/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/211103.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, November 3, 2021, Vol. 22, No. 214 Headlines B R A Z I L BANCO PAN: Fitch Affirms 'BB-' LongTerm IDRs BRAZIL: Central Bank Increases Benchmark Interest Rate to 7.75% C O L O M B I A AVIANCA HOLDINGS: Creditors Committee Defends Plan AVIANCA HOLDINGS: Seeks Court OK of Plan to Cut Debt by $3 Billion D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Exporters Happy That Taxes Won't Climb DOMINICAN REPUBLIC: No Tax Increases in Country J A M A I C A TRANSJAMAICAN HIGHWAY: S&P Alters Outlook on B+ Rating to Stable M E X I C O GRUPO GICSA: S&P Lowers ICR to 'CCC', On CreditWatch Negative GRUPO KALTEX: Fitch Rates Proposed USD220MM Secured Notes 'CCC' GRUPO KALTEX: S&P Puts 'CCC' ICR on CreditWatch Developing GRUPO POSADAS: Unsec. Creditors be Paid in Full or be Reinstated P E R U PERU: GDP Grew 11.83% in August 2021, Stats Agency Says T R I N I D A D A N D T O B A G O CARIBBEAN AIRLINES: To Resume Direct T&T-Jamaica Flights - - - - - =========== B R A Z I L =========== BANCO PAN: Fitch Affirms 'BB-' LongTerm IDRs -------------------------------------------- Fitch Ratings has affirmed Banco PAN SA's (PAN) Long-Term (LT) Local and Foreign Currency Issuer Default Ratings (IDRs) at 'BB-' with a Negative Rating Outlook and Long-Term National Rating at 'AA(bra)' with a Stable Outlook. The Negative Outlook on the Long-Term IDRs reflects the Negative Outlook on Banco BTG Pactual S.A.'s ratings, which in turn reflects Brazil's Rating Outlook and the negative operating environment. KEY RATING DRIVERS IDRs, NATIONAL RATINGS AND SUPPORT RATING PAN's IDRs, National Ratings and SR reflect BTG's high propensity to support PAN since these entities operate in the same jurisdiction, are subject to the same regulations and, following the acquisition, are part of the same regulatory group under Brazil's Central Bank prudential regulation. Therefore, lack of support would represent high reputational risk for the parent. BTG's full ownership of PAN's voting shares and the increasing degree of integration also contribute to Fitch's overall support assessment. VR PAN's VR continues to be highly influenced by the Brazilian operating environment and by its company profile, which strengthened after it changed its strategy in 2017. The ratings also consider the bank's adequate business diversification and improvements in profitability metrics. As of 2Q21, 91% of PAN´s loans were secured loans, comprised by 48% of payroll loans, followed by used vehicle financing (42%), while the remaining portfolio comprised credit cards (8%) personal loans (1%), and the run off portfolio (2%). Although the bank is planning to grow loans backed by FGTS (Guarantee Fund for Length of Service) guarantee, Fitch believes that the gradual increase of PAN´s credit card and personal loan activities may bring some volatility to asset quality ratios in the medium and long-term. Like other midsize banks (including Fintechs and digital banks), in 2020 PAN launched a digital platform to expand its products and services and in October 2021, bank signed an agreement to incorporate Mosaico, an e-commerce technology company, to build its own marketplace and increase the offer of financial services to clients. In Fitch's opinion, the digital operations will allow PAN to reduce revenue concentrations, improve its business mix and cross-selling and strengthen its profitability in the long term. PAN's operating profit-to-risk-weighted assets (RWA) ratio stood at 3.3% as of 2Q21, compared with 3.9% at the same period last year, and an average of 2.3% over the past four years. Since 2017, the institution has shown a gradual improvement in profitability, as the bank increased its capital base, which allowed PAN to retain a larger portion of its originated loans, discontinue its less profitable portfolios and reduce expenses from high-cost legacy deposits, as it keeps investing in client acquisition, technology and products. Despite asset quality pressures at the beginning of the pandemic, PAN's asset quality ratios ended 2Q21 at adequate levels. Over the past four years (YE), the average impaired loans ratio (D to H loans) was 9.58%, and in June 2021 this ratio reached 7.7% (10.3% at 2Q20). Nonperforming loans (NPLs) also remained adequate, at 5.4% in 2Q21, versus 7.0% as of June 2020. Eventual deterioration of these ratios is possible, especially considering the increase of the unsecured portfolio (credit cards and personal loans); however, Fitch believes PAN will continue to act proactively to minimize potential asset quality pressures. After the full acquisition of PAN's voting shares by BTG, PAN's financial statements started to be fully consolidated within BTG's financial statements, and all the regulatory requirements, including capitalization are now reported on a consolidated basis. However, the bank is still reporting it's managerial Capital Ratio, that stood at 15.54% at 2Q21 from 15.90% a year earlier. PAN's adjusted loans-to-deposits ratio in June 2021 improved to 125% from 190% in the 1Q21, reflecting the change in the banks funding structure, with the reduction of shareholder funding and an increase of client deposits. Fitch believes Pan's loan-to-deposits ratio will reach levels close to its peers (around 100%) in the medium term as the bank increases its client's deposits. Fitch views PAN's current liquidity position as adequate given the bank's size and its growth prospects. In June 2021, liquid assets were approximately BRL 2.0 billion and covered 33.6% of short-term customer deposits maturing up to 1 year and 93.3% of customer deposits maturing up to 3 months. The bank also has BRL 2.6 billion in interbank lines with BTG, which can help to face any liquidity pressure. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: IDRs, NATIONAL RATINGS and SUPORT RATING -- A weakening in the propensity and/or ability of BTG to provide support to PAN, which currently is not Fitch's base case scenario. VR -- A downgrade of the sovereign; -- Severe deterioration in PAN's asset quality or profitability ratios leading to a sustained decline in the bank's operating profit-to-RWA ratio below 2.5%; -- A sustained deterioration in the bank's individual capitalization (e.g. its CET1 ratio falls below 12%). Factors that could, individually or collectively, lead to positive rating action/upgrade: IDRs, NATIONAL RATINGS and SUPORT RATING -- As PAN's IDRs have a Negative Rating Outlook, in line with its parent's IDR and those of the sovereign, an upgrade is highly unlikely in the short term; -- Over the medium term, a positive rating action on the sovereign combined with a sustained recovery in the macroeconomic environment, including a reduction in the vulnerabilities of the Brazilian economy, could trigger a revision of the IDR's Rating Outlook to Stable. VR -- Given the Negative Rating Outlook on the bank's IDRs, the likelihood of an upgrade is limited. 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 PAN's ratings are driven by BTG's ratings. 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. BRAZIL: Central Bank Increases Benchmark Interest Rate to 7.75% --------------------------------------------------------------- Rio Times Online reports that Brazil Central Bank's Monetary Policy Committee (Copom) announced a more aggressive increase in the basic interest rate (SELIC), which goes from 6.25% to 7.75% per year, increasing 1.5 percentage points, reaching the highest level in four years. The market was already forecasting a hike, but there were still doubts about the level that would be set, given the fiscal risks and the persistent increase in inflation, according to Rio Times Online. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in May 2021. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2020. Moody's credit rating for Brazil was last set at Ba2 with stable outlook (April 2018). DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). =============== C O L O M B I A =============== AVIANCA HOLDINGS: Creditors Committee Defends Plan -------------------------------------------------- Juan Pedro Sanchez Zamudio of AviacionLine reports that the Official Committee of Unsecured Creditors of Avianca Holdings S.A. (The Committee), by and through its undersigned counsel, submitted on October 25, 2021, a statement in support of the confirmation of the Joint Chapter 11 Plan of Avianca Holdings S.A. and Its Affiliated Debtors, filed on September 15, 2021. The Committee believes that the settlement embodied in the Plan maximizes recoveries to holders of General Unsecured Avianca Claims. According to the Committee, the Plan represents the culmination of more than a year of negotiations among the Debtors, the Committee, and the Debtors' pre and postpetition lenders. As a result of these efforts, holders of General Unsecured Avianca Claims, who would receive no recovery in a hypothetical liquidation scenario, will share in a distribution valued at approximately $36 million. The Plan is overwhelmingly supported by the class of General Unsecured Avianca Claims, which includes the 2020 Notes and the 2023 Notes, represented by 92% of the holders of General Unsecured Avianca Claims, representing 98% of the total amount of claims held by the class. However, there were objections to the Plan, which were filed by a small number of individual holders of 2023 Notes Claims. According to the Committee, these oppositions attempt to apply legal principles that are inapplicable under the circumstances of these Chapter 11 Cases. Unfair Valuation The first objection argue that the Plan violates the Bankruptcy Law because the Debtors did not perform a "fair valuation." In response, the Committee conducted an extensive, competitive marketing process to determine the value of their estates, contacting over 125 parties to identify the best terms on which they could secure exit financing, which resulted in the Debtors' equity being valued at $800 million and the transaction that is now embodied in the Plan. 2023 Notes Remain Secured Also, the 2023 Notes Objections also appear to argue that the 2023 Notes remain secured, which is not true. On August 28, 2020, the Debtors and a majority of the holders of the 2023 Notes executed a restructuring support agreement, pursuant to which the Consenting Noteholders agreed to direct Wilmington Savings Fund Society, FSB, as trustee and collateral trustee for the 2023 Notes, to, among other things, consent to the Debtors' grant of liens securing their Debtor-In-Possession financing facility. Those liens primed the existing liens granted on all of the collateral securing the 2023 Notes, which now partially secures the DIP Facility. Avianca's Plan Consolidation is Improper Avianca Debtors have operated in a manner that justifies substantive consolidation: in particular, many of the most significant General Unsecured Avianca Claims are subject to cross-entity guarantees, and the separate corporate existence of many of the Avianca Debtors was driven principally by local regulatory requirements. The Avianca Debtors also act under one umbrella brand of "Avianca" and it is common for the Avianca Debtors to routinely transfer assets and incur intercompany liabilities based on the Avianca Debtors' needs as a whole. Avianca's Debtors Plan According to the Committee, if the Avianca Plan Consolidation is approved, then the Plan will constitute a single chapter 11 plan for all 37 consolidated Avianca Debtors. The assets and liabilities of those entities, including all general unsecured claims against them, will be treated as if they belong to a single debtor. About Avianca Holdings SA Avianca -- https://aviancaholdings.com/ -- is the commercial brand for the collection of passenger airlines and cargo airlines under the umbrella company Avianca Holdings S.A. Bogota, Colombia-based Avianca has been flying uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. Avianca Holdings S.A. and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 20-11133) on May 10, 2020. At the time of the filing, the Debtors disclosed $7,273,900,000 in assets and $7,268,700,000 in liabilities. Judge Martin Glenn oversees the cases. The Debtors tapped Milbank LLP as general bankruptcy counsel; Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon Abogados S.A.S. as restructuring counsel; Smith Gambrell and Russell, LLP as aviation counsel; Seabury Securities LLC as financial restructuring advisor and investment banker; FTI Consulting, Inc. as financial restructuring advisor; and Kurtzman Carson Consultants LLC as claims and noticing agent. The U.S. Trustee for Region 2 appointed a committee of unsecured creditors in Debtors' bankruptcy cases on May 22, 2020. The committee is represented by Willkie Farr & Gallagher, LLP. AVIANCA HOLDINGS: Seeks Court OK of Plan to Cut Debt by $3 Billion ------------------------------------------------------------------ Ezra Fieser and Steven Church of Bloomberg News report that Avianca Holdings SA asked a judge for permission to exit bankruptcy under a plan that the airline says will eliminate about $3 billion in debt and preserve over 10,000 jobs. Latin America's second-largest airline before the pandemic presented its restructuring plan at a hearing in New York. If approved, the 102-year-old company is eyeing an exit from bankruptcy this 2021. U.S. Bankruptcy Judge Martin Glenn appeared to side with the company when a handful of objectors claimed the proposal wrongly favored some creditors over others. Committee Defends Plan On Aug. 10, 2021, the Debtors filed a plan of reorganization which provides for, among other things, (a) the conversion of the Aggregate Tranche B DIP Obligations Amount into equity interests of a new holding company of the reorganized Debtors ("Reorganized AVH"), (b) an equity raise by Reorganized AVH in an aggregate amount equal to $200,000,000, to be funded through cash payments by certain of the Supporting Tranche B Lenders, and (c) the issue of certain "exit" notes in full and final settlement of Tranche A-1 DIP Facility Claims and Tranche A-2 DIP Facility Claims. Should Avianca win approval to exit bankruptcy, it will become a U.K. incorporated company. According to the Debtors, because the DIP Facility Claims exceed the value of the "Shared Collateral" -- which includes all of the collateral of the 2023 Notes Claims -- the 2023 Notes Claims (and other prepetition indebtedness that is secured by the Secured Collateral) are unsecured and are appropriately classified as General Unsecured Avianca Claims. The Plan represents the culmination of more than a year of negotiations among the Debtors, the Creditors Committee, and the Debtors' pre- and post-petition lenders. As a result of these efforts, the Committee points out that holders of General Unsecured Avianca Claims -- who would receive no recovery in a hypothetical liquidation scenario -- will share in a distribution valued at approximately $36,000,000. According to the Committee, the objections by of Burlingame Investment Partners LP, et al., incorrectly argue that the Plan violates Section 506 of the Bankruptcy Code by treating the 2023 Notes Claims as unsecured, in part because the Debtors did not perform a "fair valuation." To the contrary, the Debtors conducted an extensive, competitive marketing process to determine the value of their estates. The Debtors contacted over 125 parties to identify the best terms on which they could secure exit financing, which resulted in the Debtors' equity being valued at $800 million and the transaction that is now embodied in the Plan. About Avianca Holdings SA Avianca -- https://aviancaholdings.com/ -- is the commercial brand for the collection of passenger airlines and cargo airlines under the umbrella company Avianca Holdings S.A. Bogota, Colombia-based Avianca has been flying uninterrupted for 100 years. With a fleet of 158 aircraft, Avianca serves 76 destinations in 27 countries within the Americas and Europe. Avianca Holdings S.A. and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 20-11133) on May 10, 2020. At the time of the filing, the Debtors disclosed $7,273,900,000 in assets and $7,268,700,000 in liabilities. Judge Martin Glenn oversees the cases. The Debtors tapped Milbank LLP as general bankruptcy counsel; Urdaneta, Velez, Pearl & Abdallah Abogados and Gomez-Pinzon Abogados S.A.S. as restructuring counsel; Smith Gambrell and Russell, LLP as aviation counsel; Seabury Securities LLC as financial restructuring advisor and investment banker; FTI Consulting, Inc. as financial restructuring advisor; and Kurtzman Carson Consultants LLC as claims and noticing agent. The U.S. Trustee for Region 2 appointed a committee of unsecured creditors in Debtors' bankruptcy cases on May 22, 2020. The committee is represented by Willkie Farr & Gallagher, LLP. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Exporters Happy That Taxes Won't Climb ---------------------------------------------------------- Dominican Today reports that Dominican Exporters Association (Adoexpo) president, Elizabeth Mena, welcomed the decision of President Luis Abinader to withdraw the tax reform proposal, which shows evident support for the private sector and the national productive apparatus. Through a press release, Mena indicated that "it is time for all of us, together with civil society and the State, to work together to develop the Dominican economy," according to Dominican Today. The president of Adoexpo stressed that "today more than ever, social peace and stability are necessary to boost production and exports to make the Dominican Republic the logistics hub that we aspire to so much," 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: No Tax Increases in Country ----------------------------------------------- Dominican Today reports that after weeks of conjecture, warnings from sectors about their opposition to a tax increase and the elimination of exemptions, and the announced rejection of the opposition parties, President Luis Abinader cleared the panorama: there will be no tax reform. "We are not going to increase taxes. And today I want to announce that we will not submit any tax reform. Now our only priority is to consolidate the economic recovery," said Abinader in a nine-minute speech delivered, according to Dominican Today. The president announced the decision despite that the consolidated public debt closed last June at US$59.6 billion, which represents 68% of the gross domestic product (GDP), the report notes. In addition, when the reports prepared by international financial entities reflect the expectations for the execution of a fiscal reform or pact in the Dominican Republic with a view to reducing indebtedness and maintaining its risk rating, the report relays. Likewise, the general state budget project for 2022 reflects an estimated deficit ofRD$174.8 billion (3% of GDP), the product of total income amounting to RD$871 million and expenses of RD$1.04 trillion, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. The Troubled Company Reporter-Latin America reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings on Jan. 18, 2021, assigned a 'BB-' rating to Dominican Republic's USD1.5 billion 5.3% notes due Jan. 21, 2041. Concurrently, the Dominican Republic reopened its 2030 4.5% notes for an additional USD1.0 billion, which Fitch rates 'BB-', raising the total outstanding amount of the 2030 notes to USD2.0 billion. Standard & Poor's, on December 4, 2020, affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on the Dominican Republic. The outlook remains negative. S&P also affirmed its 'B' short-term sovereign credit ratings. The negative outlook reflects S&P's view that it could lower the ratings on the Dominican Republic over the next six to 18 months, given the severe impact of the COVID-19 pandemic on the sovereign's already vulnerable fiscal and external profiles, as well as the potential for a weaker-than-expected economic recovery. Moody's credit rating for Dominican Republic was last set at Ba3 with stable outlook (July 2017). Fitch's credit rating for Dominican Republic was last reported at BB- with negative outlook (May 8, 2020). ============= J A M A I C A ============= TRANSJAMAICAN HIGHWAY: S&P Alters Outlook on B+ Rating to Stable ---------------------------------------------------------------- S&P Global Ratings, on Oct. 29, 2021, revised the outlook on Transjamaican Highway Ltd.'s notes to stable from negative and affirmed its 'B+' rating on the notes. On Oct. 4, 2021, S&P Global Ratings revised the outlook on Jamaica to stable from negative and affirmed its 'B+' foreign currency (FC) and local currency (LC) ratings on the country. S&P said, "The stable outlook reflects our view that amid a gradual recovery in traffic volumes after the drop in 2020, we continue to expect the project to post a minimum and average debt service coverage ratios (DSCRs) of 2.08x and 2.79x, respectively, during the life of the debt. "We recently revised the outlook on Jamaica to stable from negative assuming that despite an estimated fall in GDP of 9.9% in 2020, recent fiscal reforms and savings helped the government limit the pandemic-related fiscal fallout and rise in sovereign debt. We see the risks of the pandemic for the Jamaican economy and public finances receding. We expect the economic recovery will continue building into 2022 and that the government will cautiously manage public finances and repay debt to lower its debt and interest burden. "Because of the regulated nature of the project, we believe that a hypothetical negative government intervention in the case of a sovereign default could impair its cash flows. Therefore, we cap our ratings on the project at the sovereign level. As a result, we revised the outlook on the project's $225 million senior secured notes to stable, reflecting that on Jamaica." =========== M E X I C O =========== GRUPO GICSA: S&P Lowers ICR to 'CCC', On CreditWatch Negative ------------------------------------------------------------- S&P Global Ratings lowered its long-term global scale issuer credit rating on Mexico-based real estate developer and operator Grupo GICSA S.A.B. de C.V. to 'CCC' from 'B-' and its national scale issuer credit rating to 'mxCCC' from 'mxB'. At the same time, S&P lowered its issue ratings to 'mxCCC' from 'mxB' on the company's senior unsecured notes GICSA 15, GICSA 17, and GICSA 19. All of the ratings remain on CreditWatch with negative implications. The CreditWatch negative indicates a potential one-notch downgrade before year-end if the company does not eliminate its refinancing risk related to its short-term debt maturities. At the end of September 2021, GICSA reported unrestricted cash and equivalents of about Mexican peso (MXN) 632.5 million while reported short-term debt maturities were close to MXN2.8 billion. Out of the MXN2.8 billion in short-term debt maturities, MXN1.8 billion relates to its GICSA 19 notes due on March 24, 2022, of which the company redeemed roughly half last year. Moreover, intermittent health restrictions in cities where GICSA operates continue to weigh on the company's cash collections. During the third quarter of 2021, the company did an inventory analysis of commercial spaces under lease and identified clients that, despite being under contract, had discontinued their operations and are not meeting their payment obligations. As a result, the company disclosed adjusted occupancy rates, reflecting the abandonment of these spaces, and anticipates writing off about MXN700 million of uncollectable receivables, from MXN1.3 billion reported as of Sept. 30, 2021. Thus, S&P estimates that its cash flow recovery trajectory has worsened from our last review and that its cash balance might be insufficient to meet debt maturities in 2022 without any refinancing or a favorable broader liability management plan. The company continues to work with its advisers on analyzing strategies for its debt structure and the monetization of non-productive assets to improve its financial position. However, in S&P's view, the lack of tangible progress on its plan, coupled with undermined operations, has increased the likelihood of a default in the near term. The conclusion of its liability management plan and review of the proposed terms and conditions to bondholders in the next months will be decisive for the rating. GRUPO KALTEX: Fitch Rates Proposed USD220MM Secured Notes 'CCC' --------------------------------------------------------------- Fitch Ratings has assigned a 'CCC'/'RR4' rating for Grupo Kaltex, S.A. de C.V.'s (Kaltex; Issuer Default Rating [IDR] CCC/Positive) proposed USD220 million senior secured notes. Proceeds will be used to refinance the outstanding amount of the USD220 million senior secured notes due April 2022. The 'RR4' Recovery Rating indicates characteristics consistent with securities historically recovering 31%-50% of principal and related interest. Kaltex's ratings reflect improved operating results from increased product demand, mainly in the U.S. This was partially due to pandemic recovery, changing fashion trends, and trade and raw material disruptions. In 2021, Kaltex also paid down the principal amount of its 2022 notes to USD220 million from USD320 million with proceeds from the sale of two subsidiaries, Milano and Revman. The ratings remain constrained at the 'CCC' category due to high refinancing risk, the cyclicality of the textile industry, input cost price volatility, and limitations on rapidly transferring cost increases into prices. KEY RATING DRIVERS Operational Improvement: Kaltex's EBITDA margin improved to around 11% during the LTM ended June 30, 2021 from 7.3% at YE 2020. The strong results during 2021 are due to a change in the supply chain for several retailers as a result of trade tensions between the U.S. and China. The company's operations have also benefited from a change in fashion preferences due to an increasing work-from-home environment caused by the pandemic. Asset Sales Supported Deleverage: Kaltex's shareholders have attempted to sell certain assets in recent years to improve the company's operations and liquidity position. During the first quarter of 2021, the company sold its Milano stores for approximately USD80 million and during the second quarter sold its Revman subsidiary for another USD66 million; proceeds from those sales supported the pre-payment of USD100 million of the outstanding senior notes. Combined, these subsidiaries generated around USD18 million of EBITDA during 2019. Senior Notes Refinancing: Refinancing risk is high for Kaltex as it faces the maturity of its USD220 million note in April 2022. As of June 30, 2021, the company has USD6 million of cash and marketable securities. Kaltex intends to repay this obligation with the upcoming notes issuance. The company also expects to sell around another USD30 million to USD50 million of assets to facilitate the refinancing of this debt instrument. For the LTM ending in June 30, 2021, Kaltex had a leverage level, measured as total debt /EBITDA, of 3.0x in Mexican peso terms. Fitch projects this ratio will remain around 3.5x going forward. Exposure to Cyclical Industry: The ratings reflect the company's exposure to the cyclicality of the textile industry, input cost price volatility, inability to transfer cost increases into prices rapidly and absence of long-term customer contracts. Demand is affected by variables in discretionary consumer spending, including general economic conditions, consumer confidence, unemployment, consumer debt, interest rates and political conditions. Kaltex also has customer concentration, which increases operational risk, as customers may experience weak performance or shift to a different supplier. Business Diversification: Kaltex's cash flow and profitability are supported by a diversified revenue base, operating vertical integration and product offerings. The company has diversified revenue by product type and geographic market, which reduces the risk of concentration in one segment of the textile industry, and mitigates adverse economic cycles in a particular region. As of June 30, 2021, around 50% of Kaltex's total revenues were generated in Mexican pesos and 50% in U.S. dollars. DERIVATION SUMMARY Kaltex's business position is limited by its exposure to cost increases and sales volume sensitivity to price upturns; this exposure results in higher volatility of cash flows. The company's current liquidity position is tight compared with debt service and short-term debt. The company's liquidity metrics are deemed in-line with the 'CCC' category. Kaltex's scale of operations, financial profile, profitability and leverage levels compare unfavorably with Levi Strauss & Co. (BB+/Stable). KEY ASSUMPTIONS -- Successful refinancing of the senior notes due April 2022; -- Revenue decrease of around 20% for 2021 given the sale of Milano and Revman; -- EBITDA Margin around 12% for the forecasted period; -- Total debt to EBITDA below 4x from 2021 to 2024; -- Capex of approximately MXN135 million for 2021; -- Dividend payment of MXN45 million for 2021; -- No dividend payments going forward. RECOVERY ASSUMPTIONS For issuers with IDRs of 'B+' and below, Fitch performs a recovery analysis for each class of obligations. The issue rating is derived from the IDR and the relevant Recovery Rating and notching, based on the going concern enterprise value of a distressed scenario or the company's liquidation value. The recovery analysis assumes that Grupo Kaltex would be considered a going concern in bankruptcy and that it would be reorganized rather than liquidated. Fitch has assumed a 10% administrative claim. Fitch's recovery analysis for Grupo Kaltex places a going concern value under a distressed scenario of approximately MXN2.2 billion based on going-concern EBITDA of MXN800 million and a 3.0x multiple. The going-concern EBITDA estimate reflects Fitch's view of a sustainable post-reorganization EBITDA level, upon which the agency bases its valuation of Kaltex. The MXN800 million going-concern EBITDA assumption reflects an approximated 40% discount from the Fitch's expected annual EBITDA during 2021, which should be sufficient to cover its interest expense. A 3.0x enterprise value multiple is used to calculate a post-reorganization valuation and reflects the Mexican operating environment and a mid-cycle multiple. Fitch calculates the recovery prospects for the senior unsecured debtholders in the 31%-50% range based on a waterfall approach. This level of recovery results in the senior unsecured notes being rated in line with its IDR at 'CCC'/'RR4'. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Successfully refinance its senior notes due 2022; -- FFO and EBIT margins above 5%; -- EBITDA margin improvement to above 10%; -- Positive FCF margin above 1%. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Failure to improve liquidity and complete asset sales or equity injections; -- Perception of risks on meeting interest payments; -- EBITDA margin below 7%; -- Continued operational pressures resulting in EBITDA/interest paid below 1.0x. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. LIQUIDITY AND DEBT STRUCTURE Tight Liquidity Position: For the LTM ended on June 30, 2021 the company's available cash balance was USD6 million, with its current maturity consisting of approximately USD260 million of the remaining senior notes due April 2022. As of today, the company has paid an additional USD40 million and the remaining debt is around USD220 million, all denominated in U.S. dollars. As of June 30, 2021, the issuer and the subsidiary guarantors collectively accounted for about 63% of Kaltex's consolidated assets, 95% of consolidated EBITDA and 68% of consolidated sales. The company's liquidity profile should improve once it executes the refinancing of the senior notes and maintains a consistent operational performance. The notes are secured by mortgages that include Mexican plants in Tepeji del Rio, Hidalgo and Altamira, Tamaulipas; a non-possessory pledge agreement that includes machinery and equipment owned by Manufacturas Kaltex, S.A. de C.V.; and a non-possessory pledge agreement covering machinery and equipment owned by Kaltex Fibers, S.A. de C.V. Based on company information, the approximate value of the collateral at YE 2020 was MXN1,920 million (approximately USD95 million). ISSUER PROFILE Grupo Kaltex is a private, vertically integrated textile and apparel company with operations ranging from generating energy to manufacturing and selling threads. The company offers a variety of textile products, ranging from threads, cotton fabric, jeans and linens. ESG CONSIDERATIONS Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for Management Strategy due to challenges that the company faces to implement its strategy, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for Group Structure due to ownership concentration and key man risk, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for Financial Transparency due to the absence of clearance of intercompany operations and details in operations breakdown, 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. GRUPO KALTEX: S&P Puts 'CCC' ICR on CreditWatch Developing ---------------------------------------------------------- S&P Global Ratings placed its 'CCC' long-term issuer and issue-level credit ratings on Mexico-based textile and apparel company, Grupo Kaltex S.A. de C.V. (Kaltex) on CreditWatch with developing implications, indicating that there is an equal likelihood of S&P either raising or lowering the ratings. S&P said, "At the same time, we assigned a 'CCC' issue-level rating and placed it on CreditWatch developing and assigned a '3' recovery rating to Kaltex's proposed senior secured notes due 2026. The '3' recovery rating indicates we expect meaningful recovery prospects (50%-70%) for creditors in the event of a payment default. "We expect to resolve the CreditWatch placement when the new issuance is completed and we have fully assessed the transaction's effects on the company's liquidity and capital structure. "As reflected in our 'CCC' ratings, Kaltex is currently facing a potential default and refinancing risk related to its $220 million outstanding senior secured notes due April 2022. Kaltex recently announced it intends to issue new $220 million five-year senior secured notes and use the proceeds to pay down its existing notes through a cash tender offer. In our view, the successful completion of the proposed transaction--meaning the full refinancing of the existing notes--would significantly alleviate pressure on Kaltex's liquidity and capital structure and therefore would strengthen its credit profile. However, if the company isn't able to fully refinance its notes' upcoming maturity, we think that Kaltex's default risk would continue to increase and its credit profile would further worsen." In the past few months, Kaltex has sold noncore assets, including its Milano store chain and REVMAN businesses, aiming to focus on its most profitable businesses (manufacturing and selling yarn, fabric, and linens) and lowering its debt position. The company used the proceeds of these asset sales to reduce the outstanding amount of its senior notes due 2022 by $100 million to $220 million. In S^P's view, this reflects the company's commitment to deleverage its balance sheet and improve its funding costs. S&P said, "At the same time, after a difficult 2020 due to the pandemic, business conditions in Kaltex's key markets are now gradually recovering due to less mobility restrictions and the ongoing economic recovery. Kaltex's year-to-date sales and EBITDA are 25% and 111%, respectively, above the same period last year. As a result, the company's pro forma gross debt to EBITDA at the end of June 2021, considering the recent asset sales, was 3.3x versus 8.1x in the same period last year. We also consider that the company has been complying with its short-term financial obligations, including its semiannual coupon payments of about $14 million and the amortization of other bank credit facilities, despite stressful business conditions." GRUPO POSADAS: Unsec. Creditors be Paid in Full or be Reinstated ---------------------------------------------------------------- Grupo Posadas S.A.B. de C.V. and affiliate Operadora del Golfo de Mexico, S.A. de C.V. filed with the U.S. Bankruptcy Court for the Southern District of New York a Joint Prepackaged Plan of Reorganization and a Disclosure Statement on October 26, 2021. The Debtors commenced Chapter 11 cases to restructure a balance sheet burdened by approximately US$405.7 million on account of the obligations under existing notes, the bank loans, and loans with other financial institutions. As of Sept. 22, 2021, the Debtors had outstanding debt in the aggregate principal amount of approximately US$427.5 million consisting primarily of US$392.6 million in outstanding principal amount under the existing notes. After extensive, good faith negotiations with certain of the holders of the Existing Notes, the Plan embodies a settlement among the Debtors and their key creditor constituencies on a consensual transaction that will restructure the Debtors' note obligations and position the Debtors for continued operations (the "Restructuring"). To evidence their support of the Debtors' restructuring plan, an ad hoc group of Noteholders (the "Ad Hoc Group") has executed the Restructuring Support Agreement, dated as of August 17, 2021 (the "RSA") and an additional group of holders (the "Additional Noteholders") have expressed their support for the Restructuring by executing the Letter Agreement, dated as of August 17, 2021 (the "RLA"), which together with noteholders who have executed joinders to the RSA (the "Joining Noteholders" and, together with the Ad Hoc Group and the Additional Noteholders, the "Supporting Noteholders") represent approximately 64.73% of the aggregate outstanding principal amount of the Existing Notes. The RSA and the RLA provide for the implementation of the restructuring through an expedited chapter 11 process and commit the Supporting Noteholders and the Debtors to support the Restructuring subject to the terms and conditions of the RSA and the RLA. After giving effect to the following transactions contemplated by the RSA and the Plan, the Debtors will emerge from chapter 11 appropriately capitalized to support their emergence and going forward business needs. * On the Plan Effective Date, the Reorganized Debtors shall issue: (i) senior secured notes (the "New Notes"), which shall have the terms indicated in the RSA. On the Plan Effective Date, the New Notes will be distributed to the holders of Existing Notes Claims in accordance with the Plan. On the Plan Effective Date: * Except as otherwise expressly provided in the Plan, each holder of an Allowed Administrative Claim shall receive payment in full in cash. * Each holder of an Allowed Priority Tax Claim shall receive treatment in a manner consistent with section 1129(a)(9)(C) of the Bankruptcy Code. * Each holder of an Allowed Secured Claim shall receive, at the Debtors' option: (a) payment in full in cash; (b) the collateral securing its Allowed Secured Claim; (c) Reinstatement of its Allowed Secured Claim; or (d) such other treatment rendering its Allowed Secured Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code. * Each holder of an Allowed Other Priority Claim shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy Code. * The Existing Notes Claims shall be Allowed in a total aggregate principal amount of $392,605,000 plus any accrued and unpaid interest on the respective series of notes through the Petition Date. On the Plan Effective Date, each holder of an Allowed Existing Notes Claim shall be entitled to receive, for (i) each $1,000 in principal amount and (ii) the discharge in full of all accrued and unpaid interest prior to the Petition Date in respect of such Holder's Allowed Existing Notes Claim: New Notes in the aggregate principal amount equal to (a) $1,000 plus (b) an amount (the "Additional Initial Principal Amount") equal to the sum of (x) 4% of a $1,000 principal amount multiplied by (y) a fraction equal to (A) the number of days that has elapsed from (and including) August 1, 2021 to (and including) the Plan Effective Date divided by (B) 360 days; provided that, if the Plan Effective Date shall occur on or after January 1, 2022, then (1) the amount calculated for the period from August 1, 2021 to December 31, 2021 shall be paid in the form of Additional Initial Principal Amount to each Holder of an Allowed Existing Notes Claim on the Plan Effective Date and (2) the amount calculated for the period from January 1, 2022 through the Plan Effective Date shall be paid in Cash on the Plan Effective Date. * Each holder of an Allowed General Unsecured Claim shall be, at the option of the applicable Debtor or Reorganized Debtor, (a) Reinstated or (b) paid in full in cash. * Each holder of an Allowed Intercompany Claim shall have its Claim Reinstated. * Each holder of an Interest shall have such Interest Reinstated. Class 4 consists of General Unsecured Claims. On the Plan Effective Date, each holder of an Allowed General Unsecured Claim shall be, at the option of the applicable Debtor or Reorganized Debtor, (a) Reinstated or (b) paid in full in cash. This Class will receive a distribution of 100% of their allowed claims. On the Plan Effective Date, each holder of an Interest shall have such Interest Reinstated. The Debtors anticipate that the sale of the Tulkal Assets will close prior to the Petition Date. However, if the sale of the Tulkal Assets closes after the Petition Date, but prior to the Plan Effective Date, then the proceeds of such sale shall be placed in a segregated account, subject to the approval of the Bankruptcy Court, and on the Plan Effective Date, such proceeds shall be applied in accordance with the Collateral Asset Sale Waterfall. If the sale of the Tulkal Assets closes after the Plan Effective Date, then the proceeds of such sale shall be distributed in accordance with the Collateral Asset Sale Waterfall. All Cash consideration necessary for the Reorganized Debtors to make payments or distributions pursuant to this Plan shall be obtained from Cash on hand from the Debtors, including Cash from business operations. Further, the Debtors and the Reorganized Debtors will be entitled to transfer funds between and among themselves as they determine to be necessary or appropriate to enable the Reorganized Debtors to satisfy their obligations under the Plan. Except as set forth herein, any changes in intercompany account balances resulting from such transfers will be accounted for and settled in accordance with the Debtors' historical intercompany account settlement practices and will not violate the terms of the Plan or the New Notes Documents. On the Plan Effective Date, the Reorganized Debtors are authorized and directed to issue, execute, deliver or otherwise bring into effect, as the case may be, to or for the benefit of the New Notes Trustee and the Qualified Holders of Allowed Existing Notes Claims, the New Notes Documents and any other instruments, certificates and other documents or agreements required to be issued, executed or delivered pursuant to the Plan, and take any other necessary actions in connection with the foregoing, in each case without need for further notice to or order of the Bankruptcy Court, act or action under applicable law, regulation, order or rule or the vote, consent, authorization or approval of any Entity. Proposed Counsel to the Debtors: CLEARY GOTTLIEB STEEN & HAMILTON LLP One Liberty Plaza New York, New York 10006 Telephone: (212) 225-2000 Facsimile: (212) 225-3999 Richard J. Cooper Jane VanLare About Grupo Posadas Posadas is the leading hotel operator in Mexico and owns, leases, franchises and manages 185 hotels and 28,690 rooms in the most important and visited urban and coastal destinations in Mexico. Urban hotels represent 87% of total rooms and coastal hotels represent 13%. Posadas operates the following brands: Live Aqua Beach Resort, Live Aqua Urban Resort, Live Aqua Boutique Resort, Grand Fiesta Americana, Curamoria Collection, Fiesta Americana, The Explorean, Fiesta Americana Vacation Villas, Live Aqua Residence Club, Fiesta Inn, Fiesta Inn LOFT, Fiesta Inn Express, Gamma, IOH Hotels, and One Hotels. Posadas has traded on the Mexican Stock Exchange since 1992. Grupo Posadas S.A.B. de C.V. and affiliate Operadora del Golfo de Mexico, S.A. de C.V. sought Chapter 11 protection (Bankr. S.D.N.Y. Case No. 21-11831) on October 26, 2021. The cases are handled by Honorable Judge Sean Lane. The Company tapped Cleary Gottlieb Steen & Hamilton LLP as international legal counsel; Ritch, Mueller y Nicolau, S.C. and Creel, Garcia-Cuellar, Aiza y Enriquez SC, as Mexican legal counsel; and DD3 Capital Partners as financial advisor. Prime Clerk LLC is the claims agent. ======= P E R U ======= PERU: GDP Grew 11.83% in August 2021, Stats Agency Says ------------------------------------------------------- Marco Aquino at Reuters reports that Peru's gross domestic product expanded 11.83% in August compared with August 2020, marking six straight months of economic growth for the South American country, the government's INEI statistics agency said in a statement. The expansion in August was principally driven by the construction and manufacturing sectors, the agency said, according to Reuters. In the first eight months of 2021, Peru's economy grew 18.59%, the INEI statement said. In the 12-month period through August, the country's GDP expanded 10.46%, it added, the report notes. The copper-producing country has been through turbulent political waters as new President Pedro Castillo, a leftist former school teacher, sets a new policy course, the report relays. Prior to Castillo's election in June, the country had been racked by one political corruption scandal after another, the report notes. Fitch said it downgraded Peru's long-term foreign currency bond rating to BBB from BBB-Plus, the report relays. "Peru's medium-term investment and economic outlook has weakened as a result of political volatility in recent years," Fitch said in a statement, the report adds. ===================================== T R I N I D A D A N D T O B A G O ===================================== CARIBBEAN AIRLINES: To Resume Direct T&T-Jamaica Flights -------------------------------------------------------- RJR News reports that Caribbean Airlines Limited is to resume direct service between Trinidad and Tobago and Jamaica on December 1. This follows the lifting of travel restrictions between both countries, according to RJR News. Caribbean Airlines says the flights will facilitate same-day connections to Nassau, Bahamas and other destinations, the report notes. The air carrier will also resume service from Port of Spain and Jamaica to Sint Maarten on December 11, the report notes. About Caribbean Airlines Caribbean Airlines Limited - http://www.caribbean-airlines.com/- provides passenger airline services in the Caribbean, South America, and North America. The company also offers freighter services for perishables, fish and seafood, live animals, human remains, and dangerous goods. In addition, it operates a duty free store in Trinidad. Caribbean Airlines Limited was founded in 2006 and is based in Piarco, Trinidad and Tobago. Caribbean Airlines is among many airlines whose business has been greatly affected in 2020 by the slowdown of international travel caused by the COVID-19 pandemic. The government of Trinidad & Tobago guaranteed a US$65 million loan for the airline, and that funding has helped with the airlines' cash flow shortfall since May 2020. In September 2020, the airline related it will be taking cost-cutting measures to help keep it afloat. The measures, which was to affect some 1,700 employees, included salary deductions, no-pay leaves and lay-offs. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2021. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *