/raid1/www/Hosts/bankrupt/TCRLA_Public/220401.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, April 1, 2022, Vol. 23, No. 60
Headlines
A R G E N T I N A
PETROQUIMICA COMODORO: S&P Withdraws 'CCC+' Issuer Credit Rating
B R A Z I L
BRAZIL: Plans to Launch Poverty Eradication Fund, Guedes Says
MARFRIG GLOBAL: S&P Upgrades ICR to 'BB+', Outlook Stable
C H I L E
LATAM AIRLINES: Court Approves Entry into Backstop Agreements
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Electricity Distributors Post Losses
DOMINICAN REPUBLIC: Manufacturing Activity Fell in February
DOMINICAN REPUBLIC: Taxman Discards Price Hikes From Imports
P U E R T O R I C O
COOPERATIVA DE SEGUROS: A.M. Best Affirms C(Weak) FS Rating
PUERTO RICO: Govt. Faces Financial Challenge in Exiting Bankruptcy
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: To Give Forex Relief Soon for MSMEs, Other Firms
- - - - -
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A R G E N T I N A
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PETROQUIMICA COMODORO: S&P Withdraws 'CCC+' Issuer Credit Rating
----------------------------------------------------------------
S&P Global Ratings withdrew its 'CCC+' long-term issuer credit
rating on Petroquimica Comodoro Rivadavia S.A. (PCR) at its
request. The outlook was stable at the time of the withdrawal.
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B R A Z I L
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BRAZIL: Plans to Launch Poverty Eradication Fund, Guedes Says
-------------------------------------------------------------
Reuters reports that Brazilian Economy Minister Paulo Guedes said
that the federal government plans to create a poverty eradication
fund that would be fed from the sale of public assets.
Speaking at a presidential event, he mentioned plans of creating
"Fundo Brasil," comprising BRL1 trillion ($210.51 billion) in real
state assets and BRL1 trillion in shares of state-owned companies,
according to the report.
"Each time we sell a property we will rebuild the investment
capacity of the Brazilian public sector", said Guedes, adding that
President Jair Bolsonaro would then have funds to build a planned
hydroelectric plant in the Roraima state, the report notes.
"At the same time another part of the proceeds will feed a poverty
eradication fund," the report adds.
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).
MARFRIG GLOBAL: S&P Upgrades ICR to 'BB+', Outlook Stable
---------------------------------------------------------
On March 30, 2022, S&P Global Ratings raised its global scale
issuer credit and issue-level ratings on Brazilian protein
processor Marfrig Global Foods S.A. (Marfrig) to 'BB+' from 'BB'.
S&P also affirmed its 'brAAA' national scale issuer credit rating
and its '3' recovery ratings on the notes, indicating a recovery
expectation between 50%-70%.
The stable outlook reflects S&P's view that Marfrig will keep debt
to EBITDA below 3.0x even when margins in the U.S. return to more
normal levels, while its adherence to more conservative financial
policy decisions will be the main ratings driver.
Marfrig proposed slate for BRF S.A.'s (BRF; BB/Stable/--) board was
elected on March 28, 2022, and now Marfrig will exert significant
influence over BRF's decision-making, although it only owns 33.25%
of the company.
S&P said, "Although Marfrig's 33.25% stake in BRF remains
unchanged, we consider that the board appointed by Marfrig will
largely influence strategic decisions at BRF, as opposed to last
year, when we considered Marfrig's investment to be passive. We
expect both companies to be run separately, with no cross-guarantee
or cross-default clauses in the short term, and limited synergies,
likely in the commercial area. However, we believe it is part of
Marfrig's long term strategy to diversify its portfolio into more
processed products and diverse proteins, including pork and poultry
from BRF, and so there could be a gradual merger of the operations
in the longer term. Consequently, we're assigning a moderately
strategic group status to BRF in relation to Marfrig, but we could
revise this if the full merger materializes in the next few years.
"The upgrade reflects our view that Marfrig's business risk profile
is already relatively strong for its rating category, given its
considerable size in the U.S. and South America, which mitigates
commodity cycle volatility, and that we could revise its business
profile to a stronger assessment if it continues to increase its
stake in BRF, warranting deeper commercial, operational, or
procurement synergies in the next few years.
On a stand-alone basis, Marfrig has been posting record-high
margins in its U.S. operations but pressured margins in South
America, especially in Brazil. In the U.S., high beef demand
domestically and for exports is driving up prices, which far
outpace the recent cattle price increases in the country. There is
large cattle availability in the country, especially as high grain
prices increase the cost of cattle feed and induce the farmers to
continue selling the animals. In this sense, cutout ratios,
although already falling, continue to be high. S&P expects them to
gradually decrease during 2022 and 2023 to reach more normal levels
by 2024, when margins at subsidiary National Beef should recede to
about 8%, still somewhat higher than historical levels.
In Brazil, a feeble economic recovery, lower beef consumption due
to high inflation, and high cattle prices continue to pressure
margins, although we expect margins to recover to about 6%-7% in
fiscal 2022 (ending Dec. 31, 2022), mainly from higher cattle
availability. However, S&P also expects some recovery after that,
with Marfrig's South American operations' margins gradually
approaching 8%-9% in 2023 and 2024.
S&P will now consolidate BRF proportionally into Marfrig's
financials according to its 33.25% stake in BRF. Even though the
auditors could fully consolidate BRF into Marfrig's financials, in
our opinion, a proportional consolidation more accurately reflects
the economic influence that Marfrig will exert over BRF after the
new board takes charge. This doesn't materially change Marfrig's
credit metrics, given that it is a larger company and the
consolidation factors in only part of BRF's financials. Marfrig's
adjusted debt to EBITDA was 1.8x in 2021, as a result of the
record-high EBITDA of R$14.2 billion, which it partially used to
reduce debt. However, the company also increased shareholder
remuneration to R$4.4 billion and acquired a 33.25% stake in BRF
S.A. for close to R$6.5 billion, as well as minor acquisitions,
such as Sol Cuisine and Hillary's, through its Plant Plus
subsidiary for about $100 million. Factoring in the proportional
consolidation of BRF, we expect Marfrig's adjusted debt to EBITDA
to reach 2.4x by year-end 2022, considering pressured margins and
higher leverage at BRF, as well as the cash outflows of about R$2.1
billion for the follow-on that occurred last February and the
remaining portion of Plant Plus' acquisitions.
ESG credit indicators: E-3, S-2, G-3
Environmental and governance factors are moderately negative
considerations in our credit rating analysis of Marfrig. Mixed
results stem from the company's long-term strategy, which have
involved large M&As (including the recent acquisition of 33.25% of
BRF). This has historically made credit metrics volatile and
weighed on performance consistency across various industry cycles.
In addition, the protein sector is exposed to environmental
factors, including exposure to weather events that could cause feed
costs to spike, sanitary controls that could restrict exports, and
issues involving natural capital for Brazilian beef producers,
given their exposure to cattle supply in the Amazon and Cerrado
areas, where about 40% of Marfrig's South American slaughtering
houses are located. Marfrig has committed to trace its entire
supply chain (direct and indirect suppliers) by 2030 to assure no
cattle is purchased from deforestation areas or from suppliers that
use forced labor. Currently, the company monitors 100% of its
direct suppliers. Nevertheless, Marfrig's business is now mostly in
the U.S., given that this market currently represents about 75% of
the company's revenue and more than 90% of EBITDA.
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C H I L E
=========
LATAM AIRLINES: Court Approves Entry into Backstop Agreements
-------------------------------------------------------------
LATAM Airlines Group S.A. ("LATAM Parent") and certain of its
debtor affiliates submitted a Fifth Revised Disclosure Statement
with respect to the Jont Plan of Reorganization dated March 21,
2022.
The Fifth Revised Disclosure Statement reflects revisions
principally based on the rulings and guidance provided by the Court
at the hearing to approve the Disclosure Statement Motion, further
revisions and comments made by certain parties-in-interest and
other case developments, and resulting from, inter alia, the
Court's entry of the Memorandum Decision Granting the Debtors'
Motion for Entry of an Order Authorizing and Approving the Debtors'
Entry into and Performance under Backstop Agreements and Payment of
Related Fees and Expenses and Incurrence of Certain Indemnification
Obligations.
The Debtors continued to engage in a marketing process for an
amended and restated DIP Credit Agreement, and as a result of those
efforts, the Debtors agreed to an alternative proposal provided by
a different group of prospective lenders with such proposal
reflected in an alternative amended and restated DIP Credit
Agreement (the "New Amended and Restated DIP Credit Agreement").
On March 15, 2022, the Debtors filed the Debtors' Additional
Supplement to the Motion for an Order (I) Authorizing the Debtors
to (A) Enter into the Amended and Restated Credit Agreement, (B)
Obtain Replacement Tranche C Postpetition Financing, and (C) Grant
Superpriority Administrative Expense Claims and (II) Granting
Related Relief (the "Second Supplement to the Fourth DIP Motion")
requesting Court approval of the New Amended and Restated DIP
Credit Agreement. During the hearing on the Supplement to the
Fourth DIP Motion, the Court approved the Debtors' entry into the
New Amended and Restated DIP Credit Agreement on the record.
The total committed amount under the New Amended and Restated DIP
Credit Agreement will increase to $3.7 billion which reflects an
increase in the committed amount under the Tranche C facility from
the existing $1.15 billion to $1.650 billion intended to cover the
costs of refinancing the Tranche C facility existing under the DIP
Credit Agreement.
The scheduled maturity date of the New Amended and Restated DIP
Credit Agreement will be August 8, 2022, subject to the possibility
that LATAM may extend the maturity date at its discretion to a date
no later than October 14, 2022, provided LATAM may further extend
the maturity date to a date no later than the earlier of (x)
November 30, 2022 or (y) the termination of the Restructuring
Support Agreement, in the event the World Health Organization or
the U.S. Centers for Disease Control designates any COVID-19
variant as a variant of concern or variant of high consequence (or
such other designations as may be used by the foregoing entities
with similar effect) within 45 days of the scheduled maturity
date.
As of March 11, 2022, approximately 6,479 proofs of claim had been
filed against the Debtors, asserting approximately
$125,101,190,272
in aggregate liquidated and unliquidated Claims.
On March 15, 2022, the Bankruptcy Court issued a memorandum
decision granting the Backstop Motion and approving the Debtors'
entry into the Backstop Agreements (the "Backstop Opinion"). In the
Backstop Opinion, the Court declined to rule on certain objections
made by the Creditors' Committee and other objecting parties which
the Court, in the Backstop Opinion, indicated were premature and
related to confirmation of the Plan. The Court indicated that the
objecting parties' rights to object to confirmation of the Debtors'
Plan on those grounds were preserved.
The Creditors' Committee also has learned that the Debtors have
requested that various creditors enter into certain "Claim
Allowance Agreements" whereby, among other things, (a) the Debtors
agree to stipulate to the Allowed amount of the creditor
counterparty's Claims and (b) the creditor counterparty agrees to
vote to accept the Plan. The Creditors Committee maintains that the
Debtors' seeking and entering into such agreements constitutes
impermissible solicitation of Plan votes and may violate U.S.
bankruptcy laws. The Debtors have not publicly disclosed how many
creditors they have solicited in this manner. The Debtors are
responding to certain discovery requests made by the Creditors'
Committee and the U.S. Trustee and that discovery is ongoing.
The Debtors disagree with the Creditors' Committee's contentions,
and maintain that (a) no Claims have been allowed in exchange for
any agreement to vote on the Plan, (b) "Claim Allowance Agreements"
as well as plan support agreements are commonplace in chapter 11
proceedings and (c) such agreements executed by the Debtors fully
comply with the Bankruptcy Code. Nonetheless, the Debtors have
agreed that they will not enforce any provision in a "Claim
Allowance Agreement" that would require a creditor to vote to
accept the Plan, provided, however, that, for the avoidance of
doubt, such agreement does not apply to the Restructuring Support
Agreement.
The Debtors and Reorganized Debtors, as applicable, shall fund
distributions under the Plan with: (i) Cash on hand, including Cash
from operations or asset dispositions; (ii) Cash proceeds from the
subscription of ERO New Common Stock pursuant to the ERO Rights
Offering Procedures (including the subscription of ERO New Common
Stock by Eligible Equity Holders during the ERO Preemptive Rights
Offering Period), (iii) the New Convertible Notes Class A (and the
Cash proceeds from the sale by the Sales Agent of the New
Convertible Notes Class A that would otherwise be distributed to
Ineligible Holders of General Unsecured Claims against LATAM
Parent), (iv) the New Convertible Notes Class C, (v) the Cash
proceeds from the subscription of the New Convertible Notes
(including any Cash proceeds from the subscription of the New
Convertible Notes Class A and New Convertible Notes Class C by
Eligible Equity Holders during the New Convertible Notes Preemptive
Rights Offering Period above the Allowed Class 5a Treatment Cash
Amount), and (vi) the proceeds of the Exit Financing.
Counsel for the Debtors:
CLEARY GOTTLIEB STEEN & HAMILTON LLP
Richard J. Cooper
Lisa M. Schweitzer
Luke A. Barefoot
Thomas S. Kessler
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2000
Facsimile: (212) 225-3999
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: Electricity Distributors Post Losses
--------------------------------------------------------
Dominican Today reports that the electricity distribution companies
(EDE) managed to minimally improve their average losses last year,
when compared to 2020, although seen separately in one of them the
energy losses increased.
On average, the three EDEs managed to reduce their losses from
33.1% in 2020 to 32.6% in the following period, equivalent to a
reduction of 0.5 percentage points, according to Dominican Today.
This is established in the sector performance report, prepared by
the Dominican Corporation of State Electric Companies (Cdeee),
which indicates that Edeeste and Edenorte managed to reduce their
losses, contrary to Edesur, the report notes.
Edeeste, which is the worst of the distributors in terms of energy
losses, was the one that managed to reduce this indicator the most
in 2021, 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: Manufacturing Activity Fell in February
-----------------------------------------------------------
Dominican Today reports that the Monthly Index of Manufacturing
Activity (IMAM) of the Association of Industries of the Dominican
Republic (AIRD) fell 1.8 in February, going from 64.6 in January to
62.8, showing decreases in the variables of Inventory of Raw
Materials and Sales Volume.
This Index is a portrait of the manufacturing activity of a month
in relation to the previous one and when it is below the threshold
of 50 points, it reflects that the economic conditions and
perspectives of the manufacturing sector are considered
unfavorable, according to Dominican Today.
The Industry Association of the Dominican Republic (AIRD), the
entity responsible for preparing this index, states that above 50.0
the perspectives of the industries are favorable and affirmed that
it has been above 60.0 since November of last year, 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.
DOMINICAN REPUBLIC: Taxman Discards Price Hikes From Imports
------------------------------------------------------------
Dominican Today reports that General Director of Internal Taxes,
Luis Valdez Veras, assured that, if the bill that seeks to
establish a zero rate of tariffs for importing staple products for
six months is approved, the measure will not affect projected
collections by the government for this year.
However, he recognized that the General Directorate of Internal
Taxes (DGII) must make a greater effort to collect economic
resources for the State, according to Dominican Today.
"It is being considered for six months, we are going to hope that
it will be for six months, but I again repeat: this measure, as
DGII, in what is the projection of income for the year, does not
affect us," he 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.
=====================
P U E R T O R I C O
=====================
COOPERATIVA DE SEGUROS: A.M. Best Affirms C(Weak) FS Rating
-----------------------------------------------------------
AM Best has downgraded the Long-Term Issuer Credit Rating
(Long-Term ICR) to "ccc" (Weak) from "ccc+" (Weak) and affirmed the
Financial Strength Rating (FSR) of C (Weak) of Cooperativa de
Seguros de Vida de Puerto Rico (COSVI) (San Juan, Puerto Rico). The
outlook of the FSR has been revised to negative from stable while
the outlook of the Long-Term ICR is negative.
The Credit Ratings (ratings) reflect COSVI's balance sheet
strength, which AM Best assesses as very weak, as well as its
adequate operating performance, limited business profile and weak
enterprise risk management (ERM).
COSVI's absolute capital level declined materially in 2021 due to a
decrease in the discount rate used to determine the unfunded
pension obligations in the defined benefit pension plan. As a
result, the company's risk-adjusted capital, as measured by Best's
Capital Adequacy Ratio (BCAR), also declined and continues to be
assessed at very weak. COSVI's board of directors recently approved
a capital management plan to improve absolute capital and
risk-adjusted capital strategically. However, the negative outlooks
reflect AM Best's concern for additional pressure that may impact
risk-adjusted capitalization given the history of one-off events.
Volatility in COSVI's BCAR has been high historically. Unadjusted
financial leverage remains just within AM Best's tolerances, and
quality of capital remains neutral to the ratings. AM Best notes
that COSVI will need to demonstrate execution of its capital
management plan before the balance sheet strength assessment will
be viewed differently.
Offsetting forward-looking factors are the development of a capital
management plan, and an overall strategic plan to improve the
company's risk-adjusted capitalization. COSVI also is working with
a third party to strengthen the company's overarching ERM framework
and capabilities. AM Best will continue to monitor progress on all
initiatives presented.
PUERTO RICO: Govt. Faces Financial Challenge in Exiting Bankruptcy
------------------------------------------------------------------
Jose Alvarado Vega of Caribbean Business reports that the
government of Puerto Rico faces financial challenges to exit
bankruptcy.
Gov. Pedro Pierluisi's fiscal team says it is charting a path to
Puerto Rico's exit from bankruptcy, despite the unfinished task of
creating a sustained and uniform accounting system that would allow
timely issuance of the commonwealth's audited financial statements,
which are currently three years behind.
Island government officials have acknowledged that the years-long
delays in issuing comprehensive annual financial reports (CAFRs) --
which are essential in meeting the fiscal requirements of the
federally created Puerto Rico Oversight, Management and Economic
Stability Act (Promesa) -- are largely the result of disparate
accounting systems at 130 central government agencies.
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.
* * *
The two Title III plans of adjustment have been confirmed to date,
for the Commonwealth and COFINA debtors.
=====================================
T R I N I D A D A N D T O B A G O
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TRINIDAD & TOBAGO: To Give Forex Relief Soon for MSMEs, Other Firms
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Trinidad Express reports that in Trinidad and Tobago, relief is
coming soon for businesses, including micro, small and medium
enterprises (MSMEs) that have been finding it difficult to access
foreign exchange to purchase goods needed for their operations.
Finance Minister Colm Imbert announced that within the next "couple
of weeks" he will be approaching the Cabinet to increase the
allocation of foreign exchange to the Export Import Bank of
Trinidad and Tobago (EximBank), to allow increased allocations to
importers of essential items and to expand the foreign exchange
availability to MSMEs, according to Trinidad Express.
"We are going to put considerably more money into those special
windows at the Eximbank to allow many more of our local businesses
to access foreign exchange for productive purposes," he said as he
acknowledged the rising cost of goods and shipping caused by the
Covid-19 pandemic and the Russia-Ukraine war, the report relays.
He said the Eximbank system has been working "very, very well" over
the years, the report notes.
Imbert pointed out that providing additional foreign exchange to
the Eximbank for specific purposes, aimed at sustaining the
country's livelihood and boosting exports, was a far more useful
approach than trying to tell commercial banks who they should give
foreign exchange to and how much foreign exchange they should give,
the report discloses.
He said the Government also expects that there would be improvement
to the availability of foreign exchange to the commercial sector
from the energy sector, given the outlook for oil and gas
production, the report says.
Imbert was at the time responding to a motion raised by Independent
Senator Amrita Deonarine in the Senate, the report relays.
The motion, which raised concerns over the difficulty MSMEs and the
public face accessing foreign exchange, called on the Government to
"table in Parliament, within the next six months, a comprehensive
frame that will guide key stakeholders, including MSMEs, the
Central Bank of Trinidad and Tobago and commercial banks on how the
Government intends to navigate the tightness in the foreign
exchange market to overcome downside risks in the medium to
long-term," the report discloses.
Challenges
Deonarine said after looking at a Joint Select Committee meeting in
November 2021, which enquired into the impact of Covid-19 on the
MSME sector, she did her own investigations into the challenges
faced by MSMEs, the report relays.
She said she spoke to several business chambers who confirmed that
trying to get foreign exchange through commercial banks was
difficult, the report notes.
Deonarine said she, too, found it difficult to access US currency
for business purposes, the report relays.
"You have one commercial bank giving you US$300 a day. In order to
access that, you have to call the bank every morning and hope
someone answers quickly and gets the approval to purchase. So you
have to go through a process of accumulating increments of foreign
exchange until you make up enough to make a purchase for raw
materials or replenish stocks for your business," she lamented, the
report discloses.
She said one financial institution indicated that it could no
longer provide US currency and suggested that she take a loan to
access it, the report relays.
Deonarie said at present, larger and more established businesses
were favorably positioned to get preference from financial
institutions for foreign exchange purchases as they "give the banks
a lot of business," the report relates.
She said it appeared that commercial banks were making their own
rules on allocation of scarce foreign exchange and MSMEs who are
not established appeared to be penalized by not being able to
access foreign exchange, the report notes.
"I think this borders on unethical business practice . . ."
Deonarine said, the report discloses.
She also noted that parents with children studying abroad were in
the same predicament as MSMEs, the report relays.
Stressing that the existing foreign exchange distribution system
could not continue, Deonarine called on Government to set clear
guidelines, in conjunction with the Central Bank with respect to
the availability of foreign currency for MSMEs and tertiary level
students studying abroad, the report adds.
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