/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210616.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 Wednesday, June 16, 2021, Vol. 22, No. 114 Headlines B R A Z I L PETROLEO BRASILEIRO: Discloses Offering of Global Notes SUPERVIA: Files for Bankruptcy as Traffic Was Hit by COVID-19 D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Construction Material Prices Soar G R E N A D A GRENADA: Negotiates US$8.95 Million Loan From IDB H O N D U R A S HONDURAS: IDB OKs US$45MM Loan to Finance Potable Water J A M A I C A JAMAICA: Rick's Cafe Back in Business After Breaching Regulations M E X I C O AGUAS DEL MUNICIPIO DE DURANGO: Moody's Cuts Issuer Ratings to B1 DURANGO MUNICIPALITY: Moody's Lowers Issuer Ratings to B1 YUCATAN: Moody's Affirms Ba1 Issuer Rating & Alters Outlook to Neg. N I C A R A G U A NICARAGUA: Fitch Alters Outlook on 'B-' Foreign Curr. IDR to Stable P U E R T O R I C O ALEX AND ANI: U.S. Trustee Opposes Bid to Seal Ch. 11 Details - - - - - =========== B R A Z I L =========== PETROLEO BRASILEIRO: Discloses Offering of Global Notes ------------------------------------------------------- Petroleo Brasileiro S.A. - Petrobras ("Petrobras") (NYSE: PBR) announces that its wholly-owned subsidiary, Petrobras Global Finance B.V. ("PGF"), has commenced (i) an offering of U.S. dollar-denominated global notes in the international capital markets (the "New Notes"), subject to market and other conditions (the "New Notes Offering"), and (ii) cash tender offers to purchase any and all of certain of its outstanding U.S. dollar-denominated notes (the "Tender Notes" and such offers, the "Tender Offers"). New Notes Offering The New Notes will be unsecured obligations of PGF and will be fully and unconditionally guaranteed by Petrobras. PGF intends to use the net proceeds from the sale of the New Notes to purchase Tender Notes that PGF accepts for purchase in the Tender Offers, and to use any remaining net proceeds for general corporate purposes. Tender Offers The Tender Offers are being made pursuant to the terms and conditions set forth in the offer to purchase, dated June 2, 2021 (the "Offer to Purchase" and, together with the accompanying notice of guaranteed delivery, the "Offer Documents"). A complete copy of the press release is available free at: https://prn.to/3vbc43Y As reported in the Troubled Company Reporter-Latin America, Egan-Jones Ratings Company, on May 26, 2021, maintained its 'B-' foreign currency and local currency senior unsecured ratings on debt issued by Petroleo Brasileiro S.A. EJR also maintained its 'B' rating on commercial paper issued by the Company. SUPERVIA: Files for Bankruptcy as Traffic Was Hit by COVID-19 ------------------------------------------------------------- Rodrigo Viga Gaier at Reuters reports that Brazilian metropolitan rail company Supervia filed for bankruptcy protection, the company said, as traffic was sharply hit by the COVID-19 pandemic. The company, controlled by a Japanese group that includes a subsidiary of Mitsui & Co 8031.T and West Japan Railway Co 9021.T, will restructure 1.2 billion reais (US$237.4 million) in debt, according to Reuters. Before the pandemic, Supervia, which operates in Rio de Janeiro metropolitan area, had around 600,000 passengers a day but now the number has dropped to 300,000, the report notes. The company said in a statement it will try to revise terms of the contract with the government, the report adds. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Construction Material Prices Soar ----------------------------------------------------- Dominican Today reports that the prices of construction materials continue their upward climb, which worries developers and home builders, and hardware stores, placing them in a bad position when closing and fulfilling a contract. "It's a situation that we have been denouncing for more than a year, the sustained rise in construction materials, which has reached a point such that, in that period, the cost per square meter of housing construction has skyrocketed by 30% approximately," according to Jorge Montalvo, president of the Dominican Association of Home Builders and Promoters (Acoprovi), according to Dominican Today. He told Diario Libre that products such as PVC pipes have increased 119.09% on average as a category, the report notes. "For example, within this is the SDR26 1/2 x 19 PVC tube, which in March 2020 the unit cost RD$41.93 and currently is around RD$121.07, for a difference of 188.74%, 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). ============= G R E N A D A ============= GRENADA: Negotiates US$8.95 Million Loan From IDB ------------------------------------------------- RJR News reports that the Grenada government has negotiated a US$8.95 million loan from the Inter-American Development Bank to use as a stimulus package for persons who have been marginalized by the Impact of the COVID-19 pandemic. Prime Minister Dr. Keith Mitchell said the funds will be disbursed through the Caribbean Development Bank, according to RJR News. It has a variable interest rate of about 2.06% and the terms and conditions include a five-year grace period, with repayment over 20 years, the report notes. =============== H O N D U R A S =============== HONDURAS: IDB OKs US$45MM Loan to Finance Potable Water ------------------------------------------------------- The Inter-American Development Bank (IDB) has approved a US$45 million loan to finance the Potable Water and Sanitation Program in Honduras, which will benefit nearly 31,000 households in rural areas and towns of up to 30,000 inhabitants by providing them with new and improved access to these basic services. The program aims to improve the living conditions of families in rural and periurban areas, which have historically lacked access to basic drinking water and sanitation services. It will be executed by the Secretaría de Estado en los Despachos de Desarrollo Comunitario, Agua y Saneamiento (SEDECOAS, the Department of Community Development, Water, and Sanitation). The project will also help strengthen water security in Honduras, in particular in the most vulnerable communities, improve water utilities' management in order to ensure the sustainability of infrastructure investments, and boost climate change resilience. The program consists of two major components. The first, US$38.6 million component will be used for building new drinking water distribution systems and sanitary sewers, individual sanitation solutions, and excreta and wastewater treatment systems. These investments will be designed taking into consideration potential natural disaster hazards and climate change effects. They will also have a strong focus on community participation in the systems' operation, maintenance and administration and on the promotion of changes in user behavior for the proper use of the infrastructure and facilities built. All social management activities will mainstream gender and diversity considerations, promoting the equal participation of men and women, especially in training and decision-making. The second component, of US$3.21 million, will be used for preinvestment plans and for sector strengthening activities at national, departmental, and municipal entities in priority areas in order to strengthen their planning, monitoring and technical capacities so they can better contribute to system sustainability. The IDB financing comes from two sources: 65% from the Bank's Regular Ordinary Capital, for a 25-year term, with a 5.5-year grace period and a LIBOR-based interest rate, and the remaining 35% from concessional funds, which will have a 40-year amortization period, 40 years of grace, and 0.25% interest. ============= J A M A I C A ============= JAMAICA: Rick's Cafe Back in Business After Breaching Regulations ----------------------------------------------------------------- Jamaica Observer reports that the famous Rick's Cafe in Negril which was accused of breaching the COVID-19 regulations while hosting the popular Mocha Fest party on May 27, is back in business after being shuttered for several days. According to Tourism Development Company Ltd (TPDCo) Acting Executive Director Stephen Edwards in a written response to queries from the Jamaica Observer West, "Rick's Cafe has been placed on a special monitoring regime to mitigate against future breaches of the Ministry of Tourism's COVID-19 Health and Safety Protocols. This was done following the successful completion of a COVID-19 compliance recertification process by the entity," the report notes. The special monitoring regime means that while entities within the industry are checked randomly, Rick's Cafe will be checked frequently and will also be subjected to undercover visits, according to Jamaica Observer. Edwards also stated that COVID-19 compliance certification by TPDCo allows entities to receive visitors to Jamaica, subject to all other required Government of Jamaica approvals and licenses being in place, the report relays. Rick's Cafe, located on Negril's famous West End Road, was buzzing with activity when the Observer West visited the property, the first day it reopened to the public since it was closed almost two weeks ago and its COVID-19 compliance certification revoked, the report relays. The report notes that Minister of Local Government and Rural Development Desmond McKenzie ordered the entity closed for seven days under the powers available to the Office of Disaster Preparedness and Emergency Management (ODPEM). The minister had asserted that "it is well known that entertainment activities of this type have been banned by order since March last year when COVID-19 arrived in the country. The Westmoreland Municipal Corporation did not permit this event to occur, and indeed, no municipal corporation has issued permits for events since last year". The report discloses that McKenzie, in announcing the reopening, noted that it emerged in a meeting with the Rick's Cafe management that its place of amusement licence had expired but since then, they had completed the application process and a licence was issued by the Westmoreland Municipal Corporation, the report relays. Also, the entity was already properly certified by the Ministry of Health and Wellness and the Jamaica Fire Brigade, the report notes. Rick's Cafe, which was established in 1974 by Richard "Rick" Hershman, has since expressed regret and apologized for hosting the event, the report says. Stakeholders in Negril had claimed that Mocha Fest was in breach of restrictions placed on the hosting of entertainment events, the report discloses. However, Rick's Cafe is located within the Tourism Resilient Corridor established by the Government. The Resilient Corridors include the coastline from Negril to Port Antonio (North Coast Corridor) and from Milk River to Negril (South Coast Corridor), the report relays. Only businesses within the corridor that have been trained and assessed for adherence to COVID-19 protocols are allowed to open to tourists, the report adds. =========== M E X I C O =========== AGUAS DEL MUNICIPIO DE DURANGO: Moody's Cuts Issuer Ratings to B1 ----------------------------------------------------------------- Moody's de Mexico S.A. de C.V. downgraded the issuer ratings for Aguas del Municipio de Durango (AMD) to B1/Baa3.mx from Ba3/Baa1.mx. The outlook remains negative. RATINGS RATIONALE RATIONALE FOR THE RATING DOWNGRADE The rating action to downgrade AMD's issuer ratings and to maintain the negative outlook follows the downgrade of the Municipality of Durango's issuer ratings to B1/Baa3.mx and the maintenance of the negative outlook. AMD has strong operating and financial linkages with the Municipality of Durango as it has a clear public mandate to provide essential water and sewage services. Long-term debt of AMD is guaranteed by the municipality, and a potential default would greatly damage the support provider's reputation. Moody's believes that the municipality of Durango would act in a timely manner to address any liquidity pressures that the water company may face. As such the credit quality of AMD reflects that of the Municipality of Durango. Moody's incorporate AMD's debt obligations as part of the municipality of Durango's indirect debt obligations. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook for AMD reflects the negative outlook assigned to its supporting government. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS Environmental considerations are not material to AMD's credit profile. AMD is exposed to climatic phenomena such as prolonged periods of drought; however, these risks are not material for the ratings given the support from the Municipality of Durango. Social risks are not material to AMD's credit profile. The water company is responsible for the basic service of supplying drinking water and sewerage and sanitation, and receives financial support from the municipality of Durango. Corporate governance considerations are material to AMD's credit profile, and capture the close institutional, operational and financial ties between the water company and the municipality of Durango, in conjunction with weak financial results and a tight liquidity reflecting weaker AMD's financial flexibility. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given the strong linkages between the AMD and its support provider, any upgrade or downgrade of the Municipality of Durango would likely lead to an upgrade or downgrade of the water utility. Additionally, given the weakening liquidity of Durango, should evidence arise that it will be unable to support AMD in a period of acute liquidity pressure, the strength of the relationship between Durango and AMD could weaken. This could result in a decoupling of AMD's rating from that of Durango's. The principal methodology used in these ratings was Government-Related Issuers Methodology published in February 2020. DURANGO MUNICIPALITY: Moody's Lowers Issuer Ratings to B1 --------------------------------------------------------- Moody's de Mexico S.A. de C.V. downgraded the baseline credit assessment to b1 from ba3 and the issuer ratings of the Municipality of Durango to B1/Baa3.mx from Ba3/Baa1.mx (Global Scale, local currency/Mexico National Scale) and maintained the negative outlook. RATINGS RATIONALE RATIONALE FOR THE RATING DOWNGRADE The downgrades of the BCA to b1 from ba3 and issuer ratings to B1/Baa3.mx from Ba3/Baa1.mx reflect a sharp and continuous deterioration in Durango's liquidity leading to a recurrent use of short-term debt. Moody's anticipates a sustained liquidity pressure in 2021, as a result of lower federal transfers and payments associated with the early termination of a public private project (PPP). While the municipality's liquidity position was already very weak in 2019 its cash to current liabilities ratio further deteriorated in 2020, reaching 0.17 times (x) (0.22x in 2019), the lowest value registered in five years. This figure is significantly weaker than the median of Ba3 rated Mexican municipalities (0.72x). The deterioration in the liquidity has triggered a recurring use of short-term debt for MXN50 million on an annual basis. Given lower cash financing balances forecasted in 2021/22 Moody's expects that the cash to current liabilities ratio will remain tight at 0.11x on average. In addition, the B1 rating also reflects the accounting inconsistencies registered between the results of the income statement and the balance sheet, over the analysis period. While 2020 budget outcomes have been helped by the temporary halt of some municipal services due to the pandemic, lower federal transfers in 2021 combined with a rebound in expenditure as municipal services resume will put pressure on Durango's operating results. In this context, Moody's forecasts average operating and financial balances of -2% of operating revenues and -5.5% of total revenues, respectively, in 2021/22. Additionally, the dispute over a PPP to renovate public lighting in the city led the trustee of the trust that serves as mechanism of payment of this obligation to retain MXN356 million of federal transfers (participaciones) between September 2019 and May 2021, which weighed on Durango's liquidity position. In April 2021, Durango reached a favorable agreement with the project company by agreeing to pay MXN287 million during 2020 instead of the MXN1.2 billion net present value for this PPP. While the municipality's debt ratio will significantly improve as a result (from 65.1% in 2020 to 21.8% in 2021/22), the relief on liquidity will only be marginal, and is unlikely to offset broad budget pressures, in Moody's view. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook reflects the municipality's ongoing challenges to improve its financial results, and stop the deterioration in its liquidity position. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS Environmental and social considerations are not material to Durango's ratings. Governance considerations are material to Durango's ratings. The municipality complies with the institutional framework for other Mexican RLGs (Mexican Financial Discipline Law and the National Accounting Harmonization Council). However, the municipality has weak governance, especially in terms of management practices and transparency. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given the negative outlook, the ratings could experience additional downward pressure if the municipality's liquidity continues to deteriorate as evidenced by its reliance on short-term debt. In contrast, ratings outlook could be stabilized if the operating and financial balances improved along with a sustained improvement in the municipality's liquidity position. The principal methodology used in these ratings was Regional and Local Governments published in January 2018. YUCATAN: Moody's Affirms Ba1 Issuer Rating & Alters Outlook to Neg. ------------------------------------------------------------------- Moody's de Mexico S.A. de C.V. has affirmed the ba1 baseline credit assessment and the Ba1/A1.mx (Global Scale, local currency/Mexico National Scale) issuer ratings of the State of Yucatan and changed the outlook to negative from stable. At the same time, Moody's de Mexico affirmed the debt rating of the following enhanced loan issued by the state at Baa1/Aaa.mx: MXN 2,620 million from Banamex (original face value) with a maturity of 20 years and a pledge of 16.875% of the state's General Fund of Participaciones revenues. RATINGS RATIONALE RATIONALE FOR THE NEGATIVE OULTOOK AND THE AFFIRMATION OF THE BCA AND ISSUER RATINGS The change in the outlook to negative from stable reflects Moody's assessment of the risk that Yucatan will register a more prolonged period of weakened fiscal health due to the pandemic, even as other peers begin to recover, due to the acute level of fiscal deterioration Yucatan experienced in 2020. Should Yucatan fail to lower short-term debt levels, which have risen to levels higher than peers, and continue to record weak gross operating balances and liquidity, Yucatan's credit profile may no longer be consistent with other Ba1 peers. The negative outlook also reflects the continued uncertainty about the pace of economic recovery in the state following the pandemic, which could lessen the pace of own-source revenue recovery, further challenging the state's fiscal recovery. In 2020 Yucatan's operating and cash financing balances fell to -11.7% of operating revenues and to -7% of total revenues, which resulted in a decrease of the cash to current liabilities ratio to 0.52x, figures that compare negatively with the fiscal pressure recorded from other Mexican rated peers at Ba1. This deterioration was the result of a decrease of 3.2% in the operating revenues and an increase in the operating and total expenditures of 12.2% and 8.6%, as a result of the coronavirus pandemic and for extraordinary expenditures related to health and social programs to stimulate the local economy. In addition, to cover its financial needs Yucatan acquired MXN 2.5 billion of short-term debt which, in conjunction with the long-term debt proceeds from the Banamex loan, caused a deterioration in the debt metrics to 59.7% of operating revenues in 2020 from 31.2% in 2019. The decision to affirm the BCA and issuer ratings of ba1/Ba1/A1.mx reflect Moody's opinion that Yucatan maintains sufficient fiscal resilience to reverse this deterioration should budget plans come to fruition. The state's decision to implement an increase in the payroll tax rate to 3% from 2.5%, authorized in 2020, will help increase own-source revenues as will the recovery in the economy. Additionally, Moody's expects the state will eliminate the extraordinary expenditures introduced in 2020 as the pandemic pressures subside. Combined, these results could lead to levels that would in line with Ba1 peers and ensure liquidity and debt, in particular the short-term debt, do not deteriorate further than that already observed. RATIONALE FOR THE AFFIRMATION OF THE ENHANCED LOAN RATING The affirmation of the Banamex enhanced loan reflects the affirmation of Yucatan's issuer ratings. Per Moody's methodology on rating enhanced loans, the loan ratings are directly linked to the credit quality of the issuer, which ensures that underlying contract enforcement risks, economic risks and credit culture risks (for which the issuer rating acts as a proxy) are embedded in the enhanced loans ratings. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS Environmental considerations are material for Yucatan's ratings. Yucatan is exposed to hydrometeorological phenomena's, that can cause extraordinary expenditures. However, the Mexican states historically have received support from the federal government in case of natural disasters of high magnitude, a factor that helps to contain the impact in the states' finances. In Moody's assessment social considerations are not material for the State of Yucatan's ratings. However, Moody's considers the pandemic as a social risk due to the implications on health expenditures and in the own source revenues collection. Governance considerations are material to the ratings. Yucatan complies with the general institutional framework established for Mexican RLGs, i.e. financial discipline law and the harmonization council. The state publish financial statements on a timely quarterly basis and has good transparency practices. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS If Yucatan sustains negative operating and financing balances that put additional pressure on liquidity and lead to increased dependence on short-term borrowing, the ratings could face downward pressures. Conversely, should operating and financial balances recover quickly, and the liquidity strengthens, the rating outlook could be stabilized. Given the link between the loan and the credit quality of the obligor, a downgrade/upgrade of the state of Yucatan could exert downward/upward pressure on the loan's ratings. The ratings could also face downward/upward pressure if debt service coverage levels fall/improve materially below/above Moody's expectations. The principal methodology used in rating the issuer ratings was Regional and Local Governments published in January 2018. ================= N I C A R A G U A ================= NICARAGUA: Fitch Alters Outlook on 'B-' Foreign Curr. IDR to Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Nicaragua's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B-', and revised the Rating Outlook to Stable from Negative. KEY RATING DRIVERS The stabilization of the Outlook reflects greater than expected fiscal resilience, early signs of economic recovery from a lengthy period of economic contraction, and pandemic-related multilateral disbursements that have eased near-term financing constraints. Nicaragua's ratings are constrained by the lowest World Bank Governance Indicators average score in Fitch-rated Americas, low income per capita, political stability risks and international sanctions that limit future external financing. Greater availability of multilateral funding has eased constraints on government spending and financing. In 2020 the general government deficit increased to 1.8% of GDP from 0.3% a year prior; the deficit compares favorably with the 2020 'B' median of 7.2%. The deficit was driven by an 8% increase in central government expenditure while revenues were remarkably resilient, resulting in a central government deficit of 1% of GDP. The deficit of the social security institute (INSS), which has been a driver of general government deficits, reached 0.8% of GDP, an expansion of 0.2pp compared to 2019. Fitch projects that the INSS deficit will gradually grow to 1.4% of GDP by 2023 unless there is a structural reform that improves its actuarial position. Fitch expects that the general government deficit will widen to 3.2% of GDP in 2021 and narrow to 2.7% by 2022. The wider deficit in 2021 is driven by an increase in expenditure of 16% at the central government level, the largest increase since 2015. Capital expenditure is expected to increase by 36% to 5.9% of GDP. Fitch expects that in 2021 revenues will grow by 10%, a rate not seen since 2017. Central government revenue grew by 20.8% year-on-year in 1Q21, pushed by stronger economic activity. In 2020, multilateral and bilateral financial institutions disbursed USD829 million (6.7% of GDP) to the Nicaraguan public sector, a 52% increase with respect to the USD546 million average annual disbursement between 2017 and 2019. International multilateral institutions eased their lending requirements in response to the pandemic and to hurricanes Eta and Iota in November 2020. The biggest creditors were CABEI (USD321.6 million), IMF (USD186.8 million), IDB (USD150.2 million) and the World Bank (USD67.7 million). Many of the loans signed by the government in 2020 are for multiyear programs. Fitch assumes that contracted loans will be disbursed and such disbursements will gradually fall to pre-pandemic levels by 2023. The 2018 NICA Act and other international sanctions may limit new external financing in the coming years, particularly from institutions where the U.S. has a large voting power. Domestic borrowing continues to play a smaller role in financing, with the government borrowing domestically at high interest rates and maturities under five years. The cost of debt service increased to 3.8% of GDP in 2020 from 3.0% in 2017. High liquidity and subdued demand for corporate credit has supported demand for government bonds. In 2020 the central government sold a record USD195 million (1.5% of GDP) in local bonds. Of these bonds, 56% were payable in USD with a weighted average yield of 10.6% and maturity of 3.3 years; the remaining were in bonds payable in NIO with a weighted average yield of 9.9% and maturity of 4.0 years. Between January and May 2021 the government sold USD170 million in local bonds. Central government increased deposits by 53% to NIO24.2 billion (5.6% of GDP) due to the record external disbursements and local issuance of debt in 2020. Fitch expects that central government deposits will decline in 2021 to finance the fiscal expansion. The current account surplus grew to an all-time high of 7.6% of GDP driven by robust exports despite the pandemic, import contraction and resilient remittances. This surplus combined with the influx of multilateral financing allowed the central bank to increase international reserves in 2020 by 34% to USD3.2 billion or 6.1 months of current external payments, this level of reserves compares favorably with the 'B' median of 3.9 months. In 2020 the economy contracted by 2% making it the third year in a row of recession. In 1Q21 real GDP grew by 3.4% year-on-year, and Fitch projects that the economy will grow 3.8% this year supported by higher exports and fiscal expansion. Growth projections for 2022 and 2023 are capped by credit contraction, political uncertainty stemming from the upcoming elections and the expected fiscal consolidation after the election. In April 2021 net credit of the banking sector contracted by 0.4% year-on-year marking the 32nd month of contraction, while deposits grew by 20.8%. Events leading to the presidential elections in November could deteriorate relations with the U.S. and EU, potentially increasing risks for widening or tightening of sanctions. Daniel Ortega, president since 2007, is expected to run for a fourth consecutive term. Between June 3-8 four presidential hopefuls were arrested by the government on various charges including money laundering and plotting against Nicaragua's sovereignty and independence. On June 9 the U.S. Department of the Treasury added four names to the list of sanctioned individuals bringing the total number to 30 including the vice-president, finance minister, head of the central bank and four of Daniel Ortega's children. In October 2020 the European Council renewed for one year the sanctions against six members of the government. ESG - Governance: Nicaragua has an ESG Relevance Score (RS) of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. Theses scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in Fitch's proprietary Sovereign Rating Model. Nicaragua has a low WBGI percentile ranking of 16.9%, reflecting episodes of political violence, weak political participation rights and uneven application of the law. RATING SENSITIVITIES FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO NEGATIVE RATING ACTION/DOWNGRADE: -- Public Finances: An inability to access external or local sources of financing or evidence of heightened risks in meeting debt-service payments caused, for example, by the tightening of international sanctions. FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO POSITIVE RATING ACTION/UPGRADE: -- Public Finances: Fiscal consolidation that alleviates the overall financing needs, for example, by improving the actuarial position of the INSS. -- Public Finances: Easing of financing constraints, for example due to diversification of financing sources and/or easing of international sanctions. -- Macro: Strong and sustained economic recovery, for example, owing to lower political uncertainty and easing of external financing constraints. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Nicaragua a score equivalent to a rating of 'CCC+' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to SRM data and output, as follows: -- Macroeconomic policy and performance: +1 notch, to reflect Nicaragua's consistent monetary and fiscal policy response that has supported macroeconomic stability through political shocks and the pandemic in recent years. -- Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within Fitch's criteria that are not fully quantifiable and/or not fully reflected in the SRM. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. KEY ASSUMPTIONS Fitch assumes the global economy and international oil prices perform in line with Fitch's latest Global Economic Outlook published in March 2021. ESG CONSIDERATIONS Nicaragua has an ESG Relevance Score of '5' for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. Nicaragua has an ESG Relevance Score of '5' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. Nicaragua has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. Nicaragua has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and a rating driver, as for all sovereigns. Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity. ===================== P U E R T O R I C O ===================== ALEX AND ANI: U.S. Trustee Opposes Bid to Seal Ch. 11 Details ------------------------------------------------------------- Law360 reports that the Office of the U.S. Trustee balked at a case-opening proposal by bankrupt jewelry retailer Alex and Ani LLC to bar public access to some terms of a creditor settlement woven into the debtor's Chapter 11 restructuring support agreement in Delaware. U.S. Trustee counsel David L. Buchbinder told U.S. Bankruptcy Judge Craig T. Goldblatt during an initial hearing -- a day after Alex and Ani opened its case with $156 million in debt -- that he had expected the debtors to delay argument on the request until a later hearing. About Alex and Ani LLC Founded in 2004 by Carolyn Rafaelian, Alex and Ani -- http://www.alexandani.com/-- has become a premier jewelry brand, quickly gaining popularity because of the novel and customizable nature of its signature expandable wire bracelet. Alex and Ani has been headquartered in East Greenwich, Rhode Island since 2014. Since opening its first retail store in Newport, Rhode Island in 2009, Alex and Ani has expanded to over 100 retail store locations across the United States, Canada, and Puerto Rico. Alex and Ani LLC and its affiliates sought Chapter 11 protection (Bankr. D. Del. Lead Case No. 21-10918) on June 9, 2021. In its petition, Alex and Ani listed assets and liabilities of $100 million to $500 million each. The Debtors tapped Kirkland & Ellis LLP as general bankruptcy counsel; Klehr Harrison Harvey Branzburg LLP as local bankruptcy counsel; and Portage Point Partners, LLC, as financial advisors and investment bankers. Kurtzman Carson Consultants LLC is the notice and claims agent. ********* 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. 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