/raid1/www/Hosts/bankrupt/TCRLA_Public/220316.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
Wednesday, March 16, 2022, Vol. 23, No. 48
Headlines
A R G E N T I N A
ARGENTINA: IMF Deal Bill Passes in Lower House, Heads to Senate
B R A Z I L
BRAZIL: Central Bank Announces Tougher Rules for Fintechs
BRAZIL: Official Inflation Rate Rises to 1.01% in Feb., IBGE Says
C H I L E
ENJOY SA: Fitch Raises LT Foreign Currency IDR to 'CCC+'
LATAM AIRLINES: White & Case Gives 6th Update on LATAM Bondholders
J A M A I C A
JAMAICA: Gets $100M IDB Loan to Strengthen COVID-19 Response
P U E R T O R I C O
PUERTO RICO: Judge Orders New PREPA Debt Revamp Plan by May 2
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: IMF Deal Bill Passes in Lower House, Heads to Senate
---------------------------------------------------------------
Patrick Gillespie at Bloomberg News reports that Argentina's lower
house of Congress approved on March 11 a bill that underpins the
government's US$45-billion agreement with the International
Monetary Fund, a key step toward final approval.
In a 200-37 vote, with 15 abstentions, members of the lower house
voted in favor of the deal after a marathon session in congress
that ended past 3:00 a.m. in Buenos Aires, according to Bloomberg
News. The bill will head to the Senate in the coming days, and if
approved by lawmakers, goes to the IMF's Executive Board to become
final, Bloomberg News notes.
After two years of negotiations, the cash-strapped government aims
to close a deal before a March 22 payment to the IMF comes due and
avoid a potential default with the Washington-based lender,
Bloomberg News relays.
President Alberto Fernandez's unusual step of making the
legislature vote on the agreement exposed a divide with opposition
lawmakers and within his own left-wing coalition, Bloomberg News
discloses. Key lawmakers from Fernandez's broad bloc criticized
his negotiation strategy and came out against the deal, Bloomberg
News relays. His government ultimately conceded on changes to the
text in order to win over more opposition support, Bloomberg News
notes.
With a fragmented ruling coalition, the vote in congress was the
government's way of showing the IMF that the deal has ample
political ownership, a top requirement for such agreements,
Bloomberg News says.
The agreement would be Argentina's 22nd with the IMF and the latest
chapter in a tumultuous relationship, Bloomberg News discloses.
The new loan seeks to refinance payments Argentina owes the Fund
stemming from a record bailout to the nation in 2018 that failed to
stabilize the economy at the onset of a recession, Bloomberg News
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.
===========
B R A Z I L
===========
BRAZIL: Central Bank Announces Tougher Rules for Fintechs
---------------------------------------------------------
Reuters reports that Brazil's central bank announced tougher rules
for fintechs on March 11, saying that payment institutions will be
subject to regulations based on their size and complexity and
raising standards for required capital.
The new framework, which will start taking effect in January 2023
with full implementation by January 2025, will extend the
proportionality of regulatory requirements currently used for
conglomerates of financial institutions to include financial
conglomerates led by payment institutions, notes the report.
The move is expected to affect companies such as credit card issuer
Nubank, payment company PagSeguro, financial technology solutions
firm StoneCo and digital wallet PicPay, Reuter says.
The calculation of regulatory capital will disregard assets that
have little or no value for payment institutions' functioning, said
the central bank, noting that this will ensure companies have a
greater capacity to absorb unexpected losses, adds the report.
Reuters notes that the changes, which the sector has been waiting
for since a public consultation was opened on the subject in late
2020, will preserve easier entry for new competitors in the
payments sector, "in order to increase competition in the system
and financial inclusion," the central bank said.
According to the report, Fitch Ratings said the new framework is
positive as it reduces systemic risk by raising the capital
requirement for larger institutions. It added in a statement that
many of the companies were already preparing for the change and no
capital shortage is expected.
Traditional banks in Brazil had urged the regulator to bring rules
for highly successful fintechs into line with their own, saying
that many such firms had grown at a dizzying pace amid loose
regulation, Reuters recounts.
The central bank views the new rules as necessary given the
diversification and sophistication of payment institutions since
2013, when it put them under its supervision, paving the way for
the nascent industry of financial start-ups using technology to
simplify payments, transfers and borrowing, says the report.
"In this process, part of the segment created financial
subsidiaries and started to assume new risks, without proportional
prudential requirements," the central bank said, Reuters 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).
BRAZIL: Official Inflation Rate Rises to 1.01% in Feb., IBGE Says
-----------------------------------------------------------------
Richard Mann at Rio Times Online reports that the National Wide
Consumer Price Index (IPCA), which measures official inflation,
recorded a price increase of 1.01% in February this year.
The rate is higher than in January this year (0.54%) and February
last year (0.86%), the report notes. This is the highest rate for
February since 2015 (1.25%), according to Rio Times Online.
The data was released by the Brazilian Institute of Geography and
Statistics (IBGE), the report relays.
Thus, the IPCA cumulates an inflation rate of 1.56% in the first
two months of the year, the report notes. Over the next 12 months,
the cumulative IPCA has reached 10.54%, the report says.
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).
=========
C H I L E
=========
ENJOY SA: Fitch Raises LT Foreign Currency IDR to 'CCC+'
--------------------------------------------------------
Fitch Ratings has upgraded Enjoy S.A.'s Long-Term Foreign Currency
Issuer Default Rating (IDR) to 'CCC+' from 'CCC'. Fitch has also
upgraded its USD194 million tranche A notes due in 2027 to
'B-'/'RR3' from 'CCC+'/'RR3' and USD16 million tranche B notes due
in 2027 to 'CCC-'/'RR6' from 'CC'/'RR6'.
Enjoy's upgrade reflects the improved capital structure after the
convertible series T bonds were fully converted in February 2022,
reducing debt by CLP240 billion in the last 12 months, and the
lifting of pandemic restrictions that allowed the re-opening of all
its casinos. However, it is uncertain when cash flow generation
will return to pre-pandemic and pre-social unrest levels. Enjoy
casinos have re-opened but with capacity restrictions, and the
gaming industry may take additional months to fully recover.
Enjoy's merger with Dreams will result in greater scale and
geographic diversification, with synergies benefiting cash flow
generation and therefore improving the new entity's capital
structure.
KEY RATING DRIVERS
Slow Cash Flow Recovery: Enjoy's casinos in Chile and Uruguay are
fully operational but with space and capacity restrictions.
Moreover, customers may readjust gaming expenditure behavior since
the regional economy has been highly affected by the pandemic with
increased unemployment rates, high inflation and negative GDP
growth, which may delay full cash flow recovery. Enjoy posted LTM
EBITDA of negative CLP39 billion as of Sept. 30, 2021 compared with
CLP39 billion as of Dec. 31, 2019. Fitch expects EBITDA to become
neutral to positive in 2022 growing to pre-pandemic levels in 2023,
as pent-up demand is re-established.
Deleveraging Capacity: The return to an adequate capital structure
will rely on full cash flow recovery post pandemic after the
conversion of the last convertible notes in February 2022. Enjoy
has the capacity to achieve total debt/EBITDAR ratios of around
5.0x by YE 2023, based on Fitch's expectation that profit margins
will ramp-up from current levels as customers gradually allocate
more spending to entertainment. Fitch expects EBITDA of CLP22
billion in 2022 and CLP35 billion in 2023 compared to CLP32 billion
in 2019.
Strong Market Position: Enjoy's market position is strong as it
represents around 38% of total market-share (total gross revenues)
and holds 31% of operating licenses in Chile. Around 60% of Enjoy's
EBITDA is expected to be originated in Uruguay while the balance is
originated in Chile. The casino business in Chile is mature, with
low-single-digit revenue growth, and as such, the recovery has been
slow.
Additionally, Enjoy's growth strategy is focused on improving the
performance of underdeveloped locations, such as in Santiago and
Chiloe, as its other casinos post modest growth. Recovery in Punta
del Este, Uruguay is also affected by the travel restrictions, as a
material portion of its revenues come from high-end international
players.
Committed Capex: Enjoy has committed capex related to municipal
licenses of approximately CLP20.5 billion between 2022 and 2023.
This timeframe was extended due to the lockdowns and Enjoy's
inability to continue its construction projects. It is still
uncertain whether Enjoy will be able to renew the license at San
Antonio casino as the was another bidder. These investments could
pressure the company's free cash flow generation.
Positive M&A with Dreams: Enjoy's merger with Dreams should result
in an entity with a stronger capital structure, as well as greater
scale and geographic diversification. The new entity would hold
permits for almost 60% of the casinos and have over 75% of the
revenues in the gaming industry in Chile. The new company would
also have a presence in Peru, Colombia, Uruguay, Argentina and
Panama. The historically higher margins of Dreams' operations would
improve the new company's overall profitability, and synergies
could be obtained in the supply chain and other areas.
Once the M&A is completed, Fitch will need greater insight into the
new company's corporate governance and financial management, as
well as regulatory approval for the transaction before taking a
rating action. Dreams had pre-pandemic EBITDA margins of 28%,
compared to Enjoy's 15%, which shows room for improvement under the
potential merger
DERIVATION SUMMARY
Enjoy's 'CCC' ratings are lower than other small casino operators
in the Americas. Enjoy's capital structure and business
profitability are expected to improve after the M&A with Dreams.
The company has lower profit margins than much larger operators,
such as Boyd Gaming Corporation, MGM Resorts International
(BB/Stable) and Wynn Resorts Ltd. Enjoy's business was disrupted by
the pandemic, and the recovery is expected to be gradual and slow.
Additionally, after continuous years of financial stress, the
company needs to devote capex to revitalize its asset base. Enjoy
owns all of its underlying real estate, with the exception of Vina
del Mar, San Antonio and Los Angeles, in Chile, which may provide
additional financial flexibility if required, either as collateral
or asset sales.
KEY ASSUMPTIONS
-- Casinos continue to open intermittently and with restrictions
during 2022 with full cash flow recovery expected in 2023;
-- Total capex of CLP50 bn over the period 2021-2023, including
mandatory investments in municipal licenses;
-- No dividends payments.
KEY RECOVERY RATING ASSUMPTIONS
The 'RR4' Recovery Rating reflects average recovery prospects in
the event of default. The recovery analysis assumes that the value
of Enjoy would be assessed under a liquidation approach. Fitch has
assumed a 10% administrative claim.
The waterfall results in a 51%-70% recovery, corresponding to 'RR3'
recovery, for the USD194 million notes, tranche A and 0% recovery,
corresponding to 'RR6', for the USD16 million notes tranche B
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Adjusted debt/EBITDA below 5.5x on a consistent basis;
-- FFO fixed-charge coverage significantly above 1.5x on a
sustained basis;
-- The M&A transaction with Dreams could trigger a positive
rating action should the formed entity exhibit improved
corporate governance and financial discipline.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Continued business interruption;
-- Liquidity ratio consistently below 1.0x;
-- Reverse of the reopening momentum.
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
Improving Liquidity: Enjoy's liquidity is improving as a result of
cash flow recovery and comfortable amortization profile. The
refinancing initiatives in 2020, allowed the company to extended
its debt amortization profile resulting in no significant maturity
for the next five years.
As of March 2022, the company had CLP21 billion of readily
available cash, with CLP250 billion of total debt of which only
CLP6.4 billion is short-term and the balance has maturity greater
than five years.
ISSUER PROFILE
Enjoy operates a total of 10 casinos: eight casinos in Chile, one
in Uruguay and one in Argentina. Enjoy is a leader in the Chilean
gaming and entertainment industry. It offers a complete portfolio
of recreational services that include not only casinos, but also
hotels, restaurants, spas and discotheques.
ESG CONSIDERATIONS
Enjoy has an ESG Relevance Score of '4' for Management Strategy due
to the challenges the company has faced in executing its strategy,
meeting its projections and reducing its leverage, that resulted in
it being unprepared to face the impact of the pandemic. Enjoy's
below-average execution of its strategy has contributed to a
materially weaker operational performance and capital structure in
comparison with its peers. This has a negative impact on the credit
profile, and is relevant to the rating 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.
LATAM AIRLINES: White & Case Gives 6th Update on LATAM Bondholders
------------------------------------------------------------------
In the Chapter 11 cases of LATAM Airlines Group S.A., et al., the
law firm of White & Case LLP submitted a sixth verified statement
under Rule 2019 of the Federal Rules of Bankruptcy Procedure, to
disclose an updated list of Ad Hoc Group of LATAM Bondholders that
it is representing.
As of March 9, 2022, members of the Ad Hoc Group and their
disclosable economic interests are:
Bardin Hill Investment Partners
299 Park Avenue, 24th Floor
New York, New York 10171
* Holders of $14,200,000 of 2024 Bonds and $9,000,000 of 2026
Bonds
BICE VIDA Compania de Seguros S.A.
Av. Providencia 1806, Metropolitana
Chile Santiago, Region
* Holder of $750,000 of 2024 Bonds
BNP Paribas
787 Seventh Avenue, 2nd Floor
New York, NY 10019
* Holder of $6,200,000 of 2024 Bonds, and $6,000,000 of 2026 Bonds
Canyon Capital Advisors LLC
2727 N. Harwood Street, 2nd Floor
Dallas, Texas 75201
* Holder of $85,000,000 of 2024 Bonds and $44,450,000 of 2026
Bonds
Caspian Capital L.P.
10 E. 53rd St.
New York, NY 10022
* Holder of $47,199,000 of 2024 Bonds, $55,936,000 of 2026 Bonds,
$29,580,506 in Tranche A DIP Commitments, and $19,598,660 in
Tranche C DIP Commitments
Diameter Capital Partners, LP
24 W 40th Street, 5th Floor
New York, NY 10018
* Holder of $15,000,000 of 2024 Bonds, $12,879,222.73 of Tranche A
DIP Commitments, $5,611,434.14 of Tranche C DIP Commitments, and
$2,418,411 of Claims
DSC Meridian Capital LP
888 Seventh Ave.
New York, NY 10016
* Holder of $6,502,000 of 2024 Bonds and $6,395,000 of 2026 Bonds
Glendon Capital Management, L.P.
2425 Olympic Blvd., Suite 500E
Santa Monica, CA 90404
* Holder of $5,500,000 of 2024 Bonds, $10,000,000 of 2026 Bonds,
$25,250,000 of the Revolving Credit Facility, $14,282,318.58 of
Tranche A DIP Commitments and $5,763,746.72 of Tranche C DIP
Commitments
HBK Capital Management
2300 North Field Street, Suite 2200
Dallas, Texas 75201
* Holder of $20,500,000 of 2026 Bonds and $14,289,000 of Claims
Mariner Investment Group, LLC
299 Park Avenue, 12th Floor
New York, NY 10171
* Holder of $5,000,000 of 2024 Bonds, $6,000,000 of 2026 Bonds
Redwood Capital Management, LLC
910 Sylvan Avenue
Englewood Cliffs, NJ 07632
* Holder of $2,275,000 of 2024 Bonds, $6,699,000 of 2026 Bonds,
$13,469,288 of Tranche A DIP Commitments, and $7,685,551 of
Tranche C DIP Commitments
Taconic Capital Advisors L.P.
280 Park Avenue, 5th Floor
New York, NY 10017
* Holder of $19,300,000 of 2024 Bonds and $26,911,000 of the 2026
Bonds
UBS O'Connor LLC
One North Wacker Drive
31st Floor Chicago, IL 60606
* Holder of $8,000,000 of the 2026 Bonds
VR Global Partners, L.P.
300 Park Avenue, 16th Floor
New York, NY 10022
* Holder of $4,127,000 of 2024 Bonds and $5,000,000 of the 2026
Bonds
On June 15, 2020, the Ad Hoc Group retained Counsel to represent
it
in connection with the Debtors' Chapter 11 Cases.
Each member of the Ad Hoc Group has consented to Counsel's
representation.
Counsel for the Ad Hoc Group of LATAM Bondholders can be reached
at:
White & Case LLP
John K. Cunningham, Esq.
Brian D. Peiffer, Esq.
Gregory Starner, Esq.
Joshua Weedman, Esq.
Kathryn Sutherland-Smith, Esq.
1221 Avenue of the Americas
New York, NY 10020
Telephone: (212) 819-8200
Facsimile: (212) 354-8113
E-mail: jcunningham@whitecase.com
brian.pfeiffer@whitecase.com
gstarner@whitecase.com
jweedman@whitecase.com
kathryn.sutherland.smith@whitecase.com
Richard S. Kebrdle, Esq.
Southeast Financial Center, Suite 4900
200 South Biscayne Boulevard
Miami, FL 33131
Telephone: (305) 371-2700
Facsimile: (305) 358-5744
Telephone: rkebrdle@whitecase.com
E-mail: rkebrdle@whitecase.com
A copy of the Rule 2019 filing, downloaded from PacerMonitor.com,
is available at https://bit.ly/3KDud2u and https://bit.ly/34zORRQ
About LATAM Airlines
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.
LATAM Airlines Group S.A. 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 Airlines Group S.A. 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 general
bankruptcy counsel; FTI Consulting as restructuring advisor; and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. Prime Clerk LLC is the claims agent.
=============
J A M A I C A
=============
JAMAICA: Gets $100M IDB Loan to Strengthen COVID-19 Response
------------------------------------------------------------
Jamaica will strengthen the public policy and the efficiency and
effectiveness of fiscal management to address the health and
economic crisis caused by COVID-19, with a $100 million loan
approved by the Inter-American Development Bank (IDB).
This is the second operation under the Programmatic Policy-Based
Loan (PBP) modality, which consists of two technically related, but
financially and contractually independent operations. The first one
was approved by the IDB in March 2021.
The new loan will ensure the availability and timely execution of
public resources to address the health crisis caused by pandemic.
It will also strengthen the counter-cyclical effect of fiscal
policy with the temporary introduction of measures to protect the
income of vulnerable households and increase business liquidity.
Some of the measures include improvements in the targeting of
social programs, alleviate the tourism sector and the
implementation of a tax credit program for micro, small and
medium-sized enterprises (MSMEs).
The IDB financing will also support reforms to boost economic and
fiscal recovery in the post-pandemic period, including the creation
of an independent fiscal commission to oversee government spending
and improvements in governance and gender representation in all
boards of public bodies and in the tracking of climate-related
government spending, among other measures.
This operation is in line with Vision 2025 - Reinvesting in the
Americas: A Decade of Opportunities, created by the IDB to achieve
recovery and inclusive growth in Latin America and the Caribbean,
in the areas of small and medium-sized enterprises, gender and
inclusion, and climate change.
The IDB $100 million loan has a 20-year maturity, a 5.5-year grace
period, and an interest rate based on SOFR.
As reported in the Troubled Company Reporter-Latin America on March
11, 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=====================
P U E R T O R I C O
=====================
PUERTO RICO: Judge Orders New PREPA Debt Revamp Plan by May 2
-------------------------------------------------------------
A U.S. judge ordered Puerto Rico's oversight board to try to create
a plan for restructuring the debt of its bankrupt power company by
May 2, 2022 after the commonwealth's governor terminated a 2019
plan.
U.S. District Court Judge Laura Taylor Swain, the judge overseeing
the island's bankruptcy, rejected a request by an ad hoc group of
bondholders to begin costly, court-monitored mediation for
resolving the debt of the Puerto Rico Electric Power Authority.
The judge instead ordered the island's financial oversight board to
file by May 2, 2022:
i. A proposed plan of adjustment, disclosure statement, and
proposed deadlines in connection with consideration of the
disclosure statement, plan-related discovery, solicitation and
tabulation of votes, objection period in connection with the
confirmation hearing, and proposed confirmation hearing schedule
for the PREPA Title III case; or
ii. A detailed term sheet for a plan of adjustment, with a
proposed timetable for the filing of the plan, consideration and
approval of a disclosure statement, voting and confirmation of the
plan; or
iii. A proposed schedule for the litigation of significant
disputed issues in PREPA's Title III case, including, without
limitation, the motion for stay relief to seek appointment of a
receiver, the UCC's claim objection (including, if appropriate,
litigation of antecedent questions of standing), and the issues
raised in Adv. Proc. Nos. 19-396 and 19-405; or
iv. A declaration and memorandum of law showing cause as to why
the court should not consider dismissal of PREPA's Title III case
for failure to demonstrate that a confirmable plan of adjustment
can be formulated and filed within a time period consistent with
the best interests of PREPA, the parties-in-interest and the people
of Puerto Rico.
The Court denied approval to an Urgent Motion of the Ad Hoc Group
of PREPA Bondholders Pursuant to Section 312 of PROMESA and Section
105 of the Bankruptcy Code to Appoint a Mediator and Impose
Deadlines for a PREPA Plan of Adjustment filed by the Ad Hoc Group
of PREPA Bondholders (the "Ad Hoc Group"). The Motion sought entry
of an order (i) appointing a mediator to facilitate confidential
negotiations between the Financial Oversight and Management Board
for Puerto Rico (the "Oversight Board") and the Ad Hoc Group, which
comprises certain bondholders who have entered into a restructuring
support agreement ("RSA") with the Puerto Rico Electric Power
Authority ("PREPA"), the Puerto Rico Fiscal Agency and Financial
Advisory Authority ("AAFAF"), and the Oversight Board, "to forge a
path forward if the RSA-required legislation is not passed," and
(ii) imposing deadlines on the Oversight Board to file a proposed
plan of adjustment in connection with PREPA's Title III case.
The Motion is opposed by the Oversight Board, PREPA, AAFAF, the
Speaker of the Commonwealth's House of Representatives (the "House
Speaker"), the Unsecured Creditors Committee (the "UCC") and
certain creditors.
The Court denies the Ad Hoc Group's Motion insofar as it seeks an
order requiring the Oversight Board to participate in, and PREPA to
provide unlimited financing for, mediation focused on the interests
of a particular subset of creditors under the provision of an RSA
that AAFAF has purportedly terminated. Nevertheless, the Court
expects and recognizes the need for prompt and effective engagement
in any actions necessary to bring PREPA's Title III case to a
speedy, appropriate conclusion that is consistent with the law and
that can provide for a better future for Puerto Rico. Until
recently, the Oversight Board and the government entities' words
and actions gave the Court reason to expect that a plan of
adjustment would be forthcoming promptly and that no interruption
of the Oversight Board's engagement or efforts would hinder the
process. Ms. Jaresko's resignation timetable is disturbing in that
respect. The RSA termination announcement presents the risk of a
major setback in progress toward readjustment of PREPA's
liabilities. The Court encourages the relevant parties to continue
discussions and pursue a consensual resolution of the outstanding
issues. To that end, the Court is willing to entertain a prompt
consensual revival of a private mediation proposal, accompanied by
a delineation of scope, a timetable, and evidence of the proposal's
commercial reasonableness, susceptibility to cost controls, and
consistency with any relevant requirements of the Puerto Rico
Recovery Accuracy in Disclosures Act ("PRRADA")," according to
Judge Swain's March 8, 2022 order.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70 billion,
a 68% debt-to-GDP ratio and negative economic growth in nine of the
last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III of
2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ('PROMESA').
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21, 2017. On July 2, 2017, a Title III case was commenced for
the Puerto Rico Electric Power Authority ("PREPA").
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that may
be referred to her by Judge Swain, including discovery disputes,
and management of other pretrial proceedings.
Joint administration of the Title III cases, under Lead Case No.
17-3283, was granted on June 29, 2017.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets, as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at
O'Neill & Borges are on-board as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets Inc.
is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at
https://cases.primeclerk.com/puertorico
Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA,
and PREPA.
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
*********
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 * * *