/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210702.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, July 2, 2021, Vol. 22, No. 126 Headlines B A H A M A S [*] BAHAMAS: Signs of Recovery in Tourism Sector B R A Z I L BANCO DE DESENVOLVIMENTO: Moody's Affirms B2 Issuer Rating BRAZIL: 2nd Corn Crop Should Drop to 65.3M Tons, Agroconsult Says CEMIG: Moody's Affirms 'Ba3' CFR, Outlook Remains Positive IGUA SANEAMENTO: Moody's Withdraws Ba3 Corporate Family Rating C A Y M A N I S L A N D S EMAAR SUKUK: S&P Affirms 'BB+' Rating on $2BB Sukuk Program J A M A I C A JAMAICA: FSC Says Pension Assets Go Down by 5.38% P E R U TELEFONICA DEL PERU: Moody's Lowers CFR to Ba2, Outlook Negative P U E R T O R I C O CARIBBEAN MOTEL: Creditor Seeks to Prohibit Cash Collateral Use CB REAL ESTATE: Seeks to Hire Charles A. Cuprill as Legal Counsel T R I N I D A D A N D T O B A G O CARIBBEAN AIRLINES: T&T to Fund Severance Payments to Employees - - - - - ============= B A H A M A S ============= [*] BAHAMAS: Signs of Recovery in Tourism Sector ------------------------------------------------ RJR News reports that the Bahamas government says the tourism industry is showing signs of recovery following the effects of the COVID-19 pandemic. The country issued nearly 300,000 Travel Health Visas to visitors during the first five months of the year, according to RJR News. Tourism and Aviation Minister Dionisio D'Aguilar told Parliament that the statistics show that the Family Islands are bouncing back faster than New Providence, the report notes. D'Aguilar said 60 per cent of visitors are travelling to Nassau and the remaining 40 percent to the Family Islands, the report relates. He disclosed that with the onset of COVID-19, persons want a low density, secluded vacation at a small boutique hotel or AirBnB, away from crowds and larger properties, the report adds. =========== B R A Z I L =========== BANCO DE DESENVOLVIMENTO: Moody's Affirms B2 Issuer Rating ---------------------------------------------------------- Moody's Investors Service has affirmed all global ratings and assessments assigned to Banco de Desenvolvimento de Minas Gerais S.A. (BDMG) and to Banco Regional de Desenvolvimento do Extremo Sul (BRDE). Moodys affirmed BDMG's B2 and Not Prime long and short-term global local currency issuer rating, as well as its local and foreign currency B1 and Not Prime long and short-term counterparty risk ratings. Moody's also affirmed BDMG's standalone baseline credit assessment (BCA) and adjusted BCA at b2, as well as all the assessments. The outlook on BDMG's ratings is stable. Moodys affirmed BRDE's Ba3 and Not Prime long and short-term global local currency issuer rating, as well as its local and foreign currency Ba2 and Not Prime long and short-term counterparty risk ratings. Moody's also affirmed BRDE's standalone baseline credit assessment (BCA) and adjusted BCA at ba3, as well as all the assessments. The outlook on BRDE's ratings is stable. RATINGS RATIONALE BANCO DE DESENVOLVIMENTO DE MINAS GERAIS S.A. The affirmation of BDMG's Baseline Credit Assessment (BCA) of b2 and its issuer ratings of B2 reflects the strong macroeconomic and institutional linkages with Minas Gerais, State of (B2 stable). Established to act as a financial development agent of the state government, BDMG has limited ability to diversify and operate beyond the boundaries of the state. Consequently, the bank is highly dependent upon and exposed to the local state economy and its loan book, therefore, tends to have important sector and borrower concentrations. The strong pace of loan book growth of 34% in 12 months ended in December 2020, as well as the high volume of loan deferrals mitigated the short-term pressured on problem loans ratio, that remained at 1.9% at the end of 2020. Growth was largely backed by government guaranteed loans that accounted for more than 30% of newly originated loans in 2020. The expiration of part of deferrals also increased the bank's problem loan ratio to 2.3% in Q1 2021, same level of 2019. The bank's high levels of loan loss reserves, however, that reached 4.8x its problem loans in March 2021, helps to mitigate future pressure on asset risk as the standstill periods and government-sponsored facilities expire. In affirming BDMG's ratings at B2, Moody's also acknowledges the bank's adequate capitalization, which provides an important buffer against loan losses and against the bank's modest profitability ratios. BANCO REGIONAL DE DESENVOLVIMENTO DO EXTREMO SUL The affirmation of BRDE's BCA at ba3 and issuer ratings at Ba3 acknowledges the bank's well-established role in fostering development in the relatively prosperous southern states of Brazil, and its position as one of the largest on-lenders of Banco Nacional de Desenvolvimento Economico e Social - (BNDES)'s (Ba2/Ba2 stable, ba2) to the agricultural sector. The ba3 BCA also incorporated BRDE's sound capitalization relative to similarly rated peers, as measured by Moody's tangible common equity to risk weighted assets ratio of 19.5% as of December 2021. As a non-deposit taking development bank, BRDE' stable, although highly concentrated, funding mix, which is composed of funds predominantly sourced from BNDES, has been a key factor supporting its ratings. BRDE's Ba3 issuer ratings also take into account Moody's expectation that the bank's asset quality and profitability will remain pressured in the coming two quarters given the share of loan deferrals that stood at 20% of its loan book as of December 2020. BRDE's loan portfolio has traditionally been sector and borrower concentrated owing to its footprint in the southern states whose economies have relevant contribution from agriculture, primarily on large companies. As a result, the agricultural sector accounted for around 60% of loans as of December 2020, and large companies, mainly cooperatives, made up around 55% of borrowers also. BRDE is owned by the States of Rio Grande do Sul, Santa Catarina and Parana (Ba2, stable), however its issuer rating does not incorporate any uplift from the probability of shareholder support. The stable outlook incorporates Moody's expectation that BRDE's financial profile will remain consistent with a ba3 BCA over the next 12-18 months. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS BANCO DE DESENVOLVIMENTO DE MINAS GERAIS S.A. BDMG's ratings could face upward pressure if the ratings of the State of Minas Gerais were to be upgraded. An upgrade of the bank's ratings and assessments could also be considered if its asset quality is preserved and if profitability improves after government support programs expire, and as loan volumes increase. Successful diversification of funding through stable and low costs resources could also put upward pressure on BDMG's ratings. Conversely, a downgrade of the ratings of the State of Minas Gerais could pressure BDMG's ratings downward, as well as rapid loan growth that leads to an increase in loan losses and a need for additional reserves, which could negatively affect profitability and its capital. BANCO REGIONAL DE DESENVOLVIMENTO DO EXTREMO SUL BRDE's ratings could face upward pressure if the bank's asset risk and profitability recovers. Significant diversification of the bank's funding sources would also be positive, particularly if this funding is of low cost and stable, ensuring BRDE maintains its competitive advantage. A significant weakening of BRDE's financial fundamentals, resulting from a larger-than-expected deterioration in the quality of the loan book and an ensuing reduction in capitalization levels, could have a negative effect on the bank's ratings. METHODOLOGY USED The principal methodology used in these ratings was Banks Methodology published in March 2021. BDMG, headquartered in Belo Horizonte, is a development bank owned by the State of Minas Gerais with assets of BRL8.6 billion and equity of BRL1.9 billion in December 2020. BRDE is headquartered in Porto Alegre, Brazil. The bank had total assets of BRL16.7 billion and shareholders' equity of BRL3.1 billion as of December 31, 2020. LIST OF AFFECTED RATINGS AND ASSESSMENTS The following ratings and assessments of BANCO DE DESENVOLVIMENTO DE MINAS GERAIS S.A. (BDMG) were affirmed: Long-term local-currency issuer rating affirmed at B2, Stable Short-term local-currency issuer affirmed rating at Not Prime Long-term local-currency counterparty risk affirmed rating at B1 Long-term foreign-currency counterparty risk affirmed rating at B1 Short-term local-currency counterparty risk rating affirmed at Not Prime Short-term foreign-currency counterparty risk rating affirmed at Not Prime Long-term counterparty risk (CR) assessment affirmed at B1(cr) Short-term counterparty risk (CR) assessment affirmed at Not Prime(cr) Adjusted baseline credit assessment affirmed at b2 Baseline credit assessment affirmed of b2 Outlook stable The following ratings and assessments of BANCO REGIONAL DE DESENVOLVIMENTO DO EXTREMO SUL (BRDE) were affirmed: Long-term local currency issuer rating affirmed at Ba3, Stable Short-term local currency issuer rating affirmed at Not Prime Long-term local currency counterparty risk rating affirmed at Ba2 Short-term local currency counterparty risk rating affirmed at Not Prime Long-term foreign currency counterparty risk rating affirmed at Ba2 Short-term foreign currency counterparty risk rating affirmed at Not Prime Long-term counterparty risk assessment affirmed at Ba2(cr) Short-term counterparty risk assessment affirmed at Not Prime(cr) Baseline Credit Assessment affirmed at ba3 Adjusted Baseline Credit Assessment affirmed at ba3 Outlook stable BRAZIL: 2nd Corn Crop Should Drop to 65.3M Tons, Agroconsult Says ----------------------------------------------------------------- Rio Times Online reports that the Brazilian winter corn crop in expected to reach 65.3 million tons this 2020/21 season, 14.9% less than last cycle, according to an estimate released by Agroconsult. According to the consulting firm, the drop in relation to the potential estimated in January will reach 20 million tons, the report notes. The sharp drop is due to late planting, caused by the delay in the summer soy crop and dry weather. "Losses were not higher because the planting area grew," said Andre Pessoa, partner of Agroconsult, according to Rio Times Online. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). CEMIG: Moody's Affirms 'Ba3' CFR, Outlook Remains Positive ---------------------------------------------------------- Moody's Investors Service has affirmed the corporate family rating of Companhia Energetica de Minas Gerais - CEMIG at Ba3 and its baseline credit assessment at ba3, and the issuer ratings of its subsidiaries Cemig Geracao e Transmissao S.A. and Cemig Distribuicao S.A. also at Ba3. The outlook for all the ratings remain positive. Affirmations: Issuer: Companhia Energetica de Minas Gerais - CEMIG Corporate Family Rating, Affirmed Ba3 Issuer: Cemig Geracao e Transmissao S.A. Issuer Rating, Affirmed Ba3 Issuer: Cemig Distribuicao S.A. Issuer Rating, Affirmed Ba3 Outlook Actions: Issuer: Companhia Energetica de Minas Gerais - CEMIG Outlook, Remains Positive Issuer: Cemig Geracao e Transmissao S.A. Outlook, Remains Positive Issuer: Cemig Distribuicao S.A. Outlook, Remains Positive RATINGS RATIONALE CEMIG's rating reflects the track record of substantial improvements in financial policy and risk management over the past three years. The most notable improvement is in the company's liquidity position. As of March 2021, the company reported a consolidated cash position of BRL5.6 billion, and short-term debt maturities of BRL1.6 billion. Liquidity available is sufficient to cover all debt maturities for the next 18 months. Furthermore, during the pandemic, the company reduced capital expenditures, reduced and delayed dividend distributions, and lengthened debt terms. The ratings further consider maintenance of a low leverage profile, with an expectation of debt/EBITDA below 4.0x and CFO pre WC/debt between 17%-22%. Factored in the ratings are the off-balance sheet contingent obligations related to financial debt at non-controlled subsidiaries, which cause a 20% deterioration in credit metrics if added in full to the debt balance, the potential expiration of key hydro concessions in 2025, and the turnover in key management positions. Also embedded in the ratings is the view that the company's credit quality is less linked to that of its controlling shareholder, the State of Minas Gerais (B2 stable). The ratings of Cemig Distribuicao S.A. and Cemig Geracao e Transmissao S.A. mirror that of CEMIG. All debts are guaranteed by the holding; there is cross default across the corporate family; and cash flow management is centralized, including with the use of intracompany lending. RATING OUTLOOK The positive outlook reflects Moody's expectation that CFO-pre-WC to Debt will be above 18% on a sustainable basis and that the company will maintain a prudent financial policy, holding a cash balance in excess of 12-month debt maturities. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS CEMIG's ratings can be upgraded upon continued progress in its liability management strategy, including management of foreign exchange risks and strategies to address large year-specific debt maturities, while maintaining strong credit metrics such that CFO-pre-WC/debt remains above 18% on a sustainable basis. Significant improvement in liquidity could also trigger an upgrade as well as asset sales depending on the use of proceeds. On the other hand, a rating downgrade could happen if Moody's believe that the company's liquidity risks are not being prudently managed or if there is a sustainable increase in leverage such that the company's consolidated CFO pre-WC/debt remains below 12% on a sustainable basis. The principal methodologies used in rating Companhia Energetica de Minas Gerais - CEMIG were Regulated Electric and Gas Utilities published in June 2017. IGUA SANEAMENTO: Moody's Withdraws Ba3 Corporate Family Rating -------------------------------------------------------------- Moody's America Latina Ltda. has withdrawn Igua Saneamento S.A.'s Ba3/A2.br Corporate Family Ratings in the global and national scales. Prior to the withdrawal, the ratings were under review for downgrade. The following ratings were withdrawn: Issuer: Igua Saneamento S.A. Corporate Family Ratings: Ba3 (Global Scale Rating), A2.br (National Scale Rating) Outlook Actions: Issuer: Igua Saneamento S.A. Outlook, Changed To Rating Withdrawn From Rating Under Review RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. Igua Saneamento is a leading private water utility company in Brazil by population served, operating 18 long-term water and wastewater assets with an average 20 years remaining concession period, 14 of which through concession agreements and four through public-private partnerships (PPP). The company serves an area of six million people in 37 municipalities across five states. As of April 2021, the company is indirectly owned by Canada Pension Plan Investment Board (CPPIB, 45%), Alberta Investment Management Corp. (AIMCo, 44%) and BNDES Participacoes S.A. - BNDESPAR (11%), through direct and indirect stakes in funds managed by the IG4 group, which retains management responsibility. In 2020 the company generated BRL527 million in net revenue and BRL210 million in EBITDA according to Moody's standard adjustments, reporting Net Debt/EBITDA of 5.9x and FFO/Net Debt of -1.5%, considering Moody's standard adjustments. =========================== C A Y M A N I S L A N D S =========================== EMAAR SUKUK: S&P Affirms 'BB+' Rating on $2BB Sukuk Program ----------------------------------------------------------- S&P Global Ratings affirmed its 'BB+' rating on Emaar Sukuk Ltd.'s (ESL's) $2 billion sukuk program. ESL is a limited liability company registered in the Cayman Islands with issued shares held in trust by Maples FS Ltd. ESL amended and restated the terms and conditions of the sukuk program largely to align them with the new Sharia requirements in the United Arab Emirates. Among the changes, there is now an obligation to maintain a tangibility ratio (ratio of the value of the lease assets as a proportion of the sukuk total value) above 50% throughout the lifetime of the transaction. If the tangibility ratio falls to 50% or below, but remains above 33%, Dubai-based property company Emaar Properties PJSC (EP; BB+/Stable/--), as the servicing agent, shall take steps, in consultation with its Sharia adviser, to ensure that the ratio is restored to more than 50% within the period determined by the adviser. If the ratio falls below 33%, a tangibility event occurs in which, among other things, ESL's certificates are delisted, while certificate holders are given the option to request early repayment of their sukuk. If a tangibility event occurs, and assuming a large percentage of the investors exercise their early dissolution option, EP could face heightened liquidity strain, in S&P's view. The update of the legal documents also includes the introduction of partial loss event (PLE) risk. A PLE is triggered if there has been a partial impairment of lease asset(s) in a manner that substantially deprives the lessee of its use and enjoyment of the lease assets. S&P said, "Although the service agent is obliged to properly insure the underlying assets, we think that investors can still be exposed to residual asset risk stemming from the capacity of EP to challenge the legality of the obligations to insure, given the described terms and conditions of the insurance coverage in the legal documents. As such, we rate the program under the assumption that a PLE is remote. This is underpinned by our understanding that the underlying assets for any drawdown will comprise land assets. In each drawdown, we will have to reassess this assumption. If a PLE occurs while any issuance is outstanding, the rating on that drawdown could be subject to multi-notch transition risk." The revised legal documents continue to fulfill the five conditions of S&P's criteria for rating sukuk: EP's contractual obligations will be sufficient to repay the principal amount and the periodic distributions in full and on time. The principal will be paid from a combination of the exercise price under the purchase undertaking and the deferred price under the murabaha agreement. The periodic distributions will be paid from the lease charge that EP will pay under the Ijara contract and the profit element of the murabaha agreement. We understand that the sum of these will be calibrated to match the periodic distribution amount exactly. Should this calibration not hold under a drawdown of this program, we may assign a different rating. EP's obligations under the sukuk's terms and conditions are irrevocable and will rank pari passu with EP's other senior unsecured financial obligations. EP will undertake to cover all the costs related to the transaction through the servicing agency agreement and the various contracts related to the sukuk issuance for the benefit of ESL. S&P said, "Although the documentation mentions a total loss event (TLE), we consider a TLE risk as remote since EP will use land assets as underlying assets for any drawdown. Like PLE risks, we would assess the TLE risk for each drawdown separately and may assign a different rating if, in our view, these risks are not remote. This is because, in our opinion, investors are still subject to residual asset risks as the obligations of EP to repay investors under a TLE scenario could be challenged in the same way as for a PLE." The master declaration of the trust specifies that if EP fails to fulfill its obligations under the purchase undertaking, the company shall, as an independent, severable, and separately enforceable obligation, fully indemnify the issuer for the purpose of redemption of the certificate under the condition that EP (acting in any capacity) is in actual or constructive possession, custody or control of all or any part of the lease assets. S&P said, "We note that EP has undertaken to maintain such possession, custody and control under the master lease agreement. Notwithstanding that the legal documents stipulate that all obligations of the sponsor are senior unsecured, if this obligation is altered in future updates of the legal documents or for a specific drawdown, our view of the ranking of the sukuk creditors in the event of liquidation of the sponsor might change. This could negatively affect the rating on the program and its drawdowns." S&P said, "We continue to equalize our rating on the program with our long-term issuer credit rating on EP. We will review the legal documentation of each new drawdown and, a material change in the contractual obligations or our assessment of TLE and PLE risks could affect the rating on that specific drawdown. S&P Global Ratings neither structures sukuk transactions nor provides opinions about the compliance of the transaction with Sharia." ============= J A M A I C A ============= JAMAICA: FSC Says Pension Assets Go Down by 5.38% ------------------------------------------------- Jamaica Observer reports that the recent report of the Financial Services Commission of Jamaica (FSC), the entity which regulates the pension sector, shows that pension assets continued to fall in the December quarter. The FSC noted that the Jamaican private pensions industry's track record of consistent growth each quarter was disrupted by periods of contraction during 2020, which resulted from the novel coronavirus pandemic and consequent uncertainties in the market, according to Jamaica Observer. Overall, the industry's assets contracted by 5.38 per cent, the report notes. At the end of 2020, assets totaled $663.07 billion, this compared to $700.73 billion in 2019, the report relays. However, the number of pension plans increased to 817 in 2020, compared to 809 the year before and membership grew by 6.79 per cent from 127,347 to 135,992 in 2020, the report notes. In total, the level of population coverage climbed 11.54 per cent in 2020, compared to 2019: 9.98 per cent, the report discloses. The FSC said a notable trend during the final quarter of 2020 was that level of investment in Goverment of Jamaica (GOJ) securities which surpassed investments in stocks and shares as the second-largest asset class by December 2020, the report relays. GOJ securities, while offering the lowest rates of return, are considered a safe harbour during times of financial uncertainty. Pooled arrangements, which are a combination of different assets, remained the largest asset class, the report notes. The FSC noted that during the quarter, there was also increased diversification of assets, the report says. Investments in pooled arrangements, GOJ securities, and stocks and shares have encompassed the largest portion of private pension assets for the last five years, the report relates. Over time, there has been a gradual shift from investments in GOJ securities to equities and pooled arrangements, the report notes. Pooled arrangements, valued at $250.02 billion, remained the largest asset class (37.75 per cent) during the calendar year; however, investments in GOJ securities (22.22 per cent) surpassed equity investments (21.74 per cent) to become the second-largest asset class within the aggregate private pension portfolio, the report says. This change, the FSC outlined, was partially attributable to declines in the value of equities due to uncertainties presented by the pandemic, the report discloses. Consequently, direct investments in GOJ securities and stocks and shares valued $147.17 billion and $144.01 billion, respectively, as at December 31, 2020, the report relates. More diversification was evidenced by increases in direct holdings of deposits, repurchase agreements, promissory notes, real estate, and mortgages during the period, the report notes. The FSC's report that some pension plans have also begun to pursue investments now permitted by the amended Investment Regulations, such as private equity, notwithstanding there is a general reduction in funds invested in other assets, the report says. The regulator observed, "Trustees and agents have been exploring available investment opportunities as well as diversifying assets to reduce concentration risk. Notwithstanding, a 5.38 per cent annual reduction in the value of total private pension assets, a 3.72 per cent increase was recorded during the December quarter," the report relays. As at December 31, 2020, there were 377 active pension plans within the Jamaican private pension industry, the report discloses. Despite the entrance of nine new pension plans into the industry, eleven plans exited; as a result, there were two fewer active private plans in the industry when compared to the previous year, the report notes. The FSC observed that the persion industry experienced steady growth in active membership. While private pension assets in active plans would have reduced by 5.41 per cent to $653.23 billion, active plans accounted for approximately 99 per cent of total private pension assets, an increase from the 98 per cent reported in the previous year, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. Fitch Ratings affirmed in March 2021 Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+', with a stable outlook. Standard & Poor's credit rating for Jamaica stands at B+ with negative outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). According to Fitch, Jamaica 'B+' rating is supported by World Bank Governance Indicators that are substantially stronger than the 'B' and 'BB' medians, a favorable business climate according to the World Bank Doing Business Survey, moderate inflation and moderate commodity dependence. These strengths are balanced by vulnerability to external shocks, a high public debt level and a debt composition that makes the sovereign vulnerable to exchange rate fluctuations. The Stable Outlook is supported by Fitch's expectation that the public debt level will return to a firm downward path post-pandemic, which is underpinned by political consensus to maintain a high primary surplus, the resilience of external finances, and stronger economic policy institutions. ======= P E R U ======= TELEFONICA DEL PERU: Moody's Lowers CFR to Ba2, Outlook Negative ---------------------------------------------------------------- Moody's Investors Service downgraded Telefonica del Peru S.A.A.'s Corporate Family Rating and senior unsecured ratings to Ba2 from Ba1. The outlook was changed to negative from stable. Downgrades: Issuer: Telefonica del Peru S.A.A. Corporate Family Rating, Downgraded to Ba2 from Ba1 Senior Unsecured Regular Bond/Debenture, Downgraded to Ba2 from Ba1 Outlook Actions: Issuer: Telefonica del Peru S.A.A. Outlook, Changed To Negative From Stable RATINGS RATIONALE The downgrade reflects Telefonica del Peru's competitive challenges to revert the negative trend in its operating metrics and market share that have been consistently below Moody's original expectations. EBITDA margin, as adjusted by Moody's, was 21.9% for the last twelve months ended March 2021, which negatively compares with the 24.5% posted in 2019 and 36.4% as of year-end 2016, when competition from the new entrants was limited. Despite the downward trend in margins, Moody's estimates that Telefonica del Peru's leverage will remain at or slightly above current levels of 3x. Furthermore, the rating action also considers the challenges of maintaining the company's good liquidity and credit protection metrics, in a scenario where the company is dealing with aggressive competition that will demand higher capital intensity. Liquidity could also deteriorate from the material liabilities of around PEN729 million related to SUNAT (Peruvian tax authorities). The ongoing tax dispute is related to SUNAT´s refusal to recognize Telefonica del Peru's tax deductions in connection with income taxes during 2000 and 2001. The negative outlook considers Telefonica del Peru challenges to increase prices and add subscribers in a context of aggressive competition in which Peru's economic indicators are under pressure with expected high inflation, FX volatility, persistent unemployment and political instability observed during the last months. Furthermore, the negative outlook considers the potential liquidity erosion arising from the SUNAT claims. Telefonica del Peru's Ba2 ratings reflect the company's strong competitive position in Peru as the largest telecommunications service provider in terms of revenue, and its diversification into a full suite of services, which allows it to offer bundled services in the Peruvian market. The Ba2 rating also takes into consideration the company's adequate liquidity including a comfortable debt maturity profile. However, Telefonica del Peru's Ba2 rating reflects Peru's highly competitive and price-sensitive telecommunications market, which has been straining the company's top line and margin sustainability that has been further aggravated by the social distancing measures during 2020 and early 2021. The entry of two aggressive competitors in 2014 disrupted the competitive landscape of a previously comfortable two-entity market, comprising Telefonica del Peru and America Movil, S.A.B. de C.V.'s (A3 negative) subsidiary Claro, driving down their market shares and profitability. The rating also takes into consideration Telefonica del Peru's small scale compared with that of its global peers. Since November 2019, Telefonica, S.A., shareholder of Telefonica del Peru, announced a new action plan aimed at prioritizing markets where the company sees long-term sustainable growth, leveraging infrastructure and improving efficiency. This new action plan includes, among other things, the spinoff of its businesses in Hispano America including Telefonica del Peru. Moody's are not assigning any notch uplift due to Telefonica, S.A. ownership, but Moody's will assess the Telefonica del Peru's ownership structure once the spinoff is completed. Telefonica del Peru's liquidity is good. The company has low indebtedness and a comfortable debt maturity profile. As of March 2021, the company had PEN961 million in cash, which is sufficient to cover its debt maturities until 2024. Telefonica del Peru posted positive free cash flow as adjusted by Moody's in 2020, mainly driven by its cost control initiatives including capex reduction to 15% of revenues from 19% the year before. Going forward, Moody's expect the company to generate slightly negative free cash flow driven by higher capex needs at around 20% of revenues. However, liquidity could be negatively affected if Telefonica del Peru has to pay SUNAT claims, which are still under litigation. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade would be considered if the company posts sustained market share and revenue growth that result in strong profitability while maintaining leverage below to 3.0 times and stronger interest coverage measured by (EBITDA-CAPEX)/Interest Expense 2.5x or higher on a sustained basis. An upgrade would require the maintenance of adequate or better liquidity. The rating could be further downgraded if the company is not able to maintain its market position and turnaround profitability with EBITDA margin (including Moody's adjustments) falling below 20% on a sustained basis leading to further cash burn and increase in leverage to finance capital expenditures and activities. Ratings could also be downgraded if leverage increases to a level higher than 3.5 times for a prolonged period of time. Weaker liquidity due to persistent negative free cash flow generation driven by capex or claims related to the company's tax proceedings, could built negative rating pressure. Telefonica del Peru is the largest telecommunications company in Peru, with a mobile market share of around 30% and 60% in the fixed income segment as of March 2021, according to the Peruvian telecommunications regulator — OSIPTEL. The company is an integrated telecommunications service provider offering mobile, fixed, pay-TV and business-to-business services through its Movistar brand. Telefonica del Peru is Peru's largest telecommunications company in terms of revenue, and a leader in all segments, with more than 12.6 million revenue-generating units (RGUs) in mobile and almost 3.3 million RGUs in fixed broadband and pay TV. In the 12 months that ended March 2021, the company generated revenue of around PEN6.6 billion ($1.8 billion). Telefonica del Peru is controlled by Telefonica S.A., which indirectly holds 98.94% of its shares. The remaining are traded on the Lima Stock Exchange — Bolsa de Valores de Lima. The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. ===================== P U E R T O R I C O ===================== CARIBBEAN MOTEL: Creditor Seeks to Prohibit Cash Collateral Use --------------------------------------------------------------- OSP Consortium, LLC, successor in interest of Westernbank, Banco Popular de Puerto Rico and Condado 2, LLC, asks the US Bankruptcy Court for the District of Puerto Rico to prohibit Caribbean Motel Corp. d/b/a/ Motel Caribbean from using cash collateral. OSP moves the Court to prohibit the use of its Cash Collateral and to allow it to seek and collect the related proceeds. On April 25, 2008, Westerbank extended to Caribbean Motel Corp. a $2,415,700 credit facility. The Loan was due and payable on April 25, 2013. The Loan is secured, inter alia, by the Debtor's real estate property. The Property was mortgaged through Mortgage Deed No. 1,182 executed on December 3, 2003, and secures a $2,415,700 Mortgage Note. The rents and proceeds generated from the Property secure the Loan and constitute OSP's cash collateral. Because the Debtor defaulted on the Loan, on May 20, 2014, BPPR, as Westernbank's successor in interest and OSP's predecessor, obtained a Judgment against the Debtor from the PR Court of First Instance, Superior Court of Mayaguez. On January 31, 2017, upon negotiations between the Debtor and Condado, BPPR's successor in interest, the parties and the co-debtors executed a Stipulation for the Payment of Judgment. On October 30, 2017, upon the impact of hurricane Maria on the Debtor's finances, Condado agreed to modify certain terms of the Stipulation for the Payment of Judgment, and the parties and the co-debtors executed an Amendment to Stipulation for the Payment of Judgment. OSP asserts that the Debtor also defaulted with the terms of both of these Stipulations, which had the stipulated effect of setting aside the terms of the Stipulations and reverting back to the terms of the Loan and the Judgment. A copy of the motion is available for free at https://bit.ly/3wVivK9 from PacerMonitor.com. About Carribean Motel Corporation Caribbean Motel Corp. d/b/a/ Motel Caribbean operates in the traveler accommodation industry. The Debtor is the owner of fee simple title to a land located at Guanajibo Ward, Cabo Rojo, PR with real properties used as motel. The Debtor sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case No. 21-01831) on June 15, 2021. In the petition signed by Margaro Rivera Guzman, president, the Debtor disclosed $683,781 in assets and $2,399,246 in liabilities. Wigberto Lugo Mender, Esq. at Lugo Mender Group, LLC is the Debtor's counsel. CB REAL ESTATE: Seeks to Hire Charles A. Cuprill as Legal Counsel ----------------------------------------------------------------- CB Real Estate, LLC seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Charles A. Cuprill PSC Law Offices to serve as legal counsel in its Chapter 11 case. The hourly rates charged by the firm's attorneys and paralegals are as follows: Attorneys $150 to $350 per hour Paralegals $85 per hour The firm will be paid a retainer in the amount of $15,000 and reimbursed for out-of-pocket expenses incurred. Charles Cuprill-Hearnandez, Esq., a partner at Charles A. Cuprill PSC Law Offices, disclosed in a court filing that his firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached at: Charles A. Cuprill-Hearnandez, Esq. Charles A. Cuprill PSC Law Offices 356 Fortaleza Street, Second Floor San Juan, PR 00901 Tel: (787) 977-0515 Fax: (787) 977-0518 Email: ccuprill@cuprill.com About CB Real Estate San Juan, P.R.-based CB Real Estate, LLC is a fee simple owner of two commercial buildings located in Puerto Rico and a residential property in New York, valued at $8.9 million in the aggregate. CB Real Estate sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 21-01849) on June 16, 2021. Horacio Campolieto Bielicki, president, signed the petition. In the petition, the Debtor disclosed total assets of $10,147,500 and total liabilities of $3,407,130. Charles A. Cuprill, PSC Law Offices and Luis R. Carrasquillo & Co. P.S.C. serve as the Debtor's legal counsel and financial consultant, respectively. ===================================== T R I N I D A D A N D T O B A G O ===================================== CARIBBEAN AIRLINES: T&T to Fund Severance Payments to Employees --------------------------------------------------------------- RJR News reports that the The Trinidad and Tobago government is to fund the multi-million dollar severance payments for dismissed Caribbean Airlines (CAL) employees. Finance Minister Colm Imbert said the state-owned airline, which earlier announced that it would be retrenching up to 450 employees, would need at least TT$110 million to meet severance payments, according to RJR News. Mr. Imbert said Caribbean Airlines does not have the required finances, the report notes. CAL had announced a loss of TT$172.7 million as well as a 75 per cent decline in revenue, compared to the same period in 2020, the report notes. About Caribbean Airlines Caribbean Airlines Limited - http://www.caribbean-airlines.com/- provides passenger airline services in the Caribbean, South America, and North America. The company also offers freighter services for perishables, fish and seafood, live animals, human remains, and dangerous goods. In addition, it operates a duty free store in Trinidad. Caribbean Airlines Limited was founded in 2006 and is based in Piarco, Trinidad and Tobago. Caribbean Airlines is among many airlines whose business has been greatly affected in 2020 by the slowdown of international travel caused by the COVID-19 pandemic. The government of Trinidad & Tobago guaranteed a US$65 million loan for the airline, and that funding has helped with the airlines' cash flow shortfall since May 2020. In September 2020, the airline related it will be taking cost-cutting measures to help keep it afloat. The measures, which was to affect some 1,700 employees, included salary deductions, no-pay leaves and lay-offs. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *