/raid1/www/Hosts/bankrupt/TCRLA_Public/210929.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, September 29, 2021, Vol. 22, No. 189
Headlines
A R G E N T I N A
ARGENTINA: 2022 Budget Bill Assumes Deal With IMF, Fernandez Says
ARGENTINA: Forecasts 33% Inflation & 4% Growth in 2022 Budget
B R A Z I L
JSL SA: S&P Alters Outlook to Positive & Affirms 'B+' ICR
PETROLEO BRASILEIRO: Egan-Jones Hikes Sr. Unsecured Ratings to B
SARAVA LIBRARIES: Unable to Sell Assets, Risks Bankruptcy
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Chicken Imports Fail to Trim Prices
DOMINICAN REPUBLIC: Shippers Warn of Container Shortage
E C U A D O R
ECUADOR: Egan-Jones Retains CCC Sr. Unsecured Debt Ratings
E L S A L V A D O R
BANCO AGRICOLA: Moody's Withdraws B2 LongTerm Deposit Rating
M E X I C O
CEMEX SAB: S&P Alters Outlook to Positive & Affirms 'BB' ICR
MEXICO: Egan-Jones Retains BB- Ratings on Sr. Unsecured Debt
P A N A M A
BAC INT'L: Fitch Puts 'BB+' LT IDR on Watch Negative
P U E R T O R I C O
AES PUERTO RICO: Fitch Affirms 'C' Ratings on 2022/2026 Bonds
I MORALES TIRE: Seeks to Clarify Language in Confirmed Plan
J.J.W. METAL: Taps Arroyo Cruz Law Office as Litigation Counsel
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A R G E N T I N A
=================
ARGENTINA: 2022 Budget Bill Assumes Deal With IMF, Fernandez Says
-----------------------------------------------------------------
Buenos Aires Times reports that the first draft of next year's
budget bill of Argentina will be sent to Congress and it expects
the country to reach an agreement with the International Monetary
Fund to refinance its record US$45-billion loan.
President Alberto Fernandez said the assumption requires his
administration to keep working on a new agreement with the
Washington-based lender to replace the 2018 program that failed to
lift the crisis-prone economy, according to Buenos Aires Times.
Although the Argentine government has been in talks with the IMF
for more than a year, the negotiations have produced nothing
concrete that would lead to a new program, the report notes.
"We will present the budget assuming that next year we do not have
to fulfil external commitments," Fernandez said at the Casa Rosada,
discussing the budget bill, the report relays. "If that agreement
did not exist, we have to face the payment of US$19 billion next
year," he added.
Argentina aims to negotiate a 10-year plan, known as an extended
fund facility agreement, with the Fund that would allow it to
refinance the US$45 billion it owes to the Fund, the report says.
The South American nation, which is excluded from international
debt markets, must pay the organization more than US$4 billion
before the end of the year, including US$1.9 billion asap, the
report notes.
Fernandez's coalition suffered a major defeat in the congressional
primary elections, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8, 2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
ARGENTINA: Forecasts 33% Inflation & 4% Growth in 2022 Budget
-------------------------------------------------------------
Buenos Aires Times reports that despite an intense day of crisis
and Kirchnerite fire in the wake of the Argentina government's PASO
primary defeat, Economy Minister Martin Guzman managed to meet the
statutory September 15 deadline for the 2022 Budget, submitting it
to Congress at the stroke of midnight with the signature of
President Alberto Fernandez.
Guzman received a telephone call from Vice-President Cristina
Fernandez de Kirchner denying that she sought his removal, easing
the pressure for his resignation somewhat yet failing to settle the
issue, according to Buenos Aires Times.
The 2022 Budget forecasts an annual inflation of 33 percent for
next year, a primary fiscal deficit of 3.3 percent of Gross
Domestic Product, an official exchange rate of 131.10 pesos per
dollar by the end of next year, a growth rate of four percent
(following a rebound of eight percent this year) and energy
subsidies to the tune of 1.5 percent of GDP to be achieved via
segmented public service billing (otherwise they would be 1.8
percent), according to government sources, the report relays.
As announced previously by President Fernandez, the 2022 Budget
assumes that no capital repayments will be made to the
International Monetary Fund (IMF), since it is hoped that an
agreement will be reached in the course of the year, the report
discloses. Otherwise the government stands to pay US$19.1 billion,
the report says.
The Economy Ministry forecasts that the wages of registered workers
will grow 38.3 percent, ahead of inflation, after purchasing-power
has fallen every year since 2018, the report notes.
Private consumption will grow 4.6 percent and investment 3.1
percent, according to the bill, the report notes. Exports will
rise 7.5 percent and imports 9.4 percent, the report relates.
Government revenues are forecast to surge 45.3 percent to 15.7
trillion pesos from the 10.7 trillion pesos expected this year, the
report discloses.
Economy Ministry sources told the Noticias Argentinas news agency
that this Budget represents a recovery from the "double crisis" of
"unsustainable debt" and the coronavirus pandemic, the report
notes.
The debt could only be paid by eliminating public works, subsidies
and vaccine purchases as well as by cuts in education and health
spending, the sources added, the report says.
The deficit would be financed by issuing public bonds to the tune
of 1.2 trillion pesos (two percent of GDP), printing 1.08 trillion
pesos (1.8 percent of GDP) and funds from public bodies (1.1
percent of GDP), the report relates.
Guzman's next priority was a package of measures to assist
low-income sectors in reaction to electoral defeat, which was to
have been announced, but any announcement was delayed by the
midweek Cabinet crisis, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8, 2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
===========
B R A Z I L
===========
JSL SA: S&P Alters Outlook to Positive & Affirms 'B+' ICR
---------------------------------------------------------
S&P Global Ratings, on Sept. 24, 2021, revised the outlook on its
ratings on Brazilian transportation company JSL S.A. to positive
from stable, and affirmed its 'B+' global scale and 'brAA' national
scale ratings.
The positive outlook reflects S&P's expectation that the company
will continue to gain scale and diversification, strengthening its
business, while improving credit metrics, reducing leverage
comfortably below 4.0x by the end of 2022.
Since the company went through the corporate reorganization and the
IPO last year, it has been gaining scale through internal, and
mostly acquisition-based, growth. The company completed five
acquisitions in the past 12 months that enabled JSL enter into new
business segments and types of services, such as compressed gas,
frozen and refrigerated cargo, and warehouse management. Such
growth also broadened the company's geographic diversification,
with a larger presence in the northeastern region of Brazil and
expanding its operations to other countries in South America. S&P
said, "We also factor in our analysis synergy growth among the
acquired companies, given the higher bargaining power of the
parent, the Simpar group, in acquiring new vehicles at lower costs
and at a faster pace amid the current delays in the automaking
segment, given supply chain issues, namely the lack of
semiconductors. As a result, excluding potentially additional
acquisitions, we expect JSL to post consolidated revenue above R$5
billion in 2022, compared with R$2.8 billion in 2020. We also
expect EBITDA close to R$850 million next year, sharply up from
R$510 million in 2020 (considering pro forma, 12-month operations
of acquired companies last year)."
Given JSL's public target to reach gross revenue above R$11 billion
in 2025, it aims to use most of its operating cash flows for
acquisitions or investments in its business. The recently acquired
assets have low leverage and solid profitability, and should
accelerate JSL's deleveraging with EBITDA increasing from
consolidated organic growth that wouldn't require additional debt.
S&P said, "Our current base-case scenario assumes relatively stable
gross debt levels over the next few years, R$3.0 billion - R$3.5
billion, and adjusted net debt close to R$3.0 billion, which
includes the future payments for these acquisitions. We believe JSL
would maintain debt to EBITDA at 3.0x-3.5x, with increasing EBITDA
and modest debt increases. We don't consider any new acquisitions
in our forecast, given the uncertainties about timing, size, and
amounts. Still, we believe M&As will strengthen the company's
credit quality, if accompanied by relatively stable leverage
levels."
JSL's automotive operations are still facing lower activity this
year than prior to the pandemic, given the supply chain problems in
that industry. Still, the company's increasing diversification and
higher share of revenue coming from more resilient sectors, such as
food and beverages (currently about 22% of total revenue), mitigate
the risks of prolonged downturns in some industries. JSL has also
been facing cost pressures this year on various fronts, such as
fuel, auto parts, and wages. But S&P believes its larger scale and
long-term relationship with customers will allow the company to
continue renegotiating contracts, passing through most of the cost
increases to maintain adequate profitability.
PETROLEO BRASILEIRO: Egan-Jones Hikes Sr. Unsecured Ratings to B
----------------------------------------------------------------
Egan-Jones Ratings Company, on September 15, 2021, upgraded the
foreign currency and local currency senior unsecured ratings on
debt issued by Petroleo Brasileiro S.A. – Petrobras to B from
B-.
Headquartered in Rio de Janeiro, State of Rio de Janeiro, Brazil,
Petroleo Brasileiro S.A. - Petrobras explores for and produces oil
and natural gas.
SARAVA LIBRARIES: Unable to Sell Assets, Risks Bankruptcy
---------------------------------------------------------
globalinsolvency.com, citing Lodi Valley News, reports that unable
to sell such assets as its retail outlets and its online domain,
Brazil's Sarava Libraries suffered a new setback in its judicial
recovery plan and risks declaring bankruptcy.
After an action by one of its creditors, technology company
Infosys, which questioned the retailer's plan filed in March, the
court has now decided that Sarava will file a new proposal within
30 days, under pain of filing for bankruptcy, according to
globalinsolvency.com.
However, a few days before this decision the company had already
made an adjustment to the plan and is contemplating the failure to
sell the assets, the report notes.
According to the decision of the first chamber reserved for the
Commercial Law of the Court of Justice of Sao Paulo, the new plan
will need to be voted on within 30 days, the report discloses.
To be approved, the company will need to comply with what has been
previously verified, focusing on business creditors, the report
relays.
It has already been determined, for example, that the company
regularly pays up to R$160,000 in the form of work credits, the
report discloses.
Under judicial reorganization since 2018 and with debts of about
R$674 million at the time, Sarava was not able to sell the assets
that would be used to pay creditors and inject cash into the
operation, the report says. It recently made the third attempt to
sell some stores and its e-commerce business, but it didn't attract
interested parties, the report adds.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Chicken Imports Fail to Trim Prices
-------------------------------------------------------
Dominican Today reports that despite the green light for chicken
imports by the Dominican Republic Government to influence a drop in
the price, that has not registered a drop, indicated merchants told
El Dia.
The price of chicken continues to sell between 70 pesos and 80
pesos, said Aridio Reynoso, while Jennifer Gil, also a retail
chicken seller in the Cristo Rey market, said that the clientele
has decreased by 20% due to the increases, according to Dominican
Today.
Likewise, she indicated that the increase has two months and does
not show a reduction in its costs, so they have had to buy the
chicken at 70 to sell it at 75 pesos, 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).
DOMINICAN REPUBLIC: Shippers Warn of Container Shortage
-------------------------------------------------------
Dominican Today reports that the containers in which the products
that Dominicans buy for the Christmas season are may not arrive in
time at the country's ports, due to the persistent problem in world
maritime transport, caused by the pandemic.
Dominican Today relate that the president of the Association of
Shippers of the Dominican Republic (ANRD), Teddy Heinsen, specified
that by this date generally importers have already bought Christmas
products and are shipped. However Heinsen noted that transport
capacities from China are limited and it is very likely that some
of those vans will not arrive on time, 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).
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E C U A D O R
=============
ECUADOR: Egan-Jones Retains CCC Sr. Unsecured Debt Ratings
----------------------------------------------------------
Egan-Jones Ratings Company, on September 10, 2021, maintained its
'CCC' foreign currency and local currency senior unsecured ratings
on debt issued by Republic of Ecuador. EJR also maintained its 'B'
rating on commercial paper issued by the Company.
Ecuador is a country straddling the equator on South America's west
coast.
=====================
E L S A L V A D O R
=====================
BANCO AGRICOLA: Moody's Withdraws B2 LongTerm Deposit Rating
------------------------------------------------------------
Moody's Investors Service has withdrawn all ratings and assessments
assigned to Banco Agricola, S.A. Before the withdrawal, the outlook
on the deposit rating was negative.
Withdrawals:
Issuer: Banco Agricola, S.A.
Baseline credit assessment, Withdrawn, previously rated caa1
Adjusted baseline credit assessment, Withdrawn, previously rated
b2
Long-term foreign currency deposit rating, Withdrawn, previously
rated B2; outlook changed to Ratings Withdrawn from Negative
Long-term foreign currency counterparty risk rating, Withdrawn,
previously rated B2
Long-term counterparty risk assessment, Withdrawn, previously
rated B2(cr)
Short-term foreign currency deposit rating, Withdrawn, previously
rated Not Prime
Short-term foreign currency counterparty risk rating, Withdrawn,
previously rated Not Prime
Short-term counterparty risk assessment, Withdrawn, previously
rated Not Prime(cr)
Outlook Actions:
Issuer: Banco Agricola, S.A.
Outlook, Changed To Ratings Withdrawn From Negative
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
Banco Agricola, S.A. is headquartered in San Salvador, El Salvador,
and is the largest bank in the country with assets of $5,328
million and shareholders' equity of $602 million as of June 30,
2021.
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M E X I C O
===========
CEMEX SAB: S&P Alters Outlook to Positive & Affirms 'BB' ICR
------------------------------------------------------------
S&P Global Ratings, on Sept. 24, 2021, revised its outlook on
Mexico-based cement producer CEMEX S.A.B de C.V. to positive from
negative. S&P also affirmed its global scale 'BB' issuer credit
ratings on CEMEX and its rated subsidiaries. S&P also affirmed its
'mxA/mxA-1' national scale ratings, and affirmed its issue-level
ratings on the company's senior secured debt at 'BB' and on its
perpetual bonds at 'B'. The recovery rating on CEMEX's senior
secured debt remains at '3'.
The positive outlook on both rating scales reflects the possibility
of an upgrade in the next 6-12 months if the company strengthens
cash flows and liquidity.
For the 12 months ended June 30, 2021, CEMEX revenue grew 15.2%.
For the remainder of 2021 and in 2022, S&P expects conditions for
the cement industry to remain favorable across all of the company's
key markets thanks to greater social spending in Mexico and other
Latin American markets, robust home improvement activity, and
higher remittances from the U.S. Also, investments in post-pandemic
infrastructure projects across the U.S. and Europe would be a key
driver for cement demand.
Last year, CEMEX adopted several countercyclical measures under its
'Operation Resilience' plan. The company suspended non-essential
activities, implemented savings in administrative expenses, and
increased the use of low-cost suppliers along with efficient
deployment of maintenance activities and energy consumption. Such
initiatives have contributed more than 200 basis points to CEMEX's
EBITDA margins. These actions not only strengthened profitability,
but helped prevent cash burn. Additionally, CEMEX maintained stable
prices in dollar terms, despite volatility of some currencies in
emerging markets.
S&P said, "Following a deterioration of the company's credit
metrics due to COVID-19, with adjusted debt to EBITDA exceeding at
some point 5x and funds from operations (FFO) to debt declining to
11%, our forecast in 2020 assumed that CEMEX's cement volumes would
only recover gradually and EBITDA could reach pre-pandemic levels
in 12 months. We also expected a slight improvement in CEMEX's debt
to EBITDA and FFO to debt to 4.8x and 12.5%, respectively, for
2021. Instead, these metrics reached less than 4x and close to 20%,
respectively, for the last 12 months ended June 30, 2021. In our
view, CEMEX will post its strongest financial performance in more
than a decade, as growth and efficient operations under our revised
base-case scenario will support credit metrics, which could prompt
us to reassess CEMEX's financial risk profile.
After years of debt refinancing, CEMEX has been able to extend its
debt maturity profile, and significantly reduce its exposure to
short-term risks. As of June 30, 2021, CEMEX's annual debt
maturities wouldn't exceed $600 million for the next two years, and
refinancing needs would only reach $1 billion in 2024. Also,
CEMEX's focus on maintaining a favorable standing in the capital
markets, keeping access to committed liquidity facilities, and
generally effective cash management are providing CEMEX ample
liquidity headroom. Therefore, S&P now views CEMEX's liquidity as
strong.
MEXICO: Egan-Jones Retains BB- Ratings on Sr. Unsecured Debt
------------------------------------------------------------
Egan-Jones Ratings Company, on Sept. 17, 2021, maintained its 'BB-'
foreign currency and local currency senior unsecured ratings on
debt issued by United Mexican States.
Mexico, officially the United Mexican States, is a country in the
southern portion of North America.
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P A N A M A
===========
BAC INT'L: Fitch Puts 'BB+' LT IDR on Watch Negative
----------------------------------------------------
Fitch Ratings has placed BAC International Bank, Inc.'s (BIB) Long
Term (LT) Issuer Default Rating (IDR) of 'BB+' and LT National
Scale Rating of 'AA(pan)' on Rating Watch Negative. These actions
follow the Sept. 15, 2021 announcement by BIB's ultimate parent,
Grupo Aval Acciones y Valores S.A.'s (Aval), that it plans to
deconsolidate Leasing Bogota S.A. Panama (Leasing BP, BIB's full
owner) from Banco de Bogota S.A. (Banco de Bogota).
Fitch expects to resolve the Rating Watch upon closing of the
transaction, which could take more than six months. The transaction
is dependent on regulatory approval and expected to be completed
during 1Q2022.
The ratings for Banco de Bogota, Aval and Multibank, Inc
(Multibank) are unaffected by the announcement. Fitch expects Banco
de Bogota's financial ratios to remain commensurate with its
current rating even taking into consideration potential changes,
especially in the bank's capitalization levels after BAC's
deconsolidation. Potential financial ratios variations will be
monitored by Fitch and could take several months to become clear.
Aval's ratings are driven by the business and financial profile of
its main operating subsidiary, Banco de Bogota. Fitch's assessment
of the potential support Multibank's ratings would receive from its
parent, if required, remains unchanged by this transaction.
However, if there is eventually a material change in Fitch's
assessment of the capital adequacy and/or double leverage of these
entities during or after the completion of the corporate
reorganization, this could potentially trigger a negative rating
action, although this is not the baseline scenario at present.
KEY RATING DRIVERS
According to Aval's statement, Banco de Bogota intends to separate
75% of its shares in Leasing BP in favor of its own shareholders,
including Aval. The Rating Watch reflects the possibility that
Fitch's assessment of Banco de Bogota's (BB+/Stable) propensity to
provide support to BIB could be lower, after the transaction is
completed. If Fitch's support assessment results in a downward
differentiation between BIB's IDR and Banco de Bogota's IDR, BIB's
IDRs and National ratings would be based on its standalone profile,
reflected in its Viability Rating (VR) of 'bb'. Therefore, any
potential downgrade of BIB's LT IDR would be limited to a one-notch
movement at its current VR level. On the other hand, if Fitch
concludes that the potential support remains unchanged, BIB's IDR
would be affirmed at its current level.
Currently BIB's ratings are equalized with those of Banco de
Bogota, reflecting Fitch's assessment of the potential support they
would receive from their parent if required. Fitch also placed
BIB's junior subordinated perpetual debt issuance's national LT
rating on Negative Watch, mirroring the same action on the issuer's
National LT rating. BIB's Short-Term (ST) IDR and ST National Scale
rating were affirmed at 'B' and 'F1+(pan)', respectively. Fitch
affirmed BIB's Support Ratings (SR) at '3', reflecting a moderate
probability of support from its shareholder, given its rating, and
Fitch's assessment of moderate ability and propensity to provide
support to BIB if required.
Fitch also affirmed Banco BAC San Jose, S.A.'s (BAC San Jose) LT
Foreign Currency (FC) and LT Local Currency (LC) IDRs at 'B+' and
'BB-', respectively and its ST FC IDR and ST LC IDR at 'B'. BAC San
Jose's IDR will remain at is current levels, despite this corporate
event, as Fitch's support assessment, reflected in BAC San Jose's
SR of '4', will continue to be limited by the country risk. The
Outlook for BAC San Jose's LT IDRs is Negative in line with the
Negative Outlook on Costa Rica's sovereign rating. BAC San Jose's
national ratings, including its debt issuances national ratings,
are not affected by this event.
The national ratings of the rest of BAC Credomatic's subsidiaries
in Central America (Banco de America Central, S.A. from El
Salvador, Inversiones Financieras de America Central S.A., Banco de
America Central, S.A. from Guatemala, BAC Bank, Inc., Credomatic de
Guatemala, S.A., Financiera de Capitales, S.A. and Banco de America
Central Honduras, S.A.), including its debt issuances national
ratings, are not affected by this corporate event.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- BIB's IDR and national ratings may be downgraded after the
transaction is completed in case of a reduction in Fitch's
assessment of Banco de Bogota's propensity to support its
subsidiary. Any potential downgrade would be limited to a one-
notch movement, given BIB's current VR of 'bb'.
-- Before the transaction is completed any negative action on
Banco de Bogota's IDRs would also lead to a similar action on
BIB's IDRs; BIB's IDR and SR could also be downgraded if
Fitch's assessment of its parent's willingness to support its
subsidiary is reduced;
-- BIB's subordinated perpetual bonds' National Rating would be
downgraded in case of negative actions over BIB's National
Ratings, as the bonds' ratings will maintain its four-notch
difference respect to the issuer's National Rating;
-- Negative movements in Costa Rica's sovereign ratings and
Country Ceiling would lead to similar actions on BAC San
Jose's IDRs and SR;
-- Any perception by Fitch of significantly reduced propensity
from Banco de Bogota may trigger a downgrade of BAC San Jose's
IDRs and SR. A multi-notch downgrade of Banco de Bogota's IDRs
would also cause a downgrade of BAC San Jose's IDRs.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive rating actions on BIB's IDR, National Ratings and SR
are unlikely at present due to the Rating Watch Negative;
-- BIB's perpetual subordinated bonds' National Rating would be
upgraded in case of positive actions on BIB's National Ratings
as the bonds' ratings will maintain its four-notch difference
with respect to the issuer's National Rating;
-- Positive actions in the BAC San Jose's ratings are unlikely in
the foreseeable future. The Outlook would be revised to Stable
if Fitch's assessments of the operating environment and the
Costa Rican sovereign rating's Outlook are revised to Stable.
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.
=====================
P U E R T O R I C O
=====================
AES PUERTO RICO: Fitch Affirms 'C' Ratings on 2022/2026 Bonds
-------------------------------------------------------------
Fitch Ratings has affirmed the rating for the following AES Puerto
Rico L.P. (AES PR) securities issued through the Puerto Rico
Industrial, Tourist, Educational, Medical & Environmental Control
Facilities Financing Authority:
-- $161.9 million ($160.0 million outstanding) cogeneration
facility revenue bonds Series A (tax-exempt bonds) due June
2026 at 'C';
-- $33.1 million ($12.3 million) cogeneration facility revenue
bonds, Series B (taxable bonds) due June 2022 at 'C'.
Fitch has no Rating Outlook on the project given the low likelihood
for any short-term resolution to the off-taker's 'D' rating or
conclusion of its insolvency proceedings, which could lead to
subsequent action on the project's rating. There is an issue with
the off-taker that is evolving, and remaining downside risks that
may materialize in the insolvency process are reflected in the
rating.
RATING RATIONALE
AES PR's 'C' rating is linked to, but not constrained by, the
credit quality of the Puerto Rico Electric Power Authority (PREPA),
currently rated 'D'. PREPA is the revenue counterparty under AES
PR's power purchase agreement (PPA). A payment default and negative
rating action would result if PREPA failed to make payments under
the PPA, which could become a possibility should PREPA try to
renegotiate the PPA under bankruptcy proceedings. However, PREPA is
currently honoring its PPA payment obligations, demonstrating the
importance of AES PR as a supplier of power for PREPA.
KEY RATING DRIVERS
Contracted Revenue Profile (Revenue Risk: Midrange)
The 25-year tolling-style PPA effectively mitigates some risk of
exposure to capacity price, energy margin and dispatch risks
throughout the debt term, subject to project availability and heat
rates. Project cash flows are materially independent from dispatch
levels, and revenues are subject to achievable minimum performance
thresholds of 90% effective availability factor (EAF) under the
project's PPA. However, the off-taker's ability to make future
contractual payments is unclear given its financial and operational
difficulties, which were exasperated by recent natural disasters.
Uneven Operations (Operation Risk: Weaker)
The operating performance has somewhat stabilized in recent years
with consistently high availability factors. However, AES PR has
historically been susceptible to forced outages, which have reduced
capacity payments. Further, the operating cost profile has exceeded
original estimates. Management has taken a proactive approach to
limit forced outages with some results.
Manageable Supply Risk (Supply Risk: Midrange)
Fuel supply risk is mitigated by a two-year, fixed-price fuel
supply agreement sufficient to meet the project's expected fuel
requirements through 2023. The agreement's short-term risk is
mitigated by the historical precedence for renewal and liquid
market for coal. Fuel price risk is mitigated by the tolling-style
PPA, subject to heat rates. Ash inventory is actively managed by
the project via the sale of its various ash products. AES PR's
efforts have helped to offset near-term ash disposal concerns, but
cash flow uncertainty is heightened without a permanent solution
Typical Structural Features (Debt Structure: Midrange)
The project's bonds are fixed-rate and mature within the PPA term,
but have back-loaded amortization profiles. The equity
distribution, leverage and debt service reserve provisions are
consistent with standard project finance structures. AES PR does
not have O&M or major maintenance reserves, which increases the
importance of operational stability and heightens the project's
reliance on other sources of liquidity.
Financial Summary
The project's 'C' rating is guided by Fitch's ratings definitions,
and also the assessments assigned for all the qualitative key
rating drivers. For projects in this rating category, rating case
coverages provide little additional information to evaluate the
risk of default. By definition, the rating suggests that this
issuer has little capacity to navigate adverse economic
conditions.
Other than for Waste and Hazardous Materials Management, 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.
AES PR has an ESG Relevance Score of 4 [-] for Waste and Hazardous
Materials Management due to exposure to waste disposal related to
coal ash management and pollution incidents, and is relevant to the
rating in conjunction with other factors. This has a negative
impact on the credit profile, and is relevant to the rating in
conjunction with other factors.
PEER GROUP
AES PR is comparable to other coal projects in that its revenues
are secured through a PPA, but the project bears responsibility for
operational performance, fuel supply and operating costs. The
project's low rating, due to the weak credit view on off-taker
PREPA, is comparable with other Fitch-rated projects with ratings
constrained by weak counterparties.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- An improvement in PREPA's long-term credit quality;
-- Sustained improvements to plant availability or heat rate
could enhance the long-term profile.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- PREPA's failure to meet its payment obligations would likely
impact AES PR's rating;
-- PREPA's attempts to renegotiate the PPA under its insolvency
proceedings that negatively affect the project's cash flows
and ability to service debt.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
TRANSACTION SUMMARY
Asset Description
AES PR owns and operates a net 454-megawatt coal-fired circulating
fluidized bed combustion power plant in Guayama, Puerto Rico. The
project delivers electric energy and capacity to PREPA under the
terms of a 25-year PPA. The PPA is structured as a modified tolling
agreement that reimburses the project's fuel and O&M costs.
CREDIT UPDATE
2020 DSCR was 0.62x (after 0.95x in 2019) due to elevated costs
associated with agremax disposal, an ongoing issue for AES PR. Some
of those additional costs will spill over to 2022 and below-1.0x
DSCR should persist well into next year. However, management
reports not having used the reserves to meet debt service
obligations, and reserves of more than $107.4 million (June 2021)
provide strong cushion to meet debt service going forward. Although
the project has sufficient cash liquidity and has funded debt
reserves, the project remains dependent on PREPA's continued
payments to fund operations and PREPA's long-term financial
position and restructuring plans will continue to have an outsized
effect on the project.
AES PR's availability was 85.4% for 2020 and 88.0% YTD through June
2021, with a forced outage factor of 1.2% for 2020 and 0.0% YTD
2021, indicating stable operating performance. Management reports
that most of the unavailability is due to scheduled maintenance
activity. In 2021, management implemented a Refractory Improvement
Plan on each unit as preventative maintenance that is expected to
improve availability and lower the frequency of unscheduled
outages. The project extended its existing coal supply agreement
for the period ending December 2023. Capacity factor in 2020 was
80.8%, and 85.2% YTD2021, indicating the continued reliance of the
Puerto Rico power grid on the asset.
Agremax continues to be a persistent issue for AES PR. Installation
of the liner for the on-site agremax disposal generated additional
costs as the amount of material on site turned out higher than
anticipated. Management attributes the financial underperformance
to additional costs of agremax disposal.
2020 DSCR to sank to 0.62x because of the above-mentioned issue. On
the positive side, the project earned 97.0% of capacity payments in
2020. Through end-May 2021, DSCR has been 0.96x, but management
expects DSCR to fall to 0.43x over the 12 months through June 2022,
and recover to levels close to 1x thereafter. The cash shortfall is
expected to be around $34 million, mostly explained by agremax cost
overruns of around $24 million in 2021 and $4 million in 2022.
YTD2021, the project has earned 92.4% of capacity payments.
PREPA remains in default as of September 2021. Management has
indicated that PREPA has been paying its bills regularly, in
compliance with the timeframes allowed under the PPA. PREPA's
recent payment track record and high levels of dispatch corroborate
the project's view that it is an important part of Puerto Rico's
generation system as a reliable and a low-cost producer.
ESG CONSIDERATIONS
AES Puerto Rico LP (PR) has an ESG Relevance Score of '4' for Waste
& Hazardous Materials Management; Ecological Impacts due to costs
related to coal ash management and disposal and pollution
incidents, which has a negative impact on the credit profile, and
is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
I MORALES TIRE: Seeks to Clarify Language in Confirmed Plan
-----------------------------------------------------------
I. Morales Tire Corp., together with Israel Morales Nieves, filed
with the U.S. Bankruptcy Court for the District of Puerto Rico, on
September 17, 2021, a Post Confirmation Modification of the
Subchapter V Plan confirmed on August 5, 2021.
The Debtors disclosed that in the confirmed Plan, Class 2 and 3
included treatment for PR Asset Portfolio 2013-1 International, LLC
(PRAPI) regarding liens held by PRAPI over the Debtor's properties,
which required the filing before the Court of a motion pursuant to
Sections 363 and 1141(c) of the Bankruptcy Code.
The Debtors realized, however, about the existence of ambiguous
language in the treatment of Class 2 and Class 3, which ambiguity,
the Debtors said, needs to be clarified since the Plan is a
complimentary document required to achieve the wiping of the liens
in the Property Registry. The Debtors are seeking to clarify the
treatment provided in the Plan to Classes 2 and 3, and to postpone
the effective date.
The amendments, they said, will not materially affect any rights of
any party, or the distributions included in the Plan.
A copy of the Post Confirmation Modification is available for free
at https://bit.ly/3Cy0DaG from PacerMonitor.com.
About I. Morales Tire Corp.
Aguas Buenas, P.R.-based I. Morales Tire Corp. filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code (Bankr.
D.P.R. Case No. 21-00311) on Feb. 3, 2021, listing $100,001 to
$500,000 in both assets and liabilities. Israel Morales Nieves
also sought bankruptcy protection (Case No. 21-00305). Judge
Mildred Caban Flores oversees the cases. Vilarino & Associates,
LLC, serves as the Debtor's legal counsel.
J.J.W. METAL: Taps Arroyo Cruz Law Office as Litigation Counsel
---------------------------------------------------------------
J.J.W. Metal Corp. seeks approval from the U.S. Bankruptcy Court
for the District of Puerto Rico to employ Arroyo Cruz Law Office
PSC as special litigation counsel.
The firm will assist the Debtor in the following cases:
(a) Autonomous Municipal Government of Carolina et al. vs. JJW
Metal Corp., Civil No: CA2018CV03362;
(b) JJW Metal Corp., vs. Autonomous Municipal Government of
Carolina, Case No: COP-1060;
(c) In re JJW Metal Corp., Case No. 11-0585-UU-01, before the
Department of Urbanistic Permits, Municipal Government of
Carolina stated environmental law and regulations matters.
(d) JJW Metal Corp., vs. Municipal Government of Rio Grande,
Case No.: RG2019CV00369 (S-301).
The firm will be billed at its hourly rate of $170, plus
reimbursement of expenses incurred.
Alberto Arroyo Cruz, Esq., the sole owner of Arroyo Cruz Law
Office, disclosed in a court filing that the firm is a
"disinterested person" as that term is defined in Section 101(14)
of the Bankruptcy Code.
The firm can be reached through:
Alberto Arroyo Cruz, Esq.
Arroyo Cruz Law Office PSC
410 Avenue General Valero, Suite 303
Fajardo, PR 00738
Telephone: (787) 863-5555
Facsimile: (787) 860-0412
Email: aclopsc@gmail.com
About J.J.W. Metal Corp.
Palmer, P.R.-based J.J.W. Metal Corp. sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 20-04536)
on Nov. 23, 2020. Jorge Rodriguez Quinones, president, signed the
petition. At the time of the filing, the Debtor disclosed total
assets of $1,649,341 and total liabilities of $1,750,865.
Judge Edward A. Godoy oversees the case.
The Debtor tapped Charles A. Cuprill, P.S.C., Law Offices as
bankruptcy counsel; Luis R. Carrasquillo & Co. P.S.C. as financial
consultant; and Gino Negretti Lavergne, Esq., Frank Inserni Milam,
Esq., and Arroyo Cruz Law Office PSC as special counsel. Risk
Assessment & Management (RAM) Group, Inc., Arturo Vazquez Cancel,
and ISFPE, LLC serve as the Debtor's environmental consultants.
*********
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