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/raid1/www/Hosts/bankrupt/TCRLA_Public/210812.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 Thursday, August 12, 2021, Vol. 22, No. 155 Headlines B E R M U D A BACARDI LTD: Moody's Ups GTD Sr. Unsec. Bond Rating from Ba1 B R A Z I L BRAZIL: Car Sales Fall in July due to Inventory Shortages D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Proposed Airport at Bavaro Not Profitable E C U A D O R ECUADOR: Defaulted Last Year, Now Bonds are World's Best J A M A I C A JAMAICA: Production Costs Rose in June, Statin Says M E X I C O PETROLEOS MEXICANOS: Posts $1.2BB Net Loss in 1H of 2021 P E R U PERU: Finance Minister Says President Backs Economic Agenda P U E R T O R I C O EDUCATIONAL TECHNICAL: Case Summary & 20 Top Unsecured Creditors - - - - - ============= B E R M U D A ============= BACARDI LTD: Moody's Ups GTD Sr. Unsec. Bond Rating from Ba1 ------------------------------------------------------------ Moody's Investors Service upgraded Bacardi Limited's and guaranteed subsidiary senior unsecured ratings to Baa3 from Ba1 and short-term unsecured ratings to Prime-3 from Not Prime. The Ba1 CFR and Ba1-PD probability of default rating were withdrawn as were the ratings of subsidiaries that are no longer borrowers on the company's commercial paper program. The outlook is stable. The following ratings/assessments are affected by the action: Ratings Upgraded: Issuer: Bacardi Limited Senior Unsecured Commercial Paper, Upgraded to P-3 from NP GTD Senior Unsecured Regular Bond/Debenture, Upgraded to Baa3 from Ba1 (LGD4) Issuer: Bacardi-Martini B.V. Senior Unsecured Commercial Paper, Upgraded to P-3 from NP Ratings Withdrawn: Issuer: Bacardi Corp. Senior Unsecured Commercial Paper, Withdrawn , previously rated NP Issuer: Bacardi Limited Corporate Family Rating, Withdrawn , previously rated Ba1 Probability of Default Rating, Withdrawn , previously rated Ba1-PD Issuer: Bacardi U.S.A., Inc. Senior Unsecured Commercial Paper, Withdrawn , previously rated NP Issuer: Bacardi-Martini Finance B.V. Senior Unsecured Commercial Paper , Withdrawn , previously rated NP Outlook Actions: Issuer: Bacardi Corp. Outlook, Changed To Rating Withdrawn From Stable Issuer: Bacardi Limited Outlook, Remains Stable Issuer: Bacardi-Martini B.V. Outlook, Remains Stable Issuer: Bacardi U.S.A., Inc. Outlook, Changed To Rating Withdrawn From Stable Issuer: Bacardi-Martini Finance B.V. Outlook, Changed To Rating Withdrawn From Stable RATINGS RATIONALE The upgrade to Baa3/P-3 reflects Bacardi's deleveraging to below 4x debt-to-EBITDA, having achieved 3.5x debt to EBITDA (including Moody's adjustments) as of its Q1 2022 ended June 30 through earnings growth and about $1.1 billion in debt repaid since the Patron acquisition in 2018. The company has stated that it is committed to further deleveraging. The upgrade also reflects Bacardi's strong cash generation in its fiscal 2021 despite volume drops due to on-premise shut downs related to the coronavirus, and good growth momentum even compared with pre-coronavirus periods, which Moody's expects will continue for the next 12-18 months as the company continues its premiumization strategy and benefits from overall good category momentum. While some uncertainty still exists around full recovery of on-premise venues, Moody's does not see a scenario where leverage would rise above 4x especially given the financial flexibility the company demonstrated during the crisis, including good cost and working capital management. Bacardi made the prudent decision to slightly lower its dividend during the coronavirus to preserve cash, but has since restored the payout, and still managed to achieve retained cash flow to net debt in the mid- teens, which further supports an investment grade rating. Bacardi's Baa3/P-3 ratings benefit from its solid position in the spirits industry, with a number of leading premium and super premium brands, stable cash flows, and strong profitability. The Patron acquisition is now fully integrated and has contributed significantly to growth. These factors partially mitigate the risks from debt and leverage remaining higher than the levels prior to the purchase of Patron. Although Bacardi is the largest privately owned spirits company globally, it is constrained by its smaller size when compared with certain beverage and consumer products competitors, and a degree of exposure to certain slower growing categories. Bacardi's exposure to the premium and super premium spirits segment raises the risk that it could come under pressure in a severe prolonged economic downturn. However, Moody's expects the premiumization trend to continue, even if there are temporary setbacks. Furthermore, Bacardi has performed well through past recessions, in part due to its diverse portfolio encompassing a range of brands and price points. Liquidity is excellent, with cash on hand of over $200 million as of June, almost $1 billion in funds from operations, over $200 million of free cash flow expected in FY 2022 ending in March 2022 and an undrawn $1 billion unsecured revolver. The company has no debt maturities until calendar 2023 when it faces both a $400 million term loan and a Euro 650 million notes maturity. Moody's expects that Bacardi will repay some and proactively refinance the rest. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The stable outlook reflects Moody's expectations that Bacardi will remain committed to its investment grade rating and continue to deleverage with excess free cash flow at least until leverage (by its definition) is well below 3x. Moody's also assumes in the stable outlook that the company will take a prudent approach to dividend increases such that it continues to generate healthy retained and free cash flow. The rating could be upgraded if Debt to EBITDA is sustained below 3.5x, retained cash flow (RCF) to net debt is sustained in the mid-teens or above, and operating momentum remains strong. A downgrade would be considered if debt-to-EBITDA leverage were sustained above 4.0x, liquidity deteriorated significantly, or the company faced sustained operating challenges that caused material declines in its revenues or its EBITDA margin. The rating could also be downgraded in the face of large debt funded shareholder distributions or acquisitions. ENVIRONMENTAL SOCIAL AND GOVERNANCE CONSIDERATIONS The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Moody's analysis has considered the effect on the performance of Bacardi given a gradual recovery for the coming year. Although an economic recovery is underway, it is tenuous, and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around Moody's forecasts is unusually high. Moody's regards the coronavirus outbreak as a social risk under Moody's ESG framework, given the substantial implications for public health and safety. Volatility can be expected in 2021 due to uncertain demand characteristics, channel disruptions, and supply chain disruptions. Bacardi is exposed to environmental and social risks as a distiller of spirits including the use of agricultural commodities, water, and energy in the production process and in items such as packaging. Bacardi has good financial flexibility to manage these risks including in its supply and distribution chains. Bacardi has been very active in sustainability efforts and remains focused on reducing its carbon footprint. The company aims to be 100% plastic free by the year 2030. The company also monitors its social risks closely, including product quality and safety, clean labeling and messages about alcohol content and responsible consumption. While the alcoholic beverage industry is subject to some risk due to health concerns and the impact of drunk driving, the industry as a whole, and Bacardi in particular, have made meaningful efforts to disclose the risks and promote moderate consumption of alcoholic beverage products. In terms of governance, the management team is seasoned and includes members with experience at a variety of large multinational consumer products companies. The board remains family controlled but does have six non-family directors. As a private, family-held company, Bacardi's options to assist with debt reduction following acquisitions are more limited than some other firms. For example, Bacardi did not raise equity or lower its dividend to help deleverage after the Patron acquisition. While Moody's considered the willingness to incur historically high leverage as a more aggressive financial policy, Bacardi management is committed to reduce net debt to EBITDA (by its definition) to under 3x over the long term (3.18x at June 2021). The board's election to reduce its quarterly dividend for two quarters in fiscal 2021 to preserve cash in the face of coronavirus was viewed as a governance positive. Bacardi has been owned by the Bacardi family for multiple generations and has a long-term investment horizon that focuses on investment and value preservation that aligns with debt-holder interests. The principal methodology used in these ratings was Alcoholic Beverages Methodology published in February 2020. Family owned Bacardi Limited, headquartered in Bermuda since 1965, is the largest privately held spirits company in the world. Besides its name sake rum brands, the company's premium, super premium and standard brand portfolio also includes Patron and Cazadores tequilas, Dewar's blended Scotch whisky, William Lawson's Scotch whisky, single malt whiskies, Martini vermouth and sparkling wines, D'usse cognac, Grey Goose and Eristoff vodkas, and Bombay Sapphire gin among others. Bacardi has also completed a number of acquisitions to expand its portfolio in the craft and premium/ super-premium categories including Angel's Envy bourbon, Patron tequilas, and St-Germain elderflower liqueur. Bacardi's LTM sales through June 2021 were over $4.6 billion. =========== B R A Z I L =========== BRAZIL: Car Sales Fall in July due to Inventory Shortages --------------------------------------------------------- Richard Mann at Rio Times Online reports that automobile sales in Brazil fell to 123,579 units in July, down 8.41% compared to the same month of 2020 (134,927); products are in short supply at dealerships because of the shutdown of several factories affected by the global shortage of semiconductors. According to data released by the National Federation of Vehicle Dealers (Fenabrave), car sales in July, the lowest for the month since 2005, also fell in comparison with June by 7.30% compared to the 133,306 units sold the previous month, the report relays. Fenabrave attributed the negative result in July to the shortage of cars in dealerships and the difficulty of the Brazilian industry to continue manufacturing due to the global lack of chips, says Rio Times. 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: Proposed Airport at Bavaro Not Profitable ------------------------------------------------------------- Dominican Today reports that prominent economist Henri Hebrard revealed that the Ministry of Finance made a report at the end of the last government in which it warned that the proposed Bavaro International Airport (east) would not be profitable and that the fiscal incentives that would be granted by the Dominican Gov. to them for 15 years would represent an enormous "sacrifice of the State" of almost RD$4.5 billion. "It now requires that they be offered under the same conditions and for the same time to all private airports in the country," Hebrard relates, according to Dominican Today. Herbard said the report's conclusions indicate that the results of the "cost-benefit analysis" show that in the absence of tax incentives, the project would not be financially profitable, since it does not compensate for the initial investment made. Therefore, it is expected that the investment could not be made without the granting of said incentives, the report notes. "The tax incentives would represent a fiscal sacrifice for the State of RD$4.5 billion during the considered years, of which 73% corresponds to income tax; 20.4% to the tax on assets; 4.0% to the real estate transfer tax; and 2.6% to the tariff and taxes on imports," the economist told Telematutino 11 TV, the report relates. 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 C U A D O R ============= ECUADOR: Defaulted Last Year, Now Bonds are World's Best -------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that across the world, government bondholders have seen losses pile up this year as a pickup in inflation and economic growth puts central banks under pressure to raise interest rates. That makes even more remarkable the windfalls seen in Ecuador, a junk-rated South American nation that was mired in recession even before the pandemic and was forced to restructure $17.4 billion of debt last year -- a step rating companies considered a default, according to globalinsolvency.com. The returns on the nation's bonds have topped 28% this year, more than any other country, according to a Bloomberg Barclays index, the report discloses. It's the result of a confluence of factors: a steady vaccination campaign, rising oil prices and optimism that the April election victory of President Guillermo Lasso, a former banker, will usher in a wave of market-friendly reforms, the report relays. The gains stand in contrast to the experience of investors in other major Latin American countries that have seen political unrest or the rise of left-wing parties amid the economic toll of the pandemic, the report notes. Neighboring Colombia this year was rocked by bloody protests over the president's ill-fated tax hike plans, the report discloses. In Chile, a former student protest leader to the far left of the nation's political spectrum is ahead in the presidential race, the report says. And Peru's markets have been whipsawed as President Pedro Castillo, a former rural schoolteacher from a Marxist party, called for a new constitution and a briefly delayed the appointment of his finance minister, the report adds. ============= J A M A I C A ============= JAMAICA: Production Costs Rose in June, Statin Says --------------------------------------------------- RJR News reports that producers of goods and services faced increased expenses in June. STATIN's Producer Price Index shows there was a higher cost of production mainly due to the depreciation of the Jamaican dollar to the US currency, and increased costs of imported raw materials, according to RJR News. Output prices for producers in the manufacturing industry rose by 2.2 per cent in June, 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. =========== M E X I C O =========== PETROLEOS MEXICANOS: Posts $1.2BB Net Loss in 1H of 2021 -------------------------------------------------------- EFE reports that state-owned Petroleos Mexicanos, one of the world's most indebted oil companies, reported a net loss of $1.2 billion (23 billion pesos) in the first half of 2021, down 96.2 percent from the same period of last year. In presenting the company's latest earnings report, Pemex Chief Executive Officer Octavio Oropeza said he had more "good news" to announce and also highlighted an increase in oil production, the report relays. According to the report, Pemex said total sales came in at $33 billion, up 42.8 percent from the same six-month period of 2020. Both domestic sales and exports were sharply higher, rising 34 percent (to $17.1 billion) and 54.4 percent (to $15.8 billion), respectively. Relative to the first half of 2020, gross income soared by 201 percent to $11.5 billion and operating income climbed 26.4 percent to $8 billion, notes the report. The oil company said income before taxes and duties rose to $5.7 billion, up 121.6 percent from January to June 2020, says EFE. According to the report, total crude oil production averaged 1.73 million barrels per day in the first half of 2021, an increase of 1.2 percent over the first six months of 2020. Natural gas output, meanwhile, climbed 1.6 percent to an average of 3.7 billion cubic feet per day during that same period. Pemex's total liabilities, which include short-term and long-term financial debt, taxes and duties payable and obligations for its reserve for employee benefits, came in at $207.6 billion on June 30, down 5.1 percent from Dec. 31, 2020, the EFE report relays. The report says Pemex's financial debt totaled $115.1 billion on June 30, up 0.9 percent compared to the end of last year, mainly due to temporarily used short-term financing. On a quarterly basis, Pemex posted a net income of $721 million in the second quarter, compared with a $1.9 billion net loss in the April to June period of 2020, adds EFE. The report says Pemex posted a net loss of $21.4 billion in 2020, up 38.2 percent from its net loss in 2019, a period that the company has acknowledged was the "worst crisis in its history." As reported in Troubled Company Reporter-Latin America on July 30, 2021, Moody's de Mexico, S.A. de C.V. downgraded Petroleos Mexicanos' (PEMEX) senior unsecured ratings on the company's existing notes, as well as the ratings based on PEMEX's guarantee, to A3.mx/Ba3 from A2.mx/Ba2. Moody's also affirmed PEMEX's MX-2 short term national scale. These rating actions follow Moody's Investors Service (MIS) rating action of downgrading PEMEX's corporate family rating to Ba3 from Ba2. MIS also lowered PEMEX's Baseline Credit Assessment (BCA), which reflects its standalone credit strength, to caa3 from caa2 ======= P E R U ======= PERU: Finance Minister Says President Backs Economic Agenda ----------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Peru's Finance Minister Pedro Francke was given assurances from the new government that he'll be able to implement his economic program, he said in the first interview since securing his new role. Francke, a former World Bank economist, was sworn, a day when markets crashed amid investor concern that he wouldn't take the post due to differences with other members of the cabinet appointed by President Pedro Castillo, according to globalinsolvency.com. These included Guido Bellido, a lawmaker who considers the communist government of Cuba to be a democracy, as prime minister, the report notes. "It seemed essential to me to have full support for the economic policy that we had proposed,"Francke said in the interview, adding that he hadn't had much contact with Bellido previously, the report relays. "Fortunately, that has already been resolved and it seems to me that it gives us space to develop our economic line in a completely safe way,"the report discloses. Bellido tweeted his support for Francke's policies before he was sworn-in, the report adds. ===================== P U E R T O R I C O ===================== EDUCATIONAL TECHNICAL: Case Summary & 20 Top Unsecured Creditors ---------------------------------------------------------------- Debtor: Educational Technical College, Inc. Carr #2 KM 11.2 Bayamon, PR 00959 Business Description: Educational Technical College, Inc. -- https://edutecpr.com -- was established in 1982, under the name of Academia Centro de Sewing, offering accelerated courses directed in this branch. Chapter 11 Petition Date: August 9, 2021 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 21-02392 Judge: Hon. Edward A. Godoy Debtor's Counsel: Carmen D. Conde Torres, Esq. C. CONDE & ASSOC. 254 San Jose Street 5th Floor San Juan, PR 00901-1523 Tel: 787-729-2900 Fax: 787-729-2203 Email: condecarmen@condelaw.com Total Assets: $1,969,503 Total Liabilities: $1,407,201 The petition was signed by Emilio E. Huyke as president. A full-text copy of the petition containing, among other items, a list of the Debtor's 20 largest unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/TGNJ2WQ/EDUCATIONAL_TECHNICAL_COLLEGE__prbke-21-02392__0001.0.pdf?mcid=tGE4TAMA ********* 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 * * *