/raid1/www/Hosts/bankrupt/TCRLA_Public/211210.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
Friday, December 10, 2021, Vol. 22, No. 241
Headlines
A R G E N T I N A
ARGENTINA: Gets $300M IDB Loan to Improve Buenos Aires' Health Care
IRSA PROPIEDADES: Fitch Affirms 'CCC' LT IDRs
MSU ENERGY: Fitch Affirms 'CCC' LT IDRs
B E R M U D A
NABORS INDUSTRIES: Egan-Jones Keeps CCC- Senior Unsecured Ratings
B R A Z I L
ITAIPU BINACIONAL: Brazil and Paraguay Fail to Agree on Tariffs
C O L O M B I A
GRAN TIERRA: Fitch Raises LT IDRs to 'B-', Outlook Stable
C O S T A R I C A
COSTA RICA: Moody's Affirms B2 Issuer Rating, Outlook Now Stable
D O M I N I C A
DOMINICA: Hit Hard By Pandemic; Recovery Promising, Says IMF
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Fitch Affirms BB- IDR, Alters Outlook to Stable
M E X I C O
MEXICO: Auto Output, Exports Fall Again on Semiconductor Shortage
PETROLEOS MEXICANOS: Mexico Gives $3.5B Lifeline to Help Finances
PETROLEOS MEXICANOS: Moody's Rates New $1BB Sr. Unsec. Notes 'Ba3'
P U E R T O R I C O
IGLESIAS DIOS: Seeks to Hire Gerardo Santiago Puig as Counsel
REMLIW INC: Seeks Seven-Day Extension of Time to File Sale Bid
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A R G E N T I N A
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ARGENTINA: Gets $300M IDB Loan to Improve Buenos Aires' Health Care
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The IDB approved a $300 million loan to improve access to public
health services for the Province of Buenos Aires (PBA).
The project aims to integrate public health services of the first,
second, and third levels of care as a network of services that
prioritizes healthcare for the population with exclusive public
coverage. In addition, the initiative seeks to expand the service
capacity for the prevention, detection, and care of COVID-19.
In Argentina, as in other countries, the pandemic reduced the
effective coverage of basic health services, which has not yet
returned to pre-pandemic levels. The Province of Buenos Aires (PBA)
is the largest and most populous province in the country, home to
about 40% of the population (17.5 million people). About a third of
this population has their only option for medical coverage in the
public health services.
Integrating health services is one of the key strategies for
countries to achieve universal health coverage. This approach makes
it possible to address the challenges of access, efficiency,
quality, and equity faced by health systems in the world.
The program will directly benefit about 6.6 million people with
exclusive public coverage, and indirectly 17.5 million people,
considering the universal scope of some interventions.
Supporting vulnerable populations and recovering the region's
health systems are two objectives that the IDB Group sets in its
Vision 2025, a roadmap to achieve inclusive growth in Latin America
and the Caribbean.
The loan has a 4-year disbursement period, a 5.5-year grace period,
and an interest rate based on LIBOR.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8,
2020.
Moody's credit rating for Argentina was last set at Ca on Sept. 28,
2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
IRSA PROPIEDADES: Fitch Affirms 'CCC' LT IDRs
---------------------------------------------
Fitch Ratings has affirmed IRSA Propiedades Comerciales S.A.'s
(IRSA PC) Long-Term Foreign and Local Currency IDRs at 'CCC', and
IRSA PC's unsecured notes at 'CCC'/'RR4'.
IRSA PC's ratings are capped by its exposure to Argentina's weak
operating environment, resulting in continued pressure on the
operational performance of the company's real estate portfolio. The
ratings also factor in the strong credit linkages between IRSA PC
and its parent company IRSA Inversiones y Representaciones
S.A.(IRSA), and incorporate Fitch´s expectations for a continued
gradual recovery in the operational performance of IRSA PC 's
shopping mall portfolio during the next quarters as Argentina's
economy reopens and lockdown measures are removed or reduced.
KEY RATING DRIVERS
Weak Operating Environment Caps Ratings: Argentina's economic
environment is depressed and impaired by high debt and inflation.
Argentina's annual inflation is expected to average 50% between
2021 through 2022. Argentina's continued capital controls expose
IRSA PC to FX risk overtime, as their interest expense and debt are
predominately in U.S. dollars. As for most Argentinean corporates,
Fitch believes accessibility and cost of capital to IRSA PC is
limited and at a high cost.
Strong Parent-Subsidiary Linkage: Fitch views the rating linkage
between IRSA PC and its parent company, IRSA, as strong due to
IRSA's high level of access to and control over IRSA PC's resources
and weaker legal ringfencing provisions. IRSA PC´s ratings are
driven by the consolidated credit profile of IRSA/IRSA PC. IRSA is
viewed as having dominating control, with limited or no influence
from external stakeholders. IRSA owns 79.9% of IRSA PC as of Sep.
30, 2021. IRSA PC is considered to have a stronger credit profile
than its parent. Further, IRSA PC is viewed as operationally
integral to its parent company. IRSA PC's upstream dividends
historically has represented a relevant part of IRSA's cash flow
generation, which reinforces the strong credit linkage.
High Financial Leverage: IRSA PC's net debt to EBITDA ratio was
4.7x as of Sept. 30, 2021, reflecting LTM EBITDA, total gross debt,
and cash levels of USD64 million, USD426 million and USD126
million, respectively. Fitch's net leverage calculation considers
only recurring EBITDA; assets sales are not included in the EBITDA
calculation. IRSA PC and its parent company IRSA are currently in
the process of a merger process. IRSA PC´s ratings incorporate the
expectation this merger will be fully executed during the first
quarter of 2022. Proforma leverage is high for consolidated IRSA
PC/IRSA debt at 9.2x as of Sep. 30, 2021, with proforma EBITDA,
total gross debt and cash levels of USD64 million, USD723 million
and USD133 million, respectively.
Relevant Business Position: The company is an experienced and well
positioned operator maintaining 67% of BA Malls market share and
10% BA Office market share as of November 2021, making it the
leading commercial real estate company in Argentina. The company
has maintained consistent occupancy levels around 90%, including
during the pandemic, through working with its tenants through
offered flexibility, and maintains a lease duration of around two
to three years in both the Shopping and Office segments. IRSA PC
operates 450,000 sqm of GLA and has 1,550 shopping malls tenants
and 45 office tenants without high tenant concentration.
Recovery in Malls Operations as Economy Reopens: Recovery has been
significant in 2021 as operations recuperate following the sharp
decline in operational performance seen in 2020 as a result of
pandemic-related restrictions on malls activities. Fitch expects to
see a continued gradual improvement in IRSA PC's sales and traffic
in 2022. Income has shown a 297% increase yoy in 1Q22, and although
not back to pre-pandemic levels, recovery has been seen to about
75% of pre-pandemic levels.
The company mitigated occupancy level declines during the pandemic
with provided flexibility to tenants by means of rent deferrals and
discounts. As of Sept. 30, 2021, the company's shopping mall
portfolio was approximately 89.6% occupied versus 92.8% the prior
year. The operational performance of the company's offices segment
remained more stable during the pandemic with September 2021 (1Q22)
showing only 10.7% lower revenues than pre-pandemic 1Q20.
DERIVATION SUMMARY
IRSA PC's ratings are primarily driven by Argentina´s weak
operating environment and IRSA/IRSA PC consolidate high financial
leverage and tight financial flexibility. The ratings also reflect
an experienced and well-positioned real estate operator with
adequate portfolio granularity, limited tenant concentration,
consistent consolidated occupancy levels around 90%, and lease
duration between two and three years. In terms of financial
leverage, the consolidated IRSA/IRSA PC's leverage metric, measured
as net debt/EBITDA, is expected to be around 9x range during fiscal
2022, which is viewed as relatively weaker when compared with
regional peers.
KEY ASSUMPTIONS
-- Recovery trend in occupancy continues, with occupancy levels
around 92% and 75% for the mall and office segments,
respectively, during fiscal 2022-2023;
-- EBITDA margin recovery and trending to levels around 65%
during fiscal 2022-2023.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that IRSA PC would be reorganized as
a going-concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim. The GC EBITDA estimate reflects
Fitch's view of a sustainable, post-reorganization EBITDA level
upon which Fitch bases the enterprise valuation. An EV multiple of
6x EBITDA is applied to the GC EBITDA to calculate a
post-reorganization enterprise value.
The choice of this multiple considered the following factors:
similar public companies trade at EBITDA multiples in the 12x-15x
range, Fitch used a multiple of 6x to estimate a value for IRSA PC
because this company benefits from dominant market share, unique
brands, higher barriers to entry, or undervalued assets. It also
factors in Argentina's operating environment. The recovery
performed under this scenario resulted in a recovery level of
'RR2'. The bonds are capped at 'RR4'.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade is unlikely to occur but can be considered if there
is an upgrade of the Argentine sovereign rating in conjunction
with an improved macroeconomic environment and increased
clarity surrounding the company's ability to refinance its
hard currency debt and strengthen its liquidity in U.S.
dollars given the current central bank restrictions.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A significant deterioration of credit metrics to total net
debt/EBITDA of 10x on a sustained basis;
-- Weakened EBITDA to Interest expense of below 1.0x coupled with
a liquidity position of less than USD80 million;
-- A downgrade may occur if, in Fitch's judgment, a default of
some kind appears probable or a default or default-like
process has begun, which would be represented by a 'CC' or 'C'
rating.
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
Refinancing Risk Remains: Fitch views refinancing risks for IRSA
and IRSA PC remaining high during the next 18 months. The company's
refinancing capacity is highly dependent on Argentina's macro and
economic environment, which includes the development of the
pandemic situation as well as potential continued Argentina's
capital controls restricting access to the foreign exchange market
to obtain U.S. dollars for the payment of debt maturities.
Fitch expects the issuer to execute liability management in the
next 12 months as they are facing refinancing risks associated with
upcoming debt. Post-merger, the issuer faces debt principal
payments of USD440.7 million and USD31.8 million in March 2023 and
November 2023, respectively. The issuer is planning to manage its
refinancing risks during fiscals 2022 and 2023 through a
combination of assets sales, use of own cash and debt refinancing.
The issuer maintains a readily available cash of USD133 million and
an unencumbered assets base of approximately USD2 billion as of
Sep. 30, 2021, a rating positive. IRSA/IRSA PC´s consolidated net
loan to value ratio is 30% as of Sept. 30, 2021.
ISSUER PROFILE
IRSA PC operates its real estate activities primarily in the
shopping centers and office segments. With six of its 15 shopping
centers in Buenos Aires, IRSA PC is a leading shopping mall
developer/operator in Argentina.
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.
MSU ENERGY: Fitch Affirms 'CCC' LT IDRs
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Fitch Ratings has affirmed the Long-Term Foreign Currency (FC) and
Local Currency (LC) Issuer Default Ratings (IDRs) of MSU Energy
S.A. (MSU Energy) at 'CCC' and the rating of its USD600 million
senior secured notes due 2025 at 'CCC'/'RR4'. Similar to its
Argentine peers, the ratings reflect the company's exposure to the
uncertain local operating and regulatory environment for generation
companies along with the electricity system's high dependence on
government subsidies.
Fitch expects MSU Energy's 2021 leverage to be 4.7x with a
continued deleveraging trend to 3.1x by 2024 due to the expected
amortization of the company's USD250 million private notes and
slightly higher dispatch than 2021 levels.
MSU Energy's ratings continue to reflect its dependence on the
country's offtaker and electricity market coordinator, Compania
Administradora del Mercado Mayorista Electrico (CAMMESA). MSU
Energy remains exposed to significant payment delays from CAMMESA,
given its expected tight FFO debt service coverage in 2022 and
amortizing debt.
KEY RATING DRIVERS
Heightened Counterparty Exposure: MSU Energy depends on payments
from CAMMESA, which acts as an agent for an association
representing electricity generators, transmission, distribution and
large consumers or the wholesale market participants known as
Mercado Mayorista Electrico. CAMMESA is currently paying invoices
within 66 days, which is higher than the contracted payment period
of 42 days. Fitch expects continued improvement in collections as
CAMMESA collections averaged 133% in 3Q21 and overdue receivables
to MSU declined to USD11.6 million from USD33.2 million in 2Q21.
Deleveraging Trajectory: Fitch estimates MSU Energy's total
debt/EBITDA for 2021 will fall to 4.7x from 6.6x in 2020 during the
first full year of operation for its combined cycle expansions.
Leverage will decline further to 3.7x and 3.1x, respectively in
2023 and 2024, which can be attributed to the company's USD250
million notes due 2024 beginning to amortize in 4Q21. Fitch expects
2021 FFO-interest coverage of 2.1x, reflecting the high interest
rate on its 2024 notes. An improvement to 3.6x is expected by 2024,
due to the aforementioned increased cash flow and debt reduction
over time. A further improvement is possible if MSU refinances its
2024 notes, which currently pay interest of 90-day LIBOR plus
12.5%.
Stable Cash Flow: MSU Energy's cash flow generation is relatively
stable and predictable if CAMMESA payments are received in a timely
fashion and power purchase agreement (PPA) terms are not
significantly altered. Fitch estimates 60% of the company's EBITDA
is related to Resolution 21/2016, as of 4Q21, which is U.S. dollar
denominated for a 10-year period ending in 2027, with the remaining
40% attributable to Resolution 287/17 for 15 years. The company is
not expected to have exposure to changes in Base Energy until 2027,
the country's regulatory framework for uncontracted generators,
given that MSU began operations in 2017.
Combined Cycle Conversions Completed: Fitch believes the completion
of MSU Energy's combined cycle conversions, two of which went
online in August 2020 and one in October 2020, considerably lower
the company's execution risk and will nearly double EBITDA on a
pro-forma basis to nearly USD200 million beginning in 2021. Fitch
expects the conversions to improve the plants' efficiency by 25%
and increase average dispatch to 75% from 16% with simple cycle
capacity only. The conversions added 300MW of capacity at a total
after-tax cost of USD490 million. Fitch incorporates an installed
capacity of 750MW into its base case beginning in October 2020.
Uncertain Regulatory Environment: Argentina's current economic and
political environment remains highly uncertain. Fitch believes that
a material change in the company's PPAs would adversely affect its
capital structure and pesification would create a currency mismatch
between its cash flow source and debt service obligations. The
sector is highly strategic where the government has a role as the
price/tariff regulator and also controls subsidies for industry
players. Fitch's base case assumes that Resolutions 21 and 287's
PPAs remain in their current form although a reduction in terms and
pesification of contracts are risks under the Fernandez
administration.
DERIVATION SUMMARY
MSU Energy's FC and LC IDRs of 'CCC' is in line with those of local
Argentine peers, all of which are exposed to Argentina's regulatory
risk and operating environment as electricity generation companies
dependent upon the electricity market coordinator, CAMMESA, as
their counterparty.
MSU Energy's rated Argentine utility peers are AES Argentina
Generacion S.A. (CCC), Generacion Mediterranea S.A. (GEMSA; CCC),
Capex S.A. (CCC+), Pampa Energia S.A. (B-/Stable) and Genneia S.A.
(CCC). The ratings also reflect the Argentina electricity sector's
increased reliance on government subsidies primarily due to
Argentine peso depreciation, which increases counterparty risk for
the country's generation companies. MSU Energy's successful
completion of its three combined-cycle expansions in 2020 under
Resolution 287 provide a significant boost to the company's cash
flow generation.
Fitch estimates MSU Energy's 2021 leverage, measured as gross
debt/EBITDA, will be 4.7x, which is weaker than peers such as Capex
at 2.3x, AES Argentina at 3.7x, Pampa Energia at 2.4x, Genneia at
3.4x and lower than GEMSA's dollar-based leverage of 4.8x. Fitch
expects MSU Energy to deleverage to 3.7x and 3.1x in 2023 and 2024,
respectively, as increased cash flow from the expansions is used to
pay down amortizing debt. Similar to MSU Energy, GEMSA has begun
the first of its two combined-cycle expansions awarded under
Resolution 287 and recently incurred additional debt of USD130
million to fund the project.
KEY ASSUMPTIONS
Fitch's key assumptions within the Agency's rating case for the
issuer include:
-- 750MW of total installed capacity with 250MW each at the
General Rojo, Barker and Villa Maria plants;
-- Simple cycle PPAs granted under SEE 21/2016 with a fixed
payment rate (USD/MW-month) of USD20,233 and variable payment
rate (USD/MWh) of USD8.50 for natural gas and USD7.70 for fuel
oil;
-- Combined cycle PPAs granted under Resolution 287/2017 with a
fixed payment rate (USD/MW-month) of USD19,561 and variable
payment rate (USD/MWh) of USD10.60 for natural gas and USD7.70
for fuel oil;
-- Capacity payments will be received from CAMMESA within 66 days
of invoice;
-- Recovery Rating Assumptions: In the event of a default by the
issuer, Fitch assumes a -30% EBITDA change, a 6.0x going
concern enterprise value multiple and 10% administrative
claims.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Given the issuer's high dependence on the subsidies by CAMMESA
from the Argentine Treasury, any further regulatory
developments leading to a more independent market less reliant
on support from the Argentine government could positively
affect the company's collections/cash flow.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Sustained leverage above 5.8x over the rated horizon after
expansion;
-- A reversal of government policies that result in a significant
increase in subsidies and/or a delay in payments for
electricity sales;
-- A significant deterioration of credit metrics and/or
significant payment delays from CAMMESA.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch believes MSU Energy's increased cash flow
and small working capital loans will allow it to pay the USD100
million in amortizations due 2022 on its 2024 private notes. The
payment schedule for the notes is well timed to coincide with the
increased cash flow the company began receiving in 2H20.
As of September 2021, MSU Energy had cash and equivalents of
approximately USD46 million and available credit lines of USD45
million with local and regional banks. Despite its improving
liquidity, MSU remains vulnerable to significant payment delays
from its main offtaker, CAMMESA, which is currently settling
invoices within 66 days, above the contractually agreed upon 42
days.
ISSUER PROFILE
MSU Energy is an Argentine electric power company that currently
has 750 megawatts of electric generating capacity, approximately
evenly distributed among its three power plants: General Rojo,
Barker and Villa Maria.
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.
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B E R M U D A
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NABORS INDUSTRIES: Egan-Jones Keeps CCC- Senior Unsecured Ratings
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Egan-Jones Ratings Company, on November 10, 2021, maintained its
'CCC-' local currency senior unsecured ratings on debt issued by
Nabors Industries Ltd. EJR also maintained its 'C' rating on
commercial paper issued by the Company.
Headquartered in Hamilton, Bermuda, Nabors Industries Ltd., is a
land drilling contractor, and also performs well servicing and
workovers.
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B R A Z I L
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ITAIPU BINACIONAL: Brazil and Paraguay Fail to Agree on Tariffs
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Rio Times Online reports that the meeting of Itaipu Binacional's
board of directors ended without consensus. Paraguay proposed to
increase operating costs and Brazil to lower them. Presidents Mario
Abdo Benitez and Jair Bolsonaro will meet on December 13.
Itaipu's general counsel, Gerardo Blanco, confirmed to Gen channel
that there was no agreement on the electricity tariff to be applied
next year since both countries maintained their opposing positions,
according to Rio Times Online.
The next Itaipu board meeting will be on December 15, after the
meeting between the presidents of the two countries, who will meet
on December 13 to discuss the tariff, the report notes.
As reported in the Troubled Company Reporter-Latin America on Feb.
28, 2019, Moody's Investors Service has withdrawn Itaipu Binacional
Ba2 issuer rating. Prior to the withdrawal, the outlook on the
rating was stable.
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C O L O M B I A
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GRAN TIERRA: Fitch Raises LT IDRs to 'B-', Outlook Stable
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Fitch Ratings has upgraded Gran Tierra Energy International
Holdings Ltd's (GTE) Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) to 'B-' from 'CCC+', and has upgraded the
company's senior unsecured notes ratings to 'B-'/'RR4' from
'CCC+'/'RR4'. A Stable Rating Outlook has been assigned to the
IDRs.
The upgrades reflect GTE's improved debt profile in 2021, as it is
expected to repay USD120 million of its revolving credit facility
by 4Q21. GTE's gross leverage is expected to be 2.2x in YE2021
compared with 8.6x in 2020, and total debt to 1P is expected to be
USD9.41boe compared with USD12.16boe in 2020. GTE is in full
compliance with its maintenance covenants on its revolving credit
facility (RCF), and the rating case assumes that GTE will repay the
remaining principal of the revolver in 2022. The repayment of debt
was expediated by the USD30 million in proceeds from its sale of
PetroTal's shares announced in December 2021.
KEY RATING DRIVERS
Improved Leverage Profile: GTE's gross leverage is expected to
improve to 2.2x in 2021, compared with 8.6x in 2020. This improved
leverage is due to the expectation that GTE will pay down its
revolving credit facility to approximately USD60 million by
year-end 2021. As of 3Q21, GTE reported an outstanding balance of
USD150 million on the revolver, down by USD50 million compared with
3Q20.
The rating case assumes that GTE will pay down USD90 million of the
revolver with USD30 million of proceeds from the sale of PetroTal
shares and FCF, supported by Brent prices. Total debt to 1P is
expected to improve to USD9.41boe, an improvement from its
USD12.16boe in 2020.
Small Production and Reserve Profile: GTE has a small and
concentrated production profile, which is estimated to average
27,500boed in 2021, and production is expected to increase to an
average of 32,000boed in 2022. GTE's production has realized
material disruptions in 2020 and 1H2021, where it averaged
21,630boed over a twelve-month period, but the company reported
3Q21 production at 28,957 and is expected to maintain this level in
4Q21.
Production is expected to average 34,000boed between 2022-2024,
under Fitch's price deck. GTE has realized considerable disruption
in its operations due to the social unrest in Colombia, but
disruptions appear to have calmed and the company is expected to
return to optimal production. GTE's 1P reserve life is stable and
is expected to decrease to 6.8 years from 7.9 years, due to the
company ramping up production in 2021.
Low-Cost Production Profile: GTE's half-cycle cost of production is
estimated to be USD20.2boe in 2021, a 17% decrease from 2020,
explained by the 21.5% increase in production net of royalties, and
cost cutting initiatives that resulted in a 9.5% decrease in
lifting cost to USD12.3boe from USD13.5boe in 2020 and interest
expense at USD4.55boe from USD6.6boe in 2020.
GTE's production profile compares well with its Colombian peers and
allows the company greater financial flexibility to absorb shocks
in pricing, which was the case in 2020. Further, the lower cost of
production has allowed GTE to sell at a deeper discount than peers.
The rating case is assuming GTE will sell at an average discount to
Brent of USD22.0bbl in 2021, explained by the USD5.0bbl vasconia
discount, transportation ranging from USD10bbl-USD12bbl, and the
remaining discount associated to royalties and general logistical
costs.
Cash Flow Expected to Support Liquidity: GTE's weak liquidity
position is expected to improve as it repays the RCF. After which,
the company is expected to improve its liquidity profile with FCF.
GTE is expected to be FCF positive in 2021; FFO is estimated to be
USD241 million, explained by USD290 million EBITDA minus interest
expense of USD48.7 million and cash tax of USD1.0 million.
The rating case is assuming GTE will have positive change in
working capital of USD17.0 million, supported mostly by a positive
tax credit of USD27.8 million, resulting in a Fitch defined cash
flow from operations of USD260.0 million, coupled with an annual
capex budget of USD136 million resulting in an FCF of USD122.1
million. The rating case is assuming all FCF will be allocated to
repay the revolver due in 2022; after which, the company will
strengthen its cash position rather than rely on a revolver for
liquidity.
DERIVATION SUMMARY
Gran Tierra Energy's (GTE) credit and business profile is
comparable with other small independent oil producers in Colombia.
The ratings of SierraCol Energy (B+/Stable), Geopark (B+/Stable)
and Frontera Energy Corporation (B/Stable) are all constrained to
the 'B' category or below, given the inherent operational risk
associated with small scale and low diversification of their oil
and gas production.
GTE's production profile compares favorably with other 'B' rated
Colombian oil exploration and production companies. Over the rated
horizon, Fitch expects GTE's production will average 33,000boed,
this is slightly lower than SierraCol's at 36,000boed, and lower
than Geopark and Frontera, both of which are expected to be 45,000
bbld. GTE's PDP reserve life is expected to be 3.9 years and 1P
reserve life of 6.8 years, which compares well with SierraCol's PDP
reserve life of 4.8 years and 1P reserve life of 6.3 years in 2020,
Frontera at 1.6 years and 6.2 years, and Geopark at 4.0 years and
7.4 years.
GTE's half-cycle production is expected to be USD20.2boe in 2021
and full-cycle cost to be USD38.4boe. This is higher than
SierraCol's half-cycle production cost of USD13.70 bbl in 2020 and
full-cycle cost was USD26.60 bbl and Geopark, who is the lowest
cost producer in the region at USD13.60 bbl and USD23.40 bbl, but
better than Frontera's at USD28.60bbl and USD42.20 bbl.
GTE's 2021 capital structure is expected to improve to 2.2x gross
leverage, defined as total debt to EBITDA, compared with 8.6x in
2020. GTE's total debt to PDP is expected to be USD16.56boe and
total debt to 1P be USD9.41boe in 2021. This is higher compared
with peers SierraCol at a gross leverage that will average 1.0x
over the rated horizon and a pro-forma total debt to PDP of USD7.50
bbl and total debt to 1P of USD5.68 bbl, and Geopark gross leverage
of 3.3x and debt to PDP of USD10.24bbl and 1P of USD5.48 bbl; GTE
is more in line with Frontera at 2.3x, USD19.93 bbl and USD4.98
bbl.
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for the issuer
include:
-- Fitch's price deck of USD71bbl in 2021, USD70bbl in 2022,
USD60bbl in 2023 and USD53bbl long term;
-- Working interest production of 27,642boed in 2021, 32,000boed
in 2022 and 35,000boed long term;
-- Flat USD5bbl vasconia discount to Brent from 2021-2024;
-- Well head sales transportation discount of USD10bbl-USD11bbl
on average between 2021-2024;
-- Royalties of USD12bbl in 2021 and average of USD9.60bbl from
2022-2024;
-- Operating expenses flat at USD13.00boe over the rating
horizon;
-- Transportation cost of USD1.15boe over the rating horizon;
-- SG&A cost of USD3.50boe over the rating horizon;
-- No tax payments in 2021 or 2022 and an effective tax rate of
30% thereafter;
-- Capex total of USD770 million between 2021-2024, an average of
USD190 million per year;
-- RCF balance fully repaid in 2022;
-- No acquisitions during 2020-2023;
-- No dividends or share repurchases during 2020-2023;
-- 1P Reserve Replacement of 105%;
-- USD30 million proceeds from 1st PetroTal shares sold.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Net production sustained at 30,000 beopd-35,000 boepd,
combined with a sustained 1P reserve life at or above 6.0
years;
-- Sustained gross leverage of 2.0x or less, including
improvement in debt-to-1P reserves of below USD8/bbl while
maintaining adequate liquidity defined as having a minimum
cash balance of USD100 million;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Net production falls below 25,000 boepd, combined with a 1P
reserve life of below 5.0 years;
-- Gross leverage of 4.0x of more and a total debt to 1P of
USD10.00boe or more;
-- A deterioration of liquidity to a cash position below USD25
million coupled with limited access to revolver and/or
committed credit lines;
-- A significant reduction in the reserve replacement ratio could
affect GTE's credit quality, given the current proved reserve
life of approximately five years.
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
Weak Liquidity: Fitch believes the company has a weak liquidity
profile. The company reported USD16.6 million in cash on Sept. 30,
2021. GTE is expected to be FCF positive between 2021-2023, but the
rating case assumes all FCF in 2021 and 2022 will be allocated to
repay the revolving credit facility, which had an outstanding
balance of USD150 million per 3Q21. The rating case assumes GTE
will end 2021 with USD20 million in cash, covering less than one
year of interest expense, and liquidity is expected to average
USD47 million over the rated horizon.
ISSUER PROFILE
Gran Tierra is an independent energy company with an average oil
production of approximately 30,000boed onshore in Colombia. GTE's
blocks are located in the Middle Magdalena, Llanos and Putumayo
basins. The company has 79MMboe of 1P reserve and 7.2-year reserve
life.
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.
===================
C O S T A R I C A
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COSTA RICA: Moody's Affirms B2 Issuer Rating, Outlook Now Stable
----------------------------------------------------------------
Moody's Investors Service has changed the outlook on the Government
of Costa Rica's ratings to stable from negative. Concurrently,
Moody's has affirmed Costa Rica's B2 long-term issuer and senior
unsecured bond ratings.
The change to a stable outlook reflects:
Gradual deficit reduction and lower funding needs resulting from a
recovering economy
Expectations that the current International Monetary Fund (IMF)
program will support structural policy changes by the next
administration
The affirmation of Costa Rica's B2 ratings considers the
sovereign's relative wealth levels and a dynamic economy balanced
by the decade-long rise in the government's main debt metrics.
Costa Rica's local and foreign currency country ceilings remain
unchanged. The Ba1 LC ceiling, four notches higher than the
sovereign rating, reflects limited government intervention in the
economy and a history of respect for the rule of law. The Ba3 FC
ceiling, two notches below the LC ceiling, reflects the risk of
potential transfer and convertibility controls in the event of a
default given the high level of domestic dollarization.
RATINGS RATIONALE
RATIONALE FOR CHANGING THE OUTLOOK TO STABLE FROM NEGATIVE
RECENT DEFICIT REDUCTION AND LOWER FUNDING NEEDS
Moody's forecasts that Costa Rica's fiscal deficit this year will
be 5.8% of GDP, a large number albeit lower than both last year's
result (8.1% of GDP) and that Moody's forecasted in early 2021 (7%
of GDP). The lower deficits are the result of faster economic
growth and increased revenues. These trends have supported a
reduction in overall government funding needs easing refinancing
pressures.
Real GDP growth will be 5% this year and Moody's forecasts 4%
growth in 2022, as the economy recovers from the 2020 Covid
-induced recession. Costa Rica has a long history of adapting to
economic shocks and last year's recession was only the third in
over 50 years. Moody's expects that Costa Rica will return to a 3%
average growth after 2023.
Faster economic growth will help raise government revenues to 15%
of GDP by 2023, about 1% of GDP higher than the pre Covid average
and the resulting lower deficits will help reduce funding needs
relative to prior years. Moody's estimate that Costa Rica's gross
funding needs will drop to close to 11% of GDP in 2021-2022 after
averaging over 13% of GDP in 2018 and 2019. Reduced financing
pressures will be further assisted by increased borrowing from
multilateral lenders, which usually lend at rates lower than market
funding. Moody's estimates that close to 40% of 2022 government
financing needs could be met by the IMF and other multilateral
organizations.
EXPECTATIONS IMF PROGRAM WILL SUPPORT FISCAL CONSOLIDATION UNDER
NEXT ADMINISTRATION
In March of this year the IMF's board approved a three-year $1.8
billion (2.8% of GDP) arrangement under the Extended Fund Facility
(EFF), a program targeted to countries seeking to correct
structural imbalances over an extended period. The EFF program was
approved in July by Costa Rica's unicameral legislative Assembly.
Approval by the Assembly was an important signal of political
support, with 44 of the Assembly's 57 members voting for
implementation.
The main goal of the program is gradual fiscal consolidation,
aiming for a 1% primary surplus by 2023. While some slippage is
likely, and Moody's forecasts a smaller but still positive primary
result of 0.7% of GDP, Moody's expects that Costa Rica will
continue to gradually reduce its deficits as stated under the
program even with a government change. Disbursements under the
program, spread out over the life of the agreement, are contingent
on meeting the agreed upon targets.
Costa Rica's next presidential elections are due in February 2022
with a new administration assuming office in May 2022. The next
government will inherit an existing IMF program, requiring it to
meet existing fiscal targets. Regardless of political orientation,
Moody's expects that the EFF program will be followed through by
the incoming authorities.
RATIONALE FOR AFFIRMING THE RATINGS AT B2
Costa Rica's B2 ratings reflect the balance of a relatively wealthy
and dynamic economy and relatively strong institutions with the
large increase in the country's main debt metrics since 2010.
The country's long term economic outlook remains strong as the
economy continues to transition from simple agricultural exports,
to tourism, light manufacturing, and more recently business
outsourcing and medical technology exports. Costa Rica's GDP per
capita (PPP) at $20,268 in 2020 is more than four times the median
of similarly rated countries and its $64 billion economy is also
larger than rated peers.
Costa Rica also compares favorably to other sovereigns in the
region on measures such as government effectiveness, rule of law
and control of corruption. Costa Rica's democracy is the oldest in
the region. These features of the country's institutional makeup
are supportive of the country's credit risk profile because they
speak to institutional continuity and political stability, elements
that tend to be correlated with policy predictability.
Costa Rica's B2 ratings also reflect the political difficulties in
the last decade to reign in high deficits, which increased debt
from 28% of GDP in 2010 to a forecast 70% this year. Costa Rica's
debt burden, measured both against GDP and government revenues, is
among the highest of all rated peers. And the country's debt
affordability is particularly weak, with interest payments
representing over 30% of all government revenues, one of the
highest levels among rated sovereigns. The high interest burden
increases funding risks for the country in the event of a sudden or
sharp rise in interest rates.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS
Costa Rica's ESG Credit Impact Score is moderately negative
(CIS-3), reflecting moderate exposure to environmental and social
risk, and a moderately negative governance issuer profile score
with limited fiscal policy effectiveness.
Costa Rica's exposure to environmental risks is moderately negative
(E-3 issuer profile score), related to physical climate change and
natural capital erosion. Lower crop yields because of climate
events can harm the agricultural export sector, and tourism revenue
may be affected by rising sea levels and increased storm severity.
Exposure to social risks is also moderately negative (S-3 issuer
profile score). Social considerations historically were not
material to Costa Rica's credit profile given its long history of
stable governments and democratic institutions but attempts to
reduce high fiscal deficits have encountered significant social
resistance in recent years. Popular demands to reduce perceived
inequalities and high rates of violence will continue to challenge
domestic policy choices.
The influence of Governance on Costa Rica's credit profile is
moderately negative (G-3 issuer profile) and risks are mainly
related to the political inability of several administrations to
address a growing fiscal crisis that will require significant
fiscal consolidation and structural reforms. Costa Rica has
struggled for almost 10 years to reduce high fiscal deficits, and
several previous reform attempts were stymied by political
differences.
GDP per capita (PPP basis, US$): 20,269 (2020 Actual) (also known
as Per Capita Income)
Real GDP growth (% change): -4.5% (2020 Actual) (also known as GDP
Growth)
Inflation Rate (CPI, % change Dec/Dec): 0.9% (2020 Actual)
Gen. Gov. Financial Balance/GDP: -8.1% (2020 Actual) (also known as
Fiscal Balance)
Current Account Balance/GDP: -2.2% (2020 Actual) (also known as
External Balance)
External debt/GDP: 51.7% (2020 Actual)
Economic resiliency: ba1
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On December 03, 2021, a rating committee was called to discuss the
rating of the Costa Rica, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have materially increased. The
issuer's fiscal or financial strength, including its debt profile,
has materially increased. The issuer has become less susceptible to
event risks.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
WHAT COULD CHANGE THE RATINGS UP
Upside rating potential may result from a continued drop in fiscal
deficits that supports declining debt metrics. Approval and
implementation of long term sustainable fiscal structure that
reduces the risk of future increases in debt metrics will also
support a positive rating action.
WHAT COULD CHANGE THE RATINGS DOWN
A negative rating action may result from fiscal deterioration that
results in higher government debt metrics than Moody's project,
market access challenges and higher funding costs. Evidence of
stress in the banking system could also strain the rating.
Abandonment of the IMF EFF program that leads to a funding crisis
due to lack of market funding access could also lead to a negative
rating action.
The principal methodology used in these ratings was Sovereign
Ratings Methodology published in November 2019.
===============
D O M I N I C A
===============
DOMINICA: Hit Hard By Pandemic; Recovery Promising, Says IMF
------------------------------------------------------------
The International Monetary Fund, in its concluding Statement of the
2021 Article IV Mission to Dominica, disclosed that the COVID-19
pandemic has hit Dominica hard, impacting tourism and related
sectors. Recovery in the medium term is promising, underpinned by a
large public investment program to build resilience to natural
disasters, largely financed by buoyant Citizenship by Investment
(CBI) revenue. On the fiscal front, near term policies should
prioritize expenditure efficiency, while avoiding additional taxes
and fees that hamper the recovery of the private sector and the
business climate. With public debt approaching 106 percent of GDP
after the pandemic, passing the Fiscal Responsibility Bill will
support public debt reduction and the sustainability of the
government development plan. The authorities should also reconsider
the allocation of a portion of CBI revenue to build an insurance
framework against natural disasters and debt reduction. On the
financial sector front, priority should be given to the
capitalization of credit unions and the reduction of non-performing
loans (NPLs).
Recent Developments, Outlook and Risks
1. The COVID-19 pandemic has taken a heavy toll on the Dominican
economy. GDP is estimated to have contracted by 11 percent in 2020
and to have shown a modest recovery of 3.7 percent in 2021
underpinned by a sharp reduction in tourism and related sectors,
plus the Covid-19 outbreak that forced a lockdown in August 2021.
Since March 2020, the government had a swift reaction to the
pandemic by carrying out health spending and social transfers.
However, despite ample vaccine and testing availability,
vaccination remains below 40 percent of the population due to
hesitancy. Output decline was contained by strong growth in the
construction sector due to the large public investment program in
housing and infrastructure resilient to natural disasters, financed
with record-high CBI revenue of 30 percent of GDP. Despite sharp
declines in tax revenue and increase in spending, large CBI revenue
led to a small reduction in the fiscal balance in FY2020. However,
the estimated public debt increased to 106 percent of GDP in 2020
with higher official borrowing. In this context, the current
account deficit is estimated to have widened in to near 30 percent
of GDP, underpinned by the loss of tourism exports and increase in
imports related the public investment, and the increase in
commodity prices-albeit contained by a decline in private demand
for imports.
2. The financial sector has remained liquid and stable during the
pandemic, but NPLs are above prudential benchmarks. The loan
service moratoria authorized by the regulators of banks and credit
unions helped support firms and households affected by loss of
income, helping contain a deterioration in portfolio performance.
Despite an improvement relative to 2020, NPLs remain high, in the
range of 11-14 percent of loans for banks and 10-17 percent for
credit unions (the prudential benchmark is 5 percent in both
sectors). To comply with the ECCB requirement, banks have prepared
plans to increase provisioning to 100 percent of NPLs by
2024-pre-Covid precautionary increase in provisions with adoption
of IFRS9 standards in 2018 has facilitated this process. Most loans
under moratoria have currently normalized. The financial sector
remains liquid with an increase in deposits underpinned by prudent
private spending, government transfers, the loan moratoria, and
increase in foreign remittances.
3. The growth outlook is promising, supported by the large public
investment program and the projected gradual recovery in tourism
with added hotel capacity. The government plans to maintain high
levels of public investment into the medium term financed mainly by
CBI revenue. Key projects include a new international airport,
housing resilient to natural disasters, roads improvement, a
resilient water and sewage network, improvements in the hospital
capacity (including a new hospital financed by the People's
Republic of China), and a geothermal electricity plant. These
projects will accelerate growth in the near term during the
construction phase and will also increase potential output in the
long term-including spillovers in tourism and reduction of fossil
fuel dependency, all of which improve Dominica's external
sustainability and competitiveness. GDP is projected to reach
pre-pandemic levels by 2023, averaging 5 percent growth per year
through 2022-26-tourism recovery would be supported by the ongoing
construction of new hotels and the inauguration of direct flights
from the United States from December 2021.
4. Risks to the outlook are skewed to the downside. Main risks
include renewed worldwide and domestic Covid-19 contagion waves,
leading to loss of tourism revenue and forcing lockdowns and
mobility restrictions; a decline in CBI revenue below expectations;
and insufficient progress on local vaccination due to continued
hesitancy. Weakness in the financial sector, particularly the
credit unions --where 4 out of 6 institutions have thin capital
buffers below the regulation requirement, could amplify downside
risks and may result in contingent fiscal liabilities.
Economic Policies
5. In the near term, the government should continue maximizing the
effort to increase vaccination, which is critical from health and
economic recovery perspectives. Continuing public communication and
education campaigns to address vaccine hesitancy and building
additional health care centers could prove critical in possible
contagion outbreaks.
6. Reallocation of windfall CBI revenue to balance public
investment with government financial resilience and debt
sustainability would strengthen the outlook. Thus far, the
authorities have used the majority of CBI revenue to invest in
infrastructure resilient to natural disasters. This is
understandable considering Dominica's significant exposure.
Moreover, the improvements in infrastructure in the public
investment plan are important and expected to boost potential
output-especially with resilient investments in roads, electricity
generation, a new hospital, and the water and sanitation network.
However, the risks to the outlook justify the allocation of a
portion of CBI revenue to the Vulnerability and Resiliency Fund
(VRF) for self-insurance against natural disasters (at least 10
percent of GDP plus annual savings of about 1.5 percent of GDP to
ensure its long-term sustainability), and to reduce public debt
with targeted net-repayments once output has recovered. This would
increase fiscal buffers, speed up post-disaster recovery with
funding for reconstruction and rehabilitation, and create space to
access external financing in the event of a large natural disaster
or a prolonged pandemic. This strategy would better support the
long-tern sustainability of the public investment plan and
development agenda while protecting public finances, especially
considering their long execution horizon. It would also support the
achievement of the regional debt target of 60 percent of GDP by
2035 by reducing the impact of natural disaster shocks on public
debt, while helping avert a debt crisis after an extreme shock.
This allocation, however, would come at the cost of lower public
investment, which could reduce the estimated output level by about
3-4 percentage points of GDP in the medium term.
7. Self-insurance in the VRF should be topped up with additional
coverage for large and extreme disasters, as part of a layered
insurance framework. The first layer, the VRF, would cover
relatively more recurrent but less damaging disasters. A second
layer could include increased coverage under the Caribbean
Catastrophe Risk Insurance Facility (CCRIF)-with a re-calibration
of the triggers to activate under more severe disasters. The
government could also consider a third layer of state contingent
instruments calibrated to trigger after extreme events, including
for example the World Bank CAT-DDO facility.
8. A re-prioritization in the execution of the fiscal consolidation
plan committed to in the 2020 Rapid Credit Facility disbursement
could support the recovery better. Thus far the government has made
progress on several measures it committed to: establishing limits
on discretional tax exemptions on imports; advanced preparations of
an income tax reform including a presumptive tax (which could be
passed in FY2022); and launching a property tax reform to
incentivize the use of idle property in prime urban areas. Beyond
this, the government intention to avoid additional new taxes or
charges is welcome, consistent with the objective of creating a
favorable environment for private investment while minimizing the
burden on tax administration, which is affected by limited
capacity. The actuarial analysis update of the pension system by
the Dominica Social Security (DSS) planed by early 2022 (delayed
due to covid mobility restrictions) would trigger parametric
amendments if needed for sustainability. These measures improve
allocational efficiency while addressing long-term contingent
liabilities, therefore contributing to the sustainability of the
public investment plan within the regional debt target commitment.
However, the introduction of a solid waste charge could be delayed
or reconsidered, in light of the low potential revenue and the
additional tax administration burden, while a reduction of the
preferential rate on diesel could be done later once the economy
has recovered, to reduce its distortionary impact.
9. The government should prioritize cost-saving expenditure
efficiency measures and begin preparations for their implementation
as soon as feasible. These include a civil service reform including
a review of allowances (at an advanced stage with support from
CARICAD); and better targeting of social transfers-the national
census needed to update the Ministry of Social Services' database,
has been delayed to 2022 due to the pandemic. Measures could be
taken to reduce informality and increase the tax base (Fund staff
estimates indicate that over 30 percent of the Dominica economy is
informal), including by ensuring the registration with the DSS of
workers employed in the public investment projects and with the
introduction of the presumptive tax.
10. To strengthen the public debt sustainability outlook and
support achievement of the regional debt target, the government
should maintain progress on institutional fiscal reforms.
Re-submission to Parliament the Fiscal Responsibility Bill, after a
consultation with affected parties to ensure political support
which will be critical for societal commitment and an effective
implementation. Other ongoing reforms that should be completed
include the new Public Procurement and Disposal of Public Property
Act to modernize public procurement; and a framework to monitor
state-owned enterprises, important to identify contingent
liabilities and for fiscal planning.
11. The government's fiscal plan should internalize the long-term
implications of the large public investments. On the positive side,
the projects are mostly financed with CBI revenue which implies
that the external and fiscal solvency position has improved with
the buildup of valuable revenue-generating assets that are expected
to have positive spillovers on private investment and growth. On
the downside, the added capital stock will require sustained
recurrent maintenance spending-underscoring the importance of
disaster resiliency, which has been incorporated in all the
projects. With low-cost geothermal electricity generation, the
government should maximize the potential reduction of electricity
tariffs, currently among the highest in the world. This would
improve further external competitiveness and the business
environment.
12. Domestic banks should prepare a capitalization plan to comply
with the provisioning targets set by the ECCB. Banks operating in
Dominica are working on medium-term plans to strengthen capital
buffers in 2022-24, including to meet increasing loan-loss
provisioning requirements set by the ECCB (60 percent of loans by
2022 and 100 percent by 2024). Preliminary staff analysis indicates
that domestic banks would have to increase provisioning by 55
percent in 2022 (an amount equivalent to 1.6 percent of GDP and
near 20 percent of capital) and by 160 percent by 2024 (3 percent
of GDP and near 60 percent of capital) relative to their 2021Q1
value. Delays in reducing remaining NPLs could add to this need.
13. Considering the weaknesses in the credit union sector, a plan
is needed to address capital shortfalls as soon as feasible. The
national regulator of non-bank financial institutions should stress
test credit unions and insurance companies in lieu of the risks to
the outlook. While the loan moratorium and restructuring has helped
maintain financial stability during the pandemic, credit unions
should prepare a plan to reduce NPLs. The modernization of
foreclosure legislation could facilitate seizing collateral and aid
the resolution of new and longstanding NPLs. The regulator should
enforce a plan to bring all credit unions' capital above the
regulatory minimum and prepare other structural reforms to support
financial stability. The latter includes the consideration of
options to provide liquidity assistance to the sector. This is
important considering their size and macro criticality-assets of
credit unions and insurance companies exceed 75 percent of GDP, and
credit unions deposit their liquid assets in the domestic banks.
Long-standing plans to modernize the regulation in line with
regional harmonization strategy, should be advanced in the near
term. Additional human and financial resources, and independence
from the Ministry of Finance, would strengthen supervision
effectiveness and accelerate compliance. The capitalization of
financial institutions and progress on regulatory reform are
critical to support private sector growth, while reducing the need
of government support after a shock, thereby improving the public
debt outlook.
14. Continued progress on AML/CFT legislation framework is
important to minimize risks to correspondent banking relationships.
Dominica completed its mutual evaluation round with the Caribbean
Financial Action Task Force during 2008-14 and has addressed
identified deficiencies (a reevaluation is planned in 2022). With
the passage of legislation amendments in 2020, Dominica designated
the ECCB as the competent authority for the AML/CFT regulation and
supervision of the banking sector. Strengthening of resources and
independence of the national regulator will help address weaknesses
in the non-bank financial sector and non-financial businesses,
especially risk assessment capacity and training of law enforcement
agencies. The latter commitment is critically important considering
the significant contribution the program makes to government
revenues; and concerns about the vulnerability of CBRs. Considering
Dominica's plan to adopt the digital currency launched by the ECCB
in 2020 and given the DCash platform is owned by the ECCB and
transactions will be limited to registered participants who have
acquired a Dwallet, there is potential to reduce ML/TF
vulnerability.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Fitch Affirms BB- IDR, Alters Outlook to Stable
-------------------------------------------------------------------
Fitch Ratings has revised the Outlook on Dominican Republic's
Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable
from Negative and affirmed the IDRs at 'BB-'.
KEY RATING DRIVERS
The revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Dominican Republic's ratings are supported by robust growth, a
diversified export structure, strengthened external liquidity and
higher GDP per capita, governance and social indicators than the
'BB' median. The ratings are constrained by the government's high
debt interest burden and foreign-currency share of debt, and
relative weaknesses in the macroeconomic policy framework.
The estimated 2021 general government deficit of 3.0% of GDP, and
net borrowing estimated at 2.4% of GDP, have decreased faster than
Fitch projected in March (deficit of 4.9% of GDP), reflecting the
cyclical economic recovery and fiscal policy initiatives. The
broader non-financial public sector balance posted a small deficit
0.3% of GDP for January-September 2021. Tax revenues driven by the
strong economic recovery have surpassed budget expectations; tax
revenues for 2021 include a one-time advance payment from mining
and financial firms.
The government has also restrained spending, particularly
investment. Most pandemic spending has been phased out during 2021.
The relatively high interest/revenue ratio, 17.8% in 2021, has been
lowered by two liability management operations, although a reliance
on external financing implies sensitivity to US interest rates and
global liquidity conditions.
Fitch expects narrower government deficits/GDP of 2.6% in 2022 and
2.5% in 2023, as the government begins to run small primary
surpluses during 2022-2023. In October, the government indefinitely
postponed a proposed revenue-raising tax reform. However, other
policy measures are supporting the revenue outlook. The government
will also gradually implement electronic tax filing and renew
incentives for small businesses to formalize. The administration
has already reduced the operational deficits of the state-owned
electricity distributors during 2020-2021 and cut the US
dollar-denominated domestic debt amortizations of the electric
utilities from an average of 1.3% of GDP per year during 2018-2020.
Having cut the sector's losses, Fitch expects that lower government
financing needs will be sustained.
The government had accrued deposits of 6% of GDP as of September,
and Fitch expects it to use 1.9% of GDP (DOP100 billion) cash
during 4Q21 to frontload outlays for 2022. Fitch expects greater
capital spending/GDP of 2.4% in 2022. In 2023, Fitch expects the
government deficit/GDP to plateau at 2.5%, assuming fiscal
restraint and that financial losses from the public electric
utilities do not re-emerge. Absent a tax reform, Fitch expects low
government revenues and a high interest burden will constrain
budget space for public investment and central bank
recapitalization. The authorities have engaged the Inter-American
Development Bank and IMF for consultations on a Fiscal
Responsibility Law, the fiscal policy anchors for which have not
yet been defined or the legal framework established.
Fitch expects the government debt/GDP ratio to decrease to 51% in
2021 and to stabilize near 49% during 2022-2023, well below the
government's pandemic peak of 58.2% in 2020 and below the 'BB'
median of 57% the next two years. Accounting for the 7.2pp debt/GDP
decrease this year are high real GDP growth (-5.4pp), 3.1%
Dominican peso appreciation relative to the US dollar from December
2020 to October 2021 (-1.2pp), and government use of deposits.
Risks to the government's capacity to stabilize debt/GDP beyond
2022-2023 go beyond the fiscal stance. Weaknesses in the government
debt profile expose it to risks from peso depreciation, adverse
economic shocks, looser fiscal policy particularly as the 2024
elections approach, and faster-than-expected US monetary
tightening. Three-quarters of government debt is foreign-currency
denominated, versus half for the 'BB' median. The large government
interest/revenue ratio at 21% for 2022, far exceeds the projected
'BB' median of 9.2%, and is sensitive to currency movements.
The Dominican economy is recovering robustly, growing by an
estimated 11% in 2021 (surpassing Fitch's forecast of 4.9% as of
March), and Fitch expects rising investment to drive
above-potential growth of 5.7% in 2022 and 5.3% in 2023. More than
half the population is vaccinated, and health restrictions have
lifted. Tourism and manufacturing have recovered strongly in 2021.
Private investment is increasing in hotels, free-zone
manufacturing, infrastructure, and housing. The consumption outlook
remains firm, supported by strong US remittances and recovery of
the domestic labor market.
High inflation is expected to persist through 2022 amid supply
chain and commodity price shocks. The annual average CPI increased
7.8% yoy as of October up from 3.8% yoy average inflation during
2020. 12-month annual inflation peaked in May at 10.5% yoy and
steadily declined to 7.7% in October. Strong foreign-currency
earnings have boosted international reserves and led to an
appreciation in the Dominican peso relative to the US dollar,
anchoring inflation expectations. The Central Bank of the Dominican
Republic raised its headline policy rate by 50bp to 3.5% in
November, having kept it at 3.0% through the pandemic. Fitch
expects monetary policy to remain broadly accommodative in 2022,
supporting the economic outlook.
The diversity of the Dominican Republic's exports, its FDI flows,
strengthened external liquidity, and well-managed external debt
service and amortization profile support its external finances,
although net external debt/current external receipts (CXR) of 60%
for 2021 is elevated relative to the 'BB' median of 46%. Fitch
expects the current account deficit/GDP to remain small (2.1% in
2021, 2% in 2022 and 2% in 2023) and less than the 'BB' median
average of 2.6% during the period) and to be financed by net
foreign direct investment during the three-year period. The CXR
outlook is improving with tourism, manufacturing, and minerals
exports with new investment expanding firm capacity and
infrastructure. Imports have risen due to the reopening economy and
rising fuel prices, but the current account deficit/GDP remained
contained at 1.6% for 2Q21, reinforcing Fitch's expectation that
the deficit will remain moderate.
External liquidity has continued to strengthen, and Fitch expects
the ratio to remain comfortably above 150% during 2022-2023. Net
international reserves were USD12.7billion as of 15 November, up
18.7% in the calendar year to date. The external interest/CXR ratio
of 8.1% for 2022 is manageable, although it exceeds the 'BB' median
of 5.3%. Dominican Republic's fairly even external debt
amortization schedule, supported by active debt management and a
well-cultivated international investor base, is a further credit
strength.
The Worldwide Governance Indicators (WGIs) in the 45th percentile
(2020 survey), are in line with the 'BB' median. Dominican
Republic's political stability, macro policy continuity, and a
timely, targeted pandemic policy response across two government
administrations were strengths exhibited during 2020. Further, the
Abinader government has made headway on a series of institutional
reform pledges - including the strengthening of judicial
independence, independence of the public prosecutor, and reduction
of public electric utility financial losses pledged under the
Electricity Pact - could reinforce its WGIs. Dominican Republic's
national poverty rate rose by 2.4pp, to 23.4% in 2020, far less
than in some Latin American peers.
ESG - Governance: Dominican Republic has an ESG Relevance Score
(RS) of '5[+]' and '5', respectively, for Political Stability and
Rights and for the Rule of Law, Institutional and Regulatory
Quality, and Control of Corruption. These scores reflect the high
weight that the Worldwide Governance Indicators (WGI) have in
Fitch's proprietary Sovereign Rating Model. Dominican Republic has
a medium WGI ranking at the 45.2 percentile reflecting a recent
track record of peaceful political transitions, a moderate level of
rights for participation in the political process, moderate
institutional capacity, established rule of law and a moderate
level of corruption.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Public finances: Deterioration of the government debt/GDP and
interest/revenues ratios, for example, through the loosening
of fiscal policy, the re-emergence of material financial
losses of the public electric utilities, or lower GDP growth
rates than expected.
-- External finances: An external shock that widens the current
account deficit or the emergence of tougher external financing
conditions or private capital outflows, which result in a
sustained fall in international reserves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Public finances: Implementation of policy measures that
strengthen the government's budget flexibility, fiscal policy
credibility, and the balance sheet of the government and/or
central bank.
-- Macro: Entrenchment of the central bank's inflation-targeting
regime resulting in greater monetary policy credibility and
effectiveness.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Dominican Republic a score
equivalent to a rating of 'BB-' on the Long-Term Foreign-Currency
(LT FC) IDR scale. Fitch's sovereign rating committee adjusted the
output from the SRM to arrive at the final LT FC IDR by applying
its QO, relative to SRM data and output, as follows:
-- Macro: +1 notch, to offset the temporary deterioration in the
SRM output driven by volatility from the pandemic shock,
including on GDP growth. The deterioration of the GDP growth
and volatility variables reflects a very substantial and
unprecedented exogenous shock that has hit the vast majority
of sovereigns, and Fitch believes that Dominican Republic is
demonstrating its capacity to absorb it without lasting
effects on its long-term macroeconomic stability.
-- Public Finances: -1 notch, to reflect weaknesses in the fiscal
structure owing to low revenues and material quasi-fiscal
losses from the large market debt of the central bank.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centred
averages, including one year of forecasts, to produce a score
equivalent to a LT FC IDR. Fitch's QO is a forward-looking
qualitative framework designed to allow for adjustment to the SRM
output to assign the final rating, reflecting factors within
Fitch's criteria that are not fully quantifiable and/or not fully
reflected in the SRM.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
Dominican Republic has an ESG Relevance Score of '5[+]' for
Political Stability and Rights as the Worldwide Governance
Indicators have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and a key rating driver with a high
weight. As Dominican Republic has a percentile rank above 50 for
the respective Governance Indicator, this has a positive impact on
the credit profile.
Dominican Republic has an ESG Relevance Score of '5' for Rule of
Law, Institutional & Regulatory Quality and Control of Corruption
as the Worldwide Governance Indicators have the highest weight in
Fitch's SRM and are therefore highly relevant to the rating and are
a key rating driver with a high weight. As Dominican Republic has a
percentile rank below 50 for the respective Worldwide Governance
Indicators, this has a negative impact on the credit profile.
Dominican Republic has an ESG Relevance Score of '4' for Human
Rights and Political Freedoms as the Voice and Accountability
pillar of the Worldwide Governance Indicators is relevant to the
rating and a rating driver. As Dominican Republic has a percentile
rank above 50 for the respective Worldwide Governance Indicator,
this has a positive impact on the credit profile.
Dominican Republic has an ESG Relevance Score of '4' for Creditor
Rights as willingness to service and repay debt is relevant to the
rating and is a rating driver for Dominican Republic, as for all
sovereigns. As Dominican Republic has a fairly recent restructuring
of public debt in 2005, this has a negative impact on the credit
profile.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, 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 to the way in which they
are being managed by the entity.
===========
M E X I C O
===========
MEXICO: Auto Output, Exports Fall Again on Semiconductor Shortage
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Reuters reports that Mexican automotive production and exports fell
for the fifth month running in November, figures from the national
statistics agency (INEGI) showed, as ongoing shortages of
semiconductors put the brakes on the industry.
Mexican automotive production plunged by 20.25% from November 2020
to 248,960 vehicles, while auto exports declined by 16.46% to
240,341 units, the INEGI data showed, according to Reuters.
A global semiconductor shortage has prompted automakers in Mexico
and the rest of North America to implement rolling shutdowns,
curtailing production and hitting workers hard, the report notes.
"The stoppages are due to the shortage of semiconductors and yes
production decreased due to the shortage," a spokesperson for the
Mexico operations of Detroit-based General Motors Co said in
response to a query about falling output, the report relays.
INEGI data showed that GM Mexico's production fell 43.7% in
November from a year earlier, to 40,534 units, the report
discloses. Mexican auto parts industry group INA said the global
semiconductor shortage could be further complicated in 2022 as
fifth-generation (5G) technologies are adopted, the report adds.
Nissan's Mexico unit told Reuters the shortage was also impacting
production, after INEGI data showed its output plummeted 27.2% in
November to 41,525 vehicles, Reuters reports.
Mexican auto parts industry group INA said the global semiconductor
shortage could be further complicated in 2022 as fifth-generation
(5G) technologies are adopted, the report adds.
"We estimate the impact due to semiconductor shortage will last at
least until the first quarter of next year. But this is coupled
with a very important issue, which is the switch from 4G networks
to 5G," according to INA interim chief Alberto Bustamante, notes
Reuters.
The report says Bustamante estimated the impact due to the chip
shortage could begin normalizing as of the second quarter of 2022.
Reuters recounts that Mexico's auto production fell by 20% to 3.04
million vehicles last year during the first phase of the
coronavirus pandemic, and the Mexican Automotive Industry
Association (AMIA) has forecast that it could drop by up to 5% more
in 2021.
AMIA chief Fausto Cuevas forecast that Mexico's auto production
would return to pre-pandemic levels by late 2023 or in 2024, the
report notes.
In the first 11 months of 2021, Mexican automotive production fell
by 0.68% from the same period last year to 2,767,004 vehicles,
while auto exports over the same period increased by 3.02% to
2,479,515 units, INEGI figures show.
PETROLEOS MEXICANOS: Mexico Gives $3.5B Lifeline to Help Finances
-----------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Petroleos
Mexicanos, the world's most indebted oil company, will get a $3.5
billion cash injection from the government as President Andres
Manuel Lopez Obrador orders a new business plan for the struggling
company.
The state-owned producer will use the funds to pay down obligations
and also embark on a series of bond buybacks and new issuance to
reduce the cost to service its debt, according to
globalinsolvency.com.
As part of the initiative, Pemex will also overhaul its five-year
business plan, according to a statement released by the company,
the report notes.
Lopez Obrador's latest effort to show support for Pemex, which has
a 90-year legacy in the country and for many years provided a huge
chunk of the federal budget, comes after more than a decade of
declines in output and limited investment in new fields, the report
discloses.
While the announcement appeared to provide some short-term support
for the embattled company, analysts are skeptical that it will be
enough to revive operations, the report relays.
"It seems to be a continuation of what they have been doing: a
direct transfer from the Mexican government, and trying to change
the debt from the short and medium to the longer term," said
Alejandra Leon, Latin America upstream director at IHS Markit, the
report relays.
"The critical part is whether there are changes in the operation
that generate sufficient resources to deal with the debt, and
that's still unknown," the report discloses.
Leon said she couldn't be sure that the transactions announced will
ultimately reduce Pemex's debtload, because the details on the
plans to buy back some notes and issue new bonds were unclear, the
report adds.
About Petroleos Mexicanos
Petroleos Mexicanos is engaged in the exploration, refining,
transportation, storage, distribution, and sale of crude oil,
natural gas, and derivatives of petroleum and natural gas in
Mexico. The Company is a major supplier of crude oil to the United
States.
As reported in Troubled Company Reporter-Latin America, Moody's de
Mexico, S.A. de C.V. in July 2021 downgraded Petroleos Mexicanos'
(PEMEX) senior unsecured ratings on the company's existing notes,
as well as the ratings based on PEMEX's guarantee, to A3.mx/Ba3
from A2.mx/Ba2. Moody's also affirmed PEMEX's MX-2 short term
national scale. These rating actions follow Moody's Investors
Service (MIS) rating action of downgrading PEMEX's corporate family
rating to Ba3 from Ba2. MIS also lowered PEMEX's Baseline Credit
Assessment (BCA), which reflects its standalone credit strength, to
caa3 from caa2.
PETROLEOS MEXICANOS: Moody's Rates New $1BB Sr. Unsec. Notes 'Ba3'
------------------------------------------------------------------
Moody's Investors Service assigned a Ba3 senior unsecured rating to
Petroleos Mexicanos' (PEMEX) up to $1 billion in proposed notes due
2032. The company will use the proceeds of the notes to repay debt.
The proposed notes will be jointly and severally guaranteed by the
company's operating subsidiaries, Pemex Exploracion y Produccion,
Pemex Transformacion Industrial and Pemex Logistica. The rating
outlook is negative.
Assignments:
Issuer: Petroleos Mexicanos
Senior Unsecured Regular Bond/Debenture (Foreign Currency),
Assigned Ba3
RATINGS RATIONALE
PEMEX's Ba3 corporate family rating and caa3 BCA reflect Moody's
view that the company's liquidity needs and negative free cash flow
will remain high in the next three years due to high debt
maturities and lower operating cash flow derived from the expansion
of its refining business, which has generated operating losses in
the last several years. Although oil and gas production growth has
been below management targets, Moody's acknowledges that PEMEX has
been successful in reverting production and reserves declines in
2019-20 and believes that this trend will continue in 2021-22.
However, Moody's expects that PEMEX's cash flow generation and
credit metrics will remain weak in the next three years as the
company increases fuel production, while grappling with limited
capital investment ability, high debt maturities, and volatile oil
and fuel prices.
PEMEX's Ba3 rating takes into consideration Moody's joint default
analysis, which includes assumptions of very high government
support in case of need and very high default correlation between
PEMEX and the government of Mexico, resulting in six notches of
uplift from the company's caa3 BCA. Since 2016, the government has
supported PEMEX in various ways, including capital injections, tax
reductions and early redemption of notes receivable from the
government. By the end of 2021, the government will have supported
PEMEX with close to $20 billion between tax reductions and capital
injections, for capital investments and debt payments. The
government has stated its intention to continue to support PEMEX's
debt payment obligations in 2022 and 2023. The support from the
government will allow PEMEX to reduce its debt in 2021-23.
PEMEX has weak liquidity and is highly dependent on government
support. On September 30, 2021 PEMEX had $2 billion in cash and
currently has around $300 million in available committed revolving
credit facilities to address over $7.7 billion in debt maturities
from October 2021 to the end of 2022, besides substantial negative
free cash flow in the period, driven by insufficient operating cash
generation to pay taxes and invest in capital.
The negative rating outlook on PEMEX's Ba3 ratings is primarily
based on the negative outlook on Mexico's Baa1 rating given the
importance of the sovereign's credit strength and ongoing support
to PEMEX's ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
A downgrade of Mexico's Baa1 rating would likely result in a
downgrade of PEMEX's rating. For Moody's to consider an affirmation
of PEMEX's Ba3 rating following a sovereign downgrade, the
company's BCA would have to substantially improve. Factors that
could drive a higher BCA would be the ability of the company to (i)
strengthen its liquidity position (ii) internally fund enough
capital investment to fully replace reserves and deliver modest
production growth and (iii) generate free cash flow for debt
reduction. Because PEMEX's ratings are highly dependent on the
support from the government of Mexico, a change in assumptions
about government support and its timeliness could lead to a
downgrade of PEMEX's ratings.
Further downgrades in the company's BCA could also lead to further
downgrades of PEMEX's ratings. Factors that could lead to a lower
BCA include material increase in net debt, an operating performance
worse than forecasted, reserves decline and decreases in reserves
life.
An upgrade is unlikely in the near term given the negative outlook
for Mexico's Baa1 rating and Moody's expectations for continued
negative free cash flow at PEMEX.
The methodologies used in this rating were Integrated Oil and Gas
Methodology published in September 2019.
Founded in 1938, PEMEX is Mexico's national oil company, with fully
integrated operations in oil and gas exploration and production,
refining, distribution and retail marketing, as well as
petrochemicals. PEMEX is also a leading crude oil exporter, around
60% of its crude is exported to various countries, mainly to the US
and Asia. In the nine months ended September 30, 2021 the company
produced an average of 1,745 thousand barrels of per day of crude
oil (excluding partners).
=====================
P U E R T O R I C O
=====================
IGLESIAS DIOS: Seeks to Hire Gerardo Santiago Puig as Counsel
-------------------------------------------------------------
Iglesias Dios Es Amor, Inc. seeks approval from the U.S. Bankruptcy
Court for the District of Puerto Rico to employ Gerardo Santiago
Puig, Esq., an attorney practicing in San Juan, Puerto Rico, to
handle its Chapter 11 case.
Mr. Puig will render these legal services:
(a) prepare pleading and applications and conduct examinations
incidental to administration;
(b) develop the relationship of the status of the Debtor to
the claims of creditors in this case;
(c) advise the Debtor of its rights, duties, and obligations
as Debtor operating under Chapter 11 of the Bankruptcy Code;
(d) take any and all other necessary action incident to the
proper preservation and administration of this Chapter 11 estate;
and
(e) advise and assist the Debtor in the formulation and
presentation of a Chapter 11 plan, the disclosure statement and
concerning any and all matters relating thereto.
The Debtor has agreed with Mr. Puig to pay in advance the retainer
fee of $7,000.
The attorney will be paid at his hourly rate of $200 for his
services.
Mr. Puig disclosed in a court filing that he is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code.
The attorney can be reached at:
Gerardo L. Santiago Puig, Esq.
Santiago Puig Law Offices
Doral Bank Plaza
33 Resolucion St.
San Juan, PR 00920
Telephone: (787) 777-8000
Facsimile: (787) 767-7107
Email: gsantiagopuig@gmail.com
About Iglesias Dios Es Amor
Iglesias Dios Es Amor, Inc. filed its voluntary petition for relief
under Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case
No. 21-03508) on Nov. 29, 2021, listing under $1 million in both
assets and liabilities. Elias Reyes Ortiz, president, signed the
petition. Gerardo L. Santiago Puig, Esq., at Santiago Puig Law
Offices serves as the Debtor's legal counsel.
REMLIW INC: Seeks Seven-Day Extension of Time to File Sale Bid
--------------------------------------------------------------
Remliw Inc. and Monte Idilio Inc. ask the U.S. Bankruptcy Court for
the District of Puerto Rico a brief extension of time to file the
motion to sell property at private sale to sort out the amount to
be paid to Centro de Recaudaciones de Ingresos Municipales ("CRIM")
during the Amnesty and if possible, to obtain form CRIM a
cancellation balance and at the same time to file the motion to
sell property at private sale.
At the hearing held on Nov. 17, 2021, at 1:30 p.m., the Debtor was
granted 10 days to file a motion to sell property at private sale.
The term requested became due on Nov. 27, 2021, and was
automatically extended to Nov. 29, 2021.
On May 9, 2019, CRIM filed claim number 2 in the aggregate amount
of $88,145.99, including a portion of $81,989.80 secured by the
statutory lien created by Act 83 of 1991, Art. 3.30 ("Statutory
Lien").
In the meantime, CRIM approved and offered an amnesty to the
taxpayers that includes some of the amounts claimed by CRIM for
taxes due up to 2019. The amnesty became effective on Nov. 5, 2021,
and it will last until June 30, 2021, and offers substantial
discounts that fluctuate from 55% to 25% of the principal owed and
the forbearance of interest, late charges and penalties.
The Debtor is trying to obtain from CRIM a cancellation balance
that takes into consideration the payment of its claim during the
Amnesty. Said information is of paramount importance since CRIM is
the senior lienholder up to the amounts covered by the Statutory
Lien.
The Debtor requests a brief extension of time of seven days to sort
out the amount to be paid to CRIM during the Amnesty and if
possible, to obtain form CRIM a cancellation balance and at the
same time to file the motion to sell property at private sale.
Pursuant to 11 USC Section 363(f), FRBP 6004 and PR LBR 6004-1, the
Debtor has the obligation to provide in a sale out of the ordinary
course of business accurate information as to the balance owed to
the secured lienholders.
The brief extension of time requested will not affect the
timetable
of litigation scheduled by the Court. The extension of time
requested elapsed on Dec. 6, 2021.
About Remliw, Inc.
Remliw Inc. is a privately held company, which owns a motel
located at Carr 639 Km 2.1 Arecibo, Puerto Rico.
Remliw Inc. filed a voluntary Chapter 11 petition (Bankr. D.P.R.
Case No. 19-01179) on March 2, 2019. In the petition signed by
Wilmer Tacoronte Negron, administrator, the Debtor disclosed
$2,776,090 in total liabilities. Damaris Quinones Vargas, Esq.,
at LCDA Damaris Quinones, is the Debtor's counsel.
*********
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
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contact Peter A. Chapman at 215-945-7000.
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