/raid1/www/Hosts/bankrupt/TCRLA_Public/220412.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, April 12, 2022, Vol. 23, No. 67
Headlines
A R G E N T I N A
ARGENTINA: Inflation Fears Grow as Feletti Takes Aim at Guzman
ARGENTINA: Starving for Natural Gas, Gets Relief From Bolivia
B R A Z I L
BRAZIL: Currency Strengthens Despite Inflation
BRAZIL: IDB Invests $1.5 Million to Digitize Small Businesses
C A Y M A N I S L A N D S
[*] CAYMAN ISLANDS: Freezes US$7.3 Billion of Russian Assets
C H I L E
LATAM AIRLINES: Accuses Banco del Estado de Chile of Tipping Vote
C U B A
CUBA: Struggles to Buy Fuel as Imports from Venezuela Dwindle
M E X I C O
MEXARREND SAPI: Fitch Affirms 'B+' LT IDRs, Outlook Negative
V E N E Z U E L A
VENEZUELA: New Foreign Currency Tax Hurting Businesses
- - - - -
=================
A R G E N T I N A
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ARGENTINA: Inflation Fears Grow as Feletti Takes Aim at Guzman
--------------------------------------------------------------
Buenos Aires Times reports that fears over Argentina's runaway
price increases have been stoked once again after a new report
estimated that inflation totalled 6.8% in March.
The increase was driven by a surge in food prices, which rose 9%
last month, according to a survey by the UMET metropolitan
university, according to Buenos Aires Times.
"Inflation for workers soared to 6.8[%] in March. This is a figure
not seen since the devaluation jump of August 2018," read the
institution's 'Statistical Index of Workers' report, Buenos Aires
Times notes.
According to UMET, inflation totals 16.1% for the first quarter of
the year. During that same period, food and drink prices are up
22.8%, it warned, Buenos Aires Times relays.
Drilling down further, the report said that the surge in prices was
particularly driven by breads and cereals, which increased 20.4% in
one month and by 95.4% over the last 12 months, Buenos Aires Times
discloses.
The second largest increase was seen in meats, up 8.5%, with
chicken prices leading the way (up 16.5%). Dairy products rose more
than 8%, along with sweets and confectionery and fish, Buenos, the
report relays.
Ex-education minister Nicolas Trotta, who serves as rector of UMET,
said on Twitter that inflation "is having a more severe impact on
citizens with lower incomes," the report notes.
The INDEC national statistics bureau will release figures from its
official inflation index for March, the report notes.
Guzman v Feletti
The report notes that tensions in the ruling Frente de Todos
coalition are on the rise, with inflation a real cause for concern.
Domestic Trade Secretary Roberto Feletti called on Economy Minister
Martin Guzman to do more to tackle runaway price increases.
"It is clear that we can't perform miracles," said Feletti,
returning to a regular line he has trotted out amid criticism over
price hikes, the report relays.
"The reference prices have improved, but it is insufficient," he
stressed in an interview with Radio Con Vos, says the report.
Warning that March's inflation data is going to "be high," he said
inflation "is the responsibility of the economy minister," while
calling on Guzman to draw "clear lines on policy that reduce
volatility and preserve popular income," the report discloses.
"If not, this is going to get ugly," he warned, calling for greater
"macroeconomic" measures, the report notes.
Guzman said that "inflation is a priority in economic policy" and
vowed to do more to tackle price hikes, the report discloses.
Guzman said that tackling inflation "is very important for
macroeconomic stability and exchange rate stability," 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.
Argentina obtained on March 25, 2022, approval from the Executive
Board of the International Monetary Fund (IMF) of a 30-month
extended arrangement under the Extended Fund Facility (EFF)
amounting to SDR 31.914 billion (equivalent to US$44 billion).
Under the new terms, Argentina secured a much-needed grace period
that postpones repayment of its debt. However, IMF warned of
exceptionally high risks to the program.
ARGENTINA: Starving for Natural Gas, Gets Relief From Bolivia
-------------------------------------------------------------
Peter Millard and Jonathan Gilbert at Bloomberg News report that
Argentina is getting help from neighboring Bolivia in its bid to
muddle through the upcoming southern hemisphere winter without
rationing natural gas supplies.
Bolivia agreed to send extra fuel in the cold, high-demand months
of May to September, according to Argentine government statements,
reports Bloomberg News. The Andean nation is currently shipping
roughly 7.5 million cubic meters a day to Argentina by pipeline,
but talks to ramp up provisions in winter were at an impasse
because Bolivia's production has been declining and it's been
prioritising sales to Brazil, a larger economy, Bloomberg News
notes.
There've been concerns in Argentina that it will have to ration gas
for big industrial users like fertilizers makers and aluminum
smelters if it can't afford shipments of liquefied natural gas, or
LNG, whose prices have sky-rocketed as buyers from the United
Kingdom to Japan scramble to replace Russian supplies, Bloomberg
News relays.
Bolivia finally agreed to send Argentina at least 14 million cubic
metres a day in the winter -- and Argentina has first dibs on up to
18 million cubic meters -- at an average price of about US$12 per
million British thermal units, Bloomberg News discloses. The
Bolivian provisions would substitute 14 cargoes of LNG that's
trading at more than US$35, saving cash-strapped Argentina US$770
million, according to Energy Secretary Dario Martinez, Bloomberg
News relays.
"This is good news for Argentina, for the Central Bank's dollar
reserves and for the government's fiscal plan," Martinez said in a
statement obtained by Bloomberg News.
The 14 million cubic meters is the same volume that Bolivia signed
up to last year but less than the 20 million it sent at the height
of winter in 2020, according to state news agency Télam, Bloomberg
News notes.
Despite owning shale deposits that give it huge export potential,
Argentina's natural gas production can't even meet domestic demand
because a bad business climate has constrained investments,
especially in pipelines, Bloomberg News discloses.
Argentina signed a 20-year gas deal with Bolivia back in 2006
before any wells had been drilled in vast shale formation Vaca
Muerta, Bloomberg News notes. Volumes and pricing are regularly
renegotiated, 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.
Argentina obtained on March 25, 2022, approval from the Executive
Board of the International Monetary Fund (IMF) of a 30-month
extended arrangement under the Extended Fund Facility (EFF)
amounting to SDR 31.914 billion (equivalent to US$44 billion).
Under the new terms, Argentina secured a much-needed grace period
that postpones repayment of its debt. However, IMF warned of
exceptionally high risks to the program.
===========
B R A Z I L
===========
BRAZIL: Currency Strengthens Despite Inflation
----------------------------------------------
EFE News reports that inflation in Brazil is running at 11.3%, yet
the Brazilian real continues to climb against the dollar thanks to
steep domestic rates and the global rally in commodity prices
connected with the Russian invasion of Ukraine.
The real has increased in value by 16% so far this year and is
trading at less than BRL5 to the greenback for the first time since
before the start of the Covid-19 pandemic in February 2020,
according to EFE News.
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: IDB Invests $1.5 Million to Digitize Small Businesses
-------------------------------------------------------------
IDB Lab, the innovation laboratory of the Inter-American
Development Bank (IDB) Group, will invest $1.5 million in Brazilian
startup, Dolado, to promote the digitalization of micro, small, and
medium-sized enterprises (MSMEs) operating in Brazil's favelas.
This capital will allow for the development of a platform that
provides small merchants with access to credit and supply chains,
as well as management tools that are custom-tailored for their
specificities.
Nearly 14 million low-income people live in these informal
settlements whose businesses are affected by weak supply chains
along with inefficient logistics, high prices, poor payment terms,
and poor customer service experiences. IDB Lab's investment, which
joins Valor Capital, Flourish (Omidyar Network Group), Clocktower
Ventures, GFC, and Endeavor in a $10 million investment round, will
directly benefit more than 35,000 MSME owners and indirectly
benefit favela consumers who shop locally and lack access to
digital payments or have otherwise been neglected by online
shopping and merchandise delivery channels.
Dolado provides a platform allowing merchants a complete digital
experience, including an electronic catalog to share with users,
finance management, lines of credit or acquisition of goods to
resell, the benefits of wholesale purchasing, connections with
suppliers, payment terms, safe delivery, and returns. This system
makes it possible to overcome the traditional transfers of small
merchants to large cities to acquire the products that they will
use for sale, avoiding security problems and purchases from illegal
distributors, and further formalizing the process.
"Putting technology at the service of the most vulnerable allows us
to advance by leaps and bounds in inclusion," said Irene Arias, CEO
of IDB Lab. "The digitalization of small and medium-sized companies
operating in Brazilian favelas opens new paths that will translate
into both a positive and disruptive impact for underserved
populations."
IDB Lab's direct financing of this business model, focused on
favela communities, is one more step in the IDB Group's support of
early-stage companies using technology and innovation to advance
financial inclusion for the benefit of vulnerable communities and
joins other initiatives developed by the innovation laboratory in
the region. One of them, INTEcGRA, launched an open call in
September 2020 to support projects contributing to the continuity
and resilience of independent neighborhood stores affected by the
COVID-19 pandemic in Latin America and the Caribbean. The call, led
by IDB Lab, had the collaboration of IDB Invest, the IDB's
strategic alliances office, and a significant group of large
consumer goods companies to finance projects currently in the
disbursement phase or close to approval.
This investment is part of IDB Lab's new direct investment thesis
which prioritizes early-stage startups (late seed series to series
B), addressing the most relevant development challenges facing
Latin America and the Caribbean.
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 A Y M A N I S L A N D S
===========================
[*] CAYMAN ISLANDS: Freezes US$7.3 Billion of Russian Assets
------------------------------------------------------------
RJR News reports that more than 800 asset freeze designations of
individuals and entities have been enforced in the Cayman Islands
since the Russian invasion of Ukraine in February.
The Cayman Government has created a task force to coordinate a new
sanctions regime, according to RJR News.
Numerous financial service providers have submitted more than 400
compliance reporting forms confirming that assets with an estimated
value of US$7.3 billion have been frozen, the report notes.
=========
C H I L E
=========
LATAM AIRLINES: Accuses Banco del Estado de Chile of Tipping Vote
-----------------------------------------------------------------
Rick Archer, writing for Law360, reports that South American air
carrier LATAM Airlines on Thursday, April 7, 2022, told a New York
bankruptcy judge it wants to probe what it says are inaccurate
statements concerning its Chapter 11 plan filed in a Chilean court
by an objector to the plan.
At a virtual status conference, counsel for LATAM said the airline
has filed a Rule 2004 discovery motion to look into bond indenture
trustee Banco del Estado de Chile's actions, saying they may be an
attempt to set up future litigation or influence the ongoing
Chapter 11 plan vote.
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.
=======
C U B A
=======
CUBA: Struggles to Buy Fuel as Imports from Venezuela Dwindle
-------------------------------------------------------------
Marianna Parraga, writing for Reuters, reports that Cuba is
struggling to cover a fuel deficit as imports from Venezuela and
other countries remain below historical levels and global prices
boosted by Russia's invasion of Ukraine make purchases almost
unaffordable, according to analysts and data.
Reuters says the Caribbean country, which is dependent on fuel
imports mostly from political ally Venezuela to cover more than
half of its demand, is since last month dealing with diesel and
gasoline shortages leading to long lines in front of stations.
Insufficient fuel imports are another major hurdle for Cuba's
economy, struggling to recover following the coronavirus pandemic
and harsher U.S. sanctions imposed by the administration of former
President Donald Trump, notes the report.
Venezuela's President Nicolas Maduro has provided Cuba with more
than 32,000 barrels per day (bpd) of crude since 2019 even amid
U.S. sanctions on both countries, Reuters relays. But fuel volumes
sent to the island have fallen as Venezuela has struggled to
produce refined products for its own needs, according to vessel
monitoring data.
According to the report, Cuba imported some 70,000 bpd of crude and
fuel in the first quarter of the year, below the about 100,000 bpd
the Communist-ruled island typically requires to meet normal
demand, tanker monitoring data from Refinitiv Eikon showed.
More than three-quarters of the shipments came from Venezuela, but
the OPEC-member nation has sharply cut fuel shipments to Cuba from
almost 44,000 bpd in 2020 to 21,000 bpd in 2021 and 22,000 bpd in
the first quarter this year, the data and internal documents from
state-run oil company PDVSA showed, notes Reuters.
Cuba's information ministry and Venezuela's PDVSA did not reply to
requests for comment, reports Reuters.
Before the pandemic, Cuba's fuel demand reached 137,000 bpd of fuel
oil, diesel, gasoline, cooking gas and other refined products,
Reuters relates, citing Cuba's National Statistics Office.
Since September, Cuba has not received any diesel cargoes from
Venezuela, according to the tanker tracking data and internal PDVSA
documents, which has forced Cuba to go to the open market for
increasingly costly diesel, says the report.
Reuters says the nation exceeded its imports budget by $49 million
in the first two months of the year due to high fuel prices.
Hours-long lines in front of stations were visible in Cuba's
capital Havana in late March as the government began fuel rationing
in at least one province, notes the report.
Venezuela's diesel provision to Cuba was among the arguments used
by Washington to suspend in 2020 the authorizations it had extended
for the South American country's oil-for-fuel swaps with foreign
oil producers, recounts Reuters.
The island's energy and mining minister, Livan Arronte, said Cuba -
which remains under a U.S. embargo limiting free trade with the
country - is paying freight tariffs and other costs 20% higher than
importers bringing fuel through the same routes.
===========
M E X I C O
===========
MEXARREND SAPI: Fitch Affirms 'B+' LT IDRs, Outlook Negative
------------------------------------------------------------
Fitch Ratings affirmed Mexarrend, S.A.P.I. de C.V.'s (Mexarrend)
Long-Term (LT) Local and Foreign Currency Issuer Default Ratings
(IDRs) at 'B+', Local and Foreign Currency Short-Term (ST) IDRs at
'B' and the senior unsecured LT debt rating at 'B+'/'RR4'. Fitch
also affirmed Mexarrend's LT National Ratings at 'BBB+(mex)', ST
National Ratings at 'F2(mex)' and ST portion of the senior
unsecured notes program at 'F2(mex)'. The Rating Outlook of the LT
IDRs and LT National Rating is Negative.
KEY RATING DRIVERS
Mexarrend's IDRs reflect, with high importance, its improved
capital position, still very low pretax profitability and its
funding, liquidity and coverage assessment. The Negative Outlook
reflects the challenging conditions in international debt markets
as well as refinancing risks in 2024 given Mexarrend's large global
bond maturity (USD300 million, 68.7% of its funding).
Improved Capitalization and Leverage: Mexarrend's assessment was
revised to 'b+' from 'b'. The lower tangible leverage metric of
6.8x was driven by the capital infusion received in the first
quarter of 2021, reported low but positive net profits, as well as
moderate debt growth. The temporary impact on capital through OCI
and the higher value of its dollar denominated debt due to exchange
rate fluctuation also affected leverage metrics in 2020 and is no
longer present in 2021. Fitch calculated an adjusted leverage
excluding the temporary impacts on capital through OCI as well.
Likewise, this ratio improved in 2021, decreasing to 6.3x from 7.4x
in 2020.
Profitability Remains a Weakness: As of YE 2021, the company
reversed pre-tax losses underpinned by portfolio growth and the
continued development of lending as a service strategy. In the
medium term, profitability prospects are sensitive to growth, asset
quality performance and unforeseen costs related to the business
combination. In the agency's view, lending-as-a-service operations
could support profitability while sustaining controlled leverage;
however, high dependency on this strategy as opposed to more stable
and longer-term income from leases, could add some volatility to
profits. Non-productive assets will also continue to pressure
profitability.
Challenges for Global Issuers: The downward revision of the
Funding, Liquidity and Coverage factor to 'bb-' from 'bb' reflects
Fitch's expectation of a reduction in the company's core funding,
liquidity and coverage metric (unsecured debt to total debt of
87.1% as of December 2021), as Mexarrend increases the use of
secured funding facilities, as well as more limited access to
unsecured funding due to market conditions. The downward revision
and the negative trend also reflect increased risk aversion and
reduced appetite from global investors for Mexican NBFIs after the
recent default of two payroll lenders.
As of December 2021, Mexarrend's cash and equivalents covered 97.1%
of its USD30 million maturity due in October 2022, but only 20.7%
of total 2022 maturities (of the remaining maturities 59.1% are
local ST issuances, the most recent issued in March 2022). However,
the company reported positive liquidity gaps for the next 12 months
and Mexarrend also has uncommitted but available funding facilities
that cover over two times the 2022 maturities, including recently
obtained secured funding facilities. Fitch also incorporates
expected increased encumbrance of assets in this factor
assessment.
Mexarrend Rebranding: Mexarrend has recently announced a business
combination with the Colombian Fintech Zinobe that will result in a
rebranding to 'Tangelo' by 2Q22. In Fitch's view, the short-term
impact of the transaction will be limited by Zinobe's relative size
compared to Mexarrend (less than 3% of assets); however, over the
medium to long term this could provide the resulting company with
enhanced technological capabilities which will likely enable faster
growth, additional business lines and a gradual geographical
expansion.
NPLs Exceed Peers: NPLs remain commensurate with the rating but are
higher than peers, at 7.1%. Fitch's calculation includes past due
loans and total owned loans as disclosed by the company. This ratio
is different from the 6.4% disclosed by Mexarrend because the
company includes part of its portfolio under management. Fitch's
assessment also considers the company's exposure to non-productive
real estate assets registered as investments in properties (7.5% of
total assets as of December 2021).
Fitch expects asset quality to remain similar to current levels and
consistent with the rating category. Zinobe's portfolio which
includes consumer loans represents a small portion of Mexarrend
portfolio and after the combination is not expected to relevantly
impact this assessment.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Ratings could be downgraded if Mexarrend's debt/tangible
equity metric adjusted by the temporary effects from
derivatives valuation increases to levels consistently above
9.0x over the next four quarters;
-- A substantial deterioration in Mexarrend's liquidity profile
prior to the maturity of its USD30 million international bond
in October 2022.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Rating upside potential is unlikely in the near term given the
Negative Outlook;
-- The Outlook could be revised to Stable over the next 18 months
if its core profitability metric (pretax profits to average
assets) improves above 1% and if the adjusted tangible
leverage metric stabilizes, once downside risks from the
pandemic and reduced investor confidence in Mexican NBFIs
decline;
-- The ratings could be upgraded in the medium term if the
company materially improves its business profile through
orderly growth and business model diversification, together
with improving asset quality;
-- A tangible leverage ratio adjusted by the temporary effects
from derivatives valuation consistently below 5.5x and
enhanced profitability ratios sustained above 2% could also
trigger an upgrade.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
-- The senior unsecured debt program and ST portion of the senior
unsecured notes program ratings are at the same level as
Mexarrend's IDR and ST national ratings, respectively because
the probability of default on the debt is the same as that of
the company. The recovery rating of 'RR4' reflects Fitch's
expectation of average recovery prospects.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- The ratings of Mexarrend international and local debt issues
are sensitive to a change in the company's LT IDRs and
National Ratings, respectively, as the likelihood of default
of these notes is the same as that of the company;
-- The notes' rating may diverge from the IDRs if asset
encumbrance increases to the extent that it relevantly
subordinates senior unsecured bondholders.
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The ratings of Mexarrend international and local debt issues
would be upgraded following and upgrade in the company's LT
IDRs and national ratings, respectively.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond 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.
SUMMARY OF FINANCIAL ADJUSTMENTS
For comparability and analytical purposes, Fitch reclassified
certain income statement and balance sheet accounts. Accounts
receivable from factoring and cash financing are classified as
loans, fixed assets under operating leased contracts were
classified as the operating lease portfolio, pre-paid expenses and
some other assets were reclassified as intangibles given their low
loss absorption capacity, gross operating and finance lease income
is composed of interest, operating lease and equipment financing
income net of the cost of equipment, and related services and
supplies revenue is presented net of cost as other operating
income.
ESG CONSIDERATIONS
Mexarrend has an ESG Relevance Score of '4' for or Management
Strategy, in contrast with a standard scoring of '3'. In Fitch's
view, there are risks associated with the execution of the recently
announced business combination with Zinobe, rebranding and the
development of additional business lines. Fitch believes this and
previous acquisitions have been opportunistic. Financial
performance still remains a weakness and can be further challenged
by the new strategy. Additional time is required for management to
demonstrate its ability to successfully execute its operational and
financial strategies. This has a moderately negative impact on the
rating in conjunction with other factors.
Mexarrend has an ESG Relevance Score of '4' for Governance
Structure given some concerns regarding board independence which
may impact strategic decisions. This has a moderately negative
impact on the rating in conjunction with other factors.
Mexarrend has an ESG Relevance Score of '4' for Financial
Transparency to highlight that the level of detail between audited
financial statements and quarterly financial report and the level
of disclosure differ. Such differences could limit Fitch's ability
to assess the company's financial profile. While financial
transparency is improving, these concerns still have a moderately
negative impact on 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.
=================
V E N E Z U E L A
=================
VENEZUELA: New Foreign Currency Tax Hurting Businesses
------------------------------------------------------
EFE News reports that in Venezuela, where more than 50% of all
payments are made in foreign currency, a new tax has been imposed
on "large financial transactions" (IGTF) which takes up to 20% of
the value of payments made in foreign currency, but most businesses
neither know how to process it nor have the means to comply with
the government order.
The Official Gazette says that the IGTF affects "natural and legal
persons and economic entities without legal personage, on payments
made in money different from the legal tender in the country, or in
cryptocurrencies or cryptosecurities different from those issued by
. . . Venezuela," according to EFE News.
As reported in the Troubled Company Reporter-Latin America on
Sep. 22, 2021, S&P Global Ratings withdrew its 'SD/D' foreign
currency sovereign credit ratings and 'CCC-/C' local currency
ratings on Venezuela due to lack of sufficient information. At the
same time, S&P withdrew its 'D' issue rating on 15 bonds.
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S U B S C R I P T I O N I N F O R M A T I O N
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