existing Notes validly tendered and not validly withdrawn on or prior to the expiration of the Exchange Offer and Consent Solicitation, and, in case of the 2021 Notes, prior to the execution of the supplemental indenture. Settlement of the Exchange Offer is expected to occur on May 24, 2019. The Company will issue (i) U.S.$256,992,938 in aggregate principal amount of New Notes in exchange for all of the Existing Notes tendered and accepted by the Company plus (ii) New Notes in an aggregate principal amount equal to the accrued and unpaid interest on each of the Existing Notes accepted for exchange at a rate equal to 10.500% per annum up to but excluding the settlement date. The Exchange Offer and Consent Solicitation was made, and the New Notes were being offered and issued, only: (a) in the United States, to holders of Existing Notes who are "Qualified Institutional Buyers" (as defined in Rule 144A under the Securities Act of 1933, as amended (the "Securities Act")); (b) outside the United States, subject to items (c) and (d) below, to holders of Existing Notes who are persons other than "U.S. Persons" (as defined in Regulation S under the Securities Act); (c) in the EEA, to holders of Existing Notes who are (i) persons other than U.S. Persons, and (ii) who are not retail investors. For the purposes hereof, the expression retail investor means a person who is (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); (ii) a customer within the meaning of Directive 2002/92/EC (as amended, the "Insurance Mediation Directive"), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) "Qualified Investors" as defined in Directive 2003/71/EC (as amended, the "Prospectus Directive"); (d) in the UK, to holders of Existing Notes who are persons other than U.S. Persons, and who are (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); (ii) persons who are within Article 43(2) of the Order; or (iii) high net worth companies, and other persons, falling within Article 49(2)(a) to (d) of the Order. The holders of Existing Notes who certified to the Company that they were eligible to participate in the Exchange Offer and Consent Solicitation pursuant to at least one of the foregoing conditions are referred to as "Eligible Holders." The Exchange Offer and the New Notes have not been, and will not be, registered with the Brazilian Comissão de Valores MobiliArios (CVM). The Exchange Offer and the New Notes are not offered or sold in Brazil, except in circumstances that do not constitute a public offering or unauthorized distribution under Brazilian laws and regulations. The New Notes have not been registered under the Securities Act or any state securities laws. Accordingly, the New Notes will be subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and other applicable securities laws, pursuant to registration or exemption therefrom. As reported in the Troubled Company Reporter - Latin America on May 31, 2021, Fitch Ratings has affirmed U.S.J. - Acucar e Alcool S.A.'s (USJ) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'RD' (Restricted Default) and its National Scale Rating at 'RD(bra)'. Fitch has also affirmed at 'C'/'RR6' USJ's senior unsecured notes due 2019 (USD8.7 million) and 2021 (USD3.9 million). Fitch has affirmed at 'C'/'RR4' USJ's senior secured notes due 2023 (USD272 million). =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Staple Prices Soar 36.91%, Conacerd Says ------------------------------------------------------------ Dominican Today reports that Dominican Republic National Merchants and Entrepreneurs Council (Conacerd) said essential services MSMEs are going through very difficult times and, so far in 2021, they have endured the rise in prices of staples by more than 36.91%, which has caused sales to drop by 33.5% throughout the country. According to the president of Conacerd, Antonio Cruz Rojas, the behavior is the result of the high prices of the products and due to the lack of purchasing power of the lower class and the middle sectors of the country, the report notes. In a statement, Cruz said they polled their partners in the 32 provinces to evaluate the rise in the prices of the products most demanded by the popular population and average consumers, which presented the following behavior in terms of which goes from this year 2021: The variety of soybean oils has increased four times this year of 33.5%, retail rice 22.5%, sugars 14%, pork 54%, all canned grains of recognized brands 36.6% and liquid milk up to 9%, according to Dominican Today. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). [*] DOMINICAN REPUBLIC: No Agreement No Canal, Official Warns Haiti ------------------------------------------------------------------- Dominican Today reports that Dominican Government expects that Haiti will not continue building a canal on the Massacre River until an agreement is reached on the matter, Dominican Foreign Minister Roberto Alvarez warned. "Let us advance in the dialogue on the issue of the Dajabon or Massacre River in a comprehensive manner, meanwhile, the expectation of the Dominican government is that work on the irrigation canals will not be restarted," Alvarez said at the start of the meeting of the joint bilateral commission, according to Dominican Today. He stressed that the main reason for the meeting is to focus on the work that is being started and to take into account that not only the current impasse, but also the contribution of ideas that facilitate the solution of controversy, the report notes. "The rivers and basins that have been of binational interest are found in the border area, which, by the way, is being defined as the one with the highest poverty on both sides of the island, therefore it is a population that demands immediate attention if we don't want the food crisis to deepen, access to health, low educational levels and the lack of jobs due to its consequent social conflicts," Alvarez said, the report relays. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). =========== M E X I C O =========== OPERADORA DE SERVICIOS MEGA: S&P Affirms 'BB-' ICR, Outlook Neg. ---------------------------------------------------------------- S&P Global Ratings affirmed its 'BB-' long-term global scale and 'mxA-/mxA-2' national scale ratings on Operadora de Servicios Mega, S.A. de C.V. SOFOM, E.R. (GFMEGA). At the same time, S&P affirmed its 'BB-' issue-level rating on GFMEGA's senior unsecured notes of up to $500 million and its 'mxA-2' national scale on its short-term debt. The outlook remains negative. Rationale S&P said, "We expect GFMEGA's RAC ratio to be 10.10% in 2021, after dropping to 9.4% in 2020 from an average of 14.0% in 2018-2019. This drop resulted from a higher-than-expected loan growth, worsening of Mexico's economic risk, which raised risk weights in our risk-adjusted capital framework and DTAs (representing around 29% of its TAC) due to unrealized losses from its derivative hedging strategy valuation. We expect GFMEGA to strengthen its RAC ratio (at double digits) due to the March 2021 $170 million capital injection, gradual reduction in DTAs, which we deduct from company's TAC, and our expectation that GFMEGA's profitability will return to pre-pandemic levels. We estimate GFMEGA's unrealized losses will decrease, given our expectation that Mexico's short-term interest rates will rise before U.S. rates, widening the gap between both rates. Therefore, the narrowing of the company's unrealized losses will contract its DTAs and strengthen its TAC." S&P's base-case scenario for 2021-2022 incorporates the following assumptions: -- Mexico's GDP to grow 4.9% in 2021 and 2.7% in 2022. -- GFMEGA's gross receivables to grow 20%-22% in 2021 and 2022. -- Non-performing assets (NPAs) to be remain at 4.0% in 2021 and 2022 with an average coverage ratio of 62%. -- 500 basis-point (bps) gap between Mexico's and U.S. interest rate by the end of 2022, compared with 428 bps in 2020. -- Foreign exchange rate of MXN21 per $1 for 2021 and 2022. -- No capital injection or dividend payment for 2021 and 2022. S&P said, "We estimate GFMEGA's net interest margin will be about 6.0%, including commercial margin, which we expect to reach its pre-pandemic level by end of 2022. We expect the lender's interest revenue from loans to rise, which will prevent funding costs from increasing. In addition, we consider the company's revenue diversification to return to the 2019 level. We forecast GFMEGA's return on average adjusted assets to be 2.0%-2.5% and average efficiency level of 38% for 2021 and 2022. "We removed the one-notch comparable rating adjustment and revised our assessment of GFMEGA's business position to a stronger category. This is because the entity has been resilient to the economic slump, and it has aligned with peers supported thanks to operating revenue stability and widening business diversity. We expect the lender's double-digit lending growth will continue strengthening its diversification by geography, business lines, customers, and economic sectors. During 2020, GFMEGA's lending growth of 26% outpaced that of its competitors. It offered loans to borrowers that fit its risk appetite and who the banks were reluctant to lend because of the pandemic-induced economic crisis. We expect GFMEGA's growth will be 20%-22% in the next two years and it will gradually increase its share of the Mexican leasing market. "In our opinion, GFMEGA will continue maintaining a significant single-client concentration and higher risk customer profile than those of commercial banks in Mexico. Its top 20 loans will account for slightly above 40% of total loan portfolio and 3x its TAC. In this sense, the loan with the state of Jalisco will remain as GFMEGA's largest exposure, accounting for about 20% of total loans. We consider the creditworthiness of this loan would broadly reflect the creditworthiness of Jalisco, although we don't rate the state. However, given that the loan is part of the state's budget and any changes to it need the local legislature's approval, we believe these factors reduce the likelihood of debt going sour. However, GFMEGA's significant exposure to this counterparty represents a risk that could lead to a large credit loss or provisions. We expect GFMEGA's asset quality will remain manageable in the next two years, with NPAs about 4.0%, slightly above 3.3% as of March 2021. This ratio stems from the prolonged recession. Finally, we consider GFMEGA's asset quality will be comparable to those of its peers. "We expect GFMEGA's international bond to account for about 65% of total funding base by the end of 2021, given the March 2021$150 million add-on. However, there are no significant maturities in the next two years, and the company is aiming to raise loans from various institutions to reduce its current concentration. Additionally, GFMEGA's liquidity position benefited from the bond add-on, enabling the entity to comfortably meet obligations during the next 12 months." ===================== P U E R T O R I C O ===================== PUERTO RICO: PREPA Goes Private to Save Island ---------------------------------------------- Michelle Kaske and Jim Wyss of Bloomberg New report that Puerto Rico will take a major step toward transforming its government-owned power provider as Luma Energy is set to begin operating and managing the utility, part of the commonwealth's plan to rehabilitate its aging system and end chronic outages. Luma is poised on June 1 to take over transmission and distribution for Puerto Rico's Electric Power Authority, which is the main supplier of electricity for the island's 3.3 million residents and is one of the two largest U.S. public power utilities by customer base. Prepa, as the agency is known, will retain ownership of its infrastructure. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States that's facing a massive bond debt of $70 billion, a 68% debt-to-GDP ratio and negative economic growth in nine of the last 10 years. The Commonwealth of Puerto Rico has sought bankruptcy protection, aiming to restructure its massive $74 billion debt-load and $49 billion in pension obligations. The debt restructuring petition was filed by Puerto Rico's financial oversight board in U.S. District Court in Puerto Rico (Case No. 17-01578) on May 3, 2017, and was made under Title III of 2016's U.S. Congressional rescue law known as the Puerto Rico Oversight, Management, and Economic Stability Act ('PROMESA'). The Financial Oversight and Management Board later commenced Title III cases for the Puerto Rico Sales Tax Financing Corporation (COFINA) on May 5, 2017, and the Employees Retirement System (ERS) and the Puerto Rico Highways and Transportation Authority (HTA) on May 21, 2017. On July 2, 2017, a Title III case was commenced for the Puerto Rico Electric Power Authority ("PREPA"). U.S. Chief Justice John Roberts has appointed U.S. District Judge Laura Taylor Swain to oversee the Title III cases. The Honorable Judith Dein, a United States Magistrate Judge for the District of Massachusetts, has been designated to preside over matters that may be referred to her by Judge Swain, including discovery disputes, and management of other pretrial proceedings. Joint administration of the Title III cases, under Lead Case No. 17-3283, was granted on June 29, 2017. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets, as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at O'Neill & Borges are on-board as attorneys. McKinsey & Co. is the Board's strategic consultant, Ernst & Young is the Board's financial advisor, and Citigroup Global Markets Inc. is the Board's municipal investment banker. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains a case web site at https://cases.primeclerk.com/puertorico Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA, and PREPA. O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), the agency responsible for negotiations with bondholders. The Oversight Board named Professor Nancy B. Rapoport as fee examiner and chair of a committee to review professionals' fees. SEARS HOLDING: Buyer Not Liable for Warranty Lawsuit, Says Judge ---------------------------------------------------------------- Law360 reports that a New York bankruptcy judge on May 27, 2021, ruled that Sears Holding Co. did not pass along liability for a class action alleging that the retail chain sold extended warranties it never intended to honor when it sold its assets to its ex-CEO in Chapter 11 two years ago. U.S. Bankruptcy Judge Robert Drain found that the terms of Sears' "free and clear" sale of its assets precluded the class action plaintiffs from adding the new owner of the retail chain's stores to their suit, despite their arguments that the warranties themselves were passed on in the sale. About Sears Holdings Corp. Sears Holdings Corporation -- http://www.searsholdings.com/-- began as a mail ordering catalog company in 1887 and became the world's largest retailer in the 1960s. At its peak, Sears was present in almost every big mall across the U.S., and sold everything from toys and auto parts to mail-order homes. Sears claims to be a market leader in the appliance, tool, lawn and garden, fitness equipment, and automotive repair and maintenance retail sectors. Sears and Kmart merged to form Sears Holdings in 2005 when they had 3,500 US stores between them. Kmart emerged in 2005 from its own bankruptcy. Unable to keep up with online stores and other brick-and-mortar retailers, a long series of store closings left it with 687 retail stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin Islands as of mid-October 2018. At that time, the Company employed 68,000 individuals. As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total assets against $11.33 billion in total liabilities. Unable to cover a $134 million debt payment due Oct. 15, 2018, Sears Holdings Corporation and 49 subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15, 2018. The Hon. Robert D. Drain is the case judge. The Debtors tapped Weil, Gotshal & Manges LLP as legal counsel; M-III Partners as restructuring advisor; Lazard Freres & Co. LLC as investment banker; DLA Piper LLP as real estate advisor; and Prime Clerk as claims and noticing agent. The U.S. Trustee for Region 2 appointed nine creditors, including the Pension Benefit Guaranty Corp., and landlord Simon Property Group, L.P., to serve on the official committee of unsecured creditors. The committee tapped Akin Gump Strauss Hauer & Feld LLP as legal counsel; FTI Consulting as financial advisor; and Houlihan Lokey Capital, Inc. as investment banker. The U.S. Trustee for Region 2 on July 9, 2019, appointed five retirees to serve on the committee representing retirees with life insurance benefits in the Chapter 11 cases. * * * In February 2019, Bankruptcy Judge Robert Drain authorized Sears Holdings approval to sell the business to majority shareholder and CEO Eddie Lampert for approximately $5.2 billion. Lampert's ESL Investments, Inc., won an auction to acquire substantially all of Sears' assets, including the "Go Forward Stores" on a going-concern basis. The proposal allowed 425 stores to remain open and provided ongoing employment to 45,000 employees. The new parent is Transform SR Brands LLC, doing business as Transformco, referred to as "New Sears". Transform is an American privately held company formed on Feb. 11, 2019, to acquire some of the assets of Sears Holdings Corporation. The new company is owned by Eddie Lampert's ESL Investments. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: TTCSI Calls for Intervention to Cut Job Losses ----------------------------------------------------------------- Andrea Perez-Sobers at Trinidad Express reports that the Trinidad and Tobago Coalition of Services Industries (TTCSI) is calling for urgent action by the Government to reduce job losses and business closures. TTCSI was among the other business organizations, who met with the Government to discuss the issues facing businesses that have been shut down by the recent Public Health Regulations, according to Trinidad Express. TTCSI in a statement said one of the priority openings that their president Mark Edghill put forward to the Government was the Yacht Services Association which is on the brink of collapse, the report relays. Edghill said there are over 150 applications from vessels awaiting approval for entry into Trinidad and Tobago to undergo repair works and if not approved by these vessels will be forced to book alternate ports of service, such as Grenada, which is a key competitor to Trinidad and Tobago's yachting industry, the report relates. "Furthermore, applications have been pending for more than a year from vessel owners seeking to enter Trinidad and Tobago in order to collect their vessels and depart immediately after completing quarantine requirements, at their own expense, the report discloses. There are vessel owners that have been refused extensions to remain in Trinidad and Tobago to complete repairs works and are being told to leave with no option to re-enter as our borders are closed," Edghill said, the report notes. The TTCSI recommended that each sector provide the Government with a covid Risk Assessment as well as Health and Safety Guidelines for safe operation during the pandemic, in order for the Government to understand the risk level that each sector poses and make more informed decisions regarding the identification and re-opening of low-risk sectors, the report relays. The Services Industries is also desperately pleading for grants to be made immediately accessible to sectors directly impacted by the closure of borders and restricted operations: such as Tour Operators –suffering up to 95 per cent closure of businesses, Hotels and Other Tourism-associated businesses, Event Management Companies and Professionals, along with the Food/Beverage and Dining and Entertainment establishments, the report notes. A call is being made for the Real Estate Services to be classified as an Essential Service due to the provision of the basic human right to access shelter, the report notes. "In addition, further exacerbating this has been a notable rise in domestic violence situations during the pandemic, where occupants of properties need to be housed separately. Protocols for the safe operation of Real Estate Services have been submitted to the Ministry of Health for approval since April2020, together with evidence that it remains an extremely low-risk sector," TTCSI lamented, the report relays. Another recommendation is for taxation accommodations to be considered for affected businesses, such as; tax relief; tax deferrals; tax amnesty and payment of VAT Refunds, the report adds. ********* 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. 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