/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210611.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, June 11, 2021, Vol. 22, No. 111 Headlines B R A Z I L BANCO DA AMAZONIA: Fitch Affirms 'BB-' LT IDRs, Outlook Negative BANCO DO BRASIL: Fitch Affirms 'BB-' LT IDRs, Outlook Negative BANCO DO NORDESTE: Fitch Affirms 'BB-' LT IDRs, Outlook Negative BANCO FIBRA: S&P Alters Outlook to Positive & Affirms 'B-/B' ICR BNDES: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Negative CAIXA ECONOMICA FEDERAL: Fitch Affirms 'BB-' LT IDRs, Outlook Neg. JBS FINANCE: Moody's Rates New $500M Unsecured Notes Due 2032 'Ba1' STONE PAGAMENTOS: S&P Rates Guaranteed Proposed Notes 'BB-' STONECO LTD: Moody's Assigns First Time 'Ba2' Corp Family Rating C H I L E LATAM AIRLINES: 'Absolutely Not' Selling Brazil Unit to Azul D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Allows Imports to Offset Rising Prices J A M A I C A MAYBERRY JAMAICAN: Incurs Reports US$8.1 Million Net Loss USF: Is Becoming Insolvent, Analysis Shows P U E R T O R I C O GUI-MER-FE INC: Taps Lube & Soto Law Offices as Legal Counsel - - - - - =========== B R A Z I L =========== BANCO DA AMAZONIA: Fitch Affirms 'BB-' LT IDRs, Outlook Negative ---------------------------------------------------------------- Fitch Ratings has affirmed Banco da Amazonia SA's (BASA) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. The Rating Outlook is Negative. In addition, Fitch has affirmed BASA's Long-term National rating at 'AA(bra)'/Stable, Support Rating (SR) at '3' and Support Rating Floor (SRF) at 'BB-'. As is usual for development banks, Fitch does not assign a Viability Rating to BASA. This is because its business model is strongly dependent on support from the federal government, as reflected in its dedicated policy and development role. KEY RATING DRIVERS IDRS, SUPPORT RATINGS (SR) AND SUPPORT RATING FLOORS (SRF) BASA's IDRs are driven by support from the Brazilian government, as reflected in its 'BB-' SRF. Fitch's view of support reflects a high government propensity to provide support in case of need, given the bank's state ownership and important policy role. The Negative Outlook on the IDRs mirrors the sovereign Rating Outlook, reflecting that a potentially weaker financial position for Brazil could undermine its ability to provide support to the bank. BASA is a government-owned development bank focused on supporting the northern region of Brazil, which tends to be less dominated by private agents. BASA is responsible for roughly 65% of the development credit applied in the Northern Region. As a financial agent of the government, BASA is responsible for the administration of Fundo Constitucional de Financiamento do Norte (FNO), one of the main national instruments in promoting long-term investments and support of reducing regional inequalities. FNO covers the seven states of the Northern Region (around 45% of the Brazilian territory), through several development programs (loan assets of BRL27 billion at end-2020). As the fund manager, BASA's liquidity profile is underpinned by FNO excess liquidity (fully invested in the bank) and its financial profile largely benefits from FNO a steady revenue stream through recurring management fees. These represent around 55% of BASA's operating income, although a provisional measure released by the Brazilian government aiming at reduce management and del credere fees charged by federal funds (including FNO) could pressure BASA's earnings. BASA, as one of Brazil's key policy financial institutions, has been implementing various measures to mitigate the turmoil caused by the coronavirus pandemic on Brazil's Northern economy. The bank has been providing liquidity to clients in need of working capital amid the coronavirus-induced economic shock besides supporting the roll-out of emergency programs created by the federal government to support small businesses and self-employed workers. BASA has posted above sector lending growth of 40% in 2020 due to its countercyclical role and the negotiated portfolio increased to 19% of its loan book art end-2020 (from 10% at end-2019) as part of relief measures offered to clients. In Fitch's view, the large increase in lending and renegotiations has mitigated risks to asset quality and performance to date. Large financing flows to existing exposures support borrowers' repayment performance in the short term, but may lead to larger NPLs and losses over the long term. BASA capital levels have remained adequate, but capitalization is vulnerable to country risks and asset-quality shocks. BASA Common Equity Tier 1 (CET1) was at an adequate ratio of 11.6% at end-2020, but the CET1 is largely supported by BRL1 billion hybrid debt owed to the federal government that is expected to be repaid in the medium term. Fitch also monitors the possible risk of pressure on capital due to a potential court ruling requiring BASA to provision the actuarial deficit of its proprietary pension plan for employees. NATIONAL RATINGS National Ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, BASA's 'AA(bra)' rating denotes Fitch's expectations of the default risk relative to other issuers or obligations rated on the Brazilian scale. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Upside is currently limited by the Negative Outlook on BASA's Long-Term IDR. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- BASA's ratings would be downgraded if Brazil's sovereign rating is downgraded. BASA's ratings are also sensitive to a reduced propensity of the authorities to support the bank. This could be indicated by an adverse change in BASA's policy role or a material reduction in government ownership, which Fitch views as very unlikely. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BASA's rating are driven by Brazil's Sovereign Support. ESG CONSIDERATIONS Fitch reassessed BASA's ESG Relevance Score for 'Governance Structure' (GGV) to '4' from '3'. A GGV score of '3' is the standard score assigned to all banks rated by Fitch. Given BASA's ownership and a track record of the Brazilian federal government's ability to influence and interfere in the policies of the banks it controls, Fitch believes that an increase of government influence on BASA's management and strategy could negatively affect creditors' rights. This has a moderately negative impact on the bank's rating in conjunction with other factors. 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. BANCO DO BRASIL: Fitch Affirms 'BB-' LT IDRs, Outlook Negative -------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Banco do Brasil S.A. (BdB) at 'BB-', Outlook Negative and its long-term National rating at 'AA(bra)', Outlook Stable. In addition, Fitch has affirmed BdB's Viability Rating (VR) at 'bb-', Support Rating (SR) at '3' and Support Rating Floor at 'BB-'. KEY RATING DRIVERS IDRs and VR BdB's ratings are equalized with Brazil's IDRs (BB-/Negative) and are further underpinned by the bank's VR. Fitch's view that the bank would receive support from the federal government, if needed. This reflects the majority federal government ownership, its key policy role, particularly in rural lending and systemic importance. BdB's VR reflects the constraints imposed by the current operating environment, which remains challenging. The VR also reflects with high influence the bank's strong company profile. BdB is the second largest bank in Brazil in terms of assets, third on loans and the largest by deposits, while it has a leading franchise in multiple business segments, including its agribusiness portfolio, insurance and asset management. In addition, it captures the adequate profitability and capitalization ratios that have steadily improved since the reformulation of BdB's strategic objectives after 2016. The constant changes of the bank's top management - third change since the inauguration of the new government in January 2019 - are unlikely to affect the bank's long-term strategy in Fitch's opinion because the line of report in the several bank's committee were maintained - as well as its structures and objectives, indicating maintenance of the bank's strategy. So far, Fitch didn´t see any signal of influence that could potentially indicate mismanagement. Nevertheless, the agency will continuously monitor potential political interference in the bank and its effects. As part of the measures announced by the government to mitigate the economic impact of covid-19 crisis, BdB total renegotiated portfolio reached 20% of its loan portfolio at YE 2020. As of today, the bank still has 20% of renegotiated loans still under the grace period, being most part related with subnationals, which are guaranteed by the federal government. BdB adopted the strategy to keep downgrading client ratings when appropriate - despite the flexibility measures that allowed banks to freeze rating classification until YE 2020. Because of this, Fitch does not expect a high volatility on asset quality ratios and results in the upcoming quarters. BdB's asset quality ratios stood at adequate levels through 2020 and in the 1Q21, 'D-H' loans stood at 8.3% in March 2021, from 8.8% and 8.4% at YE 2020 and YE 2019, respectively. At March 2021, BdB's NPLs as a percentage of gross loans stood at 2.0% of gross loans (1.9% in 2020 and 2.9% in 2019) while NPLs coverage has increased from 196% at YE 2019 to 328.2% at 1Q21, level that is better than peers. Bdb's low NPL levels reflects the bank´s exposure to lower risk loans with solid guarantee structures in the agribusiness, payroll loans and mortgages that at 1Q21 corresponded for 49% of total loans. The bank has also been able to gradually reduce concentrations on its loan portfolio. Top 20 clients went down from 14.9% at YE 2018 to 13% at March 2021. Despite its adequate coverage and stable portfolio, Fitch expects BdB's asset quality to continue being subject to pressures that can arise from the delays of the economy reopening process and vaccination program, which are likely to become material only at the end of 2021. BdB sustained adequate profitability in 2020 despite the challenging operating environment. The bank's operating profit/RWA ratio stood at 1.65% at YE 2020, from 1.4% a year before (2% four year average). Profitability is supported by a continuous strategy of efficiency, which has been able to partially offset the impairment charges made during 2020, which were 16% higher in comparison with 2019. However, BdB's efficiency ratio still negatively compares with largest private banks. BdB's CET1 ratio reached 12.9% at 1Q21, from 13.6% and 10% at YE 2020 and 2019, respectively. Likewise, the bank's regulatory capital ratios continued to improve. In March 2021, BdB's, Tier 1 (T1) and total regulatory capital ratios stood at 16,6% and 19.60%, respectively. BdB, similar to other federal government owned banks, it will pay back part or the full amount of the hybrid instruments subscribed by the National Treasury (Tesouro Nacional, or TN) and considered CET1 capital. For Bdb, the timing and schedule comprises the dilution of payments for the next eight years and totalled BRL8.1 billion at March 2021, that corresponded to 7.6% of BdB's CET1 capital. Furthermore, the portion of the funding provided by the Fundo Constitucional de Financiamento do Centro-Oeste (FCO) that makes up 95.8% of the bank's Tier 2 capital is subject to a 10% annual phase out between 2021-2029. Given the bank's good internal capital generation prospects, the two changes are likely to be manageable from a capital adequacy point of view. BdB's funding is diversified and retail-based as the bank is the largest bank in term of deposits as of March 2021. Customer deposits and local financial bills, which are very similar to deposits, made up 49.5% of total funding at March 2021. Locally, the bank is considered a safe haven during times of crisis and during 2020 the bank reported a 24% growth on customer deposits, which also translates in a good funding cost. BdB's liquidity continues to be comfortable. At March 2021, BdB's liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR) was 314.8% and 117.9%, from 297.6% and 113.3% respectively, a year before, while the adjusted loans to deposits (including deposit-like products) ratio stood at an adequate 94%. SUPPORT RATING AND SUPPORT RATING FLOOR The affirmation of BdB's SRs at '3' reflects the moderate probability of sovereign support. Fitch believes that the Brazilian government's willingness to support BdB in case of need is high; however, its capacity to do so has fallen, as reflected in the successive sovereign rating downgrades. BdB's SRF has been affirmed at 'BB-' and aligned with the sovereign rating. SENIOR DEBT RATING The affirmation of BdB's senior debt ratings at 'BB-' reflects the affirmation of the bank's Long-Term Foreign Currency IDR, which is the anchor rating for the debt ratings. NATIONAL RATINGS National ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, BdB's 'AA(bra)' rating denotes Fitch's expectations of the default risk relative to other issuers or obligations rated on the Brazilian scale. RATING SENSITIVITIES IDRs, SUPPORT RATING, SUPPORT RATING FLOOR, SENIOR DEBT RATINGS Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Rating upside would be contingent on an upgrade of the Brazilian sovereign rating. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- the Brazilian sovereign rating. BdB's ratings are also sensitive to changes in its strategic importance to the Brazilian government, which Fitch currently does not expect. NATIONAL RATINGS BdB's National ratings may be affected by a change in Fitch's perception of the bank's local relativities with respect to other Brazilian entities. VIABILITY RATING Factor that could, individually or collectively, lead to positive rating action/upgrade: -- BdB's VR would be reviewed in the case of a sovereign upgrade, but currently has a limited upside potential, as it captures operating environment constraints. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- BdB's VR would be reviewed in the case of a sovereign downgrade. BdB's VR would be negatively affected if its CET1 ratio falls below 9% and/or its regulatory capital ratios to approach the minimum requirements, due to a combination of asset quality deterioration, weakening of profitability or higher than expected growth. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. ESG CONSIDERATIONS Banco do Brasil S.A. has an ESG Relevance Score of '4' for Governance Structure (GGV). A GGV score of '3' is the standard score assigned to all banks rated by Fitch. Given BdB's ownership and a track record of the Brazilian federal government's ability to influence and interfere in the policies of the banks it controls, Fitch believes that an increase of government influence on BdB's management and strategy could impact negatively on creditors' rights. This has a moderately negative impact on the bank's rating in conjunction with other factors. 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. BANCO DO NORDESTE: Fitch Affirms 'BB-' LT IDRs, Outlook Negative ---------------------------------------------------------------- Fitch Ratings has affirmed Banco do Nordeste do Brasil SA's (BNB) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. The Rating Outlook is Negative. In addition, Fitch has affirmed BNB's Long-term National rating at 'AA(bra)'/Stable, Support Rating (SR) at '3' and Support Rating Floor (SRF) at 'BB-'. As is usual for development banks, Fitch does not assign a Viability Rating to BNB. This is because its business model is strongly dependent on support from the state, as reflected in its dedicated policy and development role. KEY RATING DRIVERS IDRS, SUPPORT RATINGS (SR) AND SUPPORT RATING FLOORS (SRF) BNB's IDRs are driven by support from the Brazilian authorities, if needed, as reflected in its 'BB-' SRF. Fitch's view of support reflects a high government propensity to provide support in case of need, given the bank's state ownership and important policy role. The Negative Outlooks on the IDRs reflect the potentially weaker financial position of the Brazilian sovereign, which would undermine its ability to provide support to the bank. Under its policy role, BNB's strategy is in line with the government's goal of developing and supporting the northeast through specific development programs. By law, the bank manages the Fundo Constitucional de Financiamento do Nordeste (FNE), and its operations are largely guided by its political role. The institution grants credit to 11 states, which demonstrates its development policy importance to the government. FNE is made up of public funds and is the main source of funding for long-term projects in the northeast of Brazil. As the exclusive fund administrator, BNB's revenue as well as funding and liquidity benefit from operations tied to FNE. BNB receives a management fee over FNE's equity and charges an additional yearly fee (del credere) relative to the FNE's loan on operations with shared risk. FNE-related fees provide steady and recurring fee income generation to BNB (around 40% of its operating income), although a provisional measure released by the Brazilian government aiming at reduce management and del credere fees charged by federal funds (including FNE) could pressure BNB's earnings. As part of its policy role, BNB has strongly increased its SME financing in the pandemic after the roll-out of emergency lines and by actively offering relief lines under FNE programs, most of which were allocated to SMEs hit by the coronavirus. BNB's gross loans grew 20% in FY20, while FNE loans (where BNB assumes 50% credit risk) grew 27%. The government also introduced a sector-wide relief program, which allowed banks to suspend interest and principal repayment for at least until end-2020 for companies facing difficulties as a result of the crisis, which so far has helped to delay the ultimate impact the economic shock has had on the BNB's financial metrics. The stock of impaired loans (loans rated between D-H according to local accounting rules) has remained relatively flat over 2020 and represented around 6.5% of loans at end-2020. Capital buffers are maintained only with moderate buffers over regulatory minimums (Common Equity Tier 1 of 8.8% at end-2020) due to loan expansion in recent years, but BNB's earnings have been resilient, and the bank has capital flexibility to cancel dividends if capital levels are tightened. In 2020, BNB benefited from BRL200 million non-recurring revenues from an operational agreement with Icatu Seguros, offsetting pressures on interest rate revenues. These has provided some headroom to book additional BRL509 impairment charges related to the coronavirus crisis and helped to reduce capital sensitivity to asset-quality shocks (unreserved impaired loans represented only 1.5% of CET1 at end-2020). Fitch expects BNB to remain profitable in 2021. Regulatory loosening during 2020 (although temporary) also provided the bank with some leeway in terms of capital buffers to support credit supply and navigate the downturn. NATIONAL RATINGS National Ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, BNB's 'AA(bra)' rating denotes Fitch's expectations of the default risk relative to other issuers or obligations rated on the Brazilian scale. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Upside is currently limited by the Negative Outlook on BNB's Long-Term IDR. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- BNB's ratings would be downgraded if Brazil's sovereign rating is downgraded. BNB's ratings are also sensitive to a reduced propensity of the authorities to support the bank. This could be indicated by an adverse change in BNB's policy role or a material reduction in government ownership, which Fitch views as very unlikely. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BNB's rating are driven by Brazil's Sovereign Support. ESG CONSIDERATIONS Fitch reassessed BNB's ESG Relevance Score for 'Governance Structure' (GGV) to '4' from '3'. A GGV score of '3' is the standard score assigned to all banks rated by Fitch. Given BNB's ownership and a track record of the Brazilian federal government's ability to influence and interfere in the policies of the banks it controls, Fitch believes that an increase of government influence on BNB's management and strategy could negatively impact creditors' rights. This has a moderately negative impact on the bank's rating in conjunction with other factors. 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. BANCO FIBRA: S&P Alters Outlook to Positive & Affirms 'B-/B' ICR ---------------------------------------------------------------- S&P Global Ratings, on June 8, 2021, revised its global scale rating outlook on Brazil-based Banco Fibra S.A. (Fibra) to positive from stable. At the same time, S&P affirmed its 'B-/B' ratings. S&P also raised its national scale ratings to 'brBBB+/brA-2' from 'brBBB-/brA-3'. The outlook on this scale is also positive. The revised business model--aiming to reduce the credit risk--and focus on loans backed by receivables to mid-size companies and agrobusinesses have enabled Fibra to stabilize its revenue and margins. Additionally, the bank improved its underwriting standards, and consequently, the risk profile of its portfolio, with credit losses narrowing and nonperforming loans (NPLs) decreasing sharply. S&P also believes the bank benefitted from the rising commodities prices given its exposure to agribusiness, and from financing operations of suppliers to companies that are within the same economic group as Fibra, most notably, CSN. After several years of relatively weak performance and the credit portfolio contraction of 56% between 2011 and 2018, Fibra's credit growth jumped 48.7% in 2020. This was mainly due to a 71% increase in the corporate lending segment. The bank's net interest income rose 8.4%, and fees and commissions 10.4%. This growth reflects the diversifying revenue base through the cross-selling of products such as derivatives, foreign exchange, insurance, cash management services, and capital markets advice. The bank reported a net profit of R$48.6 million in 2020, which was 91% higher than the recurring net income of R$25.4 million in 2019. Nevertheless, S&P still believes the bank has a narrower customer base and range of business activities than the industry average. In addition, due to its small scale and limited capital availability, competitive pressures may continue to threaten Fibra's capacity to generate stable revenue in the short to medium term. After substantial credit losses in retail and commercial loans, Fibra overhauled its operations. The bank shifted its focus to agribusiness and companies with gross annual revenues above R$300 million, which have better credit quality. In addition, at the end of 2017, the bank resumed lending to midsize companies, but with receivables backing most of such loans. The new vintages have been performing much better, and as the low-quality legacy loan portfolio matured, asset quality began to improve. As of December 2020, NPLs plummeted to 1.3% from an average of 6.0% in the previous five years. S&P said, "Given the lower risk profile of its new credit vintages, we believe Fibra has been less susceptible to economic downturns. In addition, renegotiated loans during the pandemic currently represent only about 1.5% of the bank's total portfolio. As a result, we forecast Fibra's NPLs to be in the 1.5%-3.0% range in the next two years. Still, losses can vary significantly, given that the 20 largest clients represent 27.5% of total loans as of December 2020." BNDES: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Negative ---------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Banco Nacional de Desenvolvimento Economico e Social (BNDES) at 'BB-' with a Rating Outlook Negative. Fitch also affirmed BNDES's long-term National Rating at 'AA(bra)'/Stable, its Support Rating (SR) at '3' and Support Rating Floor (SRF) at 'BB-'. KEY RATING DRIVERS IDRS, SUPPORT RATING AND SENIOR DEBT BNDES's ratings are equalized with Brazil's IDRs (BB-/Negative/B), BNDES's sole shareholder. The equalization reflects the full federal government ownership, BNDES policy bank status and its role in the implementation of government economic policies. Fitch does not assign a Viability Rating to BNDES as its business model is entirely dependent on the support of its state guarantor. BNDES's long-term senior unsecured debt ratings are equalized with its Long-Term IDR. BNDES is 100%-owned by the Brazilian government, which exerts influence over its lending activity, operations and governance. BNDES's purpose is to support and foster economic activities that contribute to the growth of the Brazilian economy and to promote economic and social development in Brazil. It is one of main policy banks of the government that implements its development plans and countercyclical policies. The measures announced by the government to mitigate the economic impact of the Covid-19 crisis further underpin BNDES's special policy bank status and its role as the state's financial arm. On behalf of the Brazilian government BNDES was the main agent managing several emergency programs to provide liquidity lines to SMEs and self-employed workers facing as a result of the crisis, injecting around BRL155 billion into the economy. BNDES's disbursements in the last 12 months ended in March 2021 reached BRL67.9 billion (+38% yoy). BNDES has also provided a temporary standstill for both direct and indirect loans of up to six months, which amounted 44.5% of its loan book at end-March 2021. These measures have been beneficial to the BNDES' financial profile by reducing near-term credit risks and the regulatory flexibility (standstill) on the recognition of problem assets delayed the materialization of asset-quality pressures up to date (90-day NPL ratio of 0.04% at end-March 2021). The impaired ratio (D-H rated operations to total loans), however, increased to 8.2% at end-March from levels below 5% before the pandemic crisis reflecting the revision of BNDE's internal ratings for exposures hit by Covid-19, particularly airline, shipping and urban mobility. As part of its policy role during the pandemic crisis, pre-payments to the federal government were put on hold during 2020, but were resumed in March 2021 through an extraordinary pre-payment of BRL38 billion. BNDES has also presented a plan to the federal government that targets the full liquidation of resources from the National Treasury by end-2022 through an additional extraordinary payment of around BRL62 billion by end-2021 and another round of BRL54.2 billion by end-2022. The plan was agreed on a best-effort basis and is contingent to BNDES`s internal financial planning. So far, pre-payments have not put pressure on the bank's liquidity, as the bank deleveraged significantly since it started paying back the National Treasury. BNDES is well-capitalized and capital levels have improved steadily over the last years owing to asset de-risking and strong one-off earnings from equity divestments that totaled BRL14 billion and BRL6.7 billion in 2020 and 1Q21. The bank's common equity Tier 1 (excluding hybrid instruments accounted as Core Equity) improved to 23.8% at end-March 2021 from 17.6% at end-March 2020. Exposure to equity investments has significantly reduced but these still accounted for a relatively high 54% of BNDES`s equity at end-March 2021, mostly concentrated in Petrobras, JBS and Eletrobras. Fitch expects the bank to continue divesting equity stakes in the short-term but contingent on value considerations. NATIONAL RATINGS National Ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, BNDES's 'AA(bra)' rating denotes Fitch's expectations of the default risk relative to other issuers or obligations rated on the Brazilian scale. RATING SENSITIVITIES IDRS, SR AND SENIOR DEBT Factor that could, individually or collectively, lead to negative rating action/downgrade: -- Rating downside would be primarily contingent on a downgrade of the Brazilian sovereign rating. BNDES's ratings are also sensitive to changes in its strategic importance to the Brazilian government, which Fitch currently does not expect. Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Upside is currently limited by the Negative Outlook on BNDES's Long-Term IDR. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BNDES ratings are driven by Brazil's Sovereign Support. ESG CONSIDERATIONS Fitch reassessed BNDES's ESG Relevance Score for 'Governance Structure' (GGV) to '4' from '3'. A GGV score of '3' is the standard score assigned to all banks rated by Fitch. Given BNDES's ownership and a track record of the Brazilian federal government's ability to influence and interfere in the policies of the banks it controls, Fitch believes that an increase of government influence on BNDES's management and strategy could negatively impact creditors' rights. This has a moderately negative impact on the bank's rating in conjunction with other factors. 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. CAIXA ECONOMICA FEDERAL: Fitch Affirms 'BB-' LT IDRs, Outlook Neg. ------------------------------------------------------------------ Fitch Ratings has affirmed Caixa Economica Federal (Caixa) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. The Rating Outlook is Negative. In addition, Fitch has affirmed Caixa's Long-Term National rating at 'AA(bra)'/Outlook Stable, Support Rating (SR) at '3' and Support Rating Floor (SRF) at 'BB-'. KEY RATING DRIVERS IDRs Caixa's IDRs are driven by sovereign support and are aligned with Brazil's sovereign ratings, as reflected in its 'BB-' SRF. In Fitch's view, there is a high government propensity to provide support in case of need, given the bank's federal government ownership, its key policy role in the implementation of government economic policies, and the bank's systemic importance. Fitch considers Caixa a policy bank and, as per its Bank Rating Criteria, does not assign a Viability Rating to the institution since it is not possible to form an entirely standalone credit view. The Negative Outlook on the IDRs mirrors the sovereign rating outlook reflecting that a potentially weaker financial position of Brazil could undermine its ability to provide support to the bank. Caixa is Brazil's third largest bank by total assets, and has an important market share both in mortgage loans and savings, 68.2% and 36.4%, respectively, as of March 2021. The bank's size, economies of scale, geographical reach and long-standing history afford it certain competitive advantages and support the diversification and stability of revenues. Amidst the challenging economic scenario caused by the coronavirus outbreak, Caixa reinforced its policy role implementing various measures to mitigate the downside effects of the pandemic in Brazil. The bank was responsible for operating the largest payment of social and income transfer programs in Brazil's history, totaling BRL384,8 billion to more than 121 million people. Also, the bank has supported its clients with credit lines and renegotiations. During 2020, taking advantage of the Brazilian Central Bank measures, Caixa granted a six months average grace period to around 50% of its mortgage portfolio, and increased its loan portfolio by 13.5%, specially in segments more vulnerable to economic fluctuations as the SMEs. In Fitch's view, despite the large increase in lending and renegotiations (which had a mathematical effect in maintaining NPLs at very low levels of 2% at 1Q21 from 3.1% at 1Q20), Caixa's adequate guarantee structure, with 91% of the loans collateralized and an LTV in the mortgage portfolio of 53.3%, will limit potential credit losses over the long term. In the last four years, Caixa's strategic objectives shifted from aggressive growth to the improvement of profitability, which strengthened its capitalization ratios. At the end of 1Q21, Caixa's CET1 reached 12.7% from a low 8.9% at March 2017. Despite this improvement, some pressures on the bank's capitalization ratios can occur in the next years, since Caixa agreed to repay BRL31.8 billion of the hybrid instruments subscribed by the National Treasury that are part of its CET1. Fitch believes these repayments will be manageable for the institution. Caixa's operating profit/RWA ratio for 2020 reached a low 1.2% (from 3.9% at 2019), recovering to 2.2% at the 1Q21. The decrease in 2020 occurred basically due to the reduction in interest revenues from credit operations, maintenance of certain funding costs and increase in provision expenses. Despite the significant drop, it is worth mentioning that the result of 2019 was favored by non-recurring events (sale of non-core assets) in the amount of around BRL15 billion. Caixa's funding base is highly diversified and supported by the bank's extensive network. It is predominantly retail funded, with customer deposits and deposit-like local financial bills making up 60.5% of total funding at 1Q21. Except for loans funded by FGTS, the bank has a structural maturity mismatch between its mortgage loans and liabilities. However, this maturity mismatch risk is mitigated by the historic stability of Caixa's funding base and comfortable liquidity. SUPPORT RATING AND SUPPORT RATING FLOOR The affirmation of Caixa's SRs at '3' reflects the moderate probability of sovereign support. Fitch believes that the Brazilian government would have a high willingness to support Caixa in case of need, but its capacity to do so has fallen in the recent past, as reflected in the successive sovereign rating downgrades between since 2015. Fitch has affirmed Caixa's SRF at 'BB-' and aligned it with the sovereign rating. SENIOR DEBT Caixa's senior unsecured debt rating corresponds to the bank's Long-Term IDR, since they rank equal to other senior unsecured debts. NATIONAL RATINGS National Ratings provide a relative measure of creditworthiness for rated entities only within the country. In this context, Caixa's 'AA(bra)' rating denotes Fitch's expectations of the default risk relative to other issuers or obligations rated on the national scale. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Upside is currently limited by the Negative Outlook on Caixa's Long-Term IDR. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- Caixa's ratings would be downgraded if Brazil's sovereign rating is downgraded. Caixa's ratings are also sensitive to a reduced propensity of the authorities to support the bank. This could be indicated by an adverse change in Caixa's policy role or a material reduction in government ownership, which Fitch views as very unlikely. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Caixa's ratings are driven by Brazil's Sovereign Support. ESG CONSIDERATIONS Fitch reassessed Caixa's ESG Relevance Score for 'Governance Structure' (GGV) to '4' from '3'. A GGV score of '3' is the standard score assigned to all banks rated by Fitch. Given Caixa's ownership and a track record of the Brazilian federal government's ability to influence and interfere in the policies of the banks it controls, Fitch believes that an increase of government influence on Caixa's management and strategy could impact negatively on creditors' rights. This has a moderately negative impact on the bank's rating in conjunction with other factors. In addition, Fitch changed the ESG Relevance Score for 'Community Relations, Social Access, Affordability', to '4[+]' from '2'. Caixa's public sector ownership supports its ability to attract low cost retail deposits, while its policy role ensures it retains a dominant position in the low income retail mortgage market. These factors considerably boost Caixa's franchise, strengthen its credit profile and have a moderately positive impact on its ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. JBS FINANCE: Moody's Rates New $500M Unsecured Notes Due 2032 'Ba1' ------------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to the planned $500 million (with flexibility to increase the amount subject to market conditions) 11-year senior unsecured sustainability-linked notes due 2032 to be issued by JBS Finance Luxembourg S.a r.l. The notes will be guaranteed by JBS S.A. The outlook for all ratings is stable. This will be a sustainability-linked issuance, and coupon will be linked to the performance of established sustainability performance targets set under JBS' sustainability framework, more specifically, greenhouse gas emissions targets. Net proceeds will be primarily used for liability management and other general corporate purposes, with no material impact on leverage. The rating of the notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and assume that these agreements are legally valid, binding and enforceable. Assignments: Issuer: JBS Finance Luxembourg S.a r.l. Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba1 Outlook Actions: Issuer: JBS Finance Luxembourg S.a r.l. Outlook, Assigned Stable RATINGS RATIONALE JBS' credit profile reflects the strength of its global operations as the world's largest protein producer, and its substantial diversification across protein segments, geographies and markets. However, JBS' credit profile is constrained by the volatility in the protein industry, which is subject to risk factors such as weather conditions, diseases, supply imbalances and global trade variables. Despite the business diversification, the company still has large exposure to the beef segment (about 56% of revenues and 43% of EBITDA in 1Q21) that also constrains the ratings. Corporate governance concerns continue to weigh on the company's credit profile, given the ownership concentration at J&F Investimentos, a privately held holding company owned by the Batista family, and their involvement in corruption investigations in the past. JBS' strong liquidity and successful liability management initiatives, which started in September 2018 and resulted in the extension of debt maturities and reduced funding costs, support the ratings. JBS has strong liquidity, with BRL10.3 billion in cash as of the end of March 2021 and about BRL10.5 billion available in revolving credit facilities. Liquidity is further supported by a comfortable debt amortization schedule, with about BRL6.3 billion in short-term debt, represented mostly by trade finance lines (ACCs and export pre-payments). The stable outlook reflects Moody's expectation that JBS' operational performance will remain strong, including in the beef segment, as well as in the processed and prepared foods segments in the US, Brazil and its export business. The stable outlook also reflects Moody's expectation that strong cash flow from operations will allow JBS to further reduce funding costs and leverage. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING An upgrade would be subject to the overall earnings stability of JBS, sustained conservative financial policies, and continued evidence of enhanced risk control and governance oversight, with a track record of absence of event risks related to litigations and investigations involving the company and its controlling shareholders. An upward rating movement would also require JBS to maintain strong liquidity and stable credit metrics, with leverage sustained at 2.5x or below and interest coverage (EBITA/interest expense) improving toward 6x. The ratings could be downgraded if the company's operating performance weakens, its financial policy becomes more aggressive or its liquidity deteriorates. A downgrade could be triggered by events that can increase liquidity risk or cause reputation damage, including litigations and M&A. Quantitatively, a downgrade could also occur if the company's leverage (total debt/EBITDA) stays above 3x and cash flow from operations/debt stays below 25%. The principal methodology used in this rating was Protein and Agriculture published in May 2019. Headquartered in Sao Paulo, Brazil, JBS S.A. (JBS) is the world's largest protein producer in terms of revenue, slaughter capacity and production. The company is the leader in beef, chicken and leather, and it is the second-largest pork producer in the US. The company has operations in more than 20 countries with more than 450 offices and plants, which support its large scale and diversification. In the twelve months ended March 2021, JBS reported consolidated revenue of BRL289 billion, with a consolidated adjusted EBITDA margin of 10.9%. STONE PAGAMENTOS: S&P Rates Guaranteed Proposed Notes 'BB-' ----------------------------------------------------------- S&P Global Ratings assigned its 'BB-' global scale and 'brAAA' national scale ratings on Stone Pagamentos S.A. S&P also assigned its 'BB-' issue-level rating to the proposed senior unsecured notes issued through Stone Co, which Stone Pagamentos will guarantee. The rating on the notes is subject to its review of the final issuance documentation. The outlook is stable. S&P's analysis is based on Stone's consolidated figures. The group includes its main operating company, Stone Pagamentos, which in turn has as a holding company, Stone Co, a publicly traded company on the NASDAQ stock exchange under the code STNE and incorporated in the Cayman Islands. Stone provides a platform that combines merchant acquiring, banking, credit, and software solutions. In 2020, the group has expanded its client base and increased its merchant acquiring market share at a rapid pace to about 14% from 8.5% in 2019, without denting its margins. However, it still has a smaller market share than those of larger players amid fierce competition, which could eventually pressure the company's margins. Moreover, Stone has the challenge to compete against the larger distribution channels from large banks that are associated with the largest merchant acquirers in Brazil. On the other hand, S&P views Stone as having a good operating efficiency profile, due to a lighter cost structure when compared to larger competitors owned by banks, a technology-based and flexible platform, and an integrated distribution model through its hub structure. Additionally, we consider Stone to have above-average profitability with adjusted EBITDA margin over 50% in the last few years. In 2020, despite the pandemic-induced economic shock, the group's adjusted EBITDA margin was 49.8%, slightly below historical levels, due to higher credit provisions, COVID-19-related financial incentives to clients, and higher investments in the group's operations. S&P said, "Our assessment of the group's financial risk profile is based on our expectations that Stone will maintain debt to EBITDA of 3.0x-4.0x and funds from operations (FFO) to debt of 20%-30% for the next two years. In our view, this also reflects the group's prudent financial policy toward the use of debt despite recent increase to support internal expansion. We expect Stone to remain active in its investment projects, given its strong growth prospects." STONECO LTD: Moody's Assigns First Time 'Ba2' Corp Family Rating ---------------------------------------------------------------- Moody's Investors Service has assigned a first-time Ba2 corporate family rating to StoneCo Ltd (Stone). At the same time, Moody's assigned a Ba2 rating to the proposed backed senior unsecured notes to be issued by StoneCo Ltd fully and unconditionally guaranteed by Stone Pagamentos S.A. The outlook for the ratings is stable. Offering proceeds will be used for general corporate purposes, which may include the investment in Banco Inter, growth of the business and refinancing of certain corporate indebtedness. The rating of the proposed notes assumes that the issuance will be successfully completed and that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date. It also assumes that these agreements are legally valid, binding and enforceable. This is the first time Moody's assigns ratings to Stone. Ratings assigned: StoneCo Ltd Corporate family rating: Ba2 Proposed Gtd senior unsecured notes: Ba2 Outlooks: Outlook assigned at Stable RATINGS RATIONALE Stone Ba2 rating reflects its position as the largest independent card processor in Brazil with a competitive business model offering a high level of service and broad solutions specially for small and mid-size businesses. Moody's believes the company's strategy presents a value proposition that balances growth, profitability and relative stability of client base. Moody's expects the transaction volume growth to remain robust, allowing for additional cost dilution, operating flexibility and healthy operating margins. The ratings are constrained by Stone's small scale compared to peers and short track record in an industry that evolves rapidly with strong disruption potential. Despite currently processing 11% of the financial value of all card transactions in Brazil, Stone is considerably smaller than the integrated companies Cielo S.A. (Ba1 stable) and Rede S.A. (a wholly-owned subsidiary of Itaú Unibanco S.A., Ba2 stable, ba2) that together concentrate over 50% of the market. Also, Stone is highly reliant on the anticipation of receivables product which generates half of its revenues and income. Despite the high profitability of such product, it requires heavy funding availability and suffers from increasingly harsher competition that results in lower yields. The company's aggressive acquisitive strategy is a rating constraint, currently incorporating the execution risk from the integration of Linx S.A. and the announced investment in Banco Inter S.A.. On August 2020 Stone announced the acquisition of Linx, the leading provider of retail management software in Brazil, for BRL6.7 billion, of which BRL5.9 in cash and the balance in Stone's shares. The acquisition was approved by Linx shareholders on November 17, 2020 and now awaits approval of Brazilian antitrust authority (CADE). To fund the acquisition, Stone raised BRL8.2 billion via an equity follow-on on August 2020. The acquisition is accretive from a credit perspective. Stone's and Linx's combined revenues would have been BRL4.0 billion in December 2020 and Moody's adjusted EBITDA would increase to BRL2.0 billion compared to BRL1.7 billion from Stone on a standalone basis. On the other hand, margins would be lower at 47% from 59%. Ultimately, the acquisition is a relevant development to advance Stone´s offerings in the software segment while strengthening its strategy to become a one-stop-shop for small and mid-size businesses. A recent agreement with Banco Inter will also help Stone to broaden the scope of its offering to small and mid-size businesses and leverage on the digital bank's marketplace platform, retail client base, and funding capabilities to provide working capital funds for merchants. On May 24, 2021 Stone announced the acquisition of a up to 4.99% stake in Banco Inter, an investment of BRL2.5 billion. The equity stake, indication of a member to the board of Banco Inter and first right of refusal on a possible change of control help to protect Stone's interest. Stone has been posting consistent market share gains in the fast growing but competitive electronic payments industry in Brazil, translating into an average revenue growth of around 65% per year in the last three years. The high quality of services offered by Stone via its local hubs and support lines have allowed it to attract new clients and increase its transaction processing values (TPV) at a quicker pace than the industry. Stone market share has evolved to 11.4% in Q4 20 from 4.7% in Q1 18. Stone has a strong liquidity profile. In March 2021, Stone had BRL10.6 billion in cash and equivalents of which BRL5.9 to fund the acquisition of Linx. Stone has additional liquidity in own FIDC quotas which Moody's believes amounted to BRL10.9 billion in March 2021, including FIDCs AR, TAPSO and SOMA. On the other hand, the company has BRL1.46 billion in loans maturing in the short-term. Additionally, due to the business nature of the card processing business Moody's evaluates the net receivables availability, which amounted to BRL3.1 billion in March 2021, including total receivables from issuing banks at BRL15.3 billion compared to BRL3.8 billion in third-party FIDC quotas and BRL8.4 billion in payables to merchants. Moody's expect gross leverage to remain between 3.7x and 4.0x in 2021 including the third-party quotas of FIDCs. EBITDA should advance 44% to billion. The stable outlook incorporates the strong growth in TPV and high EBITDA margin which Moody's expects Stone to maintain in the next 12 to 18 months. It also incorporates Moody's expectations that liquidity will remain strong, including not only cash to short-term debt but also the net balance of receivables. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Positive pressure on Stone's rating would require a greater diversification of revenues with less reliance on the anticipation of receivables while keeping liquidity strong, including cash to short-term debt and the net balance of receivables. Quantitatively, upward pressure would also emerge if retained cash flow/net debt remains above 20%, gross leverage remains below 3.5x, and EBITA to interest expense remains above 4.5x. A successful integration of Linx that translates into volume gains and cost efficiencies could also translate into positive rating pressure over the medium term. Negative pressure on Stone's rating would emerge in case liquidity deteriorates, including cash to short-term debt and the net balance of receivables. Market share losses coupled with consistent deterioration in EBITDA margin and increased leverage would also pressure the ratings. Large debt funded acquisitions could also trigger negative rating actions. Quantitatively, downward pressure would emerge if retained cash flow/net debt remains below 15%, gross leverage remains above 4.5x, and EBITA to interest expense remains below 3.0x over an extended period. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. StoneCo Ltd. is a Cayman Island exempted company with limited liability with shares listed in the Nasdaq. Stone's main operating arm is Stone Pagamentos S.A. located in São Paulo, Brazil. Stone is the largest independent merchant acquirer in Brazil, generating revenues from processing credit and debit card transactions, subscription services, rental of POS equipment, prepayment of receivables to merchants, and more recently banking and credit services. Stone focuses in small and mid-size businesses and seeks to offer a complete financial and technological solution to these companies including electronic payment, software for automation of business processes at the point-of-sale and working capital solutions. In 2020 Stone generated BRL3.2 billion ($613 million) in revenues with an EBITDA of BRL1.7 billion, EBITDA margin of 54.2%. ========= C H I L E ========= LATAM AIRLINES: 'Absolutely Not' Selling Brazil Unit to Azul ------------------------------------------------------------ Jeremy Hill and Ezra Fieser at Bloomberg News reports that Latam Airlines Group SA Chief Executive Roberto Alvo, seeking to stave off an overture from rival Azul SA, said the bankrupt air carrier's Brazilian operations aren't for sale. Santiago-based Latam, which has now been in U.S. bankruptcy for more than a year, has its sights set on a strong Chapter 11 exit -- not a piecemeal sale of the business, Alvo said in an interview, according to Bloomberg News. The carrier's shares briefly slumped after it denied reports that Azul SA planned to buy Latam's Brazilian subsidiary, Bloomberg News relays. While Alvo said he is "absolutely not" selling the Sao Paulo-based unit to the low cost competitor, Azul is now waiting to evaluate Latam's bankruptcy exit plan and may propose the acquisition offer directly to Latam creditors, according to a person familiar with the matter, Bloomberg News notes. Azul has unsuccessfully floated to Latam executives the idea of carving out the domestic Brazil network, according to the person. Under the proposal, Latam, the largest airline in Latin America, would have been left to focus on business elsewhere in the region while maintaining links to the route network in Brazil, the person said, Bloomberg News discloses. "We are not considering in any way, shape or form, any sale of any of our assets at this point in time," Alvo said, Bloomberg News relays. "We take this more as a sign of concern of Azul, as they understand we will be a very challenging competitor" after exiting bankruptcy, he added. A representative for Azul declined to comment. Latam sought court protection from creditors in New York last year as the Covid-19 lockdown brought global travel to a halt, Bloomberg News discloses. Since then, it has obtained $2.45 billion of fresh financing, worked to restructure its fleet of planes and recently ended a codeshare agreement with Azul, Bloomberg News says. Azul, one of Brazil's largest airlines, said in a statement following the codeshare termination that it had hired advisers and was "actively exploring industry consolidation opportunities in the region," Bloomberg News relays. Keeping Brazil in its network is a key part of Latam's strategy going forward, Alvo said. The country has "huge" growth potential and Latam "will be a very aggressive, very effective competitor" once travel demand recovers, he said, Bloomberg News notes. But first, Latam needs to find its way out of Chapter 11 bankruptcy, an often labyrinthine process that usually ends with shareholders getting wiped out and new ownership stepping in, Bloomberg News says. Capital markets have smiled upon Latam's prospects in recent months, with bonds tied to the company now trading at about 95 cents on the dollar from as low as 16 cents last year, Bloomberg News discloses. Latam hopes to receive proposals from "backstop financiers" in the coming weeks as it crafts its bankruptcy exit plan, Alvo said. The carrier is aiming to exit Chapter 11 toward the end of the year, Bloomberg News 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. The 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. Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew Glenn and partner Shai Schmidt, has been retained as counsel to the Ad Hoc Committee of Shareholders. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Allows Imports to Offset Rising Prices ---------------------------------------------------------- Dominican Today reports that President Luis Abinader revealed that his Government has decided to authorize the import of "many" mass consumption products and other characteristics as a way to counteract the "disproportionate increases" of prices experienced by various items in the local market. The head of state said it's a measure that is under study by his administration, but that its enactment is a practical decision, according to Dominican Today. As if he were anticipating the opposition or rejection that a measure of that nature could eventually provoke in sectors of the country, Abinader warned that his commitment is with the Dominican people, the report notes. He stressed that the increase in prices of different raw materials in the international market, generates increases in essential products in the Dominican Republic, but affirms that they have been produced "disproportionately," the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 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). Exports from Mesoamerica increased an estimated 4 percent year-on-year in the first quarter of 2021, after falling 8.5 percent in 2020. In Mexico, export values experienced a modest recovery, as external sales increased by 3.1 percent in January-March 2021 compared to the same period in 2020. Shipments from Central America grew by 11.3 percent over the same months. The United States explained two-thirds of the total increase in exports from Mesoamerica, although sales to the northern market were less dynamic than to other destinations. Total imports from Latin America increased by an estimated 8.7 percent year-on-year in the first quarter of 2021, after falling by 15.1 percent in 2020. The report was prepared by the IDB's Integration and Trade Sector and its Institute for the Integration of Latin America and the Caribbean (INTAL). ============= J A M A I C A ============= MAYBERRY JAMAICAN: Incurs Reports US$8.1 Million Net Loss --------------------------------------------------------- RJR News reports that Mayberry Jamaican Equities reported a net loss of US$8.1 million for the financial year which ended December 2020. Despite the loss, the company says its capital base remains strong, according to RJR News. Mayberry says it expects a positive impact on the earnings of its major holdings as the country and markets begin to recover from the pandemic, the report adds. USF: Is Becoming Insolvent, Analysis Shows ------------------------------------------ RJR News reports that an analysis conducted by the Auditor-General's Department has revealed that the Universal Service Fund (USF) is becoming insolvent. The analysis showed that the USF's solvency ratio, which measures the capacity of the entity to meet its debt and other obligations, has declined steadily, according to RJR News. A report of the findings, which was tabled in the House of Representatives, says the downward trend in the ratio suggested the USF is closer to become financially distressed, RJR News notes. The USF collects the levy on international calls terminating on local networks, the report relays. However, its earnings have nose-dived due to a decline in voice calls, the report adds. ===================== P U E R T O R I C O ===================== GUI-MER-FE INC: Taps Lube & Soto Law Offices as Legal Counsel ------------------------------------------------------------- GUI-MER-FE, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire Lube & Soto Law Offices, PSC to serve as legal counsel in its Chapter 11 case. The firm's hourly rates are as follows: Madeline Soto Pacheco, Esq. $250 per hour Teresa M. Lube Capo, Esq. $250 per hour Paralegals $85 per hour The Debtor paid $5,000 to the law firm as a retainer and $1,738 as the Chapter 11 filing fee. Madeline Soto Pacheco, Esq., and. Teresa Lube Capo, Esq., disclosed in court filings that their firm is a "disinterested persons" as the term is defined in Section 101(14) of the Bankruptcy Code. The law firm can be reached at: Madeline Soto Pacheco, Esq. Teresa M. Lube Capo, Esq. Lube & Soto Law Offices, PSC 1130 F.D. Roosevelt Avenue San Juan, PR 00920-2906 Tel: 787.841.1704 Email: madelinesotopacheco@yahoo.com About GUI-MER-FE GUI-MER-FE, Inc. sought Chapter 11 protection (Bankr. D. P.R. Case No. 21-01659) on May 27, 2021. At the time of the filing, Debtor disclosed total assets of between $100,000 and $500,000 and total liabilities of between $1 million and $10 million. Mercedes Garcia Reyes, president, signed the petition. Lube & Soto Law Offices, PSC is the Debtor's legal counsel. ********* 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. 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