/raid1/www/Hosts/bankrupt/TCRLA_Public/210826.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 26, 2021, Vol. 22, No. 165
Headlines
A R G E N T I N A
LA RIOJA: Fitch Affirms 'RD' LT IDRs
TELECOM ARGENTINA: Fitch Affirms 'B' LT LC IDR, Outlook Stable
B R A Z I L
BANCO ABC: Fitch Affirms 'BB' Long-Term IDR
BANCO BOCOM: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Neg.
BRAZIL: Bolsonaro Vexed by Central Bank Autonomy
SAMARCO MINERACAO SA: Must Submit DIP Loan Plan to Trustee
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: State Once Again Sole Owner of Refidomsa
G R E N A D A
GRENADA: FROC Suggests Gov't. Focus More on Diversifying Economy
M E X I C O
BENITO JUAREZ: Moody's Affirms Ba2 Issuer Rating, Outlook Negative
GRUPO AEROMEXICO: Egan-Jones Keeps D Senior Unsecured Ratings
P U E R T O R I C O
NATIONAL JEWELRY: Gets OK to Tap Luis Flores Gonzales as Counsel
- - - - -
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A R G E N T I N A
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LA RIOJA: Fitch Affirms 'RD' LT IDRs
------------------------------------
Fitch Ratings has affirmed Province of La Rioja's Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) at 'RD'. Fitch
also affirmed the province's 9.75% senior unsecured notes for USD
300 million due in 2025 at 'D'. La Rioja's SCP is assessed at 'rd'.
Fitch has relied on its rating definitions to position the
province's ratings and SCP.
The action reflects the still unsettled default over La Rioja's
9.75% senior unsecured notes due in 2025. The province is in
negotiations with creditors to perform a Distressed Debt Exchange
(DDE). Fitch will continue monitoring negotiations.
KEY RATING DRIVERS
La Rioja's ratings were downgraded to 'rd' on Sept. 28, 2020,
following the province's non-payment of its semiannual interest
payments for USD14.625 million for its 9.75% senior unsecured notes
due in 2025, after the 30-day cure period expired on Sept. 23,
2020. The province's failure to cure the missed interest payment
before the 30-day grace period expired triggered an event of
default as per the transaction documents.
Due pandemic-related negative macroeconomic conditions, on Aug. 24,
2020, the province issued a formal notice stating its intentions to
miss the interest payment and to use its grace period to initiate a
process to restructure its USD bonds. On Sept. 23, 2020, the limit
date of the grace period expiration, the province issued a formal
note stating the continuation of its restructuring process and its
intentions to continue working on the enhancement of its debt
service profile.
On July 13th, 2021, La Rioja issued another formal note announcing
it had entered a non-disclosure agreement with its three main
bondholders, which accounted for 63% of outstanding bonds, with no
agreement reached up to that moment.
The notes were issued for USD200 million in February 2017 and then
reopened in the same year for an additional USD100 million
issuance, forming a single series for USD300 million. The bond is
denominated in U.S. dollars and accrues interest at a fixed rate of
9.75%, payable on a semi-annual basis (Feb. 24 and Aug. 24 of each
year).
The bond's maturity date is Feb. 24, 2025, with equal capital
payments in the last four years (on Feb. 24, 2022; Feb. 24, 2023;
Feb. 24, 2024; and Feb. 24, 2025). The notes are a senior unsecured
obligation of La Rioja governed by the laws of the state of New
York. The proceeds were used for the development of Parque Arauco
S.A.P.E.M.'s clean energy projects and other public works.
Risk Profile: 'Vulnerable'
Province of La Rioja's 'vulnerable' risk profile is based on all
six attributes rated at 'Weaker' and on the vulnerable
macroeconomic environment, in which Argentinian LRGs operate. The
assessment reflects Fitch's view of a very high risk relative to
international peers that the issuer's ability to cover debt service
with the operating balance may weaken unexpectedly over the
forecast horizon (2021-2023), due to lower revenue, higher
expenditure, or an unexpected rise in liabilities or debt or
debt-service requirement.
Debt sustainability: 'DS Score' category
Since La Rioja is not able to comply with its financial obligation,
the calculation of the debt sustainability becomes less relevant.
Province of La Rioja has an ESG Relevance Score of '5' for Creditor
Rights. La Rioja hasn't cured its default on its 9.75% senior
unsecured notes, which is driving the rating action. This credit
event is highly relevant to the rating and is a key rating driver
with a high weight. The breach of a formal agreement assuring the
payment of debt service has negatively impacted creditors' rights.
Province of La Rioja has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact management practices, regulatory
framework and national policies of the sovereign have over the
provinces' financial obligations, in conjunction with other
factors.
DERIVATION SUMMARY
Province of La Rioja's SCP is assessed at 'rd'. La Rioja's has a
'vulnerable' risk profile and a 'less relevant given RD' debt
sustainability score. Fitch has relied on its rating definitions
and has incorporated the province's restrictive-default event to
position the province's ratings and its SCP.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- La Rioja's IDRs and SCP would be reassessed upon the
completion of a debt restructuring process to reflect its new
credit profile.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- La Rioja is rated 'RD'; therefore, there can be no further
negative rating action on its ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure 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 three 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.
ISSUER PROFILE
La Rioja is located in the northeast region of Argentina and has a
GDP of around USD2 billion, or less than 1% of national GDP. Due to
its relatively small size, public sector employees represent almost
one third of the local economy. The province reports below average
income of around USD5,200 per capita.
ESG CONSIDERATIONS
Province of La Rioja has an ESG Relevance Score of '5' for Creditor
Rights due to the Province's inability to cure its default on its
9.75% senior unsecured notes, which has a negative impact on the
credit profile, and is highly relevant to the rating, resulting in
an implicitly lower.
Province of La Rioja has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption due
to the negative impact of management practices, the regulatory
framework and national policies of the sovereign over the
provinces' financial obligations, which has a negative impact on
the credit profile, and is relevant to the rating[s] in conjunction
with other factors.
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.
TELECOM ARGENTINA: Fitch Affirms 'B' LT LC IDR, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed all of Telecom Argentina S.A.'s ratings,
including the Long-Term (LT) Foreign Currency (FC) Issuer Default
Rating (IDR) at 'B-', the LT Local Currency (LC) IDR at 'B', and
the USD unsecured notes ratings at 'B-'/'RR4'. Fitch has revised
the Rating Outlook on the LT LC IDR to Stable from Negative. The
Rating Outlook on the LT FC IDR remains stable.
The rating action follows multiple court rulings that affirmed
Telecom Argentina's ability, rather than the telecom regulator, to
set prices. The ratings reflect Fitch's expectation that the
company will be able to continue passing along the effects of
Argentine peso depreciation and inflation. The majority of the
company's operations and assets are in Argentina, an operating
environment which is characterized by macroeconomic instability.
The company benefits from a robust financial and operational
profile, underpinned by its operational cash flow generation,
relatively conservative capital structure, and strong competitive
position in both fixed and mobile services.
KEY RATING DRIVERS
Courts Maintain Price-Setting Independence: Argentine courts have
ruled in favour of Telecom Argentina and against ENACOM regarding
the company's ability to raise prices with inflation, following
government efforts to freeze or control telecom service prices.
Telecom Argentina has raised prices several times during 2021, and
Fitch expects the company to increase prices as necessary to pass
through Argentine peso depreciation and inflation. This should
allow the company to maintain a healthy EBITDA margin around 32%
and net leverage under 2.0x over the coming years.
Country Ceiling Limits FC Ratings: Telecom Argentina's FC IDR is
constrained by the 'B-' country ceiling of the Argentina. Fitch
believes that the company's default would most likely be driven by
transfer and convertibility restrictions, not by a material
deterioration of the company's operating profile.
Strong Operator, Weak Operating Environment: Telecom Argentina is
the leading integrated operator, with strong competitive positions
in both fixed and mobile services. The company's strong product
offerings and brand recognition support its robust cash flow. The
company has historically weathered the turbulent macroeconomic
environment by increasing service prices to offset rising operating
expenses. The company's ability to pass through a majority of
inflation to consumers enables it to maintain strong credit
metrics.
Financial Profile in Line with IG Peers: Telecom Argentina's
financial structure ranks among the strongest of Fitch-rated
telecom companies in the region, due to the company's conservative
capital structure and consistent EBITDA margins above 30%. Fitch
forecasts net debt/EBITDA of approximately 1.7x-2.0x over the
rating horizon, in line with stronger investment grade operators
throughout the region. Fitch estimates that the company will
refinance upcoming maturities over the medium term as necessary and
maintain debt around USD2.5 billion.
Moderate Financial Flexibility: Despite the uncertainty regarding
capital controls during 2020-2021, the company has consistently
been able to access international debt markets on an unsecured
basis. Fitch expects refinancing risk to remain manageable, despite
the company's relatively short-dated amortization profile. The
company's liquidity position is further supported by its
operational cash flow generation, as well as the high proportion of
its cash balances in dollars, which provide a natural hedge to
foreign exchange risk. Fitch does not expect shareholder
distributions to compromise the company's liquidity.
DERIVATION SUMMARY
The speculative ratings of Telecom Argentina compare with those of
other Argentine issuers YPF S.A. (CCC) and Arcor S.A.I.C.
(B/Stable) that have solid business and capital structures but
whose ratings are restricted by the difficulties of operating in
Argentina amidst high inflation and government imposed capital
controls. Similar to YPF, Telecom Argentina faces high levels of
regulation, which has hindered its cash flow generation. Arcor's
ratings are higher than those of YPF and Telecom Argentina due to
its operations in Brazil and the cash it holds abroad in its
foreign subsidiaries.
The company's business and financial profile are in line, or
superior to, diversified investment grade telecom operators
including Telefonica Moviles Chile S.A. (BBB+/Stable), Telefonica
del Peru S.A.A. (BBB-/Negative), and Colombia Telecomunicaciones
(BBB-/Stable). Telecom Argentina has either a more conservative
capital structure, or a stronger market position, or both.
Compared to regional peer UNE EPM Telecomunicaciones (BBB-/Stable),
Telecom Argentina has comparable or higher market shares in mobile
and fixed, along with similar profitability and lower leverage.
Ultimately, both the FC and LC IDR will continue to be driven by
the difficulties of the Argentine operating environment text.
KEY ASSUMPTIONS
Fitch's key assumptions within its rating case for the issuer
include:
-- Company is able to pass on the majority of inflation to
consumers each year;
-- Net leverage around 1.7x-2.0x;
-- EBITDA margins in the low 30% range;
-- Capex of USD674 million in 2021; around 15% of revenues after
that.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Telecom Argentina's FC IDR is bound by the 'B-' Country
Ceiling of Argentina; therefore, an upgrade of the Argentine
sovereign and concurrent upward move in the Country Ceiling of
Argentina would result in an upgrade;
-- Telecom Argentina's LC IDR is constrained by the difficulties
of the Argentine operating environment; therefore, a decrease
in regulatory risk and macroeconomic turmoil would result in
an upgrade.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Telecom Argentina's FC IDR is bound by the 'B'- Country
Ceiling of Argentina; therefore, a downgrade upgrade of the
Argentine sovereign and concurrent downward move in the
Country Ceiling of Argentina would result in a downgrade;
-- An increase in regulatory interference that inhibits the
company's ability to pass through inflation and devaluation
could result in a downgrade.
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
Strong Liquidity, Reduced Refi Risk: Telecom Argentina has strong
liquidity, with cash of ARS51 billion against short term debt of
ARS53 billion. The majority of Telecom Argentina's cash and debt
are dollar denominated, following the repatriation of the company's
international dollars last year. While the company was able to
access the Banco Central de la Republica Argentina earlier this
year to meet its USD bond maturity, the risk of Argentine capital
controls will continue to constrain the company's ratings. The
company has some operations in Paraguay and Uruguay, but Fitch does
not consider these substantial enough to circumvent the Argentine
Country Ceiling (B-).
Telecom Argentina's liquidity and financial flexibility are
supported by the company's robust cash flow generation, which Fitch
expects to cover capital expenditures. Telecom Argentina's
refinancing risk is relatively low, particularly following the
paydown of USD105 million unsecured USD notes in June 2021. The
company has a long history of refinancing and rolling over bank
debt and international agency (e.g. International Finance
Corporation) loans. 90% of the company's remaining 2021 debt is
local ARS debt and the 2022 maturities are mostly (USD323 out of
the equivalent of USD555 million) international agency debt.
The company's net leverage, at around 1.8x, has been consistent
throughout the last few years of macroeconomic turmoil in
Argentina. Fitch expects the company to maintain debt of around
USD2.5 billion over the coming years. The company's ability to pass
through inflation to consumers has been critical for their ability
to maintain cash flow generation, despite the majority of capex
being USD denominated.
ISSUER PROFILE
Telecom Argentina S.A. is the largest integrated telecommunications
services provider in Argentina, offering broadband, pay TV and
fixed and mobile telecommunications services throughout the
country.
SUMMARY OF FINANCIAL ADJUSTMENTS
Standard lease adjustments, reclassification of certain operating
expenses and working capital items
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.
===========
B R A Z I L
===========
BANCO ABC: Fitch Affirms 'BB' Long-Term IDR
-------------------------------------------
Fitch Ratings has affirmed Banco ABC Brasil S.A.'s (ABCBr)
Long-Term Foreign (LT FC IDR) and Local-Currency Issuer Default
Rating (LT LC IDR) at 'BB', and National Long Term Rating at
'AAA(bra)'. The Rating Outlook on the LT LC IDR and LT National
Long-Term Rating is Stable. The Outlook on the LT FC IDR is
Negative.
KEY RATING DRIVERS
ABCBr's IDRs and National Ratings are driven by Fitch's assessment
of the expected institutional support that ABCBr would likely
receive from its parent, Arab Banking Corporation B.S.C. (ABC;
Long-Term IDR BB+/Stable) if needed.
The Negative Outlook on the Foreign Currency (LT FC) IDR mirrors
the Outlook on the Brazilian Sovereign Ratings (LT FC and LC IDRs
BB-/Negative). ABCBr's LT FC IDR is constrained by Brazil's Country
Ceiling of 'BB'.
The bank's Support Rating (SR) of '3' reflects the expected support
from ABC, which is based in Bahrain. Fitch believes the entity is a
strategically important subsidiary for its ultimate parent, and the
subsidiary ratings are highly influenced by its role in the group,
given its core role as a relevant contributor to the group's
consolidated profits, which also underpins the low potential for
disposal. The latter is partially offset by the high influence of
its material size in respect to the parent. Country risks may limit
ABC's ability to provide support if needed. However, Fitch also
considers that the Brazilian regulators have a track-record of not
interfering in the banking system's operations.
ABCBr's financial profile does not have a direct impact on its IDRs
and national ratings, but is relevant in Fitch assessment of the
parent's propensity of support as well as for the stand-alone
creditworthiness evaluation as reflected in the bank's Viability
Rating (VR). The operating environment, in which the bank operates,
has a high influence on the VR, as does the company profile. All
other factors including the quantitative factors that follow below,
currently have a moderate influence on the VR.
Asset quality metrics remained satisfactory as the pandemic's
lingering negative effect on the bank's credit portfolio was less
than expected. The bank's loan portfolio is well-diversified by
economic sector and represented only about 45% of the bank's funded
assets as of June 30, 2021. At that date, ABCBr reported a very low
level of NPLs over 90 days (BACEN E-H) to total credit exposure of
only 1.2%. The bank also conservatively maintained an over 90-day
Coverage Ratio of 264% at June 30, 2021.
The bank's profitability during the first half of 2021 showed a
strong recovery from full year 2020 due to improved margins,
increased fee income, and much lower credit costs. The bank's
operating profit to risk-weighted assets (RWA) ratio improved
sharply to 2.3% at June 30, 2021.
ABCBr capital ratios have remained fairly stable over the past few
years due in part to modest profit generation and conservative
credit portfolio growth. At June 30, 2021, the bank's common equity
Tier 1 (CET1) ratio declined to 12.6% from 13.2% at YE 2020 due
mostly to higher loan growth. ABCBr reported a total Regulatory
Capital ratio of 15.9% and is in full compliance with BACEN
requirements and Basel III rules.
The bank continues to focus on ensuring a stable liquidity position
through conservative asset liability management policies to
mitigate gaps with hedging and funding diversification. As of June
30, 2021, local funding accounted for 57% of the bank's funding and
within that percentage, corporate deposits accounted for nearly 21%
of the total. International funding accounted for nearly 26% with
the majority of that related to trade finance and the remainder
from well-known multi-lateral agencies such as the International
Development Bank, the International Finance Corporation and
Proparco.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IDRs AND SR
-- A change in Fitch's assessment of ABC's willingness or ability
(due to the material size of the subsidiary) to support ABCBr;
-- A negative rating action or downgrade of either the ratings of
ABC or the sovereign in the case of the LT IDRs.
VR
-- A sovereign downgrade or negative rating action as the bank is
closely linked with Brazil's operating environment;
-- A significant deterioration of ABCBr's asset quality that
results in credit costs that severely limit its profitability
(operating profit to RWA ratio consistently below 1.5%) and
ability to grow its capital;
-- A sustained decline in ABCBr's CET1 ratio below 11%.
NATIONAL RATINGS
-- Unfavorable changes in ABCBr's credit profile relative to its
Brazilian peers could result in a reduction in its National
Ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IDR AND SR
-- ABCBr's FC LT IDR and SR remain constrained by the sovereign
rating and country ceiling;
-- An upgrade or positive rating action on the sovereign (not
likely as the FC IDR has a Negative Outlook.
VR
-- ABCBr's VR has limited upside potential, as it is constrained
by the operating environment.
NATIONAL RATINGS
-- The National Ratings are currently at the top of the National
Rating Scale and thus further upgrades are not possible.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond 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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The ratings of Banco ABC Brasil S.A. may be affected by changes to
the ratings of parent, Arab Banking Corporation, Bahrain.
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.
BANCO BOCOM: Fitch Affirms 'BB' Foreign Currency IDR, Outlook Neg.
------------------------------------------------------------------
Fitch Ratings has affirmed Banco BOCOM BBM S.A.'s (BOCOM BBM)
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB',
Long-Term Local Currency IDR at 'BB+', and Long-Term National
Rating at 'AAA(bra)'.
The Rating Outlook remains Negative on the Long-Term IDRs, and
Stable for the National Ratings.
KEY RATING DRIVERS
IDRs, NATIONAL RATINGS AND SUPPORT RATING
BOCOM BBM's IDRs, National Ratings and Support Ratings reflect
Fitch's view of a high probability of support if needed from their
Chinese parent bank, Bank of Communications Co, Ltd. (BOCOM;
Long-Term Foreign Currency IDR A/Stable and Viability Rating bb-).
The Long-Term IDR is constrained by Brazil's 'BB' Country Ceiling,
while its Long-Term Local Currency IDR is currently capped at two
notches above Brazil's Local Currency sovereign rating
(BB-/Negative). This reflects Fitch's view that BOCOM's propensity
and ability to provide support to its subsidiary's senior creditors
is linked to Brazilian sovereign risk, and might be reduced in case
of extreme sovereign stress, despite the group's strategic
commitment to the country. The Negative Outlook on the IDRs mirror
the Outlook on Brazil's Long-Term IDR.
BOCOM owns 80% of BOCOM BBM and the parent's IDRs are driven by the
Chinese state's ownership in the bank and its systemic importance.
Under Fitch's assessment, Chinese state support to BOCOM would flow
through to BOCOM BBM, should the need arise. BOCOM has a strong
ability to provide support if needed, as BOCOM BBM's modest size
relative to the overall group is unlikely to represent a
constraint.
In addition, Fitch considers BOCOM BBM a strategically important
subsidiary of BOCOM, given its role in fulfilling the strategies
and long-term growth plans of the group in Brazil and the potential
synergies between the two entities, which is considered a high
importance factor for the rating.
VR
BOCOM BBM's Viability Rating (VR) is currently constrained by the
Brazilian sovereign rating of 'BB-', given the intrinsic exposure
of the bank's activities within Brazil, including significant
exposure to government securities. The bank's VR also captures
constraints imposed by the operating environment.
The VR is supported by the bank's moderate corporate lending
franchise in the domestic market and its stable but niche business
model. It also reflects a moderate risk appetite, resulting in
stronger asset quality than many of its peers. BOCOM BBM's
capitalization is solid, while funding and liquidity is comfortable
and benefits from ordinary support from BOCOM.
BOCOM BBM asset quality metrics were strong pre-pandemic,
benefiting from its moderate credit appetite, skewed towards
upper-midsized clients and large corporates. Asset quality proved
resilient to date, with an impaired loan ratio of 0.4% at end-March
2021, down from 1.2% a year earlier, better than the Brazilian
banking sector's average. The bank's solid reserve coverage of
impaired loans (199% at YE 2020) also provides some protection in
the current environment. However, asset quality remains sensitive
to high concentration exposures in respect to single borrowers,
which may increase the vulnerability of its loan book to single
performance fluctuations.
Current capital ratios provide the bank with moderate buffers over
regulatory requirements. The common equity Tier 1 (CET1) ratio of
11.3% at YE 2020 decreased in recent years due to business
expansion. However, further loss-absorption capacity in the form of
hybrid instruments fully subscribed by its parent supports a
stronger Tier 1 capital ratio of 14.4% and reinforces Fitch's
assessment that BOCOM is committed to support growth when
required.
The bank's funding and liquidity are adequate and stable, as
reflected in an adjusted loan-to-deposits ratio of about 102% at YE
2020. The bank's liquidity buffers are adequate given limited
forthcoming maturities. Fitch's assessment of BOCOM BBM's funding
and liquidity profile incorporates the benefits it derives from
being part of BOCOM, and the extensive ordinary support in terms of
liquidity provided by its Chinese parent.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- BOCOM's ratings are sensitive to a downgrade of Brazil's
sovereign rating.
-- The IDRs, National Ratings and Support Rating could also be
downgraded if BOCOM's IDRs, from which they are notched,
suffer a multiple-notch downgraded. While it is not Fitch's
base case, BOCOM BBM's ratings would also be sensitive to the
Brazilian operation becoming less strategic for BOCOM or to
BOCOM BBM becoming significantly less integrated within the
group, leading Fitch to no longer viewing it as a
strategically important subsidiary to BOCOM's operations.
-- The VR could be downgraded if the regulatory CET1 ratio falls
below 11% without a credible plan to restore it in a timely
manner, or if Fitch observes a prolonged deterioration in
profitability than currently envisage, or a larger-than
expected increase in impaired loans.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The Rating Outlook on the Long-Term IDRs could be revised to
Stable if there is a similar action on the Brazilian sovereign
rating. BOCOM'S IDRs could be upgraded if Fitch believes that
BOCOM BBM has become more strategically important to BOCOM,
provided that the rating on the Brazilian sovereign was also
upgraded.
-- An upgrade on the VR is unlikely and would be contingent on a
material improvement of the operating environment, which is
currently scored at 'b+'/Negative, and/or a sovereign upgrade.
This would have to be accompanied by a sustained improvement
of core banking profitability, combined with a strengthening
of the bank's franchise and business model.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond 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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BOCOM BBM's IDRs and National Ratings are driven by support from
the Bank of Communications Co, Ltd. (BOCOM; LT FC IDR A/Stable and
VR bb-), which owns 80% of BOCOM BBM.
ESG CONSIDERATIONS
BOCOM'S ESG Relevance score for Governance Structure risk has been
revised to '3' from '4' to align this score with its parent. Fitch
believes the Chinese regulatory developments on financial reform
and governance standards in recent years have reduced the potential
for undue state or regulatory influence to materially affect the
bank's credit profile, even with the lack of independence from the
state as its majority shareholder.
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.
BRAZIL: Bolsonaro Vexed by Central Bank Autonomy
------------------------------------------------
The Associated Press reports that Brazil's President Jair Bolsonaro
has begun expressing irritation at the central bank's newfound
autonomy as surging inflation presents a threat to his 2022
reelection prospects, government officials told The Associated
Press.
During a flight home from Mato Grosso state, Bolsonaro said that he
regretted signing the bill into law earlier this year that granted
the bank autonomy, a high-level official aboard told the AP.
Separately, Bolsonaro on several recent occasions has expressed
discomfort with the autonomy and said that he would like to
interfere in monetary policy, a minister who has heard such
complaints himself told the AP.
Both spoke on condition of anonymity because they weren't
authorized to speak publicly, the report notes.
The law passed in February sought to protect the bank from
political meddling and burnish Brazil's economic credibility among
investors, the report discloses.
Under the law's terms, the president still nominates the central
bank chief, but cannot fire him for disagreements about monetary
policy, the report adds.
Bolsonaro in 2018 provided assurances that he would remain
hands-off economic policymaking, and the market celebrated his pick
to lead the central bank: economist and former trader Roberto
Campos Neto, who began a fixed four-year term in April, recalls the
report.
The report relates that bank autonomy is among few significant
economic reforms that Bolsonaro’s administration has managed to
secure. Others have faced headwinds, including lately a tax reform
proposal, at the same time as the government signals it may boost
spending next year despite limited fiscal space.
According to Reuters, twelve-month inflation is tracking at almost
9%, its fastest pace in over five years. After the government drew
down pandemic welfare disbursements, the poor have been especially
hard hit by double-digit increases in the prices of foodstuffs,
cooking gas and electricity, notes the report.
Economists surveyed by the central bank have raised their 2021
inflation forecast for 19 straight weeks, and the cost-of-living
increase is expected to exceed the bank’s target for the first
time in six years, Reuters relates.
The report says economists expect 3.9% inflation in 2022, nearly
the midpoint of the bank’s target range after creeping upward in
recent weeks. Still, the minister who spoke on condition of
anonymity told the AP that Bolsonaro has spoken of his concern
about out-of-control inflation during the election year.
Reuters says the Supreme Court was scheduled to begin analysis of
the law's constitutionality on Aug. 25. Bolsonaro voiced support
for the court to uphold bank autonomy at a June 22 ceremony, during
which he said everyone trusts in Campos Neto.
His statement about regretting autonomy came in response to
comments hours earlier from Campos Neto, who the president said he
wished he could replace with the stroke of a pen, according to the
official present, notes Reuters. Campos Neto said in an online
event hosted by the Council of the Americas that "local noise" has
had an impact on 2022 inflation expectations.
"There is uncertainty, or at least a higher level of noise, in the
institutional part of how Brazil works and the fight between
powers," Campos Neto said, adding that the market has also
understood the government is seeking to increase spending of its
conditional-cash transfer program for the poor, reports Reuters.
"In other words, the market is associating some of the actions the
government is taking to a will to have a more robust program, and
they’re linking some of the things the government is doing with
the election, and I think that creates additional noise."
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).
SAMARCO MINERACAO SA: Must Submit DIP Loan Plan to Trustee
----------------------------------------------------------
Mariana Durao and Cristiane Lucchesi of Bloomberg News report that
a judge said in an injunction that Samarco Mineracao SA, a
Brazilian iron-ore producer jointly owned by Vale SA and BHP Group,
will have to open a new competitive process to receive offers for
a loan before taking any financing.
The company must give interested parties 15 days to submit the
debtor-in-possession loan proposals to the trustee responsible for
its bankruptcy protection process in order to choose the best
offer, Judge Carlos Roberto de Faria wrote in a decision dated
Aug. 16, which was posted August 20, 2021, on the Minas Gerais
court website.
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
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: State Once Again Sole Owner of Refidomsa
------------------------------------------------------------
Dominican Today reports that the Dominican State has once again
acquired 49% of the shares that the Venezuelan company PDV Caribe
had in the Dominican Oil Refinery (Refidomsa), Finance Minister
Jochi Vicente announced.
The report sys the transaction was carried out for an amount of
88.1 million dollars and with this operation the Dominican
Government once again has absolute control of the refinery.
"This transaction was carried out in coordination with both the
Venezualan Government, with Patsa (the subsidiary company of Rizek
Group) and there were also communications with the US Government,
specifically with the Office of Foreign Assets Control, to
guarantee that the Dominican Republic does not violate any of the
conditions of the sanctions imposed by the US government on
Venezuela," Vicente explained, the report relates.
He stressed that the Dominican Government received "no objection"
from the United States, Dominican Today notes.
"With this transaction, the Dominican state once again controls
100% of the refinery's subscribed capital and has absolute control
of this very important company within the State's assets," the
report quoted the minister as saying.
Vicente pointed out that in 2010, the Dominican State sold 49% of
Refidomsa's share capital (for US$135,107 million) to Venezuelan
company PDV Caribe, S.A., recalls Dominican Today.
The minister explained that this transaction has many benefits, but
in the short term it will not have any impact on the fuel prices,
says the report.
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).
=============
G R E N A D A
=============
GRENADA: FROC Suggests Gov't. Focus More on Diversifying Economy
----------------------------------------------------------------
RJR News reports that the Fiscal Responsibility Oversight Committee
(FROC) in Grenada, which monitors the spending of the central
government, has recommended that the Government become less reliant
on receipts from the Citizenship by Investment (CBI) program and
instead focus on diversifying the economy.
The FROC report, which was officially presented by the committee
during a news conference stated that volatility in these receipts
will impact the predictability of resources to spending program in
the longer term, according to RJR News.
The report, which relates to 2020, said the Grenada Government
could face significant challenges in the medium term, even if
economic growth returns in 2021, the report adds.
===========
M E X I C O
===========
BENITO JUAREZ: Moody's Affirms Ba2 Issuer Rating, Outlook Negative
------------------------------------------------------------------
Moody's de Mexico affirmed the ba2 baseline credit assessment and
the Ba2/A2.mx issuer ratings (Global Scale, local currency/Mexico
National Scale) of the Municipality of Benito Juarez (Cancun). The
outlook is negative.
At the same time, Moody's affirmed the debt ratings of Baa3/Aa3.mx
of the following two enhanced loans of the Municipality of Benito
Juarez (Cancun):
Baa3/Aa3.mx (Global Scale, local currency/Mexico National Scale)
to an enhanced loan from Banco Azteca for MXN500 million loan
(original face value) with a maturity of 15 years and a pledge of
31.73% of the municipality's General Participation Fund revenues.
Baa3/Aa3.mx (Global Scale, local currency/Mexico National Scale)
to an enhanced loan from BBVA Bancomer for MXN500 million loan
(original face value) with a maturity of 15 years and a pledge of
31.73% of the municipality's General Participation Fund revenues.
The enhanced loans are payable through a master trust with BBVA
Bancomer F/4109047 as trustee to which the municipality has pledged
the rights and flows of its and General Participations Fund
revenues.
RATINGS RATIONALE
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook reflects the operational challenges faced by
Benito Juarez from the coronavirus pandemic (which Moody's views as
a social risk) and ongoing vaccination process. While tourism
activity and related revenue has increased, the municipality is
facing a significant increase in operating expenditures, including
those for personnel, which continues to present downward pressure
on operating balances. Although the municipality has indicated this
increase is intended to be temporary, should it continue for longer
than expected it may lead to structural deterioration in operating
and financial balances, leading to a weakening in the
municipality's liquidity position. If the observed trend as of June
2021 continues in 2021-22, the operating and financial balances
could deteriorate to average levels of -17.8% of operating revenues
and -15% of total revenues. This would also exert downward pressure
on liquidity over the same period, with cash to current liabilities
averaging 0.30 times (x).
RATIONALE FOR THE AFFIRMATION OF THE ISSUER RATINGS
The affirmation of Benito Juarez's ba2 bca and Ba2/A2.mx issuer
ratings reflects Benito Juarez's typically strong own source
revenues collection, backed by the recent observed recovery in the
touristic activity in the municipality, as well as an adequate
liquidity position and manageable and declining debt levels.
Despite the operating challenges, the municipality has no plans to
acquire any long-term or short-term debt.
Benito Juarez has a track record of recording positive operating
outcomes, averaging 6.2% over the period 2015-2019 which should aid
the management's ability to manage through the current fiscal
pressure. Following the onset of the coronavirus pandemic and
related slowdown in tourism activity, Benito Juarez's own-source
revenue fell 28% in 2020. This led to a sharp decline in gross
operating balance, which recorded its first negative outcome
(-11.1% of operating revenue) in the past 10 years. However, as of
June 2021, own-source revenue collection has recovered, increasing
21.5%, backed by strengthening activity in the tourism sector and
overall growth in employment. Moody's forecasts that own source
revenue collection will increase to an average of 62.8% in 2021-22
from the 57.2% registered in 2020. Should revenue remain
consistent, and the municipality succeeds in curbing the increase
in operating expenses, Moody's expects the municipality to return
to a positive gross operating balance in 2022.
Additionally, Benito Juarez has maintained a declining trend in
their leverage levels, registering a ratio of net direct and
indirect debt to operating revenues of 38.2% as of December 2020.
This is expected to further decrease to an average of 32.4% for
2021-22, given that there are currently no plans to acquire any
long or short-term debt. The municipality's liquidity has remained
at adequate levels, registering a ratio of cash to current
liabilities of 0.70 times (x), from 2016-20. Although Moody's
expects a decrease in this indicator to an average of 0.36x for
2021-22 under its base case scenario, this decrease is mitigated by
the null history of use of short-term debt.
RATINGS RATIONALE FOR THE ENHANCED LOAN RATINGS
The affirmation of the two enhanced loans reflects the affirmation
of Benito Juarez's issuer ratings. Per Moody's methodology on
rating enhanced loans, the loan ratings are directly linked to the
credit quality of the issuer, which ensures that underlying
contract enforcement risks, economic risks and credit culture risks
(for which the issuer rating acts as a proxy) are embedded in the
enhanced loans ratings.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Environmental considerations are material and reflect moderate
risk. Benito Juarez is located in the Caribbean Ocean and therefore
is exposed to natural disasters, as well as to the arrival of
sargassum. However, up to now the finances of the municipality have
not been affected, given the beach cleaning programs already
consolidated in the municipality on public beaches, while on
private beaches the responsibility lies in the concessionaires.
Regarding hurricanes, their impact is mitigated by the history of
support from higher government orders (state and federal).
Social considerations are not material for Benito Juarez, the
municipality registers positive social indicators such as very low
marginalization index, based on the CONAPO that measures the
position of the municipality in terms of health, education, and
income level, among others. Also, the municipality is relevant in
economic terms, since receives more than 40% of Quintana Roo's
total tourism and is the most important destination at a national
level. Moody's considers the coronavirus pandemic as a social risk
given the impact that has caused in the revenues and in the
expenditures of Benito Juarez.
Governance considerations are material to Benito Juarez ratings,
the municipality has an average behavior in terms of governance,
management, institutional framework and a support assumption (low),
in line with other Mexican rated municipalities. This reflects that
the municipality comply with the Mexican Financial Discipline Law,
as well as with the accounting guidelines of the National
Accounting Harmonization Council, it publishes financial statements
on a quarterly basis.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Downward pressure could arise if Benito Juarez's operating
expenditures pressures remain sustained in 2021-22 without further
increases in revenue beyond current forecasts. This would result in
continued deterioration in operating and financial balances as well
as liquidity. On the contrary, if the municipality successfully
halts the growing trend in operating expenditures and, as a result,
the operating and financial balances register a continued
improvement, then the outlook on the ratings could be stabilized.
Given the links between the enhanced loans and the credit quality
of the issuer, an upgrade of Benito Juarez's issuer rating would
likely result in an upgrade of the enhanced loan ratings.
Conversely, a downgrade of the municipality's issuer rating, or a
material decline in debt service coverage to levels below Moody's
expectations, could exert downward pressure on the ratings of the
loans.
The principal methodology used in rating the issuer ratings was
Regional and Local Governments published in January 2018.
GRUPO AEROMEXICO: Egan-Jones Keeps D Senior Unsecured Ratings
-------------------------------------------------------------
Egan-Jones Ratings Company, on August 17, 2021, maintained its 'D'
foreign currency and local currency senior unsecured ratings on
debt issued by Grupo Aeromexico SAB de CV. EJR also maintained its
'D' rating on commercial paper issued by the Company.
Headquartered in Mexico City, Mexico, Grupo Aeromexico SAB de CV
operates as an airline.
=====================
P U E R T O R I C O
=====================
NATIONAL JEWELRY: Gets OK to Tap Luis Flores Gonzales as Counsel
----------------------------------------------------------------
National Jewelry, LLC received approval from the U.S. Bankruptcy
Court for the District of Puerto Rico to hire the Law Offices of
Luis D. Flores Gonzales to serve as legal counsel in its Chapter 11
case.
The firm's services include:
a. advising the Debtor with respect to its duties, powers and
responsibilities;
b. advising the Debtor in connection with its reorganization
planning;
c. assisting the Debtor in negotiations with creditors to
formulate a feasible plan of reorganization;
d. preparing legal documents and appearing before the court;
and
e. providing other legal services.
The firm's hourly rates are as follows:
Luis D. Flores Gonzales, Esq. $200 per hour
Certified Legal assistants $60 per hour
Paraprofessional persons $40 per hour
The Debtor paid $5,000 to the law firm as a retainer fee.
Luis Gonzales, Esq., disclosed in a court filing that he is a
"disinterested person" as the term is defined in Section 101(14) of
the Bankruptcy Code.
The firm can be reached at:
Luis D. Flores Gonzales, Esq.
Law Offices of Luis D. Flores Gonzales
Ave. Ponce De Lleon 1225, Suite MZ-9
VIG Tower, Santurce, PR 00907
Tel: 787-758-3606
Email: ldfglaw@yahoo.com
About National Jewelry
National Jewelry, LLC filed a petition for Chapter 11 protection
(Bankr. D.P.R. Case No. 21-01742) on June 4, 2021, disclosing total
assets of up to $50,000 and total liabilities of up to $500,000.
Judge Enrique S. Lamoutte Inclan oversees the case. The Debtor is
represented by the Law Offices of Luis D. Flores Gonzales.
*********
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
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Chapman, Editors.
Copyright 2021. All rights reserved. ISSN 1529-2746.
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