/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210803.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, August 3, 2021, Vol. 22, No. 148 Headlines B R A Z I L BANCO FIBRA: Moody's Withdraws B3 Long Term Deposit Rating BRAZIL: Government Cuts 2021 Budget Deficit Forecast, Report Shows DIAMOND OFFSHORE: Merger Rumor Prompts Biggest Investor Suit PETROBRAS: Oil and Gas Production Stable in 2nd Quarter 2021 C O L O M B I A LIFEMILES LTD: Moody's Hikes CFR to B3 & Rates $400MM Term Loan B3 LIFEMILES LTD: S&P Affirms 'B-' ICR, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Farmers Having Hard Time Selling Products E L S A L V A D O R EL SALVADOR: Moody's Downgrades Long Term Issuer Rating to Caa1 M E X I C O CEMENTOS PACASMAYO: S&P Alters Outlook to Stable, Affirms 'BB+' ICR P A R A G U A Y RUTAS 2 AND 7: Fitch Affirms BB+ Rating on USD457.6MM Notes P U E R T O R I C O PUERTO RICO: Debt Adjustment Hearings to Start on November 8 T R I N I D A D A N D T O B A G O HAKKA RESTAURANT: Closes Woodbrook Location TRINIDAD & TOBAGO: Yacht Sector Still Closed - - - - - =========== B R A Z I L =========== BANCO FIBRA: Moody's Withdraws B3 Long Term Deposit Rating ---------------------------------------------------------- Moody's Investors Service has withdrawn all ratings and assessments assigned to Banco Fibra S.A. Before the withdrawal, the outlook on the deposit ratings was stable. Withdrawals: Issuer: Banco Fibra S.A. Adjusted Baseline Credit Assessment, Withdrawn, previously rated b3 Baseline Credit Assessment, Withdrawn, previously rated b3 Long-Term Counterparty Risk Assessment, Withdrawn, previously rated B2(cr) Short-Term Counterparty Risk Assessment, Withdrawn, previously rated NP(cr) Long-Term Counterparty Risk Ratings Local Currency, Withdrawn, previously rated B2 Long-Term Counterparty Risk Ratings Foreign Currency, Withdrawn, previously rated B2 Short-Term Counterparty Risk Ratings Local Currency, Withdrawn, previously rated NP Short-Term Counterparty Risk Ratings Foreign Currency, Withdrawn, previously rated NP Senior Unsecured Medium-Term Note Program, Withdrawn, previously rated (P)B3 Other Short Term debt rating, Withdrawn, previously rated (P)NP Local currency Long-Term Deposit Ratings, Withdrawn, previously rated B3; outlook changed to Ratings Withdrawn from Stable Foreign currency Long-Term Deposit Ratings, Withdrawn, previously rated B3; outlook changed to Ratings Withdrawn from Stable Local currency Short-Term Deposit Ratings, Withdrawn, previously rated NP Foreign currency Short-Term Deposit Ratings, Withdrawn, previously rated NP Outlook Actions: Issuer: Banco Fibra S.A. Outlook, Changed To Ratings Withdrawn From Stable RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. Fibra is headquartered in Sao Paulo, Brazil, with assets of BRL9.8 billion and shareholders' equity of BRL1.2 billion as of December 31, 2020. The principal methodology used in these ratings was Banks Methodology published in July 2021. BRAZIL: Government Cuts 2021 Budget Deficit Forecast, Report Shows ------------------------------------------------------------------ Rio Times Online reports that Brazil's government cut its 2021 primary budget deficit forecast, based on a bi-monthly revenue and expenditure report which showed an expected jump in tax revenues on the back of stronger economic growth. The Economy Ministry now expects a deficit excluding interest payments of R$155.4 billion (US$30 billion) this year, or 1.8% of gross domestic product, down from R$187.7 billion, or 2.2% of GDP, in May's report, according to Rio Times Online. It raised its 2021 net revenue forecast by R$43.1 billion to R$1.476 trillion, the report notes. 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). DIAMOND OFFSHORE: Merger Rumor Prompts Biggest Investor Suit ------------------------------------------------------------ Law360 reports that Diamond Offshore Drilling Inc.'s largest stockholder sued the company in Delaware's Chancery Court late Monday, July 26, 2021, to force an annual meeting and board vote, saying the meeting is overdue and citing reports that the company is mulling a potentially conflicted sale to another driller. Avenue Capital Management LP alleged that Diamond has not held an annual meeting since May 2020 and that it emerged from Chapter 11 in Texas in April 2021 with a board now potentially tilted toward the interests of Pacific Investment Management Company, or PIMCO, Diamond's second-largest shareholder after Avenue's 17. About Diamond Offshore Drilling Inc. Diamond Offshore Drilling, Inc., provides contract drilling services to the energy industry worldwide. The company operates a fleet of 15 offshore drilling rigs, including 4 drillships and 11 semi-submersible rigs. It serves independent oil and gas companies, and government-owned oil companies. The company was founded in 1953 and is headquartered in Houston, Texas. Diamond Offshore Drilling is a subsidiary of Loews Corporation. The company has major offices in Australia, Brazil, Mexico, Scotland, Singapore, and Norway. Diamond Offshore Drilling, Inc., along with its affiliates, filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Tex. Lead Case No. 20-32307) on April 26, 2020. The petitions were signed by David L. Roland, senior vice president, general counsel, and secretary. As of Dec. 31, 2019, the Debtors disclosed $5,834,044,000 in total assets and $2,601,834,000 in total liabilities. The case is assigned to Judge David R. Jones. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Porter Hedges LLP are acting as the Company's legal counsel and Alvarez & Marsal is serving as the Company's restructuring advisor. Lazard Freres & Co. LLC is serving as financial advisor to the Company. Prime Clerk LLC is the claims and noticing agent. PETROBRAS: Oil and Gas Production Stable in 2nd Quarter 2021 ------------------------------------------------------------ Rio Times Online reports that Petroleo Brasileiro S.A. (Petrobras) registered, in the second quarter, a 1.1% growth in oil and gas production, compared to the first quarter, for an average of 2.796 million barrels of oil equivalent per day (BOE/day). In the annual comparison, there was a slight retraction of 0.2%, according to Rio Times Online. In relation to the first quarter, the state-controlled company attributed the production increase to the ramp-up curve of platforms P-68 (which operates in the Berbigao and Sururu fields, in the Santos Basin deep water pre-salt fields) and P-70 (Atapu field), the report notes. There was an increase in oil sales to Europe, Latin America, the United States, India, and a reduction in exports to China, adds the report. About Petrobras Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian Petroleum Corporation - Petrobras) is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. Petrobras control significant oil and energy assets in 16 countries in Africa, the Americas, Europe and Asia. But, Brazil represents majority of its production. The Brazilian government directly owns 54% of Petrobras' common shares with voting rights, while the Brazilian Development Bank and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control 5%, bringing the State's direct and indirect ownership to 64%. A corruption scandal was uncovered in 2014 that involved Petrobras. The scandal related to money laundering that involved Petrobras executives. The executives were alleged to get received kickbacks from overpriced contracts, to the tune of about $3 billion in total. Moody's Investors Service affirmed the 'Ba2' long term foreign currency credit rating of Petrobras on August 23, 2019. Outlook is stable. S&P Global Ratings revised outlook on Petrobras to stable and affirmed 'BB-' foreign currency and local currency credit ratings on April 7, 2020. Fitch revised outlook on Petrobras to negative and affirmed 'BB-' long term foreign currency and local currency credit ratings on May 7, 2020. =============== C O L O M B I A =============== LIFEMILES LTD: Moody's Hikes CFR to B3 & Rates $400MM Term Loan B3 ------------------------------------------------------------------ Moody's Investors Service upgraded LifeMiles, Ltd.'s senior secured and corporate family ratings to B3 from Caa1. At the same time, Moody's assigned a B3 rating to LifeMiles' proposed $400 million 5-years senior secured term loan. The outlook changed to stable from negative. The proceeds of the proposed term loan will be used to refinance existing debt. The proposed term loan will have similar characteristics to LifeMiles' existing term loan that matures in 2022 including mandatory prepayments depending on the company's leverage. The rating of the term loan assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody's to date and assume that these agreements are legally valid, binding and enforceable. Rating actions: Issuer: LifeMiles Ltd. Corporate Family Rating, upgraded to B3 from Caa1 Senior Secured Bank Credit Facility, upgraded to B3 from Caa1 Assignments: Issuer: LifeMiles Ltd. Senior Secured Term Loan due 2026, Assigned B3 Outlook Actions: Issuer: LifeMiles Ltd. Outlook, Changed To Stable From Negative RATINGS RATIONALE LifeMiles upgrade to B3 reflects its recovery from the impact of Covid-19 to its operations and Moody's expectation that the company will continue to maintain strong liquidity while improving its credit profile. The ratings also incorporate LifeMiles exposure to the weak credit profile of its controlling shareholder Avianca Holdings, S.A. which has been in Chapter 11 since May 2020. LifeMiles' ratings continue to consider its diversified and sticky base of commercial partners and co-brand credit card growth, and strong market position in its territories of operation. The corporate family rating is at the same level as the senior secured rating given that it is the only debt in the company's capital structure . LifeMiles' gross billings continued to recover in 2021 after being affected by the reduction in air travel in mid-2020 when most of Avianca's air fleet was grounded following the closure of Colombia's air space to passenger travel. LifeMiles' largest contributors to gross billings are its financial partners, which include cobranded credit cards and miles conversion agreements (49%), and airlines (29%), being Avianca its largest customer, responsible for approximately 12% of gross billings in 1Q21. Miles redeemed in air travel have gained momentum in 2021 reaching around 63% of total miles redeemed in 1Q21. Still, this proportion is below the 90% average of air redemptions seen in 2019 but Moody's has seen continued increase in air travel in the 2Q21. Furthermore, Moody's has a positive outlook for the Global Passenger Airlines industry for 2021 due to expected widespread increase in air travel starting in the 2H21 with a positive demand trend to run into 2023. LifeMiles' cash and cash equivalents of $75 million as of March 31, 2021 ($82 million as of June 30, 2021) can cover 1.1x its short-term debt related to the term-loan maturing in 2022 . LifeMiles has posted positive free cash flow over the twelve months ended March 31, 2021 and in 2020 as it has reduced substantially its dividend payout . Moody's anticipates the company will pay around $50 million in dividends in 2021 and zero dividends in 2022-24 Moody's expects that the company will continue to have adequate liquidity based on LifeMiles minimum liquidity policy maintaining cash balances equivalent to six months of rewards plus two quarters of debt service. The stable outlook reflects Moody's view that the company´s operation and credit metrics will continue to recover and that the Chapter 11 filing of Avianca will not hurt LifeMiles' liquidity or credit profile. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade of LifeMiles' ratings would require an improvement in Avianca's credit profile being able to exit its Chapter 11 as a going concern while maintaining its ability to continue operating. An upgrade would also require LifeMiles to maintain ring-fencing provisions that limit cash upstream to shareholders, as well as an adequate liquidity and profitability. Quantitatively, an upgrade would require LifeMiles to maintain its adjusted debt/EBITDA lower than 5.0 times on a sustained basis. LifeMiles' ratings could be downgraded if the company's liquidity deteriorates in particular, through excessive cash distribution to shareholders, or if Avianca's credit profile during or after the Chapter 11 process further deteriorates. Amendments to the loan agreement such that the mandatory prepayment provisions are waived or canceled, and excess cash flow is not used to pay down debt could also result in a downgrade. The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. LifeMiles Ltd. is a coalition loyalty program and the solely operator of Avianca's frequent flyer program. LifeMiles has over 600 active commercial partnerships that allow its members to accrue and redeem miles for different products and services such as airline tickets, hotels, and rental cars amongst others. LifeMiles is 90% owned by Avianca Holdings S.A. and 10% owned by Advent Intl. LifeMiles reported gross billings of $108 million over the twelve months ended March 31, 2021. LIFEMILES LTD: S&P Affirms 'B-' ICR, Outlook Stable --------------------------------------------------- On July 30, 2021, S&P Global Ratings affirmed its 'B-' global scale issuer credit and issue-level ratings on loyalty program company LifeMiles Ltd. S&P also revised downward the stand-alone credit profile (SACP) on LifeMiles to 'b' from 'bb-'. S&P also assigned its 'B-' issue-level rating on LifeMiles' proposed $400 million term loan B. S&P said, "The stable outlook reflects our view that our rating on LifeMiles will remain capped at 'B-' as long as Avianca continues Chapter 11 proceedings. We also expect LifeMiles to maintain the leverage metric above 5.0x for the next 12-18 months, while its mileage accruals stabilize in line with the expected recovery in passenger traffic." During 2020, Avianca Holdings S.A.'s (D/--/--) loyalty program company, LifeMiles Ltd., reported a 64.6% decline in revenue arising from the global health and safety measures to prevent the spread of COVID-19, due to a significant drop in airlines' passenger traffic. Avianca serviced 74.1% less passengers in 2020, compared with previous year. S&P said, "Travel restrictions remain in place across many regions, and we expect this to be the case until the vaccination program gathers sufficient pace to allow a reopening of borders and the lifting of travel restrictions. On the other hand, Avianca remains under Chapter 11 proceedings, which limits the airline's ability to bolster growth in service offerings, primarily on international routes to which it was transitioning prior to the onset of the pandemic. However, the recovery in air travel is faster than expected, given the significant rise in travel demand in North America, related to widespread vaccination. Therefore, we expect passenger traffic this year to reach 33% of the 2019 level and 67% for 2022, compared with 25% in 2020." In 2019, before the pandemic, gross billings with stronger correlation to travel represented about 60% of total billings (program miles, member direct sales, and conversion agreements), while gross billings with weaker correlation to travel made up the remaining 40% (co-branded credit cards and coalition billings). Although on a three-month rolling basis gross billings with weaker correlation to travel have recovered to about 90% of pre-pandemic levels, gross billings with stronger correlation to travel remain at around 35% of pre-COVID-19 levels. Therefore, a material portion of LifeMiles' gross billings will recover in tandem with travel demand in the next couple of years. Furthermore, S&P expects the company's burn-to-earn ratio to remain higher than normal as redemptions of miles grow faster than accruals in the short term. S&P said, "According to our updated financial assumptions on LifeMiles for 2021 and 2022, until the passenger volume stabilizes, LifeMiles' debt to EBITDA will be above 5.0x and drop to pre-pandemic levels by the end of 2023. In our previous review of the company, we were expecting a one-year deviation in LifeMiles' leverage and a gradual recovery going forward. However, we now expect the company's financial risk profile to take longer to reach the pre-pandemic category. "The company's debt structure consists of a first lien term loan B of about $352.6 million as of March 31, 2021. Due to this facility and LifeMiles' financial policy, the company was able to preserve about $80 million of available cash. Additionally, the company has limited dividend distributions tied to this level of cash. In our view, LifeMiles' proposed $400 million Term Loan B, will also maintain liquidity covenants that will focus on prevailing its cash position and will also reduce any liquidity risks arising from short-term maturities as it will refinance ahead of its maturity on Aug. 18, 2022." =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Farmers Having Hard Time Selling Products ------------------------------------------------------------- Dominican Today reports that vegetable sellers are having a hard time to selling their products inside the Villa Consuelo market. Such a scene is frequently repeated in that supply plaza which was inaugurated in 2012 after 18 years of waiting, which five municipal administrations could not materialize and where its 250 cubicles, which would be supplied with different products, would respond to the demands of a wide consumer base, according to Dominican Today. But when visiting this place, the scene is totally different, since the two floors arranged for sales are seen with little attendance of visitors and on its second level with closed modules and without merchandise, the report notes. Alejandro Castillo, a vegetable vendor, attributed the few visits of users to the informal stalls in the area, as well as to the circulation of the "guaguitas" (little pickup trucks) and tricycles that also offer their products and that are ahead of them, the report relays. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). ===================== E L S A L V A D O R ===================== EL SALVADOR: Moody's Downgrades Long Term Issuer Rating to Caa1 --------------------------------------------------------------- Moody's Investors Service has downgraded the Government of El Salvador's long-term foreign-currency issuer and senior unsecured ratings to Caa1 from B3. The outlook remains negative. The key drivers the downgrade were: 1) Market access for the sovereign is likely to remain constrained ahead of a challenging debt amortization schedule beginning in 2023. 2) A deterioration in the quality of policymaking that has intensified implementation risks to the authorities' fiscal adjustment plans and increased uncertainty about financing prospects. The negative outlook on the Caa1 rating reflects Moody's view that the fiscal position remains vulnerable and susceptible to financing shocks that could jeopardize the sovereign's repayment capacity ahead of the challenging redemption schedule on its external market debt beginning in January 2023. Limited availability of funding alternatives for the sovereign and uncertainty surrounding the possibility of fresh financing from the International Monetary Fund (IMF) suggest that the sovereign will continue to face liquidity pressures in future years despite the authorities' willingness to enact measures to achieve further, gradual fiscal consolidation. Concurrently, Moody's also lowered El Salvador's foreign-currency country ceiling to B2 from B1 maintaining the existing two-notch gap between the sovereign rating and the foreign-currency ceiling to reflect the deteriorating predictability of institutions and government policies, weak policy effectiveness and the government's relatively large share in the country's total external debt. Moody's does not assign a local currency country ceiling for El Salvador because the country is fully dollarized. RATINGS RATIONALE RATIONALE FOR THE DOWNGRADE OF THE RATINGS TO Caa1 FIRST DRIVER: MARKET ACCESS FOR THE SOVEREIGN IS LIKELY TO REMAIN CONSTRAINED AHEAD OF A CHALLENGING DEBT AMORTIZATION SCHEDULE BEGINNING IN 2023 A persistently high cost of market funding and the need to access markets to rollover maturing debt highlight risks to repayment capacity ahead of a series of external bond amortizations beginning in January 2023, given already low debt affordability metrics. High yields on the sovereign's outstanding debt issuances, illustrated by an EMBIG sovereign spread of 805 as of 28 July 2021, and a reliance on short-term domestic sources of financing have been partly responsible for the sovereign's tight liquidity position as there has not yet been a formal agreement on an International Monetary Fund (IMF) program to alleviate funding constraints, and to lend credibility and anchor market confidence such that the maturing market debt can be rolled over at sustainable rates. Although Moody's has incorporated the potential funding flows from a possible IMF program in its analysis of El Salvador's funding prospects for 2022, the rating agency believes that even if an agreement is reached with the IMF on a financing program, issues involving the sovereign's high cost of funding are unlikely to be fully addressed by official funding flows. Elevated interest expenditures on debt service will continue to weigh on fiscal performance, constraining the sovereign's liquidity position ahead of a challenging amortization schedule. Moody's estimates indicate that the ratio of interest payment-to-government revenue was 17.8% in 2020 well above the 8.4% median for B-rated sovereigns and higher than the 13.3% median for Caa-rated sovereigns. Moreover, its projections indicate that the interest burden is likely remain above peer medians through at least 2024. SECOND DRIVER: A DETERIORATION IN THE QUALITY OF POLICYMAKING THAT HAS INTENSIFIED IMPLEMENTATION RISKS TO THE AUTHORITIES' FISCAL ADJUSTMENT PLANS AND INCREASED UNCERTAINTY ABOUT FINANCING PROSPECTS The sovereign's liquidity situation for 2021 has improved as a result of a 26.3% increase in central government revenues in January-May 2021 relative to the same period in 2020, reflecting a strong economic rebound supported by a 45.3% growth in remittance inflows in January-June 2021 versus the same period last year. Moody's forecasts that economic growth will be in the order of 4.5% in 2021, with upside risks from continued high remittance inflows that would support domestic demand, following a contraction of 7.9% in 2020. Despite these improved conditions, a series of policy decisions have undermined governance and institutional strength, delaying negotiations with the IMF, generating uncertainty and adding further challenges to debt sustainability and market access. On June 4, the government withdrew from the International Commission against Impunity in El Salvador after the Organization of American States, which established the commission to fight corruption, appointed a member of the political opposition as an advisor. Before that, on May 1, the newly sworn-in Legislative Assembly, where President Nayib Bukele's party Nuevas Ideas holds a supermajority (56 of 84 total seats), voted to remove and replace five Supreme Court justices. More controversially, on June 9, the Legislative Assembly approved the world's first law to make Bitcoin (a cryptocurrency) legal tender in the country, such that both the US dollar and Bitcoin are now legal currency for settling transactions. In Moody's opinion, these measures reflect weakened governance in El Salvador, raising tensions with international partners -- including the United States (Aaa stable) -- and jeopardizing progress toward an agreement with the IMF. In this context, risks associated to El Salvador's need to access sufficient external financing ahead of bond redemptions beginning in January 2023 have materially increased. RATIONALE FOR NEGATIVE OUTLOOK The negative outlook reflects Moody's view that risks to El Salvador's credit profile are skewed to the downside. This is based on Moody's opinion that the fiscal position remains vulnerable and susceptible to financing shocks that could jeopardize the sovereign's repayment capacity ahead of the challenging redemption schedule on its external market debt beginning in January 2023, particularly if market access remains constrained. Although the authorities are likely to continue enacting measures to achieve further, gradual fiscal consolidation, public debt ratios remain elevated at 89.2% of GDP as of the end-2020. Given large financing needs, which Moody's estimates will be in excess of 15% of GDP in 2022, and upcoming debt redemptions in subsequent years, identifying sources of financing against a backdrop of tight liquidity will be a key credit challenge. Even if an agreement with the IMF unlocks fresh multilateral financing, implementation risks and policy missteps could undermine market sentiment, potentially increasing risks to bondholders. ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS El Salvador's ESG Credit Impact Score is highly negative (CIS-4), reflecting moderate exposure to environmental risk, highly negative exposure to social risks and a very highly negative governance issuer profile score (IPS) with limited financial resilience. El Salvador's exposure to environmental risks is moderately negative (E-3 IPS), related to physical climate change and limited natural capital. El Salvador's geography is dominated by a region known as the Dry Corridor, characterized by heavy precipitation events that lead to flooding and landslides and occasional droughts. The steady rise in the frequency and severity of droughts and other climate-related shocks poses a threat to the country's agriculture sector, which employs 16% of the country's population. Extreme weather events can influence El Salvador's key credit metrics, such as GDP growth volatility, household incomes and agricultural export earnings. Exposure to social risks is highly negative (S-4 IPS). Despite a recent decline, El Salvador's homicide rate remains among the highest in the Western Hemisphere. While remittances from El Salvadorans living abroad support about 20% of economic activity, which boosts consumption, high levels of violence and insecurity stunt the country's investment levels, productivity and long-term growth potential. The influence of governance on El Salvador's credit profile is very highly negative (G-5 IPS) reflecting its weak government effectiveness, rule of law and control of corruption. A deteriorating predictability of institutions and government policies also undermines the governance issuer profile score. GDP per capita (PPP basis, US$): 8,422 (2020 Actual) (also known as Per Capita Income) Real GDP growth (% change): -8.5% (2020 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 0.5% (2020 Actual) Gen. Gov. Financial Balance/GDP: -8.8% (2020 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: 0.5% (2020 Actual) (also known as External Balance) External debt/GDP: 74.% (2020 Actual) Economic resiliency: b1 Default history: No default events (on bonds or loans) have been recorded since 1983. On July 28, 2021, a rating committee was called to discuss the rating of the El Salvador, Government of. The main points raised during the discussion were: The issuer's institutions and governance strength, have materially decreased. Other views raised included: The issuer's economic fundamentals, including its economic strength, have not materially changed. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. The issuer's susceptibility to event risks has not materially changed. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS WHAT COULD CHANGE THE RATINGS UP Steady progress on consolidating central government finances that substantially reduces financing needs and improves market access at materially lower funding rates, or multilateral funding in amounts large enough to fully cover government financing needs in 2021-23, including upcoming external market debt redemptions, could lead to an upgrade of the sovereign's rating. WHAT COULD CHANGE THE RATINGS DOWN Downward pressure on the sovereign's credit profile would emerge if the sovereign is unable to secure multilateral financing, including from the IMF, large enough to materially ease liquidity pressures. The persistence of funding costs at a level that compromises debt sustainability would put additional downward pressure on El Salvador's credit profile increasing the risk of losses to bondholders. The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019. =========== M E X I C O =========== CEMENTOS PACASMAYO: S&P Alters Outlook to Stable, Affirms 'BB+' ICR ------------------------------------------------------------------- On July 30, 2021, S&P Global Ratings revised its outlook on Peru-based cement producer Cementos Pacasmayo S.A.A. (CPAC) to stable from negative and affirmed its 'BB+' global scale issuer and issue-level credit ratings. The stable outlook reflects S&P's view that CPAC will maintain solid operating and financial performance and prudent financial policy in the next 12 months. This should result in net debt to EBITDA of 2.0x-3.0x by the end of 2021 and in 2022. Stronger-than-expected cement demand in northern Peru rose at a faster-than-expected pace because of rising DIY construction activity and greater public spending on infrastructure, mostly related to Peru's agreement with the U.K. As a result, CPAC posted an all-time high sales volume (about PEN1.8 billion) in the last 12 months ended June 2021. S&P said, "We expect CPAC to continue benefiting from the healthy market momentum in the coming quarters, although at a slightly slower pace than in the same period last year. Therefore, we expect CPAC's revenue to be close to PEN1.7 billion by the end of 2021. On the other hand, CPAC's EBITDA margins slipped to near 25% in the 12 months ended June 2021, given its higher use of imported clinker, to keep up with the high cement demand, along with higher commodities and fuel costs. However, we expect a gradual recovery in margins in the second half of 2021 and in 2022 to the traditionally high level near 30%." S&P saod, "The company distributed dividends of about PEN338 million (or $86 million) on July 6, 2021, about twice the usual amount. We don't expect such level to remain in the next 12 months. Although it will likely depend on the company's capacity to maintain its cash flows, in addition to potential expansionary capital expenditures (capex) and refinancing of its 2022 and 2023 debt maturities. Nonetheless, we expect CPAC's credit metrics and liquidity position to remain in line with the current rating level. We estimate CPAC's adjusted net debt to EBITDA to rise to 2.5x-2.7x by the end of 2021 from about 2.0x in the 12 months ended June 2021, but yet below 3.0x as of the end of 2020. Moreover, we estimate CPAC's discretionary cash flows to be negative in 2021, after dividend distributions. For 2022, we estimate its net debt to EBITDA to be 2.0x-2.5x, given our assumptions of sales relatively unchanged from those in 2021, and CPAC's greater use of own-sourced clinker, rather than imports, which should improve EBITDA margins to historic levels. "We expect demand for building materials to remain strong in the upcoming quarters in Peru, especially in the northern region given that public funds allocated for reconstruction there after the El Nino effect in 2017 to be 65% disbursed. However, the electoral win by Mr. Castillo could represent a major shift from Peru's current economic model. During his campaign, Mr. Castillo proposed several reforms such as a potential expansion of the state's role in the economy and introducing protectionist measures, seeking to increase tax revenue from foreign firms. Even if some of these proposals are not approved by the divided Congress, there's a risk that the investment trends in key sectors could be undermined, crimping demand for cement and concrete. However, given CPAC's revenue mix, where about 91.4% of sales in 2020 came from bagged cement--usually consumed for DIY construction activity--we expect some resiliency in the company's cement dispatches." =============== P A R A G U A Y =============== RUTAS 2 AND 7: Fitch Affirms BB+ Rating on USD457.6MM Notes ----------------------------------------------------------- Fitch Ratings has affirmed the 'BB+sf' rating to the USD457.6 million series 2019-1 senior secured notes issued by Rutas 2 and 7 Finance Limited (the issuer), an SPV incorporated in the Cayman Islands. The Rating Outlook is Stable. Sacyr Ruta Del Este_ Rutas 2y7 DEBT RATING PRIOR ---- ------ ----- Series 2019-1 78319MAA1 LT BB+sf Affirmed BB+sf TRANSACTION SUMMARY The notes are expected to be fully backed by PDI Trust Securities upon the completion of all bond construction milestones. PDIs are deferred investment recognition payment rights vested upon completion of construction milestones (tramos) of Rutas 2 and 7 projects from the Republic of Paraguay (RoP). PDIs are public debt of the sovereign and their budgeting process follows the same procedure as a sovereign bond's debt service. Upon a commitment termination event (CTE) or work reduction, investors will receive the initial issue price plus a protection return rate to compensate for the amount of time the portion being prepaid has been outstanding. Fitch's ratings address the likelihood of timely payment of interest and principal on the notes. KEY RATING DRIVERS Rating Linked to Sovereign's Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR): Through its analysis, Fitch has determined that the primary risk contributor for the transaction is the RoP; therefore, the rating of the transaction is linked to Paraguay's LT FC IDR, 'BB+'/Stable. The rating reflects Fitch's view of the credit quality of deferred investment payment obligations (PDIs), permitted investments during the availability period, and the Inter-American Development Bank (IDB; AAA/Stable) and IDB Invest (AAA/Negative) as LOC providers to cover advances made to the concessionaire during the availability period. Reliance on the Government Payment Obligation: After the availability period, Fitch assumes that payment on the notes will rely on the RoP's unconditional and irrevocable payment obligation regarding vested PDIs. Under Paraguayan law 1535, PDIs are considered external public debt of the RoP denominated in USD. Additionally, pursuant to the PPP Trust Agreement, PDI payment right holders will have direct recourse against Paraguay for failure to make any payment as and when due. Credit Quality of Permitted Investment: Note's proceeds are held by the issuer in the initial notes general account and are being used during the availability period to grant advances to the concessionaire and purchase PDI trust securities. During the availability period, these funds may be invested in securities denominated as permitted investments which are linked to the RoP credit quality. Given the magnitude of this exposure, the credit quality of the notes during the availability period is capped at the lower of the rating of Paraguay or the credit risk of these securities. IDB and IDB Invest Backing Purchase Price Advances: The concessionaire will be able to make PDI purchase price advances from proceeds of the notes held in escrow under certain conditions. The amount of the IDB LCs will always be equal to the total amount of PDI purchase price advances made to the concessionaire during the availability period, which will decrease as PDIs are generated and PDI trust securities purchased. According with Fitch's criteria, the IDB and IDB Invest do not pose additional risk to a 'BB+' risk presenting entity. No Exposure to Construction/Performance Risk: PDIs are Paraguayan-law governed, freely transferable payment rights. Once issued, they are not related to the PPP Contract and therefore do not depend on the status of the construction or operation of the project, thus eliminating construction and operating risk. Vested PDIs survive the termination or nullity of the PPP Contract for any reason. Construction Progress in 2021: Coronavirus has had a moderate direct impact in Paraguay due to the country's low number of cases. Public works construction was never suspended by the government, allowing the concessionaire of the project to continue making progress. As of June 30 2021, the overall progress of the project was slightly behind both the expected construction schedule and in the project tranches (tramos) to be sold to the issuer. Minimized Negative Carry Exposure: Prior to the purchase of 100% of the PDI trust securities, transaction expenses will be higher than the income generated by the PDI payments. The negative carry was properly mitigated by the upfront funding of a trust account used to cover expenses. Early Redemption Protections: Upon a CTE or works reduction, the noteholders will be repaid at the purchase price of the notes plus a redemption premium with the remaining amounts not invested to purchase PDI trust securities, LCs provided by the IDB and the IDB Invest, and a protection amount provided by the protection provider. The size of the protection amount will be equal to the maximum remaining negative carry net of the amounts anticipated to be available to the issuer from the proceeds of investments and available cash. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The ratings on the transactions are linked to the LT FC IDR of Paraguay; hence, an upgrade of Paraguay's FC IDR would trigger an upgrade of the rated notes in the same proportion. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The ratings on the transactions are linked to the LT FC IDR of Paraguay; hence, a downgrade of Paraguay's FC IDR would trigger a downgrade of the rated notes in the same proportion; -- Any change in Fitch's view regarding the strength of the sovereign obligation regarding PDI payments may have a downward effect on the rating assigned to this transaction. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven 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 seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. ===================== P U E R T O R I C O ===================== PUERTO RICO: Debt Adjustment Hearings to Start on November 8 ------------------------------------------------------------ RJR News reports that the hearings to confirm Puerto Rico's debt adjustment plan that would restructure some $35 billion in debt are slated to start on November 8. The debt adjustment plan is expected to face opposition during confirmation hearings because the island's government and legislature oppose the proposed 8.5% pension cuts contained in the plan for pensions that are higher than $1,500 per month, according to RJR News. U.S. District Court Judge Laura Taylor Swain denied a request to amend procedures ahead of the approval of the plan's disclosure statement, which may occur at a hearing set for July 27. Puerto Rico's total debt is approximately US$74 billion. 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 to chair a committee to review professionals' fees. ===================================== T R I N I D A D A N D T O B A G O ===================================== HAKKA RESTAURANT: Closes Woodbrook Location ------------------------------------------- Andrea Perez-Sobers at Trinidad Express reports that Indian-style Chinese cuisine HAKKA Restaurant and Bar has permanently closed its doors at its Ariapita Avenue, Woodbrook, location. The closure was attributed to a decline in fine dining and the economic downturn, coupled with the Covid-19 pandemic, according to Trinidad Express. The restaurant said it was moving to a "modern alternative" which will be rolled out at Brentwood Mall in Chaguanas, the report notes. HAKKA announced on its Facebook page that after 11 years on the Avenue, it will be saying goodbye to its "mother ship" establishment, the report relays. "We wish to thank all our dear guests who have supported us through the years. This is not the end but, rather, a new beginning for us all to share. We are extremely excited to have you join us on this journey," the post stated, the report discloses. HAKKA said commencing this month, "we will start rolling out a new a la carte menu in all express locations," the report says. Owner Marcus Jagdeo told the Express that even before the onset of Covid, the restaurant industry had noticed a decrease in people dining out and less lining on the Avenue, the report notes. "Especially on the western end of the Avenue in particular, where the restaurant and bar was located, activity has died down a lot. All the restaurants on that Avenue are feeling the pinch. There was a lot of talk by the Government to revive the strip but that has not yet been developed," he said in a phone interview, the report relays. The report discloses that Jagdeo noted: "The closure on the Avenue is not the death of HAKKA as the new location at Brentwood Mall in Chaguanas in a few months will offer the options of indoor and outdoor dining, an express section along with a drive-through. People want more convenience such as parking along with tighter security for parked vehicles." Hope for 2022 Jagdeo said the move to reopen in Chaguanas was a "rebirth" and he was confident that foot traffic will be greater as there will now be options available to customers buying food to go, the report relays. He said a new HAKKA Express will be located at Piarco Plaza soon and a new a la carte menu will be rolling out at other locations, as in-house dining is restricted at this time, the report notes. "It is not all gloom and doom. While restaurants globally have been suffering from a decline in fine dining sales, innovation is the key to survival. We are hoping that by 2022 the industry and the business sector on a whole begins to thrive again," Jagdeo added, the report relays. Earlier, after 15 years of operations, Chaud Restaurant closed its doors, the report says. Its founder, chef Khalid Mohammed, in a social media post indicated that Chaud Events, Chaud Cafe & Wine Bar and Chaud Cafe Vite will continue, the report notes. Joe's Pizza Italian Restaurant said their St Augustine branch has been permanently closed, but their Chaguanas, Diego Martin and Maraval branches remain open, the report adds. TRINIDAD & TOBAGO: Yacht Sector Still Closed -------------------------------------------- Trinidad Express reports that the yacht services sector says it continues to be ignored even though the country's borders have been opened. "Since the official reopening of borders on July 17 the sea borders remain effectively closed," the Yacht Services Association of Trinidad and Tobago (YSATT) complained in a statement, according to Trinidad Express. It recalled that after months of consultation with stakeholders such as the Coast Guard, Customs and Immigration, an arrival procedure was devised, the report relays. "All this planning, however, has seemingly been for naught as the TTravel Pass that was announced mere days before border reopening does not even include sea ports," YSATT said, the report notes. The association believes that the impression given by various Government ministers at their weekly news conferences is that the "sea ports and the marine services sector is merely an afterthought," the report discloses. "The ministers in charge of the TTravel Pass have only begun to address the insufficiencies of their touted travel solution days after the borders have reopened," it stated, the report relays. "Never mind the fact that we are an island with many more ports of entry than simply Piarco International Airport, we have an entire sector that has been anxiously awaiting this reopening. "The reality is the vessels that have been turning up at our shores are still being refused entry," the report notes. YSATT reiterated its argument that the reason for this was that the TTravel Pass is required by Immigration but doesn't cater for sea port arrivals, 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 * * *