/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210901.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 Wednesday, September 1, 2021, Vol. 22, No. 169 Headlines B R A Z I L BRAZIL: Tax Revenues Keep Rising in July -- Highest Since 1995 BRAZIL: Treasury Bonds Now Pay 10%/Yr on Risk Perceptions CIELO SA: Posts Q2 2021 Results C O S T A R I C A AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes BANCO DE COSTA RICA: Fitch Affirms 'B' LT IDRs, Outlook Negative BANCO NACIONAL: Fitch Affirms 'B' LT IDRs, Outlook Negative BANCO POPULAR: Fitch Affirms 'B' LT IDRs, Outlook Negative D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Retakes Total Control of Refidomsa Refinery DOMINICAN REPUBLIC: Risks Losing its Farmland J A M A I C A DIGICEL GROUP: Pressure Mounts as Voice Revenues Continue to Drop P U E R T O R I C O HOGAR CARINO: Confirmation Hearing Slated for Sept. 22 MACY'S INC: Moody's Upgrades CFR to Ba2 & Alters Outlook to Stable T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: PMC Workers Appeal for Reopening of Industry - - - - - =========== B R A Z I L =========== BRAZIL: Tax Revenues Keep Rising in July -- Highest Since 1995 -------------------------------------------------------------- Richard Mann at Rio Times Online reports that according to the Federal Tax Service, the collection of taxes and duties in July amounted to BRL171.270 (US$33) billion. The result represents a real increase (adjusting for inflation) of 35.47% compared to the same month of 2020, according to Rio Times Online. Compared to June this year, the tax collection increased by 23.67%, the report notes. The amount collected last month was the highest for July since records began in 1995, the report discloses. In the year through July, federal tax revenues totaled BRL1.053 trillion, the highest since records were kept in 1995. The revenue result was within the expectations of the institutions surveyed by Broadcast Projections, the report adds. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). BRAZIL: Treasury Bonds Now Pay 10%/Yr on Risk Perceptions --------------------------------------------------------- Rio Times Online reports that fiscal and political uncertainties have dominated the Brazilian market in recent weeks. Investors are concerned about threats to the spending cap, the main pillar of the country's public finances. There are new risks, such as the proposal to introduce extended rather than immediate payment of federal judicial debts, and to create a new, topped-up Bolsa Familia (aid for the poor) in an election year, according to Rio Times Online. There is also growing friction between President Jair Bolsonaro and the Supreme Court (STF), which could lead to an institutional crisis, the report notes. A combination of political and fiscal noise has heightened risk perceptions in the country. The result? Investors reassessed assets and began to demand a higher premium to compensate for the scenario, the report adds. Brazilian treasury bonds now pay 10% per year because of heightened risk perceptions, Rio Times relates. 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). CIELO SA: Posts Q2 2021 Results ------------------------------- Cielo S.A. posted Q2 2021 Results Earnings Conference Call held August 3, 2021. "We had R$180 million in net revenue, something that is non-recurrent and a growth of 33% vis-a-vis the first quarter this year. This is the third quarter in which we report this type of growth on a year-on-year comparison. We had a 30% growth and the growth of the SMB and long tail growth was 49%. I highlight in this quarter, the strong discipline in terms of our expenditures with a drop of 5% in the year-on-year comparison with normalized expenditures." A full text copy of the company's financial results is available free at: https://bit.ly/2WD50Bu Headquartered in the city of Barueri, Brazil, Cielo S.A. (Cielo) is the leading corporation in the merchant acquiring and payment processing industry in Brazil, with presence in almost all Brazilian municipalities. With shares listed on B3 S.A. - Brasil, Bolsa, Balcao (B3, Ba1 stable), formerly BM&F Bovespa, Cielo is controlled by BB and Bradesco, which together hold 58.7% of the company's voting stocks and are the second and fourth-largest commercial banks in Brazil, respectively, in terms of total assets. As reported in the Troubled Company Reporter - Latin America on Aug. 30, 2021, Moody's Investors Service downgraded Cielo S.A.'s corporate family rating to Ba2 from Ba1. At the same time Cielo's senior unsecured notes and the backed senior unsecured notes issued by Cielo USA Inc. were also downgraded to Ba2 from Ba1. The outlook is stable. =================== C O S T A R I C A =================== AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes ------------------------------------------------------------------- Fitch Ratings has affirmed the 'B' rating on Autopistas del Sol, S.A.'s (AdS) international notes with a Negative Rating Outlook. Fitch has also affirmed the 'AA-(cri)' national scale rating on AdS' local notes with a Negative Outlook. The international and local notes are supported by the cash flow generation of the Costa Rican toll road known as Ruta 27. RATING RATIONALE The ratings reflect the asset's traffic and revenue profile, supported by an adequate toll adjustment mechanism. Mostly used by commuters, the project may face significant competition in the short-to-medium term once the main competing road is improved and especially if its tariffs are significantly lower than those of Ruta 27. Toll rates are adjusted quarterly to exchange rate and annually to reflect changes in the U.S. Consumer Price Index (CPI). The ratings also reflect a fully amortizing senior debt structure with a fixed interest rate and a net present value (NPV) cash trap mechanism that prevents an early termination of the concession before debt is fully repaid. Fitch's Rating Case minimum and average debt service coverage ratios (DSCR) are 0.9x and 1.1x, respectively, which remain in line with Fitch's criteria guidance for the assigned rating. The eventual shortfalls in coverage ratios will likely be covered by the reserve accounts available within the structure. Under this scenario, Fitch expects the project will receive MRG payments from 2025 onward, which totals 14% of annual revenues in average. The Negative Outlook reflects Fitch's view on Costa Rica's sovereign credit risk and the links to the sovereign credit quality through the minimum revenue guarantee (MRG). It also reflects the potential for further financial deterioration as a result of a slower traffic recovery following the material reduction in 2020 and increased competition from the San Jose-San Ramon alternative route after the first phase of improvement construction works are completed, which is aggravated by the fact that the debt service reserve fund is not fully funded. KEY RATING DRIVERS Mostly Commuter with Growing Heavy Traffic [Revenue Risk - Volume: Midrange]: Light vehicles account for approximately 90% of all users, however its post-pandemic recovery has been slower than that of heavy vehicles. The road is used by commuters on workdays and by residents of San José traveling to the beaches on the weekends. It could face significant competition once major improvements to the existing and congested San Jose-San Ramon Route are made. The concession agreement provides an MRG that compensates the issuer if revenue is below certain thresholds, somewhat alleviating this risk. Adequate Rate Adjustment Mechanism [Revenue Risk - Price: Midrange]: Toll rates are adjusted quarterly to reflect changes in the Costa Rican Colon (CRC) to USD exchange rate and annually to reflect changes in the U.S. CPI. Tolls may be adjusted prior to the next adjustment date if the U.S. CPI or the CRC/USD exchange rate varies by more than 5%. Historically, tariffs have been updated appropriately. Suitable Capital Improvement Program [Infrastructure Development & Renewal: Midrange]: The asset is operated by an experienced global company with a higher-than-average expense profile due to its geographical attributes. The majority of the investments required by the concession have been made. The concession requires lane expansions when congestion exceeds 70% of the ideal saturation flow, which triggers the need for further investments. However, the project would only be required by the grantor to perform these investments to the extent they do not represent a breach in the DSCRs assumed by the issuer in the financing documents. Structural Protections Against Shortened Concession [Debt Structure: Midrange]: Debt is senior secured, pari passu, fixed-rate, and fully amortizing. It is USD-denominated but no significant exchange rate risk exists due to the tariff adjustment provisions set forth in the concession and because CRC-denominated toll revenues will be converted to USD daily. There is an NPV cash trap mechanism to prepay debt if revenue overperforms, which largely mitigates the risk of the concession maturing before the debt is fully repaid. Typical project finance features include a six-month debt service reserve account (DSRA), a six-month backward and forward-looking 1.20x distribution trigger and limitations on investments and additional debt. Financial Summary: Under Fitch's Rating Case, the project yields a minimum and average DSCR of 0.9x and 1.1x, respectively. The concession is expected to expire in July 2033, which matches its concession maturity. It assumes payments under the MRG starting in 2025, which amounts in average to 14% of annual revenues. The metrics are in line with Fitch's applicable criteria for the assigned rating. PEER GROUP Comparable projects in the region include Tranjamaican Highway (TJH; BB-/Stable) in Jamaica. AdS and TJH are similar projects since they both are strong commuting assets within their respective country's capital cities. They also share all attributes at the midrange level, but the difference in ratings comes from AdS' lower metrics (average DSCR of 1.1x versus 2.0x under Fitch's rating case) and because TJH has no dependency on traffic growth in order to repay the rated debt. TJH is rated above the Jamaican sovereign (B+/Stable) and is constrained by Jamaica's Country Ceiling of 'BB-'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Negative rating action on Costa Rica's sovereign ratings could trigger a corresponding negative action on the rated notes. -- Traffic recovery significantly below the Fitch's rating case expectation of 77% of 2019 levels in 2022 and/or a substantially greater than expected traffic loss occurs due to the completion of works in the competing route. -- A deterioration of the liquidity available for debt service, including reserves. Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The Negative Outlook on the international rating could be revised to Stable following a corresponding rating action on Costa Rica's sovereign ratings along with observed traffic levels above Fitch's rating case expectations, reaching DSCRs above 1.0x and the maintenance of adequate levels of liquidity. 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. TRANSACTION SUMMARY The asset serves as a connection between the city of San Jose and its metropolitan area with Puerto Caldera, along the Pacific Coast. The asset is operated by Globalvia, one of the world leaders in infrastructure concession management, which manages 28 concessions in seven countries. The company was established in 2007 by FCC Group and Bankia Group. In March 2016, Globalvia was acquired by pension funds OPSEU Pension Plant Trust Fund (40%), PGGM N.V. (40%) and Universities Superannuation Scheme Ltd (20%). CREDIT UPDATE During the first half of 2021 traffic recovered 87% of 2019 traffic, which surpasses Fitch's Rating Case projection of 75%, as Fitch expected the competing road to start having a negative impact on Ruta 27 earlier in this year. The completion of the first sections of the competing road is expected for late Q32021 or early Q42021. Revenues up to June 2021 were USD35.5 million, which is 18% higher than the USD30 million expected by Fitch in its Rating Case, due to the delay in the completion of the improvements of the competing road and an increase of heavy vehicle traffic which pay higher toll-rates. This amount also compares favorably to the USD30 million generated in the first half of 2020 and the USD38.2 million in the same period of 2019. As per Fitch's expectations, the MRG was not drawn. During the first semester of 2021, operational expenses were USD6.4 million, close to Fitch's expectations of USD6.5 million. Total disbursements were USD10 million, lower than the USD10.8 million in Fitch's Rating Case, mainly due to lower Capex figures as investments were postponed due to the pandemic. Actual DSCR in 1H2021 was 1.04x, higher than Fitch's Rating Case DSCR of 0.84x, mainly due to the better-than-projected revenue performance. The DSRA has not been drawn, however at USD19.2 million, its target balance is only 91% funded, given the lack of cash available to catch-up with the most recent six-month debt service target. Improvements to the competing route San Jose-San Ramon (Ruta Uno) are underway. The government of Costa Rica is developing four projects that it has labeled as undelayable. This is the first phase of a total of 17 projects expected to improve and expand this road. Fitch expects the first phase will be completed late Q32021 or early Q42021 and the second phase is expected to start construction in February 2023 and conclude in 2024. Ruta Uno announced that they will increase the toll tariffs of the road, however, total tolls are still materially cheaper than those of Ruta 27. FINANCIAL ANALYSIS Fitch is not differentiating between its Base and Rating case assumptions, given the level of uncertainty about future traffic performance. Fitch has revised its Rating Case assumptions to reflect Fitch's current expectations of traffic recovery in light of the delay in the enhancements to the competing road. For 2021, Fitch assumes a recovery of 85% relative to 2019 levels based on an actual 1H2021 performance of 87% and the following average assumptions of quarterly traffic: 3Q21 (87%); and 4Q21 (77%). For 2022, 2023 and 2024, Fitch assumes average recoveries of 77%, 85%and 65%, relative to 2019 levels, which considers, among other factors, the negative impact from the competing route that will likely complete its improvements in Q4 2021 and 2024.From 2025 until 2033, Fitch expects a compounded annual growth rate of 2.7%. O&M and major maintenance expenses were projected following the issuer's budget plus 7.5% for every year U.S. inflation is forecast at 3.6% for 2021, 2.8% for 2022, 2.4% for 2023 and 2.0% afterward. This scenario resulted in a minimum and average DSCR of 0.9x and 1.1x, respectively. Available liquidity is sufficient to withstand transitory shortfalls when CFADs cannot fully cover debt service. Under this scenario, MRG will be received from 2025 onward. Fitch also developed a Severe Downside Case that assumed a more extended traffic recovery compared to the Rating Case. Traffic in 2021 was assumed to be 83% relative to 2019 levels based on an actual 1H2021 performance of 87% and the following average assumptions of quarterly traffic: 3Q21 (82%); and 4Q21 (75%). For 2022, 2023 and 2024, Fitch assumes average recoveries of 72%, 80% and 60%, relative to 2019 levels. From 2025 until 2033, Fitch expects a compounded annual growth rate of 2.7%. If the Severe Downside Case materializes, credit metrics deteriorate to minimum and average DSCR of 0.8x and 1.1x, respectively, with further use of the DSRA until its near depletion in 2026. 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 DE COSTA RICA: Fitch Affirms 'B' LT IDRs, Outlook Negative ---------------------------------------------------------------- Fitch Ratings has affirmed Banco de Costa Rica's (BCR) Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) and Short-Term Foreign and Local Currency IDRs at 'B'. Fitch has also affirmed the bank's Viability Rating (VR) at 'b', Support Rating (SR) at '4' and Support Rating Floor (SRF) at 'B'. The Rating Outlook on the Long-Term IDRs remains Negative. A full list of ratings follows at the end of this release. KEY RATING DRIVERS IDRs BCR's IDRs are driven by Fitch's assessment of the bank's sole owner, the Republic of Costa Rica's (B/Negative) ability and propensity to support it. The IDRs are aligned with the sovereign and reflect the explicit guarantee stated in the National Banking System Law. According to the law, the Costa Rican government is responsible for all unsubordinated liabilities of state-owned banks in the event of the bank's liquidation. The Negative Rating Outlook for the IDRs reflects Costa Rica's sovereign Rating Outlook. Fitch's assessment of support also considers, with moderate importance, the sovereign's limited financial flexibility to provide support to the bank, despite BCR's important policy role, which would be difficult to transfer. Support Rating (SR) and Support Rating Floor (SRF) The bank's SR and SRF are driven by its high systemic importance and the relevant share of gross loans and customer deposits, ranking second in the Costa Rican banking system. Fitch believes there is limited probability that the bank would receive sovereign support if needed, which underpins its SR and SRF. SRF indicates the minimum level to which the entity's Long-Term IDRs could fall if Fitch does not change its view on potential sovereign support. Viability Rating (VR) The bank's 'b' VR is highly influenced by Fitch's assessment of Costa Rica's challenging operating environment (OE). Fitch believes BCR's creditworthiness will remain pressured by a slow recovery in economic activity, which continues to pressure credit growth and asset quality. Fitch believes asset quality will remain sensitive to potential medium-term credit deterioration of the loan portfolio under pandemic-related alleviation measures, which will no longer be applicable after December 2021. BCR's company profile is sound and has a higher influence on the its VR, due to its good franchise and universal banking business model. BCR is the 2nd largest bank in the country, and as of June 2021, has a market share by loans and deposits of around 20%. Fitch believes that BCR's asset quality is exposed to OE pressures, slow economic recovery, and does not rule out further deterioration once the relief measures cease. As of June 2021, BCR's impaired loan ratio of 2.7% remains above its historical average of 2.5%. Deterioration is clearer when foreclosed assets are added to the impaired ratio, reaching 4.3%, unfavorable against the 3.6% of 2017-2020 average. Loans under alleviation measures represented a high 15.6% of total gross loans and represent a potential credit deterioration in the medium term. Loans loss allowances over impaired loans ratio of 135.6% is considered prudent given the current situation. Fitch believes profitability will remain pressured by potential asset quality deterioration, but will likely remain within its current rating level. Earnings and profitability are modest, as the 2016-1H20 average operating profit over risk weighted assets (RWA) was 1.2%, due to reduced business volumes, a pressured net interest margin, below-than-peers operational efficiency and growing LICs. Fitch believes BCR is capable of maintaining the improved operating profitability metrics registered as of 1H 2021. Operating profit over RWA was 1.7%, a material improvement over the 2017-2020 average of 0.85%. This is driven by an improved net interest margin that benefits from a lower interest-bearing liability cost; moreover, loan impairments charges have decreased and overall operating expenses show improvement due to the bank's cost-control measures. Fitch expects the bank's equity to be sufficient to continue to navigate under the challenging OE. The bank's Fitch Core Capital (FCC) to RWAs ratio of 13.9% provides a satisfactory loan-loss absorption capacity. Improved profitability also provides additional equity-growth prospects, which somewhat offsets the government's limited ability to make extraordinary injections. The ratio has shown mild improvement and compares well with the bank's closest peers. Fitch expects liquidity metrics to remain stable for the remainder of the year, and amply benefited by the bank's deposit franchise, and the flight to quality usually observed during times of stress. As of June 2021, the loan-to-deposits ratio is 82%, while stable, growing sight deposits predominate. The entity has a high concentration by depositor, as the top 20 customers represent 30% of the total deposits. Also, wholesale funding access remains adequate. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- IDRs, VR, SR and SRF: BCR's ratings are sensitive to changes in Costa Rica's sovereign ratings. Negative changes in the bank's IDRs, VR, SR and SRF would mirror any movement in Costa Rica's sovereign ratings. -- VR: The bank's VR is sensitive to negative changes in Costa Rica's operating environment. Downgrades in BCR's VR could also come from a material deterioration in the bank's financial and company profile, namely a loan portfolio deterioration that affects operating profitability, exhibiting sustained losses and its FCC to RWA ratio remains consistently below 9%. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- IDRs: The Rating Outlook Negative on the IDRs signifies a limited upside in the near future; however, BCR's IDRs could be upgraded in the event of an upgrade of Costa Rica's sovereign rating. -- SR and SRF: The SR and SRF are constrained, but could be upgraded if Costa Rica's sovereign and Country Ceiling ratings are upgraded, as this would reflect a reduction in the potential constraints on the bank's capacity to receive extraordinary support. -- VR: The upside potential for the VR is limited by the stressed OE as a result of the impact of the health crisis. An improvement of the operating environment that improves the bank's financial metrics could lead to an upgrade of its VR. The sovereign rating acts as a cap to BCR's VR. 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. SUMMARY OF FINANCIAL ADJUSTMENTS -- Fitch calculated the consolidated operation's RWAs and related metrics by using BCR's individual risk weighted assets and those of its main subsidiary Banco Internacional de Costa Rica (BICSA). Also, total capital ratio for the consolidated operation was calculated using the capital base of the bank and each of its regulated and non-regulated subsidiaries. All input for these calculations were taken from the consolidated financial statements of both BCR and BICSA. -- Pre-paid expenses and other deferred assets were reclassified as intangible and deducted from total equity in order to calculate Fitch Core Capital. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BCR's IDRs are driven by the support it would receive from its sole owner, the Republic of Costa Rica (B/Negative). The IDRs are aligned with the sovereign and reflect the explicit guarantee stated in the National Banking System Law. According to the law, the Costa Rican government is responsible for all unsubordinated liabilities of the state-owned banks in the event of the banks' liquidation. ESG CONSIDERATIONS Fitch has revised BCR's ESG Relevance Score for Governance Structure to '3' from '4' as Fitch believes that BCR's state ownership would not influence its business model and financial performance nor perceives weaknesses on its corporate governance framework that could have an impact on the rating in combination 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. BANCO NACIONAL: Fitch Affirms 'B' LT IDRs, Outlook Negative ----------------------------------------------------------- Fitch Ratings has affirmed Banco Nacional de Costa Rica's (BNCR) Long-Term (LT) Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B', and Short-Term (ST) Foreign and Local Currency IDR at 'B'. The Rating Outlook for the LT rating is Negative. In addition, Fitch has affirmed BNCR's Viability Rating (VR) at 'b', Support Rating (SR) at '4', Support Rating Floor (SRF) at 'B', and National Scale Ratings at 'AA+(cri)' and 'F1+(cri)' for the LT and ST, respectively. The Rating Outlook for the National LT Rating is Stable. KEY RATING DRIVERS IDRs and National Ratings BNCR's IDRs and national ratings reflect Fitch's assessment of the potential support the bank would receive if needed from its sole owner, the Costa Rican government (B/Negative). The bank's IDRs are aligned with the sovereign and considers the explicit guarantee stated in the National Banking System Law, which establishes that the Costa Rican government is responsible for all non-subordinated liabilities of the state-owned banks in the event of their liquidation. The Negative Outlook for the Long-Term IDRs mirrors Costa Rica's sovereign Outlook. Fitch's assessment of the sovereign's propensity and ability to provide support also includes BNCR's high systemic importance and the sovereign's constrained financial flexibility to support the bank. Fitch also considered BNCR's significant and long-standing policy role, which would be difficult to transfer. SR and SRF BNCR's SR and SRF reflect the limited probability of sovereign support due to the current Costa Rican government's restricted ability to support it. The SR and SRF are driven by BNCR's high systemic importance and position as the largest player in the Costa Rican banking system for loans and customer deposits. The SRF indicates the minimum level the entity's Long-Term IDRs could fall to if Fitch does not change its view on potential sovereign support. Senior Unsecured Debt All senior unsecured debt is rated at the same level as the bank's ratings in Fitch's international and national scales, as the likelihood of default on the debt is the same as BNCR's. In accordance with Fitch's rating criteria, the recovery prospects in the event of a default of the senior unsecured debt of BNCR is average and is reflected in a Recovery Rating of 'RR4'. Viability Rating (VR) BNCR's VR remains highly influenced by Fitch's assessment of the Costa Rican operating environment (OE) at 'b'/Negative. The challenges in the operating environment, derived from the pandemic, has continued to impose pressure on its financial performance, mainly on its asset quality and credit growth. The bank's VR also reflects, with high importance, its sound company profile characterized by its leading franchise as the largest player in the Costa Rican banking system, with the highest, although declining, market shares, as of June of 2021, of 23.8% by loan portfolio and 26.0% by deposits (YE17: 26.5% and 29.7%, respectively). Although the percentage of the bank's loan portfolio under relief measures bank is currently lower than that observed in 2020, Fitch expects further deterioration on the bank's loan quality as these loans season or if the economic recovery takes longer than expected. The application of the credit relief measures, which will expire in December 2021, is currently executed under more selective terms, and will still limit the visibility on the magnitude of the loan portfolio deterioration for all the banks. As of the first half of 2021 (1H21), the non-performing loan (NPL) ratio continued its increasing trend, standing at 3.9% (industry: 2.8%), while the reserve coverage of NPL remained below 100% (June 2021: 93.4%; system: 157%) given the material level of real guarantees (63% on its loan portfolio), and notwithstanding the increasing loan impairment charges (LIC) to contain the loan deterioration. BNCR's profitability is stabilizing through recovery of the net interest margin (although the level is still below pre-pandemic levels), continued improvements in operating efficiency, increasing participation of non-interest income and despite increasing LICs related to the pandemic. As of June 2021, the operating profit to risk weighted assets (RWA) ratio increased to 1.4% from 1.2% in 2020. BNCR's capitalization core metric continued its improving trend. As of June 2021, the Fitch Core Capital (FCC) to RWA ratio was 14.7%. Fitch believes that capital metrics will be benefited by an expected modest business expansion and a better internal capital generation under the prevailing environment. BNCR's funding structure is one of its main strengths, reflecting its leading franchise in deposits, a diversified funding profile and the government support. Its key funding source, the deposit base (86% of total funding as of June 2021), continued increasing, although at a modest rate, in 1H21 (1.8%, non-annualized) which, along the credit contraction, reinforced the decreasing trend in the loan-to-deposit ratio to 74.9% as of June 2021. Historical deposit stability, wide access to alternative funding sources and material liquid assets mitigate the institution's exposure to the liquidity risk. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- BNCR's IDRs, VR, SR and SRF ratings are sensitive to changes in Costa Rica's sovereign ratings. Negative changes in these ratings would mirror any movement in Costa Rica's sovereign ratings. -- The bank's VR is also sensitive to the Costa Rica's challenging OE. The VR could also be downgraded by a materially further loan portfolio deterioration that affects operating profitability and pressures the FCC to RWA ratio consistently below 9%. -- A downgrade of BNCR's national ratings would reflect a weakening in the ability and propensity of the Costa Rican government to provide support, in relation to the creditworthiness of other entities in the same jurisdiction. -- The bank's senior unsecured debt would mirror any negative change in the BNCR's international and national scale ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- BNCR's IDRs could be upgraded in the event of an upgrade of Costa Rica's sovereign rating. However, the Negative Rting Outlook on the IDRs results in a limited upside in the near future. -- BNCR's SR and SRF are constrained but could be upgraded if Costa Rica's sovereign and Country Ceiling ratings are upgraded, as this would reflect a reduction in the potential constraints on the bank's ability to receive extraordinary support. -- Given the current limitations of the OE and the Sovereign rating, an upgrade of the VR is unlikely in the short term. An improvement of the OE that improves the bank's financial metrics could lead to an upgrade of its VR. The sovereign rating acts as a cap to BNCR's VR. -- An upgrade of BNCR's national ratings would reflect a strengthening in the ability and propensity of the Costa Rican government to provide support to the bank, in relation to the creditworthiness of other entities in the same jurisdiction. -- The bank's senior unsecured debt would mirror any positive change in the BNCR's international and national scale ratings. 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. SUMMARY OF FINANCIAL ADJUSTMENTS Fitch reclassified prepaid expenses, deposits as guarantee, construction in process and other deferred assets as intangibles and deducted them from total equity to reflect their low absorption capacity. Fitch reclassified recoveries from charge-offs as non-operating income. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BNCR's ratings are linked to the Costa Rican sovereign rating. 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 POPULAR: Fitch Affirms 'B' LT IDRs, Outlook Negative ---------------------------------------------------------- Fitch Ratings has affirmed Banco Popular y de Desarrollo Comunal's (BPDC) Foreign- and Local-Currency Long-Term Issuer Default Ratings (IDRs) at 'B' and Short-Term Foreign and Local Currency IDR at 'B'. The Rating Outlook on the Long-Term Rating is Negative. Fitch has also affirmed the bank's Viability Rating (VR) at 'b', Support Rating (SR) at '5' and Support Rating Floor (SRF) at 'B-'. At the same time, Fitch affirmed the national ratings at 'AA+(cri)' with a Negative Outlook and 'F1+(cri)'. KEY RATING DRIVERS IDRs, National Ratings and Senior Debt BPDC's IDRs are driven by its VR, which reflects its stand-alone creditworthiness, highly influenced by Fitch's assessment of Costa Rica's operating environment (OE) and the bank's company profile. The ratings consider with moderate importance of its pressured asset quality and profit generation, the high levels of capitalization ratios and its stable funding structure. BPDC's ratings continue to be highly influenced by the challenging OE in Costa Rica marked by a slow recovery in economic activity that continue to pressure credit growth and asset quality. The effects of the coronavirus pandemic on the economic activity are still present but the impact has been lessened in some extent by relief programs, thus Fitch estimates pressures over banks business generation and financial performance will continue. The bank's financial profile is supported by its public nature and the benefits granted by law, such as mandatory capitalization and inflow of deposits. In Fitch's view, the bank's role in the pension regime as the depositary of mandatory savings from Costa Rican workers, its market share in consumer lending, and its large franchise are evidence of its systemic importance. BPDC is the third largest bank in the country in deposits and in consumer lending, with a market share of 13.3% and 14.5%, respectively. The Negative Outlook for the Long-Term IDRs and National Ratings reflects downside risks on the OE and the banks' credit profile, which could face a sharper or more sustained weakening, in case of a milder economic recovery and highlights a downside potential at the sovereign, rated at 'B' with a Negative Outlook. In Fitch's opinion, BPDC's asset quality is still prone to deterioration, considering that loan forbearance programs, which have remained low so far, are available until December 2021. As of 1H21, BPDC's NPL ratio of 2.7% was fairly close to pre-pandemic levels (2019: 2.6%). However, after adjusting for write-offs, this indicator rises to 3.3% (2019: 2.8%). The bank voluntary increased its loan loss allowances, reaching as of 1S21, 188% of impaired loans. Fitch view this as favorable to cope in the medium term with the expiration of relief measures. As of June 2021, BPDC's operating profit over Risk Weighted Assets (RWA) was 1.9%, showing improvement over 2020 (0.3%). This result is largely due to gains on the investment portfolio that increased earnings generation, although Fitch considers this trend might not replicate to the same magnitude in 2022. Fitch expects the bank's profits will remain sensitive to pressures in the current OE that may result in higher-than-expected provisions for impaired loans. Fitch expects that the bank's loss absorption capacity to remain sound in 2021, driven by high capital ratios and reserves coverage. BPDC's Fitch Core Capital to RWA ratio stood at 31.6% at 1S21, up from 28.3% at 2020, and is among the highest relative to its local and international peers. Fitch believes that BPDC's capital position will remain consistent with its current rating level supported by lower loan growth than previous years that could compensate the lower profitability. Fitch does not anticipate significant reductions or changes in the bank's deposit volume and funding profile under the current OE. The bank has access to diverse funding sources and maintains adequate levels of liquid assets. However, Fitch believes that BPDC's funding structure is less diversified compared with larger domestic peers. The loan to deposit ratio stood at 118.5% as of 1S21. Customer deposits continued strengthening in 2021, supported by deposit inflows similar to other banks. Debt Ratings All senior unsecured debts are rated at the same level of the issuer's Long- and Short-Term Rating in national scale, as the likelihood of default on the debt is the same as BPDC. Support Rating (SR) and Support Rating Floor (SRF) BPDC's SR of '5' and SRF of 'B-' reflect Fitch's belief that senior creditors cannot rely on the probability of receiving extraordinary support from the Costa Rican government due to on the sovereign's current ability to support the bank. This is despite the bank's public nature and its law benefits, as well as its systemic importance. SRF indicates the minimum level to which the entity's Long-Term IDRs could fall if Fitch does not change its view on potential sovereign support. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- BPDC's IDRs, SR and SRF ratings are sensitive to Costa Rica's sovereign rating or material weakening of the OE; -- While not Fitch's base case scenario, changes in company profile that diminish the advantages granted by law would pressure the bank's international and national ratings; -- The IDRs and VR of BPDC could be downgraded if deterioration in the OE results in a loan portfolio deterioration that affects operating profitability, exhibiting sustained deterioration levels of non-performing loans and profitability; -- The bank's senior unsecured debt would mirror any negative change in the BPDC's ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- IDRs and VR: Positive rating action is unlikely in the short term, given the Negative Outlook. The Outlook could be revised to Stable if both the sovereign rating and OE would be revised to Stable. The upside potential for the VR is limited by the stressed OE as a result of the impact of the health crisis. Over the medium term, an improvement of the OE that strengthens the bank's financial metrics could lead to an upgrade of its VR; -- SR and SRF: BPDC's SRF is also sensitive to changes in the sovereign rating. Fitch's base case scenario anticipates BPDC maintaining its current systemic importance and company profile and, therefore, changes to the SR are not likely; -- The Negative Outlook on the National Scale rating could be revised to Stable if the entity were able to maintain stable and consistent levels of operating profit to risk-weighted assets, and controlled and sustained levels of non-performing loans; -- The bank's senior unsecured debt would mirror any positive change in the BPDC's ratings. 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. SUMMARY OF FINANCIAL ADJUSTMENTS All intangible assets and other prepaid expenses were deducted from FCC since the agency considers these to have low capacity to absorb losses. Recoveries from write-offs were reclassified as non-operating income. 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. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Retakes Total Control of Refidomsa Refinery --------------------------------------------------------------- Dominican Today reports that one day after the operation that returned full control over Refidomsa to the Dominican State, Finance Minister, Jose Manuel 'Jochi' Vicente, highlights that the refinery had "a shackle that did not allow it to advance." This is due to the sanctions that the United States has applied since 2019 to the Venezuelan state oil company PDVSA, which for the last 11 years owned 49% of the refinery's shares, according to Dominican Today. It was PDV Caribe, a PDVSA subsidiary, that last March proposed the operation to the Dominican government, the report notes. The Venezuelan oil company, which faces serious liquidity problems to pay its creditors, presented a solution that allowed Patsa -- a subsidiary of the Rizek Group -- to obtain something in exchange for the devalued Venezuelan bonds it had in its possession, while for the Venezuelan government it represented a way out to comply with Patsa and lower its public debt, and it allowed the Dominican government to achieve the old aspiration of retaking total control of the refinery, the report adds. 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). DOMINICAN REPUBLIC: Risks Losing its Farmland --------------------------------------------- Dominican Today reports that in the Dominican Republic, only 23% of the territory is farmland, and of that percentage, only 13% of quality 1, a proportion considered very low by geographical technicians. Although a national survey on the amount of land that remains available is still awaited, that percentage is much lower, due to the "constant and worrying" encroachment of these lands for urban development, according to Dominican Today. "The problem of urban occupation of agricultural land is serious in the country, mainly in Cibao Central, Bonao, Villa Altagracia and San Juan, where we have the best agricultural land," says Bolivar Troncoso, director of the National Geographical Institute, the report notes. Troncoso participated together with Kelvin Cruz, president of the Dominican Federation of Municipalities (Fedomu), and Domingo Matias, vice minister of Territorial Planning and Regional Development of the Ministry of Economy, Planning and Development (MEPyD), in a press conference to announce a national awareness plan for local governments on the need to preserve agricultural soils, the report adds. 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). ============= J A M A I C A ============= DIGICEL GROUP: Pressure Mounts as Voice Revenues Continue to Drop ----------------------------------------------------------------- Jamaica Observer reports that a new edition of the BuddeComm report released last week, discusses the challenges facing regional telecommunications companies due to the novel coronavirus pandemic which "continues to wreak havoc on the health and economies of countries throughout the Caribbean region". The report, which was published Aug. 24, said that poor tourism receipts have impacted the telecoms sector, with declines seen in subscriber numbers (particularly for prepaid mobile services - the mainstay of short-term visitors) and revenue, according to Jamaica Observer. "Fixed and mobile broadband services are two areas that have benefited from the crisis to a small extent as employees and students have resorted to working from home, but their contribution to the sector has been insufficient to offset steep falls in other areas of the market," the report said, Jamaica Observer notes. BuddeComm describes Digicel's debt challenges as arising from the pandemic, Jamaica Observer relays. Digicel, the region's second-largest telecom operator, filed for Chapter 15 bankruptcy in the US in April 2020, Jamaica Observer discloses. The report outlines that while the company has continued to operate in all of its Caribbean markets as it seeks to refinance billions of dollars of debt, "the pressure is mounting as voice revenues continue to drop from quarter to quarter, and recent adverse currency fluctuations have made the debt burden even worse," Jamaica Observer notes. The other major telco, regional incumbent Cable & Wireless Communications (CWC), is said to be experiencing similar drops in subscriber numbers and revenue, Jamaica Observer relays. However, it was noted, "CWC has the benefit of having the financial backing of its new owner, telecoms multinational Liberty Global," Jamaica Observer relates. Budden.com said that "CWC is steadily expanding and enhancing its fixed and mobile networks in many of the countries it serves around the Caribbean, despite many locations being small islands with very small populations. The investment strategy should enable CWC to at least maintain its market share - if not grow it substantially should Digicel falter," Jamaica Observer discloses. The researchers are not optimistic about the growth of 5G mobile. They said it is one of the areas of the telecom market that does not yet appear poised for growth, Jamaica Observer says. They opined, "Governments, regulators, and even the mobile network operators have shown that they have little appetite for investing in 5G opportunities at the present time. Network expansion and enhancements remain concentrated around improving LTE coverage. Until the economies and markets stabilise, and overseas visitors return (with increased spending power as well as higher expectations), there is unlikely to be much momentum towards implementing 5G capabilities anywhere in the region," Jamaica Observer notes. It was noted that while Digicel has been able to continue providing uninterrupted service in all its Caribbean operations, the battle is not yet over, Jamaica Observer relays. "Digicel's revenues are declining quarterly due to the protracted impact of the [novel coronavirus] pandemic, which keeps the profitable tourism market away from the region, and [contributes to] the stagnation of the domestic subscriber base," it was stated, Jamaica Observer adds. About Digicel Group Digicel Group is a mobile phone network provider operating in 33 markets across the Caribbean, Central America, and Oceania regions. The company is owned by the Irish billionaire Denis O'Brien, is incorporated in Bermuda, and based in Jamaica. As reported in the Troubled Company Reporter-Latin America in April 2020, Moody's Investors Service downgraded Digicel Group Limited's probability of default rating to Caa3-PD from Caa2-PD. At the same time, Moody's downgraded the senior secured rating of Digicel International Finance Limited to Caa1 from B3. All other ratings within the group remain unchanged. The outlook is negative. On April 10, 2020, the TCR-LA reported that Fitch Ratings has downgraded Digicel Limited to 'C' from 'CCC', and its outstanding debt instruments, including the 2021 and 2023 notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also downgraded Digicel International Finance Limited to 'CCC+' from 'B-'/Negative, and its outstanding debt instruments, including the 2024 notes and the 2025 credit facility, to 'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative Rating Outlook from DIFL. ===================== P U E R T O R I C O ===================== HOGAR CARINO: Confirmation Hearing Slated for Sept. 22 ------------------------------------------------------ Judge Edward A. Godoy of the U.S. Bankruptcy Court for the District of Puerto Rico conditionally approved the Disclosure Statement of Hogar Carino, Inc. The Court ruled that acceptances or rejections of the Debtor's Plan of Reorganization must be filed on or before 14 days prior to the confirmation hearing, which is set for September 22, 2021 at 1:30 p.m. via Microsoft Teams. Final approval of the Disclosure Statement shall also be considered at such hearing. Any objection to final approval of the Disclosure Statement and/or confirmation of the Plan must be filed on or before 14 days prior to said hearing date. A copy of the order is available for free at https://bit.ly/2WoOO6W from PacerMonitor.com. About Hogar Carino San Juan, P.R.-based Hogar Carino, Inc. filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 21-01181) on April 16, 2021. Elizabeth Noemi Padro Rivera, vice president, signed the petition. In the petition, the Debtor disclosed total assets of $176,883 and total liabilities of $1,568,780. Judge Edward A. Godoy oversees the case. The Debtor tapped The Law Offices of Luis D. Flores Gonzalez and Virgilio Vega III, CPA as its legal counsel and accountant, respectively. MACY'S INC: Moody's Upgrades CFR to Ba2 & Alters Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service upgraded Macy's, Inc.'s corporate family rating to Ba2 from Ba3 and its probability of default rating to Ba2-PD from Ba3-PD. The senior secured notes at Macy's Retail Holdings, LLC (MRH) were upgraded to Baa3 from Ba2. The senior unsecured notes at Macy's, Inc. and Macy's Retail Holdings, LLC were upgraded to Ba3 from B1. The Macy's Retail Holdings, LLC commercial paper rating was affirmed at NP. The speculative grade liquidity rating was upgraded to SGL-1 from SGL-2. The outlook was changed to stable from negative. The CFR upgrade reflects governance considerations including Macy's early redemption of $1.3 billion of first lien secured debt, the commitment to repay the $294 million senior unsecured notes due January 2022, and the reinstatement of a smaller dividend than historical levels with a moderate share authorization of $500 million, despite its significant recovery in operating performance. The upgrade also acknowledges Macy's stronger than expected rebound in earnings in 2021. Moody's estimates that Macy's can maintain debt/EBITDA around 3.0x even as consumer spending normalizes in fiscal 2022. The upgrade of the senior secured notes to Baa3 from Ba2 reflects their relatively stronger position after the redemption of the first lien notes as the second lien notes now is the only debt secured by the collateral that had previously been pledged to the former first lien notes. The upgrade of Macy's speculative grade liquidity rating to SGL-1 reflects its positive free cash flow generation, sizable excess cash balances and the expectation that its $2.9 billion revolver will be undrawn at the end of fiscal 2021. Upgrades: Issuer: Macy's, Inc. Corporate Family Rating, Upgraded to Ba2 from Ba3 Probability of Default Rating, Upgraded to Ba2-PD from Ba3-PD Speculative Grade Liquidity Rating, Upgraded to SGL-1 from SGL-2 Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 (LGD4) from B1 (LGD5) Issuer: Macy's Retail Holdings, LLC Senior Secured Regular Bond/Debenture, Upgraded to Baa3 (LGD2) from Ba2 (LGD3) Senior Unsecured Regular Bond/Debenture, Upgraded to Ba3 (LGD4) from B1 (LGD5) Affirmations: Issuer: Macy's Retail Holdings, LLC Senior Unsecured Commercial Paper, Affirmed NP Outlook Actions: Issuer: Macy's, Inc. Outlook, Changed To Stable From Negative Issuer: Macy's Retail Holdings, LLC Outlook, Changed To Stable From Negative RATINGS RATIONALE Macy's, Inc.'s Ba2 corporate family rating reflects its conservative capital allocation strategy which includes its continued prioritization of debt reduction and the reinstatement of a smaller common dividend after its suspension at the onset of the pandemic. The rating also reflects Macy's large scale with LTM net sales of roughly $21.1 billion as of July 31, 2021 and its market position as the US's largest department store chain. Its integrated approach to stores and online enhances its ability to meet the demands of the rapidly changing competitive environment. The company has improved its operating performance though customer reengagement, cost reduction and solid inventory management. Nonetheless, secular trends including increased movement of sales online, faster delivery demands, as well as intense competition from alternative channels have accelerated during the pandemic. The rating remains constrained by the risk of business normalization as consumer spending is currently benefitting from stimulus, reopening, and pent up demand. Macy's could also face further market share erosion as alternative channels continue to outperform. Macy's has very good liquidity, evidenced by Moody's expectation that the company will end fiscal 2021 with approximately $1 billion in cash despite the repayment of the $1.3 billion of senior secured notes and the planned repayment of $294 million senior unsecured notes due January 2022. Moody's expects its $2.941 billion revolver due 2024 to only be used for seasonal borrowings in fiscal 2021. The stable outlook reflects the company's success in resizing its cost structure and its conservative financial strategy as well as the expectation that Macy's will maintain a credit profile appropriate for the Ba2 rating as consumer demand normalizes. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the company demonstrates a consistent track record of sales and operating income performance which includes a stabilization or increase in its market share relative to alternative competitive channels as well as its department store peers. Quantitatively, a rating upgrade would also require maintaining very good liquidity and a conservative financial strategy. Quantitatively ratings could be upgraded if debt/EBITDA is sustained below 2.5 times and EBIT/interest expense is sustained above 4.0 times. Ratings could be downgraded should liquidity deteriorate, comparable sales and operating income performance reflect a weaker market position or a more aggressive financial strategy is pursued including the utilization of unencumbered assets for any purpose other than deleveraging. Quantitatively, ratings could be downgraded debt/EBITDA be sustained above 3.5x and interest coverage below 3.0x. Macy's, Inc., with its corporate office in New York, is one of the nation's premier retailers, with LTM net sales of approximately $21.1 billion. The company operates 726 stores in 43 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's, Bloomingdale's, Bloomingdale's Outlet, Macy's Backstage, Market by Macy's, Bloomie's, and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com websites. Bloomingdale's in Dubai and Kuwait are operated by Al Tayer Group LLC under license agreements. The principal methodology used in these ratings was Retail Industry published in May 2018. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: PMC Workers Appeal for Reopening of Industry --------------------------------------------------------------- Kim Boodram at Trinidad Express reports that employees of private members clubs (PMCs) have appealed to Prime Minister Dr Keith Rowley and Health Minister Terrence Deyalsingh to reopen their industry, that some of the affected are struggling to pay bills and buy food. The PMC workers, through the Union of Members Clubs and Lottery Workers, have written to the PM and Deyalsingh, asking that casinos be allowed to reopen under the recommended public health guidelines, according to Trinidad Express. Association president, Joshua Johnson, pointed out to the Government ministers in both letters that the industry employs thousands of breadwinners, including single mothers, the report notes. With the next school term approaching, some form of income has become critical, the association has said, the report relates. Private members clubs were closed along with much of the non-essential economy for several months, after enjoying a brief reopening that ended when the Government returned to near-lockdown as the Covid-19 daily infection rate rose, the report says. The letters thanked both officials in advance for their "compassion" and "mercy", and sought dialogue, during which Johnson said stakeholders were willing to outline their anti-Covid protocol if allowed to reopen, the report discloses. He noted in a telephone interview that when it was allowed to reopen briefly earlier this year, the members clubs industry adhered to strict protocol such as enforced sanitizing, crowd control and physical distancing, the report relays. He said even as daily infections rose at that point, no positive Covid-19 cases had been traced back to any members' clubs, the report says. Single Mothers Affected Johnson said the industry provides legal work to thousands of decent people, many of them single mothers, the report notes. He said up to 5,000 workers have been directly affected since the clubs were closed, and another 30,000 who benefit from or do business with the industry, the report says. The association noted in its August 23, 2021 letter to Deyalsingh that its peers in the Lotto and Play Whe sectors were allowed to return to work on August 9, the report discloses. The letter said for the past 117 days, employees who were "predominantly single mothers with dependent children have been without income and the means to take care of their children," the report relates. "Not one of our comrades received the Salary Relief Grant," the letter stated. "We suffer from nervousness, anxiety, depression and a whole plethora of mental health issues, as we do not know where our next meal is coming from," the report relays. The letter stated that disenfranchised employees have "creditors on our doorstep, harassing us for payments", and "some of us do not even have a doorstep as we have been evicted by our landlords. It is hard for us out here. We feel overwhelmed and forsaken," the report notes. The letter recalled that Deyalsingh and the Ministry of Health would have approved the protocol handbook previously used by the industry for reopening, the report discloses. Staff were trained to maintain the health regulations and entry protocol for temperature and sanitation, the report notes. Johnson said up to 95 per cent of the industry is now vaccinated with Sinopharm, the report adds. In its letter to Rowley, the association thanked the Government and its medical team for the country's pandemic response. However, the association believes that when regarding the data driving the reopening of the economy, its members "fit the criteria" to resume operations, the report relays. The letter described the membership as "productive" people who pay taxes, and while they fully support the State's aim to reopen schools in early September, some children may not be able to attend, the report notes. "We are not working to provide the necessary tools for them to restart school," the letter to the PM stated, the report says. The letter said members have been surviving by the "mercies of God". "Dr Rowley we are depressed, broken and feel forsaken," the letter said. The association is appealing for an urgent meeting of stakeholders and the relevant State officials to discuss a return to business in the near future. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *