/raid1/www/Hosts/bankrupt/TCRLA_Public/220222.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, February 22, 2022, Vol. 23, No. 32
Headlines
A N T I G U A A N D B A R B U D A
ANTIGUA & BARBUDA: Economy on a Steady Path Of Recovery, IMF Says
A R G E N T I N A
ARGENTINA: Inflation Reaches 3.9% in Jan, Annual Rate Hits 50.7%
ARGENTINA: To Send IMF Deal to Congress Before Start of March
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: January Prices Up by 1.18%
DOMINICAN REPUBLIC: Remittances Dip But Reach US$759.3 Million
E L S A L V A D O R
SALVADORENO DPR: Fitch Lowers Rating on Three 2015 Loans to 'B-'
J A M A I C A
PALACE AMUSEMENT: Continued Financial Losses for Firm
M E X I C O
GRUPO KALTEX: Fitch Lowers LongTerm IDRs to 'CC'
P U E R T O R I C O
EMPACADORA Y PROCESADORA: Seeks Cash Collateral Access
U R U G U A Y
BANQUE HERITAGE: S&P Affirms 'BB-' ICR, Outlook Stable
- - - - -
=====================================
A N T I G U A A N D B A R B U D A
=====================================
ANTIGUA & BARBUDA: Economy on a Steady Path Of Recovery, IMF Says
-----------------------------------------------------------------
An International Monetary Fund (IMF) team, led by Mr. Varapat
Chensavasdijai, met virtually with the authorities of Antigua and
Barbuda during February 7-11, 2022 to discuss recent economic
developments and policy priorities. At the conclusion of the visit,
Mr. Chensavasdijai issued the following statement:
"Antigua and Barbuda's economy is rebounding from the COVID-19
pandemic. Real GDP growth is estimated at 4.8 percent in 2021,
following a sharp contraction of 20.2 percent in 2020. A sustained
recovery in tourism and construction activity is expected to
underpin real output growth of 7 percent in 2022. Two-thirds of the
population have been fully vaccinated, which is among the highest
rates in the Caribbean. However, a prolonged pandemic (e.g., due to
the emergence of new virus variants) and supply chain disruptions
could put a drag on the recovery at the same time as wage and price
pressures build.
"The government is determined to meet the targets under its
medium-term fiscal strategy to bring public debt-to-GDP to under 70
percent by 2030. Despite the pandemic, fiscal consolidation resumed
in 2021 and the primary deficit narrowed to 1.8 percent of GDP
(from 3.8 percent in 2020) reflecting domestic revenue
mobilization, external grants, and the reprioritization of
spending. The 2022 budget envisages a zero primary balance, with an
ambitious capital spending plan financed by higher revenues, grants
and borrowing. The uncertain revenue outlook underscores the need
to streamline tax exemptions, strengthen tax compliance, and fully
implement tax and customs administration reforms. It will also be
important to assess the costs and benefits of the current energy
pricing mechanisms given rising international oil prices.
Containing spending on wages and transfers and improving public
financial management will be essential. In addition, the
authorities should prioritize clearing arrears to suppliers and
creditors while avoiding the accumulation of new arrears.
"The financial sector is showing signs of recovery. Banks are
well-capitalized and liquid, but credit growth has been slow,
particularly to the household sector. Loans under moratoria at
banks and credit unions have declined significantly in 2021 and
nonperforming loan ratios have remained stable. Nonetheless,
supervisors should closely monitor asset quality and ensure that
loan loss provisioning is proportional to credit quality risks,
especially at credit unions.
"Antigua and Barbuda is highly susceptible to climate change and
natural disasters, and continues to face structural challenges
related to the high costs of reconstruction from Hurricane Irma and
limited access to affordable home insurance against disasters. The
National Adaptation Plan to build climate resilience is expected to
be completed by year-end. There are ongoing initiatives to make
homes and public infrastructure more disaster-resilient, as well as
to invest in renewable energy. The Blue Economy Plan identifies new
sustainable sectors and opportunities to diversify the economy;
capacity building and financing will be necessary to realize the
plan's objectives.
"The mission would like to thank the authorities and all our other
counterparts for their close collaboration and for the candid and
productive discussions."
IMF summarizes that:
-- Antigua and Barbuda's economy is on a steady path of recovery,
buoyed by strong tourism and construction activity.
-- Fiscal consolidation is underway despite the pandemic.
Steadfast implementation of the government's medium-term fiscal
strategy, supported by well-designed policy measures, will be
critical to put debt on a firm downward trajectory.
-- Financial sector performance has improved. Continued close
monitoring of asset quality is warranted as loan moratoria come to
an end.
=================
A R G E N T I N A
=================
ARGENTINA: Inflation Reaches 3.9% in Jan, Annual Rate Hits 50.7%
----------------------------------------------------------------
Buenos Aires Times reports that consumer prices in Argentina rose
3.9 percent in January as inflation accelerated for a second
straight month, the INDEC national statistics bureau reported.
Over the last 12 months, prices in Argentina have risen 50.7
percent - one of the highest annualized rates in the world,
according to Buenos Aires Times.
Hikes in January were led by communications (7.5 percent), food and
non-alcoholic beverages (up 4.9 percent) and health (4.1 percent),
with prices overall last month rising at their highest level in 10
months, the report discloses.
Slowing runaway inflation is one of the key points under discussion
with the International Monetary Fund (IMF) as the government seeks
a new financing program to restructure more than US$44 billion in
debt, the report relays.
Late last month, President Alberto Fernandez announced that his
government had reached an agreement in principle with the
multilateral lender to restructure the remainder of the record
US$57-billion stand-by loan agreed in 2018 under the previous
government led by former president Mauricio Macri, the report
discloses.
Argentina's government, which wants to close a deal by late March,
is seeking a new extended fund facility (EFF) programme that runs
until 2034, the report notes.
Last year, Fernandez's government extended a series of price
freezes in order to lower prices on essential items. Last month,
officials agreed a new deal with producers based on items that make
up the basic basket of goods, limiting hikes to six percent until
March, the report recalls.
Economist Sebastian Menescaldi, of the EcoGo consultancy firm, said
that the acceleration of inflation in January could be "partly
explained" by the relaxation of price controls, the report notes.
He estimated that while the agreement with the IMF "would provide
certainty, in the short term it will force new changes in relative
prices" - citing, for example, the knock-on impact of a potential
reduction of subsidies for energy and transport tariffs, the report
relays.
The Central Bank's latest survey of expectations, based on reports
from 39 banks, consulting firms and economic research centres,
forecasts an annual inflation rate of 55 percent for the 12 months
of 2022, the report discloses.
"The impact of international inflation is difficult to calculate,
but in February we are already seeing rises in bread and meat
prices. We estimate 3.4 percent inflation for this month
[February], but five percent for food," said Menescaldi, the report
says.
Communications (7.5 percent) was the biggest driver of price rises
in January, driven by an approved increase in telephone and
Internet services, followed by restaurants and hotels (5.7 percent)
and miscellaneous goods and services, which includes personal
hygiene items (4.3 percent), INDEC reported, the report notes.
Also outpacing the monthly rate were recreation and culture with a
rise of 4.2 percent and health with 4.1 percent, due to an increase
in prepaid medicine services, the report relays.
Argentina's economy, which had been in recession since 2018 and
slumped 9.9 percent in 2020 amid the coronavirus pandemic,
recovered in 2021 and grew 10.3 percent in the first 11 months of
the year, the report says.
According to estimates from the Economy Ministry, last year closed
with a rebound in GDP of more than 10 percent, with the economy
forecast to grow another three percent in 2022, the report
discloses.
Economy Minister Martín Guzman has said that the agreement reached
with the IMF, which must be approved by Congress, will not imply
either austerity or a brake on growth, the report says.
The government wants to close a deal with the Fund quickly and be
ready to present a bill outlining the IMF deal when the ordinary
sessions of Congress open on March 1, 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.
ARGENTINA: To Send IMF Deal to Congress Before Start of March
-------------------------------------------------------------
Buenos Aires Times reports that Argentina's government aims to send
a bill to Congress detailing an agreement with the International
Monetary Fund over a new financing program "before March 1,"
according to Casa Rosada sources.
If possible, the Alberto Fernandez administration wants to use the
president's speech inaugurating a new round of congressional
sessions in early March to "talk about the future" and not the IMF
deal, said the sources, who asked not to be identified, according
to Buenos Aires Times.
Consulted by Noticias Argentinas, top sources in Government House
said that talks with the IMF outlining the final details of a new
financing programme for Argentina's US$44.5-billion debt to the
multilateral lender were accelerating, the report notes.
"We initially believed that we would not reach March 1," said one
of the sources, explaining that the president's speech was set to
"talk about the Fund," the report relays. But, the source said, if
a bill is sent to Congress, the head of state will be able to
address other topics in depth too, the report notes.
"The debate on the agreement will take place later, but if the bill
has already been submitted" to Congress it would "no longer be the
central theme of the speech," said one source, the report
discloses.
After the meeting of the IMF Executive Board to discuss the state
of negotiations with Argentina, government sources reflected: "It
was seen that everything was much more accelerated than we
assumed," the report says.
"The staff presented and the IMF board said 'let's go.' They
complained, but they approved it]. Still, there is not much left.
If the Board approve what you present, you can't change much," they
argued, the report relays.
Another of the Casa Rosada sources added: "The Board said it was
fine, that it is on track, the report notes. They complained
politically that the structural reforms demanded by the Fund were
lacking, but that they would still move forward, the report says.
In the face of this, the feeling is that it may be a matter of
days" until a deal is sealed, they added, the report discloses.
"When the bill reaches Congress it will not be possible to change
it, because it will be the agreement with the Fund," they stressed,
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.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: January Prices Up by 1.18%
----------------------------------------------
Dominican Today reports that the Central Bank reported that
consumer prices (CPI) rose 1.18% compared to December 2021, while
year-on-year inflation, measured from January 2021 to January 2022,
was placed at 8.73%.
The institution detailed that the groups with the highest
contribution to inflation were housing (3.45%), food and
non-alcoholic beverages (1.17%) and transportation (0.88%),
accordig to Dominican Today.
It added that the housing group, first in contribution in the
general CPI for January 2022, varied 3.45%, as a result of the
15.43% increase in electricity service rates, arranged by the
Superintendence of Electricity, within the framework of the
National Pact For the Reform of the Electricity Sector, the report
adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
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.
DOMINICAN REPUBLIC: Remittances Dip But Reach US$759.3 Million
--------------------------------------------------------------
Dominican Today reports that the Central Bank of the Dominican
Republic (BCRD) reported that in January 2022, the remittances
received reached US$759.3 million, which compared to 2021
represents a slight year-on-year decrease of 4.2%.
However, the entity highlights that this amount exceeds by US$172.4
million and US$222.2 million the remittances received in January
2020 and 2019, periods in which the aid schemes that were
implemented after March 2020 were not yet available due to the
entry of the COVID-19 pandemic, and which ended last September,
according to Dominican Today.
"This result indicates that remittance flows are adjusting to a new
level, higher than the average prior to the pandemic, although
somewhat lower than the one observed between March and September
2021, a period that was characterized by significant specific
fiscal stimuli that they sought to combat the economic effects of
COVID-19," the BCRD said in a statement, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
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.
=====================
E L S A L V A D O R
=====================
SALVADORENO DPR: Fitch Lowers Rating on Three 2015 Loans to 'B-'
----------------------------------------------------------------
Fitch Ratings has downgraded the Series 2015 Loans issued by
Salvadoreno DPR Funding Ltd to 'BB-' from 'BB'. The Rating Outlook
remains Negative.
The rating action follows Fitch's downgrade of Davivienda Sal's LT
IDR to 'B-' from 'B', which in turn followed the downgrade of El
Salvador's LT IDR to 'CCC' from 'B-' and its Country Ceiling to
'B-' from 'B'.
DEBT RATING PRIOR
---- ------ -----
Salvadoreno DPR Funding, Ltd.
2015-1 LT BB- Downgrade BB
2015-2 LT BB- Downgrade BB
2015-3 LT BB- Downgrade BB
TRANSACTION SUMMARY
The future flow program is backed by existing and future U.S.
dollar-denominated diversified payment rights (DPRs) originated by
Banco Davivienda Salvadoreno, S.A. (Davivienda Sal). The majority
of DPRs are processed by designated depositary banks (DDBs) that
have signed acknowledgement agreements (AAs) irrevocably obligating
them to make payment to an account controlled by the transaction
trustee.
Fitch's ratings address timely payment of interest and principal on
a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: On Feb.
16, 2022, Fitch downgraded Davivienda Sal's Long-Term (LT) Issuer
Default Rating (IDR) to 'B-' from 'B' with a Negative Rating
Outlook. The bank's LT IDR continues to be capped by the Salvadoran
Country Ceiling, which Fitch downgraded to 'B-' from 'B' on Feb. 9,
2022. The bank's LT IDR is based on the potential support it could
receive from its parent, Banco Davivienda S.A. (LT IDR:
BB+/Stable).
Fitch also downgraded the bank's Viability Rating to 'ccc' from
'b-', which is highly influenced by El Salvador's operating
environment (OE), revised to 'ccc' from 'ccc+' with a negative
trend. The negative trend reflects that there are still downside
risks in the OE for the Salvadoran banking sector that could add
headwinds on its financial performance.
Going Concern Assessment (GCA): Fitch uses a GCA score to gauge the
likelihood that the originator of a future flow transaction will
stay in operation through the transaction's life. Fitch assigns
Davivienda Sal a GCA score of 'GC2' based on the bank's market
position as the third largest bank by loans (15.2%) in the
Salvadoran banking system, as of December 2021, and the strong
likelihood of parent support.
Several Factors Limit Notching Differential: The 'GC2' score allows
for a maximum uplift of four notches from the bank's IDR; however,
uplift is tempered to three notches due to Davivienda Sal's IDR and
GC score being support-driven and El Salvador's lack of las resort
lender.
Low FF Debt Relative to Balance Sheet: Davivienda Sal's total
outstanding future flow debt balance as of January 2022 represents
1.1% of the bank's total funding and 5.0% of non-deposit funding
based on financials as of September 2021. Fitch considers these
ratios small enough to allow the financial future flow ratings up
to the maximum uplift indicated by the GCA score, but it is
tempered to three notches in this case.
Coverage Levels Commensurate with Assigned Rating: Debt Service
Coverage remains strong amidst the current operating environment as
transaction flows have increased over the past year. Considering
average rolling quarterly cash flows between July 2016 and June
2021, Fitch expects quarterly debt service coverage ratios (DSCRs)
to be approximately 47.2x the maximum quarterly debt service for
the life of the program.
Structure Reduces Sovereign/Diversion Risks: The structure
mitigates certain sovereign risks by collecting cash flows offshore
until periodic debt service requirements are met, allowing the
transaction to be rated over the sovereign country ceiling. Fitch
believes payment diversion risk is partially mitigated by the AAs
signed by the three correspondent banks processing the vast
majority of USD DPR flows.
No Lender of Last Resort: El Salvador is a dollarized economy
without a true lender of last resort. While certain mechanisms are
in place to help fend off a banking system crisis, this limits the
notching differential of the transaction.
The Key Rating Drivers listed in the applicable sector criteria,
but not mentioned above, are not material to this rating action.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The transaction ratings are sensitive to changes in the credit
quality of the originating bank, which in turn is sensitive to
changes in the credit quality of El Salvador and its operating
environment. A deterioration of the credit quality of
Davivienda Sal by one notch is likely to pose a constraint to
the rating of the transaction from its current level;
-- The transaction ratings are sensitive to the ability of the
DPR business line to continue operating, as reflected by the
GCA score, and a change in Fitch's view on the bank's GCA
score can lead to a change in the transaction's rating. The
quarterly DSCRs are expected to be greater than 40x and should
therefore be able to withstand a significant decline in cash
flows in the absence of other issues. However, significant
declines in flows could lead to a negative rating action. Any
changes in these variables will be analyzed in a rating
committee to assess the possible impact on the transaction
ratings.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch does not anticipate developments with a high likelihood
of triggering an upgrade. However, the main constraint to the
program rating is the originator's rating and bank's operating
environment. If upgraded, Fitch will consider whether the same
uplift could be maintained or if it should be further tempered
in accordance with criteria.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven 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 seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The future flow ratings are driven by the credit risk of Davivienda
Sal as measured by its LT IDR.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=============
J A M A I C A
=============
PALACE AMUSEMENT: Continued Financial Losses for Firm
-----------------------------------------------------
RJR News reports that movie theatre operator Palace Amusement
continues to see mounting financial losses.
For the quarter ended December, the company made a loss of $111.1
million, according to RJR News.
That was up from the $81 million loss suffered during the same
period in 2020, the report notes.
The quarter's performance increased Palace's losses for the
mid-point of its fiscal year, to $191 million, the report relays.
However, revenue for the October to December quarter increased, the
report notes.
Palace earned $151 million up from $37 million in the prior year,
the report adds.
===========
M E X I C O
===========
GRUPO KALTEX: Fitch Lowers LongTerm IDRs to 'CC'
------------------------------------------------
Fitch Ratings has downgraded Grupo Kaltex, S.A. de C.V.'s Long-Term
Local and Foreign Currency Issuer Default Ratings (IDRs) to 'CC'
from 'CCC'. Fitch has also downgraded the company's outstanding
USD218 million senior secured notes due 2022 and the proposed up to
USD220 million senior secured notes issuance to 'CC'/'RR4' from
'CCC'/'RR4'. Additionally, the Rating Outlook Positive was
removed.
The downgrades reflect Kaltex's continued tight liquidity and
difficult conditions it has faced in refinancing its USD218 million
notes falling due April 11, 2022, which represent 100% of its debt
obligations. The 'CC' ratings indicate that default remains
probable despite efforts by the company to sell assets to lower the
amount of bonds that it would have to refinance, as well as to
offer collateral in its refinancing efforts with bondholders.
KEY RATING DRIVERS
High Refinancing Risk: In Fitch's opinion, default appears probable
on Kaltex's USD218 million notes falling due April 11, 2022. The
company had USD28 million of cash and marketable securities as of
Sept. 30, 2021. Kaltex has unsuccessfully attempted to sell around
USD50 million of assets to facilitate the refinancing of this debt
instrument. For the LTM ending in Sept. 30, 2021, Kaltex had a
leverage level, measured as total debt /EBITDA, of 2.7x in Mexican
pesos. Fitch projects this ratio will remain around 3.5x going
forward.
Asset Sales Lowered Debt: Kaltex's has been selling different
assets during the past couple of years to improve the company's
operations and liquidity position. During the first half of 2021,
the company sold its Milano stores for approximately USD80 million
and its Revman subsidiary for another USD66 million. Proceeds from
those sales supported the pre-payment of USD100 million of the
outstanding senior notes during 2021.
Exposure to Cyclical Industry: The ratings reflect the company's
exposure to the cyclicality of the textile industry, input cost
price volatility, inability to transfer cost increases into prices
rapidly and absence of long-term customer contracts. Demand is
affected by variables in discretionary consumer spending, including
general economic conditions, consumer confidence, unemployment,
consumer debt, interest rates and political conditions. Kaltex also
has customer concentration, which increases operational risk, as
customers may experience weak performance or shift to a different
supplier.
Business Diversification: Kaltex's cash flow and profitability are
supported by a diversified revenue base and product offerings. The
company has diversified revenue by product type and geographic
market, which reduces the risk of concentration in one segment of
the textile industry, and mitigates adverse economic cycles in a
particular region. As of Sept. 30, 2021, around 50% of Kaltex's
total revenues were generated in Mexican pesos and 50% in U.S.
dollars.
DERIVATION SUMMARY
Kaltex's business position is limited by its exposure to cost
increases and sales volume sensitivity to price upturns; this
exposure results in higher volatility of cash flows. The company's
current liquidity position is tight compared with debt service and
short-term debt.
The company's liquidity metrics are deemed in-line with the 'CC'
category. Kaltex's scale of operations, financial profile,
profitability and leverage levels compare unfavorably with Levi
Strauss & Co. (BB+/Stable).
KEY ASSUMPTIONS
-- Revenue decrease of around 20% for 2021 given the sale of
Milano and Revman;
-- EBITDA Margin around 12% for the forecasted period;
-- Total debt to EBITDA below 4x from 2021 to 2024;
-- Capex of approximately MXN135 million for 2021;
RECOVERY ASSUMPTIONS
For issuers with IDRs of 'B+' and below, Fitch performs a recovery
analysis for each class of obligations. The issue rating is derived
from the IDR and the relevant Recovery Rating (RR) and notching,
based on the going concern enterprise value of a distressed
scenario or the company's liquidation value. The recovery analysis
assumes that Grupo Kaltex would be considered a going concern in
bankruptcy and that it would be reorganized rather than
liquidated.
Fitch has assumed a 10% administrative claim. Fitch's recovery
analysis for Grupo Kaltex places a going concern value under a
distressed scenario of approximately MXN2.2 billion, based on
going-concern EBITDA of MXN800 million and a 3.0x multiple. The
going-concern EBITDA estimate reflects Fitch's view of a
sustainable post-reorganization EBITDA level, upon which the agency
bases the valuation of the company.
The MXN800 million going-concern EBITDA assumption reflects an
approximated 45% discount from the Fitch's expected annual EBITDA
during 2021, which should be sufficient to cover its interest
expense. A 3.0x enterprise value multiple is used to calculate a
post-reorganization valuation and reflects the Mexican operating
environment and a mid-cycle multiple.
Fitch calculates the recovery prospects for the senior unsecured
debtholders in the 31%‒50% range based on a waterfall approach.
This level of recovery results in the senior unsecured notes being
rated in line with its IDR at 'CCC'/'RR4'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Successfully refinance its senior notes due 2022;
-- FFO and EBIT margins above 5%;
-- EBITDA margin improvement to above 10%;
-- Positive FCF margin above 1%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Failure to improve liquidity and complete asset sales or
equity injections;
-- Perception of risks on meeting interest payments;
-- A default or default-like process has begun
-- EBITDA margin below 7%;
-- Continued operational pressures resulting in EBITDA/interest
paid below 1.0x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Tight Liquidity Position: For the LTM ended on Sept. 30, 2021 the
company's available cash balance was USD28 million, with its
current maturity consisting of approximately USD218 million of the
remaining senior notes due April 2022.
ISSUER PROFILE
Grupo Kaltex is a private, textile and apparel company with
operations that go from generating energy to manufacturing threads
and selling them. The company offers a variety of textile products,
ranging from threads, cotton fabric, jeans and linens.
ESG CONSIDERATIONS
Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for
Management Strategy due to challenges that the company faces to
implement its strategy, which has a negative impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for
Group Structure due to ownership concentration and key man risk,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
Grupo Kaltex, S.A. de C.V. has an ESG Relevance Score of '4' for
Financial Transparency due to the absence of clearance of
intercompany operations and details in operations breakdown, which
has a negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=====================
P U E R T O R I C O
=====================
EMPACADORA Y PROCESADORA: Seeks Cash Collateral Access
------------------------------------------------------
Empacadora y Procesadora del Sur, Inc. asks the U.S. Bankruptcy
Court for the District of Puerto Rico for authority to use cash
collateral and provide adequate protection to secured creditor,
Banco Popular de Puerto Rico.
The Debtor requires the use of cash collateral to preserve the
value of the estate.
BPPR pursuant to certain UCC filings has a first rank lien over the
Debtor's account receivables and cash collateral. As of petition
date, the Debtor owes BPPR $2,932,601.
The value of the collateral as of the Filing Date was estimated to
be $2,502,354.
The Debtor will use cash collateral during the interim period for
its post-petition operational and restructuring obligations.
As adequate protection, the Debtor will make a monthly payment of
$13,896 to the Secured Creditor, which is based on the original
contractual interest rate over the value of the collateral as
detailed in the Budget.
To the extent there is a diminution in the value of the Secured
Creditor's interests in the Prepetition Collateral, the Secured
Creditor, is granted replacement liens in post petition
receivables, which Replacement Liens are valid, binding,
enforceable and fully perfected as of the Petition Date without the
necessity of the execution, filing or recording by the Debtor or
the Secured Creditor.
The Secured Creditor will also be granted an allowed administrative
claim under Bankruptcy Code Section 507(b) with respect to all
Adequate Protection obligations, to the extent that the Replacement
Liens do not adequately protect the diminution in the value of the
Secured Creditor's interests in the Collateral from the Petition
Date.
The total dollar amount requested as per the Budget is $4,685,201,
up until May 15, 2022. There is also a carve-out for U.S.
Trustee's fees of $10,963.
A copy of the motion is available at https://bit.ly/3I1hPZm from
PacerMonitor.com.
About Empacadora Y Procesadora Del Sur, Inc.
Empacadora Y Procesadora Del Sur, Inc. sought protection under
Chapter 11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case No.
22-00354) on February 15, 2022. In the petition signed by Carlos C.
Rodriguez Alonso, president, the Debtor disclosed $11,604,565 in
assets and $10,598,204 in liabilities.
Alexis Fuentes Hernandez, Esq., at Fuentes Law Office represents
the Debtor as counsel.
=============
U R U G U A Y
=============
BANQUE HERITAGE: S&P Affirms 'BB-' ICR, Outlook Stable
------------------------------------------------------
S&P Global Ratings affirmed its issuer credit on global and
national scales on the following financial institutions. The
affirmations follow a revision to S&P's criteria for rating banks
and nonbank financial institutions and for determining a Banking
Industry Country Risk Assessment (BICRA). The rating affirmations
occurred on the following entities:
-- Banco Bilbao Vizcaya Argentaria Uruguay (BBVA Uruguay; global
scale: BBB/Stable/A-2, national scale: uyAAA/Stable/-);
-- Banque Heritage (Uruguay) SA (BB-/Stable/--, uyA-/Stable/--);
and
-- Cooperativa de Ahorro y Crédito Fucerep (Fucerep; B/Stable/--,
uyBB+/Stable/--).
S&P's outlooks on these entities remain unchanged.
S&P said, "Our assessments of economic risk and industry risk in
Uruguay also remain unchanged at '5' and '6', respectively. These
scores determine the BICRA and the anchor, or starting point, for
our ratings on financial institutions that operate primarily in
that country. In our view, the trends for economic and industry
risks remain stable."
BBVA Uruguay
S&P said, "We affirmed our ratings on BBVA Uruguay. Ratings reflect
its good competitive position in the Uruguayan financial system,
with nationwide operations across various lending sectors, which
provides business stability. We also incorporate the bank's
satisfactory capital base and adequate internal capital generation
that will maintain asset growth in upcoming years. BBVA Uruguay's
asset quality metrics are in line with those of the banking system
average. We expect nonperforming loans (NPLs) to remain low in the
next few quarters, because we don't forecast new large corporate
cases and expect the rest of the portfolio to remain relatively
healthy.
"In addition, we consider the bank to have an adequate funding and
liquidity profile, with operations funded primarily with deposits.
BBVA Uruguay has a comfortable liquidity position in domestic and
foreign currencies, which is in line with those of domestic peers
and incorporates characteristics of Uruguay's financial system.
Considering these factors, BBVA Uruguay's stand-alone credit
profile (SACP) is 'bbb'. The global scale rating on BBVA Uruguay
reflects its SACP because the latter doesn't incorporate notching
from external support from either the government or the group.
"We consider the bank as a moderately strategic subsidiary of its
Spain-based parent, Banco Bilbao Vizcaya Argentaria S.A. (BBVA;
A/Negative/A-1), which owns 100% of the bank's equity. However, our
rating on BBVA Uruguay doesn't incorporate extraordinary group
support because the sovereign rating on Uruguay (BBB/Stable/A-2)
limits the long-term rating on the bank. We rarely rate financial
institutions higher than the sovereign where they operate, because
we consider it unlikely that these institutions would remain
unaffected by developments in domestic economies. ESG factors have
no material influence on our credit rating analysis of BBVA
Uruguay."
Outlook
S&P said, "The stable outlook on BBVA Uruguay for the next 24
months mirrors the one on Uruguay, because the rating on the
sovereign limits the rating on the bank. We expect BBVA Uruguay to
maintain its competitive position and business stability, as well
as adequate capitalization metrics because we expect internal
capital generation to be sufficient to finance asset growth in
coming years, despite the 40% dividend payout. We also expect asset
quality metrics to remain manageable. A potential weakening of BBVA
Uruguay's intrinsic credit quality wouldn't automatically result in
a downgrade because of potential extraordinary support from the
parent."
Downside scenario. S&P could lower the ratings on BBVA Uruguay in
the next 24 months if it takes a similar action on the sovereign,
but outlook on the latter is currently stable.
Upside scenario. A positive rating action is limited at this point
and would depend on an upgrade of Uruguay.
Ratings Score Snapshot
Issuer credit rating:
Global scale: BBB/Stable/A-2
National scale: uyAAA/Stable/--
SACP: bbb
Anchor: bbb-
Business position: Strong (+1)
Capital and earnings: Adequate (0)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Banque Heritage (Uruguay)
S&P said, "We affirmed our ratings on Banque Heritage (Uruguay).
The ratings reflect its small scale and limited business
diversification in the Uruguayan financial system, with a market
share of about 1% in terms of loans and deposits. In addition, it
continues to post higher trading gains than its domestic peers,
which we consider a less stable source of income than credit
activity. The ratings also incorporate our view that the bank will
maintain capitalization metrics in line with its growth strategy,
with an expected risk-adjusted capital (RAC) ratio between 8% and
9% in the next two years. Our assessment of the bank's risk
position incorporates the high client concentration in its
corporate loan portfolio, dollarization that's higher than the
industry average, and the complexity of its wealth management
business (mainly related to nonresident clients). Additionally, we
consider Banque Heritage (Uruguay) to have sound liquidity metrics,
given that the Uruguayan financial system has high levels of
liquidity in part due to its high share of deposits in U.S.
dollars. However, we believe the bank has a moderate funding
profile, resulting from the high share of nonresident deposits and
wholesale deposit profile, which are a less stable funding source
than retail or resident deposits. Because of these factors, the
bank's SACP is 'bb-'. The long-term issuer credit rating on the
bank is at the same level as its SACP, because the latter doesn't
incorporate notching from external support from either the
government or the parent.
"ESG factors have an overall neutral influence on our credit rating
analysis of Banque Heritage (Uruguay). The bank was able to
overcome a fraud case in 2017, caused by an employee who had
mismanaged funds belonging to a small group of nonresident clients
inthe private banking segment. Thanks to its insurance unit and
support from its parent, Banque Heritage Switzerland, the Uruguayan
subsidiary was able to absorb losses. Since then, the bank has
taken various measures to enhance internal controls and governance,
particularly by increasing operational controls in its wealth
management activities."
Outlook
The stable outlook on Banque Heritage (Uruguay) for the next 12
months reflects S&P's expectation that it will maintain its
capitalization levels in line with its planned business growth,
while asset quality metrics stay manageable despite the loan
portfolio concentration.
Downside scenario. S&P said, "A downgrade is possible in the next
12 months if the bank's capitalization metrics fall below 7%, which
could happen if the loan portfolio grows beyond our expectations,
together with still sluggish results and the absence of capital
support to back its expansion. In addition, we could lower the
rating if the bank's loan portfolio concentration erodes asset
quality metrics and generates losses."
Upside scenario. The likelihood of a positive rating action in the
next 12 months is limited at this point and would depend on the
bank's stronger intrinsic credit fundamentals.
Ratings Score Snapshot
Issuer credit rating
Global scale: BB-/Stable/--
National scale: uyA-/Stable/--
SACP: bb-
Anchor: bbb-
Business position: Moderate (-1)
Capital and earnings: Adequate (0)
Risk position: Moderate (-1)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Fucerep
S&P said, "We affirmed our ratings on Fucerep. Our ratings on
Fucerep reflect its small size in the Uruguayan financial system,
with narrow business diversification, as well as its weak
profitability. At the same time, the ratings are based on good
capitalization levels, along with our concerns over Fucerep's
future asset quality and credit loss trajectory. We will continue
to monitor the performance of its expanding small- and mid-size
enterprise (SME) loan portfolio, especially for those loans without
government guarantees, which could raise NPLs and credit losses. In
addition, although still in initial stages, the growth of consumer
loans in segments without payroll discounts could also pose
additional risk to Fucerep.
"Additionally, our ratings on Fucerep reflect a funding profile
that has a higher client concentration than its peers, despite the
entity's status as a cooperative. This concentration is only
mitigated by the high proportion of time deposits and systematic
savings accounts (programmed savings) that provide some stability
to funding. We also consider Fucerep's liquidity as adequate, and
it has available contingent credit lines. ESG factors have no
material influence on our credit rating analysis of Fucerep."
Outlook
S&P said, "The stable outlook on Fucerep for the next 12 months
reflects our expectation that it will maintain its sound
capitalization metrics, given that its members' contributions
offset still weak profitability. Asset quality metrics could
further deteriorate, stemming from the impact of higher
unemployment, the increasing share of loans to SMEs (sovereign
guarantee loans represent 7% of total portfolio), and to a lesser
extent, new loans without payroll discount mechanisms."
Downside scenario. S&P could downgrade Fucerep if its bottom-line
losses further widen without sufficient member contributions to
compensate, which could weaken the currently sound capital levels
of the cooperative, with its risk-adjusted capital (RAC) levels
consistently below 10%.
Upside scenario. S&P could upgrade Fucerep if it executes its
business strategy, and maintain credit losses under control, along
with sound capitalization.
Ratings Score Snapshot
Issuer credit rating
Global scale: B/Stable/--
National scale: uyBB+/Stable/--
SACP: b
Anchor: bbb-
Business position: Constrained(-3)
Capital and earnings: Strong (+1)
Risk position: Constrained(-2)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Ratings List
RATINGS AFFIRMED
BANCO BILBAO VIZCAYA ARGENTARIA URUGUAY
Issuer Credit Rating BBB/Stable/A-2
Uruguay National Scale uyAAA/Stable/--
BANQUE HERITAGE (URUGUAY) SA
Issuer Credit Rating BB-/Stable/--
Uruguay National Scale uyA-/Stable/--
COOPERATIVA DE AHORRO Y CRÉDITO FUCEREP
Issuer Credit Rating B/Stable/--
Uruguay National Scale uyBB+/Stable/--
COOPERATIVA DE AHORRO Y CRÉDITO FUCEREP
Preferred Stock uyB+
*********
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.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *