/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210813.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, August 13, 2021, Vol. 22, No. 156 Headlines A R G E N T I N A GENNEIA SA: Commences Exchange Offer for 2022 Notes B E R M U D A APEX GROUP: S&P Assigns 'B-' Issuer Credit Rating, Outlook Stable B R A Z I L SAMARCO MINERACAO: Creditors Provide Better Loan Than Vale-BHP J A M A I C A JAMAICA: Film Industry Sees $2 Billion Decline in Business M E X I C O ALPHA HOLDING: S&P Lowers $400MM Senior Notes Rating to 'D' GRUPO AEROMEXICO: Creditor Committee Objects to New Max 737 Leases P E R U PERU LNG: Fitch Lowers LT IDRs to 'B+', Outlook Remains Neg. PERU LNG: Moody's Downgrades CFR to B3 on Weak Liquidity Position PERU: Markets Extend Tumble With No Finance Minister in Sight PERU: New President, Prime Minister Raise Risks as Debt Tumbles P U E R T O R I C O VIEQUES FO & G: Seeks to Hire Godreau & Gonzalez as Legal Counsel T R I N I D A D A N D T O B A G O CARIBBEAN AIRLINES: Urged to Rethink Layoffs - - - - - ================= A R G E N T I N A ================= GENNEIA SA: Commences Exchange Offer for 2022 Notes --------------------------------------------------- Genneia S.A. disclosed the commencement of (i) its offer to exchange (the "Offer" or "Exchange Offer") any and all of its outstanding 8.750% Series "XX" Notes due 2022 (the "Series XX Notes") and any and all outstanding Notes due January 22, 2022 (the "Private Notes" and together with the Series XX Notes, the "Existing Notes") for its newly issued 8.750% Senior Secured Notes due 2027 Senior (the "New Notes") and cash, as applicable and (ii) its solicitation of consents (the "Consent Solicitation"), upon the terms and subject to the conditions set forth in the Exchange Offer and Consent Solicitation Memorandum (the "Exchange Offer and Consent Solicitation Memorandum"), dated August 2, 2021, the related Eligibility Letter, and, where applicable, the related Transfer Certificate (together, the "Offer Documents"). Capitalized terms not defined herein shall have the meaning ascribed to them in the Offer Documents. A full text copy of the press release is available free at: https://prn.to/2U0Xsb2 Genneia S.A. is privately held independent power producer company that owns and operates a portfolio of power projects with 1.3 GW of installed capacity. Genneia was the first company to build and operate a wind farm in Argentina in 2012 and is currently the leading renewable power company in the country with 840 MW wind and solar plants, representing around 25% of the renewable market in Argentina. As reported in the Troubled Company Reporter-Latin America on Aug. 6, 2021, Moody's Investors Service has assigned a Caa3 rating to Genneia S.A.'s proposed new notes, while also affirming Genneia S.A.'s Caa3 Corporate Family Rating and senior unsecured ratings. The outlook is stable. ============= B E R M U D A ============= APEX GROUP: S&P Assigns 'B-' Issuer Credit Rating, Outlook Stable ----------------------------------------------------------------- S&P Global Ratings assigned its 'B-' issuer credit rating to Bermuda-based Apex Group Ltd. (Apex) and its financing subsidiaries, Apex Group Treasury Ltd. and Apex Group Treasury LLC. S&P also assigned its 'B-' issue rating and '3' recovery rating to the group's proposed $1,412 million term loans and $200 million RCF. S&P said, "The stable outlook reflects our view that Apex will continue to successfully integrate its acquisitions in the next two years, increasing its EBITDA base and generating positive free operating cash flow (FOCF) in 2022 and thereafter. We expect margin accretion following the transaction, with a material improvement in margins by about 8-10 percentage points between 2020 and 2023, and leverage falling by eight turns for the same period." Apex's fair business risk profile is supported by the group's leading position as a global fund administrator, and recurring revenue streams from a blue-chip client base. Although it started relatively small and operates in a fragmented industry, Apex has grown rapidly since its inception in 2003, and now offers a breadth of services across its fund, financial, and corporate solutions. Furthermore, the contract structure, with about 85% of fixed fees and including inflation-linked pricing and low customer concentration (below 5%), supports the business risk profile. These characteristics contribute to revenue visibility and resilience, as demonstrated by the group's recent financial performance during the COVID-19 pandemic, with very high organic growth of about 14% year-on-year and 37% on a consolidated and statutory basis in 2020, as well as strong March 2021 year-to-date values. Unlike other rated competitors and fund administrator peers, the group offers depositary and banking solutions through its subsidiary European Depositary Bank S.A. (EDB).The bank is a regulated entity, subject to capital requirements, with ringfenced cash and liabilities. S&P said, "The issued debt is held in the corporate division and we deconsolidate the bank's contribution to Apex's consolidated figures. Although we do not capture the bank's financials in our credit metrics, the bank does contribute to the group's service offering and supports the group's business risk profile, in our view. Furthermore, the bank can provide dividends to the parent, although we do not forecast this over the next two fiscal years. In the event of financial distress, a change in EDB's creditworthiness would not directly trigger a change in our ratings on Apex; although if the bank's regulatory capital fell, there could be capital injections from Apex. This would, in turn, limit the capital available for servicing the proposed debt. Nevertheless, this is not our base case, and we believe the bank's current creditworthiness, its strategy of not growing its balance sheet, and potential support from shareholders in a hypothetical financial distress scenario all mitigate this risk. "We expect Apex's strategy of continued acquisitions to further accelerate revenue growth and support the group in building its service offering. The acquisitive nature of Apex underpins the group's strategy to build an expansive "one-stop" solution and offer more services than its trust and corporate service (T&CS) competitors. This would also support the group's competitive standing by enhancing the opportunity for greater cross-selling and customer stickiness. This is exemplified by the group's new digital payments platform and high expected profitability. However, the T&CS industry is relatively fragmented and characterized by increased consolidation, since other players are also racing to build an integrated service offering. As such, and as is the case for other fund administrators, we believe it is likely that mergers and acquisitions (M&A) will remain a key pillar of Apex's strategy, beyond the acquisitions under exclusivity agreements. The group's issuance proceeds will see around $472 million earmarked for acquisitions with an additional $41 million for existing acquisition-related earnouts.The group has issued U.S. dollar and euro term loans amounting to about $1,412 million, and a pre-placed $275 million second-lien term loan to repay $1,066 million of term loans. The remainder of the transaction proceeds will be mainly used to fund acquisitions. The group also has $35 million of unrestricted cash on balance sheet and full capacity under a new RCF amounting to $200 million, post transaction. This supports our positive view of the group's prospective liquidity over the next 12 months. "Though improving in 2022-2023, we expect continued pressure on free cash flow generation and S&P Global Ratings-adjusted margins, given our expectations of continued acquisition- and integration-related costs, which we view as recurring. This drives our assessment of profitability as below average when compared with other professional services providers in the wider business services industry. We view Apex as intrinsically cash generative. However, we project free cash flow to remain marginally negative in 2021 as a result of transaction-related one-offs, and constrained in 2022-2023 as the group spends cash to integrate the acquisitions and pay for M&A-related costs and earnouts in the next two fiscal years. Nevertheless, we view as a positive the fact that Genstar Capital is very supportive, and we understand that it would likely contribute equity should the group continue very aggressive M&A. "Despite the successful integration of the 2019 series of acquisitions, the group's cost-savings initiatives carry some operational and execution risk, in addition to incurring exceptional costs, in our view. The group's business has a relatively limited track record, given its inception in 2003 and subsequent changes within the business. Furthermore, we see the M&A spend as more aggressive than some other rated T&CS peers, given Apex's scale. This leads to a significantly more conservative base case relative to management expectations and our negative comparable rating analysis assessment, which brings the rating down by one notch. Nevertheless, we believe there is material upside to the credit metrics and rating if realized and unrealized synergies materialize to the degree management anticipates. "Our assessment of Apex's financial risk profile reflects our projections of very high leverage, and our expectation that the group's financial metrics will remain above our 5.0x highly leveraged threshold in the next two years. In addition to the issuances outlined above, the capital structure comprises $437 million-equivalent preferred shares as of May 2021 (issued outside the restricted group and held by external investors). Although we assess the preferred shares as debt-like, we do not expect this to weigh on Apex's cash interest and cash flow as it accrues noncash interest. This leads to elevated leverage of about 23.5x-24.5x in the fiscal year (FY) ending Dec. 31, 2021, or around 18x-19x when excluding the group's noncash pay preferred equity issuance. Our adjusted leverage figures include $88 million of leases and $47 million of acquisition-related contingent consideration in FY2021. Our base case subsequently forecasts deleveraging as the EBITDA base increases, with leverage falling in 2023 toward 15x-17x in FY2023 (10x-12x on a cash pay leverage basis). "The stable outlook indicates that Apex will continue to successfully integrate its acquisitions in the next two years, increasing its EBITDA base and generating FOCF. We expect margin accretion following the transaction, with a material improvement in margins by about 8-10 percentage points between 2020 and 2023, and leverage falling by as much as eight turns, although remaining high." S&P could lower the ratings if: -- Apex records persistent negative FOCF, such that we view the capital structure as unsustainable; or -- S&P assesses the financial policy as increasingly aggressive, with ongoing debt-funded acquisitions or shareholder returns, resulting in persistent very high leverage. S&P could raise the ratings if: -- The group builds a track record of generating positive FOCF with our calculation of funds from operations (FFO) cash interest coverage remaining sustainably above 2.0x; -- Adjusted debt to EBITDA fell materially and there was a strong commitment from the financial sponsor to sustain lower leverage; or -- Apex further diversified by increasing the contribution of EDB and banking services within the group, while remaining well capitalized. =========== B R A Z I L =========== SAMARCO MINERACAO: Creditors Provide Better Loan Than Vale-BHP -------------------------------------------------------------- Mariana Durao and Cristiane Lucchesi of Bloomberg News report that the Samarco iron ore venture in Brazil can't accept a loan offered by its owners Vale SA and BHP Group because the proposed interest rate is higher than an offer from creditors, according to the judge overseeing the case. Samarcowas offered BRL1.18 billion ($226 million) in debtor-in-possession financing from Vale and BHP at 9.5% interest. But creditors including York Global Finance offered the same amount at a rate of 9%. The company called the latter proposal "inconsistent" and lacking important details. About Samarco Mineracao SA Samarco Mineracao SA is a Brazilian mining joint venture between BHP Group and Vale SA. erves as an iron ore processing company. The company provides blast furnace, direct reduction, sinter feed, as well as low and normal silica content pellets. On April 9, 2021, the Debtor filed a voluntary petition for judicial reorganization in the 2nd Business State Court for the Belo Horizonte District of Minas Gerais in Brazil pursuant to Brazilian Federal Law No. 11,101 of February 9, 2005. Samarco Mineracao filed for Chapter 15 bankruptcy recognition (Bankr. S.D.N.Y. Case No. 21-10754) on April 19, 2021, in New York, to seek U.S. recognition of its Brazilian proceedings. The Debtor's U.S. counsel: Thomas S. Kessler Cleary Gottlieb Steen & Hamilton LLP Tel: 212-225-2000 E-mail: tkessler@cgsh.com ============= J A M A I C A ============= JAMAICA: Film Industry Sees $2 Billion Decline in Business ---------------------------------------------------------- RJR News reports that the Jamaica film industry has recorded a two thirds decline equating to $2 billion in the value of business generated from local and overseas films. As a result of COVID restrictions, film production expenditure fell to $388.8 million, according to RJR News. According to data from the Planning Institute of Jamaica, temporary jobs created by the industry declined by 334 to 1,171 last year, the report notes. The Jamaica Film and Television Association says it expects a rebound next year, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. Fitch Ratings affirmed in March 2021 Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+', with a stable outlook. Standard & Poor's credit rating for Jamaica stands at B+ with negative outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). According to Fitch, Jamaica 'B+' rating is supported by World Bank Governance Indicators that are substantially stronger than the 'B' and 'BB' medians, a favorable business climate according to the World Bank Doing Business Survey, moderate inflation and moderate commodity dependence. These strengths are balanced by vulnerability to external shocks, a high public debt level and a debt composition that makes the sovereign vulnerable to exchange rate fluctuations. The Stable Outlook is supported by Fitch's expectation that the public debt level will return to a firm downward path post-pandemic, which is underpinned by political consensus to maintain a high primary surplus, the resilience of external finances, and stronger economic policy institutions. =========== M E X I C O =========== ALPHA HOLDING: S&P Lowers $400MM Senior Notes Rating to 'D' ----------------------------------------------------------- S&P Global Ratings lowered its issue-level rating on Alpha Holding S.A. de C.V.'s (Alpha) $400 million senior notes to 'D' from 'CC'. At the same time, S&P removed the rating from CreditWatch negative. S&P said, "On June 18, 2021, we lowered our issuer credit and issue-level ratings on Alpha to 'CC' from 'CCC' at the start of a 30-day grace period for interest payment on its $300 million senior secured notes due December 2022. On July 20, 2021, given that the company didn't make the payment after 30-calendar days since the start of the grace period, we lowered the issue-level rating on Alpha's senior notes of $300 million to 'D' from 'CC'. Additionally, we cut our issuer credit rating on the company to 'D' from 'CC', reflecting the highly unlikely possibility that Alpha will honor its financial obligations as they come due. After the rating action, all ratings on Alpha are at 'D'." Alpha skipped the aggregate interest payment of $18 million on its 9% semi-annual senior notes of $400 million due February 2025. On Aug. 2, 2021, the company announced a voluntary relief under Chapter 11 of the U.S. Bankruptcy Code for its affiliates that operate its Colombian business, which represented at about 30% of total loan portfolio, according to the latest available information. Alpha and its Mexican subsidiaries are not included in the Chapter 11 filing. Additionally, on Aug. 11, 2021, the firm announced that it has began in Mexico City a jointly administered voluntary filed proceeding according to Mexico's bankruptcy law. Alpha also mentioned that through this proceeding, the Mexican affiliates intend to pursue a controlled restructuring and possible sale of their assets in order to maximize value for the benefit of their creditors and other stakeholders. Alpha recently hired lawyers and consultants to complete the analysis of the accounting errors and restatement to its financial statements. In addition, the company announced that an ad-hoc group of holders of more than 50% in principal amount of the notes was formed, which has appointed financial and legal advisors that are engaged in dialogue with the company. Negotiations with bondholders and other creditors are ongoing and the potential outcomes remain unclear. The Mexican affiliates, together with their U.S. and Colombian counterparts, have continued discussions with an ad-hoc group of bondholders and other creditors throughout their respective restructuring filings. Environmental, social, and governance (ESG) credit factors for this credit rating change: -- Risk management and internal controls -- Transparency Poor transparency, risk management, and internal controls weaken the firm's creditworthiness. S&P considers the recent announcements related to accounting errors and restatement of its financial statements reflect governance deficiencies, which resulted in reputational damage to the company, harming the business confidence of customers and investors. GRUPO AEROMEXICO: Creditor Committee Objects to New Max 737 Leases ------------------------------------------------------------------ Andrea Navarro of Bloomberg News reports that Aeromexico's Committee of Unsecured Creditors filed a motion to object the airline's motion to enter into new Boeing Max 737 leases, according to a docket filed Aug. 7, 2021 before a N.Y. bankruptcy court. The Committee believes the motion should not proceed because Aeromexico decided to acquire the new aircraft after it began the exit financing process. At least two of the three exit financing proposals contain an enterprise value based on a plan that didn't contemplate the acquisition of the new aircraft, the Committee says. Because the 737MAX Aircraft (including those subject to the DAE Leases) are inexorably intertwined with the Debtors' valuation and, in turn, have a significant impact on the proposed recoveries to unsecured creditors, the Committee believes that the most sensible path forward is to use the mediation as a forum for the Debtors, Committee, and potential exit financing sources to consider the proposed 737MAX Aircraft acquisition, its expected impact on the Debtors' earnings, and any related increase in total enterprise value that potential investors may be willing to include in their proposals. About Grupo Aeromexico Grupo Aeromexico, S.A.B. de C.V. (BMV: AEROMEX) -- https://www.aeromexico.com/ -- is a holding company whose subsidiaries are engaged in commercial aviation in Mexico and the promotion of passenger loyalty programs. Aeromexico, Mexico's global airline, has its main hub at Terminal 2 at the Mexico City International Airport. Its destinations network features the United States, Canada, Central America, South America, Asia and Europe. Grupo Aeromexico and three of its subsidiaries sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11563) on June 30, 2020. In the petitions signed by CFO Ricardo Javier Sanchez Baker, the Debtors reported consolidated assets and liabilities of $1 billion to $10 billion. Timothy Graulich, Esq., of Davis Polk and Wardell LLP, serves as counsel to the Debtors. ======= P E R U ======= PERU LNG: Fitch Lowers LT IDRs to 'B+', Outlook Remains Neg. ------------------------------------------------------------ Fitch Ratings has downgraded PERU LNG S.R.L.'s (PLNG) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B+' from 'BB-'. The Rating Outlook remains Negative. In addition, Fitch has downgraded PLNG's USD940 million senior unsecured notes due 2030 to 'B+'/'RR4' from 'BB-' PLNG's downgrade and Outlook reflect the weaker operational performance given international prices for natural gas, operational disruptions at the plant and consequent higher leverage due to decreasing EBITDA generation. Per Fitch's updated Oil & Gas Price Deck for Henry-Hub (HH) and National Balance Point (NBP) indexes, PLNG's net total debt to EBITDA will reach 16.0x during 2021, and remain above 7.0x during 2022, exacerbating the company's cash flow volatility. KEY RATING DRIVERS Deteriorated EBITDA Due to Lower Gas Prices: For the LTM as of March 2021, PLNG's EBITDA registered USD51 million, mainly due to a gross profit decrease reflected on the company's margin contractions, which were a result of lower international LNG prices during 2020. Fitch expects PLNG's EBITDA will reach approximately USD54 million during 2021, assuming 67% of shipments to HH-indexed destinations, making a substantial portion of PLNG's operational performance linked to this index. The remaining portion should be evenly distributed between NBP and JKM indexes. Given the structure of the company's Sales and Purchase Agreement with Shell International Trading Middle East Limited (SITME), Fitch estimates the exposure to commodity price risk remains a key issue for PLNG, given low HH and NBP gas prices. In addition, plant interruptions due to several operational events, will reduce the expected volume for exports to approximately 156 Tbtu during 2021, significantly lower than 205 Tbtu of natural gas exported during 2020. These unexpected events will reach approximately USD21 million in additional costs and capex, and will increase total capex to nearly USD46 million during 2021. Fitch estimates these material disruptions in gas supply due to operational outages will extend PLNG's plant interruption until the end of August 2021. Leverage Remains High: Per Fitch's Oil & Gas price assumptions, natural gas prices for HH and NBP will improve during 2021, reaching 2.90 USD/mcf and 6.00 USD/mcf, respectively, mainly driven by low gas inventories in storage, strong demand in Asia, and recovering demand in Europe. In the long term, prices will remain at 2.45 USD/mcf for HH, depressed international gas prices result in a slower deleverage trajectory for Peru LNG, with net leverage staying above 4.5x for the next few years. FCF is forecast to remain positive through the medium term, including capex related to the projects of ethane recovery, port availability and unexpected events. Fitch expects PLNG will not distribute dividends over the rating horizon in order to accumulate cash to make front-to-debt amortization payments starting in September 2024. Moderate to Low Business Profile: PLNG's ratings reflect its moderate to low business-risk profile, stemming from its Sales and Purchase Agreement (SPA) with Shell International Trading Middle East Limited (SITME), which has no volume risk, but has commodity price exposure to Liquefied Natural Gas (LNG) prices. As per the company's Contracted Sales Prices (CSP) with SITME, PLNG is committed to deliver a fixed volume to its off-taker under a take or pay structure until 2028. SITME delivers natural gas cargos to international markets, which are paid at different pricing indexes depending on actual natural gas supply and demand in those markets. PLNG receives payments from SITME defined on indexes such as HH, NBP and Japan Korea Marker (JKM). Subsequently, PLNG pays Camisea, through the Gas Sales and Purchase Agreement (GSA) based upon the multiple destinations natural gas cargos were dispatched. Strong Off-Taker and High-Quality Shareholders: The company's ratings are supported by the strength of PLNG's gas buyer: Royal Dutch Shell Plc (AA-/Stable). Fitch estimates that PLNG's production represents 3% to 5% of Shell's global integrated gas sales. In addition, Shell is PLNG's second largest shareholder with a 20% stake in the company, after Hunt Oil with a 50% stake, which is also the operator of PLNG. SK Innovation owns a 20% stake and the Japanese industrial conglomerate Marubeni Corporation with the remaining 10% stake of PLNG's shares. Strong shareholder agreement reflects the commitment to maintain the company's viability, both in supportive contracts, as well as direct support, including a USD60 million capital injection in 2016 that bolstered PLNG's already robust liquidity position. Strategic Asset in the Country: PLNG's operations are a key link in the chain of royalties, which has historically contributed up to approximately USD600 million in payments to the Peruvian government. Although depressed oil and gas prices have diminished these cash flows, Fitch estimates that the government still stands to receive between USD100 million and USD150 million annually over the medium term related to both natural gas production and, more importantly, associated liquids from Block 56 in the Camisea field. PLNG consumes approximately 50% of Camisea's natural gas production, exporting to international markets almost all of its production, contributing to the country's monetization of its liquid's resources. In addition, PLNG is gradually being integrated into Peru's domestic gas supply strategy in the form of expanded trucking services for transportation within its borders. Although currently small-scale, this service has gained additional importance in light of the suspension of the Southern Gas Pipeline project. Fitch estimates these factors could mitigate the kind of social and environmental obstacles that can disrupt companies in the sector. Natural Monopoly: PLNG is insulated from competitive risk within Peru by virtue of high investment barriers and the GSA that effectively gives it exclusive rights to much of the country's exportable gas supply, allocated in Block 56. PLNG's total construction costs reached USD3.8 billion between 2007 and 2010. Additionally, the company has secured a 40-year investment agreement with the government, protecting PLNG from any modification or amendments upon the terms agree through a unilateral decision. Given the continent's NG supply characteristics, additional investments in capacity is unlikely or forthcoming. Within Peru, liquefaction capacity is also limited, primarily as function of the allocation of gas resources and PLNG's GSA with Block 56 of the Camisea field. The bulk of the country's reserves are located within the Camisea consortium's Block 88. However, this block is exclusively reserved for domestic NG consumption. Nearly 90% of the country's remaining gas reserves are within Blocks 56 and 57, for which production is ultimately committed to PLNG. Manageable Capex Program: Fitch estimates total capex of USD46 million during 2021, including PLNG's investments to increase port availability, ethane recovery project and operational event that caused the plant interruption. Going forward, the agency expects PLNG's regular maintenance capex will be flat at USD5 million during normal years, increasing to a range of USD12 million and USD15 million in those years with major maintenance. Fitch believes PLNG could cover these investments, with the company's internal cash flow generation, without incurring in additional debt. DERIVATION SUMMARY PLNG has limited regional peers. Even outside Latin America, LNG plants tend to operate on a more purely take-or-pay, capacity-based on a tolling business model, whereas PLNG incorporates commodity price risk. Tolling based peers such as Transportadora de Gas del Peru (BBB+/Stable) and GNL Quintero S.A. (BBB+/Stable) benefit from the related cash flow stability afforded by their revenue structure. GNL Quintero, in particular, supports a significantly higher leverage (between 6.0x to 7.0x through the medium term), as it operates a tolling terminal unloading, storing and re-gasifying liquefied natural gas on behalf of gas buyers under 20-year exclusive term use-or-pay agreement. While TGP has a projected leverage of 2.5x in the near term, its revenues derived from long-term ship or pay contracts to transport natural gas and natural gas liquids from the country's main gas production formation, Camisea, to the main consumption area and export terminal. Similar to GNL Quintero, PLNG is considered a strategic asset for the country, while GNL Quintero allows the liquefaction from imported natural gas in Chile, PLNG is the main infrastructure allowing Peru to export natural gas. In the U.S. corporate universe, Cheniere Energy Partners' (BB/Positive) rating is supported by a secured debt structure and subsidiary business models consistent with the aforementioned tolling structure. Its rating is primarily linked to its deep structural subordination, with roughly USD14 billion out of USD16 billion of non-recourse debt structurally senior to Cheniere's bonds. TransCanada PipeLines Limited's (A-/Negative) large scale and diversity across regulatory-based and long-term contracted businesses in natural gas pipelines warrants a higher rating compared with PLNG's single operation. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for the issuer include: -- Fitch's Gas price deck for Henry Hub (HH) at $2.9 per MMBtu during 2021 and long-term price at $2.45; -- Fitch's Gas price deck for National Balance Point (NBP) at $6.0 per MMBtu during 2021 and long-term price at $5.0; -- HH-indexed destinations receive 67% of shipments, with the remainder evenly distributed between NBP and JKM-indexed destinations; -- Exported volumes at 156 Tbtu during 2021 due to operational interruption in the plant, returning to 210 Tbtu during 2022, as major maintenance is scheduled, and increasing to 225 Tbtu per year 2023-2024; -- Transportation costs annually adjusted by the U.S. Producer Price Index; -- Annual capex of USD46 million in 2021, including the port availability and ethane recovery projects; -- Long term maintenance capex of USD5 million during normal years, increasing to a range of USD12 million and USD15 million in those years with major maintenance; -- No dividends payments during rating horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Amendments to contracts that would reduce price and volume risk, similar to its tolling-based peers in the region; -- Net leverage consistently below 3.5x; -- Built up cash consistently over the rating horizon with EBITDA interest coverage consistently over 3.5x; -- Hedge strategy to mitigate the company's exposure to commodity price risk; -- Greater visibility on medium- to long-term re-contracting options; -- Equity contribution from shareholders to enhance the liquidity position to face upcoming debt maturities could help stabilize the Rating Outlook. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Any cash distribution to shareholders combined with acceleration in repayments of USD110 million drawn credit line with SITME; -- Consecutive years of negative FCF preventing the company to accumulated cash to serve its debt payments; -- Failure to reach total net debt to EBITDA below 5.0x; and EBITDA interest paid coverage ratio above 2.5x by 2023; -- Material disruptions in gas supply or other operational outages eroding the company's cash flow generation. 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 Deteriorated Liquidity: As of March 2021, PLNG reported USD125 million of cash on hand. PLNG faces no significant maturities in the short term, as the bond starts amortizing during 2024. In addition, PLNG's original USD75 million undrawn committed credit line was reduced to USD40 million during the first half of 2021, out of which USD20 million is currently available. Fitch anticipates PLNG's liquidity will be eroded during 2021 due to operational events that halted the plant production increasing PLNG`s total costs and capex for approximately USD21 million. ISSUER PROFILE PERU LNG S.R.L. was created on 2003 with the purpose of developing, building, and operating a liquefied natural gas (LNG) plant. The company operates a 4.5 million mtpa gas liquefaction plant, and its related facilities, a marine terminal and a 408km pipeline that transports natural gas (NG) from the Camisea fields to the coast. Additionally, PERU LNG built a LNG Truck Loading Facility to promote the mass use of natural gas via the transport of this fuel to interior regions of the country. Total investment reached USD3.8 billion. PLNG's primary shareholder is Hunt Consolidated, Inc. (50% stake), which also has a 25% share in Block 56 in the Camisea field. Likewise, Royal Dutch Shell plc (AA-/Stable), a 20% stake, through its subsidiary Shell International Trading Middle East (SITME) is PLNG's sole off taker. Remaining shareholders include Sk Innovation Co, Ltd (20%) and Marubeni Corporation (10%). 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. PERU LNG: Moody's Downgrades CFR to B3 on Weak Liquidity Position ----------------------------------------------------------------- Moody's Investors Service downgraded PERU LNG S.R.L.'s (PLNG) corporate family rating and senior unsecured rating on the company's existing notes to B3 from B1. The rating action was based on the company's weak liquidity position, consequence of unexpected extended plant stoppages that affect cash flow generation. The rating outlook remains negative. Downgrades: Issuer: PERU LNG S.R.L. Corporate Family Rating, Downgraded to B3 from B1 Senior Unsecured Regular Bond/Debenture, Downgraded to B3 from B1 RATINGS RATIONALE Despite solid commodities prices, PLNG's cash generation will be weak in 2021 due to low production volumes, caused by over 80 days of plant stoppages in the first three quarters of the year, triggered mostly by unexpected mechanical problems in the company's sole plant. In the last three years, PLNG has experienced recurring plant stoppages either due to external events or unplanned shutdowns, which evidence continued high operating risk. For 2021, PLNG's management expects production to reach 156 trillion British thermal units (TBtus), close to 30% below the 217 Tbtus originally expected for the year. Therefore, Moody's expects PLNG's EBITDA to reach about $30 million, if Henry Hub averages $3 per million BTU in the year, as per the rating agency's estimates. Annual interest payments amount to $51 million and capital spending in 2021 will hover around $46 million (up from about $12 million in major maintenance years, such as 2022, and a normalized level of $5 million in years without major scheduled maintenance works), which increases liquidity risk. While PLNG's shareholders are mostly financially strong and can provide support, it remains to be seen how they could help the company's liquidity situation. However, Moody's understands that PLNG's management is working with shareholders to develop a plan to support the company. PLNG's B3 ratings are based on its exposure to natural gas and Liquified Natural Gas (LNG) prices volatility; high operating risk; elevated leverage; small, single operational asset base; and limited access to external funding. These factors are somewhat counterbalanced by PLNG's low supply risk, high capacity utilization rates, limited competition risk, minimum foreign-exchange risk, implicit shareholders support and its high relevance to Peru's trade balance and energy industry. It is also positive that PLNG's shore tension vertical units project, aimed at improving the ability to deliver cargoes during adverse weather conditions, should be completed in the first quarter of 2022, as per management, and therefore support cash generation. PLNG has high liquidity risk. The company's cash on hand amounted to $100 million in July 2021 and Moody's expects its operating cash to be negative $31 million in 2021 given low sales volumes. The company currently has $20 million availability under its $40 million committed revolving credit facility, which matures in March 2023. Most of PLNG's accounts payable refer to the $110 million credit received from the off-taker SITME, a subsidiary of Shell, a shareholder. PLNG's debt maturity is still comfortable because amortization of the existing notes begins in September 2024 (about $78 million in amortization payments, twice a year). Management expects to receive certain reimbursement from property damage insurance, but amount and timing is still unclear. The negative rating outlook reflects the risk that PLNG's credit profile continues to deteriorate if the operating risk remains high as the start of the amortization of the existing notes approaches. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS PLNG's B3 ratings could be downgraded if its cash flow generation does not improve in 2022 and its liquidity position and interest coverage ratio remain weak. A stabilization of PLNG's rating outlook or a rating upgrade could occur if the company's liquidity position becomes at least adequate when comparing to its capital investment and debt payment obligations. The principal methodology used in these ratings was Midstream Energy published in December 2018. PLNG, based in Lima, Peru, has a 4.45 million tons per annum (mmtpa) natural gas liquefaction plant located in Pampa Melchorita (Canete), a marine terminal, and a 408-kilometer pipeline that transports natural gas from the Camisea fields (Cusco, Peru). The company is committed to selling 218 TBtus of LNG per year to a subsidiary of Shell (SITME), which in turn has committed to take-or-pay this annual volume (95% of PLNG's total capacity) until 2028. In the last twelve months ended in March 2021 PLNG posted revenues of $644 million and EBITDA of $52 million. PERU: Markets Extend Tumble With No Finance Minister in Sight ------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Peruvian assets tumbled on concern new President Pedro Castillo's top economic adviser may not take a cabinet role, further fueling investor anxiety over his government's plans to remake the economy. An ETF tracking Peru stocks fell more than 7%, the currency had its worst day since 1994 and overseas bonds due in 2031 slipped to the lowest in seven weeks, according to the report. Peru equity funds recorded their biggest outflow in more than eight years, according to EPFR Global data, continuing a streak of market volatility that's upended the Andean nation's reputation among investors for relative stability and reliable policy making, the report notes. Castillo, a former schoolteacher and union leader affiliated with a Marxist party, emerged out of relative obscurity this year to win the presidency after consolidating support from Peru's left-wing, the report relays. While investors have been unsettled by some of his proposals, they took solace from the expectation that his chief economic adviser, former World Bank economist Pedro Francke, would take over as finance minister and largely preserve macro-economic policy, albeit with a greater focus on social spending and fighting unemployment, the report adds. PERU: New President, Prime Minister Raise Risks as Debt Tumbles --------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that investors sent Peruvian bonds sliding in the aftermath of President Pedro Castillo's inaugural call for a new constitution and choice of prime minister. Peru's dollar bonds due in a century are the second-worst performers in the world, beating only serial-defaulter Belize, according to data compiled by Bloomberg, reports globalinsolvency.com. Meanwhile, the yield on the benchmark bond due in 2031 rose to the highest since the close on June 16, a day after the final vote count showed Marxist party-backed Castillo winning the election, the report notes. The cost of insuring the nation's debt against default has climbed six basis points since his speech, reaching the highest level in over a month, the report relays. The report notes that while Castillo had hinted at more centrist economic policies toward the end of his campaign, the former school teacher took some investors by surprise, appointing a hard-liner from the Peru Libre party to be his prime minister and bolstering the influence of the Marxist group, the report adds. ===================== P U E R T O R I C O ===================== VIEQUES FO & G: Seeks to Hire Godreau & Gonzalez as Legal Counsel ----------------------------------------------------------------- Vieques FO & G, Inc. seeks approval from the U.S. Bankruptcy Code for the District of Puerto Rico to employ Godreau & Gonzalez Law, LLC to serve as legal counsel in its Chapter 11 case. The firm's services include the preparation of the Debtor's plan of reorganization, representation of the Debtor in adversary proceedings and other legal services in connection with the case. The firm will charge these fees: Partners $150 per hour Associates $125 per hour Rafael Gonzalez Valiente, Esq., at Godreau & Gonzalez, disclosed in court filings that he and other employees of his firm are "disinterested" as defined in Section 101(14) of the Bankruptcy Code. Godreau & Gonzalez can be reached through: Rafael Gonzalez Valiente, Esq. Godreau & Gonzalez Law, LLC P.O. Box 9024176 San Juan, PR 00902-4176 Tel: (787)726-0077 Email: rgv@g-glawpr.com About Vieques FO & G, Inc. Vieques FO & G, Inc. sought protection for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 21-01688) on May 28, 2021, listing $50,001 to $100,000 in assets and $100,001 to $500,000 in liabilities. Judge Edward A. Godoy oversees the case. Rafael A. Gonzalez Valiente, Esq., at Godreau & Gonzalez Law, LLC, represents the Debtor as legal counsel. ===================================== T R I N I D A D A N D T O B A G O ===================================== CARIBBEAN AIRLINES: Urged to Rethink Layoffs -------------------------------------------- RJR News reports that After Caribbean Airlines Limited's announcement that 379 employees would be retrenched, as part of restructuring, there are calls for the company to rethink its approach. Instead of laying off workers, Peter Farmer, Secretary General of the Aviation, Communication and Allied Workers Union, said the airline must introduce innovations to its operations to be more profitable, according to RJR News. Mr. Farmer told Trinidad's Newsday newspaper that CAL seems to have been concentrating more on reducing the market rather than expanding the market, whereas other airlines have been expanding with the Caribbean. In a statement, the airline announced 280 employees will be laid off and an additional 99 people put on temporary layoff, the report relays. About Caribbean Airlines Caribbean Airlines Limited - http://www.caribbean-airlines.com/- provides passenger airline services in the Caribbean, South America, and North America. The company also offers freighter services for perishables, fish and seafood, live animals, human remains, and dangerous goods. In addition, it operates a duty free store in Trinidad. Caribbean Airlines Limited was founded in 2006 and is based in Piarco, Trinidad and Tobago. Caribbean Airlines is among many airlines whose business has been greatly affected in 2020 by the slowdown of international travel caused by the COVID-19 pandemic. The government of Trinidad & Tobago guaranteed a US$65 million loan for the airline, and that funding has helped with the airlines' cash flow shortfall since May 2020. In September 2020, the airline related it will be taking cost-cutting measures to help keep it afloat. The measures, which was to affect some 1,700 employees, included salary deductions, no-pay leaves and lay-offs. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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