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/raid1/www/Hosts/bankrupt/TCRLA_Public/211027.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, October 27, 2021, Vol. 22, No. 209 Headlines B R A Z I L BRAZIL: States Foresee US$6B Loss From ICMS Tax Change C O L O M B I A BANCO AGRARIO: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable BANCOLDEX: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Global Eyes Observe Tax Reform Process DOMINICAN REPUBLIC: Rum Producers Oppose Tax Increases E L S A L V A D O R BANCO AGRICOLA: S&P Alters Outlook to Neg. & Affirms 'B-/B' ICRs J A M A I C A JAMAICA: Inflation Rises to 8.2% SSL VENTURE: Remains Insolvent W/ Exposure to Bankruptcy This Year P A R A G U A Y BANCO REGIONAL: S&P Affirms 'BB' ICR & Alters Outlook to Negative P U E R T O R I C O HOSPEDERIA VILLA: Wins Cash Collateral Access Thru Oct 31 ISLA DEL CARIBE: Unsecureds Will Get 3% of Claims in 60 Months - - - - - =========== B R A Z I L =========== BRAZIL: States Foresee US$6B Loss From ICMS Tax Change ------------------------------------------------------ Brazilian states recalculated in R$32 (US$6) billion the size of their collective losses under the bill that changes the way ICMS (a Value Added Tax on the transfer of goods) is charged to mitigate the rise in fuel prices. The bill was approved by the Chamber of Deputies and is now being processed in the Senate. In a note, the National Committee of State Finance Secretaries (Comsefaz) says that this loss will occur for both states and municipalities, as the latter receive a share of the state ICMS tax revenues. After failing to stop the tax change in the Chamber of Deputies, the states are promoting a joint effort to convince senators to reject the bill. 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 =============== BANCO AGRARIO: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed Banco Agrario de Colombia S.A.'s (Agrario) Long-Term (LT) Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+' with a Stable Rating Outlook. KEY RATING DRIVERS IDRS Agrario's IDRs reflect Fitch's expectations of support from the bank's sole shareholder, the Colombian government (BB+/Stable), should it be needed. The Stable Rating Outlook on Agrario's IDRs mirrors the Outlook on Colombia's IDR. Although the bank's ratings are based purely on Fitch's assessment of expected government support, the financial profile is relevant to the agency's appreciation of support propensity. SUPPORT RATING AND SUPPORT RATING FLOOR Even though the Colombian government does not explicitly guarantee Agrario's liabilities, its key role in the development of the government's agricultural policy results in an equalization of its Support Rating Floor (SRF) with the sovereign's LT IDR of 'BB+'. Additionally, Fitch believes the government's willingness to support Agrario, should it be required, is strong, given its substantial stake in the bank. The ability of support is reflected in the Republic of Colombia's ratings and underpins the bank's Support Rating (SR) of '3'. VR The bank's Viability Rating (VR) of 'bb' is highly influenced by the operating environment and its business model. Agrario's sound profitability, improved but weak asset quality, adequate capitalization and diversified funding structure have a moderate influence on its VR. Fitch believes Colombia's sovereign rating and broader operating environment (OE) considerations highly influence Agrario's VR. The OE assessment for Colombian financial institutions is Stable, as Fitch expects any additional fallout from the pandemic to be manageable for Colombian financial institutions and Banagrario at their current rating levels. Agrario is also highly influenced by its concentrated business model. Agrario's business model is concentrated as its policy role is to promote the consistent and sustainable development of the agricultural sector. The bank maintains a clear focus and a strong franchise in the small- and medium-sized agricultural producer markets. The operating profit to RWA ratio improved to 8.8% at 1H21 (YE20: 2.9%). The Fitch Core profitability ratio benefits from the significant proportion of income from valuation of held to maturity instruments and from the zero-risk weighting received by the large public-sector investment portfolio. The operating profit-to average total assets ratio improved to 2.9% at 1H21 from 1.0% at YE20. Fitch notes that the improvement in profitability results from lower credit costs compared with 2020 when the bank anticipated potential deterioration and adopted a conservative approach in terms of provisioning. Fitch expects profitability to remain stable in 2021, as loan impairment charges will be lower. As of June 2021, the 90-days NPL ratio decreased to 6.8% (YE20: 7.6%), reflecting better delinquency levels across all segments due to better risk management and an improved collection process. At 154.7%, loan loss allowance coverage of NPLs is adequate and protects the bank amid the current OE. Fitch expects asset quality to remain stable and commensurate with the bank's rating category due to the agricultural sector's sound performance, as it has been one of the less affected sectors amid the crisis. Agrario's Fitch Core Capital to Risk Weighted Assets (RWA) ratio improved to 20.5% at 1H21 from 18.7% at YE20 as RWA density decreased with the early adoption of Basel III regulation. Nevertheless, in light of Banagrario's high exposure to the public sector, which receives zero risk weighting, Fitch prefers to use the tangible common equity to tangible assets ratio for comparison purposes among peers. This ratio stood at 6.3% at 1H21 and lags the banking system average of 13.2% at the same date. In Fitch's opinion, Agrario's capital position is of moderate importance for the bank's ratings and is commensurate with its rating level and risk exposure despite comparing unfavorably to its rating category benchmarks, due to the Colombian government's support. Agrario's liquidity is sound and has strengthened as core deposits grew 9.2% at 1H21 (YE20: 15.8%). Accordingly, the loan to deposit ratio improved to 82.4% in June 2021 from 89.6% at YE20. Liquidity was aided by measures implemented by the monetary authorities to provide funds to the banking system amid the crisis. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Given the limitations of the operating environment an upgrade is unlikely in the medium term; -- As a development bank that is owned by the state, Agrario's creditworthiness and ratings are directly linked to those of the sovereign. Hence, its ratings and Rating Outlook will move in line with any potential change in Colombia's ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- As a development bank owned by the state, Agrario's creditworthiness and ratings are directly linked to those of the sovereign. Hence, its ratings and Rating Outlook will move in line with any potential change in Colombia's ratings; -- Fitch will monitor any change in the government's support propensity, and particularly the potential impact on Agrario's ratings after the holding company legal framework is defined; -- Although not a baseline scenario, Agrario's ratings could change if Fitch perceives a decrease in the bank's strategic importance to the government's public policies. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Banco Agrario's ratings are driven by Colombia's sovereign rating (BB+/Stable). ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. BANCOLDEX: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable ------------------------------------------------------------ Fitch Ratings has affirmed Banco de Comercio Exterior de Colombia S.A.'s (Bancoldex) Foreign and Local Currency Long-Term Issuer Default Ratings (IDRs) and Support Rating Floor at 'BB+'. The Rating Outlook is Stable. Fitch has also affirmed Bancoldex's subsidiary Fiduciaria Colombiana de Comercio Exterior S.A.'s (Fiducoldex) National Scale ratings at 'AAA(col)'; Outlook Stable. KEY RATING DRIVERS IDRS, NATIONAL RATINGS AND SENIOR DEBT Bancoldex's ratings and outlook are aligned with those of the sovereign, reflecting Fitch's assessment of the Colombian government's willingness and capacity to provide timely support to Bancoldex if needed. Although the Colombian government does not explicitly fully guarantee all of Bancoldex's liabilities, the government has majority ownership of the entity. Additionally, Fitch views Bancoldex as an integral arm of the state in implementing economic development policies. The entity also has many operational and financial synergies with the public administration. Colombia's ability to support Bancoldex is reflected in its sovereign rating (BB+/Stable). Bancoldex's ratings consider its high strategic importance within Colombia for promoting SMEs, as well as large commercial and corporate entities in improving competitiveness and fostering foreign trade. Its primary activity as a development bank is the provision of wholesale funds and guarantees to commercial banks and other non-bank financial institutions, as well as direct credit lines to SMEs and corporates for economic reactivation. Bancoldex is a wholesale development bank which primarily structures general obligation loans to supervised financial institutions. Although Bancoldex's ratings are based purely on Fitch's assessment of expected government support, the financial profile is relevant to the agency's appreciation of the entity's policy role for the government. In Fitch's view, Bancoldex's financial performance could still experience some pressures due to the economic effects from the coronavirus pandemic. Bancoldex's countercyclical role as part of the government initiatives to mitigate the coronavirus's impact on the economy underpinned higher growth and profitability in 2020. Past-due loans greater than 30 days increased to 2.3% at June 2021 due to the incorporation of its sister company in 2020 and Bancoldex strategy to grant direct credit lines to SMEs and corporates. However, as is typical of development banks, already limited profitability mainly due to narrower margins as per its social role (operating profit to RWAs of 1.46% as of June 2021), and asset quality metrics could deteriorate further due to the operating environment challenges and high borrower concentrations (top 20 loans accounted for 3.5x equity as of June 2021). The entity adopted full Basel III in August 2020, which increased the regulatory capital ratio to 22.1% at YE 2020 and reduced the impact of higher growth, as well as the ARCO absorption in July 2020. As of June 2021, CET1 was 18.4% explained per low asset growth and a reduction in profitability. Bancoldex has diversified its funding sources through new bond issuances, term deposits and credit lines with local and international financial institutions. In terms of liquidity, the bank maintains adequate coverage of liabilities by maturity in both local currency and US dollars, benefitting from its liquid investment portfolio. Fitch affirmed the local senior debt issuances at the same level as Bancoldex's national long-term rating as the notes' likelihood of default is the same as that of Bancoldex. SUPPORT RATING AND SUPPORT RATING FLOOR Bancoldex's Support Rating and Support Rating Floor were affirmed at '3' and 'BB+', respectively, given the entity's importance as a development bank. Fitch's Support Rating Floors indicate a level below that which the agency will not lower the bank's long-term IDRs, as long as Fitch's assessment of the support factors does not change. FIDUCOLDEX Fiducoldex's National Ratings reflect the support they would receive from Bancoldex in case of need, mainly based on the agency's opinion of the entity's relevance for Bancoldex's business model and the reputational and franchise implications from a subsidiary default. Furthermore, Fitch highlights the synergies with its parent and respective role executing the group's long-term strategy. RATING SENSITIVITIES BANCOLDEX IDRS, NATIONAL RATINGS AND SENIOR DEBT Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Given the limitations of the operating environment an upgrade is unlikely in the medium term. -- As a development bank that is majority owned by the state, Bancoldex's creditworthiness and ratings are directly linked to those of the sovereign. Hence, its ratings and Outlook will move in line with any potential change in Colombia's ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- As a development bank that is majority owned by the state, Bancoldex's creditworthiness and ratings are directly linked to those of the sovereign. Hence, its ratings and Outlook will move in line with any potential change in Colombia's ratings. -- Fitch will monitor any change in the government's support propensity, and particularly the potential impact on the development bank's ratings after the holding company legal framework is defined. -- Although not a baseline scenario, Bancoldex's ratings could change if Fitch perceives a decrease in the bank's strategic importance to the government's public policies. SUPPORT RATING AND SUPPORT RATING FLOOR Potential changes in Bancoldex's Support Rating and Support Rating Floor would be driven by a change in Colombia's sovereign rating and/or a change in the expected propensity of support from the Colombian government. FIDUCOLDEX Factor that could, individually or collectively, lead to positive rating action/upgrade: -- The ratings of Fiducoldex will reflect any rating action taken on their main shareholder Bancoldex and any change in Fitch's assessment on the propensity and/or ability of the parent to provide support. Factor that could, individually or collectively, lead to negative rating action/downgrade: -- The ratings of Fiducoldex will reflect any rating action taken on their main shareholder Bancoldex and any change in Fitch's assessment on the propensity and/or ability of the parent to provide support. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS -- Bancoldex ratings are support driven from Colombian government. -- Fiducoldex ratings are support driven from Bancoldex. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Global Eyes Observe Tax Reform Process ---------------------------------------------------------- Dominican Today reports that in reports prepared this year by international financial entities, the expectations for the execution of the reform or fiscal pact in the Dominican Republic are reflected with a view to reducing the level of indebtedness of the country and maintaining its rating. Analysts from Barclays, JP Morgan, Moody's and the IMF agree in reports released separately on the need for the country to strengthen its fiscal framework, according to Dominican Today. On October 7, analysts at J.P. Morgan highlighted that the Ministry of Finance presented the national budget for next year on the 1st of this month, the report notes. "The fact that there was no tax reform proposal was somewhat disappointing," they said, the report relays. Moody's analysts had already issued a critical report on March 26 in which they indicated that a committee was convened in that month to discuss the country's rating, the report discloses. Among the main points raised was that the issuer's fiscal or financial strength, including its debt profile, has decreased substantially, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). DOMINICAN REPUBLIC: Rum Producers Oppose Tax Increases ------------------------------------------------------ Dominican Today reports that the Dominican Association of Rum Producers (Adopron) warned that an increase in the Selective Tax on Alcoholic Strength would increase the excessive inequality between the different categories of beverages and encourage the growth of the illicit market. "A tax change of this nature will reduce collections and expose lower-income consumers to the risk of poisoning from the consumption of adulterated beverages of lower price, as they are deprived of the right to acquire legal products that guarantee their safety," warned the members of the entity, which groups the most traditional and recognized brands in the country, by means of a communique, according to Dominican Today. They said that the 2012 tax reform had a devastating impact on the Dominican rum industry, generating a drop in sales of more than 30% that to date has not recovered, the report notes. They added that this also generated a drop in actual collections of about RD $ 3 billion, the report relays. As a result, the State had to wait six years to recover its revenues before the reform, the report says. "Encouraged by the excessive tax burden of the lowest price segment, an illegal market was generated that reached 3 million liters in a year, defrauding the State of more than 2 billion in annual taxes and making unfair competition to legal producers who comply with all the rules and honor all their commitments," Adopron said in a statement obtained by the news agency. They argue that high taxes also led to the emergence of a clandestine industry that produces and markets toxic beverages that have killed hundreds of people in the past 18 months, the report relays. "The ron dominicano is the product with the highest Effective Rate of Taxation in the country, reaching 70% in the low price segment, the report notes. He indicated that in proportional terms, rum pays more than twice as much tax as the rest of the alcoholic beverages, both local and foreign, the report says. That is, a national product that represents a country brand is penalized much more than imported products," they point out, the report relays. They emphasized that an increase in the Selective Tax on Alcoholic Strength would increase the excessive inequality between the different categories of beverages and encourage the growth of the illicit market, reducing collections and exposing lower-income consumers to the risk of poisoning from the consumption of adulterated beverages of a lower price, as they are deprived of the right to consume legal products that guarantee their safety, the report discloses. "We recognize the need for the Government to increase its revenues to face the difficult scenario we are currently experiencing and we are committed to collaborating to identify possible, reasonable and equitable scenarios that allow increasing revenues without causing serious effects on companies and society," the organization said, the report relays. Finally, he stressed that Dominican rum is one of the industries that bring the most value, tangible and intangible, to the Dominican Republic, and if it is suffocated with disproportionate taxes, companies that have produced a valuable country brand for more than a century would be condemned to bankruptcy, the report notes. "We ask for equity, that we all contribute in the same way to the country we deserve!" the note concludes, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). ===================== E L S A L V A D O R ===================== BANCO AGRICOLA: S&P Alters Outlook to Neg. & Affirms 'B-/B' ICRs ---------------------------------------------------------------- S&P Global Ratings revised its outlook on Banco Agricola S.A. to negative from stable. S&P also affirmed its 'B-' long- and 'B' short-term issuer credit ratings on it. The bank's stand-alone credit profile (SACP) remains at 'bb-'. S&P said, "We revised our trend on the economic risk in BICRA to negative from stable, based on concerns over the sovereign's access to liquidity, its limited financial flexibility regarding debt management, and a deterioration in the quality of El Salvador's policies. We believe these risks could materialize in the banking sector amid greater economic imbalances, if the government fails to remedy this situation, intensifying operating challenges for domestic banks. This is because their financial fundamentals are strongly correlated with the creditworthiness of El Salvador through macroeconomic conditions and financial assets. If the country's economy continues to deteriorate and external position keeps weakening, these factors could strain banks' customers, weakening affecting asset quality, capitalization, and liquidity levels. Additionally, given the exposure of the banking industry to government risk, in the form of sovereign bond holdings, we believe the latter could pose risks if El Salvador is unable to close the agreement with the IMF and fails to cover its short-term domestic debt. "We expect the economy to grow 9% in 2021 thanks to strong growth in exports and remittances, and progress in COVID-19 vaccinations. We assume that recovery in the U.S. and more favorable external conditions will help boost El Salvador's growth in 2021 and beyond. Still, we expect lending growth to slow to about 4.5% in the next two years, given that economic recovery could be sluggish. Additionally, delinquencies haven't significantly changed--nonperforming assets (NPAs) are below 3% and credit losses are less than 2%. We note that banking system's borrower relief program covered 53% of total loans at its peak (June 2020), dropped to 11% as of September 2021. Therefore, we forecast asset quality to keep worsening in 2021 and 2022, although remain manageable. Finally, we estimate that less than 1% of total loans are allocated to government entities and about 10% of the bank's total assets in the form of Salvadorian bonds. "At the same time, we revised our trend on the industry risk to negative from stable. The latter reflects a potential downward revision in the institutional framework and industry's competitive dynamics scores. We believe that the adoption of Bitcoin as a legal tender in the country might represent greater scrutiny and operating costs for the banking industry. In this regard, monitoring compliance and controls associated with Know Your Customer (KYC) and anti-money-laundering guidelines (GAFI Recommendations) are likely to represent additional operating costs, which could dent the already modest profitability of the banking system. In this sense, we believe that industry stability could be diminish if regulation and controls are not robust enough to prevent tax evasion and money laundering, or to mitigate the banking system's contingent risk related to cybersecurity and BTC market volatility. Finally, a drop in profitability due to lower fees and commissions and higher operating costs could also undermine the industry's stability. Additionally, the abovementioned risks could exacerbate challenges for the banking regulator, requiring the latter to develop more sophisticated tools to ensure that banks proactively manage these risks. "The adoption of Basel III capitalization rules in El Salvador is still pending and is excluded from our base-case scenario for 2021 and 2022. On the funding side, Salvadoran banks have shown high levels of core customer deposits as a percentage of their total funding base (85%), of which around 60% are retail deposits, according to our estimates. The share of customer deposits of systemwide loans has been historically adequate, averaging 80% in the past four years, and we expect this ratio to range from 80% to 85% during the next two years. "If the abovementioned economic and industry risk trends materialize, we would revise our economic and industry risk assessments to '10' from '9' and to '8' from '7', respectively. Such actions could result in a revision of our BICRA group to '9' from '8' and the anchor to 'b' from 'b+'. "Despite the BICRA's trend changes, we're affirming our 'B-/B' issuer credit ratings on Banco Agricola, because we don't believe it's currently vulnerable or dependent upon favorable business, financial, and economic conditions to meet its financial commitments during the next 12 months. "Our ratings on Banco Agricola continue to reflect our expectations that it will maintain its resilience and business stability despite economic woes in El Salvador. The latter underpinned Banco Agricola's leading market position in El Salvador and its adequate business stability, supported by well-diversified business profile. Moreover, we project that the ongoing economic stress could pressure Banco Agricola's profitability, and consequently its risk-adjusted capital (RAC) ratio, which we estimate at 6.5% for the next 12 months. The ratings also incorporate the bank's manageable delinquencies and credit losses despite the adverse market and economic conditions in El Salvador. Finally, we also capture the benefits from the bank's large and diversified retail deposit base that supports its funding profile amid the market conditions. In our opinion, liquid securities and low short-term debt obligations provide the bank with enough liquidity to cover expected and unexpected cash flows disbursements in the next 12 months. "The outlook on Banco Agricola is negative, reflecting an at least one-in-three chance of a downgrade in the next 6-18 months. Despite bank's adequate liquidity, the negative outlook reflects that a potential deterioration in the country's macroeconomic conditions could harm the bank's liquidity levels. If Banco Agricola's liquidity remains sound and stable, we could revise the outlook to stable. "Additionally, we expect Banco Agricola to maintain its status as a core subsidiary of Bancolombia, S. A. y Companias Subordinadas (BB+/Stable/B) because the Salvadoran bank remains an important vehicle for the group's strategy in Central America." ============= J A M A I C A ============= JAMAICA: Inflation Rises to 8.2% -------------------------------- RJR News reports that point-to-point inflation in Jamaica as at September 2021 was 8.2 per cent. The Statistical Institute of Jamaica (STATIN) reported the rise in the cost of goods over the 12 month period, at a press, according to RJR News. This is outside the Bank of Jamaica's target of four to six per cent, the report notes. Inflation for the month of September was up 2.3 per cent, compared to August, the report discloses. This was mainly influenced by an 8.1 per cent increase in the cost of transportation, the report adds. About Jamaica Jamaica is an island country situated in the Caribbean Sea. Jamaica is an upper-middle income country with an economy heavily dependent on tourism. Other major sectors of the Jamaican economy include agriculture, mining, manufacturing, petroleum refining, financial and insurance services. Fitch Ratings affirmed in March 2021 Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+', with a stable outlook. Standard & Poor's credit rating for Jamaica stands at B+ with negative outlook (April 2020). Moody's credit rating for Jamaica was last set at B2 with stable outlook (December 2019). According to Fitch, Jamaica 'B+' rating is supported by World Bank Governance Indicators that are substantially stronger than the 'B' and 'BB' medians, a favorable business climate according to the World Bank Doing Business Survey, moderate inflation and moderate commodity dependence. These strengths are balanced by vulnerability to external shocks, a high public debt level and a debt composition that makes the sovereign vulnerable to exchange rate fluctuations. The Stable Outlook is supported by Fitch's expectation that the public debt level will return to a firm downward path post-pandemic, which is underpinned by political consensus to maintain a high primary surplus, the resilience of external finances, and stronger economic policy institutions. SSL VENTURE: Remains Insolvent W/ Exposure to Bankruptcy This Year ------------------------------------------------------------------ Durrant Pate at Jamaica Observer reports that venture capital company SSL Venture Capital Jamaica Limited remains insolvent but its finances are improving. The company's auditor, Baker Tilly, has issued a qualified opinion on SSL Venture Capital Jamaica Limited's consolidated financial statements for June 30, 2021, according to Jamaica Observer. SSL Venture Capital Jamaica Group as at June 30, 2021 has accumulated deficit of $160.6 million, in contrast to a year ago when the deficit was $319.5 million, the report notes. For the company, the accumulated deficit was $123.4 million as at June 30 this year in comparison to $222.5 million in 2020, the report relays. In addition, at June 30, 2021, the group's current liabilities exceeded its current assets by $73.2 million coming from $18.3 million in 2020, the report discloses. This makes the group, which is listed on the Jamaica Stock Exchange insolvent, with its exposure to bankruptcy growing in 2021, the report says. In their qualified opinion on the 2021 financial statements, Baker Tilly drew attention to Note 2(c) in the financial statements, which indicate that the group reported profits in 2021 of $164.8 million and a loss of $152.8 million in 2020, the report relates. This profit was not sufficient to eliminate the accumulated losses over the years, the report discloses. Losses were also reported in previous years, whilst the company chalked up profits in 2021 of $99 million and a loss of $55.13 million in 2020, plus losses reported in previous years, the report says. Baker Tilly opined that, "Continuation as a going concern, therefore, may be in doubt and is dependent on obtaining continued financial support," the report notes. The auditors say, "No adjustments have been made in the financial statements for any effects this might have on the carrying values of assets and liabilities as at the reporting date. The group and the company have not been able to sustain profitable operations, as such have remained dependent on their ultimate parent (SSL Growth Equity Limited) for continued financial support. To date, SSL Growth Equity has not made any formal commitment to continue such support," the report relays. The audit evidence obtained by Baker Tilly is sufficient and appropriate to provide a basis for its qualified opinion with the auditing firm, noting that, "The audit of the consolidated and stand-alone financial statements conclude on the appropriateness of management's use of the going concern basis of accounting," the report discloses. Baker Tilly emphasizes that its "conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the group and the company to cease to continue as a going concern," the report relays. Based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group's and the company's ability to continue as a going concern, Baker Tilly contends that, "If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion," the report discloses. The Jamaica Observer sought and obtained a response from SSL Venture Capital regarding the future of the group and company, the report relays. Chief Operating Officer Anthony Dunn advised the Caribbean Business Report that, "Since the company is technically insolvent the board and executive management are considering options to ensure shareholders' interest in SSL Venture Capital are protected. The market would be informed of further actions to be taken by the company," the report relays. He reiterated the auditors' findings that, "The group and the company have not been able to sustain profitable operations, as such have remained dependent on their ultimate parent (SSL Growth Equity Limited) for continued financial support." Dunn restated the observation of Baker Tilly that the business may be in doubt and would be dependent on obtaining further financial support, the report notes. However, he was quick to make the point that SSL Venture Capital Group reported profits for the first time in 2021 of $164.8 million after losses in 2020 of $152.8 million and losses in previous years, the report says. Dunn sought to make the distinction between Stocks and Securities Ltd (SSL Jamaica), which remains a privately, licensed and active brokerage and wealth management company and SSL Venture Capital, the report discloses. SSL Jamaica is the second-oldest brokerage house in Jamaica and is separate and independent of SSL Venture Capital, the report relays. After taking the reins in 2019 of both SSL Jamaica and SSL Venture Capital, current CEO Zachary Harding last year started restructuring SSL Venture Capital, which is no longer focusing on start-up companies, the report relays. SSL Venture Capital was formed in 2018 by Mark Croskery, the then CEO of SSL Jamaica, the report says. SSL Venture Capital was listed on the Jamaica Stock Exchange in August 2018, following a reverse takeover of failed music publishing company, C2W, the report notes. The company later acquired equity in Blue Dot, Muse 360, and Bar Central. The aim at the time was to assist fledgling entrepreneurs to access funding to realise their dreams and to introduce these entities to the Junior Market as part of the exit strategy, the report relays. Muse 360 Integrated Limited ceased operational activities in August 2019, the report recalls. The stake in Blue Dot was sold to its founder but that transaction was later rescinded and 20 per cent of the shares was sold to Yes Iyah Limited, a company owned by Ryan Reid, Sean Shelton and Dr Michael Banbury, the report notes. The remaining 30 per cent is under contract with an unnamed party, the report says. Bar Central was shuttered in December 2020 as the novel coronavirus pandemic had a devastating impact on the company's revenues, the report adds. =============== P A R A G U A Y =============== BANCO REGIONAL: S&P Affirms 'BB' ICR & Alters Outlook to Negative ----------------------------------------------------------------- S&P Global Ratings revised the outlook on Banco Regional S.A.E.C.A. to negative from stable and affirmed the 'BB' issuer credit rating on the bank. The outlook revision to negative reflects the potential downgrade of Banco Regional if the bank isn't able to implement its new business strategy amid weakened credit fundamentals. In recent quarters, the bank has gone through a business transformation to strengthen its credit risk management. The process involved a clean-up of its loan portfolio (reducing the use of refinancing policies on its agriculture loans that increased nonperforming loans) and of its repossessed assets, which hurt the bank's loan origination. Its loan portfolio has diminished 15% in the last year and a half, along with profitability (as the bank built up provisions in the context of lower rates and volumes), and in turn capitalization due to poor internal capital generation. Banco Regional's capitalization metrics were further hit by the reduction of accumulated results (a drop of PYG173.734 million, about 10% of the bank's capital) to create additional provisions and the repurchase of PYG70 billion of preferred stock from retail holders. More recently, Banco Regional has announced a new business strategy that involves revamping profitability by diversifying its loan portfolio, increasing its presence in the retail segment, and accelerating its digital transformation while still keeping its leading position in the agriculture loan business. To execute this strategy, the bank has been working to incorporate a new strategic partner that would provide fresh resources. ===================== P U E R T O R I C O ===================== HOSPEDERIA VILLA: Wins Cash Collateral Access Thru Oct 31 --------------------------------------------------------- Judge Michael Caban Flores of the U.S. Bankruptcy Court for the District of Puerto Rico approved the joint motion filed by Hospederia Villa Verde Inc. and secured creditor Yajad 77, LLC, which extends their Stipulation for the Interim Use of Cash Collateral, Adequate Protection and Reservation of Rights. As previously reported by the Troubled Company Reporter, the parties filed a joint motion to extend their stipulation on the Debtor's use of cash collateral until October 31, 2021, according to the terms agreed upon by the parties. The Debtor and YAJAD are negotiating on the treatment of YAJAD's claim under the Debtor's reorganization plan. About Hospederia Villa Verde Hospederia Villa Verde, Inc., owner and operator of the Villa Verde Inn, sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 21-01015) on March 31, 2021, listing $500,001 to $1 million in both assets and liabilities. Harold A. Frye Maldonado, Esq., at Frye Maldonado Law Office, serves as the Debtor's legal counsel. YAJAD 77, LLC, as secured creditor, is represented by Hermann D. Bauer, Esq. and Gabriel A. Miranda Rivera, Esq. at O'Neill and Borges LLC. ISLA DEL CARIBE: Unsecureds Will Get 3% of Claims in 60 Months -------------------------------------------------------------- Isla Del Caribe Development, Inc. filed with the U.S. Bankruptcy Court for the District of Puerto Rico a Plan of Reorganization under Subchapter V dated October 18, 2021. The Debtor is a corporation duly organized under the laws of the Commonwealth of Puerto Rico since December 10, 2007. It was created by Ms. Carmelita Agosto Acosta, who was the sole shareholder of the corporation. The Debtor is dedicated to the development of real estate and lease or sale of the same. The Debtor filed its bankruptcy petition in order to protect the Naguabo Property from the execution of the Judgment and be able to continue operations and provide an orderly payment to all of its creditors. After the filing of the bankruptcy petition the Debtor filed a special appearance in the federal criminal proceedings against Mr. Luis Santana Mendoza advising of the bankruptcy filing and that the Naguabo Property subject to forfeiture was property of Debtor's bankruptcy estate. The Plan will treat claims as follows: * Class 2 consists of the allowed secured claim of Popular Auto on account of the loan secured with the Toyota Tacoma SR5 property of the Debtor. The Debtor listed Popular Auto in the total amount of $17,150.00. The Debtor has maintained regular payments to Popular Auto and it will continue providing payment under the terms and conditions of their pre-petition agreement. Payments are being made in favor of the Debtor by Mr. Joe Santana Maldonado, Debtor's President, who will continue assuming payments under the term of the Plan. * Class 3 consists of the allowed secured claim of CRIM on account of the Naguabo commercial property. Any and all allowed under this class will be paid on or before 60 months from the date of relief, including interest at the prevailing Prime Rate as of the date of confirmation. The Debtor will pay CRIM's allowed amount on or before the 60 month period from the proceeds of the sale of any of the real estate property of the Debtor. * Class 4 consists of the allowed secured claim of Oriental Bank. The Debtor has been making post petition monthly payments to Oriental Bank in the amount of $3,000.00 to be applied to the principal amount of the debt. The Debtor will continue to make payments in the amount of $3,000.00 for a period of 60 months from the date of the relief. Oriental Bank's allowed claim will accrue interest at a rate of 4.25% during this 60 month period. * Class 5 consists of all general unsecured claims. The Debtor listed unsecured creditors for in the total amount of $127.11. The State Insurance Fund filed Claim No. 3 in the amount of $117.30. This class also includes the unsecured portion of CRIM's Claim No. 1 in the amount of $146,553.12 and the Department of Treasury's unsecured portion of Claim No. 4 in the amount of $9,522.33. Creditors under this class will be paid 3% of their allowed claim on or before 60 months from the date of relief, in consecutive monthly payments. This class is impaired. * Class 6 includes all equity and interest holders who are the owners of the stock of the Debtor. Creditors under this class will not receive payment and are not entitled to vote. This class is not impaired. The proposed plan will be funded with Debtor's cash in bank, sale of real estate, any proceeds obtained from the claim to be filed against Sistema Universitario Ana G. Mendez and the funds from Debtor's post petition operations including the rents received from the Naguabo Property. A full-text copy of the Plan of Reorganization dated October 18, 2021, is available at https://bit.ly/3prTPbh from PacerMonitor.com at no charge. Attorney for Debtor: C.CONDE & ASSOC. Carmen D. Conde Torres, Esq. Luisa S. Valle Castro, Esq. San Jose Street #254, 5th Floor Tel: (787)729-2900 Fax: (787)729-2203 Email: condecarmen@condelaw.com About Isla del Caribe Development Naguabo, P.R.-based Isla del Caribe Development, Inc. sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D. P.R. Case No. 21-02191) on July 19, 2021. Joe Santana Maldonado, president, signed the petition. At the time of the filing, the Debtor disclosed total assets of $1,335,000 and total liabilities of $660,493. Judge Enrique S. Lamoutte Inclan oversees the case. The Debtor tapped C. Conde & Assoc. as legal counsel and Jose A. Diaz Crespo, CPA, at Dage Consulting CPA's, PSC as accountant. ********* 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. 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