/raid1/www/Hosts/bankrupt/TCRLA_Public/211222.mbx        T R O U B L E D   C O M P A N Y   R E P O R T E R

                 L A T I N   A M E R I C A

          Tuesday, December 21, 2021, Vol. 22, No. 248

                           Headlines



B R A Z I L

OI SA: Fitch Affirms 'CCC+' LT IDRs


D O M I N I C A N   R E P U B L I C

BANCO DE RESERVAS: Fitch Alters Outlook on 'BB-' LT IDR to Stable

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B R A Z I L
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OI SA: Fitch Affirms 'CCC+' LT IDRs
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Fitch Ratings has affirmed all of Oi S.A.'s ratings, including the
Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) at
'CCC+', the LT Local Currency (LC) IDR at 'CCC+', the USD unsecured
2025 notes at 'CCC+'/'RR4', and the National LT Rating at
'B(bra)'/Stable. Fitch also affirmed the USD secured 2026 notes of
Oi Movel S.A. at 'CCC+'/'RR4'.

Oi's ratings reflect weak cash flow prospects once the company
executes its divestment plan as well as the limited expected
dividends over the next few years from Oi's proforma 42% stake in
V.tal. Fitch projects net leverage will be well above 10x on a pro
forma basis with the divestments. Positively, asset sales have
progressed, which has increased certainty of a liquidity boost in
the near term. If divestment proceeds of BRL26 billion are not used
to reduce debt by more than BRL15 billion and Oi's remaining
business (New Oi) continues to show revenue trends below
expectations, a 1-2 notch downgrade would occur.

KEY RATING DRIVERS

Asset Sales: Oi is in the process of completing the sale of its
mobile unit for BRL15.8 billion to a consortium of the three other
mobile network owners in Brazil, as well as a 51% stake in its
fiber optic infrastructure assets (now rebranded as V.tal) for
BRL10.6 billion to BTG Group. After the completion of the
transaction, which will also include the merger of subsea fiber
optic assets and a contribution by the buyer of BRL1.5 billion, Oi
will own 42% of V.tal.

Debt Prepayments: The net proceeds of the mobile sale and to a
lesser extent the proceeds from the sale in the stake of V.tal will
be used to pay down both pre-petition and post-petition
liabilities. Oi is expected to use part of net sales proceeds of
BRL24 billion to reduce the BRL 4.6 billion secured development
bank loan, the USD880 million 2026 notes, the BRL 2.3 billion
bridge private debenture. In addition, it will pay BRL3 billion in
non-consolidated convertible debt at V.tal and is expected to pay
BRL3.3 billion of bank and ECA debt

Partial Divestment of Fiber Infrastructure: The main objectives
behind the sale of Oi's stake in V.tal are to enhance Oi's
financial flexibility while allowing V.tal to continue to expand
its fiber optic network. After the V.tal transaction is concluded
V.tal will cease to be jointly and severally liable with the
debtors for their payment obligations as per the amendments to the
judicial reorganization plan.

The remaining Oi group (New Oi) will house the legacy copper
infrastructure and will focus on providing fiber optic and other
digital services for its residential, commercial and customers
through V.tal's network. The company will maintain other assets
such as call center and technical & logistics services, in addition
to most of the debt.

Fiber Strategy: There has been a sharp increase in the demand for
high-speed internet in Brazil, which has coincided with significant
investments by Oi's competitors. Oi has invested close to BRL15
billion over the last two years, primarily on deploying its FTTH
network, passing about 13.5 million homes and connecting 3.2
million of them of as of Sept. 30, 2021. These figures compare with
7.8 million homes passed and 1.7 million homes connected the same
period of last year.

V.tal will also offer fiber to other telecoms. A neutral
infrastructure provider can aggregate wholesale telecom demand,
providing a cost-effective solution to carriers seeking to expand
network coverage and capacity. As carriers plan for 5G deployment,
V.tal also hopes to capitalize on increased demand for fiber to the
tower (FTTT).

Weak Financial Profile: New Oi's leverage and coverage metrics will
be remain weak after the completion of the asset sales. Fitch
anticipates that V.tal will have superior growth characteristics
relative to New Oi. However, Fitch does not expect V.tal to pay
dividends until 2024 at the earliest. The low growth potential of
New Oi and the deconsolidation of V.tal contribute to the overall
weak assessment of Oi's credit profile despite the planned
reductions in overall debt.

Debt Ratings Capped: Fitch applies a bespoke approach to recovery
for issuers rated 'B+' and lower, using the higher of going-concern
and liquidation estimates to enterprise valuation. Fitch forecasts
recovery rates commensurate with an 'RR1' rating for the secured
notes due in 2026, which could potentially cause an uplift of up to
three notches (B+/RR1) from Oi's IDR. However, Fitch's
"Country-Specific Treatment of Recovery Ratings Criteria" caps
Brazilian issuers at 'RR4', resulting in an instrument rating of
'CCC+', equal to Oi's FC IDR, despite the new secured notes
collateral package and seniority.

DERIVATION SUMMARY

Oi's ratings reflect its restructured financial profile and the
still uncertain outlook for its turnaround strategy. Compared to
Latin American carriers in the low speculative grade/distressed
territory, such as Digicel Group Holdings Limited (CCC/ Positive),
Oi has better liquidity. Fitch also expects Oi to carry higher
leverage and lower profitability as a result of the divestments of
the higher margin assets. Compared to American carriers that have
either restructured or declared bankruptcy, such as Windstream and
Frontier, Oi has a better business position as the third largest
telecom operator in Brazil.

The ratings are not constrained by Brazil's operating environment
or country ceiling; however, the company is wholly exposed to
fluctuations in the Brazilian macroeconomic environment.

KEY ASSUMPTIONS

Fitch's key assumptions within its rating case for the issuer
include:

-- New Oi revenues in the BRL9.0 billion - BRL10.0 billion range,
    along with EBITDA margins of 12%-15%;

-- Successful mobile and infrastructure transactions for the
    agreed upon amounts (BRL16.5 billion and BRL10.6 billion);

-- Proceeds from asset sales are used to pay down debt, according
    to JRP amendments;

-- For the recovery analysis, Fitch estimates a going concern
    EBITDA of around BRL1.4 billion and uses a 4.0x multiple. Most
    of the enterprise value comes from the 42% stake in V.tal,
    valued at approximately BRL20.0 billion.

RATING SENSITIVITIES

Factor that could, individually or collectively, lead to positive
rating action/upgrade:

-- Fitch does not anticipate a positive rating action for Oi in
    the near term due to the expected high leverage and negative
    free cash flow.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

-- Failure to repay debt in excess of BRL15 billion;

-- Weak operating results at New Oi;

-- Competitive pressures leading to lower than expected revenue
    and cash flow generation and coverage ratios dropping 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

Adequate Liquidity: As of Sept. 30, 2021, New Oi had BRL3.2 billion
of cash and equivalents against BRL268 million of short-term debt
and forecast interest payments of around BRL1.5 billion.

Oi will launch a tender offer for the 2026 secured notes at par
plus 33.33% of the coupon following the sale of the mobile unit.
The net proceeds from the mobile sale will be applied to tendered
notes. The economic rationale underlying the transaction is to save
on interest expense and to reduce refinancing risk.

Fitch expects the gross proceeds from these divestments to be
around BRL27.0 billion-BRL28.0 billion, which will be used to
prepay debt according to the amended JRP. Fitch expects that
secured creditors will be paid first, followed by unsecured
creditors in installments.

ISSUER PROFILE

Oi owns copper infrastructure provides fiber optic and other
digital services for residential and corporate customers. The
company is in the process of selling its mobile operations as well
as a stake in V.tal, which is a fiber optic network in Brazil.

ESG CONSIDERATIONS

Oi S.A. has an ESG Relevance Score of '4' for Financial
Transparency. Reporting is adequate, but the complexity of the
financial and operational restructuring weighs on the overall
assessment of Transparency, which has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.



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D O M I N I C A N   R E P U B L I C
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BANCO DE RESERVAS: Fitch Alters Outlook on 'BB-' LT IDR to Stable
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Fitch Ratings has revised the Outlook on Banco de Reservas de la
Republica Dominicana, Banco de Servicios Multiples (Banreservas)
and Banco Multiple BHD Leon, S.A. (BHDL)'s Long-Term Issuer Default
Ratings (IDRs) to Stable from Negative and affirmed the IDRs at
'BB-'.

The revision of the Outlook to Stable follows Fitch's revision of
the Dominican Republic's sovereign Rating Outlook to Stable from
Negative. Fitch has adjusted its operating environment (OE)
assessment for the Dominican banking system to Stable from Negative
as Fitch expects robust economic growth of 11% in 2021, 5.7% in
2022 and 5.3% in 2023 to provide a favorable environment for credit
growth and to sustain asset quality and profitability.

Fitch has also withdrawn Banreservas' and BHDL's Support Rating and
Support Rating Floor as they are no longer relevant to the agency's
coverage following the publication of its updated Bank Rating
Criteria on Nov. 12, 2021. In line with the updated criteria, Fitch
has assigned both banks a Government Support Rating (GSR).

KEY RATING DRIVERS

BANRESERVAS

IDRs

The bank's IDRs reflect Fitch's expectations of support from the
bank's sole shareholder, the government of the Dominican Republic,
should it be needed.

VR

Fitch believes Dominican Republic's Sovereign Rating and broader
operating environment considerations moderately influence the VR of
Banreservas. The VR also weights Banreservas's robust business
profile due to its strong local competitive position as the largest
bank in Dominican Republic and leadership position in the
commercial and consumer segments.

Capitalization is tight relative to its rating category,
particularly when considering its high asset concentrations and the
lower risk-weighting of its assets. Tangible equity to tangible
assets stood at a low 5.9% as of September 2021 Fitch believes the
ratio will sustain above the 5.5% trigger. Banreservas' asset
quality improved recently, reflecting better commercial and
consumer segment performance. The improvement was also supported by
expansion of its loan portfolio (NPLs at 1.3% of total loans as of
3Q21) and strong loan loss reserve coverage of 506.1%. Fitch
believes that the bank's profitability will remain commensurate to
its rating in 2022 as the impact of the provisions has already been
absorbed. Operating profit to total average assets improved to 2.6%
as of 3Q21 due to lower cost of credit and extraordinary trading
income.

GOVERNMENT SUPPORT RATING

Fitch has assigned Banreservas a GSR of 'bb-' to reflect its
systemic importance with a deposit market share of 33.6%, its
policy role by collecting funds for the government's single
treasury account to pay debt obligations, its role as a provider of
public sector loans, and its 100% government ownership. The GSR
also reflects moderate probability of support being forthcoming
because of uncertainties about the ability or propensity of the
Dominican Republic due to its speculative-grade IDR, should it be
needed.

SUBORDINATED DEBT

Banreservas' outstanding subordinated debt includes an
international issuance of USD300 million due 2023. The anchor
rating for the international subordinated issues is the IDR, given
the bank's government ownership and policy role. This issuance is
two notches below the IDR, reflecting the baseline notching for
loss severity of two notches, due to its subordination nature and
no coupon deferral.

NATIONAL RATINGS

Banreservas' national ratings and its related company's ratings are
not directly impacted, as these ratings reflect the relative
strengths and weaknesses of the entities in the local market.

BHDL

IDRs and VR

BHDL's VR drives its Long-Term IDRs. The bank's VR is moderately
influenced by the Sovereign Rating and broader operating
environment considerations. The VR also weights the bank's business
profile due to its strong franchise as the third largest bank in
the Dominican Republic.

BHDL's asset quality modestly deteriorated to 2.0% as of 3Q21 but
the loan loss allowance coverage is conservative at 268.9% and
provides loss absorption capacity. Profitability proved to be
resilient as BHDL created voluntary provisions before the pandemic,
which mitigated the significant increase in loan impairment charges
to address the risks stemming from the coronavirus crisis;
operating profit to RWAs improved to 3.7% mainly due to lower
credit cost and extraordinary trading income. Adequate
capitalization (FCC of 14.4%) is expected to be sustainable in
2022, driven by the moderate loan growth, lower RWA density due to
the reduction in market risk, and earnings generation.

GOVERNMENT SUPPORT RATING

Fitch has assigned BHDL a GSR of 'b+' to reflect that despite
BHDL's solid franchise in deposits of 15.8%, which drives us to
consider it as a systemically important bank, there is limited
probability of support being forthcoming because of significant
uncertainties about the ability or propensity of the Dominican
Republic to do so.

NATIONAL RATINGS

BHDL' national ratings and its local related companies' ratings in
Dominican Republic are not directly impacted, as these ratings
reflect the relative strengths and weaknesses of the entities in
the local market.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive
rating action/upgrade:

BANRESERVAS

IDRS and VR

-- Over the medium term, the VR could be upgraded by the
    confluence of improvements in the operating environment and
    the financial profile of the bank.

Subordinated Debt

-- Banreservas' subordinated debt rating is sensitive to any
    upgrade in the bank's IDR and National Long-Term rating.
    Consequently, there is limited upside potential.

GSR

-- Banreservas' GSR could be upgraded if the sovereign rating is
    upgraded.

BHDL

IDRs and VR

-- Upside potential is limited. Over the medium term, the VR
    could be upgraded by the confluence of improvements in the
    operating environment and the financial profile of the bank.

GSR

-- An upgrade of BHDL's GSR is possible in the event of a
    sovereign upgrade if it coincides with a strengthening of the
    sovereign's ability and propensity to support the bank.

Factors that could, individually or collectively, lead to negative
rating action/downgrade:

IDRS and VR

-- The IDRs would be downgraded following a downgrade of the
    sovereign rating;

-- The bank's IDRs are sensitive to a change in Fitch's
    perception of the Dominican sovereign of propensity to support
    the bank;

-- A relevant deterioration in asset quality or profitability or
    sustained pressures on Banreservas' tangible common
    equity/tangible assets ratio to below 5.5% could trigger a
    downgrade of its VR;

Subordinated Debt

-- Banreservas' subordinated debt rating is sensitive to any
    downgrade in the bank's IDR.

GSR

-- Banreservas' GSR would be affected if Fitch negatively changes
    its assessment of the Dominican government's propensity to
    provide timely support to the bank. This could also arise in
    the event of a sovereign negative rating action.

BHDL

IDRs and VR

-- Negative changes in the BHDL's IDRs and VR would mirror any
    movement in the Dominican Republic's sovereign ratings and
    Country Ceiling.

-- Downgrades of BHDL's VR could also result from significant
    pressure on the bank's financial profile, such as a relevant
    deterioration in asset quality or profitability combined with
    a FCC to RWAs ratio consistently below 10%.

GSR

-- A downgrade of BHDL's GSR could occur if the sovereign's
    ability to support the bank weakened, as reflected in a
    sovereign downgrade, or if the sovereign's propensity to
    support the bank becomes less likely.

VR ADJUSTMENTS

BANRESERVAS

Fitch has assigned a Business Profile score of 'bb' that is above
the 'b' category implied score due to the following adjustment
reasons: Market Position (positive).

Fitch has assigned a Funding and Liquidity score of 'bb-' that is
above the 'b' category implied score due to the following
adjustment reasons: Deposit Structure (positive).

BHDL

Fitch has assigned a Business Profile score of 'bb' that is above
the 'b' category implied score due to the following adjustment
reasons: Market Position (positive) and Strategy and Execution
(positive).

Fitch has assigned a Funding and Liquidity score of 'bb-' that is
above the 'b' category implied score due to the following
adjustment reasons: Deposit Structure (positive).

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.

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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S U B S C R I P T I O N   I N F O R M A T I O N

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Chapman, Editors.

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