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/raid1/www/Hosts/bankrupt/TCRLA_Public/210723.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 23, 2021, Vol. 22, No. 141 Headlines B E R M U D A APEX GROUP: Acquires Mola-Administration B R A Z I L BRAZIL: 5 Restos Unite to Fight Inflated Delivery Fees BRAZIL: Firms Take Out Loans to Keep Cash Flow Out of the Red D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Company Reclassification Should Benefit Workers H O N D U R A S HONDURAS: Moody's Affirms 'B1' Long Term Issuer Rating J A M A I C A JAMAICA: JMEA Warns Some Local Business Will See Cost Increases UNIV. OF THE WEST INDIES: Officials to Discuss Fin'l. Challenges M E X I C O ELEMENTIA SAB: S&P Alters Outlook to Stable, Affirms 'BB-' ICR P E R U NG PET R&P: Fitch Assigns BB+ Rating to USD355MM Unsec. Notes NG PET R&P: Moody's Assigns Ba1 Rating to $355MM Sr. Unsec. Notes P U E R T O R I C O ABAB CORP: Seeks to Employ Saldana Carvajal as Special Counsel ALM LLC: Sept. 1 Plan & Disclosure Statement Hearing Set PUERTO RICO ELECTRIC: Brigade Capital Cuts Debt by $200 Million X X X X X X X X LATAM: ECLAC Wants Fin'l. and Int'l. Cooperation System Reassessed - - - - - ============= B E R M U D A ============= APEX GROUP: Acquires Mola-Administration ---------------------------------------- Apex Group Ltd (Apex), a global financial services provider, has acquired mola-administration, one of Germany's leading fund administrators. This strategic acquisition establishes the Group's local presence in Germany, supplementing its existing capabilities to serve clients in Germany and the wider European market. mola-administration serves a range of clients, with a 10-year track record of providing fund administration services to private equity firms, venture capital, debt, special situations and digital assets funds managing EUR3.5 billion of assets. By joining the Apex Group, mola-administration's client base will benefit from access to the Group's single-source solution which includes locally delivered services across depositary, custody, digital banking, ManCo, fund administration, middle office, corporate services and an ESG Ratings and Advisory solution. This deal further complements the Group's geographic expansion strategy and is the latest in a series of recently announced acquisitions including BRL Trust Investimentos and MAF in Brazil, Tzur in Israel and the proposed acquisition of Mainstream Group in Australia. Following the transaction and the integration of Mainstream Group, the employees of Hamburg headquartered mola-administration will join the Group's 5,000 strong global team across 50 offices worldwide. With this acquisition the Group increases its overall European presence to over 2,000 people across 17 offices. Peter Hughes, Founder and CEO of Apex Group, says: "We have long considered Germany to be a market of huge opportunity for our business and have been awaiting the right acquisition to enable our expansion into the geography. All our strategic acquisitions are motivated by the increased value and benefits they can deliver for our clients and this further expansion of our cross-border offering in Europe will further enable the provision of expert local market support. The addition of mola-administration to the Group continues to strengthen the geographic footprint and reach of our single-source solution, enabling us to seamlessly support our clients, regardless of their location." Frank Falkenberg, CEO of mola-administration, adds: "We are excited to become part of the Apex Group and the benefits that their international reach and depth of product offering will deliver for our clients. Apex's respected global brand and experts, as well as their wide range of innovative client services such as ESG reporting and advisory are underpinned by leading technology which will benefit our current and future clients throughout the lifecycle of their funds. As part of the Apex Group we will be able to generate significant value for the clients and we look forward to the future together." Financial terms of the transaction have not been disclosed. Simmons & Simmons provided legal counsel to Apex Group. Network Corporate Finance GmbH & Co. KG provided financial advisory and Heuking Kühn Lüer Wojtek provided legal counsel to mola-administration. As reported in the Troubled Company Reporter-Latin America on July 14, 2021, S&P Global Ratings assigned its preliminary 'B-' issuer credit rating to Bermuda-based Apex Group Ltd. (Apex) and its financing subsidiaries, Apex Group Treasury Ltd. and Apex Group Treasury US LLC. S&P also assigned its preliminary 'B-' issue rating and '3' recovery rating to the group's proposed $1,412 million term loans and $200 million RCF. =========== B R A Z I L =========== BRAZIL: 5 Restos Unite to Fight Inflated Delivery Fees ------------------------------------------------------ Rio Times Online reports that Brazil's antitrust agency, the Administrative Council for Economic Defense (CADE) July 16, unrestrictedly approved a partnership between companies in the food sector - such as Outback, Dominos, Giraffas, Bobs and Rei do Mate - to create and operate a delivery platform, according to Rio Times Online. The approval was published in the Federal Gazette, the report notes. The new service, called Quiq, will enable all delivery or take away orders to be organized in a single place, thereby reducing costs that restaurants have with platforms such as iFood, Rappi and Uber Eats, the report relays. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). BRAZIL: Firms Take Out Loans to Keep Cash Flow Out of the Red ------------------------------------------------------------- Rio Times Online reports that research shows that keeping the cash flow out of the red motivates more than 30% of entrepreneurs to seek loans. Other reasons are opening new businesses and paying debts. When facing a challenging economic context for business continuity, the search for credit among entrepreneurs is mostly done to keep the cash flow in the red, according to Rio Times Online. According to a survey by Lendico, a fintech specialized in personal credit, 34% of entrepreneurs take out loans for working capital, the report notes. Even with the predominance of loans for working capital, the survey also observed an increase in credit applications for starting a new business, the second most common reason, adds the report. The pandemic has shown that innovation will be more and more decisive for business every day, the report relays. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Company Reclassification Should Benefit Workers ------------------------------------------------------------------- Dominican Today reports that companies that, due to the reclassification recently approved, have mixed parameters that correspond to establishments of different sizes, should be assumed in the most convenient range for their workers. Resolution 01/2021 of the Ministry of Labor clarifies that, if a company meets criteria for different scales, that is, the number of workers in one classification and gross sales in another, the variable of the higher scale will be taken as predominant for setting their classification and consequent applicable minimum wage, according to Dominican Today. However, the economist Antonio Ciriaco, vice dean of the Faculty of Economics of the State University of Santo Domingo (UASD), believes that the reclassification of companies could harm workers in the future who should receive an improvement in their income, the report notes. 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). =============== H O N D U R A S =============== HONDURAS: Moody's Affirms 'B1' Long Term Issuer Rating ------------------------------------------------------ Moody's Investors Service has affirmed the Government of Honduras' B1 long-term issuer and B1 senior unsecured bond ratings. The outlook remains stable. The rating affirmation at B1 balances: 1. A strong fiscal framework relatively to peers with debt metrics that remain below B medians despite the pandemic induced increase 2. Credit challenges deriving from weak institutions and limited economic development Honduras' local and foreign currency country ceilings remain unchanged at Ba1 and Ba3, respectively. The three-notch gap between the local currency ceiling and the sovereign rating reflects limited government presence in the economy and a moderate external vulnerability risk. The two-notch gap between the foreign currency ceiling and the local currency ceiling incorporates Honduras' relatively weak policy effectiveness that may be prone to impose transfer and convertibility restrictions in times of stress. RATINGS RATIONALE RATIONALE FOR THE RATING AFFIRMATION AT B1 FIRST DRIVER: A STRONG FISCAL FRAMEWORK RELATIVE TO PEERS WITH DEBT METRICS THAT REMAIN BELOW B MEDIANS DESPITE THE PANDEMIC INDUCED INCREASE Honduras' debt metrics have worsened due to the pandemic crisis but remain below those of most B-rated peers. In 2019, right before the pandemic, Honduras' general government debt to GDP reached 42% and Moody's estimates it will reach almost 56% in 2022. In comparison the median for B1-B2 rated peers is forecast to reach 70% of GDP by next year. The increase in the debt burden is the result of higher fiscal deficits, which Moody's expects will fall as the pandemic shock recedes. Government deficits averaged only 0.3% of GDP in the five years prior to the crisis but jumped to a forecast average of 4.7% for 2020 and 2021 due to a combination of both lower revenues and higher expenditures. For next year Moody's forecasts the fiscal deficit will fall to 2.5% of GDP and a further drop in 2023 and 2024 will result in debt stabilizing below 60% of GDP. The government's debt affordability also compares favorably with peers with Honduras' interest payments to revenue of about 8% in 2021 substantially lower than the 13% peer median. Although Honduras has a higher portion of its debt denominated in foreign currency than similarly rated countries, estimated at 69% in 2021, most of that is with bilateral and multilateral institutions which lend at below market rates. Over 50% of all of Honduras' debt is with such institutions and despite demonstrated access to both local and international capital markets Moody's estimates the country will continue to rely heavily on official funding. A program with the IMF, in place since 2019 and recently expanded to total $769 million in lending, provides access to low cost funding and continues to represent an important support factor of the country's strengthened fiscal framework. SECOND DRIVER: CREDIT CHALLENGES DERIVING FROM WEAK INSTITUTIONS AND LIMITED ECONOMIC DEVELOPMENT Weak institutions remain a structural credit challenge for Honduras. The country ranks in the lowest 10 percent of rated sovereigns in the Worldwide Governance Indicator (WGI) scores for government effectiveness and the rule of law. It ranks in the lower 30% for other measures of institutional strength such as control of corruption. Domestic political risk is also a relevant factor, as evidenced by both WGI scores and a recent history of protests and political turmoil. Honduras' 2017 presidential elections led to accusations of voter fraud and widespread protests and two years later other protests erupted over perceived government corruption. Honduras will hold new presidential elections in November of this year. The risk of a flare up remains high given limited government responses to high levels of poverty and income inequality. The rating is constrained by the small size of the economy, its limited degree of diversification given high dependence on maquila- and agriculture-based activities, and a low level of overall economic development. Honduras' nominal GDP, which Moody's estimates at $25 billion in 2021, is less than half the $52 billion median for similarly rated sovereigns. GDP per capita on PPP terms in 2020 (latest available data) reached $5,450, compared to the $9,804 median for peers. Honduras has historically benefited from relatively stable economic growth. Real GDP rose 3.7% on average in the decade prior to the pandemic. Health-related lockdowns and the impact of tropical storms resulted in a 9% drop in the economy last year. Moody's expects economic activity will rebound to 4.8% growth 2021 and a gradual return to trend growth of about 3.5% annually after that. Very high remittances, averaging over 20% of GDP per year, remain a key support for the economy. RATIONALE FOR THE STABLE OUTLOOK The stable outlook reflects Moody's expectation that medium-term growth prospects and the government's commitment to prudent fiscal and monetary policies will stabilize debt after the recent pandemic induced increase. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS Honduras' ESG Credit Impact Score is highly negative (CIS-4) reflecting its weak governance profile and limited resilience due to low economic development, its moderately negative exposure to environmental risks, and above all its highly negative exposure to social risks. Honduras' exposure to environmental risks is assessed as moderately negative (E-3 issuer profile score) based on the country's exposure to climate change risks from recurring droughts and hurricanes, which can deplete agricultural production. Exposure to physical climate risk is the major concern for the country while access to water, the depletion of natural capital, and waste and pollution are all moderately negative risks for Honduras. Exposure to social risks is highly negative (S-4 issuer profile score), a result of the country's high levels of poverty and inequality, low education outcomes and high levels of domestic violence. Like many other emerging economies Honduras benefits from a comparatively benign demographic structure. The influence of governance on Honduras' credit profile is highly negative (G-4 issuer profile score) reflecting its weak government effectiveness, rule of law, and control of corruption. Political polarization remains high, which can affect growth and reform implementation. Anti-government protests have been common in recent years amid accusations of electoral fraud and corruption. GDP per capita (PPP basis, US$): 5,450 (2020 Actual) (also known as Per Capita Income) Real GDP growth (% change): -9% (2020 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 4% (2020 Actual) Gen. Gov. Financial Balance/GDP: -4.5% (2020 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 2.9% (2020 Actual) (also known as External Balance) External debt/GDP: 46% (2020 Actual) Economic resiliency: b1 Default history: No default events (on bonds or loans) have been recorded since 1983. On July 15, 2021, a rating committee was called to discuss the rating of the Honduras, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's institutions and governance strength, have not materially changed. The issuer's governance and/or management, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Evidence that the debt increase has plateaued, and that fiscal deficits have returned to pre pandemic levels, coupled with low post-election political risks could generate upward pressure on the credit rating. Alternatively, continued rising debt metrics, resulting from lower growth, or relaxed fiscal constraints, could lead to a negative rating action. A worsening of structural institutional weaknesses, including heightened political protests related to the presidential election, could also lead to a downgrade. The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019. ============= J A M A I C A ============= JAMAICA: JMEA Warns Some Local Business Will See Cost Increases --------------------------------------------------------------- RJR News reports that the Jamaica Manufacturers and Exporters Association (JMEA) has warned that businesses which are dependent on the US will see an immediate increase in their cost structure and a reduction in their profit performance as they absorb some of the increases caused by a rise in US consumer prices. JMEA President Richard Pandohie is hoping this will provide the opportunity to push agriculture output and agri-businesses in an effort to reduce the country's US$1 billion food import bill, according to RJR News. Consumers are being urged to shop wisely, and as best as possible, support local businesses, as opposed to imported goods, the report notes. 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. UNIV. OF THE WEST INDIES: Officials to Discuss Fin'l. Challenges ---------------------------------------------------------------- RJR News reports that the executive management team of the University of the West Indies (UWI) be will going into a planning retreat to discuss a new operational plan to deal with the financial challenges facing the institution as a result of shortfalls in expected revenues. A statement from the UWI says many students and governments are experiencing difficulties in meeting financial obligations to the University in respect of tuition fees and related economic costs for teaching and learning, according to RJR News. The university is looking to cut expenditure and increase revenues by 10 per cent annually over the next three years, the report notes. According to the statement, each UWI campus is expected to implement commercial projects in an effort to strengthen its entrepreneurial functions, the report adds. =========== M E X I C O =========== ELEMENTIA SAB: S&P Alters Outlook to Stable, Affirms 'BB-' ICR -------------------------------------------------------------- On July 21, 2021, S&P Global Ratings revised its outlook on Mexico-based building materials company Elementia S.A.B. de C.V. (Elementia) to stable from negative. S&P also affirmed its 'BB-' issuer credit rating on the company. S&P sid, "The stable outlook reflects our expectation that Elementia will continue to have a solid operating and financial performance in the next 12 months across all business units and key credit metrics will continue to improve. This should result in an adjusted net debt to EBITDA close to 3.0x and free operating cash flow (FOCF) to debt of about 10%. "In our view, downside risks on Elementia's credit profile have dissipated due to stronger-than-expected demand for building materials in the company's key markets. In the 12 months ended March 2021, Elementia's revenues grew close to 13% against the same period last year. This was mostly driven by double-digit sales growth across most units, largely explained by higher volumes and better prices in its metals division. Cement sales in Mexico and the U.S. grew about 20%-25%, building systems revenue grew close to 10%, and metals about 5%. Along with better pricing, the company's effort to optimize its product offerings and reduce inventory improved cash flow and profitability. The metals and building systems units have gradually recovered profitability since first and second quarter of 2020, when they were hit by nonrecurring costs, disruptions from the pandemic, and lower metals prices. For the next 12 months, we expect Elementia's consolidated revenues to grow in the 5%-10% range, driven by our forecast economic recovery across its major markets, coupled with high construction activity, specifically in informal housing in Latin America and residential housing in the U.S. "We expect Elementia's management team will continue focusing on boosting profitability. In our view, management's strategic actions including resizing and optimizing its product portfolio toward more profitable stock keeping units (SKUs), pricing initiatives, strict cost management and cutting non-essential expenses, coupled with a more efficient inventory management, while maintaining a prudent financial policy toward capital expenditures (capex) will remain key to increase its profitability and cash flows. For the next 12 months, we expect Elementia's EBITDA margin to trend toward 15%-16% and FOCF to be within MXN1.0 billion-MXN1.5billion. "We also expect Elementia to continue gradually reducing its gross debt, as evidenced in the first quarter of 2021, when it called its $425 million senior notes and repaid it with a mix of cash reserves, local notes issued, and new bank lines with Banco Inbursa S.A. (BBB/Negative/A-2; mxAAA/Stable/mxA-1+). During the first quarter of 2021, Elementia's gross debt decreased by about MXN2.4 billion. Moreover, it also terminated its factoring program with suppliers. As a result, Elementia's improved EBITDA, coupled with debt reduction and a solid cash balance, reduced its adjusted net leverage ratio to 3.6x in March 2021, from 4.0x in year-end 2020, and we expect this metric to drop toward 3.0x by the end of 2021 and 2.5x-3.0x in 2022. "We revised our liquidity assessment for the next 12 months, given the relatively large amount (MXN5.3 billion) of short-term debt due in this period, which is higher than its cash reserves and FFO. We expect the company to refinance most of these short-term debt maturities toward longer-term maturities, given its close relationships with its creditors and the support from the controlling shareholders." Additionally, Elementia has available uncommitted credit facilities for about MXN2.5 billion, which it could use in case of liquidity shortfalls. Due to improving market conditions and the company's operations, management has resumed the spin-off process of its metals and building systems divisions. The improvement in the operating performance of all three units and a relatively positive economic outlook for the next 12 months provide greater predictability for Elementia's credit metrics from the potential effects of the spin-off, specifically for the period that cross-guarantees for both companies' debt will remain in place. However, the final terms and conditions on the spin-off will be crucial to determine any effect on the rating. On the other hand, given the refusal of U.S. regulators to approve the sale of Elementia's Keystone cement plant and other assets, S&P no longer expects major proceeds from asset sales in its base-case scenario for the next 12 months. ======= P E R U ======= NG PET R&P: Fitch Assigns BB+ Rating to USD355MM Unsec. Notes ------------------------------------------------------------- Fitch Ratings has assigned a 'BB+' rating to the USD355 million sustainability linked unsecured notes to be co-issued by NG PET R&P Latin America S.A. and San Miguel Industrias PET S.A. Fitch has also affirmed NG Packaging & Recycling Corporation Holdings S.A.'s (SMI) Long-Term Issuer Default Rating (IDR) and USD300 million senior unsecured notes issued by San Miguel Industrias PET S.A. at 'BB+'. The Rating Outlook is stable. The co-issuers are providing joint and several guarantees for the new senior unsecured notes. The notes will also be guaranteed by all material subsidiaries from NG Packaging & Recycling Corporation Holdings S.A. (SMI) and NG Packaging & Recycling Corporation Holdings II S.A.(Sinea), which manufactures closures. The company will report combined accounts for NG Packaging & Recycling Corporation Holdings S.A. and NG Packaging & Recycling Corporation Holdings II S.A. The ratings reflect the SMI group's (SMI and Sinea) resilient business model as a one-stop-shop for rigid plastic packaging, positive FCF and expected improved credit metrics. Proceeds from the new notes will be used to refinance the USD300 million senior unsecured notes due in 2022 issued by San Miguel Industrias PET S.A. and guaranteed by NG Packaging & Recycling Holding S.A. KEY RATING DRIVERS Fully Integrated: Through the incorporation of the assets of Sinea's closures business under the new perimeter of the bond transaction, the SMI group will reinforce its position as a one-stop-shop regional supplier, with packaging solution for containers, closures, thermoforming and recycled resin that creates barriers to entry for competitors. The combination reinforces SMI's presence in the fast-growing closure segment, and will provide cross selling opportunities and synergies across Latin America. Sinea's LTM sales, EBITDA and net debt were USD75 million, USD13 million, USD81 million, respectively, of 1Q21. Deleveraging: SMI group's net leverage is projected to decline towards 3.0x in 2021 (3.7x pro forma including factoring as of 1Q21) due to improved EBITDA resulting from a strong increase in volumes and the ramp-up of new contracts, notably in the closures segment. The SMI group's EBITDA is expected to increase to about USD130 million in 2021 from USD108 million on proforma basis in LTM 1Q21. Fitch's ratings factor in the potential for the SMI group to pursue organic and inorganic opportunities in the future, in an effort to increase scale, improve product diversification and further consolidate its presence in the countries of operation, while maintaining a capital structure in-line with the rating. Positive FCF: The SMI group's FCF is expected to reach about USD40 million in 2021, due to increased EBITDA and capex of approximately USD42 million. Maintenance capex for the group is forecasted to be limited to around USD15 million, as the company has a well-invested manufacturing platform. Geographic and Product Diversification: Fitch estimates that 62% of the group's EBITDA will be generated outside of Peru at YE 2021, specifically in Central America, Colombia, Ecuador, Mexico and others countries. The geographic and product diversification also allows the company to bid for international contracts and provides more flexibility in negotiations with international suppliers. Contracted Sales: SMI group's long-term contracts, which make up about 85% of sales as of March 2021, are positive for the rating, as they provide predictability in cash flow generation and reduce business risk. The company's weighted average life of contracts is above six years, with no material contract expiring before 2026. Containers (preforms and bottles) are expected to represent 75% of group sales and closures about 20% of group sales due to the inclusion of Sinea in 2021. The SMI group has a pass-through model that provides margin protection against price volatility in resin and natural hedges against currency fluctuation as equipment and client contracts are in U.S. dollars. DERIVATION SUMMARY The 'BB+' rating reflects SMI group's resilient business model, the company's geographic and product diversification, its highly contracted revenues and its pass-through model that provides margin protection against price volatility. The company has more than doubled its size over the last seven years, but remains smaller than international peers such as Amcor plc (BBB/Stable). SMI group's client concentration remains high following the regional industry concentration, with the top eight clients representing a large portion of total revenues. Fitch expects SMI group's net debt/EBITDA to trend toward 3.0x by 2021. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for the issuer include: -- EBITDA of about USD130 million in 2021; -- Capex of about USD42 million in 2021; -- No dividend payments in 2021; -- Net debt/ EBITDA to reach 3x by 2021. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Net leverage below 2.5x on a sustained basis; -- Strong FCF on a sustained basis; -- Decreased revenues client concentration. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Net leverage above 4.0x on a sustained basis; -- Non-renewal of a large supply contract or sharp contraction of EBITDA; -- Negative FCF on a sustained basis. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Manageable Liquidity: SMI group had cash and cash equivalents of about USD30 million and short-term debt of USD 31 million due in 1Q21. Short-term debt is mainly related to working capital, while the USD300 million senior unsecured notes mature in 2022, which the company will refinance with the new USD355 million senior unsecured bond. SMI group is a private company majority-owned by Nexus Group, the leading private equity fund in Peru, and is associated with Intercorp, one of Peru's largest conglomerates. ISSUER PROFILE SMI is a leading rigid plastic packaging solutions company in Latin America, serving the main multinational CPGs in the beverage, food, personal and home care industries. The company benefits from a highly visible and diversified revenue stream through longstanding contracts with blue chip customers with resin pass-through provisions. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. NG PET R&P: Moody's Assigns Ba1 Rating to $355MM Sr. Unsec. Notes ----------------------------------------------------------------- Moody's Investors Service assigned a Ba1 rating to NG PET R&P Latin America, S.A. ("NG Latin America")'s and San Miguel Industrias PET S.A. ("SMI")'s proposed $355 million and up to seven years tenor guaranteed senior unsecured notes, stable outlook. Both entities will act as co-issuers of the notes. At the same time, Moody's assigned for the first time a Ba2 Corporate Family Rating to NG Packaging & Recycling Corporation Holdings ("NG Packaging"), and at the same time placed the rating under review with direction uncertain. The Ba2 rating on San Miguel Industrias PET S.A. ("SMI")'s senior unsecured notes due in 2022 was also placed under review with direction uncertain. Concurrently Moody's withdrew SMI's Ba2 CFR. The proposed notes include a sustainability linked structure that is in line with the group's targets in terms of recycled pet usage and tons of post-consumer waste managed by the group. Proceeds will be used to repay existing debt including SMI's $300 million senior unsecured notes due 2022. The proposed notes will also benefit from guarantees of subsidiaries of NG Packaging & Recycling Corporation Holdings S.A. II ("Sinea"), an entity that performs closures operations. NG Packaging and Sinea are not legally consolidated, but have a strategic partnership and are run by the same management team. Together these companies are known as SMI Group. Given the complementary nature of their portfolios, synergies between both entities will drive most of the business growth going forward. Currently, guarantors account for more than 85% of SMI Group's EBITDA and assets. "The rating action reflects our view that if the transaction proceeds as announced, it will strengthen NG Packaging's credit profile and support its ability to repay the upcoming maturing $300 million notes, due in 2022," says Sandra Beltran, a Moody's Vice President Senior Analyst. "At the same time, the rating action considers our expectation that if the transaction does not proceed or is delayed, NG Packaging will face significant refinancing risk." added Beltrán. RATINGS RATIONALE NG Packaging's Ba2 Corporate Family Rating reflects its leading position in the rigid plastic market in the Andean region, Central America and the Caribbean (CA&C), and its ability to pass over volatility in raw material costs to its customers, thereby reducing the strain on its operating margin. The rating takes into account NG Packaging's advantageous position because of its intensive use of modern technology and the existence of long-term contracts with blue chip clients comprising 87% of its total sales. Qualitatively, the rating incorporates the company's relationship with Intercorp Peru Ltd. which owns one of the largest banks in Peru, Banco Internacional del Peru S.A.A. - Interbank (Baa1 stable). Intercorp is a strategic partner and co-investor of Nexus, NG Packaging and Sinea's indirect shareholder. Intercorp and Nexus are active issuers in the local and international capital markets, having raised more than $7.4 billion over the past 13 years, including the initial public offering (IPO) of Intercorp Financial Services and the IPO of InRetail. Conversely, NG Packaging's rating is mainly constrained by its reduced size and scale compared with those of its global industry peers. The rating is also limited by NG Packaging's still low free cash flow generation. Pro forma for the transaction, Moody's expects that SMI Group's adjusted debt to EBITDA will decline to about 2.8x by the end of 2021 from over 4.3x at December 31, 2020. Moody's expects Grupo SMI to benefit from the closures business, across the cross-selling expansion through one-stop-shop offering, and continued growth in existing markets. Moody's also expects free cash flow to be maintained at 13% of total debt level by the end of 2022 as most of expansion capital investments have already been concluded and dividends will not be declared at least before the company meets its leverage target of a gross debt to EBITDA ratio below 3.0x. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The Ba2 ratings on NG Packaging and SMI's existing 2022 notes are under review with direction uncertain. The rating review will focus on the successful placement of the proposed notes. Currently, refinancing risk posed by the $300 million notes due 2022 is limiting the rating. Therefore, a successful placement of the proposed notes will result in positive pressure given the company's track record of expanding and consolidating its position in Latin America's plastic packaging market. Positive pressure is also supported by a positive business prospects given still under penetration of plastic packaging in Latin America, positive trends for recycled products, demand recovery from strict Covid related quarantine measures and synergies from the partnership with Sinea. Conversely, if the transaction does not go through, the company will face increasing refinancing risk that will pose significant negative pressure to the ratings. On Review Direction Uncertain: Issuer: San Miguel Industrias PET S.A. Senior Unsecured Regular Bond/Debenture, Placed on Review Direction Uncertain, currently Ba2 Assignments: Issuer: NG Packaging & Recycling Corporation Holdings Corporate Family Rating, Assigned Ba2; Placed Under Review Direction Uncertain Issuer: NG PET R&P Latin America, S.A. Gtd Senior Unsecured Regular Bond/Debenture, Assigned Ba1 Withdrawals: Issuer: San Miguel Industrias PET S.A. Corporate Family Rating, Withdrawn, previously Ba2 Outlook Actions: Issuer: NG Packaging & Recycling Corporation Holdings Outlook, Assigned Rating Under Review Issuer: NG PET R&P Latin America, S.A. Outlook, Assigned Stable Issuer: San Miguel Industrias PET S.A. Outlook, Changed To Rating Under Review From Stable The principal methodology used in these ratings was Packaging Manufacturers: Metal, Glass and Plastic Containers Methodology published in September 2020. Headquartered in Panama, NG Packaging & Recycling Corporation Holdings ("NG Packaging") is a manufacturer and distributor of rigid plastics, especially PET preforms and bottles that are used in the food, beverage and consumer markets. With operations in Peru, Ecuador, Panama, El Salvador Colombia, Mexico, Argentina, Guatemala, Nicaragua and Costa Rica among other countries in CA&C, the company has five product lines, ten facilities and 30 in-house operations that are strategically located in eight countries. It has two recycling PET resin plants, one in Peru and the other in Colombia. For the full year 2020, NG Packaging reported total revenue of around $474 million and SMI Group reported $518 million pro forma. Since August 2013, SMI has been part of Intercorp Peru Ltd., one of the largest and most diversified conglomerates in Peru, with operations in financial services, retail, education, real estate and restaurants. ===================== P U E R T O R I C O ===================== ABAB CORP: Seeks to Employ Saldana Carvajal as Special Counsel -------------------------------------------------------------- ABAB Corporation seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire Saldana, Carvajal & Velez-Rive, P.S.C. as its special counsel. The Debtor requires a special counsel to provide legal services with regard to general matters, including employment law, civil and commercial litigation. The firm's hourly rates are as follows: Partners $175 per hour Associates $150 per hour Law Clerks $125 per hour Paralegals $75 per hour Luis Saldana Roman, Esq., a principal at Saldana, Carvajal & Velez-Rive, 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: Luis N. Saldana Roman, Esq. Saldana, Carvajal & Velez-Rive, P.S.C. 166 Constitution Ave. San Juan, PR 00901 Tel.: (787) 289-9250 Fax: (787) 289-9253 Email: lsaldana@scrvlaw.com About ABAB Corporation ABAB Corporation, doing business as Payless Car Rental, filed a Chapter 11 petition (Bankr. D. P.R. Case No. 21-02140) on July 15, 2021. At the time of the filing, the Debtor had between $1 million and $10 million in both assets and liabilities. Alberic Colon Solis, president, signed the petition. Judge Enrique S. Lamouttee Inclan oversees the case. Charles A. Cuprill P.S.C. Law Offices serves as the bankruptcy counsel while Saldana, Carvajal & Velez-Rive, P.S.C. serves as the special counsel. The Debtor's financial consultant is Luis R. Carrasquillo & Co., P.S.C. ALM LLC: Sept. 1 Plan & Disclosure Statement Hearing Set -------------------------------------------------------- On July 13, 2021, Debtor ALM LLC, d/b/a Agua La Montana, filed with the U.S. Bankruptcy Court for the District of Puerto Rico a Disclosure Statement and Plan. On July 15, 2021, Judge Mildred Caban Flores conditionally approved the Disclosure Statement and ordered that: * That acceptances or rejections of the Plan may be filed in writing by the holders of all claims on/or before 14 days prior to the date of the hearing on confirmation of the Plan. * That any objection to the final approval of the Disclosure Statement and/or the confirmation of the Plan shall be filed on/or before 14 days prior to the date of the hearing on confirmation of the Plan. * That the debtor will file with the Court a statement setting forth compliance with each requirement in U.S.C. Sec. 1129, the list of acceptances and rejections and the computation of the same, within 7 working days before the hearing on confirmation. * Sept. 1, 2021, at 9:00 a.m., and continued, if necessary, for September 2, 2021, at 9:00 a.m. via Microsoft Teams is the hearing for the consideration of the final approval of the Disclosure Statement and the confirmation of the Plan. A copy of the order dated July 15, 2021, is available at https://bit.ly/3kEeVB7 from PacerMonitor.com at no charge. Counsel for the Debtor: Mary Ann Gandia-Fabian, Esq. Ganbia-Fabian Law Office P.O. Box 270251 San Juan, PR 00928 Tel: 1-787-390-7111 Fax: 1-787-729-2203 Email: gandialaw@gmail.com About ALM LLC ALM, LLC, a/k/a Agua La Montana, is the owner of a fee simple title to a property located in Trujillo Alto, Puerto Rico having a current value of $860,943. ALM, LLC filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 20-04571) on Nov. 25, 2020. The petition was signed by Kristian E. Riefkohl Bravo, president. At the time of the filing, the Debtor disclosed total assets of $1,083,384 and total liabilities of $2,919,967. Judge Mildred Caban Flores is the case judge. The Debtor tapped Gandia Fabian Law Office as counsel and Jose Victor Jimenez, CPA, of Jimenez Vazquez & Associates, PSC as an accountant. PUERTO RICO ELECTRIC: Brigade Capital Cuts Debt by $200 Million --------------------------------------------------------------- Michelle Kaske of Bloomberg News reports that Brigade Capital Management reduced its investment in debt tied to Puerto Rico's central government and its electric utility by about $200 million, according to court documents filed in the commonwealth's record bankruptcy. Brigade, as of July 12, held $29.8 million of Puerto Rico general obligations and bonds sold by the island's government-owned Electric Power Authority, according to the court documents. That's down from when the firm held $231.2 million on April 13, including a $70 million fuel-line obligation from the electric utility, called Prepa. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States that's facing a massive bond debt of $70 billion, a 68% debt-to-GDP ratio and negative economic growth in nine of the last 10 years. The Commonwealth of Puerto Rico has sought bankruptcy protection, aiming to restructure its massive $74 billion debt-load and $49 billion in pension obligations. The debt restructuring petition was filed by Puerto Rico's financial oversight board in U.S. District Court in Puerto Rico (Case No. 17-01578) on May 3, 2017, and was made under Title III of 2016's U.S. Congressional rescue law known as the Puerto Rico Oversight, Management, and Economic Stability Act ('PROMESA'). The Financial Oversight and Management Board later commenced Title III cases for the Puerto Rico Sales Tax Financing Corporation (COFINA) on May 5, 2017, and the Employees Retirement System (ERS) and the Puerto Rico Highways and Transportation Authority (HTA) on May 21, 2017. On July 2, 2017, a Title III case was commenced for the Puerto Rico Electric Power Authority ("PREPA"). U.S. Chief Justice John Roberts has appointed U.S. District Judge Laura Taylor Swain to oversee the Title III cases. The Honorable Judith Dein, a United States Magistrate Judge for the District of Massachusetts, has been designated to preside over matters that may be referred to her by Judge Swain, including discovery disputes, and management of other pretrial proceedings. Joint administration of the Title III cases, under Lead Case No. 17-3283, was granted on June 29, 2017. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets, as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at O'Neill & Borges are on-board as attorneys. McKinsey & Co. is the Board's strategic consultant, Ernst & Young is the Board's financial advisor, and Citigroup Global Markets Inc. is the Board's municipal investment banker. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains a case web site at https://cases.primeclerk.com/puertorico Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA, and PREPA. O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), the agency responsible for negotiations with bondholders. The Oversight Board named Professor Nancy B. Rapoport as fee examiner and chair of a committee to review professionals' fees. =============== X X X X X X X X =============== LATAM: ECLAC Wants Fin'l. and Int'l. Cooperation System Reassessed ------------------------------------------------------------------ Jamaica Observer reports that the executive secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Barcena, has reiterated the importance of reforming the international financial system to address the debt problem within the region. Barcena indicated that the external debt of Latin America and the Caribbean increased by 10 percentage points and that the region allocates 59 per cent of its exports of goods and services to the payment of debt service, according to Jamaica Observer. Consequently, she stressed that new initiatives are needed to address this issue, including the redistribution of Special Drawing Rights of the International Monetary Fund from developed countries to developing countries, and funds multilateral organizations, such as the Fund for the Relief of COVID-19 proposed by the Government of Costa Rica, the report notes. "Changes in the international financial architecture must include a multilateral sovereign debt restructuring mechanism to address commitments with private creditors, hand in hand with the creation of a multilateral agency that acts as a counterweight to the current oligopoly of risk ratings." Barcena argued recently during a session entitled 'Investing on the SDGs' of the United Nations High-Level Political Forum 2021, the report relays. "This is urgent. The small island developing states (SIDS) of the Caribbean and the small countries of Central America face a very complex situation,"she said, noting that a moratorium on debt payment could benefit the Caribbean countries, the report discloses. "Profound changes and new forms of cooperation with middle-income countries are needed, which recognize the multi-dimensionality of development and avoid approaches based solely on per capita income, the report says. "We must also move towards more progressive taxation, just as the United States is doing. Orthodoxy is being questioned and it is necessary to go in that direction, as well as to combat tax evasion and avoidance and illicit financial flows. But for that we need a multilateral architecture, we cannot do it alone," she added. Regarding investment, Barcena emphasized the need to close the investment gap, the report relays. "Our investment rate is 17 per cent, but in Europe it is 26 per cent and in Asia-Pacific and emerging economies 33 per cent. We have to increase investment, public and private," she explained, noting that the economic infrastructure gap in Latin America and the Caribbean represents six per cent of gross domestic product, the report notes. According to her, developing countries and especially middle-income countries - which include most of the region - need a boost in liquidity and actively participate in debt relief initiatives, but as a result of the novel coronavirus pandemic, will no longer have higher levels of investment or the levels of activity before the crisis, the report adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. 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 * * *