/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/220429.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Friday, April 29, 2022, Vol. 23, No. 80 Headlines B E R M U D A TEEKAY TANKERS: Egan-Jones Cuts Senior Unsecured Ratings to BB- B R A Z I L BANCO VOTORANTIM: S&P Affirms 'BB-/B' ICRs, Outlook Stable ODEBRECHT OFFSHORE: S&P Ups Issue Rating on Sr. Sec. Notes to 'B-' TUPY SA: Fitch Puts BB LongTerm IDRs on Watch Pos. Amid MWN Deal D O M I N I C A N R E P U B L I C [*] DOMINICAN REPUBLIC: Ports Eye 10k Jobs; Hub Status J A M A I C A JAMAICA: Discloses Marginal Increase in Gas Prices JAMAICA: Notes Decline in Remittances Over Last Two Years M E X I C O MAXCOM TELECOMUNICACIONES: S&P Withdraws 'D' Long-Term ICR P A N A M A BICSA SA: Fitch Affirms BB- LongTerm IDRs, Outlook Stable P E R U PETROLEOS DEL PERU SA: S&P Cuts Foreign Currency Rating to 'BB' P U E R T O R I C O BLD REALTY: Seeks Approval to Hire Dage Consulting as Accountant S T . L U C I A ST. LUCIA: Defers Full Implementation of Tax Waiver for Workers - - - - - ============= B E R M U D A ============= TEEKAY TANKERS: Egan-Jones Cuts Senior Unsecured Ratings to BB- --------------------------------------------------------------- Egan-Jones Ratings Company on April 14, 2022, downgraded the foreign currency and local currency senior unsecured ratings on debt issued by Teekay Tankers Ltd. to BB- from BB. Headquartered in Hamilton, Bermuda, Teekay Tankers Ltd. provides oil transportation services through a fleet of mid-size tankers, including Suezmax and Aframax crude oil tankers and Long Range 2 product tankers. =========== B R A Z I L =========== BANCO VOTORANTIM: S&P Affirms 'BB-/B' ICRs, Outlook Stable ---------------------------------------------------------- S&P Global Ratings affirmed its global scale 'BB-' long-term and 'B' short-term issuer credit ratings on Banco Votorantim S.A. (Banco BV). S&P also affirmed its 'brAAA'/brA-1+' national scale ratings on the bank and on its subsidiary Banco BV S.A. (previously called BV Leasing Arrendamento Mercantil S.A.). The outlook on these ratings remains stable. At the same time, S&P affirmed all of its issue-level ratings on Banco BV. S&P's ratings on Banco BV incorporates its leading position in used vehicle financing in Brazil, sizable wholesale operations, manageable nonperforming loans (NPLs), and adequate funding profile. The bank also has been improving its capital metrics due to a reduction in capital-deductible deferred tax assets (DTAs) along with moderate credit growth and stronger profitability, prompting S&P to revise its forecast risk-adjusted capital (RAC) ratio to about 5.5% from 4.5%-5.0% for the next two years. S&P bases its stable outlook on Banco BV on its outlook on Brazil, and S&P expects the ratings on the bank to move in tandem with those on the sovereign. ODEBRECHT OFFSHORE: S&P Ups Issue Rating on Sr. Sec. Notes to 'B-' ------------------------------------------------------------------ On April 27, 2022, S&P Global Ratings raised its issue-level rating on Brazil-based drill vessels debt-issuing entity, Odebrecht Offshore Drilling Finance Ltd.'s (ODFL) tranche 1 senior secured notes to 'B-' from 'CCC+'. S&P affirmed the recovery rating on the notes at '2'. The outlook is stable, reflecting S&P's expectation that the three vessels will operate at an average of 98% economic uptime, resulting in a debt service coverage ratio (DSCR) of 1.5x, adding its cash and reserve accounts. S&P said, "We expect ODFL to post a DSCR near 1.5x (considering cash and reserve accounts) by December 2022, when the notes are due. This results from our expectation of higher cash flow available for debt service after it secured a 500-day charter and service contract for Norbe VI with Petro Rio, which started in April 2022. In our view, this is positive from a credit standpoint because it considerably reduces the market risk the project was exposed to before the re-contracting. "We don't incorporate the re-contracting of the vessels ODN I and ODN II because their contracts end in the third quarter of 2022. These revenue assumptions, together with the existing $38 million cash as of December 2021, should allow ODFL to make the final payment of about $100 million in interest and principal." A $37.7 million debt service reserve account (cash and stand-by letter of credits) covers the downside risks from potential lower operational availability of the vessels or higher operating costs. TUPY SA: Fitch Puts BB LongTerm IDRs on Watch Pos. Amid MWN Deal ---------------------------------------------------------------- Fitch Ratings has placed Tupy S.A.'s ratings, including its 'BB' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and 'AA(bra)' Long-Term National Scale Rating, on Rating Watch Positive following the announced acquisition of MWM at an enterprise value of BRL865 million. Fitch has also placed Tupy Overseas S.A.'s 'BB' rated USD375 million senior unsecured notes due 2031 on Positive Watch. Fitch expects to take any actions on Tupy's ratings upon the closing of the transaction with MWM, which may take more than six months to finalize. Fitch believes the acquisition will increase Tupy's scale, product value-add and overall diversification, improving its overall credit profile over the ratings horizon. KEY RATING DRIVERS Acquisition Benefits: Fitch estimates that this transaction could add an additional BRL2.7 billion in revenues for Tupy, which implies pro forma consolidated revenues of approximately BRL10 billion when added to the BRL7.1 billion in 2021. MWM's EBITDA margins are estimated at 8% of revenues, which is lower than Tupy's historical average but more stable due to its contract-based model. MWM is a market leader in the production, machining, assembly and supply chain management of third-party engines in Brazil. The company estimates over 20% of trucks in the country carry engines assembled by MWM. The new operations will allow Tupy to offer customers contract-based manufacturing and engineering services, potentially providing more stable revenue streams. The transaction will also provide Tupy access to other relevant sectors including industrial power generators (gensets), biofuel solutions, marine engines, and engine spare parts. Through MWM's energy generation businesses, Tupy expects to venture into providing all-encompassing decarbonization solutions to the agricultural and industrial sectors in Brazil. Acquisition Risks: Although Fitch expects the acquisition to increase and diversify Tupy's business, there are also risks associated with it. Merging both companies' operations could lead to potential integration issues or higher-than-expected integration costs. This could affect the attainment of any expected synergies derived from the transaction. The acquisition is pending shareholder vote and regulatory approval, but Fitch does not expect major issues with these. Acquisition Overview: On April 18, 2022 Tupy announced the acquisition of MWM from Navistar Inc. for an enterprise value of BRL865 million or 4x EBITDA. The company expects the transaction to close at the end of the year pending shareholder and regulatory approvals. Funding for the transaction may come from local debt issuance, but the exact mechanism is still pending. As a result, Fitch expects leverage to increase upon completion of the transaction to above 2.4x net leverage, but then decrease over the ratings horizon to below 2x. DERIVATION SUMMARY Ratings of auto parts companies are usually constrained by the sector's volatility, capital and labor intensity characteristics, and natural client concentration. Metalsa, S.A. de C.V. (BBB-/ Stable) and Nemak, S.A.B. de C.V. (BBB-/Stable) have investment grade ratings due to their conservative capital structures, larger scale and wider geographic diversification. Tupy's low leverage and strong liquidity compares well with its peers. However, its 'BB' rating reflects its small scale and moderate diversification, as well as its high exposure to OEMs. Tupy's credit profile is stronger than that of Tenneco Inc. (B+/Negative Watch. Tenneco's rating reflects its more leveraged capital structure, which was magnified by the pandemic. Tupy is rated one notch below Dana Incorporated (DAN, BB+/Stable) because DAN stands out as a leading global supplier of driveline components for light, commercial and off-road vehicles, with significant higher scale and diversification. Tupy's acquisition of Teksid, completed in October 2021, increased its scale and geographic reach in the industry, but brought some manageable execution and integration risks due to Teksid's lower margins. With the addition of MWM's operations Tupy will further increase its scale and business diversification, but MWM also has lower margins than Tupy. KEY ASSUMPTIONS Fitch's Key Assumptions Within The Rating Case for the Issuer: -- BRL865 million acquisition of MWM by the end of 2022 with consolidation beginning in 2023; -- MWM acquired at 4x EBITDA multiple at an EBITDA margin of around 8% of revenues; -- Tupy borrows the funds to finance the acquisition of MWM from the local markets at Selic plus spread; -- Includes full consolidated of Teksid's operations in 2022; -- Domestic volumes to grow with Brazilian GDP and foreign volumes with U.S. and Eurozone GDPs; -- Gradual dilution of fixed expenses following gains of scale; -- Prices increase in line with inflation and benefited by pass- through pricing; -- BRL to USD at 5.35 in 2022, as per Fitch's forecast; -- Capex of BRL443 million and BRL494 million in 2022 and 2023, respectively; -- Working capital requirements normalize to historical averages gradually; -- Dividend pay-out ratio of 25% within the ratings horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Further expansion of Tupy's geographic footprint while materially improving FCF; -- FFO gross leverage below 2.5x; -- EBITDA gross leverage sustained below 3.0x; -- EBITDA net leverage consistently below 2.0x; -- Maintenance of robust liquidity. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A severe decline in U.S. pickup and truck production that leads to sustained reduced demand for Tupy's products; -- FFO gross leverage above 3.5x for a prolonged period; -- EBITDA gross leverage sustained above 4.0x; -- EBITDA net leverage above 3.0x on a recurring basis; -- Significantly negative FCF, eroding the company's liquidity. 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 Strong Liquidity: Fitch expects Tupy to maintain strong liquidity during the rating horizon as part of its conservative financial policy. In 2021, cash and marketable securities was BRL1.3 billion in comparison to short-term debt of BRL466 million. Tupy exchanged its USD350 million bond due 2024 to a USD375 million due in 2031, while significantly reducing debt service. By lengthening its bond maturity, Tupy significantly reduced any liquidity and refinancing risks. In the beginning of the pandemic in 2020, Tupy borrowed approximately BRL500 million short-term debt with Brazilian banks as uncertainties related to the depth and duration of the crisis were high. ISSUER PROFILE Tupy is a Tier-1 and Tier-2 global automotive supplier that was founded in 1938 in Joinville, Santa Catarina in Southern Brazil. It is one of the world's largest independent manufacturers of high-value-added cast iron structural components, such as engine blocks and cylinder heads. 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. DEBT RATING PRIOR ---- ------ ----- Tupy Overseas S.A. senior unsecured LT BB Rating Watch On BB Tupy S.A. LT IDR BB Rating Watch On BB LC LT IDR BB Rating Watch On BB Natl LT AA(bra) Rating Watch On AA(bra) =================================== D O M I N I C A N R E P U B L I C =================================== [*] DOMINICAN REPUBLIC: Ports Eye 10k Jobs; Hub Status ------------------------------------------------------ Dominican Today reports that Dominican Port Authority (Apordom) Executive director Jean Luis Rodriguez, assured that the Dominican Republic is becoming a regional logistics hub with purpose and commitment, "as has been the mandate and vision of President Luis Abinader." Rodriguez specified that this management is developing a master plan with which they seek to promote the arrival of cruise passengers and the generation of some 10,000 jobs for which Apordom has opened itself to the world and has signed various agreements, reinforcing the participation of cruise ships and the search for higher investments, according to Dominican Today. "We are convinced that these new terminals, which currently have three: San Souci, Amber Cove and La Ramona, as well as several anchorages, and for this period of government we could lead the country to have three to seven cruise terminals. You can already imagine the importance of this advance for the Dominican Republic," he said, the report notes. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'. The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative. S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said. A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. ============= J A M A I C A ============= JAMAICA: Discloses Marginal Increase in Gas Prices --------------------------------------------------- RJR News reports that a marginal decline in gas prices was to be implemented April 28. A liter of 87 and 90 was to cost $0.25 less. However, diesel and ultra low sulphur diesel as well as kerosene will increase by $4.50, according to RJR News. Meanwhile, the price of propane will go down by $0.50 while $0.25 will be shaved off the price of butane. As reported in the Troubled Company Reporter-Latin America on March 11, 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. JAMAICA: Notes Decline in Remittances Over Last Two Years --------------------------------------------------------- RJR News reports that it appears that fewer Jamaicans have been receiving remittances over the past two years. Head of Market Research Limited, Don Anderson, says a survey for the first quarter reflected a continued decline in the number of households receiving remittances, according to RJR News. This occurred despite an increase in remittance volumes, the report notes. "But what we've noticed in the 2021 period, is that the number of households receiving remittances fell by six percentage points - we cannot yet identify what the factors are. I think we will have to independently assess the situation and hopefully we can provide some answers, but these are significant numbers," the report discloses. Meanwhile, businesses in all industries surveyed except the tourism sector, indicated plans to increase capital investments in the short to medium term, the report relays. Based on responses to the latest business confidence survey, only 13% of businesses in the tourism sector were bullish on increasing investment, the report says. That's a 24% decline compared to the first quarter of 2021, the report discloses. Anderson says other services, including personal care, saw the largest increase in the desire to invest, the report notes. "Seventy two point 7 percent of firms in the construction and installation sector say they are going to be investing more in capital to grow. The largest increase were in services such as personal care - that was up by 27.7 percent. So people are becoming more entrepreneurial . . . " he added. As reported in the Troubled Company Reporter-Latin America on March 11, 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== M E X I C O =========== MAXCOM TELECOMUNICACIONES: S&P Withdraws 'D' Long-Term ICR ---------------------------------------------------------- S&P Global Ratings withdrew its 'D' long-term issuer credit and issue-level ratings on Maxcom Telecomunicaciones S.A.B. de C.V. (Maxcom) at the company's request following Transtelco Holding Inc.'s acquisition of Maxcom on Nov. 15, 2021. Maxcom had repaid about $54 million of the outstanding 8% senior secured notes due 2024, representing approximately 94.96% of the total value. Transtelco aims to maintain Maxcom as a private entity, aligning it to its business model. =========== P A N A M A =========== BICSA SA: Fitch Affirms BB- LongTerm IDRs, Outlook Stable --------------------------------------------------------- Fitch Ratings has affirmed Banco Internacional de Costa Rica, S.A.'s (BICSA) Long-Term Issuer Default Rating (IDR) at 'BB-' and its Viability Rating (VR) at 'bb-'. The Rating Outlook is Stable. Fitch has also affirmed the bank's Short-Term IDR at 'B'. KEY RATING DRIVERS IDRs, VR AND NATIONAL-SCALE RATINGS BICSA's IDRs are driven by its VR. The VR, in turn, is highly influenced by BICSA's risk profile, consisted of solid credit policies and risk controls that, in Fitch's opinion, have allowed the bank to remain stable throughout the economic cycles. The bank's business profile is also marked by a modest franchise and a corporate-oriented business model that yields a lower total operating income (of around USD44 million) compared to peers. Nevertheless, the institution shows a stable financial performance throughout the business cycles, reflected by its adequate loan quality metrics alongside a solid capitalization and sound liquidity. BICSA's operating environment (OE) assessment weighs its international operations as it has exposures in around 30 jurisdictions. Panama and Costa Rica represent around 63% of total earning assets. Outlook in most jurisdictions influences the affirmation of Fitch's OE assessment at 'bb' with a stable trend. The bank's company profile yields a reasonable competitive position in the regional trade finance with a stable base of regional clients and small market shares. The bank continues to focus its business generation with very focused customer segmentation while also emphasizing factoring and leasing services. Fitch believes BICSA's asset quality ratios have a good prospect of improving given the bank's growth plans favored by the recovering economies in which it operates. As of 2021, the 90+ days overdue loans ratio remained reasonable at 2.5% considering its niche focus and reduced business volume over the last two years. Moreover, the proportion of "modified" loans amount to 3.3% of total gross loans, which compares favorably with peers. BICSA's corporate-oriented business model has historically yielded structurally low profitability. As of YE21, the operating return of risk-weighted assets (RWA) remained at a weak level of 0.33% (2020: 0.31%, 2017-2020 average of 0.62%). Fitch believes BICSA's profitability will improve as its business volume recovers in 2022 but will remain relatively low as expected from a niche corporate bank. BICSA's funding and liquidity assessment is favorable as liquidity indicators are sufficient to cover the bank's needs, as liquidity coverage was 208% as of 2021. The loans/deposits ratio is still high at 193.1% since most of its funding comes from numerous and ample wholesale lines (from around 39 financial institutions). Customer deposits remain with a high concentration by depositor rate of around 34%, but this is partially offset by long-standing relational business focus. BICSA's capitalization is aligned to the VR level at 'bb-' as CET1 was 13.8%, as of December 2021, above the average 12.5% registered in 2017-2020, supported by a full retention policy that offsets lower profitability. Fitch expects capitalization ratios to remain above its rating sensitivity despite low operating returns. Expected moderate credit growth would alleviate any additional pressures. SSR BICSA's SSR reflects Fitch's opinion on the capacity and propensity of its shareholders, BCR and BNCR to support BICSA, if necessary. The 'b' SSR considers reputational risk to be of high importance as the issuer is highly associated with its shareholders Banco de Costa Rica (BCR, B/Stable) and Banco Nacional de Costa Rica (BNCR, B/Stable), and there is a history of substantial reputational impact during stress scenarios. The regulation of shareholders to also of high importance because the Costa Rican regulatory requirements to support state banks can positively influence the support of the banks to its subsidiary BICSA. NATIONAL SENIOR DEBT RATINGS IN PANAMA AND EL SALVADOR The Long-Term and Short-Term National Rating of BICSA's senior unsecured issuances in Panama are rated at 'A-' and 'F2' (respectively) at the same level of the issuer and reflects the bank's intrinsic creditworthiness. The National Rating of BICSA's senior unsecured debt issuances in El Salvador, rated 'AAA(slv)' with a Stable Outlook, reflects the relative strength of the Panamanian bank compared with other issuers in El Salvador. BICSA's IDR is five notches above El Salvador's 'CCC' Sovereign Rating. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade or material deterioration of the OEs in Panama and Costa Rica where BICSA has its main exposures could lead to a downgrade of BICSA's IDRs, VRs and National ratings; -- The IDR, VR and National ratings could be downgraded based on a deterioration of the bank's financial profile reflected in a significant and sustained increase in its impaired loans and by a further reduction of its operating profit to RWA that reduces its CET1 ratio below 12%; -- A downgrade of BICSA's VR could likely affect its IDRs and National ratings, but the resulting levels of these ratings would be determined by the implied floor derived from its shareholders' IDRs, as the ratings could once again be driven by parent support. -- SSR is sensitive to negative changes in BCR's and BNCR's ability or propensity to provide timely support to the bank (i.e., a downgrade of the parent's Long-Term IDR to 'B-' or below); -- Panamanian debt ratings would reflect any possible movement in their respective IDRs; -- Senior unsecured debt ratings would continue to be aligned with the bank's IDR. -- Salvadoran debt ratings could be downgraded in response to a material reduction in BICSA's IDR. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- An improvement in the bank's OEs, particularly in Panama and Costa Rica, could lead its IDRs and VRs to improve in the medium term by up to one notch from the current IDRs of its parent companies; -- In the medium term, a significant and sustained improvement in its financial performance, resulting in a higher operating return on RWAs above 1.25% and an improved funding structure reflected in a loan-to-deposit ratio of 140%, while maintaining capitalization ratios assets and strong asset quality could drive an upgrade of its IDR, VR and National ratings; -- Although not likely in the foreseeable future, the SSR is sensitive to significant positive changes in BCR's and BNCR's ability or propensity to provide timely support to the bank; -- Panamanian debt ratings would reflect any possible movement in their respective IDRs; -- Senior unsecured debt ratings would continue to be aligned with the bank's IDR. -- The Salvadoran debt ratings are at currently the highest possible level of the rating scale. VR ADJUSTMENTS The VR score of 'bb-' has been assigned above the 'b+' implied score due to the following adjustment reason: Risk Profile (positive). 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 Pre-paid expenses and other deferred assets were reclassified as intangible in order to calculate a consistent tangible common equity/tangible assets ratio in relation to previous periods. 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. DEBT RATING PRIOR ---- ------ ----- Banco Internacional LT IDR BB- Affirmed BB- de Costa Rica, S.A. ST IDR B Affirmed B Natl LT A-(pan) Affirmed A-(pan) Natl ST F2(pan) Affirmed F2(pan) Viability bb- Affirmed bb- Shareholder Support b Affirmed b senior unsecured Natl LT AAA(slv) Affirmed AAA(slv) senior unsecured Natl LT A-(pan) Affirmed A-(pan) senior unsecured Natl ST F2(pan) Affirmed F2(pan) ======= P E R U ======= PETROLEOS DEL PERU SA: S&P Cuts Foreign Currency Rating to 'BB' --------------------------------------------------------------- On April 27, 2022, S&P Global Ratings lowered its global scale foreign currency rating on Peruvian government-owned refiner and fuels supplier Petroleos del Peru S.A. (Petroperu) to 'BB' from 'BB+', mainly reflecting that it revised downward its liquidity assessment to weak, which resulted in a revision of Petroperu's stand-alone credit profile (SACP) to 'b-' from 'b'. S&P also kept its view of the likelihood of government support as very high, which is a key rating component that provides four notches of uplift to the final rating. S&P said, "We kept the ratings on CreditWatch with negative implications, capturing our view that there's a chance we could downgrade the company multiple notches in the next 90 days depending on the execution of its plan to address the 2021 audit, which is ongoing. We also consider the need to obtain the waivers from the bondholders and Cesce and to secure the funds for the payment of the first installment for Cesce credit facility in June 2022, considering Petroperu's stretched liquidity." On April 5, Petroperu announced the appointment of a new board and key management positions, including a new CEO and CFO. Following these changes, S&P reviewed topics such as liquidity, the audit process, and government support with the new management team and the Ministry of Finance. Considering the latest developments, including the delay in the execution of the plan to address the still pending 2021 audited financials and the deterioration of the working capital balances resulting from shorter payment terms for oil imports in the first quarter, S&P concluded that Petroperu's liquidity and financial flexibility have weakened since our last publication and is no longer commensurate with its less than adequate liquidity assessment. More importantly, S&P expects liquidity may remain under pressure in the short term while the plan to address the pending audit materializes, including the waiver negotiations, and while the initiatives to support the company´s liquidity are effectively implemented (including, for example, securing the funds for the repayment to Cesce in June 2022). S&P said, "Our previous rating action considered the company's liquidity as less than adequate given the availability of significant short-term facilities, the recovery of Petroperu's financial performance in 2021, the steady EBITDA expectations for 2022, and the support Petroperu has historically received from the financial community even during the pandemic. However, as of today, with no other audit firms lined up as alternatives and with the agreement with the auditor PricewaterhouseCoopers (PwC) still pending, we note that the company's uncommitted short-term facilities dropped to $2.7 billion from $3.0 billion between February 2022 and April 20, 2022. We also see a higher use rate of the facilities, which increased to 53% from 33%. This pressures our liquidity ratio, which shows a material deficit.. "Finally, we removed the positive comparative rating adjustment. In the past, we included this positive adjustment on the rating to reflect the company's relative strength compared with regional peers due to the ongoing government support. We saw examples of support to Petroperu more frequently than for peers such as ENAP or ANCAP, the government-owned refineries in Chile and Uruguay, respectively. However, we now don't think that such a differential compared to peers is sufficiently justified. In our view, more effective ongoing support and oversight from the government would have prevented the events affecting Petroperu from happening. Therefore, we removed the positive CRA." The company expects to announce the agreement with PwC (the auditor) soon, but no other audit firms presented offers. However, at this stage the target date for Petroperu to release its audited statements is no longer on June 15 as initially proposed, but July 15 at the earliest or even early August, based on the latest information provided by the management team. Once the agreement is signed, S&P expects the company and its financial advisor to officially launch a consent solicitation to waive the breaches related to the bonds and Cesce documentation. S&P said, "In our view, there's still a very high likelihood that the company will benefit from extraordinary support from the government in the event of financial distress and to avoid a default in payment. We base this assessment on the company's very important role in Peru's energy matrix. We also think Petroperu has a very strong link to the government. The latter is involved in key investment decisions and gives authorization to conduct significant investments and approval to raise debt. In addition, in the past, the government did show signs of support, and currently has various initiatives to support Petroperu under consideration." Petroperu's government shareholders have reaffirmed their intention to support the company, especially after the recent appointment of new management. They confirmed that Petroperu is a strategic asset for the country and fulfills a critical role in the fuel supply, which is why they plan to take the necessary measures to avoid a payment default of the company. S&P will continue to monitor the relationship between Petroperu and the Peruvian government, including the latter's incentives, capacity, and tools to support the company, particularly in the uncertain global economic context and company-specific conditions, which at the moment are very stressed. ESG credit indicators: E-4, S-2, G-5 ===================== P U E R T O R I C O ===================== BLD REALTY: Seeks Approval to Hire Dage Consulting as Accountant ---------------------------------------------------------------- BLD Realty, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire Dage Consulting CPA's, PSC as its accountant. The firm will be paid at these rates: Jose A. Diaz Crespo, CPA $160 per hour Senior Accountant $85 per hour Staff Accountant $65 per hour Jose A. Diaz Crespo, CPA of Dage Consulting disclosed in a court filing that her firm is a "disinterested person" as the term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Jose A. Diaz Crespo, CPA Dage Consulting CPA's, PSC 340 Industrial Victor Fernandez Suite 201B San Juan, PR 00926 Tel: 787-428-3388 Email: jdiaz@dageconsulting.com About BLD Realty BLD Realty, Inc. is the fee simple owner of two real properties located at Barrio Espinosa in Vega Alta, P.R., having an aggregate value of $1.34 million. The company is based in Guaynabo, P.R. BLD Realty filed a petition under Chapter 11, Subchapter V of the Bankruptcy Code (Bankr. D.P.R. Case No. 22-00802) on March 24, 2022, listing $1,900,571 in assets and $3,834,736 in liabilities. Roberto Santos Ramos serves as Subchapter V trustee. Carmen D. Conde Torres, Esq., at C. Conde & Assoc. serves as the Debtor's legal counsel. ================= S T . L U C I A ================= ST. LUCIA: Defers Full Implementation of Tax Waiver for Workers --------------------------------------------------------------- The St. Lucian government says it has been forced to defer the full implementation of a tax waiver for workers earning up to EC$4,000 per month due to the impact of Russia's invasion of Ukraine. Effective January 1 next year, 15,000 public and private sector workers earning up to EC$2,083 monthly will pay no income tax. Prime Minister and Minister of Finance, Philip J. Pierre said the tax waiver had been an election promise made by his St. Lucia Labour Party. However, he told legislators that the decision to defer full implementation followed a review of the fiscal situation. Mr. Pierre said the government also considered the likelihood of higher interest rates occasioned by changes in the global economic environment. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. 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