/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210914.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, September 14, 2021, Vol. 22, No. 178 Headlines B R A Z I L B3 SA BRASIL: Fitch Assigns FirstTime 'BB' LT IDRs B3 SA: Moody's Gives Ba1 Rating to New Sustainability Linked Notes BANCO NACIONAL: Chapter 15 Case Summary ITAU UNIBANCO: Sees Benchmark Selic Rate Rising Above 7.5% C H I L E LATAM AIRLINES: Has Several Financing Offers to Exit Bankruptcy LATAM AIRLINES: Intends to Recover Pre-Crisis Profitability by 2024 D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Chicken, Garlic & Onion Highest Rise in August DOMINICAN REPUBLIC: Provinces With Presence of Swine Fever at 15 DOMINICAN REPUBLIC: Shippers Say Expect Higher Fees E C U A D O R ECUADOR: Reaches New Deal with IMF, To Receive $1.5BB This Year M E X I C O BANCO SANTANDER MEXICO: Fitch Rates USD700MM AT1 Notes Final 'BB+' CONSORCIO ARA: Moody's Affirms 'Ba2' Global Scale Issuer Rating - - - - - =========== B R A Z I L =========== B3 SA BRASIL: Fitch Assigns FirstTime 'BB' LT IDRs -------------------------------------------------- Fitch Ratings has assigned B3 S.A. Brasil, Bolsa, Balcao (B3) first-time 'BB' Long-term Foreign- and Local-Currency Issuer Default Ratings (IDRs). Fitch has assigned a 'BB(EXP)' rating to B3's U.S. dollar senior unsecured Sustainability-Linked notes. Fitch has also assigned 'AAA (bra)'/'F1+(bra)' National Long- and Short-Term Ratings. The Rating Outlook for the Long-Term IDRs is Negative and Stable for the National Long-Term rating. Assignment of a final rating to the senior unsecured notes will be contingent on the receipt of final documents consistent with Fitch's expectations. KEY RATING DRIVERS IDRs and Senior Debt B3's ratings are based on its intrinsic creditworthiness and are highly influenced by its company profile and the Brazilian operating environment. Its Long-Term Foreign- and Local-Currency IDRs are one notch above the operating environment factor score and sovereign ratings. Fitch views it as unlikely for the differential to widen in the foreseeable future. B3's IDRs reflects the company's very robust business model with a dominant domestic franchise in trade, post-trade and clearing services across multiple asset classes in Brazil. B3's ratings are constrained by Fitch's assessment of the Brazilian operating environment for Financial Market Infrastructure firms (FMIs), currently at a 'bb-' factor score with a negative outlook. B3's ratings also reflect its above peer profitability and growing margins despite economic downturns over the last few years and moderate risk appetite with strong operational and counterparty risk infrastructure. B3's ratings also incorporate solid management, corporate governance and strategy, robust capital and leverage ratios, and sound funding, liquidity and coverage. B3's revenues related to trading, post-trading and clearing activities (listed segment) -for equities and derivatives comprised 69.3% of total revenues in 1H21, a higher portion than leading global peers. Remaining relevant business activities are related to infrastructure for financing (mainly liens registration, 4.5%), OTC (includes central depositary activities, treasury direct and derivatives at 10.3%) as well as subscription-based services (includes data and information services at 12.5%). All business lines have shown growth, but trading activities have benefited from asset price volatility and from the sharp decline in interest rates in 2020. However, a prolonged decline of Brazil's economy could undermine trading activity and investor interest, thus pressuring B3's revenues. Fitch considers B3's margining process framework and its safeguard structures robust and well-articulated, which reduces credit and counterparty risks stemming from its central counterparty clearing (CCPs) activities - compliant with IOSCO principles. This considers the collection of guaranty funds and default waterfall procedures, which are viewed by Fitch as being effective. At June 2021, there were no past cases of default. B3's CCPs' margin collateral related to government securities, represented 74% of total collateral, which increases B3 exposure to the sovereign debt and which could pose a risk in the event of sovereign deterioration. The company's EBITDA margins have been very strong and above industry and regional peers despite severe negative macroeconomic conditions in Brazil since 2014. Results in 1H21 and 2020 were positively impacted by increased trading volumes. B3's EBITDA margin reached 73.6% in 1H21, up from an average of 63.8% between 2020-2017, which is consistent with Fitch's 'aa' category for earnings and profitability benchmark range for FMIs of greater than 50%. Fitch expects B3's profitability to remain at current levels during 2021. However, 2022 is a presidential election year, and Fitch expects strong market volatility, which could benefit B3 depending on foreign investors' appetite, given that they represent almost half of equities trading volume. B3 maintains low leverage, and internal capital generation has been sufficient to cover operational needs. As of June 2021, B3's leverage, based on Fitch's core metric of gross debt /EBITDA stood at 1.3x, up from 1.0X at end 2020, at the mid-range of Fitch's 'a' category capitalization and leverage benchmark range for FMIs of 0.5x-2.0x. Fitch expects a modest increase in leverage as a result of B3's proposed bond issuance in 3Q21. However, the ratio for 2021-end is likely to be close to 1.8x, a level that would be in line with Fitch's rating sensitivities for the assigned rating. In Fitch's view, B3 has a strong funding and liquidity profile. Fitch's core metric for this factor, EBITDA/interest expenses, stood at comfortable 20x at June 2021, from an average of 10.6x in the prior four years, at the lower end of Fitch's 'a' category for funding and liquidity benchmark range for FMIs of 10x-15x. B3 maintains a strong cash position, with liquid assets around BRL 21.4 billion (unrestricted liquidity of BRL 10 billion). B3's liquidity and credit facilities designed specifically for its CCPs, which are unutilized so far, are indicative of a strong liquidity profile. While operational risks have been adequately managed as reflected in good system availability ratios, legal risks remain from tax and civil proceedings. Together they totaled BRL 43,5 billion or 1.9x B3's total equity position as of June 2021, and the proceedings are currently classified as "possible" according to B3's financial statements. In Fitch's assessment, no loss was assumed under the rating horizon of up to 24 months. National Scale Ratings B3's national scale ratings are relative to the entity's creditworthiness compared to other issuers within Brazil's jurisdiction. The assignment of the long-term National Ratings at 'AAA(bra)' reflects the company's superior credit profile relative to other Brazilian entities. RATING SENSITIVITIES IDRs and Senior Debt Factors that could, individually or collectively, lead to negative rating action/downgrade: -- B3's ratings could be downgraded in the event of further negative rating actions on the Brazilian sovereign and/or from a downgrade of Fitch's assessment of the operating environment factor score, as this would weaken the company and financial profiles; -- The ratings could be negatively affected if counterparty risks at B3's CCPs increase to a level beyond accompanying margin and guaranty fund growth, such that it increases the risk of compromising B3's liquidity/equity position or from prolonged and repetitive system outages that result in reputational damage; -- Unfavorable decisions/expectations related to existing tax and civil proceedings that weaken B3's financial profile could result in a downgrade of one or more notches; -- A material and sustained deterioration in B3's financial performance, translating into sustained EBITDA margins below 50% or gross leverage above 3x, could also put downward pressure on ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The Outlook for B3's IDRs could be revised to Stable if Fitch's assessment of the operating environment outlook is revised to Stable, most likely as a result of a revision of Brazil's sovereign Outlook to Stable; -- B3's IDR could potentially be upgraded as a result of an upgrade of Brazil's sovereign rating, but otherwise, B3's ratings have limited upside potential in the near future, as they are already one notch above Brazil's sovereign ratings. National Ratings Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The national scale ratings of B3 are at the highest level on the national scale; therefore, they cannot be upgraded. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- The national ratings of B3 may be affected by a change in Fitch's perception of the company's creditworthiness with respect to other Brazilian entities rated on the national scale. 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. 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. B3 SA: Moody's Gives Ba1 Rating to New Sustainability Linked Notes ------------------------------------------------------------------ Moody's Investors Service has assigned a Ba1 foreign currency senior unsecured debt rating to the sustainability linked notes proposed by B3 S.A. -- Brasil, Bolsa, Balcao's ("B3"). The proposed notes will be denominated in US dollars. The proposed notes include a sustainability linked structure that is in line with the Company's gender equality in leadership positions target by 2026 and the creation and offering of a "Diversity Index" by 2024. Proceeds will be used for general corporate purposes. Assignments: B3 S.A. - Brasil, Bolsa, Balcao: Foreign currency unsecured debt rating of Ba1 RATINGS RATIONALE The Ba1 senior unsecured debt rating assigned to notes to be issued by B3 S.A. -- Brasil, Bolsa, Balcao's (B3) derives from the firm's existing issuer rating of Ba1. B3's Ba1 rating reflects the firm's scale driven by its historically strong profitability and high pretax margins, as well as its cash flow generation, which will remain strong over the next 12 -18 months supported by the continued development of Brazilian capital market activities. Moody's assessment also takes into consideration B3's manageable, though rising, leverage and the company's high dividend payout target for 2021, which is compensated by the robust cash flow and earnings stream. B3's ratings are positioned one notch above Brazil's Ba2 sovereign rating, reflecting its dominant market position, diverse revenue base and resilient financial performance preserved during the economic contraction in 2020. However, B3's business model has strong credit linkage to Brazilian sovereign risk, given that its cash position and the majority of its settlement funds that safeguard it from counterparty default are invested in Brazilian government bonds. B3 reported a recurring pre-tax income of BRL6.3 billion ($1.3 billion) in the twelve months to June 2021, an increase of 50.9% versus the same period a year earlier, illustrating its increased scale. Pre-tax margin, as calculated by Moody's, was 63.1% in the first half of 2021, compared to 58.9% in 2020 (50.8% in 2019). Moody's expects B3 to continue to post strong financial results in 2021 as equity investments remain attractive and Brazil's equity market continues to deepen in terms of equity issuances, trading volumes and investor numbers, despite recent rises in interest rates. Combined with increased market volatility in the wake of coronavirus, B3's core businesses experienced record trading volumes in 2020, including its second highest ever level of public offerings. Moody's said that the Ba1 rating also acknowledges B3's dominant market position, particularly in cash equities trading and post trading, as it is the only stock exchange in Brazil and it operates Brazil's large and systemically important central counterparty clearing house and depositary. As result, B3's business model enables it to generate growing revenues particularly during periods of market volatility, when equities and interest rate and currency derivative volumes rise. Under the terms of the bond, if B3 does not meet defined sustainability targets, the payable interest rate will step up. The first criteria is the creation of a diversity index of an equities portfolio by December 2024 that encourages companies listed on B3's stock exchange to employ women in leadership positions. The second is to ensure that 35% of B3's leadership positions are held by women by December 2026. Moody's considers that B3's aim of achieving these key objectives as well as its sustainability framework, set up in line with the International Capital Market Association's Sustainability Linked Bond and Loan Principles 2020, are an inherent part of the company's sustainability practices. Considering this proposed issuance, Moody's estimates that B3's leverage will rise from its current level of 1.3x EBITDA as of June 2021 to 1.6x, based on the last twelve months EBITDA to June 2021. While this will take leverage above the company's stated target for 2021 of 1.5x, B3 has BRL3.1 billion of debt maturing until the end of 2022 and once this matures leverage will fall to below its current target level. While the debt issuance will lead to pressure on its EBITDA to interest expense coverage ratios as well as its cash flow coverage, Moody's expects B3 to continue to post strong cashflow generation which will maintain coverage ratios commensurate with its Ba1 rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING A downgrade in B3'foreign currency debt ratings could be driven by a deterioration in the company's financial fundamentals, which, in turn, could be triggered by a decrease in its operating margin that substantially reduces the company's debt-service capacity and leads its leverage to increase significantly. Negative pressure on the ratings could also arise from a deterioration in the company's risk management capabilities and execution effectiveness. A decline in Brazil's creditworthiness could also result in B3's ratings being downgraded. The principal methodology used in this rating was Securities Industry Service Providers Methodology published in November 2019. BANCO NACIONAL: Chapter 15 Case Summary --------------------------------------- Chapter 15 Debtor: Banco Nacional S.A. Avenida Rio Branco, 115 20o Andar, Sala 2033, Centro Rio de Janeiro/RJ 20040 Brazil Business Description: Banco Nacional operates as a bank. Nacional was founded in 1944 as Banco Nacional de Minas Gerais S.A. Foreign Proceeding: BACEN Presidential Act No. 1059/2004 Chapter 15 Petition Date: September 9, 2021 Court: United States Bankruptcy Court Southern District of New York Case No.: 21-11594 Judge: Hon. Martin Glenn Foreign Representative: Reginaldo Brandt Silva Avenida Rio Branco, 115 20o Andar, Sala 2033, Centro Rio de Janeiro/RJ 20040 Brazil Foreign Representative's Counsel: Warren Gluck, Esq. Elliot A. Magruder, Esq. HOLLAND & KNIGHT LLP 31 W. 52nd St. New York, NY 10019 Tel: (212) 513-3200 Fax: (212) 385-9010 Email: warren.gluck@hklaw.com elliot.magruder@hklaw.com Estimated Assets: Unknown Estimated Debt: Unknown A full-text copy of the Chapter 15 petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/WMDABNA/Banco_Nacional_SA_and_Reginaldo__nysbke-21-11594__0001.0.pdf?mcid=tGE4TAMA ITAU UNIBANCO: Sees Benchmark Selic Rate Rising Above 7.5% ---------------------------------------------------------- Rio Times Online reports that Brazil's Itau bank sees "considerable chance" of benchmark Selic rate rising above 7.5% The Central Bank has adopted a correct stance in indicating that the treasury's benchmark interest rate should be raised to a restrictive level in the face of inflation expectations above the target, says Sao Paulo-based Itau Unibanco, the largest banking institution in Brazil, according to Rio Times Online. In the bank's evaluation, the Selic above the neutral level by approximately 1 point, i.e., between 7.5% and 8%, "seems consistent with the current deviation of the IPCA projections in relation to the target," the report notes. As reported in the Troubled Company Reporter-Latin America on Aug. 18, 2021, Moody's Investors Service affirmed all ratings assigned to Itau Unibanco S.A. (IU), including the long-term local currency deposit rating at Ba2, the long-term foreign currency deposit rating at Ba3, and the Brazilian national scale deposit rating at Aa1.br, following the affirmation of the bank's ba2 standalone baseline credit assessment (BCA). ========= C H I L E ========= LATAM AIRLINES: Has Several Financing Offers to Exit Bankruptcy --------------------------------------------------------------- Maria Chutchian of Reuters reports that LATAM Airlines said it has received several offers to fund its exit from Chapter 11 bankruptcy, each of which are worth more than $5 billion. LATAM, the largest airline in Latin America, received the offers from creditors and shareholders, according to a filing with the U.S. Bankruptcy Court in New York City. The Santiago, Chile-based company did not reveal the number of offers received or from whom they came, but Delta Air Lines Inc is LATAM's largest shareholder. Other shareholders include Qatar Airways, with a 10% stake. LATAM, which also operates in Brazil, Colombia, Ecuador and Peru as well as having operations through Latin America, Europe, the United States and the Caribbean, only said in the filing the offers came from "its most significant claimholders and its majority shareholders." It said negotiations for financing are ongoing. LATAM filed for Chapter 11 bankruptcy protection in New York in May 2020 as world travel came to a halt amid the COVID-19 pandemic. It hopes to accomplish by the end of the year the major tasks it needs to exit bankruptcy but may not formally exit by that time, according to a person familiar with the company's thinking who asked not to be identified. The financing proposals the airline has received each include a combination of new debt and equity, which would be backstopped by the creditors or shareholders making the offer, the company said. Each offer would likely result in the substantial dilution of existing shares, it said. However, the source said LATAM has no intention of pursuing a sale of any of its business units. The company also forecast in Chilean regulatory filings a return to pre-pandemic profitability and capacity by 2024, as well as a projected 13% increase in total revenue by 2026. LATAM estimates the total claims filed in the bankruptcy will fall between $8 billion and $9.9 billion, according to the regulatory filing. The company's exclusive period to file a proposed reorganization plan expires on Sept. 15, but it filed a motion seeking an extension through Oct. 15. It will have the option to extend that deadline again by about a month if necessary. LATAM has said it wants to grow its Boeing 787 Dreamliner fleet as part of its five-year business plan and expects to have a fleet of 28 by the end of 2021. The airline's overall fleet will decrease to 286 by the end of the year from around 340 before the pandemic. However, it expects to increase that amount back up to 331 by 2026. In August, the company secured court approval to enter into lease agreements with Avolon Aerospace Leasing Limited and ORIX Aviation Systems for five Dreamliners made by Boeing Co. The company had $1.9 billion in liquidity as of July 31. It also has the option to tap additional financing approved earlier in the bankruptcy proceeding, including up to $750 million in secondary financing. About LATAM Airlines Group LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. It is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as bankruptcy counsel, FTI Consulting as restructuring advisor, Lee Brock Camargo Advogados as local Brazilian litigation counsel, and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. The Boston Consulting Group, Inc. and The Boston Consulting Group UK LLP serve as the Debtors' strategic advisors. Prime Clerk LLC is the claims agent. The official committee of unsecured creditors formed in the case tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters Jureller Southard & Stevens, LLP as conflicts counsel, UBS Securities LLC as investment banker, and Conway MacKenzie, LLC as financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is the committee's Brazilian counsel. The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as counsel. Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew Glenn and partner Shai Schmidt, has been retained as counsel to the Ad Hoc Committee of Shareholders. LATAM AIRLINES: Intends to Recover Pre-Crisis Profitability by 2024 ------------------------------------------------------------------- Market Research Telecast reports that Latam Airlines plans to recover pre-crisis profitability by 2024. The airline Latam Airlines, the most important in Latin America, presented its five-year business plan on Thursday within the framework of its reorganization plan and projected the recovery of its profitability to levels prior to the coronavirus pandemic to the year 2024. The presentation of the company, together with its subsidiaries in Brazil, Chile, Colombia, Ecuador, the United States and Peru, also considers an increase in operating income of 78% by 2026, compared to the pre-ndemic period, thanks to the recovery of the demand, the fleet plan and the operational and financial projections until 2026, among other aspects. The airline's plan was well received by its majority shareholders and main creditors, who presented various offers -â€“ the specific number was not specified -- for financing in the order of more than 5,000 million dollars each. Each proposal contemplates raising those more than 5,000 million dollars through the issuance of new debt and capital in the Latam Group, which would be supported by the parties that make the proposal. All this within the framework of the exit plan of Chapter 11 of the United States Bankruptcy Law, which the company took advantage of last year in the face of the economic blow that the pandemic hit and that allows a company that cannot pay its Debts restructure and continue to function without pressure from creditors. "Despite the dramatic crisis we have faced, we have made the most of our restructuring, not only becoming substantially more efficient but also consolidating a better value proposition for clients, which has been reaffirmed by the great interest we have received in providing exit financing," said the CEO of Latam Airlines, Roberto Alvo, according to the statement. The company also reported that it filed a motion that seeks to extend the exclusivity period to present its reorganization plan under Chapter 11 of the US bankruptcy law until October 15, 2021 and request approvals of the same plan until December 15 of 2021. Latam, born in 2012 from the merger between the Chilean Lan and the Brazilian Tam, flew before the pandemic to 145 destinations in 26 countries and operated approximately 1,400 daily flights, transporting more than 74 million passengers annually. With the pandemic, it reduced its operation by up to 95% and ended 2020 with a drop in its operating income to 58.4% and a net loss of $ 4,545.9 million. About LATAM Airlines Group LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. It is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as bankruptcy counsel, FTI Consulting as restructuring advisor, Lee Brock Camargo Advogados as local Brazilian litigation counsel, and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. The Boston Consulting Group, Inc. and The Boston Consulting Group UK LLP serve as the Debtors' strategic advisors. Prime Clerk LLC is the claims agent. The official committee of unsecured creditors formed in the case tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters Jureller Southard & Stevens, LLP as conflicts counsel, UBS Securities LLC as investment banker, and Conway MacKenzie, LLC as financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is the committee's Brazilian counsel. The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as counsel. Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew Glenn and partner Shai Schmidt, has been retained as counsel to the Ad Hoc Committee of Shareholders. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Chicken, Garlic & Onion Highest Rise in August ------------------------------------------------------------------ Dominican Today reports that according to statistics from the Central Bank (BCRD), the groups with the most significant contribution to inflation in August 2021 were food and non-alcoholic beverages (1.47%), transport (1.07%), and restaurants and hotels (1.31%), which explained 83% of the general inflation of the period. Overall, inflation in August 2021 stood at 0.80%, and cumulative inflation in the first eight months was 5.41%, according to Dominican Today. Meanwhile, central bank figures indicate that year-on-year inflation, measured from August 2020 to August 2021, stood at 7.90%, the report notes. Food & Beverage According to the Consumer Price Index (CPI), the foods that most influenced the price increase were fresh chicken (7.70%), garlic (22.23%), soft drinks (5.76%), onions (11.63%), tomatoes (19.38%), ordinary beef (4.14%), chili peppers (9.80%), soybean oil (1.37%), pineapple (12.44%), salami (0.91%) and rice (0.25%), the report relates. Meanwhile, other food goods registered decreases in prices,such as: eggs (-4.42%), avocados (-17.87%), green bananas (-3.98%), pork (-2.04%), sobado bread (-1.35%), green bananas (-0.97%), oranges (-7.38%) and water bread (-1.18%), the report notes. The CPI of the alcoholic beverages and tobacco group grew 0.80%, as a result of the rise in the price of packaged beer (1.16%), malt (0.43%), whiskey (0.6%), 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: Provinces With Presence of Swine Fever at 15 ---------------------------------------------------------------- Dominican Today reports that the provinces with the presence of African swine fever (ASF) in the Dominican Republic remain at 15, while La Altagracia and San Pedro de Macoris are under suspicion, indicate the data provided by the Ministry of Agriculture. The provinces with ASF, according to official data, are Montecristi, Dajabon, Santiago Rodriguez, Santiago, Espaillat, La Vega, Hermanas Mirabal, Duarte, Sanchez Ramirez, Greater Santo Domingo, Elias Pina, San Juan, San Cristobal, San Jose Ocoa and Barahona, according to Dominican Today. Puerto Plata belonged to the group under suspicion, but according to the statements of the director of Agriculture Communications, Erick Montilla, it was controlled, the report notes. So far, the Dominican authorities have disbursed a total of 226.4 million pesos to 872 pig farmers affected by ASF detected in the country, the report relays. According to Montilla, 300.4 million pesos are pending payment, 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: Shippers Say Expect Higher Fees --------------------------------------------------- Dominican Today reports that one of the unexpected blows of the pandemic has hit the shipping sector directly, in a process of container shortages, delays in dispatches and intermittent port closures that have affected the entire trading system internationally. One of the results of the imbalance between the capacity of goods shipments and the triggering of demand by consumers has resulted in a jump in freight prices and effects on the usual maritime trade routes, according to Dominican Today. Representatives of the Association of Shippers of the Dominican Republic indicated that it is still possible that freight rates rise "a little more," the report relays. The laws of supply and demand are ruthlessly enforced in the shipping and container market, and vessels transit more safely to the ports of those willing to pay more for freight shipments, the report discloses. "We are paying US$13,000 to US$14,000 for a container and it is very possible that, because Americans pay U$20,000 for each one, that freight will go up a little bit more," Teddy Heinsen, president of the Association of Shippers, told Diario Libre, 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). ============= E C U A D O R ============= ECUADOR: Reaches New Deal with IMF, To Receive $1.5BB This Year --------------------------------------------------------------- Reuters reports that Ecuador has reached a new staff-level agreement with the IMF that could result in $1.5 billion in new disbursements this year following promises by President Guillermo Lasso's government to cut spending, the finance minister said. The South American nation last year struck a $6.5 billion deal with the multilateral lender to help revive an economy that for years struggled under low oil prices and was further weakened by a brutal coronavirus outbreak, according to the report. Lasso, who was elected this year, inherited the IMF program from former President Lenin Moreno, who faced massive street protests in 2019 following efforts to close the fiscal gap by limiting fuel subsidies, the report notes. Moreno walked back that measure in the face of a week of unrest led by indigenous protesters, highlighting the complex situation facing any Ecuadorean government that seeks to cut its fiscal deficit, the report relays. Lasso this month said the government would halve the deficit to $2.4 billion in 2022, the report adds. As reported in the Troubled Company Reporter-Latin America on Sep. 2, 2021, Fitch Ratings has affirmed Ecuador's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'B-' with a Stable Outlook. =========== M E X I C O =========== BANCO SANTANDER MEXICO: Fitch Rates USD700MM AT1 Notes Final 'BB+' ------------------------------------------------------------------ Fitch Ratings has assigned a 'BB+' final rating to Banco Santander Mexico, S.A., Institucion de Banca Multiple, Grupo Financiero Santander Mexico's (Santander Mexico) USD700 million Perpetual Subordinated Non-Preferred Contingent Convertible Additional Tier 1 (AT1) notes. The notes have fully discretionary, non-cumulative coupons and are subject to partial or full conversion to common equity if the bank's consolidated CET1 ratio falls below 5.125%. The proceeds of the offering will be used for corporate purposes. KEY RATING DRIVERS The rating of 'BB+' assigned to Santander Mexico's AT1 notes is notching down from the bank´s support-driven Issuer Default Rating (IDR) of 'BBB+'/Stable. The bank´s proposed AT1 securities are rated three notches below its IDR, a two-notch adjustment for loss severity and one notch for non-performance risks. Per Fitch´s criteria, the potential for institutional support neutralizes nonperformance risk and caps these ratings to the level at which similar securities issued by Banco Santander S.A. (Santander) are rated. The two notches for loss-severity risk reflect the poor recoveries for bond-holders due to the notes' deep subordination since these notes are senior only to the bank´s common equity. While the one notch for incremental non-performance risk reflects that the notes have a fully discretionary and non-cumulative coupons payment. Additionally, the interest due on the notes will be automatically cancelled if the bank's Common Equity Tier 1 (CET1), Tier 1 and Total Regulatory Capital Ratios fall below 7%, 8.5% and 10.5%, respectively, plus additional 1.2% of capital requirements for domestic systemically important banks (D-SIBs) and countercyclical buffers. The AT1 debt securities have also loss absorption features in the form of a conversion to common equity trigger; partial or full conversion would occur if Santander Mexico's CET1 regulatory ratio falls to or below 5.125%. Santander Mexico's IDR reflects Fitch's view of a strong ability and propensity of support from Santander in case of need. For more details on Santander Mexico's ratings and credit profile, including its IDR rating drivers and sensitivities. RATING SENSITIVITIES Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The bank's AT1 notes rating could change in the event of an upgrade on the bank's support driven IDR. However, there is limited upside potential, as the entity is considered strategically important to Santander, and its ratings are already at the maximum support-driven uplift per Fitch's criteria. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- The bank's hybrid securities ratings could change in the event of a downgrade on the bank's support-driven IDR. 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 Prepaid expenses and other deferred assets were classified as intangibles and deducted from equity to reflect its low absorption capacity. Fitch has made adjustments to the Risk Weighted Assets in accordance with its criteria. Fitch consolidated the bank's Risk Weighted Assets with those of its subsidiaries with credit operations PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Banco Santander Mexico & Affiliates' IDRs and National Scale ratings are driven by institutional support from its parent company, Banco Santander, S.A. 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. CONSORCIO ARA: Moody's Affirms 'Ba2' Global Scale Issuer Rating --------------------------------------------------------------- Moody's de Mexico S.A. de C.V. affirmed the Ba2 global scale and the A2.mx national scale issuer ratings of Consorcio ARA, S.A.B. de C.V. The outlook was changed to stable from negative. "The rating action reflects our expectations that ARA's credit metrics will continue to improve in the next 12 to 18, with leverage at 2.1x in 2021" said Sandra Beltran, a Moody's VP-Senior Analyst. The outlook also incorporates Moody's expectations that ARA will continue to generate positive FCF while maintaining an adequate liquidity profile. RATINGS RATIONALE The change in outlook to stable from negative is primarily driven by Moody's expectations that ARA's key credit metrics will continue to recover over the next 12 to 18 months, supported by a more normalized economic conditions in Mexico, its main market amid the progress in the vaccination rollout throughout the country. Moody's expects ARA's leverage (Moody's-adjusted debt/EBITDA) to reduce to 2.1x in 2021, compared to 3.2x in 2020. The company's performance was significantly affected by lockdown restrictions in 2020, with sales down by 29% and EBITDA (as adjusted by the company) by 39%, reflecting delays in construction, stricter lockdown rules and a lower number of workers in some of the cities where the company operates. ARA's Ba2/A2.mx ratings continue to reflect its leading market position in the Mexican homebuilding sector, as well as its conservative growth strategy and prudent financial policies. Other credit positives include the company's strategy of having a diversified product portfolio, which provides flexibility to its operations. ARA's strong credit metrics and liquidity also support its ratings. These positives are offset by its relatively small size; its business concentration in Mexico; and the challenges inherent to the business, such as the need to invest capital in land, licenses, permits and infrastructure, which can be a costly and lengthy process. ARA's recovery trend has been strong with housing revenue increasing for two consecutive quarters as of June 30, 2021. The comeback has been mainly driven by the middle income and residential segments. In the LTM ended June 2021, both segments increased its share to roughly 67% of total housing revenues from 60% in 2019 as the company continued to decrease its exposure to the lower income segment which is the most impacted in economic downturns. Moody's expects this trend to continue for the second half of 2021 as economic activity in Mexico continues to improve on the back of strong demand from the US, the ongoing vaccine rollout and a low 2020 base. The LTM revenue as of June 2021 is now 22% below revenues reported in 2019, which are pre-COVID levels and Moody's expect a full recovery by the end of 2022. The stable outlook reflects Moody's view that ARA's revenue generation and profitability will gradually recover towards pre-crisis levels over the next two years, owing to more normalized economic environment, and the company's cost savings initiatives. The stable outlook also incorporates Moody's expectations that ARA will continue to generate positive FCF and will maintain an adequate liquidity profile. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if the company is capable of substantially recovering its financial metrics and maintaining adequate liquidity buffer within the next one to two years. The ratings could be downgraded if the economic recovery in Mexico is threatened by a significant delay in the distribution of the coronavirus vaccine through 2021. Downside risks to the Mexican economy could lead to significant cash burn that threatens ARA's ability to cover corporate expenses such as interests, taxes and working capital with internal sources. The principal methodology used in these ratings was Homebuilding And Property Development Industry published in January 2018. Consorcio ARA, S.A.B. de C.V. (ARA) is the largest public homebuilder in Mexico. The company operates in 16 states through 43 developments in the country. ARA is majority owned (48.6%) and controlled by the Ahumada family, and the rest of the stock is publicly traded on the Mexican Stock Exchange. The company reported revenue of MXN6,022 million for the 12 months that ended June 30, 2021. The period of time covered in the financial information used to determine Consorcio ARA, S.A.B. de C.V.'s rating is between 01/01/2016 and 30/06/2021 (source: Audited Financial Statements). ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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