/raid1/www/Hosts/bankrupt/TCRLA_Public/220421.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, April 21, 2022, Vol. 23, No. 74
Headlines
A R G E N T I N A
ARCOS DORADOS: Discloses Proposed Senior Notes Offering
B A H A M A S
BAHAMAS: Reports 62.2% Reduction in Fiscal Deficit
B R A Z I L
ELETROBRAS: Guedes Says Audit Court to Vote on Privatization
IOCHPE-MAXION SA: Fitch Affirms Then Withdraws 'BB-' IDRs
C O L O M B I A
COLOMBIA: Industrial Production Slowed Down in February
C O S T A R I C A
DPR-CR LIMITED: Fitch Affirms 'BB+' Rating on Outstanding Notes
G U A T E M A L A
GUATEMALA: S&P Affirms 'BB-/BB' Sov. Credit Rating, Outlook Now Pos
M E X I C O
BANCA MIFEL: S&P Affirms 'BB-' ICR, Outlook Negative
IXTAPALUCA MUNICPALITY: Moody's Withdraws 'B1' Issuer Rating
P E R U
PERU: Bonds Slip as Investors Lose Patience With Politics
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Announces 'Partial' Increase in Fuel Prices
U R U G U A Y
CONSORCIO DEL URUGUAY: Moody's Upgrades CFR to Ba2, Outlook Stable
- - - - -
=================
A R G E N T I N A
=================
ARCOS DORADOS: Discloses Proposed Senior Notes Offering
-------------------------------------------------------
Arcos Dorados Holdings Inc. (NYSE: ARCO) ("Arcos Dorados" or the
"Company") disclosed its subsidiary Arcos Dorados B.V. (the
"Issuer") intends to offer senior unsecured notes (the "Notes") in
a private placement to qualified institutional buyers in accordance
with Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"), and outside the United States to non-U.S.
persons in accordance with Regulation S under the Securities Act.
The Notes are expected to be guaranteed on a senior unsecured basis
by the Company and certain of the Company's subsidiaries. The Notes
will include Sustainability Performance Targets associated with the
Company's commitments to reduce greenhouse gas emissions by 36% in
its restaurants and offices and by 31% in its supply chain by
2030.
The timing of pricing and terms of the Notes are subject to market
conditions and other factors. The proceeds from the Notes offering
will be used by the Issuer: (i) to fund the tender offers conducted
by the Company to purchase for cash (a) any and all of its
U.S.$201,763,000 of its properly tendered (and not validly
withdrawn) outstanding 6.625% senior notes due 2023, and (b) up to
U.S.$150,000,000 aggregate principal amount of its properly
tendered (and not validly withdrawn) outstanding 5.875% senior
notes due 2027; and (ii) for general corporate purposes.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy these securities, nor will there be
any sale of these securities, in any state or jurisdiction in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
state or jurisdiction. The Notes and related guarantees have not
been registered under the Securities Act, or any applicable state
securities laws, and will be offered only to qualified
institutional buyers pursuant to Rule 144A promulgated under the
Securities Act and outside the United States to non-U.S. persons in
accordance with Regulation S under the Securities Act. Unless so
registered, the Notes and related guarantees may not be offered or
sold in the United States except pursuant to an exemption from the
registration requirements of the Securities Act and any applicable
state securities laws.
About Arcos Dorados
Arcos Dorados is the world's largest independent McDonald's
franchisee, operating the largest quick service restaurant chain in
Latin America and the Caribbean. It has the exclusive right to own,
operate and grant franchises of McDonald's restaurants in 20 Latin
American and Caribbean countries and territories with more than
2,250 restaurants, operated by the Company or by its
sub-franchisees, that together employ over 90 thousand people (as
of 12/31/2021). The Company is also committed to the development of
the communities in which it operates, to providing young people
their first formal job opportunities and to utilize its Recipe for
the Future to achieve a positive environmental impact. Arcos
Dorados is listed for trading on the New York Stock Exchange (NYSE:
ARCO). To learn more about the Company, please visit the Investors
section of our website: www.arcosdorados.com/ir.
Troubled Company Reporter-Latin America reported on Apr 20, 2022,
reported that Moody's Investors Service assigned a Ba2 rating to
the proposed seven to 10-year senior unsecured
sustainability-linked
notes to be issued by Arcos Dorados B.V., fully and unconditionally
guaranteed by its parent company, Arcos Dorados Holdings Inc.
("Arcos
Dorados"). The Ba2 ratings on Arcos Dorados existing notes remain
unchanged. The outlook is stable.
Fitch Ratings has also assigned a 'BB' to the proposed new
sustainability-linked unsecured notes issued by Arcos Dorados B.V.
The notes will be fully and unconditionally guaranteed by Arcos
Dorados Holdings Inc. Proceeds of the notes are for debt
refinancing.
=============
B A H A M A S
=============
BAHAMAS: Reports 62.2% Reduction in Fiscal Deficit
--------------------------------------------------
RJR News reports that the Government of Bahamas has reported a
62.2% reduction in the country's fiscal deficit since the start of
the 2021/2022 fiscal year.
The Ministry of Finance's statement on the February Monthly Fiscal
Summary Report reveals that the deficit is estimated at $326.5
million, 38% of the budget, compared to $863.7 million during the
prior fiscal period, according to RJR News.
During a recent briefing on the results, Financial Secretary Simon
Wilson explained that the largest part of the government's
expenditure has been paying bills left over by the previous
government, the report notes.
As reported in the Troubled Company Reporter-Latin America on Nov.
16, 2021, S&P Global Ratings lowered its long-term foreign and
local currency sovereign credit ratings on the Commonwealth of The
Bahamas to 'B+' from 'BB-'. At the same time, S&P Global Ratings
revised its transfer and convertibility assessment to 'BB-' from
'BB'. The outlook is stable.
===========
B R A Z I L
===========
ELETROBRAS: Guedes Says Audit Court to Vote on Privatization
------------------------------------------------------------
Marcela Ayres and Leticia Fucuchima at Reuters report that Brazil's
Economy Minister Paulo Guedes said that the federal audit court TCU
will vote on the Eletrobras' privatization, adding the schedule is
tight for the planned share offering.
About Eletrobras
Eletrobras (NYSE: EBR) or Centrais Eletricas Brasileiras S.A. --
eletrobras.com -- is a major Brazilian electric utilities company.
It is Latin America's biggest power utility company, having a
generating capacity of about 43,000 MW. The company holds stakes
in a number of Brazilian electric companies and employs more than
25,000 people. The Brazilian federal government owns 52% stake in
Eletrobras. The company was founded in 1962 and is based in Rio de
Janeiro, Brazil.
Its subsidiaries include Eletrobras Distribuicao Acre; Eletronorte
(Centrais Eletricas do Norte do Brasil SA); Eletrobras Electropar;
CHESF (Companhia Hidro-Eletrica do Sao Francisco; Sao Francisco's
Hydroelectric Company); and Eletrobras CGTEE.
S&P Global Ratings affirmed on April 13, 2022, its 'BB-' global
scale issuer credit and issue-level ratings on Eletrobras. S&P also
affirmed its 'brAAA/brA-1+' national scale ratings. The outlook on
Eletrobras remains stable, mirroring that on the sovereign. Fitch
Ratings affirmed in early June 2021 Eletrobras' Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) and outstanding
senior unsecured bond ratings at 'BB'. Fitch's National Scale
ratings of Eletrobras, its rated subsidiaries and their outstanding
local debentures ratings were also affirmed at 'AA(bra)'. As for
Moody's, it upgraded Eletrobras' ratings to Ba2 from Ba3, including
the company's senior unsecured debt and corporate family rating
(CFR), in September 2020.
IOCHPE-MAXION SA: Fitch Affirms Then Withdraws 'BB-' IDRs
---------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Foreign-Currency (FC) and
Local-Currency (LC) Issuer Default Ratings (IDRs) of Iochpe-Maxion
S.A. (Iochpe) at 'BB-'. The National Scale rating was affirmed at
'A+(bra)'. The Rating Outlook is Stable. Iochpe-Maxion Austria
GmbH's senior unsecured LT Rating has also been affirmed at 'BB-'.
Fitch has subsequently withdrawn all ratings.
The affirmation of the ratings reflects the improvement of Iochpe's
operational metrics in 2021. The ratings also reflect Iochpe's
customer and regional diversification as a large global wheels
producer and as an important producer of side rails and commercial
vehicle frames in the Americas as well as the competitive nature of
the wheels industry.
Fitch has withdrawn the ratings for commercial purposes.
KEY RATING DRIVERS
Key Rating Drivers do not apply as the company's ratings have been
withdrawn.
DERIVATION SUMMARY
Iochpe's ratings compare with capital goods supplier Meritor's
(BB-/Rating Watch Positive) whose product lines are focused
primarily on driveline components and brakes for commercial
vehicles, off-highway equipment and trailers. Meritor revenues and
EBITDA are about 50% larger than Iochpe's. Similar to Iochpe,
Meritor generally retains a top-three market position in most of
its product segments.
Both entities face heavy competition in their main products.
Iochpe's exposure to commercial vehicles is around 45% but
Meritor's cash flow profile is more heavily concentrated in that
segment. Sales to this end market are more volatile than the light
vehicle market. Fitch also estimates that roughly a quarter of
Meritor's sales come from the aftermarket, which is more stable.
This compares with Iochpe's exposure to aftermarket sales around
6.1% of consolidated revenue.
From a geography standpoint Iochpe is more diversified with Europe
being its largest revenue contributor at around 32%, followed by
North America at roughly 39%. This compares with Meritor's exposure
to North America at around 65% and Europe at around 20%. However,
Iochpe's approximate exposure of 29% to South America, which mainly
comprises Brazil, has been more volatile. Meritor's gross leverage,
expected over the next two years in the 3x-4x range is similar to
Iochpe's.
RATING SENSITIVITIES
Rating Sensitivities do not apply as the company's ratings have
been withdrawn.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Iochpe's liquidity is sufficient and is
supported by cash and access to funding. Cash balance as of
year-end 2021 was BRL1 billion compared with one-year maturities of
BRL1.2 billion. The company has approximately BRL770 million in
committed credit lines.
ISSUER PROFILE
Iochpe Maxion S.A (Iochpe) is a Tier-1 auto-part producer with a
global footprint. The company supplies steel wheels for light and
commercial vehicles and agricultural machinery and aluminum wheels
for light vehicles. It also produces side rails, cross members and
full frames for commercial vehicles and structural components for
light vehicles.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Following the withdrawal of international ratings for Iochpe-Maxion
S.A., Fitch will no longer be providing the associated ESG
Relevance Scores.
===============
C O L O M B I A
===============
COLOMBIA: Industrial Production Slowed Down in February
-------------------------------------------------------
Rio Times Online reports that Colombia's industrial production
registered a year-on-year growth of 10.7% in February. However, it
contracted compared to the previous month, due to a brake in the
dynamics of mining activity, especially in oil extraction, the
Government revealed.
The 10.7% variation in February compared to a 15.1% growth in
industrial production in January is due to a slowdown in mining
activity and oil extraction dynamics, according to Rio Times
Online.
As reported in the Troubled Company Reporter-Latin America on
Dec. 13, 2021, Fitch Ratings has affirmed Colombia's Long-Term
Foreign Currency Issuer Default Rating (IDR) at 'BB+'. The Rating
Outlook is Stable.
===================
C O S T A R I C A
===================
DPR-CR LIMITED: Fitch Affirms 'BB+' Rating on Outstanding Notes
---------------------------------------------------------------
Fitch Ratings has affirmed the ratings assigned to the outstanding
series issued by DPR-CR Limited at 'BB+'. The Rating Outlook on the
notes is Stable.
DEBT RATING PRIOR
---- ------ -----
DPR-CR Limited
2017-2 G2616*AB1 LT BB+ Affirmed BB+
TRANSACTION SUMMARY
The future flow program is backed by U.S. dollar-denominated
existing and future diversified payment rights (DPRs) originated by
Banco Davivienda (Costa Rica), S.A. (Davivienda CR). The majority
of DPRs are processed by designated depository banks (DDBs) that
have executed acknowledgement agreements (AAs), irrevocably
obligating them to make payments to an account controlled by the
transaction trustee. Fitch's ratings address timely payment of
interest and principal on a quarterly basis.
KEY RATING DRIVERS
FF Rating Driven by Originator's Credit Quality: On March 17, 2022,
Fitch affirmed Davivienda CR's Long-Term (LT) Local-Currency (LC)
Issuer Default Rating (IDR) at 'BB-' and revised the Outlook to
Stable from Negative, reflecting the revised Stable Outlook on the
sovereign rating. The LC IDR is consistent with the maximum uplift
of two notches above the sovereign rating allowed by Fitch's
criteria.
Fitch also affirmed Davivienda CR's Viability Rating (VR) at 'b',
which remains at the same level of the sovereign rating, reflecting
the high influence of the challenging operating environment on the
financial profile of the bank. The ratings assigned to Davivienda
CR are driven by the support the bank would receive from its
Colombian parent, Banco Davivienda, S.A. (Davivienda; BB+/Stable),
if required.
Strong Going Concern Assessment (GCA): Fitch uses a GCA score to
gauge the likelihood that the originator of a future flow
transaction will stay in operation throughout the transaction's
life. Fitch assigns a GCA score of 'GC2' to Davivienda CR, based on
the bank's strategic importance to its parent, as well as its
moderate importance within the Costa Rican financial system. The
score allows for a maximum of four notches above the LC IDR of the
originator; however, additional factors limit the maximum uplift.
Several Factors Limit Notching Differential: The 'GC2' score allows
for a maximum uplift of four notches from the originator's IDR
pursuant to Fitch's future flow methodology. However, the uplift is
tempered to two to three notches as the maximum rating uplifts only
apply to transactions where the originating bank is rated at the
lower end of the rating scale and further tempered, in this
instance, to two notches as Davivienda CR's IDR is support-driven.
Moderate Program Size: The future flow transaction represents
approximately 1.68% of Davivienda CR's total funding and 4.27% of
non-deposit funding when considering the current outstanding
balance on the program ($52.3 million) as of Dec. 31, 2021 and
utilizing December 2021 financials. While Fitch considers these
ratios small enough to differentiate the credit quality of the
financial future flow transaction from the originator's LC IDR, an
increase in future flow debt size could constrain the transaction
ratings.
Coverage Levels Commensurate with Assigned Rating: When considering
average rolling quarterly DDB flows over the last four years
(January 2018 - December 2021) and the maximum periodic debt
service over the remaining life of the program, Fitch's projected
quarterly DSCR is 111.1x. Moreover, the transaction can withstand a
reduction in flows of approximately 99.1% and still cover the
maximum quarterly debt service obligation. Nevertheless, Fitch will
continue to monitor the performance of the flows as potential
economic pressures could negatively impact the assigned rating.
Sovereign/Diversion Risks Reduced: The structure mitigates certain
sovereign risks by keeping cash flows offshore until scheduled debt
service is paid to investors, allowing the transaction to be rated
above Costa Rica's country ceiling. Fitch believes payment
diversion risk is partially mitigated by the AAs signed by the five
correspondent banks processing the vast majority of DPR flows.
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to negative
rating action/downgrade:
-- The transaction ratings are sensitive to changes in the credit
quality of the originating bank. A deterioration of the credit
quality of the sovereign and/or originating bank by more than
one notch is likely to pose a constraint to the rating of the
transaction from its current level.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch does not anticipate developments with a high likelihood
of triggering an upgrade. However, the main constraint to the
program rating is the originator's rating and bank's operating
environment. If upgraded, Fitch will consider whether the same
uplift could be maintained or if it should be further tempered
in accordance with criteria.
-- The transaction ratings are sensitive to the ability of the
DPR business line to continue operating, as reflected by the
GCA score. Additionally, the transaction rating is sensitive
to the performance of the securitized business line. The
quarterly DSCRs are expected to be sufficient to cover debt
service obligations and should therefore be able to withstand
a significant decline in cash flows in the absence of other
issues. However, significant further declines in flows or an
increase in the level of future flow debt as a percentage of
the bank's liabilities could lead to a negative rating action.
Any changes in these variables will be analyzed in a rating
committee to assess the possible impact on the transaction
ratings.
-- No company is immune to the economic and political conditions
of its home country. Political risks and the potential for
sovereign interference may increase as a sovereign's rating is
downgraded. However, the underlying structure and transaction
enhancements mitigate these risks to a level consistent with
the assigned rating.
-- Fitch has revised global economic outlook forecasts as a
result of the Ukraine War and related economic sanctions.
Downside risks have increased and Fitch has published an
assessment of the potential rating and asset performance
impact of a plausible, but worse-than-expected, adverse
stagflation scenario on Fitch's major SF and CVB sub-sectors
("What a Stagflation Scenario Would Mean for Global Structured
Finance"). Fitch expects LatAm's Global Cross-Sector's
financial future flow transactions in the assumed adverse
scenario to experience a "Virtually No Impact" indicating a
low risk for rating changes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The future flow ratings are driven by the credit risk of Davivienda
CR as measured by its LT LC IDR.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=================
G U A T E M A L A
=================
GUATEMALA: S&P Affirms 'BB-/BB' Sov. Credit Rating, Outlook Now Pos
-------------------------------------------------------------------
S&P Global Ratings affirmed its 'BB-' long-term foreign currency
and 'BB' long-term local currency sovereign credit ratings on
Guatemala. S&P revised its outlook on the long-term ratings to
positive from stable. S&P also affirmed its 'B' short-term foreign
and local currency ratings on Guatemala.
The transfer and convertibility assessment remains 'BB+'.
Outlook
The positive outlook reflects an at least one-in-three possibility
of an upgrade over the next six to 18 months if economic resilience
persists amid global volatility and the run-up to the 2023 general
elections. Sustained economic growth will gradually address
long-standing social needs and infrastructure gaps.
Downside scenario
S&P could revise the outlook to stable in the next six to 18 months
if economic momentum dissipates and Guatemala's economic growth
prospects weaken. A deterioration of Guatemala's fiscal or debt
profiles beyond our expectations could worsen the sovereign's
financial profile and result in a negative rating action.
Rationale
The ratings on Guatemala are based on S&P's view of its
still-developing public institutions and a challenging political
environment that constrains policymaking effectiveness. The
Guatemalan economy rebounded strongly in 2021, following a modest
economic contraction in 2020, and we expect real GDP to grow around
3.7% in 2022-2025. On a per capita basis, Guatemala's GDP growth
now compares in line with peers. Further steps to promote long-term
growth and address high social needs would be needed to
substantially reduce the country's high poverty level. On the other
hand, Guatemala's solid external position, moderate general
government debt to GDP, and sound monetary policy constitute
relative credit strengths to manage the challenging and volatile
external economic environment.
Institutional and economic profile: Macroeconomic stability and
fiscal prudence counterbalance still-developing public
institutions, political fragility, and high poverty
-- After a recovery of 8% in 2021, S&P expects the economy to grow
around 4.5% this year and approach 3.5% growth thereafter.
-- The government's reactivation plan continues to reflect
Guatemala's commitment to macroeconomic stability and overall
fiscal prudence.
-- Still-developing institutions and political fragility limit
long-term predictability and effectiveness of policymaking.
Guatemala's economy grew 8% in 2021, backed by an early reopening
of the economy, unprecedented monetary and fiscal support, and
resilient remittances. S&P expects GDP to grow around 4.5% this
year and approach 3.5% growth thereafter. U.S. economic recovery
will support Guatemala's performance. About one-third of
Guatemala's exports go to the U.S., and it expects remittances,
which accounted for about 18% of GDP in 2021, to remain strong
given the strength of U.S. labor market, and they will continue to
support household consumption in Guatemala. On a per capita basis,
the forecast implies GDP average growth of 2.3% over 2022-2025, now
comparing in line with peers.
Guatemala is a small open economy with a high level of informality,
affecting an estimated 70% of the working-age population. Per
capita GDP will likely slightly recover to about $6,000 over the
next three years but still reflects many years of low investment,
political gridlock, and weak competitiveness. Key to raising
potential growth in the coming years will be reforms to foster
competitiveness and investment, supported by sustained measures to
reduce crime. Slow vaccination rollouts and persistent
sociopolitical tensions pose risks to recovery.
Since taking office in January 2020, the administration of
President Alejandro Giammattei has encouraged greater
private-sector participation in the economy. The government
provided expansive support to the economy amid the pandemic and has
managed the security situation with notable results. However, a
challenging political environment with political fragmentation, as
his right-wing Vamos Party has only 16 of the 160 seats in
Congress, and fragile coalitions limit the government's ability to
advance meaningful reforms. The next general elections will be held
in June 2023. Our assessment of Guatemala's governance indicates
weak checks and balances between institutions, perceptions of
corruption, and a record of weak policy implementation.
Flexibility and performance profile: Moderate debt and fiscal
deficit, a solid external position, and sound monetary policy help
maintain macroeconomic stability
-- Net general government debt is likely to hover around 21% of
GDP in the aftermath of the pandemic.
-- S&P expects Guatemala's external profile to remain stable in
the coming three years.
-- A flexible exchange rate and sound monetary policy have
anchored inflation expectations.
Guatemala's general government deficit narrowed to 1.2% of GDP in
2021 from 4.9% in 2020 as a result of post-pandemic recovery. Over
2022-2025, S&P expects the fiscal deficit to hover around 2.6% of
GDP as a result of the government's social and infrastructure
spending program. The government recently announced an increase of
investment expenditure (0.4% of GDP) and some initiatives to
mitigate the impact of higher import prices, including gas,
oil-related products, and electricity subsidies (0.25% of GDP).
These expenditures will be funded using government deposits in the
central bank stemming from better-than-expected fiscal performance
in 2021. S&P expects net general government debt to hover around
21% of GDP during 2022-2025.
Despite recent tax administration improvements (customs and
digitalization such as electronic invoicing or tax declaration
forms), as well as one-off events, the sovereign ability to
consistently increase its revenues, which S&P expects will hover
around 11.6% of GDP, remains limited. Without fiscal reform, it is
highly unlikely that these revenues could rise substantially as a
share of GDP over the next three years.
S&P said, "We expect that continued cautious fiscal policies should
lead to a stable general government debt burden during 2022-2025.
Following the contraction of the general government deficit, net
general government debt decreased toward 18% of GDP in 2021 from
21% in 2020. We expect the interest burden to hover around 14.6% in
2022-2025 driven by gradual revenue recovery."
At the end of 2021, 44.6% of the sovereign's debt was denominated
in U.S. dollars, which exposes it to a sudden quetzal depreciation.
Although this ratio is down from 58.6% in 2013, it remains a
negative rating factor. Balancing this exposure is that 84% of
sovereign debt is at fixed interest rates, and Guatemala's maturity
profile is stable over the next three years. In addition, most of
its external debt--which accounted for 42% of total debt--is with
multilateral institutions.
The current account has been in surplus over the last six years. It
narrowed to 2.5% of GDP in 2021, after widening to 4.9% of GDP in
2020, and S&P expects it to continue gradually narrowing over the
next three years (to 1.1% of GDP in 2025), affected by higher
imports and oil prices, and a moderate growth pace on remittances,
partially offset by export dynamism, which will benefit from U.S.
growth.
S&P said, "Accordingly, we forecast Guatemala's narrow net external
debt to hover around 6% of current account receipts this year and
slightly increase during 2023-2025. The country's gross external
financing needs will likely average 72% of current account receipts
and usable reserves over the same period. Net foreign direct
investment posted an extraordinary increase in 2021 (3.85% of GDP),
owing to the acquisition of a domestic telecoms firm. We consider
2021 foreign direct investment (FDI) to be a one-off event and
expect FDI to return to around 0.9% of GDP in the next few years.
In our view, besides global uncertainty, FDI has been poor because
of low investor confidence given political instability and the
overall weak business climate. We expect that planned initiatives
to restore legal certainty for large-scale investment projects
could boost investors' confidence over the next couple of years."
Guatemala's monetary policy continues to reflect the central bank's
mandate to control inflation as well as its operational
independence. Low inflation is also due to the overall currency
stability over the last few years. S&P estimates inflation will
stay within the central bank's target of 4% plus/minus 1%. The
banking sector remains solid with pandemic-related measures phased
out last year.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
GUATEMALA
Transfer & Convertibility Assessment
Local Currency BB+
GUATEMALA
Senior Unsecured BB-
RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION
TO FROM
GUATEMALA
Sovereign Credit Rating
Foreign Currency BB-/Positive/B BB-/Stable/B
Local Currency BB/Positive/B BB/Stable/B
===========
M E X I C O
===========
BANCA MIFEL: S&P Affirms 'BB-' ICR, Outlook Negative
----------------------------------------------------
S&P Global Ratings affirmed its issuer credit and issue-level
ratings on the following 18 Mexican banks and NBFIs. S&P also kept
one entity on CreditWatch negative. S&P also affirmed the issuer
credit ratings on Bladex. The affirmations follow a revision to our
criteria for rating banks and NBFIs and for determining a Banking
Industry Country Risk Assessment (BICRA).
S&P affirmed ratings on the following entities:
-- Banco Nacional de Comercio Exterior S.N.C. (Bancomext; foreign
currency: BBB/Negative/A-2, local currency: BBB+/Negative/A-2);
-- Banco Nacional de Obras y Servicios Publicos S.N.C. (Banobras;
BBB/Negative/A-2);
-- Nacional Financiera S.N.C. (NAFIN; foreign currency:
BBB/Negative/A-2, local currency: BBB+/Negative/A-2);
-- BBVA Mexico S.A. (BBB/Negative/A-2);
-- Banco Nacional de Mexico S.A. (Citibanamex; global scale:
BBB/Negative/A-2, national scale: mxAAA/Negative/mxA-1+);
-- Banco Mercantil del Norte S.A. (Banorte; BBB/Negative/A-2);
-- HSBC Mexico S.A. (BBB/Negative/A-2);
-- Banco Inbursa S.A. (BBB/Negative/A-2);
-- Scotiabank Inverlat S.A. (Scotiabank; BBB/Negative/A-2);
-- Banca Mifel S.A. (BB-/Negative/B);
-- Banco Compartamos S.A. (BB+/Negative/B);
-- Fondo Especial de Asistencia Tecnica y Garantia Para Creditos
Agropecuarios (FEGA) (FEGA; (BBB/Negative/A-2);
-- Instituto del Fondo Nacional de la Vivienda para los
Trabajadores (Infonavit) (Infonavit; (BBB/Negative/A-2);
-- Engencap Holdings, S. de R.L. de C.V. (BB-/Stable/--);
-- Operadora de Servicios Mega S.A. de C.V. (GFMEGA;
BB-/Negative/--);
-- Mexarrend S.A.P.I. de C.V. (B/Stable/--);
-- Financiera Independencia S.A.B. de C.V. (Findep;
B+/Negative/--);
-- Credito Real, S.A.B. de C.V., SOFOM, E.N.R. (SD/--/--); and
-- Bladex (BBB/Stable/A-2).
S&P's outlooks on the 18 banks and NBFIs remain unchanged.
At the same time, S&P kept its ratings on one entity on CreditWatch
negative:
-- Unifin Financiera, S.A.B. de C.V. (Unifin; B+/Watch Neg/--).
In addition, the stand-alone credit profiles (SACPs) of the 18
Mexican banks and NBFIs, and Bladex, and S&P's assessment of the
likelihood of extraordinary external support, remain unchanged
under our revised criteria.
Mexican Banks
S&P said, "Our assessments of economic risk and industry risk in
Mexico remain unchanged at '6' and '3', respectively. These scores
determine the BICRA and the anchor, or starting point, for our
ratings on financial institutions that operate primarily in that
country. The trends we see for economic risk and industry risk
remain stable."
Mexican NBFIs
S&P said, "The starting point--or anchor for our ratings on finance
companies (fincos or NBFIs) in Mexico remains unchanged at 'bb',
which is two notches lower than the banks' anchor. We have reduced
the differential between the bank and NBFI anchors to two notches
from our standard three notches. This is because NBFIs in Mexico
can benefit from credit facilities granted directly by development
banks (government-owned banks), which represent a stable funding
source even in stressful situations. Additionally, we believe some
development banks would support this sector through guarantees in
case of an extended period of market turmoil--as its track record
demonstrates."
Bancomext
S&P said, "The ratings on Bancomext reflect an almost certain
likelihood that the government would provide extraordinary and
timely support to the bank in the event of financial distress. We
also consider Bancomext's position as the country's second-largest
state-owned bank. In addition, the ratings incorporate our
forecasted risk-adjusted capital (RAC) ratio of about 7.8% for the
next 24 months, given the annual aprovechamientos (expenses paid to
the government) and capital injections by the government. Although
we expect the pandemic-induced economic shock to pressure the
bank's asset quality, it will remain at manageable levels."
Finally, the ratings take into account Bancomext's financial
flexibility, manageable short-term obligations, and the ongoing
support that the government provides to the bank in terms of
funding sources through the full guarantee of its financial
obligations.
Outlook
S&P said, "The negative outlook on the global scale ratings on
Bancomext stems from our negative outlook on Mexico (foreign
currency: BBB/Negative/A-2, local currency: BBB+/Negative/A-2). If
we downgrade the sovereign in the upcoming 12 months, we would take
the same action on the bank. Therefore, the ratings on the bank
will continue to move in tandem with those on the sovereign,
reflecting Bancomext's status as a government-related entity
(GRE)."
Upside scenario. If S&P revises the outlook on Mexico to stable
from negative in the next 12 months, it would take the same action
on Bancomext.
Rating score snapshot
Issuer credit rating:
Foreign currency: BBB/Negative/A-2
Local currency: BBB+/Negative/A-2
Stand-alone credit profile: bbb-
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: +1
ALAC support: 0
GRE support: +1
Group support: 0
Sovereign support: 0
Additional factors: 0
Banobras
The ratings on Banobras reflect an almost certain likelihood that
the government would provide extraordinary and timely support to
the bank in the event of financial distress. S&P said, "The ratings
also incorporate our expectation that the bank will remain the
largest development bank in the country, one of the main lenders to
state and municipalities, and the infrastructure segment. The
ratings also incorporate the bank's sound capitalization levels
with a forecasted RAC ratio of about 10.2% in 2022. Additionally,
the bank's healthy asset quality metrics support its risk position.
Finally, in our view, the government's support in meeting Banobras'
obligations provides the bank with the financial and funding
flexibility to manage its liquidity profile."
Outlook
S&P said, "The negative global scale outlook on Banobras stems from
our negative outlook on Mexico. This reflects the bank's status as
a GRE, given our view of its critical role and integral link to the
Mexican government. Therefore, the ratings on Banobras will
continue to move in tandem with those on the sovereign."
Downside scenario. If S&P downgrades Mexico in the upcoming 12-24
months due to a potentially weaker fiscal profile and complications
in policy execution, it could take the same action on the bank.
Upside scenario. If S&P revises the outlook on Mexico to stable
from negative in the next 12-24 months, we would take the same
action on Banobras. This could result from effective economic
management that raises investor confidence and encourages private
investment, which could mitigate structural weakness in GDP growth
prospects, helping to reinforce public finances.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
NAFIN
S&P said, "The ratings on NAFIN reflect our expectations that
despite its limited business diversification, the bank will remain
resilient to the pandemic-induced economic slowdown, thanks to its
solid market share. Our ratings also incorporate a projected RAC
ratio of about 5.9% for the next two years. Although we expect the
pandemic-related economic damage to pressure NAFIN's asset quality,
we expect it to remain in line with the Mexican banking system's
average. Finally, we consider that NAFIN's GRE status provides it
with greater financial flexibility than those of other Mexican
banks, allowing it to manage its liquidity profile."
Outlook
S&P said, "The negative outlook on the global scale ratings on
NAFIN stems from our negative outlook on Mexico. If we downgrade
the sovereign in the coming 12-18 months, we would take the same
action on the bank. Therefore, the ratings on NAFIN will continue
to move in tandem with those on the sovereign, reflecting the
bank's status as a GRE."
Upside scenario. If S&P's revises the outlook on Mexico to stable
from negative in the next 12-18 months, it would take the same
rating action on NAFIN.
Rating score snapshot
Issuer credit rating:
Foreign currency: BBB/Negative/A-2
Local currency: BBB+/Negative/A-2
Stand-alone credit profile: bb+
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Moderate (-1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: +2
ALAC support: 0
GRE support: +2
Group support: 0
Sovereign support: 0
Additional factors: 0
BBVA Mexico
The ratings on BBVA Mexico reflect its position as the largest and
one of the most diversified banks in Mexico, helping it to navigate
the sharp economic downturn. S&P said, "Additionally, the bank has
sound capitalization, reflected in a forecasted RAC ratio of about
11.9% for the next 24 months, which according to our methodology
stands at the strong category. The ratings also incorporate asset
quality metrics gradual recovery, and our expectations of
manageable delinquencies and credit losses going forward." Finally,
the bank's large retail branch network and digital capabilities
provide it with a stable deposit base to meet its funding needs.
BBVA Mexico has sound liquidity levels thanks to its broad liquid
assets more than 1x the bank's short-term wholesale funding.
Outlook
S&P said, "The negative outlook on BBVA Mexico reflects our view
that if we downgrade Mexico in the next 12 months, we could take
the same action on the bank. We rarely rate financial institutions
above the long-term sovereign rating because, during sovereign
stress, the latter's regulatory and supervisory powers may restrict
a bank's or financial system's flexibility." Banks are affected by
many of the same economic factors that cause sovereign stress.
Upside scenario. The rating on the bank will move in tandem with
the Mexican sovereign rating, given that the latter constrains the
rating on BBVA Mexico. If S&P revises the outlook on the sovereign
rating to stable, it would take a similar action on BBVA Mexico.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb+
Anchor: bbb-
Business position: Strong (+1)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: -1
ESG credit indicators: E-2, S-2, G-2
Citibanamex
S&P said, "We affirmed our global and national scale ratings on
Citibanamex at 'BBB/A-2' and 'mxAAA/mxA-1+' respectively. Recently,
Citibanamex's ultimate parent, Citigroup (Citi; BBB+/Stable/A-2),
announced that the group intends to exit its consumer, small
business, and middle market banking business in Mexico. We will
analyze potential impact on Citibanamex's SACP and the group
support once we have a clearer vision on how this strategy will be
implemented. However, we believe that during Citi's exit plan, it
will maintain commitment and support to its Mexican subsidiaries."
Outlook
The negative global scale rating outlook on Citibanamex indicates
that S&P could downgrade it in the next two years if:
-- S&P downgrade the sovereign; or
-- New details about Citi's exit plans lead S&P to believe that
Citibanamex will have a weaker creditworthiness, perhaps if it's
sold to a weaker buyer than Citi following the execution of those
plans.
Upside scenario. S&P could revise the outlooks on the global and
national scale ratings to stable from negative if it concludes that
Citi is likely to retain ownership of Citibanamex in order to
continue operating its institutional and private banking business
in Mexico. However, the higher global scale ratings would also
require a stable outlook on the sovereign rating.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb+
Anchor: bbb-
Business position: Strong (+1)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: -1
ESG credit indicators: E-2, S-2, G-2
Banorte
S&P affirmed its ratings on Banorte. The ratings reflect Banorte's
sound and resilient balance sheet based on its outstanding
diversification by lines of business, customers, and revenues. The
ratings also reflect the bank's conservative stance on risk taking,
its solid risk-adjusted capitalization levels, and adequate funding
structure mostly based on fragmented deposits that support the
bank's liquidity position. These strengths outweigh the stiff
competition among banks amid worsening business conditions and low
consumption.
Outlook
The negative outlook for the next 12 months on Banorte reflects an
at least one-in-three chance of a downgrade of Mexico this year,
which would result in the same action on Banorte. S&P said, "We
expect the ratings on Banorte to move in tandem with those on the
sovereign in the next 12 months. This is because we rarely rate
financial institutions above the long-term sovereign rating because
during sovereign stress, the latter's regulatory and supervisory
powers may restrict a bank's or financial system's flexibility. In
our view, banks are affected by many of the same economic factors
that cause sovereign stress."
Downside scenario. A potential downgrade on Mexico--and
consequently of Banorte--could result from a potentially weaker
fiscal profile associated with contingent liabilities related to
the magnitude of potential extraordinary support for state-owned
companies Petroleos Mexicanos (PEMEX) and Comision Federal de
Electricidad (CFE) amid lower non-oil tax base and fewer fiscal
buffers. Given that Banorte's 'bbb+' SACP remains one notch above
the long-term global scale rating on Mexico, S&P believes that a
downgrade stemming from the bank's stand-alone credit factors is
unlikely.
Upside scenario. S&P said, "Given that the sovereign ratings cap
those on Banorte, we could revise the outlook on it to stable in
the next 12 months if we were to revise the outlook on Mexico to
stable. The outlook on the long-term national scale rating is
stable because only a two-notch downward revision of Banorte's SACP
would prompt us to lower the national scale rating, a scenario we
currently consider as remote."
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb+
Anchor: bbb-
Business position: Strong (+1)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: -1
ESG credit indicators: E-2, S-2, G-2
HSBC Mexico
S&P said, "We expect HSBC Mexico's profitability to recover
gradually during 2022 thanks to the higher loan origination pace
and lower provisioning than last year. HSBC Mexico remains the
fifth-largest player in terms of assets and deposits in the Mexican
banking system. We believe its broad commercial presence in the
country, large customer base, valued franchise, and nationwide
footprint will enable the bank to cope with the ongoing adverse
market conditions."
Outlook
The negative outlook on HSBC Mexico mirrors that on Mexico. This is
because S&P rarely rate financial institutions above the long-term
sovereign rating, because S&P believes the banks are affected by
many of the same economic factors that cause sovereign stress.
Downside scenario. If S&P downgrades Mexico in the coming 12-24
months, it could take the same action on HSBC Mexico.
Upside scenario. The sovereign rating on Mexico constrains the
ratings on HSBC Mexico, therefore, the latter will likely move in
tandem with that on the sovereign. If S&P revises the outlook on
Mexico to stable from negative in the next 12-24 months, it would
take the same action on HSBC Mexico.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb-
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: +1
ALAC support: 0
GRE support: 0
Group support: +1
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
Banco Inbursa
S&P said, "We expect Banco Inbursa's loan origination pace to
recover sharply this year, which coupled with a slowdown in
provisioning, will raise profitability above those in the past two
years. We believe the bank´s broad presence in Mexico's corporate
lending segment, as well its position as the seventh-largest lender
in terms of assets and deposits in the country, will enable its
business stability and bottom-line results to remain resilient.
Finally, we expect Banco Inbursa to maintain manageable asset
quality metrics, along with a stable and highly diversified funding
base."
Outlook
The negative outlook on Banco Inbursa mirrors that on Mexico. This
is because S&P rarely rates financial institutions above the
long-term sovereign rating, because S&P believes the banks are
affected by many of the same economic factors that cause sovereign
stress.
Downside scenario. If S&P downgrades Mexico in the coming 12-24
months, it could take the same action on Banco Inbursa.
Upside scenario. If S&P revises the outlook on Mexico to stable
from negative in the next 12-24 months, it would take the same
action on Banco Inbursa. The sovereign rating on Mexico constrains
the ratings on Banco Inbursa, and ratings on the latter will likely
move in tandem with those on the sovereign.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
Scotiabank
S&P said, "We affirmed our ratings on Scotiabank. The ratings
reflect its diverse loan portfolio composition and sound brand
reputation in the Mexican banking system, which will continue to
support its business position. The mortgages' high share of total
loans will allow the bank to continue expanding its loan portfolio
while maintaining its business stability. Our ratings also
incorporate a projected RAC of 10% on average for the next two
years. We expect Scotiabank's asset quality to remain in line with
the Mexican banking system average. Finally, we expect that a
diversified and ample deposit base will continue to support the
bank's funding base and provide sufficient liquidity for any
potential needs. The bank's SACP is 'bbb'."
Outlook
S&P said, "The negative outlook on the global scale rating on
Scotiabank reflects our view that if we downgrade the sovereign in
the next 12-18 months, we could take the same action on the bank.
This is because we rarely rate financial institutions above the
long-term sovereign rating, given that we believe that during a
sovereign stress, regulatory and supervisory powers may restrict
the bank's financial flexibility. Additionally, we expect
Scotiabank to remain a strategically important subsidiary of The
Bank of Nova Scotia (A+/Stable/A-1)."
Downside scenario. S&P could lower the global scale ratings on
Scotiabank in the next 12-18 months if it take a negative rating
action on Mexico.
Upside scenario. S&P could revise the negative outlook on
Scotiabank to stable in the next 12-18 months if it takes the same
rating action on the sovereign ratings.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
Banca Mifel
The ratings reflect its long-lasting relationships in niche markets
that helped the bank to resume growth and to gradually recover its
profitability. S&P said, "They also reflect our expectations that
Banca Mifel's RAC ratio will remain close to 7.1% for the next 24
months. Additionally, we consider that the pandemic-induced
economic downturn will continue pressuring asset quality. Finally,
we also consider the bank's funding profile, which is primarily
based on wholesale sources, to provide sufficient liquidity to
cover any potential needs. The bank's SACP is 'bb-'."
Outlook
S&P said, "The negative outlook on Banca Mifel reflects our
expectations that there's a one-in-three chance of a downgrade in
the next 12 months. This could happen if higher-than-expected
loan-loss reserves lower bottom-line results and don't offset the
expected growth in risk-weighted assets. This would reduce a
consolidated RAC ratio below 7%, diminishing the bank's
loss-absorption capacity."
Upside scenario. S&P could revises the outlook to stable in the
next 12 months if after the phaseout of Banca Mifel's relief
programs, its asset quality remains within our expectations,
avoiding the need to raise loan-loss reserves. This would enable
internal capital generation to recover, allowing the bank to
maintain a consolidated RAC ratio consistently above 7%.
Rating score snapshot
Issuer credit rating: BB-/Negative/B
Stand-alone credit profile: bb-
Anchor: bbb-
Business position: Moderate (-1)
Capital and earnings: Adequate (0)
Risk position: Moderate (-1)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
Banco Compartamos
The ratings on Compartamos reflect its leading position in Mexico's
microfinance sector, fragmented customer base, and wide
geographical footprint. S&P said, "We still view Compartamos'
expected above-average profitability and RAC ratio as credit
strengths. Furthermore, Compartamos' risk profile reflects the
concentration of its operations in riskier lending segments and
more volatile asset quality indicators than those of domestic
peers. Wholesale sources account for the bulk of the bank's funding
structure. Nevertheless, Compartamos has proven access to debt
markets and contingent liquidity sources. In our view, the bank
holds sufficient liquidity cushion to cover financial obligations
for the next 12 months thanks to the short-term nature of its loan
portfolio. The bank's SACP remains at 'bb+'."
Outlook
The negative outlook on Compartamos for the next 12 months reflects
a potential downgrade if the group's (Gentera S.A.B de C.V.'s) RAC
ratio drops consistently below 15%. This could happen if the
recovery of profits takes longer than S&P expects, mainly due to
worsened operating conditions and loan deterioration, or if
resumption of dividend payouts in 2022 erode Compartamos' capital
base.
Upside scenario. S&P could revise the outlook to stable in the next
12 months if the group's recovery is faster than it expects, and
internal capital build-up keeps the RAC ratio consistently above
15% for both entities.
Rating score snapshot
Issuer credit rating: BB+/Negative/B
Stand-alone credit profile: bb+
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Very strong (+2)
Risk position: Constrained (-2)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
FEGA
The ratings on FEGA reflect its leading position in the
agribusiness segment through its guarantees scheme, and its stable
operating revenue, given the entity's role in supporting the
government's goal to develop the domestic agribusiness sector. FEGA
has sound capitalization levels, reflected in a projected RAC ratio
of about 24% for the next two years. Furthermore, the fund has
maintained manageable asset quality metrics, given its focus on
clients with high credit quality. Finally, S&P considers that
FEGA's GRE status provides it with financial flexibility that's
greater than those other Mexican NBFIs, allowing it to effectively
manage its funding base and liquidity profile.
Outlook
The negative outlook on FEGA for the next 24 months reflects the
outlook on Mexico. S&P expects the fund will maintain its
significant role in the agribusiness segment and that the
government would support it if needed. Therefore, the ratings on
the entity will move in tandem with those on Mexico.
Upside scenario. S&P could revise its outlook on FEGA to stable in
the next 24 months if it was to take the same action on Mexico.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb-
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Very strong (+2)
Risk position: Adequate (0)
Funding and liquidity: Adequate and strong (0)
Comparable rating analysis: 0
Support: +1
ALAC support: 0
GRE support: +1
Group support: 0
Sovereign support: 0
Additional factors: 0
Infonavit
S&P said, "Our ratings on Mexico-based mortgage lender Infonavit
continue to reflect our view of the extremely high likelihood of
support from the government in case of financial distress. In this
regard, we expect its leading market position, and large and
diversified client base to help Infonavit maintain its business
stability despite substantial economic strains. Moreover, we
forecast that the weakening quality of the loan portfolio will
limit internal capital generation, but we expect the RAC ratio to
remain above 10%. In addition, we believe Infonavit's funding
structure remains as one of its main credit strengths, given that
the mandatory employee-owned contributions represent more than 90%
of the entity's total liabilities. Finally, we believe Infonavit's
liquidity management systems are appropriate to track cash inflows
and outflows, and there are no liability concentrations that could
compromise the lender's liquidity in the next 12-24 months."
Outlook
The negative outlook on Infonavit mirrors the one on Mexico and
will move in tandem with it. On the other hand, if Infonavit's SACP
weakens, our ratings on the lender will likely remain unchanged due
to the extremely high likelihood of support from the government in
case of financial distress. S&P said, "However, we could revise
downward the entity's SACP if asset quality--non-performing assts
(NPAs), NPA coverage, or net charge-offs (NCO) ratios--deteriorates
above our expectations. We could also revise downward Infonavit's
SACP it its RAC ratio falls below 10%, resulting from significant
trading losses or higher cost of risk that reduce the lender's
internal capital generation."
Downside scenario. The negative outlook on Infonavit reflects at
least a one-in-three chance of a downgrade of the sovereign in the
next 12-24 months due to a potentially weaker fiscal profile given
off-budget risks mostly from PEMEX amid lower non-oil tax base and
fewer fiscal buffers.
Upside scenario. S&P could revise the outlook on Infonavit to
stable in the next 12 months if it was to revise the outlook on the
sovereign to stable.
Rating score snapshot
Issuer credit rating: BBB/Negative/A-2
Stand-alone credit profile: bbb-
Preliminary anchor: bb-
Anchor adjustment: +3
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Constrained (-2)
Funding and liquidity: Strong and strong (+1)
Comparable rating analysis: 0
Support: +1
ALAC support: 0
GRE support: +1
Group support: 0
Sovereign support: 0
Additional factors: 0
Engencap
S&P said, "We affirmed our ratings on Engencap. Ratings reflect our
view that the entity enjoys a prominent market position as the
second-largest independent leasing company in Mexico. We believe
this will continue to support operating revenue stability during
strained business conditions. We expect our RAC ratio to around 9%
for the next couple of years, mainly thanks to relatively stable
bottom-line results. Finally, the company benefits from integrating
TIP's funding capabilities to reduce funding costs and access
additional financing. Also, we believe that the company has enough
liquidity to cover its expected and unexpected cashflows and won't
face significant debt maturities in the next 12 months."
Outlook
S&P said, "The stable outlook on Engencap for the next 12 months
reflects our view that despite weak economy, the company will keep
its forecasted RAC ratio at around 9% during 2022. Prudent loan
origination, conservative dividend policy, and its prominent market
position in the Mexican leasing sector will help Engencap generate
bottom-line results, and consequently, increase the RAC ratio. In
addition, we expect the lender's NPAs to remain below 6% of total
loans and credit losses about 1.5%, which is consistent with our
risk position evaluation."
Downside scenario. S&P said, "We could lower the ratings in the
next 12 months if Engencap's asset quality dips more than we
expect, hampering its internal capital generation. We could also
lower the rating if the RAC ratio decreases below 7% or asset
quality is weaker and below that of peers. We could also downgrade
Engencap if its liquidity erodes as collection falls or if
refinancing risk increases sharply."
Upside scenario. S&P could raise the ratings in the next 12 months
if Engencap's forecasted RAC ratio is consistently above 10%. This
could happen if internal capital generation surpasses its
projections, while asset quality metrics remain within its
expectations.
Rating score snapshot
Issuer credit rating: BB-/Stable/--
Stand-alone credit profile: bb-
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Moderate (-1)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Unifin
S&P said, "We kept our ratings on Unifin on CreditWatch negative.
We believe that global, regional, and sector risks will continue
weighing on Unifin's access to funding sources and its financial
flexibility in the coming months. The international unsecured
market--particularly for independent NBFIs in the region--remains
partially closed after the default of some NBFIs. We believe Unifin
would likely substitute international notes funding with secured
and unsecured issuances mainly in the Mexico's capital market.
Nevertheless, we believe that terms and conditions of those
alternative sources could pressure Unifin's earnings capacity,
maturity profile, and collateralization levels, straining its
funding profile and financial flexibility.
"Profitability will remain below pre-pandemic levels, because we
expect global and regional economic risks to continue rising. In
our view, Unifin could face higher funding costs, reflecting
Mexico's prospective interest rate hikes stemming from inflation
pressures and the funding challenges for Mexican NBFIs. While we
expect bottom-line results to remain below historical levels in
2022, a conservative dividend policy will offset the impact, as
we've observed in the past 24 months, allowing us to maintain our
assessment of Unifin's capital and earnings as adequate."
CreditWatch
The CreditWatch negative listing reflects a possible downgrade in
the next 90 days if the company's liquidity worsens.
S&P could downgrade Unifin if:
-- It's unable to raise funds in the domestic capital market;
-- It struggles to roll over its revolving debt; or
-- The firm has lower collections and/or unexpected cash outflows
that could compromise its liquidity profile.
S&P could remove the ratings from CreditWatch negative in the next
90 days if liquidity pressures abate. This could occur if Unifin
issues debt in domestic capital market.
Rating score snapshot
Issuer credit rating: B+/Watch Neg/--
Stand-alone credit profile: b+
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Moderate (-1)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating Analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
GFMEGA
S&P said, "We affirmed our ratings on GFMEGA. Ratings reflect our
opinion that the entity has been resilient to the economic slump
thanks to operating revenue stability, widening business diversity,
and rising market share in Mexico's leasing market. The company's
RAC ratio remains pressured due to sharp growth of its loan
portfolio, weaker internal capital generation, and a contraction on
its total adjusted capital (TAC). Additionally, we expect GFMEGA's
NPAs, credit losses, and risk concentrations to worsen but remain
consistent with our risk position assessment. Finally, the
company's funding mostly consists of an international bond, posing
a concentration risk in terms of funding mix and maturities.
However, in terms of liquidity, Mega benefits from a comfortable
financial flexibility to meet its obligations during the next 12
months."
Outlook
The negative outlook on GFMEGA reflects the one-in-three chance of
a downgrade in the next 12 months if the RAC ratio remains below
10%. This could occur if:
-- The TAC doesn't grow as we expect, which could result from
widening unrealized losses, such that DTAs are not recovered; or
-- The loan portfolio grows above S&P's expectations without
sufficient internal capital generation or capital injections to
offset such growth.
In addition, S&P could downgrade GFMEGA if its asset quality
weakens beyond its expectations, because of significant single
client concentration.
Upside scenario. S&P could revise the outlook to stable in the next
12 months if GFMEGA's RAC ratio returns to 10% or above and we
believe the ratio will continue strengthening in the next few
years.
Rating score snapshot
Issuer credit rating: BB-/Negative/--
Stand-alone credit profile: bb-
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Moderate (-1)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Mexarrend (Tangelo)
The ratings on Mexarrend incorporate its position as one of the
largest independent leasing companies in Mexico, coupled with its
relatively stable operating revenue base, despite the
pandemic-induced economic shock. The ratings also reflect our
expectation of a RAC ratio of 8.3% on average for 2022. The ratings
also point to Mexarrend's relatively high loan customer
concentration, which could erode easily asset quality metrics.
S&P's assessment of Mexarrend's funding takes into consideration
its single issuance due 2024. However, it expects the entity to
expand gradually and diversify its funding sources, and to diminish
its refinancing risk in the next 12-18 months.
Outlook
S&P said, "The stable outlook reflects our expectation that
Mexarrend will keep its RAC ratio above 7% amid the economic
turmoil and our expectation of a Mexico's slow recovery.
Additionally, we expect the company to achieve gradually a more
diversified funding base, while maintaining sufficient liquidity
levels and manageable short-term financial obligations to meet its
daily operation without any disruptions during the next 12
months."
Downside scenario. S&P said, "We could lower the ratings in the
next 12 months if Mexarrend's RAC ratio drops below 7% as result of
deeper-than-expected credit losses without the appropriate capital
to absorb them or if credit growth is beyond our expectations. In
addition, we could lower the rating if liquidity erodes as a result
of lower collections, unexpected outflows, or a funding shortage."
Upside scenario. S&P's could raise our ratings on Mexarrend if the
projected RAC ratio is consistently above 10% in the next 12-24
months thanks to a strong capital base.
Rating score snapshot
Issuer credit rating: B/Stable/--
Stand-alone credit profile: b
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Constrained (-2)
Funding and liquidity: Moderate and adequate (-1)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Findep
S&P said, "We affirmed our ratings on Findep. We consider that
despite recent improvement, Findep's business profile continues to
face challenges to grow its loan portfolio that's now focused on
individual personal loans. The ratings also reflect its capital
base that will remain the main credit strength with projected
average RAC ratios of 9.8% for the next 24 months. Despite recent
improvements in asset quality, we consider that NPAs and credit
losses will remain above other NBFIS we rate in the region.
Finally, we consider that Findep has no significant refinancing
risks in the next 12 months and that its liquidity remains healthy
with enough cash flows to cover any potential needs that could
arise."
Outlook
The negative outlook on Findep reflects difficulties stemming from
its business contraction, which could jeopardize its revenue and
business stability. The outlook also reflects the pressures on its
asset quality metrics due to the pandemic's lingering effects.
Downside scenario. S&P said, "We could downgrade Findep in the next
12 months if its focus on individual loans and cost efficiencies
isn't enough to stabilize its revenue or to compensate for smaller
operations. We could also lower the ratings if the pandemic's
lingering effects erode the company's asset quality further,
resulting in a combined NPA and NCOs ratio above 25%."
Upside scenario. S&P could revise the outlook to stable in the next
12 months if Findep achieves cost efficiencies that offset the
effects of the shrunken portfolio and provide sufficient revenue
stability. In addition, it would need to see asset quality metrics
that outperform our expectations, with combined NPA and NCOs of
about 20%.
Rating score snapshot
Issuer credit rating: B+/Negative/--
Stand-alone credit profile: b+
Preliminary anchor: bb-
Anchor adjustment: +1
Business position: Adequate (0)
Capital and earnings: Adequate (0)
Risk position: Constrained (-2)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
Credito Real
The 'SD' ratings on Credito Real reflect that the lender didn't pay
principal on its CHF170 million senior notes due on Feb. 9, 2022.
The rating on these notes is 'D', while the ratings on other senior
notes remain at 'CCC-'. S&P said, "We will monitor closely if
there's any written notification of payment acceleration from the
trustees or the holders of at least 25% in principal amount of
outstanding notes. This is because the offering memorandums provide
bond holders the right to accelerate interest and/or principal
payment, triggering a cross default of Credito Real's outstanding
bonds. In such a case, we would lower ratings on the respective
bonds to 'D'."
Issuer credit rating: SD/--/--
Bladex
S&P said, "We expect the bank to maintain sound asset quality
metrics despite the persistent global challenges . We also expect
Bladex's prudent risk management, sound underwriting practices, and
moderate risk tolerances to mitigate a potential hit to its
metrics. Even though we expect economic risks to rise overall
across the region, we consider that Bladex's current and expected
country risk blend provides some cushion against the credit-profile
weakening. Finally, Bladex's strong capitalization levels will
remain a credit strength despite the continued economic malaise
across the region."
Outlook
S&P said, "The stable outlook on Bladex reflects our expectation
that its asset quality metrics will remain manageable with low
delinquencies in the next 12-24 months, allowing the RAC ratio to
be above 10% for the same period. The outlook also reflects our
expectation that the bank's blended economic risk anchor won't
meaningfully change in 2022 and 2023."
Downside scenario. S&P said, "We could lower our ratings on Bladex
in the next 12-24 months if its RAC ratio falls below 10%. This
could occur if the bank's credit losses widen significantly above
our expectations, while internal capital generation through
earnings doesn't compensate for the rising provisions. We can also
lower our ratings if the bank changes its strategy drastically by
increasing its exposure to countries with weaker economic risk as
to lower its anchor."
Upside scenario. S&P could upgrade Bladex in the next 12-24 months
if it maintains a consistently sound risk position with NPAs and
credit losses below 1%, while maintaining a diversified loan book
and client base. In addition, Bladex would have to keep a low
exposure to higher risk countries, while the trend in the economic
risk in countries where Bladex operates should stabilize at current
levels without further deterioration. Moreover, the bank's deposits
would have to remain steady in order to keep its liquidity metrics
in line with those of its main peers. An upgrade of Bladex would
require a combination of these scenarios.
Rating score snapshot
Issuer credit rating: BBB/Stable/A-2
Stand-alone credit profile: bbb
Anchor: bbb-
Business position: Adequate (0)
Capital and earnings: Strong (+1)
Risk position: Adequate (0)
Funding and liquidity: Adequate and adequate (0)
Comparable rating analysis: 0
Support: 0
ALAC support: 0
GRE support: 0
Group support: 0
Sovereign support: 0
Additional factors: 0
ESG credit indicators: E-2, S-2, G-2
Ratings List
RATINGS AFFIRMED
Banco Nacional de Comercio Exterior, S.N.C. (Bancomext)
Foreign currency BBB/Negative/A-2
Local currency BBB+/Negative/A-2
Banco Nacional de Obras y
Servicios Publicos, S.N.C. (Banobras) BBB/Negative/A-2
Nacional Financiera, S.N.C.
Foreign currency BBB/Negative/A-2
Local currency BBB+/Negative/A-2
BBVA Mexico S.A. BBB/Negative/A-2
Banco Nacional de Mexico, S.A. (Citibanamex) BBB/Negative/A-2
Banco Mercantil del Norte, S.A. (Banorte) BBB/Negative/A-2
HSBC Mexico S.A. BBB/Negative/A-2
Banco Inbursa S.A. BBB/Negative/A-2
Scotiabank Inverlat, S.A. BBB/Negative/A-2
Banca Mifel, S.A. BB-/Negative/B
Banco Compartamos, SA BB+/Negative/B
Fondo Especial de Asistencia Tecnica y
Garantia Para Creditos Agropecuarios (FEGA) BBB/Negative/A-2
Instituto del Fondo Nacional de la Vivienda
para los Trabajadores (Infonavit) BBB/Negative/A-2
Engencap Holdings, S De RI. De CV BB-/Stable/--
Operadora de Servicios Mega, S.A. de C.V. BB-/Negative/--
Mexarrend, S.A.P.I. de C.V. B/Stable/--
Financiera Independencia S.A.B. de C.V. B+/Negative/--
Credito Real, S.A.B. de C.V. SD/--/--
Banco Latinoamericano
de Comercio Exterior, S.A BBB/Stable/A-2
RATING STILL ON CREDITWATCH
Unifin Financiera, S.A.B de C.V. B+/Watch Neg/--
IXTAPALUCA MUNICPALITY: Moody's Withdraws 'B1' Issuer Rating
------------------------------------------------------------
Moody's de Mexico S.A. de C.V., has withdrawn the B1 (Global Scale,
local currency) and Baa3.mx (Mexico National Scale) issuer ratings
of the Municipality of Ixtapaluca. Moody's has also withdrawn the
stable outlook and the b1 baseline credit assessment (BCA).
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
The principal methodology used in these ratings was Regional and
Local Governments published in January 2018.
The period of time covered in the financial information used to
determine Ixtapaluca, Municipality of's ratings is between January
01, 2016 and December 31, 2020 (source: Financial Statements of the
Municipality of Ixtapaluca: 2016-2020).
=======
P E R U
=======
PERU: Bonds Slip as Investors Lose Patience With Politics
---------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Peru's
foreign debt has touched record lows as a wave of social unrest
amid quickening inflation upends a market once famed for its
resilience to near-perpetual political crisis.
Government bonds due in 2031 have tumbled 5.5 cents to trade at 89
cents on the dollar, lingering near an all-time low, according to
globalinsolvency.com.
The extra yield investors demand to hold Peru's bonds over U.S.
Treasuries, meantime, is at 194 basis points, versus just 165 a
week prior, according to JPMorgan Chase & Co. data, the report
notes.
President Pedro Castillo is struggling to stem unrest in response
to sky-high food and fuel prices, exacerbated by the war in
Ukraine, the report relays.
There is mounting pressure for him to resign, just over eight
months into his term and even after he recently survived a second
impeachment vote, the report discloses.
With five presidents in just over four years, there is a sense that
Peru is becoming ungovernable, the report says.
And of course, a surge in U.S. yields is adding even more pressure
to the Andean nation's dollar bonds, the report notes.
Peru's dollar bonds are the second-worst performing in the world so
far in April, according to data compiled by a Bloomberg bond index,
surpassed only by Sri Lanka which announced plans to suspend
foreign debt payments, the report relays. The Andean nation's
100-year bond is just off a record low 68 cents, and the sol is
down about 2% in the past five days, the report adds.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Announces 'Partial' Increase in Fuel Prices
--------------------------------------------------------------
Jamaica Observer reports that the Trinidad and Tobago Government
recently announced an increase in fuel prices even as it
acknowledged that it is cognizant of the effect it will have on
consumers.
Finance Minister Colm Imbert, speaking in the Parliament, said that
the increase in fuel prices will take effect from April 19 and that
the adjustments were being made on the basis of factors such as the
effect of the Russian invasion of Ukraine of international oil
prices, according to Jamaica Observer.
"The Government is cognizant of the effect of an increase in the
price of fuel on consumers, notwithstanding the fact that a fuel
subsidy is a regressive measure.
"The Government is of the view that the liability for any fuel
price adjustment should be shared more or less equally. The public
should be asked to pay half the cost of the increased market prices
of fuel, while the Government absorbs the other half of the
increased cost," he said, the report relays.
Imbert told legislators that Cabinet decided there should be a
partial adjustment of the prices of motor fuels, "not to the full
market prices, but sufficient to allow an equal distribution of the
cost," the report discloses.
As a result, the prices of premium gasoline and super gasoline will
be adjusted by one Trinidad and Tobago dollar (One TT dollar =
US$0.16 cents) per liter to TT$6.75 and TT$5.97, respectively,
while the price of diesel will be adjusted by TT$0.50 cents per
liter to TT$3.91 per liter, the report relays.
The Government said the cost of liquefied petroleum gas (LPG) will
remain fixed at TT$21 for a 20-pound cylinder of cooking gas for
domestic customers, while the price of kerosene will be adjusted to
TT$3.50 per liter which is little over half the true market price,
the report adds.
=============
U R U G U A Y
=============
CONSORCIO DEL URUGUAY: Moody's Upgrades CFR to Ba2, Outlook Stable
------------------------------------------------------------------
Moody's Investors Service has upgraded Consorcio del Uruguay S.A.'s
global scale Corporate Family Rating to Ba2 from Ba3. The outlook
on the rating is stable.
The rating action concludes Moody's review of Consorcio's rating
that began on November 11, 2021.
The following rating was upgraded:
Issuer: Consorcio del Uruguay S.A.
Global Corporate Family Rating, to Ba2 from Ba3
Outlook Actions:
Outlook, Changed to Stable from Rating Under Review
RATINGS RATIONALE
The conclusion of the review and the upgrade of Consorcio's CFR to
Ba2 follows Moody's assessment that the company's financial
performance, particularly in terms of asset quality and
capitalization, remains resilient through economic cycles and the
company continues to report consistent results after macroeconomic
shocks. Also, as a sole provider of prior savings groups that has
historically attracted low and medium income individuals in
Uruguay, Consorcio has reported sustained operational growth
between 2020 and 2021, while its single product continues to
compete with other financial institutions which offer regular
loans.
In upgrading Consorcio's CFR to Ba2, Moody's acknowledges the
company's good track record of asset quality maintained over the
past five years, which was also sustained during the COVID-19
pandemic. Consorcio's problem loan ratio stood at 1.05% in December
2021, compared with 0.94% in December 2020 and 1.37% in December
2019. In addition, as a result of the intrinsic features of
Consorcio's product, asset risk is mitigated by the company's
mutualized lending framework, as the process of binding cash awards
is contingent to clients providing collateral of up to three times
the amount of remaining installments in their saving plans, and
also requires clients to validate income sources that support
payment of remaining installments.
In terms of profitability, Consorcio's income origination stems
from fees that are embedded in clients' monthly contributions for
the savings plans. Moreover, to a lesser scale, it also generates
interest income from investment of liquid assets. The company's
ratio of net income to average managed assets was 2.10% in December
2021 and averaged 2.90% during the last three years.
Consorcio has a relatively stable funding structure that derives
from the long-term nature of its savings plans and a business model
which essentially links its borrowers to its savings plans'
contributors. This steady access to long-term funding, along with a
regulatory framework that allows Consorcio to withhold clients'
savings until they meet requirements for withdrawals, reduces its
liquidity risk significantly. Consorcio's capitalization, measured
by Moody's preferred ratio of TCE to total assets, remained robust
at 15.90% in December 2021, slightly above 15.82% in year-end 2020.
Also in December 2021, the company's volume of regulatory capital
was 146% above the minimum capital requirement from the central
bank.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Consorcio's rating could face upward pressure if the entity reports
significant improvement in its business presence and market share
in the Uruguayan financial system, while not showing deterioration
in asset quality and capital metrics. An improvement in operating
conditions could also be positive for Consorcio's rating.
Negative pressure on Consorcio's rating could emerge from a
substantial deterioration in its earnings generation capacity,
asset quality and capitalization, or in the operating environment.
METHODOLOGY USED
The principal methodology used in this rating was Finance Companies
Methodology published in November 2019.
*********
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
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2022. All rights reserved. ISSN 1529-2746.
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