/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/210921.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 21, 2021, Vol. 22, No. 183 Headlines B A H A M A S BAHAMAS: Moody's Lowers LongTerm Issuer Rating to Ba3, Outlook Neg B R A Z I L BANCO BTG PACTUAL: Moody's Affirms Ba2 LongTerm Deposit Ratings GOL LINHAS: Receives US$200 Million Investment MARFRIG GLOBAL: Fitch Affirms 'BB' LT IDRs & Alters Outlook to Pos. [*] BRAZIL: Services Up 3.9% From Pre-Pandemic Level, IBGE Says C O L O M B I A AVIANCA HOLDINGS: Shares Drop as Hearing for Ch.11 Exit Nears AVIANCA HOLDINGS: U.S. Trustee Criticizes 'Death Trap' Provision AVIANCA HOLDINGS: US Trustee Wants Opt-In Forms in Ballots D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Chicken Farmers Assure Supply, At a Price E C U A D O R ECUADOR DPR: Fitch Affirms BB- Rating on Series 2020-1 Loan V E N E Z U E L A VENEZUELA: Moody's Withdraws 'C' Rating on Senior Unsecured Debt X X X X X X X X LATAM: IDB Says Economic Recovery Dependent on COVID Testing, Vaxx - - - - - ============= B A H A M A S ============= BAHAMAS: Moody's Lowers LongTerm Issuer Rating to Ba3, Outlook Neg ------------------------------------------------------------------ Moody's Investors Service has downgraded the Government of The Bahamas' long-term issuer and senior unsecured ratings to Ba3 from Ba2 and maintained the negative outlook. The downgrade to Ba3 reflects the significant erosion of The Bahamas' economic and fiscal strength brought on by the coronavirus pandemic. Moody's expects the gradual recovery in tourism to leave a long-lasting impact on The Bahamas's credit profile through materially higher debt and interest burdens, which will significantly exceed those of Ba3-rated peers. The Bahamas' credit profile continues to be supported by a relatively strong institutional framework and a stable political environment. The Bahamas also benefits from its comparatively high level of GDP per capita, which supports its debt-carrying capacity. The negative outlook reflects the ongoing risks to the credit profile related to the pace of fiscal consolidation, which will be determined largely by how quickly tourism activity recovers. A slower pace of fiscal consolidation would result in higher borrowing requirements and exacerbate funding risks. The Bahamas' local currency ceiling was lowered to Baa2 from Baa1. The four-notch gap to the local currency rating reflects an established track record of predictable and reliable macroeconomic policymaking balanced against a reliance on tourism that represents a common risk for the government and non-government issuers in the country. The Bahamas' foreign-currency ceiling was lowered to Baa3 from Baa2. The one-notch gap between the local and foreign-currency ceilings reflects low transfer and convertibility risk, itself anchored by a history of relatively strong economic institutions supporting exchange rate stability and limited external indebtedness, despite a history of capital controls. RATINGS RATIONALE RATIONALE FOR DOWNGRADE TO Ba3 EROSION OF ECONOMIC AND FISCAL STRENGTH AS A RESULT OF THE CORONAVIRUS PANDEMIC The duration and severity of the coronavirus shock has fundamentally weakened The Bahamas' credit profile with lasting consequences in terms of a higher debt burden and weaker debt affordability as well as reduced economic strength. Real GDP contracted by 14.5% in 2020, with the tourism industry most severely affected by a shutdown that lasted for most of the year. Despite the uptick in tourism activity in recent months, The Bahamas faces prospects of a slow economic recovery, and one that remains vulnerable to potential future variants of the coronavirus. Moody's expects stayover tourist arrivals to return to 2019 levels only by 2024 at the earliest. The economic recovery is highly dependent on a rebound in tourism activity. Tourism's direct contribution to GDP was around 19% of GDP in 2019 and, when including the indirect contribution from other industries such as transport and accommodation and food service, 40% of GDP on average between 2015 and 2019. The severity of the economic contraction contributed to a significant increase in The Bahamas' debt and interest burdens, which are now significantly higher than Ba-rated peers. The Bahamas' debt burden was already higher than Ba-rated peers prior to the pandemic and will remain above similarly rated peers as the economy recovers only slowly from the pandemic. Fiscal consolidation driven by the removal of COVID-related spending on unemployment benefits and other related items, along with a revenue recovery will support fiscal consolidation, which will reduce the debt burden gradually. The Bahamas' debt burden will remain close to 80% of GDP by the end of FY2022/23 (fiscal year ending June 30, 2023), well above the Ba3-rated median (60%). Moreover, The Bahamas' narrow revenue base means its debt measured by the debt-to-revenue ratio, which stood at 509% at the end of FY2020/21, will also remain significantly higher than the Ba-rated median of 266%. The combination of a rising debt burden and a decline in revenue contributed to a further worsening of debt affordability, with the interest-to-revenue ratio increasing to 23% in FY2020/21 compared with 16% in FY2019/20. Moody's expects the interest-to-revenue ratio to peak in FY2021/22, but to remain above 20% over the subsequent three years, and significantly higher than rated peers. Despite the government's recent debt increases, its debt has a favorable structure thanks to a captive domestic investor base and a long maturity profile, particularly for its external market debt. Meanwhile, The Bahamas' relatively strong institutional framework, stable political system and a fiscal policy framework that is more responsive to economic shocks have supported the credit profile. The Bahamas also stands out among similarly rated peers because of its comparatively high level of GDP per capita, which supports its debt-carrying capacity. RATIONALE FOR THE NEGATIVE OUTLOOK The negative outlook reflects the material risks to the pace of the economic recovery, which would slow the pace of fiscal consolidation and increase funding risk. The pace of the economic recovery, and particularly tourism activity, will directly affect the pace of fiscal consolidation and how quickly debt begins to decline. The reliance on indirect taxation -- VAT and excise taxes -- makes government tax collection more sensitive to the speed of the economic recovery. A slower recovery would place downward pressure on revenue and limit the speed of fiscal consolidation and prospects for debt stabilization. Larger-than-expected fiscal deficits in turn would increase reliance on external market borrowing and could create external liquidity pressure. ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS The Bahamas' ESG Credit Impact Score is moderately negative (CIS-3) reflecting its exposure to environmental risks, moderately negative social risks and a strong institutional framework that supports its governance. The Bahamas' exposure to environmental risks is moderately negative (E-3 issuer profile score). The Bahamas is in the so-called Hurricane Belt and has been affected by more frequent and stronger tropical storms in recent years. Because tourism represents a large share of the economy, disruptions to the sector caused by weather events can affect the credit profile. In addition, The Bahamas is exposed to rising sea levels, with 72% of its land being low lying or within five meters above sea level. Exposure to social risks is moderately negative (S-3 issuer profile score). Despite having a high per capita GDP on a purchasing power parity basis, high unemployment levels for the younger segment of the labor force can weigh on the economy. The influence of governance on The Bahamas' credit profile is neutral-to-low (G-2 issuer profile). Aspects of governance strength, including a relatively strong institutional framework, help mitigate some of the E and S risks to which The Bahamas is exposed. GDP per capita (PPP basis, US$): 33,148 (2020 Actual) (also known as Per Capita Income) Real GDP growth (% change): -14.5% (2020 Actual) (also known as GDP Growth) Inflation Rate (CPI, % change Dec/Dec): 1.2% (2020 Actual) Gen. Gov. Financial Balance/GDP: -6.8% (2020 Actual) (also known as Fiscal Balance) Current Account Balance/GDP: -20.8% (2020 Actual) (also known as External Balance) External debt/GDP: 34.3% (2020 Actual) Economic resiliency: ba1 Default history: No default events (on bonds or loans) have been recorded since 1983. On September 14, 2021, a rating committee was called to discuss the rating of the Bahamas, Government of. The main points raised during the discussion were: The issuer's economic fundamentals, including its economic strength, have materially decreased. The issuer's fiscal or financial strength, including its debt profile, has materially decreased. Other views raised included: The issuer has become increasingly susceptible to event risks. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Given the negative outlook, an upgrade is unlikely in the near future. The implementation of fiscal and economic policies that support a fiscal consolidation process that places government debt on a more durable downward trajectory would likely result in a return to a stable outlook. An improvement in debt affordability, which includes relying more on lower-cost domestic and external official sources of funding over more expensive external market issuance, could also support a return to a stable outlook. A slower pace of fiscal consolidation that contributes to tightening financing conditions and a rise in borrowing costs, which would challenge the government's ability to finance fiscal deficits and maturing debt would likely lead to a further downgrade. The principal methodology used in these ratings was Sovereign Ratings Methodology published in November 2019. =========== B R A Z I L =========== BANCO BTG PACTUAL: Moody's Affirms Ba2 LongTerm Deposit Ratings --------------------------------------------------------------- Moody's Investors Service has affirmed all ratings and assessments assigned to Banco BTG Pactual S.A. (BTG or BTG Pactual), including the Ba2 long term local and foreign currency deposit ratings, the Ba1 long term local and counterparty risk ratings, and the (P)Ba2 long term senior unsecured rating assigned to its MTN program. The bank's baseline credit assessment and adjusted baseline credit assessment of ba2 were also affirmed, along with its long and short-term counterparty risk assessment of Ba1(cr) and Not-Prime(cr). All other short terms ratings and assessments were also affirmed. The outlook on the ratings is stable. At the same time, Moody's also affirmed all ratings assigned to Banco BTG Pactual S.A. Grand Cayman Branch and Banco BTG Pactual S.A. Luxembourg Branch. RATINGS RATIONALE The affirmation of BTG's ba2 BCA acknowledges its well-established investment banking franchise, strong profitability and increasing earnings diversification through the expansion of its asset management and wealth management activities as well as the potential of its new retail banking operation. This strategy is supported by adequate capitalization and disciplined risk management that has provided increasing stability in revenues over the past five years. The BCA affirmation also recognizes the benefits of the launch its digital retail bank, which will reinforce its competitive strength as a universal bank, while adding a low-cost and steady core deposit base which will help to reduce the bank's intrinsic reliance on confidence sensitive market-based funding, which remains above other same-rated peers in Brazil. As the largest investment bank in Brazil, the investment banking and sale and trading divisions continued to respond for the bulk of total revenues, 52.8% in the first half of 2021 remaining a volatile component of the bank's profitability. In the first six months of 2021, earnings from investment banking and sales and trading rose by 69.9% versus a year previously BTG has also reported consistent growth of its asset and wealth management activities (19.6% of total revenues in the first half of 2021), which have grown strongly as Brazil's deepening capital markets over the past five years. BTG's diverse revenues sources have supporting its net income of 1.68% relative to tangible assets in the first half of 2021, above the 1.63% reached in 2020, and Moody`s expects the bank to continue to report strong profitability. The recent launch of BTG's digital bank targeting medium and high-income clients application is aligned to the bank's strategy to compete with the leading financial institutions in Brazil for higher income retail banking customers and Moody`s expects this will also lead to greater earnings diversity and stability. BTG has operated an open architecture investment platform, BTG digital, through which it distributes a suite of financial products since 2016, and its retail bank will complement this distribution channel. In 2021, BTG has also made several acquisitions of complementary businesses and increase of its sales and distribution force that helped to expand its distribution networks and product offering and build a sizeable customer base, particularly through the whole acquisition of Banco Pan in April 2021,in early 2021. BTG Pactual's capitalization, measured as tangible common equity as a proportion of risk weighted assets (TCE/RWA), was 10.0% as of June 2021, down from 12.13% a year earlier. While the decline followed the full consolidation of Banco Pan, historically the bank has had strong access to equity through frequent follow-on offerings, as shown by it raising BRL5.6 billion in equity in two issuances in January and June 2021. Moody's expects the bank's capitalization to remain at adequate levels, recovering to the 11.5% -12% level reported between 2018 and 2020 and to remain above rated peers. Capitalization will also be sufficient to continue to support the bank's growing loan book and the continuing to build out its digital retail banking platform, particularly in light of its strong profitability. In terms of asset risk, BTG reported a problem loan ratio of 1.1%, up from 0.5% in 2020. The deterioration was due in large part to the consolidation of Banco Pan's higher risk consumer loans. Overall, BTG's lending book has showed strong growth, particularly in corporate lending which rose 51% in the last twelve months ending June 2021. Although, problem loans will likely increase as a result of the bank's growing book focused on consumer and small to middle sized companies, Moody's expect asset quality to remain strong supported by the high collateralization of portfolio, the granularity of its loans as well as its high level of reserve coverage of 300%. As of June 2021, reserves for loan losses rose following the acquisition of Banco Pan and stood at 3.5% of gross loans (3.7% in 2020). The ba2 BCA also reflects BTG's more complex legal structure with a large number of direct and indirectly controlled entities, as well as its capital market activities. However, Moody's notes that BTG's governance frameworks and related controls and processes have materially improved over the past five years. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS BTG's ratings are unlikely to face upward pressure, as the bank's adjusted BCA because they are currently at the same level as the Government of Brazil's Ba2 sovereign rating, which carries a stable outlook. Conversely, the rating could be downgraded if Brazil's sovereign rating is downgraded, or if rapid loan growth leads to a greater than expected increase in asset risk for BTG Pactual or if the bank's capitalization ratio drops sharply. Downward rating pressure could also be triggered by weakening liquidity, which could increase the bank's intrinsic vulnerability to its institutional-based funding structure. ISSUERS AND RATINGS AFFECTED Issuer: Banco BTG Pactual S.A. Baseline credit assessment of ba2 Adjusted baseline credit assessment of ba2 Long and short-term local and foreign currency deposit ratings of Ba2, stable outlook and Not-Prime Long and short-term local and foreign currency counterparty risk ratings of Ba1 and Not-Prime Long and short-term counterparty risk assessment of Ba1(cr) and Not-Prime(cr) Long and short-term senior unsecured MTN program ratings of (P)Ba2 and (P)Not-Prime Issuer: Banco BTG Pactual S.A., Grand Cayman Branch Long and short-term local and foreign currency counterparty risk ratings of Ba1 and Not-Prime Long and short-term counterparty risk assessment of Ba1(cr) and Not-Prime(cr) Long and short-term senior unsecured MTN program ratings of (P)Ba2 and (P)Not-Prime Senior unsecured debt rating of Ba2, stable outlook Subordinate debt rating of B1(hyb) Subordinate debt rating of Ba3 Issuer: Banco BTG Pactual S.A., Luxembourg Branch Long and short-term local and foreign currency counterparty risk ratings of Ba1 and Not-Prime Long and short-term counterparty risk assessment of Ba1(cr) and Not-Prime(cr) Long-term senior unsecured MTN program ratings of (P)Ba2 Senior unsecured debt rating of Ba2, stable outlook Outlook Actions: Issuer: Banco BTG Pactual S.A. Outlook, Remains Stable Issuer: Banco BTG Pactual S.A., Grand Cayman Branch Outlook, Remains Stable Issuer: Banco BTG Pactual S.A., Luxembourg Branch Outlook, Remains Stable The principal methodology used in these ratings was Banks Methodology published in July 2021. GOL LINHAS: Receives US$200 Million Investment ---------------------------------------------- Richard Mann at Rio Times Online reports that Gol Linhas disclosed that it will expand its codeshare agreement with American Airlines, making it exclusive for the next three years; further, the U.S. carrier will make a US$200 million (R$1.05 billion) investment in the company via a stock purchase. The new agreement expands the terms of the partnership signed between the two companies in February 2020, increasing travel opportunities for its passengers, enhancing the customer experience, and improving Gol's competitive position on routes connecting North and South America, according to Rio Times Online. As reported in the Troubled Company Reporter-Latin America in June 2021, S&P Global Ratings revised the outlook on Brazilian airline Gol Linhas Aereas Inteligentes S.A. (Gol) to stable from developing and affirmed its global scale 'CCC+' and national scale 'brBB' issuer credit ratings on Gol. At the same time, S&P affirmed its 'CCC+' issue-level rating on the senior unsecured notes but revised the recovery rating to '4' from '3', indicating its expectation of average (30%-50%; rounded estimate: 35%) recovery in the event of a payment default. MARFRIG GLOBAL: Fitch Affirms 'BB' LT IDRs & Alters Outlook to Pos. ------------------------------------------------------------------- Fitch Ratings has affirmed Marfrig Global Foods S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB', and, MARB BondCo PLC and NBM US Holdings, Inc.'s senior unsecured notes at 'BB'. In addition, Fitch has affirmed Marfrig's National Scale rating at 'AA+ (bra)'. The Rating Outlook has been changed to Positive from Stable. The Positive Outlook reflects Marfrig's strong operating performance, expected positive FCF, and low net leverage ratios. KEY RATING DRIVERS Steady Net Leverage: Marfrig's net debt/EBITDA ratio (adjusted by minorities dividends, and excluding BRF shares) is expected to remain steady at about 2.0x (1.9x in 2020) and gross leverage to be below 3.0x in 2021 thanks to increased EBITDA and strong FCF. Fitch expects Marfrig to generate about BRL1.1 billion of FCF including dividends paid to minorities in 2021. The company is benefiting from strong beef trends in the industry due to the high availability of cattle in the USA, as well as high beef prices due to strong demand supported by the reopening of U.S. economy. The EBITDA margin of the company's U.S. subsidiary, National Beef, is expected to peak at close to 19% in 2021 and normalize to high single digit in the following years. Performance in South America has been weak due to higher cattle costs and subdued recovery of consumer demand in Brazil. Exports continues to remain the main driver of profitability in South America due to international beef demand. Robust Business Position: Marfrig's ratings incorporate the company's size and geographic diversification in the volatile protein commodity industry. Marfrig is a pure beef player with a processing capacity of 30,100 head/day. National Beef is the fourth-largest beef processor in the United States with approximately 14% of the beef processing capacity in the U.S. (13,100 head/day). In South America, Marfrig is one of the region's leading beef producers, with a primary processing capacity of 17,000 head/day of which 12,100 head/day in Brazil, 3,700 head/day in Uruguay and 1,200 head/ day in Argentina. The company has invested about USD1.3 billion in the acquisition of BRF shares (about 32%, of which 8.93% are still to be approved by CADE). Management has not expressed any intention to acquire or merge with BRF, and is not represented at BRF board of director. Geographical Diversification: Marfrig's exposure to the volatile beef segment of the protein sector is partially mitigated by its geographic diversification into the two largest beef producing markets. National Beef represented about 87% of the group EBITDA, and the remaining 13% was represented by South America (mostly in Brazil) for the LTM 2Q21. Sales from National Beef are primarily made in the U.S., which reduces the company's exposure to risks related to trade tariffs, quotas and bans. Exports represented 60% of South American revenues, and the company has thirteen accredited plants (Brazil, Uruguay, Argentina) for exporting to China. This geographical diversification enables the groups to mitigate cattle cycles, sanitary, social, deforestation in the Amazon Biome and other environmental risks due to the complexity in the monitoring of the supply chain. Resilient U.S. Beef Demand: Marfrig's competitive advantages stem from its large scale of operations, access to export markets from Brazil and the U.S., and long-term relationships with farmers, customers and distributors. USDA forecasts beef production to increase by 2% in 2021 and decrease by about 3% in 2022. USDA projects Brazil beef production and consumption to decline by about 5% in 2021. DERIVATION SUMMARY Marfrig's ratings reflect its solid business profile and geographic diversification as a pure player in the beef industry with a large presence in South America (notably in Brazil) and in the U.S. with National Beef. Marfrig is well positioned to compete in the global protein industry due to its size and geographic diversification. Regarding size, the business compares favourably with its regional peer Minerva S.A. (BB/Stable), which is mainly a beef processor in South America. JBS S.A. (BBB-/Stable) and Tyson Foods (BBB/Stable) enjoy a higher level of scale of operations, stronger FCF, and higher product and geographical diversification than Marfrig. KEY ASSUMPTIONS Fitch's key assumptions within its rating case for the issuer include: -- Sales are driven by better prices and strong performance of National Beef; -- Acquisition of BRF shares for about USD1.3 billion; -- Positive FCF; -- Adj. net leverage of close to 2.0x as of YE 2021. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Sustainable and positive FCF; -- Decrease in gross and net leverage to below 4.0x and 3.0x, respectively, on a sustained basis beyond 2022; -- Improved visibility regarding Marfrig's stake on BRF. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Negative FCF on a sustained basis; -- Gross leverage above 5.0x and net leverage above 4.0x on a sustainable basis beyond 2022. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: As of June 30, 2021, Marfrig had BRL8.3 billion of cash and cash equivalents (excluding BRL5.2 billion worth of BRF shares), compared with BRL8.5 billion of short-term debt. The short-term debt is mainly related to trade finance lines. ISSUER PROFILE Marfrig Global Foods S.A. (Marfrig) is a multinational corporation and the world's second largest beef company in terms of production capacity. The company operates 32 units (slaughter and processing facilities), distribution centers and offices located in North America, South America, Europe and Asia. The company's activities include the production, processing, sale and distribution of foods made from animal protein. ESG CONSIDERATIONS Marfrig has an ESG Relevance Score of '4' in Governance as a result of ownership concentration due to the control of the company by the Molina family. The shareholder's strong influence upon management could result in decisions being made to the detrimental to the company's creditors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3' - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. [*] BRAZIL: Services Up 3.9% From Pre-Pandemic Level, IBGE Says --------------------------------------------------------------- Iolanda Fonseca at Rio Times Online reports that the 1.1% rise in the volume of services provided in Brazil in July compared to June pushed the services sector to operate at a level 3.9% higher than in February 2020, in the pre-pandemic period. The data are based the Monthly Service Survey by the Brazilian Institute of Geography and Statistics (IBGE), according to Rio Times Online. In July, transportation operated 6.9% above the pre-pandemic, February 2020 level, while services provided to households were still 23.2% below, the report notes. 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). =============== C O L O M B I A =============== AVIANCA HOLDINGS: Shares Drop as Hearing for Ch.11 Exit Nears ------------------------------------------------------------- Loren Moss of Finance Colombia reports that shares in Colombian airliner Avianca have lost almost half their remaining value in the first week of September 2021 as the bankrupt company prepares a Chapter 11 exit plan that would probably wipe out the rest of their worth. The company that once traded over $15 USD per share on the New York Stock Exchange (NYSE:AVH) was delisted last 2020 after the company filed for bankruptcy, and shares traded on Colombia's BVC (BVC:PFAVH) were trading at 112 pesos (2.9 cents US) at the end of the September 6, 2021, trading. In a plan that Avianca has proposed to exit bankruptcy, current company debt, including debtor-in-possession financing would be converted to equity shares in a reorganized holding company, taking precedence over, and thus wiping out any residual value in shares of the bankrupt holding company. In other words, the new lenders would become the shareholders and existing shareholders would get nothing. Avianca's 6K filing dated September 1 follows below: In the context of Avianca Holdings S.A.'s ("Avianca" or the "Company") Chapter 11 proceedings, on September 1, 2021, the Company, as debtor-in-possession ("DIP"), intends to file a motion with the Bankruptcy Court (the "Court") seeking approval of the terms of, and the Company's entry into and performance under, an Equity Conversion and Commitment Agreement (the "ECCA"), dated September 1, 2021, by and among the Company, certain of its subsidiaries and a majority of Avianca's "Tranche B" Lenders under the Company's outstanding DIP Credit Agreement (the "Supporting Tranche B Lenders"). The terms of the ECCA provide for the potential conversion of approximately $900 million in Tranche B DIP obligations into equity in a reorganized new holding entity of the Companies (as defined below) and the contribution by the Supporting Tranche B Lenders of $200 million of additional capital in exchange for equity in such reorganized entity upon the satisfaction of certain conditions. Following a competitive marketing process for exit financing, the Company's management decided (in consultation with certain stakeholders) to refinance Tranche A of its previously outstanding DIP facility with New Tranche A-1 DIP/Exit Loans and New Tranche A-2 DIP/Exit Loans (as disclosed to the market on July 22, 2021) and to move forward in its negotiations with its Tranche B lenders. The ECCA, which remains subject to final approval by the Court, evidences Avianca's decision to elect the conversion option under its DIP credit agreement and is the result of such negotiations with the Supporting Tranche B Lenders. Further to our disclosures to the market on May 20, 2020, April 14, 2021 and July 22, 2021, although the Supporting Tranche B Lenders have executed the ECCA, the ECCA remains subject to approval by the Court and to the satisfaction of certain other conditions. Accordingly, at this stage of the process, it is still not possible to know (i) if third parties, creditors or shareholders will contribute new capital, or if the value of the shares of the Company (ordinary and/or preferred) will be diluted and, to the extent such is the case, the extent of such dilution; or (ii) if the Company or any of its affiliated debtors in the Chapter 11 proceedings (the Debtors) will be liquidated. In any event, U.S. law imposes upon the Debtors a priority order (known as the "absolute priority rule") to pay claims existing before the restructuring proceeding filing date. Generally, the value of the Debtors must be directed (i) first, to satisfy secured claims, up to the value of the collateral securing such claims; (ii) second, to satisfy unsecured priority claims; (iii) third, to satisfy non-priority unsecured claims; and (iv) fourth, to shareholders of the Debtors. Generally, a particular class of claims may not receive any distribution until all claims senior to such class have been paid in full. If the Court confirms a plan of reorganization on terms consistent with the ECCA, the Company's shareholders (including ordinary shareholders and preferred shareholders) will not receive any distribution. As a result of the foregoing, under the Chapter 11 plan, the value of the shares of the Company would be reduced to zero, due to the decrease in equity of the Company attributable to the Debtors' liabilities to third parties and creditors, as well as the injection of capital by new investors pursuant to the Chapter 11 plan. In addition to the filing described above, on August 31, 2021, the Company filed with the Court two additional exhibits to the disclosure statement that the Company has proposed to distribute to voting creditors in connection with its Chapter 11 plan of reorganization (the "Disclosure Statement"). These exhibits, customary for reorganization proceedings under Chapter 11, are Exhibit C and Exhibit D. The proposed Disclosure Statement was previously filed at Docket No. 1983. All filings in the Chapter 11 proceedings are available at http://www.kccllc.net/avianca/document/list/5155. About Avianca Avianca -- https://aviancaholdings.com/ -- is the commercial brand for the collection of passenger airlines and cargo airlines under the umbrella company Avianca Holdings S.A. Bogota, Colombia-based Avianca has been flying uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. Avianca Holdings S.A. and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 20-11133) on May 10, 2020. At the time of the filing, the Debtors disclosed $7,273,900,000 in assets and $7,268,700,000 in liabilities. Judge Martin Glenn oversees the cases. The Debtors tapped Milbank LLP as general bankruptcy counsel; Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon Abogados S.A.S. as restructuring counsel; Smith Gambrell and Russell, LLP as aviation counsel; Seabury Securities LLC as financial restructuring advisor and investment banker; FTI Consulting, Inc. as financial restructuring advisor; and Kurtzman Carson Consultants LLC as claims and noticing agent. The U.S. Trustee for Region 2 appointed a committee of unsecured creditors in Debtors' bankruptcy cases on May 22, 2020. The committee is represented by Willkie Farr & Gallagher, LLP. AVIANCA HOLDINGS: U.S. Trustee Criticizes 'Death Trap' Provision ---------------------------------------------------------------- Law360 reports that the U.S. Trustee's Office is asking a Delaware bankruptcy judge to reject Colombian airline Avianca's disclosure of its debt-swap Chapter 11 plan, saying it fails to explain why it is imposing a $6 million "death trap" clause on its unsecured creditors. In an objection filed Tuesday, September 7, 2021, U.S. Trustee William Harrington argued the disclosure statement Avianca Holdings has filed on its Chapter 11 plan fails to justify plan clauses that give unsecured creditors an additional $6 million recovery if the class approves the plan and require creditors to act to avoid releasing their legal claims. "Here the Debtors seek to bind creditors who abstain from voting, and do not Opt-Out of the releases, with third-party releases. There is no basis, however, to conclude that such inaction constitutes consent to the releases. Id. Accordingly, unless these third-party releases are severed from the Plan, the Disclosure Statement should not be approved, as it does not explain why creditors that abstain from voting may have their rights against third-parties stripped away," the U.S. Trustee said. To the extent the Plan seeks to furnish an opportunity for a creditor who either rejects the Plan or abstains from voting on the Plan to consent to the third-party releases, such consent should be demonstrated through an unequivocal opt-in procedure. About Avianca Avianca -- https://aviancaholdings.com/ -- is the commercial brand for the collection of passenger airlines and cargo airlines under the umbrella company Avianca Holdings S.A. Bogota, Colombia-based Avianca has been flying uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. Avianca Holdings S.A. and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 20-11133) on May 10, 2020. At the time of the filing, the Debtors disclosed $7,273,900,000 in assets and $7,268,700,000 in liabilities. Judge Martin Glenn oversees the cases. The Debtors tapped Milbank LLP as general bankruptcy counsel; Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon Abogados S.A.S. as restructuring counsel; Smith Gambrell and Russell, LLP as aviation counsel; Seabury Securities LLC as financial restructuring advisor and investment banker; FTI Consulting, Inc. as financial restructuring advisor; and Kurtzman Carson Consultants LLC as claims and noticing agent. The U.S. Trustee for Region 2 appointed a committee of unsecured creditors in Debtors' bankruptcy cases on May 22, 2020. The committee is represented by Willkie Farr & Gallagher, LLP. AVIANCA HOLDINGS: US Trustee Wants Opt-In Forms in Ballots ---------------------------------------------------------- William K. Harrington, the United States Trustee for Region 2, objects to the Disclosure Statement for the Chapter 11 Plan of Avianca Holdings S.A. and Its Affiliated Debtors. The United States Trustee claims that the Disclosure Statement fails to provide adequate information about the non-consensual non-debtor releases that will be imposed under the Plan. Five out of twenty-three Classes are entitled to vote, while all remaining non-voting classes will be subject to the Plan's non-consensual releases. The United States Trustee points out that the Plan does not provide for a creditor or interest holder to affirmatively consent to a third party release. Affirmative consent through an Opt-In Form, however, would be the clearest and most transparent procedure with respect to third party releases. The Disclosure Statement should also affirmatively state that Opt-Out designations will be honored, or, if not, why not. The United States Trustee asserts that if, in fact, the Debtors seek to impose releases upon holders of non-voting claims or interests, the Plan must make that intent clear, and provide for a means of allowing the affected party to affirmatively consent to such releases. Accordingly, these classes should be provided with a Notice of Non-voting status with an optional Release Opt-In Form. Next, the Disclosure Statement should provide adequate information regarding what the Debtors consider to be the rare and exceptional circumstances that would justify this Court imposing a third-party release on an impaired non-consenting creditor. The Disclosure Statement provides no information concerning any unique circumstances that would justify such extraordinary relief. Finally, the Disclosure Statement should explain the basis for the imposition of the Death Trap provision on holders of Class 11 â€“ General Unsecured Avianca Claims, providing for an increased $6 million recovery if Class 11 accepts the Plan. A full-text copy of the United States Trustee's objection dated September 7, 2021, is available at https://bit.ly/2VBfWje from Kurtzman Carson Consultants LLC, claims agent. About Avianca Avianca -- https://aviancaholdings.com/ -- is the commercial brand for the collection of passenger airlines and cargo airlines under the umbrella company Avianca Holdings S.A. Bogota, Colombia-based Avianca has been flying uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. Avianca Holdings S.A. and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 20-11133) on May 10, 2020. At the time of the filing, the Debtors disclosed $7,273,900,000 in assets and $7,268,700,000 in liabilities. Judge Martin Glenn oversees the cases. The Debtors tapped Milbank LLP as general bankruptcy counsel; Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon Abogados S.A.S. as restructuring counsel; Smith Gambrell and Russell, LLP as aviation counsel; Seabury Securities LLC as financial restructuring advisor and investment banker; FTI Consulting, Inc. as financial restructuring advisor; and Kurtzman Carson Consultants LLC as claims and noticing agent. The U.S. Trustee for Region 2 appointed a committee of unsecured creditors in Debtors' bankruptcy cases on May 22, 2020. The committee is represented by Willkie Farr & Gallagher, LLP. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Chicken Farmers Assure Supply, At a Price ------------------------------------------------------------- Dominican Today reports that according to data from the Central Bank of the Dominican Republic (BCRD), the 10 products that registered the most increases during the month of August are led by fresh chicken. This product monopolized the headlines of the newspapers due to the shortage that consumers denounced and that was verified by local media, despite the poultry farmers assuring that the production covered the demand, according to Dominican Today. The pound of fresh chicken at the beginning of the year was dispatched to the public, on average, at RD$69.13 in the country's supermarkets, according to data from the National Institute for the Protection of Consumer Rights (Pro Consumidor), and in the last survey carried out Between August 20 and 26, a pound of white meat is around RD$72.48, a 4.84% jump in August, the report notes. 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 DPR: Fitch Affirms BB- Rating on Series 2020-1 Loan ----------------------------------------------------------- Fitch Ratings has affirmed the outstanding series 2020-1 loan originated by Ecuador DPR Funding at 'BB-'. The Rating Outlook is Negative. The Negative Outlook on the loan rating reflects Banco Pichincha C.A. y Subsidiarias' (BP) Negative Outlook. DEBT RATING PRIOR ---- ------ ----- Ecuador DPR Funding LT BB- Affirmed BB- 2020-1 TRANSACTION SUMMARY The future flow program is backed by U.S.-dollar-denominated, existing and future diversified payment rights (DPRs) originated in the U.S. by BP of Ecuador. A majority of DPRs are processed by designated depository banks (DDBs) that have executed account agreements. Fitch's rating addresses timely payment of interest and principal on a quarterly basis. KEY RATING DRIVERS Future Flow Rating Driven by Originator's Credit Quality: The rating of this future flow transaction is tied to the credit quality of the originator, BP. On Dec. 11, 2020, Fitch affirmed BP's Long-Term Issuer Default Rating (IDR) at 'B-' with a Negative Outlook and its Viability Rating (VR) at 'b-'. BP's Negative Outlook reflects the increased downside risks from the economic implications of the coronavirus pandemic. Going Concern Assessment (GCA) Score Supports Notching Differential: Fitch uses a GCA score to gauge the likelihood that the originator of a future flow transaction will stay in operation through the transaction's life. Fitch assigns a GCA score of 'GC1' to BP based on the bank's systemic importance and largest bank in the Ecuadorian banking system in terms of assets and deposits. The score allows for a maximum of six notches above the Local Currency (LC) IDR of the originator; however, additional factors limit the maximum uplift. Factors Limit Notching Differential: The 'GC1' score allows for a maximum six-notch rating uplift from the bank's IDR, pursuant to Fitch's future flow methodology. However, uplift is tempered to three notches from BP's IDR mainly due to Ecuador's lack of last resort lender. Moderate Future Flow Debt Relative to BP's Balance Sheet: Total future flow debt including the series 2020-1 loan represent approximately 1.1% of BP's total funding and 19.4% of non-deposit funding utilizing unconsolidated financials as of June 2021. Fitch considers the ratio of future flow debt to overall non-deposit funding to be low enough to allow the financial future flow ratings up to the maximum uplift indicated by the GCA score. Coverage Levels Commensurate with Assigned Rating: When considering rolling quarterly DDB flows between August 2016 and July 2021, Fitch expects the quarterly minimum debt service coverage ratio (DSCR) to be approximately 166.2x, considering the maximum debt service for the life of the program. No Lender of Last Resort: Ecuador is a dollarized economy without a true lender of last resort. While certain mechanisms are in place to help fend off a banking system crisis, this limits the notching differential of the transaction. Reduced Redirection/Diversion Risk: The structure mitigates certain sovereign risks by collecting cash flows offshore until collection of the periodic debt service amount, allowing the transaction to be rated over the sovereign country ceiling. Fitch believes payment diversion risk is partially mitigated by the Account Agreements signed by the three correspondent banks processing the vast majority of USD DPR flows originating in the U.S. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The transaction ratings are sensitive to changes in the credit quality of BP. A further deterioration of the credit quality of BP is likely to pose a constraint to the current rating of the transaction. -- The transaction ratings are sensitive to the ability of the DPR business line to continue operating, as reflected by the GCA score and a change in Fitch's view on the bank's GCA score can lead to a change in the transaction's rating. Additionally, the transaction rating is sensitive to the performance of the securitized business line. The expected quarterly DSCR is approximately 166.2x, and should therefore be able to withstand a significant decline in cash flows in the absence of other issues. However, significant further declines in flows could lead to a negative rating action. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings. -- No company is immune to the economic and political conditions of its home country. Political risks and the potential for sovereign interference may increase as a sovereign's rating is downgraded. However, the underlying structure and transaction enhancements mitigate these risks to a level consistent with the assigned rating. Factor that could, individually or collectively, lead to positive rating action/upgrade: -- Fitch does not anticipate developments with a high likelihood of triggering an upgrade. However, the main constraint to the program rating is the originator's rating and BP's operating environment. If upgraded, Fitch will consider whether the same uplift could be maintained or if it should be further tempered in accordance with criteria. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven 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 seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The future flow ratings are driven by the credit risk of Banco Pichincha C.A. as measured by its Long-Term IDR. ================= V E N E Z U E L A ================= VENEZUELA: Moody's Withdraws 'C' Rating on Senior Unsecured Debt ---------------------------------------------------------------- Moody's Investors Service has withdrawn the C ratings of the local currency senior unsecured debt instruments of the Government of Venezuela. Withdrawals: Issuer: Venezuela, Government of Senior Unsecured Regular Bond/Debenture, Withdrawn , previously rated C RATINGS RATIONALE Moody's has decided to withdraw the ratings for its own business reasons. =============== X X X X X X X X =============== LATAM: IDB Says Economic Recovery Dependent on COVID Testing, Vaxx ------------------------------------------------------------------ RJR News reports that two economists from the Inter-American Development Bank (IDB) have suggested that the Latin America region's economic recovery will depend heavily on countries' ability to test their populations and providing access to vaccines, particularly for frontline workers. In the IDB's latest Quarterly Bulletin, economists Henry Mooney and David Rosenblatt noted the importance of access to vaccines for workers in tourism and tourism-related activities and cautioned that availability of timely COVID-19 testing was also key to returning countries to some level of normalcy, according to RJR News. According to Mooney and Rosenblatt, per capita income recovery was a good measure of return to a positive economic place, the report notes. Based on the latest available data and projections, only Guyana saw positive real per capita GDP growth in 2020 relative to 2019, owing to the start of production at its considerable oil discoveries, the report adds. ********* 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 * * *