/raid1/www/Hosts/bankrupt/TCRLA_Public/220107.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, January 7, 2022, Vol. 23, No. 0
Headlines
A R G E N T I N A
ARGENTINA: Agribusiness Plan Casts Doubt on Climate Goals
ARGENTINA: To Raise Power, Natural Gas Prices by 17% & 20% in 2022
B E R M U D A
TEEKAY CORP: Egan-Jones Keeps B Senior Unsecured Ratings
TEEKAY TANKERS: Egan-Jones Keeps BB Senior Unsecured Ratings
B R A Z I L
ACU PETROLEO: Fitch Rates USD650MM Fixed-Rate Sec. Notes 'BB(EXP)'
ACU PETROLEO: Moody's Rates Senior Secured Notes 'Ba2'
GOL LINHAS: To Resume Flights to Paraguay and Bolivia
JBS SA: Supermarkets Ban Beef Products
P A R A G U A Y
PARAGUAY: Central Bank Expected 6.8% Inflation by End of 2021
T R I N I D A D A N D T O B A G O
NATIONAL FLOUR: May Have to Increase Flour Price
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A R G E N T I N A
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ARGENTINA: Agribusiness Plan Casts Doubt on Climate Goals
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Buenos Aires Times reports that Argentina aims to significantly
increase production and exports of agricultural products over the
next decade, according to a new plan providing incentives for the
agribusiness sector.
On November 11, the Executive branch presented the draft Regime for
the Promotion of Federal, Inclusive, Sustainable and Exporting
Agroindustrial Development to the lower house Chamber of Deputies.
It foresees a set of benefits for agricultural, agroindustrial and
forestry investments in Argentina for the next 10 years, according
to Buenos Aires Times.
The plan, which will be debated in Congress, was created as a
result of an agreement between President Alberto Fernandez's
government and the main agribusiness leaders. Industry estimates
claim that these measures and investments will give a US$7-billion
boost to exports and create 150,000 jobs throughout the country,
the report notes. However, environmentalists have expressed
concern about the impact it would have on Argentina's compliance
with its emissions reduction targets, the report relays.
New Incentives for Argentina's Agribusiness
To achieve its economic objectives, the promotion plan proposes a
set of benefits, including: accelerated return on agribusiness
investments by allowing higher tax deductions in the first years;
earlier reclaim of the Value Added Tax (VAT); and deferred income
tax payments for cattle breeding, the report discloses.
According to the agricultural sector, these incentives and benefits
will promote investment in better inputs and technologies, which
will then allow agricultural and livestock production to increase,
the report relays.
The project is the result of an agreement between the government
and the Argentine Agroindustrial Council (CAA), a coalition of more
than 60 institutions linked to the countryside, which aims to
"consolidate Argentina as a leader in the international trade in
animal and vegetable foods, in animal feed and and as an exporter
of agri-food ecosystem technologies," according to its own
definition, the report relays.
The initiative also has the support of the main opposition parties
and, if approved, is expected to provide a framework of stability
to the sector, benefitting small, medium and large companies and
producers throughout the country, the report notes. Agriculture is
responsible for seven out of every ten dollars (US$) that enter the
country through exports, the report says.
Crops account for two thirds of Argentina's total agricultural
production, with around 100 million tonnes a year destined for
foreign trade (mainly soy, maize, wheat and sunflower), while meat
and dairy farming make up the remaining third. In the first six
months of 2021, the sector's share of the nation's total exports
reached 67 percent, and represented a total income of around US$24
billion, the report discloses.
Welcomed by Agribusiness
"We believe that this promotion scheme will allow the purchase of
more machinery and equipment, more fertilizers and more seeds with
better genetics, and all of this will lead to greater production
with a lower tax burden," said Julio Calzada, director of economic
studies at the Rosario Stock Exchange, the report relays.
Elbio Laucirica, acting president of Coninagro, an organisation
that brings together cooperatives in the agricultural sector,
believes that the law, if passed, "will place Argentina in much
more advantageous conditions and in a privileged position in the
world, not only in the generation of foreign currency, but also in
the generation of employment throughout the country, with a good
impact on regional economies," the report discloses.
Alfredo Paseyro, executive director of the Argentine Seedbeds
Association (ASA), said that the initiative "does not solve all the
problems of the agro-industry, but the outlook of the project is
positive, as it encourages productive agroindustrial investment
with different incentives," the report says.
The initial objective of the CAA was much more ambitious than the
government's initial proposal, Paseyro said, but "we had to seek
points of agreement." Two of the issues that were left out were
the reduction or removal of export duties, and an improvement in
exchange rates, the report discloses.
Paseyro hopes that the proposal will be dealt with in Congress "as
soon as possible" and is confident that the project can be improved
during parliamentary debate "without this meaning modifying what
was agreed with the government," the report relays.
Sustainable Agriculture?
Although the plan has "sustainable" in the title, some have
questioned it in the context of the climate crisis, the report
notes. Agriculture, livestock, forestry and other land uses
together account for 37 percent of Argentina's greenhouse gas
emissions, according to the latest official inventory, the report
discloses.
In its nationally determined contribution (NDC) to the Paris
Agreement, Argentina pledged not to exceed net emissions of 349
megatonnes of carbon dioxide by 2030, which represents a total cut
of 19 percent of emissions from the historical peak reached in
2007, the report notes.
Argentina has also committed to achieving an emissions-neutral
economy by 2050. In fact, the government was scheduled to present
its plan to achieve this goal at the recent COP26 climate change
conference, but did not do so, following pushback from the
agribusiness sector against more ambitious targets in the days
before the summit began, the report says.
The planned increase in production "is in clear opposition to
Argentina's goal of carbon neutrality by 2050", civil society
organisation Fundacion Ambiente y Recursos Naturales (FARN) said in
a statement by the news agency.
Maria Marta Di Paola, FARN's director of research, said the
government's proposal "represents a deepening of the agroindustrial
model and its environmental impacts," the report relays.
"In this context [of climate change] agribusiness is a victim,
because it suffers the ravages of droughts and floods, and it is a
victimiser, because it is the second largest sector in the national
matrix of greenhouse gas emissions," she added.
For Di Paola, "we have to revise this model as we know it, which
sees the advance of agricultural frontiers over native forests,
which sequester carbon, and the advance over wetlands," the report
notes.
Agroecology promotes agricultural production that conserves the
basic natural resources for food production, such as soil, water
and biodiversity, the report discloses. In Argentina, it is
promoted by various organisations, such as the Union de
Trabajadores de la Tierra (UTT), which brings together some 22,000
food-producing family farms in 18 provinces, the report relays.
For Agustin Suarez, spokesperson for UTT, the government's new
agroindustrial plan "continues to deepen the agro-export model and
the lobby of monopolistic companies," the report relays. Suarez
also proposed an expansion of agroecology and called for a new
framework for land use planning in the agricultural sector, the
report notes.
"It is a promotion of intensive farming, with greater use of
transgenic [genetically modified] seeds and agrochemicals, and the
expansion of the agricultural frontier at the expense of forests
and entire communities – just as they have been doing for four
decades," Suarez said, the report notes. "Everything is a loss for
the Argentinian people," he added.
Forests, as well as wetlands, are important reservoirs of carbon
dioxide, the main gas that causes global warming. Globally, it is
estimated that about 20 percent of global emissions originate from
deforestation, the report discloses. Between 1998 and 2018, 5.8
million hectares were deforested in Argentina, the report relays.
"In addition, the socio-environmental impacts of agrochemical use
on human health, water courses and soil quality need to be
reviewed," Di Paola adds. In Argentina, around 500 million litres
of pesticides and herbicides are used every year, according to
estimates by the NGO Naturaleza de Derechos, the report notes.
FARN believes that the bill should be submitted to a process of
public participation in which the different actors can express
their concerns about its environmental implications, the report
discloses.
"We believe it is essential to [instead] promote agroecology, which
can mitigate the environmental impacts of the agroindustrial
model," Di Paola concluded, the report adds.
The Outlook for Argentina's
Agribusiness
Elbio Laucirica, from Coninagro, stated that in order to increase
agroindustrial production, it is not necessarily essential to
increase the surface area of farms, but rather to "invest in
technology," and that this new official initiative facilitates such
investment, the report notes.
He also explained the concept of "sustainable" as it is interpreted
in the proposal, with social, economic and environmental variables:
"The social aspect involves promoting the rootedness of the land,
and providing the services needed by producers in rural areas. The
economic aspect has to do with generating income to produce
investments. And from the environmental point of view, Argentina
is at the forefront with no-till farming, saving water, fossil fuel
use and carbon emissions," the report says.
Meanwhile, Julio Calzada, from the Rosario Stock Exchange, stressed
that the agro-industrial sector is actively involved in reducing
and mitigating its greenhouse gas emissions, the report discloses.
Calzada highlighted two programmes: The Argentine Carbon Neutral
Programme, which calculates the carbon footprint of each sector and
certifies the carbon balance of export products; and the Visión
Sectorial del Gran Chaco (VISEC) programme, which aims to reduce
deforestation in the Gran Chaco with certifications of
"deforestation-free" products for international markets, the report
relays.
Alfredo Paseyro, from the ASA, said that the sector is "committed
to sustainability, with good practices and complying with
international standards and the demands of buyers, who set their
own conditions and environmental standards," the report notes.
"In the countryside we always say that we are borrowing the land
that we have to leave to our children, and that is a responsibility
that goes beyond any manual of good environmental practices,"
concluded Paseyro, the report relays.
For Laucirica, the sector faces great challenges: "We have to raise
producer awareness, train producers and their staff in technologies
and control. We need the state to carry out the necessary controls
and to certify us, so that society is convinced that we are doing
things right," the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Fitch Ratings' affirmed Argentina's 'CCC' Long-Term
Foreign-Currency and Local-Currency Issuer Default Ratings (IDRs)
at 'CCC' last Oct. 18, 2021, reflecting macroeconomic imbalances
and acute financing constraints that continue to undermine debt
repayment capacity following 2020 bond restructurings, and
significant political uncertainty around how these challenges will
be addressed.
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. DBRS' credit rating for Argentina is CCC, given
on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
DBRS further relayed that Argentina is also seeking a new agreement
with the International Monetary Fund (IMF) to replace the canceled
2018 Stand-by Agreement. Formal negotiations on the new financing
began in November 2020. Obligations to the IMF amount to $44
billion, with major repayments coming due in 2022 and 2023.
ARGENTINA: To Raise Power, Natural Gas Prices by 17% & 20% in 2022
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Buenos Aires Times reports that Argentina is preparing to announce
hikes to household utility tariffs in 2022, with a 17 percent cap
on electricity prices and 20 percent cap on natural gas prices,
according to a government official who asked not to be identified
because the matter is not yet public knowledge.
The increases will be announced between January and February and
will be in effect for the whole year, according to Buenos Aires
Times. The main criterion is to keep increases below inflation
after price hikes of nine percent for energy and six percent for
gas in 2021, the report notes. Currently, Argentina's annual
inflation is over 50 percent, the report relays.
The government will also seek to implement "tariff segmentation" in
early 2022 for Greater Buenos Aires, which will reduce utility
subsidies for 500,000 users, the report discloses. Initially, the
measure will affect 10 percent of consumers in Buenos Aires City
and 24 surrounding municipalities. In the capital, those living in
properties where the value of a square metre exceeds US$3,700 will
pay the full amount, the report says.
Currently, 60 percent of the rates in Greater Buenos Aires are
subsidized, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. It's capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Fitch Ratings' affirmed Argentina's 'CCC' Long-Term
Foreign-Currency and Local-Currency Issuer Default Ratings (IDRs)
at 'CCC' last Oct. 18, 2021, reflecting macroeconomic imbalances
and acute financing constraints that continue to undermine debt
repayment capacity following 2020 bond restructurings, and
significant political uncertainty around how these challenges will
be addressed.
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. 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.
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B E R M U D A
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TEEKAY CORP: Egan-Jones Keeps B Senior Unsecured Ratings
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Egan-Jones Ratings Company, on December 6, 2021, maintained its 'B'
foreign currency and local currency senior unsecured ratings on
debt issued by Teekay Corporation. EJR also maintained its 'C'
rating on commercial paper issued by the Company.
Headquartered in Hamilton, Bermuda, Teekay Corporation is a
provider of international crude oil and liquefied natural gas (LNG)
marine transportation services.
TEEKAY TANKERS: Egan-Jones Keeps BB Senior Unsecured Ratings
------------------------------------------------------------
Egan-Jones Ratings Company, on December 8, 2021, maintained its
'BB' foreign currency and local currency senior unsecured ratings
on debt issued by Teekay Tankers Ltd.
Headquartered in Hamilton, Bermuda, Teekay Tankers Ltd. provides
oil transportation services through a fleet of mid-size tankers,
including Suezmax and Aframax crude oil tankers and Long Range 2
product tankers.
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B R A Z I L
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ACU PETROLEO: Fitch Rates USD650MM Fixed-Rate Sec. Notes 'BB(EXP)'
------------------------------------------------------------------
Fitch Ratings has assigned the rating of 'BB(EXP)' to the
fixed-rate senior secured notes of Acu Petroleo Luxembourg S.A.R.L.
(Acu Petroleo Luxembourg, the Issuer) for up to USD650 million due
in 2035. The Rating Outlook is Negative.
RATING RATIONALE
Açu Petroleo Luxembourg's rating reflects the characteristics of
the underlying asset, an operational oil transshipment port whose
revenue profile is exposed to contract renewal and volume ramp-up
risks. The project expects volumes to increase as a result of the
development of the Pre-Salt Fields which depends on long term oil
prices. The expected rating further reflects the regulatory model
that does not impose minimum or maximum pricing restrictions and
the expectation that the premium tariff, related to the reliability
of the port's services, will at least remain stable during the
following years.
The expected issuance will count with a full guarantee from Acu
Petroleo S.A. (Acu Petroleo) and the structure will contemplate a
legal and target amortization schedule, set to allow for the debt
to be fully amortized in 10 years, through a target amortization
cash sweep mechanism. This structure mitigates, to some extent,
future reductions in volumes.
Under the Rating Case, the project presents strong loan life
coverage ratio (LLCR) of 1.8x and the project presents consolidated
minimum and average debt service coverage ratios (DSCRs), from 2023
to 2026, of 1.2x and 1.6x, respectively. From 2022 to 2024 the
volumes are mostly contracted with strong International Oil
Companies (IOCs) and DSCRs of around 1.2x in these years are
commensurate with the assigned rating.
The Negative Outlook reflects the corresponding Negative Outlook on
Brazil's current 'BB-' Long-Term Foreign Currency Issuer Default
Rating as the transaction is exposed to transfer and convertibility
risk and the weakening of the Brazilian sovereign rating could
implicate in a higher risk of controls on the transfer of foreign
currency to serve the debt.
KEY RATING DRIVERS
Concentrated Business Model [Revenue Risk: Volume -- Midrange]:
Acu Petroleo is a transshipment port that has been operational
since 2016. Acu Petroleo's business plan considers a ramp-up in
volumes in the next years, based on the development of the Pre-Salt
Fields in the Campos Basin in Brazil. Although it benefits from a
long-term take-or-pay (ToP) agreement with Shell Brasil, subsidiary
of Royal Dutch Shell plc (AA-/Stable), it is exposed to contract
renewals since all of other ToPs contracts, will mature in the next
years.
The port is also exposed to the long-term oil prices since the
long-term price expectation should determine the development of new
fields. The port does not present a diversified business model with
the operation fully focused in the transshipment of crude oil.
Inflation Linked Contract [Revenue Risk: Price -- Midrange]:
The regulatory model does not impose minimum or maximum pricing
restrictions. The ToP agreements set forth annual tariffs
readjustments that follows U.S. inflation, measured by PPI for
Industrial Commodities, and they had been readjusted in a timely
manner since the port began operations. The revenues and debt are
U.S. dollar-denominated, but some operational costs and expenses
are denominated in Brazilian real (BRL), exposing the transaction
to the risk of BRL appreciation.
Modern and Well-Maintained Infrastructure [Infrastructure
Development & Renewal -- Stronger]:
Acu Petroleo's facilities are modern and well maintained and are
expected to have long useful lives. The capacity is above
medium-term volume forecast and planned investments comprise
predominantly channel dredging and widening, in case volumes
ramp-up according to base case projections. The investments and
maintenance capex should be funded with operational cash
generation.
Fixed Rate with a Target Cash Sweep Mechanism [Debt Structure --
Stronger]:
The expected issuance will be senior, fully amortizing, has a fixed
interest rate and count with a guarantee from Acu Petroleo. The
structure will contemplate a legal and target amortization schedule
set to allow for the debt to be fully amortized in 10 years,
through a target amortization cash sweep mechanism. The structure
presents a strong covenant package that includes financial triggers
for dividends distribution (DSCR > 1.30x), change of control
provision and a six-month offshore debt service reserve account
(DSRA). The structure will also limit new senior indebtedness,
which will require rating confirmation.
Financial Summary
Under the rating case, the minimum and average DSCRs, from 2023 to
2026, are 1.2x and 1.6x, respectively. From 2022 to 2024 the
volumes are mostly contracted with strong IOCs and DSCRs of around
1.2x in these years are commensurate with the assigned rating.
Moreover, metrics should increase over the years, since under the
rating case the company is able to perform the cash sweep payments
all of the years.
Peer Group
Prumo Participacoes e Investimentos S/A (Prumopar) (senior secured
notes; BB/RON) and Newcastle Coal Infrastructure Group Pty Ltd
(NCIG) (senior secured notes; BBB-/ROS) are LIC closest peers. The
ratings of LIC are explained by the fact that Prumopar and NCIG
benefit from a larger revenue share driven by ToP contracts through
the tenor of the debt when comparing with Acu Petroleo and presents
stronger overall financial metrics. Under the rating case Prumopar
presents a PLCR of 1.3x and NCIG presents an average DSCR of also
1.3x.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A negative rating action on Brazil's sovereign rating;
-- Fitch's expectations on the oil price to be below USD53 per
barrel, leading to a lower up-lift on volume projections;
-- Failure of the project to renew most of the take-or-pay
contracts that are due in 2023.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- The rating could have the Outlook revised to Stable as a
result of a positive rating action on Brazil's sovereign
rating;
-- Fitch's expectations on the oil price to be above USD53 per
barrel, leading to a lower up-lift on volume projections;
-- Success in the renewal of most of the take-or-pay contracts
that are due in 2023.
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
TRANSACTION SUMMARY
Acu Petroleo Luxembourg S.A.R.L. is a non-operation entity that is
fully owned by Acu Petroleo S.A. and is a special purpose vehicle
created to issue the notes. The notes will be fully guaranteed by
Acu Petroleo S.A. that is the Brazilian largest private crude oil
transshipment port. Acu Petroleo is operational since 2016 and
there is an expectation that volumes should ramp-up considerably
with the development of the pre-salt fields.
The expected notes are in the amount of USD 650 million, senior
secured, fixed-rate, to be issued in the 144A/Reg S market which
will be backed by the fully operational terminal and all material
assets related thereto. The structure will contemplate a legal and
target amortization schedule set to allow for the debt to be fully
amortized in 10 years, through a target amortization cash sweep
mechanism. The structure includes financial triggers for dividends
distribution (DSCR > 1.30x), change of control provision and a
six-month offshore DSRA and Operation and Maintenance Reserve
Account. The structure will limit new senior indebtedness, which
will require rating confirmation.
Proceeds of the offering will be used primarily to refinance the
company's existing debt that was originally put in place to finance
the construction of the terminal and to pay a one-time distribution
to shareholders.
FINANCIAL ANALYSIS
Fitch's key assumptions within the Agency's base case for the
issuer include:
-- U.S. PPI: 2.8% in 2022, 2.4% in 2023 and 2.0% from 2024
onwards;
-- Foreign Exchange Rate (BLR/USD): 5.20 in 2021, 5.50 in 2022,
5.25 in 2023, 5.25 in 2024, and depreciation according with
the difference between IPCA (Brazilian CPI) and PPI from 2025
onwards;
-- Volume: IHS Base Case projections minus a 10% haircut;
-- Operational and maintenance cost performed by Oiltanking: same
as management;
-- Operational and maintenance cost performed by Ferroport: same
as management;
-- Other Operational and maintenance cost: 5% over management;
-- Capital expenses: 5% over management.
The same assumptions were used in the rating case scenario, with
the exception of:
-- Volume: IHS USD48/bbl Case projections;
-- Operational and maintenance cost performed by Oiltanking: 5%
over management;
-- Operational and maintenance cost performed by Ferroport: same
as management;
-- Other Operational and maintenance cost: 10% over management;
-- Capital expenses: 10% over management.
Fitch has not differentiated tariffs between the cases as there is
a limited operational history and lack of information to form a
view about the level of tariffs when demand is higher.
In Fitch's base case, minimum and average (2023-2026) DSCRs and
LLCR are 1.7x, 2.6x and 2x respectively. Under the rating the
minimum and average (2023-2026) DSCRs and LLCR are 1.2x, 1.6x and
1.8x, respectively.
ACU PETROLEO: Moody's Rates Senior Secured Notes 'Ba2'
------------------------------------------------------
Moody's Investors Service assigned a first time Ba2 rating to the
proposed senior secured notes to be issued by Acu Petroleo
Luxembourg S.A R.L. ("Issuer") and guaranteed by Acu Petroleo
S.A.'s ("Company", "Açu Petroleo") in the amount of $650 million
and final legal amortization in 2035. The outlook is stable.
Proceeds of the issuance will be used to repay approximately $233
million in existing debt (unrated), as well as fund reserve
accounts for debt service and O&M and to support overall fees and
expenses related to the issuance, with remaining proceeds being
made available to the shareholders and for general corporate
purposes.
The assigned rating is based on preliminary documentation received
by Moody's as of the rating assignment date. Moody's does not
expect changes to the documentation reviewed over this period nor
does it anticipate changes in the main conditions that the Notes
will carry. Should issuance conditions and/or final documentation
of the debt deviate from the original ones submitted and reviewed
by the rating agency, Moody's will assess the impact that these
differences may have on the ratings and act accordingly.
Assignments:
Issuer: Acu Petroleo Luxembourg S.A R.L.
Gtd Senior Secured Global Notes, Assigned Ba2
Outlook Actions:
Issuer: Acu Petroleo Luxembourg S.A R.L.
Outlook, Assigned Stable
RATINGS RATIONALE
The Ba2 rating reflects the port's strong asset features, as the
only private terminal of oil transshipment in the country, which is
strategically located near to pre-salt reserves and mature fields
in Campos and Santos Basin. Given the favorable market position the
company will benefit from future increases in Brazil's offshore oil
production. Moody's view is that Brazil's exports of crude oil
production will grow significantly over the medium-term with oil
prices in the range of $50-$70/barrel (bbl), coupled with limited
domestic refining capacity and no significant increase in
utilization rates forecasted. At the same time, Moody's expects
Brazil's oil production to grow even in a scenario of lower oil
prices (e.g. $40/bbl), given the relative lower breakeven prices on
pre-salt oil fields, as well as a slew of projects under
development.
The project finance debt structure provides additional protections
to creditors that further support the rating, such as a fully
amortizing debt structure that yields to an average DSCR of 1.8x
over the life of the transaction; 6-month DSRA and OMRA funded with
cash at closing (could be replaced by eligible letters of credit
non-recourse to the Company or subordinated to the senior rated
debt); rights on future receivables, pledge of the port's assets
(primary physical assets are the jetty, breakwater and related
infrastructure) and shares of the Acu Petroleo to ensure step-in
rights under an event of default. The structure also encompasses a
clear cash sweep mechanism for target amortization payments in the
event of excess cash generation, along with distribution tests and
limitations on the incurrence of additional debt. Nonetheless, the
debt structure allows for the issuance of additional debt and
incorporation of subsidiaries under certain scenarios that could
constrain the rating in the future. Still, any further leverage or
acquisition is subject to certain financial covenants and ratings
affirmation. Moody's Base Case rating scenario considers an
additional debt issuance of about $75 million for port expansion in
connection with the Company's "access channel" expansion, which
could be triggered around 2028 once historical DSCR reaches the
minimum threshold of 1.50x and average volume levels of 800,000
barrels per day in the preceding twelve-month period.
The rating is also constrained by the exposure to revenue
volatility due to the lack of long-term take-or-pay contracts and
partially contracted structure during the life of the transaction.
The port is exposed to re-contracting risk and ultimately to the
volatility in oil prices, as the majority of the existing
transshipment operations agreements will be expired by 2023. The
longer contract in the portfolio is with Royal Dutch Shell Plc (Aa2
stable), but it is expected to gradually decrease from 55% of total
revenues in 2022 to 10% by 2036 in Moody's Base Case scenario.
Also, the port's ownership structure encompass contractual
arrangements under which Acu Petroleo is subject to a Port Access
Contract with rights to use of port facilities held by Ferroport
Logistica Comercial Exportadora S.A ("Ferroport") subject to a fee
payment. Both companies share the dredging costs. Still, the
priority of use of port facilities remains with Ferroport, which
apply exclusively for the vessel traffic on the access channel
(i.e, iron ore vessels have priority over oil tankers to
inbound/outbound maneuvers). Under certain conditions, Anglo
American Minerio de Ferro Brasil ("AAMFB"), 50% owner of Ferroport
iron ore terminal, has the right to obtain an injunctive relief in
aid of an arbitration procedure to require Acu Petroleo to modify
or suspend shipments activities. Despite this contractual weakness,
Moody's views the likelihood of this happening is reduced given the
economic incentives in the contractual relationship between the two
companies and comprehensive contractual features that mitigate the
risk of AAMFB from taking an unreasonable action to halt Acu
Petroleo's activities.
OUTLOOK
The stable outlook reflects Moody's view of steady growth of oil
transshipment volumes handled by the port supporting an average
legal DSCR of 1.8x for the life of the transaction, as well as the
maintenance of all licenses and of the long-term O&M Agreement with
Oiltanking. The stable outlook also incorporates the assumption of
continuing degree of the current level of commitment from the
ultimate shareholders to the Company and from AAMFB to the port of
Acu's operations.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Moody's said, "While we do not expect a rating upgrade in the short
to medium term given the stable outlook, higher transshipment
volumes for a prolonged period or revenue stability supported by a
larger portion of long-term take-or-pay contracts could trigger
upward pressure on the rating. An upgrade would also require lower
leverage profile, consistent with a higher rating category, such as
DSCR above 2.0x."
The rating could be downgraded if there is a sustained
deterioration in the Company´s operating performance such that
legal DSCR remains below 1.5x on sustained basis. Negative rating
pressure could arise if (i) the expected proportion of long-term
ToP volume delines, (ii) re-contracting the excess capacity at less
favorable terms, or (iii) if there is a deterioration in the
shareholder's or AAMFB commitment to the port operations that is
detrimental to the credit quality of the Company. Deterioration in
Brazil´s sovereign credit quality Government of Brazil (Ba2
stable) could place also downward pressure on the rating.
COMPANY PROFILE
The Issuer is a private limited liability company incorporated and
existing under Luxembourg, which is fully owned by Acu Petroleo.
Since 2016, Acu owns and operates the largest private crude oil
transshipment terminal in Brazil, the oil terminal (T-OIL) of the
Port of Acu, which currently is the only private infrastructure in
Brazil capable of receiving VLCC class ships -- with a cargo
capacity of up to two million barrels. Acu Petroleo is part of the
Port of Acu, a complex built and operated by Prumo Logistica S.A.
(not rated), located in the State of Rio de Janeiro, in Brazil. Its
port license allows the movement of 1.2 million barrels per day
(bpd) and the depth of the terminal is 25 meters. In 2020, Acu
Petroleo handled 307,000 bpd with over 100 operations in the year.
GOL LINHAS: To Resume Flights to Paraguay and Bolivia
-----------------------------------------------------
Rio Times Online reports that from April 9, GOL customers will be
able to fly again to the Paraguayan capital Asuncion, and from May
5 to Santa Cruz de La Sierra, Bolivia.
From April 9, 2022, GOL will operate three weekly flights between
Guarulhos International Airport and Asuncion, on Tuesdays,
Thursdays and Saturdays, according to Rio Times Online.
From May 29, it will operate another flight on Mondays to the same
destination, totaling four weekly flights between the two
countries, the report notes.
The return flight between Asuncion and Sao Paulo will depart on the
same days, the report relays.
GOL Airlines, Brazil's largest national carrier, will resume two
additional international flights in April and May 2022, suspended
since March 2020, the report adds.
About Gol Linhas
Founded in 2000 and based in Sao Paulo, Brazil, Gol is the largest
low-cost carrier in Latin America, offering over 750 daily
passenger flights to connect Brazil's major cities and various
destinations in South America, North America and the Caribbean,
along with cargo and charter flight services. Gol also owns 100%
of Smiles, a loyalty program company with more than 18.5 million
participants that allows members to accumulate miles and redeem
tickets in more than 900 destinations around the world and offer
non-ticket reward products and services. In the twelve months ended
June 2021, Gol reported consolidated net revenues of BRL5.5
billion.
As reported in the Troubled Company Reporter-Latin America, Fitch
Ratings, in September 2021, upgraded GOL Linhas Aereas Inteligentes
S.A.'s (GOL) Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) to 'B-' from 'CCC+' and upgraded its Long-Term
National Scale rating to 'BB+(bra)' from 'B-(bra)'. Fitch has also
upgraded GOL Finance's unsecured bonds to 'B-'/'RR4' from
'CCC+'/'RR4'. Fitch has assigned a Stable Outlook for the IDRs and
the Outlook for the national scale rating remains Stable. S&P
Global Ratings, also in September 2021, revised the outlook on
Brazilian airline Gol Linhas Aereas Inteligentes S.A. (Gol) to
positive from stable and affirmed its global scale 'CCC+' issuer
credit rating.
JBS SA: Supermarkets Ban Beef Products
--------------------------------------
Kat Smith at livekindly.co reports that several European
supermarket chains have said they will ban Brazilian beef due to
its links to illegal Amazon rainforest deforestation.
Reuters reported that there are some big names amongst the chains
that have committed to removing beef of Brazilian origin from their
shelves, including Sainsbury's in the UK, Lidl Netherlands,
Carrefour Belgium, Delhaize, and Albert Heijn, the largest
supermarket chain in the Netherlands, according to livekindly.co.
The report notes that many of the products affected are produced by
the JBS SA, the world's largest meat producer. The ban follows an
investigation released by Brazilian nonprofit publication, Reporter
Brasil, which claims that JBS indirectly sourced cows from
illegally deforested areas, the report discloses.
JBS defended its position, stating that it has "zero tolerance for
illegal deforestation" and has blocked more than 14,000 suppliers
for failing to meet its standards, the report relays. It added
that the investigation mentioned five of its 77,000 direct
suppliers, and that said suppliers met its policies at the time,
the report says. JBS adds that monitoring the indirect suppliers
within its supply chain is a challenge, but it aims to be capable
of doing so by 2025, the discloses.
What the beef ban includes differs from supermarket to supermarket,
the report relays. Sainsbury's, which says that 90 percent of its
beef is sourced from Britain and Ireland, will stop sourcing its
private-label beef from Brazil, the report notes. Auchan France
will remove beef jerky products made by JBS, while Carrefour
Belgium and Delhaize will remove Jack Link's beef jerky, the report
says. (JBS and Jack Link's have a jerky-based joint venture
together.) Lidl Netherlands will stop selling all beef from South
America starting in 2022 and Albert Heijn will drop all Brazilian
beef, the report discloses.
The Problem With The Beef Supply Chain, And With JBS
The beef giant has two means of obtaining cattle: direct suppliers
and indirect suppliers, the report relays. With direct suppliers,
JBS obtains cattle from "full cycle" farms where the animals are
raised from birth to slaughter, before being sent to a JBS
slaughterhouse, the report says. But with its indirect suppliers,
the cattle are born and raised before being sold off to another
farm or slaughterhouse, the report notes. Through this method,
there is no way of knowing if the cow was raised on illegally
deforested land, the report discloses. This scheme is also called
"cattle laundering," and it's done to hide the animals' origin, the
report relays.
JBS rakes in $50 billion annually and has been involved in a wide
range of scandals not including its links to illegal deforestation
(which it pledged to end more than a decade ago), ranging from ties
to ranches that use slave labor and animal welfare violations to
bribing politicians and price-fixing, the report notes. This is
not the first time that a report has uncovered JBS' ties to illegal
deforestation, the report says. Illegally grazed cattle has also
been tied to human rights abuses against Indigenous peoples and
other traditional residents, the report relays.
The Brazilian meat producer's impact on the planet is far-reaching,
the report notes. A recent report even tied some of the world's
top fashion brands to Amazon rainforest deforestation, all because
they source their leather from JBS, the report discloses.
The Amazon rainforest is the world's largest tropical rainforest,
and the rate of deforestation has accelerated since right-wing
President Jair Bolsonaro took office in 2019 and rolled back
several environmental protections, the report relays.
Deforestation reached a 15-year high between August 2020 and July
2021, with a loss of 8,224 miles of forest. The majority of the
land is cleared for cattle ranches, the report says.
While JBS says that it will crack down on its supply chain, cattle
ranching, and the whole of industrial animal agriculture, are still
inextricably linked to the climate crisis, the report notes. In
addition to being the cause of 14.5 percent of human-caused
greenhouse gas emissions each year (with beef making up more than
60 percent of emissions), it is tied to biodiversity loss, air and
water pollution, human rights violations, and animal abuse, the
report discloses. Deforestation is also a major source of carbon
emissions, as tropical rainforests such as the Amazon are major
carbon sinks, the report relays.
To its (nominal) credit, JBS has put money into more sustainable
alternative proteins, the report relays. It acquired Vivera,
Europe's largest plant-based meat producer, earlier this year and
this month and owns Colorado-based Planterra Foods, which makes
vegan meats, the report notes. And earlier, the meat-producing
heavyweight announced that it will acquire Spanish cultivated
protein startup BioTech Foods and establish a cultivated protein
R&D center in Brazil next year, the report discloses. However, JBS
cannot continue to rely on industrial animal agriculture if the
environmental benefits of its alternative protein ventures are
going to have any sort of positive effect, the report adds.
As reported in the Troubled Company Reporter-Latin America in
August 2021, S&P Global Ratings revised the global scale outlook on
JBS S.A. (JBS) and its fully owned subsidiary JBS USA Lux S.A. (JBS
USA) to positive from stable and affirmed its 'BB+' issuer credit
rating. The recovery expectations remain unchanged, and S&P
affirmed the 'BB+' ratings on the senior unsecured notes and the
'BBB' ratings on the secured term loans.
===============
P A R A G U A Y
===============
PARAGUAY: Central Bank Expected 6.8% Inflation by End of 2021
-------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Paraguay was to
end 2021 with inflation of 6.8%, well above the official target and
the highest rate since 2010, driven by food and fuel price
increases, the central bank said.
In 2020, consumer prices in the country rose 2.2% and the official
goal for 2021 was to end the year with a 4% rise. In 2010,
inflation was 7.2%, according to globalinsolvency.com.
Fuels soared almost 30%, beef 18% and flour 16% in 2021, according
to a report from the bank, which did not register increases in
consumer prices during the month of December, the report notes.
Inflation has been increasing throughout the year, in line with the
rest of South America, as the economy recovers from the effects of
the coronavirus pandemic, the report relays. The Central Bank has
increased its reference rate during recent months in a bid to
control prices, the report discloses.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
NATIONAL FLOUR: May Have to Increase Flour Price
------------------------------------------------
Trinidad Express reports that majority State-owned National Flour
Mills (NFM) said if the price of wheat on the international market
continues to go up, the company would have no choice but to
increase the price of flour.
According to Trinidad Express, in ten questions and answers that
were part of its news release, NFM also said if wheat prices
decrease in the coming months, it would reduce its flour prices:
Q: What sort of knock-on effect can we expect with the cost of
other food items like bread, roti and doubles, which use flour as a
main input?
A: While flour is the main ingredient in a range of food items, it
is not the only one, so an average increase of 19 per cent in the
price of flour should not necessarily translate into a 19-per cent
increase in the price of everything that contains flour.
Q: Should the price of wheat return to its previous levels, would
NFM be prepared to reduce prices?
A: Yes! NFM operates in a competitive environment, and we are
continuously exploring ways to improve our levels of efficiency,
and to ensure the consumer gets the best value for money.
Q: Has the Government imposed price control on NFM?
A: No. NFM is a publicly listed company on the Trinidad and Tobago
Stock Exchange. The majority of its shares (51 per cent) is owned
by the Government of Trinidad and Tobago through National
Enterprises Limited (NEL), and the other 49 per cent is publicly
held. The company operates in the open market, and is not subject
to price controls.
Q: The price of wheat has increased more than 100 per cent, yet NFM
has only increased prices by about 19 per cent. Is this price
increase sufficient to cover the increase in costs?
A: During the past 18 months, NFM has embarked on a number of
initiatives to improve its levels of efficiency and streamline
internal processes, in an attempt to reduce processing costs. We
are acutely aware of the knock-on effect that any increase in the
price of flour, a basic ingredient in many products, could have in
the market, so we have set the price at the lowest practical level
to maintain commercial viability.
Q: Has NFM communicated with the other manufacturers/distributors
of flour to determine what the new price should be?
A: No. To do so would breach the fundamental tenets of operating in
an open and competitive market.
The price increase was based on commercial factors—the increased
price of wheat, the higher costs of shipping, etc, coupled with the
costs of processing, packaging, distribution, and the other
components required to bring finished product to the market. The
commercial challenge is to keep that price as low as possible while
operating profitability.
Q: What can we expect of NFM's financial performance, given the
price increase?
A: Relative to the greater than 100 -per cent increase in the price
of wheat and shipping, it would be fair to say that a 19-per cent
increase in the price of flour is marginal, and is intended to
ensure the company continues to operate with reasonable business
margins. We expect to earn market-attractive returns going
forward.
Q: Is there expected to be any other increases in products by NFM,
where wheat or flour is also a raw material input?
A: That will be determined by factors beyond NFM's control—ie,
price of raw material and shipping. However, we will continue to
focus on the items within our control, and do everything we can to
run an efficient operation and to keep our milling and processing
costs as low as possible.
Q: If the cost of grain continues the upward trend, is there
expected to be another price increase by NFM?
A: We cannot sell a product for less than our production costs,
especially where raw and packaging material makes up 64 per cent of
that cost. Therefore, if the cost of these inputs continues to
increase, we will have no choice but to adjust the prices of our
products to reflect those increases.
Q: What impact will this increase have on the cost of a basket of
goods to the consumer?
A: The direct impact, assuming use of four 2kg bags of flour per
month, is estimated to be an increase of $10 for the typical
family—eg, an increase from $12.50 to $15 on a 2kg bag of Ibis.
Q: Has the price of flour been increased in other Caricom
countries?
A: Barbados, Jamaica and Guyana have all increased prices so far
this year. Jamaica increased prices in May, and again in October.
Barbados increased in February, and Guyana in November.
*********
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 2022. All rights reserved. ISSN 1529-2746.
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