/raid1/www/Hosts/bankrupt/TCRLA_Public/220217.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
Thursday, February 17, 2022, Vol. 23, No. 29
Headlines
A R G E N T I N A
ARGENTINA: IMF Focus on Saving Country From Inflation Path
YPF SA: Fitch Affirms 'CCC' LongTerm IDRs
B A H A M A S
BAHAMAS: Non-Compliant With BEPS Reporting Standard
B O L I V I A
BOLIVIA: S&P Affirms 'B+/B' Sovereign Credit Ratings, Outlook Neg.
B R A Z I L
BRAZIL: Investments Abroad Slow Down
C H I L E
LATAM AIRLINES: Asks Court Approval for Backstop Financing Deal
LATAM AIRLINES: Searches for Lenders to Refinance Bankruptcy Loan
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: To Cull Big Tax Breaks
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Central Bank Says Inflation Still a Challenge
- - - - -
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A R G E N T I N A
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ARGENTINA: IMF Focus on Saving Country From Inflation Path
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globalinsolvency, citing Bloomberg News, reports that the
International Monetary Fund is focused on getting Argentina to make
economic changes to curb runaway inflation and wants a plan to
increase tax revenue and improve public spending in a staff-level
agreement with the nation.
The IMF recognizes that the program being worked out after an
initial understanding was reached needs to have broader support
from society, a lesson learned from the deal that collapsed in
2018, Managing Director Kristalina Georgieva said, according to
globalinsolvency.
A program would help the nation avoid an even-worse economic
deterioration and increasing poverty as it battles inflation
running above 50%, she said, the report notes.
Georgieva underlined the importance of the plan being based on
realistic assumptions that don't only depend on the expected
scenario but also contemplate risks, the report relays.
It must recognize the limits of the potential for making changes in
Argentina in the coming years, given the opposition from the
radical left-wing portion of the country's ruling Peronist
coalition, she said, the report discloses.
Tax and spending changes are "two areas of structural
conditionality that would come in the staff-level agreement,"
Georgieva told reporters in a virtual news conference. "Our main
focus is to get Argentina out of this very dangerous path of high
inflation," the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its 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.
YPF SA: Fitch Affirms 'CCC' LongTerm IDRs
-----------------------------------------
Fitch Ratings has affirmed the Long-Term Foreign Currency (FC) and
Local Currency (LC) Issuer Default Ratings (IDRs) of YPF S.A. at
'CCC'. In addition, Fitch has affirmed YPF's outstanding senior
unsecured notes at 'CCC'/'RR4'. Fitch has also maintained the
standalone credit profile at 'b'.
YPF's ratings are in line with Fitch's "Government Related Entities
(GRE) Criteria." YPF is majority owned by the government and
strategically important to the country. YPF's dominant market share
in the supply of liquid fuels in Argentina, coupled with its large
hydrocarbon production footprint in the country, could expose the
company to government intervention through pricing policies or
investment strategies.
Argentina exerts strong control over YPF through energy regulations
and/or its 51% economic interest in the company. Furthermore, Fitch
believes Argentina would have strong incentives to support the
company under a distress situation as a result of the strong
socio-political and financial implications of a default.
KEY RATING DRIVERS
Links to Sovereign: YPF is closely linked to the Republic of
Argentina due to its ownership structure, as well as recent
government interventions. Argentina controls the company through
its 51% stake, and provincial government officials serve on the
company's board of directors. In addition, the republic sometimes
governs the company's strategy and business decisions. The
Argentine government has a history of significant interference in
the oil and gas sector. For example, Decree No. 1277 set
regulations related to investment levels in the oil and gas sector
and domestic price reference points. Although YPF is a leading
energy company in Argentina, government policies present
challenges, inhibiting its business strategy.
Moderate Leverage: Fitch believes YPF has a moderate leverage
profile, which will be low in the near term due to higher oil and
gas prices, but rise slightly over the rated horizon as commodity
prices fall. Fitch estimates YPF's total debt/EBITDA will be 1.8x
in 2021 and increase to an average of 2.1x over the rated horizon.
YPF's total debt/1P is high, estimated to be USD8.74 per boe, and
consistent with the 'bb' category. Furthermore, Fitch estimates
YPF's EBITDA to interest expense will be 6.2x in 2021 and fall to
an average 5.1x thereafter.
High Production Cost Profile: Fitch's rating case assumes
production will remain flat averaging 529,000boed over the rating
horizon. YPF's cost of production is slightly lower than the
guaranteed price under Barril Criollo of USD55 per barrel and
Fitch's assumed Brent price for 2021 of USD52.40boe. Fitch
estimates YPF's half-cycle costs of USD26.5boe and full-cycle cost
of USD41.5boe, which are both high and above average for players in
the region.
The company's high cost is mostly attributed to higher than average
lifting cost of USD9.7boe and high interest cost per barrel of
USD12.3boe in 2020, estimated by Fitch. The company's full-cycle
break-even implied prices were above weighted average realization
prices for oil and gas, primarily as a result of decreasing
domestic gas prices and high level of gas production, which
accounted for approximately 56% of total production together with
natural gas liquids during 2020. Crude oil production comprised
44%.
Volatile Operating Environment: While the volatile economic
environment in Argentina has made unconventional development in
Vaca Muerta more difficult, it has attracted international partners
and grown production in the basin. Following a contraction of 9.9%
in 2020, Fitch expects Argentina's real GDP to grow by 10.1% in
2021. Refined product sales decreased by 15.8% in 2020, but
rebounded by 15.4% as of 3Q21 over 2020. Inflation is expected to
average 51.9% between 2021 and 2023, and government debt/GDP ratio
is estimated to be 78% in 2021 and 86% in 2022, with a majority of
government debt, 65%-75%, being external over the same time frame.
DERIVATION SUMMARY
YPF's linkage to the sovereign is similar in nature to its Latin
American national oil companies (NOCs) peers, namely PEMEX
(BB-/Stable), Petrobras (BB-/Negative) and Ecopetrol (BB+/Stable),
and government-owned entities ENAP (A-/Stable) and Petroperu
(BBB/Stable). These companies all have strong linkage to their
respective sovereigns given their strategic importance to each
country and the potentially significant negative social and
financial implication a default could have at a national level.
YPF's upstream business closest peers are Pemex, Petrobras and
Ecopetrol. YPF's total 2020 production averaged 467,000boed, and
the reserve life was 5.4 years, most comparable with Ecopetrol with
a production of 231,000boed and a reserve life of 8.7 years in
2021, but less than Petrobras' production of 2.8 million boed and a
reserve life of 8.7 years and Pemex's production at 2.4 million
boed and a reserve life of 8.4 years.
YPF has an adequate capital structure with gross leverage ratio
defined as total debt/EBITDA of 4.1x in 2020 and total debt/1P of
USD8.8 per boe compared with Ecopetrol at 3.1x and USD7.5 total
debt/1P, Petrobras at 2.2x and USD6.1 per boe and Pemex at 14.6x
and USD15.3 per boe. YPF's leverage is expected to decline to 1.8x
in dollar terms in 2021 on the strength of higher crude prices.
Unlike its peers ENAP, Petrobras, Pemex and Petroperu, YPF is not
the sole provider of refined fuels in Argentina. In 2020, the
company had a 54% market share. YPF is an integrated energy
company, similar to Petrobras and Pemex, offering the company more
financial flexibility, while ENAP is predominately a refining
company that sells to marketers.
Historically, YPF has operated autonomously with periodic controls
of fuel prices and crude. Similar to Pemex and Petrobras, YPF has
administered an import-parity pricing policy and other price
controls in 2018 to tame inflation, which is projected to be 48% in
2021. Until recently, YPF has had success in tightening the spread
between import parity and local prices.
When compared with downstream-focused entities ENAP and Petroperu,
YPF is expected to have a lower total debt/EBITDA ratio of 1.8x in
2021 compared with ENAP at 5.5x and Petroperu at 26.9x. Petroperu's
elevated leverage is explained by its investment plan to increase
capacity by 2021, while ENAP has maintained a higher leverage
profile for an extended period of time, but the company is highly
strategic for the Chilean government, and thus it rating is aligned
as a result.
KEY ASSUMPTIONS
-- Average gross production of 529,000boe from 2021-2024;
-- Realized oil price of USD52.40/bbl in 2021 and an average of
USD50/bbl thereafter;
-- Natural gas prices rise to USD3.70/MMBTU in 2021 and settle at
USD3.50/MMBTU thereafter;
-- Average capex of roughly USD2.4 billion per year from 2021-
2023 and USD1.6 billion in 2024;
-- Downstream sales volume follows Real GDP forecasts;
-- Fitch ARS/USD forecasts for year average and end of period
during 2021-2024.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The Foreign Currency Issuer Default Rating (IDR)is linked to
Argentina's sovereign rating, and an upgrade can only occur
with an upgrade of Argentina's Country Ceiling.
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- Argentina's sovereign rating is 'CCC', the lowest level
allowed under Fitch's sovereign criteria; therefore, a
downgrade of Foreign and Local Currency IDRs would reflect
Fitch's belief that a default of some kind appears probable,
or a default or default-like process has begun for the
company, 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
Adequate Liquidity: YPF reported USD1.0 billion in cash and cash
equivalents in 3Q21. Per Fitch's estimates, this covers roughly 1.4
times the company's interest expense. The company's debt maturity
profile did improve after the completion of its exchange
particularly the exchange of its 2021 notes with USD826 million and
USD791 million due in 2022 and 2023, respectively. It has USD1.46
billion due in 2025, which includes a USD1.1 billion bond. Fitch
expects YPF will continue to roll over short term bank and trade
financing debt over the rated horizon.
ISSUER PROFILE
YPF S.A is the largest fully integrated energy company in
Argentina. YPF participates in three segments: Upstream,
Downstream, and Gas and Power.
ESG CONSIDERATIONS
YPF S.A. has an ESG Relevance Score of '4' for Governance Structure
due to Argentina federal government's majority ownership in YPF,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
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B A H A M A S
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BAHAMAS: Non-Compliant With BEPS Reporting Standard
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RJR News reports that the European Union (EU) has mentioned The
Bahamas on a list of countries that have not fully complied with a
criterion related to base erosion and profit shifting (BEPS) and
that has to do with a country's reporting minimum standard.
According to an article published by tax news website taxnotes.com,
countries are being required by the EU to implement the standard of
reporting before a peer review that is scheduled for late 2023, the
report notes.
While the article calls the list a gray list, Attorney General Ryan
Pinder told Guardian Business that the list is not so much a gray
list, but an acknowledgement that The Bahamas has made certain
commitments to the EU that it remains in discussions about, the
report notes.
The article explains that this criterion had at one time been
omitted, but recently reappeared, the report relays.
The BEPS issue deals with offshore financial centers like The
Bahamas that may have companies registered and domiciled in the
jurisdiction and attracting profits without having any real inputs
or outputs in that country, according to RJR News.
As reported in the Troubled Company Reporter-Latin America on Nov.
16, 2021, S&P Global Ratings lowered its long-term foreign and
local currency sovereign credit ratings on the Commonwealth of The
Bahamas to 'B+' from 'BB-'. At the same time, S&P Global Ratings
revised its transfer and convertibility assessment to 'BB-' from
'BB'. The outlook is stable.
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B O L I V I A
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BOLIVIA: S&P Affirms 'B+/B' Sovereign Credit Ratings, Outlook Neg.
------------------------------------------------------------------
S&P Global Ratings, on Feb. 15, 2022, affirmed its 'B+' long-term
foreign and local currency sovereign credit ratings and 'B'
short-term foreign and local currency ratings on the Plurinational
State of Bolivia. The outlook remains negative. The transfer and
convertibility assessment remains unchanged at 'B+'.
Outlook
The negative outlook indicates the possibility of a downgrade over
the coming six to 12 months due to vulnerabilities stemming from a
potential weakening of the sovereign's debt profile because of a
higher interest burden and the risk of poorer-than-expected
external balances.
Continued deterioration in the sovereign's debt burden or an
unexpected adverse movement in exchange-rate markets could increase
the sovereign's interest payments as a share of its revenues,
thereby worsening fiscal rigidity and leading to a downgrade. S&P
could also lower the rating if there is an erosion of the country's
external profile due to unexpected shocks to commodity prices that
results in persistent imbalances or if there are other developments
that diminish the sovereign's access to funding.
Conversely, S&P could revise the outlook to stable in the next year
if effective policy management leads to faster-than-expected
correction of the fiscal gap and stabilization of the sovereign's
debt and interest burden. Political initiatives to curb expenditure
growth or boost revenues could bolster Bolivia's budgetary
flexibility and help contain external vulnerabilities.
Rationale
The ratings on Bolivia capture structural weaknesses, such as its
low per capita GDP (which we project at US$3,550 in 2022), and
increasing vulnerabilities from persistent and sizable fiscal
deficits that have led to a rapid increase in government debt and a
deterioration of the country's external profile. The ratings also
reflect weak political institutions with limited checks and
balances, and limited monetary policy flexibility arising from
exchange-rate rigidities.
Bolivia has used fiscal policy, especially through public
investment, to sustain GDP growth and to improve living conditions,
as improved social indicators over the past decade demonstrate.
However, the country's fiscal and external profiles have worsened
over recent years and become rating vulnerabilities. Bolivia's net
government debt as a share of GDP will likely exceed 60% by 2023,
from 30% in 2019. Its narrow net external debt has deteriorated
consistently, reflecting growing public-sector external borrowing
and diminished foreign exchange reserves.
The ratings also reflect a track record of low inflation, a low
level of dollarization in the financial system, and a manageable
debt service profile in the next two years.
Institutional and economic profile: Slowing economic growth and
challenging political context constrain Bolivia's capacity to
address fiscal weakness
-- An estimated GDP recovery of 6.2% in 2021 leaves an output gap
relative to pre-pandemic levels.
-- Growth will likely slow to 3.6% in 2022 and 3.0% for 2023-2025
as a weaker fiscal position will likely limit the government's
ability to boost growth.
-- Weak political institutions with limited checks and balances
reduce the predictability and effectiveness of policymaking.
S&P's institutional assessment of Bolivia takes into account weak
checks and balances between institutions, as well as limited
predictability over policy implementation and effectiveness.
Moreover, political divisions and social fragmentation remain high
after the 2019 political crisis.
The current administration, which took office in late 2020, focused
on expansionary measures to stabilize the economy while containing
the pandemic. In 2020, GDP contracted 8%, resulting in a setback in
all social indicators after many years of impressive progress in
boosting income and living standards. S&P estimates GDP grew 6.2%
in 2021, closing the year's GDP just below pre-pandemic levels.
Meanwhile, unemployment fell to 5% from its 11% peak amid the 2020
crisis.
Fiscal measures helped sustain GDP growth and manage the social
fallout from the pandemic, but they also worsened an already
weakening debt dynamic. A current account surplus in 2021 helped
stabilize Bolivia's external profile, which had been eroding for
several years, but public finances continued to deteriorate.
The irregular change of government in 2019, with the resignation of
the former president, and continued high political polarization
after the 2020 elections highlight the difficulty in undertaking
timely and forceful fiscal adjustments to stabilize the continuing
increase in the sovereign's debt burden.
S&P said, "We expect broad continuity in key economic policies. The
administration will likely continue to rely on the public sector to
invest and spur GDP growth while maintaining government control of
key strategic sectors of the economy, as indicated in its 2021-2025
development plan. However, the government's weaker public finances
are likely to slow project execution capacity and, consequently,
the economic growth rate.
"We estimate GDP growth will decelerate to 3.6% this year before
stabilizing at 3% in 2023-2025. A key driver will continue to be
public spending, while private investment and foreign direct
investment (FDI) will likely remain low. We expect that FDI will
average less than 1% of GDP in coming years."
Flexibility and performance profile: Worsening debt metrics and
weakened external buffers remain prominent rating weaknesses
-- Supportive commodity prices improved the current account
balance to an estimated surplus of 0.6% of GDP last year, from an
average deficit of 2.7% of GDP in 2018-2020.
-- High prices for commodity exports should support a current
account surplus in 2022 and ease pressure on foreign exchange
reserves.
-- Slow fiscal adjustment will likely push net general government
debt beyond 60% of GDP by 2023.
Supportive commodity prices will likely lead to a second year of
current account surpluses in 2022, followed by a deficit next year
given stagnant gas export capacity and import pressure. Mineral
exports (especially gold) have been growing even as oil and gas
production has been slowing. This, added to recent high prices,
raised gold exports to 23% of total good exports in 2021, slightly
above the 20% share of natural gas exports .
Natural gas exports represented around 30% of the country's total
exports before the pandemic. However, the sector's export capacity
has been gradually decreasing over the last decade amid stagnant
production and increased domestic demand for gas. Bolivia has had
to adjust the minimum export volumes pledged under its gas
purchasing contracts with Brazil and Argentina to reflect the
current reduced export capacity of the sector. To tackle this
decline, the administration raised Bolivia's gas exploration budget
At the same time, other ongoing projects aim to boost
industrialization and raise the export capacity of the mineral
sector and substitute for imports. However, the potential positive
impact of such spending would appear in the long term, beyond S&P's
forecast period. At the same time, gains from increasing oil
prices--used to determine Bolivian gas exports --will have a
limited impact on Bolivia's current account because the trade
surplus in oil products has been decreasing since 2016 due to
stagnant export volumes and rising gasoline imports.
The recent improvement in the current account helped to stabilize
foreign exchange reserves at year-end 2021 at US$4.6 billion--50%
of the 2018 level. S&P said, "However, we expect the current
account is likely to return to a deficit balance averaging 2.3% of
GDP in 2023-2024, absent policy changes. The deficits will reflect
expected normalization of commodity prices; recovery in domestic
demand, including significant government spending; and moderate to
weak prospects for export growth. The external deficits are likely
to be mostly financed by debt because FDI will likely remain low.
As a result, we project narrow net external debt to rise to 80% of
current account receipts (CAR), from 60% currently."
Gross external financing needs are likely to average 87% of CAR and
usable reserves in 2022-2025, from 76% in 2021. Only 17% of
external debt is owed to commercial creditors. The completion of
recently proposed liability management operations that reduce debt
service payments in the coming years would have a marginal positive
impact on these external ratios. S&P expects foreign exchange
reserves to remain stable at US$4.5 billion over the next two
years, assuming continued access to external market financing.
However, an unexpected and prolonged inability to access external
funding could increase vulnerability in the external profile given
expected current account deficits.
The government is likely to undertake a gradual fiscal correction
from recent high deficits. As a result, the increase in net general
government debt relative to GDP is likely to remain above 6% in
2022-2023, down from a nearly 13% record amid the pandemic. Fiscal
correction would mainly come from the withdrawal of extraordinary
measures implemented in response to COVID-19 in 2020 and 2021,
slowing execution of infrastructure spending, and continued
recovery in tax revenues. Royalties and other gas-related
taxes--which represent around 18% of general government
revenues--would likely benefit from the high export prices this
year. High infrastructure needs and the administration's ambitious
infrastructure program will likely keep capital expenditure high at
6% of GDP, or 20% of total general government spending.
S&P expects sovereign debt to continue growing over its forecast,
with net general government debt exceeding 60% of GDP by 2023, up
from 37% on average in 2019-2020. Net debt was growing quickly
before the COVID-19 pandemic, reaching 30% of GDP in 2019 from only
16% in 2017. Higher debt could raise interest spending as a share
of government revenue toward 5% by 2025, depending on interest
costs and exchange-rate movements. A high share of foreign currency
debt (over 45% of the total sovereign debt) makes the debt burden
vulnerable to potential sharp adverse swings in currency.
Rapid growth of credit over the last decade has boosted the assets
of the banking sector, which now exceed 100% of GDP. At the same
time, the pandemic-induced slowdown and prolonged credit
moratoriums could worsen the asset quality of banks. That said,
reported nonperforming loans are around 1.6% of total loans and are
fully covered by conservative provisioning policies and the high
share of the collateralized loan portfolio. Slower credit growth
raises the risk of potentially higher nonperforming loans.
The considerable reduction in the foreign currency exposure of the
financial system mitigates the risks to stability.
Dollar-denominated lending has plunged during the past few years,
and it now represents only about 1% of total bank loans, reflecting
both currency stability for many years and low inflation. Average
inflation was 0.7% in 2021, among the lowest in the region.
However, the exchange-rate regime also constrains monetary
flexibility.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
BOLIVIA (PLURINATIONAL STATE OF)
Sovereign Credit Rating B+/Negative/B
Transfer & Convertibility Assessment
Local Currency B+
BOLIVIA (PLURINATIONAL STATE OF)
Senior Unsecured B+
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B R A Z I L
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BRAZIL: Investments Abroad Slow Down
------------------------------------
Rio Times Online reports that the growing wave of Brazilian
investments abroad - in assets such as stocks, fund shares, and
fixed income securities - experienced a slowdown at the end of last
year.
After expressive results, especially in the second quarter, the
movement has slowed down, and even the balance of the so-called
portfolio investments was negative in the last three months of
2021, according to Rio Times Online.
The movement is explained by the high Selic rate, stock market
correction abroad, and stable dollar, the report notes.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
Standard & Poor's credit rating for Brazil stands at BB- with
stable outlook (April 2020). S&P's 'BB-/B' long-and short-term
foreign and local currency sovereign credit ratings for Brazil were
affirmed in December 2021 with stable outlook. Fitch Ratings'
credit rating for Brazil stands at 'BB-' with a negative outlook
(November 2020). Fitch's 'BB-' Long-Term Foreign and Local
Currency Issuer Default Ratings (IDRs) has been affirmed in
December 2021. Moody's credit rating for Brazil was last set at
Ba2 with stable outlook (April 2018). DBRS's credit rating for
Brazil is BB (low) with stable outlook (March 2018).
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C H I L E
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LATAM AIRLINES: Asks Court Approval for Backstop Financing Deal
---------------------------------------------------------------
Rick Archer of Law360 reports that the Chilean carrier LATAM
Airlines asked a New York bankruptcy judge February 10, 2022, to
approve a backstop financing agreement for its Chapter 11 plan that
creditor groups claim would pay unreasonably high fees to the
backstop creditors. On the first day of a two-day hearing
conducted virtually, U.S. Bankruptcy Judge James Garrity heard
LATAM Airlines Group SA argue
that it has reached a reasonable deal to backstop the $5.4 billion
new equity offering included in its Chapter 11 plan, while the
objecting creditors called the proposed $734 million in fees for
the backstopping parties "unprecedented."
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP, as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC, as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
LATAM AIRLINES: Searches for Lenders to Refinance Bankruptcy Loan
-----------------------------------------------------------------
Jeremy Hill of Bloomberg News reports that Latam Airlines Group SA
is working to identify a lender or lenders to refinance a slug of
debt obtained during its bankruptcy, a lawyer for the Chilean
carrier said February 10, 2022.
Latam intends to file court papers related to the refinancing by
Feb. 17, 2022 and the debt in question matures in April, Lisa
Schweitzer of Cleary Gottlieb Steen & Hamilton said in a
bankruptcy
hearing.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP, as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC, as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: To Cull Big Tax Breaks
------------------------------------------
Dominican Today reports that the Dominican Government will begin
the gradual dismantling of tax exemptions on fuels received by
electricity generating companies established in isolated systems or
for their own non-interconnected consumption until the complete
elimination of that privilege.
In a letter sent to companies in the sector, the government
notified that the measure is part of the financial organization
process of the State to strengthen its collection capacity and
achieve fiscal sustainability, according to Dominican Today.
The letter indicates that these generators sell their energy to
private companies, hotels or for their own generation of a
commercial activity, so their commercial rates can reflect their
operating costs, the report notes.
"It is taken into consideration that a high percentage of
electricity sales in current isolated systems have commercial rates
that could allow these taxes to be part of the operating costs of
the businesses that operate there, freeing the State from an
expense or important tax burden, which will contribute to the
reduction of the fiscal deficit that each year the Dominican State
has to face and assume," it said, the report notes.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican Today related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, 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-'. 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.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative. S&P also affirmed
its 'BB-' long-term foreign and local currency sovereign credit
ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said. A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Central Bank Says Inflation Still a Challenge
----------------------------------------------------------------
Trinidad Newsday reports that the Central Bank is expecting
economic growth in 2022 in Trinidad and Tobago following the
prolonged lockdown last year, but there will still be challenges
because of higher prices, mainly on imported goods.
The bank made the projection in its economic bulletin for January,
which was released, according to Trinidad Newsday.
It said expects higher natural gas production as several projects
being undertaken by major energy companies are expected to kick off
in fiscal 2022, the report notes. These include the bp Matapal
project which achieved first gas in September last year, seven
months ahead of schedule, from the Savannah exploration well
discovered in 2017, the report relays. The initial production from
this development alone is expected to be in the range of 250-350
mmscfd once all the wells are fully operational, the report
discloses.
Internationally, demand for energy commodities owing to increased
global economic activity will continue to drive prices upward,
especially since the supply of energy commodities is currently
constrained, the report notes. The bank added that winter
temperatures should also bolster prices, the report relays.
In January, West Texas Intermediate (WTI) crude oil prices went up
77.2 per cent compared to last year, to about US$52 per barrel, and
peaked in early February at US$90.58, the report notes. The WTI
price was US$89.65 on Wednesday, while Brent crude oil which
averaged at US$87 a barrel was US$91.48, the report discloses.
The bank also expects improvements in production in the non-energy
sectors as long as there are no further lockdowns or restrictions
on mobility, the report relays. It noted that there would be
changes in the way business is done as more electronic
transactions, and more business are done online. It warned that the
change would pose a challenge to businesses that are slow to adapt,
the report notes.
International shortages owing to higher costs in freight and
insurance are expected to continue in the early months of 2022, the
report relays. Spikes in prices of international agricultural
commodities, such as grains, wheat and other major agricultural
commodities that are imported would also play a part in the
challenges to economic growth, it said, the report notes.
The spread of the delta and omicron covid19 variants slowed global
economic growth and increased uncertainty about how quickly the
world could recover from the pandemic, the bank said but noted
there was still steady growth amid inflation, food insecurity and
climate change challenges, the report says.
Citing Ministry of Labour statistics, the bank said 1,098 people
were retrenched during the first ten months of 2021. A total of
2,517 people were retrenched during a similar period of 2020, the
report notes. At the same time, the number of job advertisements
published in the print media during 2021 declined by 16 per cent
year-on-year, the report discloses.
While there was a resumption of business activity, the bank said
there was a decline of real economic activity by three per cent
compared to the same period in 2020, because of a 3.5 per cent fall
off in non-energy sector production, and a decline in the energy
sector by 1.9 per cent, the report notes.
Global inflation in the second half of 2021 caused domestic
inflation to rise above two per cent in July, the report discloses.
Headline inflation increased to 3.6 per cent in November, compared
to 1.8 per cent in June, the report relays. Food inflation moved
to 6.1 per cent in November from 5.1 per cent in June, the report
notes. Core inflation (which excludes the food component)
increased to three per cent in November from 1.1 per cent in June,
the report says.
The bank said government fiscal accounts recorded a deficit of
about TT$2 billion in the first two months of fiscal year
2021/2022. At the end of December, government debt amounted to
TT$130 billion or 83.3 per cent of GDP, compared to TT$126.6
billion at the end of September, the report discloses.
Liquidity as at January 2022 had a daily average of TT$8.9 billion,
but gross official reserves went down by US$74 million to US$6.87
billion, the report adds.
*********
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
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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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