/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/220512.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, May 12, 2022, Vol. 23, No. 89 Headlines B A H A M A S BAHAMAS: Economy Expected to Recover From Pandemic by Next Year B R A Z I L BRAZIL: Retail Sales Top Expectations with 1% Growth in March BRF SA: Fitch Affirms 'BB' Issuer Default Rating, Outlook Stable C O L O M B I A OPAIN: Fitch Removes 'BB+' on $415MM Notes From Rating Watch Neg. TERMOCANDELARIA POWER: Fitch Affirms 'BB' LongTerm IDRs D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Housing Prices Soar Since 2018 DOMINICAN REPUBLIC: To Get US$1.8B Form World Bank, But Needs More E L S A L V A D O R BANCO DE DESARROLLO: Moody's Downgrades Issuer Rating to Caa3 J A M A I C A DIGICEL GROUP: Fitch Affirms 'CCC' IDR, Off Rating Watch Positive P E R U NEXA RESOURCES: S&P Withdraws 'BB+' LT Issuer Credit Rating P U E R T O R I C O CAPETE CORPORATION: Case Summary & Six Unsecured Creditors MAM CORPORATION: Case Summary & 15 Unsecured Creditors U R U G U A Y CASA FINANCIERA: Fitch Affirms 'CCC' LongTerm IDRs SUCURSAL URUGUAY: Fitch Affirms 'CCC' LongTerm IDRs V E N E Z U E L A VENEZUELA: Leisure & Fashion on Board Economic Recovery Train X X X X X X X X LATAM: Do Not Hike Wages to Match Inflation, Says Haynes - - - - - ============= B A H A M A S ============= BAHAMAS: Economy Expected to Recover From Pandemic by Next Year --------------------------------------------------------------- RJR News reports that the Bahamian economy is expected to fully recover from the economic shock of the COVID-19 pandemic over the course of next year, possibly slightly ahead of earlier projections. However, Central Bank Governor John Rolle says the current economic environment has to be characterized by caution, as higher oil prices and inflation threaten the more than $3 billion in external reserves, the report discloses. 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 =========== BRAZIL: Retail Sales Top Expectations with 1% Growth in March ------------------------------------------------------------- Reuters reports that retail sales in Brazil rose more than expected in March, the third straight monthly gain, despite double-digit inflation in Latin America's largest economy, official figures showed. According to government statistics agency IBGE, sales grew 1% in March from February, more than the 0.4% increase forecast in a Reuters poll of economists, the report notes. Six of the eight activities surveyed recorded growth, with computer and communication office equipment and supplies gaining 13.9%, according to Reuters. Sales were up 4% from the same month a year earlier, also higher than the 2.1% raise predicted by economists, the report relays. That resulted in a 1.3% increase in the first quarter from the same period last year, the report notes. The sector also posted 1.9% growth from the previous quarter, the agency said, the report discloses. Financial conditions in Brazil have tightened as the country's central bank aggressively raises interest rates to curb inflation that reached 12% in mid-April, Reuters relays. Retail sales are now 2.6% above the pre-pandemic level of February 2020, the report notes. But considering the expanded retail sector, which includes cars and building materials, six sectors are below pre-pandemic levels, while four are above, Santos said, the report adds. About Brazil Brazil is the fifth largest country in the world and third largest in the Americas. Jair Bolsonaro is the current president, having been sworn in on Jan. 1, 2019. As reported in the Troubled Company Reporter-Latin America on April 15, 2022, Moody's Investors Service affirmed the Government of Brazil's long-term Ba2 issuer ratings and senior unsecured bond ratings, (P)Ba2 senior unsecured shelf ratings, and maintained the stable outlook. Standard & Poor's credit rating for Brazil stands at BB- with stable outlook (April 2020). S&P's 'BB-/B' long-and short-term foreign and local currency sovereign credit ratings for Brazil were affirmed in December 2021 with stable outlook. Fitch Ratings' credit rating for Brazil stands at 'BB-' with a negative outlook (November 2020). Fitch's 'BB-' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) has been affirmed in December 2021. DBRS's credit rating for Brazil is BB (low) with stable outlook (March 2018). BRF SA: Fitch Affirms 'BB' Issuer Default Rating, Outlook Stable ---------------------------------------------------------------- Fitch Ratings has affirmed BRF S.A.'s (BRF) Long-Term Foreign and Local Currency Issuer Default Rating and senior unsecured notes at 'BB'. Fitch has also affirmed BRF's National Rating and Debentures at 'AA+(bra)'. The Rating Outlook remains Stable. These affirmations reflect BRF's expected deleveraging in 2022, the resilience of its business due to its geographic diversification and product offering, as well as sound liquidity following a capital increase in early 2022. This capital increase provides BRF with financial flexibility in a challenging economic environment characterized by inflationary pressure, weak consumer confidence and high interest rates. KEY RATING DRIVERS Slow Deleveraging Expected: Fitch expects BRF's net leverage to decrease toward 3.7x in 2022 (4.1x in 2021) primarily as a result of a BRL5.4 billion capital increase in early 2022, which was necessary to mitigate weak operating cash flow due to cost pressure. Fitch forecasts high single-digit revenue growth driven by price increases and the strong performance of BRF's international operations (notably the halal and export segments), while its Brazilian operations is expected to remain challenged by the weak consumer environment. Fitch's net debt/EBITDA ratio is around 0.9x higher than the ratio reported by BRF due to IFRS16 adjustments as well as the inclusion of securitized receivables. Pressured EBITDA: Fitch forecasts EBITDA of about BRL5 billion (before IFR16 adjustments) in 2022, which is a drop from BRL5.6 billion in 2021, due to higher raw materials (corn and soybean) and logistics costs. BRF increased its average price by 19% during 2021 but its EBITDA margin declined to 11.5% in 2021 (12.9% in 2020) due to high commodity costs that are expected to persist in 2022. Performance was driven by the resilience of the Brazilian division and strong performance of the Halal and direct export units (notably Singapore, South Africa and Oman) of its international operations; Asia was negatively impacted by contraction of pork export volumes as the herd has been rebuilt following the Asian swine flu. New Board Change: Marfrig Global Foods S.A., while maintaining its participation stable at about 33.25%, gained influence over the BRF board in late March 2022 with the election of 10 board members including the nomination of Marcos Antonio Molina as the new Chairman, effectively allowing Marfrig to influence the company's strategy. Fitch expects both companies to operate separately as they have different operations, brands, limited synergies, no legal ties (guarantees or debt cross-default) and substantial shareholders float. However, a merger of the two companies can't be ruled out in the long term as a merger was attempted in 2019. Steady Capex: Fitch expects capex to remain steady at about BRL3.1 billion in 2022 due to the difficult operating environment amid weak consumption in Brazil. Fitch is not forecasting any large M&A in 2022. The company aims to become one of the two largest food companies for pets in Brazil and to have approximately 70% of revenue derived from its portfolio of high added-value products by the end of this decade. Geographic Diversification: BRF's business profile benefits from its geographic diversification, with approximately 47% of its sales occurring outside Brazil. The company's diversification, in terms of sales and production, mitigates risks, such as potential restrictions on exports that may occur in particular regions of the country due to sanitary concerns. Protein Sector: Fitch expects long-term fundamentals for the protein sector to remain positive due to growing demand for protein and strong export markets. The USDA forecasts Brazilian chicken meat domestic consumption to remain stable, but for exports to remain strong at about nine percent in 2022. However, the sector remains exposed to raw material pressure, sanitary risks, exports bans and environmental issues including deforestation from grain suppliers in Brazil. Strong business profile: BRF is one of Brazil's largest food companies and one of the largest poultry exporters worldwide, with cash flow benefitting from strong domestic brands that give the company market shares ranging between 40% and 50% in multiple market segments. Although barriers to entry in the processed food segment are relatively low, BRF benefits from its extensive product offering, strong brand recognition, recurring innovation and extensive distribution capacity for refrigerated products in Brazil. DERIVATION SUMMARY BRF S.A.'s ratings reflect the group's business profile as one of the largest poultry exporters in the world, with a solid processed foods business, strong brand awareness in Brazil, and a vast distribution platform. The company is also leader in the Halal market with a market share of about 38% in the Gulf Cooperation Council countries. BRF's ratings are tempered by the company's large exposure to Brazil and high business, execution and sanitary risks associated to the commodity part of the business. The company has weaker credit metrics compared to other international peers, such as Tyson Foods Inc. (BBB/Stable), and JBS SA (BBB-/Stable), which operate with lower gross and net leverage ratios. KEY ASSUMPTIONS Fitch's Key Assumptions Within Fitch's Rating Case for the Issuer: -- Revenue growth driven by high single-digit prices; -- Net debt/EBITDA trending towards 3.7x in 2022; -- Capital increase of BRL5.4 billion; -- No dividends. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Net leverage at or below 3x for a sustained period of time and gross leverage below 4x for a sustained basis period of time; -- Positive FCF. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Net debt/EBITDA above 4x or Gross debt/ EBITDA above 5x for a sustained period of time; -- Sustained negative FCF generation; -- EBITDA margin below 8%; -- Weak liquidity; -- A multi-notch downgrade of Brazil would put pressure on BRF's ratings. 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: BRF's liquidity remains adequate. As of Dec. 31, 2021, BRF had BRL7.5 billion of cash and cash equivalents and BRL3.2 billion of short-term debt (mainly trade finance and working capital lines). Approximately 67% of the total debt is foreign currency denominated. The company's liquidity was bolstered by an additional BRL5.4 billion following the capital increase in February 2022. ISSUER PROFILE BRF S.A. (BRF) is one of the largest food companies in the world, with strong brands such as Sadia, Perdigão, Qualy, Paty, Dánica, Bocatti and Vienissima. Its products are sold in 127 countries and four continents. ESG CONSIDERATIONS Fitch has changed BRF ESG Relevance Score of '4' from '3' in Governance as a result of ownership concentration due to the influence of Marfrig on BRF board. The shareholder's strong influence upon management could result in decisions being made to the detrimental to the company's creditors. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. DEBT RATING PRIOR ---- ------ ----- BRF S.A. LT IDR BB Affirmed BB Natl LT AA+(bra) Affirmed AA+(bra) senior unsecured LT BB Affirmed BB senior unsecured Natl LT AA+(bra) Affirmed AA+(bra) =============== C O L O M B I A =============== OPAIN: Fitch Removes 'BB+' on $415MM Notes From Rating Watch Neg. ----------------------------------------------------------------- Fitch Ratings has removed the 'BB+' rating of Sociedad Concesionaria Operadora Aeroportuaria Internacional, S.A.'s (OPAIN) USD415 million senior secured notes (the notes) from Rating Watch Negative (RWN) and has placed them on Rating Outlook Negative. OPAIN is the concessionaire of El Dorado International Airport in Bogota, Colombia. The rated notes coexist on a pari-passu basis with two Colombian peso denominated loans, for amounts of COP100 billion and COP315 billion, which mature in October 2025 and December 2028, respectively. RATING RATIONALE The removal of the RWN reflects Fitch's reduced concerns with respect to the project's short-term liquidity, as a result of better than expected traffic and revenue performance in the last quarter of 2021 and during the first two months of 2022. The assignment of the Negative Outlook reflects the uncertainty with respect to the pace of traffic recovery, where a slower recovery could reduce the project's ability to comply with its operational and financial obligations. The latter is especially relevant considering that there is a remaining amount of concession fees from 2020 that should be paid by June 2022 of approximately COP60 billion. The rating reflects El Dorado airport as a strategic asset for Colombia, being the main gateway to the country and the third-largest airport in Latin America in terms of traffic volume. The airport has a robust traffic base, comprising mainly origin and destination (O&D) passengers and has a demonstrated history of strong traffic performance with relatively low volatility. The rating also reflects a dual-till rate-setting framework, with an adjustment mechanism for regulated revenues that tracks local and U.S. consumer prices indices. The debt is fixed-interest rate and fully-amortizing with a six-month debt service reserve account (DSRA) and standard covenant package and structural features. Under Fitch's rating case, minimum and average debt service coverage ratio (DSCR) are 0.6x (in 2022) and 1.1x (2022-2026), respectively. After 2023, the average DSCR improves to 1.3x and would be consistent with the assigned rating, according to applicable criteria. The DSCR below 1.0x in 2022 is due to the payments of the concession fees from 2020 and 2021, which were delayed. However, the concessionary already paid COP147 billion with cashflow from operations, and the expected shortfall can be covered with existing liquidity (unrestricted cash and DSRA). As of February 2022, the project maintains an unrestricted cash balance of COP147 billion (USD38 million). KEY RATING DRIVERS Essential Infrastructure Asset in Colombia [Revenue Risk: Volume - Stronger]: Located in Bogota's metropolitan area, El Dorado airport is a critical facility that serves as the country's largest commercial airport and its international gateway. The airport benefits from a large O&D base, with traffic volume showing strong positive growth for the last decade and no meaningful competition from other airports or forms of transportation. Although Avianca Holdings S.A. constitutes over 60% of total traffic (pre-pandemic levels), counterparty risk is relatively mitigated by the airport's strategic and competitive position within the country and the region. Dual-Till Rate Setting [Revenue Risk: Price - Midrange]: The concession contract establishes that regulated revenues, which comprise the majority of OPAIN's revenues, are adjusted yearly to track 95% of Colombian or the U.S. CPI, depending on the currency denomination of the tariff. Extraordinary increases in tariffs may occur in case either CPI varies by more than 10%, since the last tariff update. Commercial revenues are not subject to a tariff adjustment mechanism and are negotiated in private agreements with each tenant. Well-Maintained Airport [Infrastructure Development/Renewal - Stronger]: El Dorado is a modern airport in good condition, with well-defined maintenance needs, as the concession expires in six years. The airport ended the construction phase in January 2019, and no major works are pending, aside from potential complementary and voluntary works. According to the independent engineer, capex related to refitting the airport (replacement capex, or repex) is adequate to cope with the expected expenses associated to the concession's expiration. Midrange Structural Features [Debt Structure - Midrange]: Debt structure comprises the U.S. dollar-denominated senior secured notes issuance and two non-rated Colombian peso-denominated loans. The notes are fully amortizing and with a 4.09% fixed-interest rate. The structure benefits from six-month DSRAs with one offshore account for the rated debt and one onshore account for the non-rated facilities. The offshore account shall increase over the debt term to 12-months debt service if the historical DSCR ended on or after June 30, 2024 is less than 1.20x. Other structure features include adequate debt incurrence and a dividend distribution test at 1.20x, which provides adequate mitigation for the absence of a cash waterfall. Exposure to foreign exchange risk is seen as limited as approximately 75% of revenues are U.S. dollar-denominated, providing a natural hedge against Colombian peso/U.S. dollar exchange rate variations. Financial Summary: DSCR is viewed as the relevant metric for the transaction, given its short maturity and fully-amortizing nature. Minimum and average DSCRs under Fitch's rating case are 0.6x (2022) and 1.1x (2022-2026), respectively. After 2022, the average improves to 1.3x and would be consistent with the assigned rating, according to applicable criteria. PEER GROUP El Dorado's closest peer is Mexico City's airport (Grupo Aeroportuario de la Ciudad de Mexico, GACM), rated 'BBB-' with a Stable Rating Outlook. GACM and El Dorado are international gateways for their countries with a sizable O&D market. However, GACM has aged facilities and significant capacity constraints, while El Dorado is a modern and well-maintained airport with defined maintenance needs. GACM's average DSCRs is higher at 1.8x, while El Dorado shows DSCR below 1.0x in 2022 due to current liquidity constraints. Additionally, although GACM's current leverage at 14.7x is high for the rating category, it is expected to return to within the indicative criteria range for the rating category by 2023. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Traffic recovery in 2022 below 2019 levels, and/or the expectation of slow and extended recovery; -- Significant disruptions in operations from Avianca, its anchor carrier; -- Material deterioration of liquidity that jeopardize the project's ability to pay debt service. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Traffic recovery in 2022 significantly above 2019 levels; -- A positive rating action on Colombia's sovereign rating, as long as the airport's fundamentals support that view. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Sovereigns, Public Finance and Infrastructure 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 three 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. CREDIT UPDATE In 2021, total passengers reached 22.1 million, which represented 63% of the levels observed in 2019. Domestic traffic showed a greater resilience than international traffic, with an average recovery of 72% versus 45%. During 4Q21, traffic recovery was 86%, outperforming Fitch rating case's expectations of 75%. Also, at the close of February 2022, traffic recovery reached 99% compared with the same month in 2019, which also compares favorably with Fitch's expectation of 85%. According to the concessionaire, traffic recovery was affected in 2021 due to a combination of several factors, such as the restriction of the daily airport's operations by the Civil Aviation Authority of Colombia following the reopening of the airport in September 2020 and the confidence of travelers to fly. This restriction was eased in November 2021, which allowed the airport to increase its operation to approximately 90% of its total capacity. Traffic also benefited from the increase in airlines' route offering during the year. Total revenues were COP828 billion (USD221 million), representing 63% of the levels registered in 2019, and exceeded Fitch's rating case projections by 11%, due to a higher-than-expected recovery in international traffic. During 1Q22, Opain paid the first and second instalment of the differed concession fee payments corresponding to 1H20, and the concession fee for the 2H20, which had been differed by ANI. The remaining concession fee corresponding to 1H20 will be paid through three remaining instalments, two in May and one in June 2022. Operating expenditures in 2021, excluding the concession fee, were COP203 billion, below Fitch's expectation of COP222 billion, due to lower service and maintenance expenses. Also, capex reached COP5 billion, below Fitch's expectation of COP6 billion. In December 2021, Opain successfully close the refinancing of its COP315 billion loan with Bancolombia, which has reduced the pressure in the cash flow available to serve the rated debt for 2022, since the principal payments of 2022 have been differed for later years. Debt service in 2021 was COP307 billion, higher than projected due to a higher Colombian inflation in 2021, which increased the interest payment of the COP315 billion loan. Also, when considering the actual average COP/USD exchange rate in 2021, debt service payments of the notes, express in COP, were higher than projected. As a result of higher revenues and lower expenses, DSCR in 2021 was 1.1x, above Fitch's rating case projection of 1.0x. The U.S. dollar-denominated and the Colombian peso-denominated DSRAs currently are properly funded with a balance of USD33 million and COP31 billion, respectively. FINANCIAL ANALYSIS Fitch's base case reflects actual performance in 2021 and assumes domestic traffic reaches full recovery in 2022 plus a growth of 5%; then, a 4.5% CAGR from 2023 to 2026. For international passengers, the agency assumed a 90% recovery in 2022 and 100% in 2023, compared with 2019; then, a 5.1% CAGR from 2024 to 2026. The budgets for administrative and operating expenses were stressed by 3%. U.S. CPI reflects Fitch's forecast of 4.5% in 2022, 2.6% in 2023 and 2.0% from 2024 onward, while Colombia's CPI forecast is 3.5% in 2022 and 3.0% from 2023 onward. Under this scenario, minimum DSCR is 0.7x in 2022 and average (2022-2026) is 1.2x. Fitch expects debt service in 2022 to be met with held cash balances. Fitch's rating case assumes domestic traffic reaches full recovery in 2022. Then, a 3.3% CAGR from 2023 to 2026. For international passengers, the agency assumed a recovery of 80% in 2022, 90% in 2023 and 100% in 2024; then, a 3.7% CAGR from 2025 to 2026. The budgets of administrative, operating and capital expenses were stressed by 5%. U.S. CPI and Colombia's CPI were assumed the same as the base case. Under this scenario, minimum DSCR is 0.6x in 2022 and average (2022-2026) is 1.1x. Fitch expects debt service in 2022 to be met with held cash balances. SECURITY The ANI granted OPAIN a 20-year concession to operate and expand El Dorado International Airport on Sept. 12, 2006. Located in Bogota, the capital city of Colombia, El Dorado is the third-busiest airport in Latin America in terms of traffic and the most active in the region in terms of cargo. It has an estimated catchment area of 10.7 million people and serves all major Colombian cities at 41 domestic routes and major international destinations at 50 international routes across the Americas and Europe. The concession agreement excludes the runways and air traffic control, taxiways, administrative buildings, and designated military, police and government facilities. The airport airfield consists of two parallel independent runways. In January 2019, OPAIN ended the construction phase. All the mandatory works have been carried out including the construction of a new passenger terminal, new cargo facilities, new office buildings and new apron. 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. RATING PRIOR ------ ----- Sociedad Concesionaria Operadora Aeroportuaria Internacional S.A. Sociedad Concesionaria Operadora Aeroportuaria Internacional S.A./ Senior Secured Bond/1 LT LT BB+ Affirmed BB+ TERMOCANDELARIA POWER: Fitch Affirms 'BB' LongTerm IDRs ------------------------------------------------------- Fitch Ratings has affirmed TermoCandelaria Power S.A.'s (TPL) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB'. The Rating Outlook is Stable. Fitch has also affirmed TPL's USD596 million senior unsecured note due 2029 at 'BB'. The ratings reflect the strategic importance of TPL's assets for the Atlantic coast of Colombia, given the current constrains of the transmission infrastructure and quality of service requirements. The company's ratings continue to reflect the combined operations of its operating subsidiaries,TEBSA and TECAN, its competitive position in the electricity generation market in Colombia, limited contracted position, and the low diversification of its asset base. Fitch expects gross leverage to trend toward 3.5x from 2023, which assumes TECAN's combined cycle project enters online in 4Q22 and starts generating an additional USD35 million from the reliability charge. KEY RATING DRIVERS Strategic Asset for the Atlantic Region: TPL's assets are significant for the Atlantic coast of Colombia, providing roughly 20% of the region's electricity demand, generating 3,500 GWh per year on average. TPL's assets are designed to cover peaks in electricity demand, shortfalls from the country's hydroelectric plants, and cope with constraints in the transmission grids and quality of service requirements. TPL constitutes a natural hedge for the intermittency of non-conventional renewable projects, which are slated to come on-line in the medium term. Limited Contracted Position: TPL remains a marginal cost producer with no long-term power purchase agreements (PPAs), which makes it highly reliant on spot sales. This risk is offset by transmission network inefficiencies (i.e. bottlenecks) and its cost competitiveness, as it sources gas domestically and has access to an LNG terminal in the Caribbean coast of Colombia. TPL's gas-fired plants generated 3,525GWh in 2021, 94% of this amount, or 3,306GWh, was out-of-merit (dispatch due to system inefficiencies at generation cost) and 219GWh was in-merit (spot sales). The current constraints in transmission infrastructure should offset the effect of the entry of lower-cost plants, such as EPM's 2,400MW Ituango hydro plant and the 2,500MW of non-conventional renewable projects in the country. Limited Operational Diversification: TPL's credit profile is constrained by the limited diversification of its operations. The company is exposed to a higher degree of event risk than local and regional peers from unexpected outages or disaster disruptions. Although out of contract sales eliminate exposure to spot market volatility as a buyer, TPL's take-or-pay regasification contracts would put additional pressure on its subsidiaries' cost structure in the event of an interruption in generation. TPL combines the operations of 1,295MW of thermal electric assets, which represented around 7% of the Colombian electricity generation matrix and around 24% of the country's thermal installed capacity in 2021. Gas Contracts Renegotiated: TPL reduced its exposure to dispatch risk and lower demand conditions by renegotiating gas contract commitments with key local suppliers beginning in 2021. The new contracts reduced the total committed cost by nearly 24% in 2021. Additionally, the company is able to defer the purchase of gas, allowing it to optimize production according to price and demand conditions. In exchange, the company agreed to extend one of the two main contracts for an additional two years through 2024. TPL may purchase additional gas under the contracts, if needed, or import LNG from its leased terminal storage until 2026 with the right to extend until 2031. Reliance on System Inefficiencies: TPL benefits from the country's transmission bottleneck in the northern coast, which results in persistent dispatch by TEBSA in order to meet demand despite the company's comparative higher costs relative to non-coastal generation assets. TPL's ratings incorporate Fitch's expectation that TEBSA will maintain a load factor around 50% in the medium term, which would be in line with historical levels. Demand characteristics of the Caribbean coast also suggest relatively high growth through the medium term, supporting TEBSA's continued dispatch as long as present transmission and capacity dynamics continue. Structure Mitigates Market Risks: In the long term, new investments in the transmission network or the development of nonconventional renewable energy projects in Colombia's coastal region could displace TEBSA within the dispatch curve, resulting in lower EBITDA. The government has awarded 2,000MW of wind projects in the La Guajira Region, although transmission line construction delays will likely push their commercial operation dates into at least 2023. These risks are partially mitigated by TPL's amortizing structure. Credit Profile Linked to OpCos: TPL is a holding company that combines operations of two electricity generation companies, TEBSA and TECAN, located on Colombia's Caribbean coast. TPL fully owns and controls TECAN and has a 57.38% stake in TEBSA. TPL's ratings are mostly related to TEBSA's credit profile as TEBSA accounts for approximately 80% of TPL's consolidated EBITDA. Fitch expects a more even split between the two plants once TECAN completes its combined cycle expansion in 4Q22. DERIVATION SUMMARY TPL's ratings are in line with Nautilus Inkia Holdings LLC's (BB/Stable), its closest peer. Although lacking Inkia's geographical diversification and asset base mix provided by its key subsidiary Kallpa Generacion S.A. (BBB-/Stable), TPL's financial policy and amortization profile are more conservative, with expected 2023 gross leverage levels post-expansion of 4.1x, while Fitch expects Inkia's leverage to be 4.6x in 2023. Inkia's debt is structurally subordinated to debt at the operating companies, while TPL's recent transaction fully replaced debt at the subsidiary level. TPL's capital structure also compares positively with Orazul Energy Peru S.A. (BB/Stable). Orazul's high medium-term leverage of 5.0x under Fitch's forecast places it at the high end of its rating level. TPL's business risk is higher than multi-asset energy regional investment-grade peers such as AES Panama Generation Holdings, S.R.L. (BBB-/Stable), Kallpa and AES Andes S.A. (BBB-/Stable). All of these companies benefit from a strong contractual position in their respective markets. These companies' PPAs support their cash flow stability through USD-linked payments and, in Kallpa's case, pass-through clauses related to potential increases in fuel costs. This contributes to higher EBITDA visibility in the long term compared to TPL, which remains exposed and exogenous supply/demand dynamics. Although TPL's key subsidiary TEBSA maintains relative cost efficiency that currently places it within the coastal base load, future additions to the local renewable energy matrix or expansion of the national transmission network could potentially displace the company from its strong competitive position in the coastal region in the long term. TPL ratings are two notches below Fenix Power Peru S.A. (BBB-/Stable). As a single-asset generator with a high proportion of take-or-pay costs and including its deleveraging trajectory of reaching below 4.4x by 2024, Fitch views Fenix's standalone credit quality in line with a 'BB' rating. Nevertheless, Fenix's ratings are buoyed by its strong support from its parent Colbun S.A. (BBB+/Stable). KEY ASSUMPTIONS Fitch's Key Assumptions Within Fitch's Rating Case for the Issuer -- The company closes the cycle at its TECAN plant increasing its installed capacity to 566MW from 314MW in October 2022 -- The company's reliability charge increases at an average U.S. CPI rate of inflation of 2.0%; -- TPL's combined annual generation over the medium term of roughly 3,600GWh per year, similar to the level reported in 2020; -- TEBSA's and TECAN's availability factors at 90%; -- No dividends are paid over the rating horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Sustained total debt/EBITDA of 3.3x or lower in combination with a debt service coverage ratio above 1.8x. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- Consolidated leverage levels above 4.8x on a sustained basis; -- FFO interest coverage of 2.0x or below on a sustained basis or a debt service coverage ratio below 1.2x; -- Material delays or cost overruns at the TECAN combined cycle project. 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 Tight Liquidity: TPL's liquidity position was tight at 1.2x as of YE 2021, given the beginning of amortizations on a full year of interest on its 2029 notes as well as a still recovering economic environment following a challenged 2020. Consolidated cash on hand ended 2021 with USD53 million to attend USD44.7 million. Fitch estimates capital expenditures of USD75 million in 2022, the majority of which is earmarked for the combined cycle closure at the company's TECAN's plant. FFO interest coverage is expected to be tight as well at just above 2.0x during the rating horizon. TPL has lending relationships with both local and international banks for its working capital needs. ISSUER PROFILE TPL is a holding company that owns and operates 1,295MW of thermal power capacity in the Atlantic region of Colombia, through Termobarranquilla (TEBSA) and Termocandelaria (TCAN), making up roughly 24% and 7% of the country's thermal and total installed capacity, respectively. SUMMARY OF FINANCIAL ADJUSTMENTS -- Total debt adjusted by financial leases under IFRS 16; -- Total debt adjusted by intercompany loans from TPL to TEBSA and TCAN; -- EBITDA adjusted by dividends paid to minority shareholders. 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 ---- ------ ----- TermoCandelaria LT IDR BB Affirmed BB Power, S.A. LC LT IDR BB Affirmed BB senior unsecured LT BB Affirmed BB =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Housing Prices Soar Since 2018 -------------------------------------------------- Dominican Today reports that houses that cost between 1,750,000 and 1,800,000 pesos, (US$62,000) in 2018, currently reflect increases close to 100% due to the impact of the raw materials used by the sector. "These same homes that we are placing at 3,500,000 and 3,700,000 pesos are the same homes that we placed in 2018 at 1,800,000 or 1,750,000 pesos," explained the president of the Dominican Confederation of Small and Medium Construction Companies (Copymecon), Eliseo Christopher, according to Dominican Today. He said that, at the beginning of 2021, the small developers "assuming some costs," were placing and delivering them at 2,250,000 and 2,249,000 pesos, "but right now the sales that are going to come out of those homes are 3,500,000 and 3,700,000 pesos, with an increase extremely wide," the report relays. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'. The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative. S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said. A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. DOMINICAN REPUBLIC: To Get US$1.8B Form World Bank, But Needs More ------------------------------------------------------------------- Dominican Today reports that the fiscal deficit is expected to be reduced from 2.7% to 2.3% of the gross GDP during the period 2021-2026, but the Dominican Republic needs more fiscal space for health services, social safety nets, public investments, the accumulation of reserves against natural disasters and to ensure a descending debt trajectory. The World Bank Group raises in its new report for the Country Alliance Framework with which they plan to invest US$1.8 billion in development projects, according to Dominican Today. In the heels of the effects caused by the Covid-19 pandemic, the Dominican Government created an economic and social aid plan to help the population cope with the economic crisis that was aggravated by the war between Russia and Ukraine, the report notes. The set of measures aimed at reducing the impact on citizens' out-of-pocket spending has consumed more than 11.0 billion pesos in these first four months of 2022, more than was spent in all of 2021, when it was calculated that spending was for 15.0 billion pesos, according to the Ministry of Economy, Planning and Development (MEPyD), the report relays. Despite the variation in the pace of public spending, the Minister of Economy, Ceara Hatton, assured that the development of the budget execution has been satisfactory and that the fiscal balance continues to be positive, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'. The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative. S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said. A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. ===================== E L S A L V A D O R ===================== BANCO DE DESARROLLO: Moody's Downgrades Issuer Rating to Caa3 ------------------------------------------------------------- Moody's Investors Service has downgraded Banco de Desarrollo de la Republica de El Salvador's (Bandesal) foreign currency issuer rating to Caa3 from Caa1 and its baseline credit assessment (BCA) to caa3 from caa1. The bank's long-term counterparty risk rating and counterparty risk assessment were also downgraded to Caa2 and Caa2(cr), from B3 and B3(cr), respectively. At the same time, the short-term counterparty risk rating and counterparty risk assessment were affirmed at Not Prime and Not Prime(cr), respectively. The outlook remained negative. The rating action follows the announcement made by Moody's Investors Service on May 4, 2022 that it downgraded El Salvador's sovereign bond rating to Caa3 from Caa1, and maintained the negative outlook. The following ratings and assessments assigned to Banco de Desarrollo de la Republica de El Salvador were downgraded: Baseline credit assessment and adjusted baseline credit assessment, to caa3 from caa1 Long-term foreign currency issuer rating, to Caa3 from Caa1, outlook remains negative Long-term foreign currency counterparty risk rating, to Caa2 from B3 Long-term counterparty risk assessment, to Caa2(cr) from B3(cr) The following ratings and assessments assigned to Banco de Desarrollo de la República de El Salvador were affirmed: Short-term foreign currency counterparty risk rating of Not Prime Short-term counterparty risk assessment of Not Prime(cr) Outlook action: Outlook remains negative RATINGS RATIONALE The downgrade of Bandesal's ratings and assessments was prompted by the downgrade of El Salvador's sovereign bond rating to Caa3, from Caa1. Bandesal's issuer rating is constrained by El Salvador's sovereign rating, reflecting Moody's view that as a state-owned bank, its creditworthiness is intrinsically interlinked with that of the government. The sovereign rating action reflects an increased probability of a credit event – restructuring, distressed exchange, or default – with relatively high severity, as the sovereign faces a challenging debt amortization schedule with bond maturities in 2023 and 2025 in a context of continued funding stress and persistently high financing needs. The negative outlook on Bandesal's rating is also in line with the negative outlook on the sovereign rating which in turn captures Moody's view that in the event of a default losses to investors could exceed those typically associated with a Caa3 rating. The interlinkages between Bandesal and the government's creditworthiness are mainly related to the impact of the sovereign credit profile on the bank's operating environment and potential funding pressures for the bank that could arise from a deterioration of El Salvador's own access to market funding and a potential sovereign credit event. These pressures are partly mitigated by Bandesal's reliance on long-term multilateral funding. The low predictability of institutions and government policies coupled with the sovereign's liquidity pressures create additional risks for the bank's overall credit profile. Despite the deteriorated credit conditions of the sovereign government, Bandesal has maintained good asset quality metrics, which benefit from its focus on indirect lending through other financial institutions, and strong capital position. The bank's Caa3 rating also acknowledges its preferred creditor status as the government development bank in El Salvador and the conservative risk guidelines. However, in 2020-21, riskier direct loans to corporates and Micro-, Small and Medium-sized Enterprises (MSMEs) expanded, reaching 31% gross loans, from about 5% in 2018-19, which will increase pressure on future asset risk metrics, as these loans mature amid less favorable economic conditions and higher energy prices. While the bank focused on growing into higher risk lending, loan loss reserves declined to 2.5% in 2021, from a 3.6% average for the past five years. Bandesal's strong capitalization represents a key strength and provides a sizeable buffer to absorb losses and support loan growth. As of September 2021, the bank's tangible common equity (TCE) to risk weighted assets (RWA) ratio stood at about 47% supported by the bank's earnings and contained dividend payments, although it declined from 56% in 2020 due the acceleration of loan growth into corporates and MSMEs in 2021. This expansion strategy also pressured the bank's liquidity profile in 2021, with liquid assets declining to 10% of tangible banking assets at the end of 2021, from about 20% in the past five years. However, despite being a state-owned bank, Bandesal does not hold El Salvador's sovereign debt, and does not provide direct financing to the government, as per the Salvadoran Development Bank Law [1], a mitigant to additional pressure that could arise considering the current sovereign liquidity conditions. In terms of profitability, the bank has historically reported moderate performance, with net income to tangible banking assets below 1%. This results from Bandesal's focus on lower-margin loans to financial institutions and its full reliance on a more expensive wholesale funding, which is partially compensated by its historically low credit costs. While profitability levels increased between 2020 and 2021 mainly because of higher yield on the direct lending portfolio, Moody's believes that rising funding costs and potentially higher provisioning expenses will push profitability closer to historical levels. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS An upgrade is unlikely for Bandesal at this time because the rating is currently constrained by the Government of El Salvador's sovereign rating and the outlook is negative, aligned to the outlook on the sovereign rating. However, the outlook could be changed to stable following a stabilization of the Government of El Salvador's sovereign rating outlook, provided that the bank's financial profile remained sound. On the other hand, downward pressure on the bank's ratings would arise following a further downgrade of the sovereign rating in light of the high interlinkages between bank's creditworthiness and that of the government. The principal methodology used in these ratings was Banks Methodology published in July 2021. ============= J A M A I C A ============= DIGICEL GROUP: Fitch Affirms 'CCC' IDR, Off Rating Watch Positive ----------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of Digicel Group Holdings Limited (DGHL) at 'CCC' and removed the Rating Watch Positive (RWP) on all ratings. The IDR of Digicel Limited (DL) has been downgraded to 'CCC+' from 'B-' and the IDR Digicel International Finance Limited (DIFL) has been affirmed at 'B-' with a Stable Rating Outlook. The removal of the RWP and downgrade of Digicel Limited reflect increased refinancing risk of its $925 million Unsecured Notes due in March 2023 due to deteriorating macroeconomic conditions globally, rising interest rates and increased investor risk aversion. DIFL's ratings reflect its strong position in the capital structure as the direct owner of the Caribbean operating subsidiaries. DIFL's consolidated leverage is in the 4x range compared with DGHL at around 6x and DL at 5x. KEY RATING DRIVERS Significant Refinancing Risk: Digicel is expected to use $1.4 billion of net proceeds from the sale of its Pacific asset to repay the $1.048 billion senior secured PIK Notes due 2025 at DGHL. Even if the remaining $352 million will be used to partially repay its Digicel Limited's $925 million senior unsecured note due in March 2023, the ability of Digicel Limited to successfully refinance the balance of this debt outside of a coercive exchange remains uncertain due to deteriorating macroeconomic conditions, rising interest rates and a decrease in risk appetite. There is a low margin of safety for the company, and a default and/or default like process is a real possibility, which is reflected in the removal of the Rating Watch Positive and downgrade to 'CCC+' from 'B-' for Digicel Limited and the affirmation of CCC for DGHL. Group Structure: Fitch has de-emphasized the importance of strength and the linkages of the consolidated group, due to its complex group structure and legal maneuvering, aggressive corporate governance, and the uncertainties surrounding cross-border insolvency in the countries of operation. While strong operational ties bind the group, the company's 2019 and 2020 debt restructurings have caused Fitch to discount the importance of the consolidated group, which is reflected in different IDRs for the different entities. Business Profile: Digicel's geographic diversification and competitive position are strong for the rating levels. The company is active in 32 markets across the Caribbean and Pacific, with leading market share in most; Many of these markets are duopolies, and Fitch does not believe the risk of a new entrant is high, due to the small size of each market. These dynamics support consistent EBITDA margins of around 40%. The group's USD2.4 billion in capex since FY 2015 should ensure network competitiveness. Under these circumstances, Fitch expects the company's competitive position to remain stable over the medium term. Modest Improvement in Sales: A rebound in tourism is expected to modestly improve the company's Caribbean revenues, which represent 80% of consolidated revenues, over the rated horizon increasing by 10% to USD2.0 billion. The company's revenues have been under pressure due to local currency depreciation and declining mobile voice sales, which have outweighed gains elsewhere. The company is diversifying into higher growth B2B solutions and home entertainment (B2C broadband and TV), to mitigate the decline in mobile voice, but B2B and entertainment account for only 20% of revenues at present. Aggressive Corporate Governance: Digicel's decision to restructure debt twice remains a constraint on the ratings. The group has a concentrated ownership and control structure along with a complex group structure that weakens both Digicel's corporate governance and the group's consolidated credit profile. Digicel Group Holdings Limited has an Environmental, Social and Corporate Governance (ESG) Relevance Score (RS) of '5' for Group Structure due to its complex group structure and incorporation status in dozens of countries, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. Digicel Group Holdings Limited has an ESG RS of '5' for Governance Structure due to the concentrated nature of its decision making and willingness to restructure debt, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. DERIVATION SUMMARY DGHL's solid business profile, with leading mobile market shares in its well-diversified operational geographies supported by network competitiveness, is stronger than Oi S.A. (CCC+), which has also restructured its debt. Similar to Oi, Digicel has very limited financial flexibility and a weak financial structure. Digicel's financial profile is materially weaker than its regional diversified telecom peers in the speculative-grade rating categories, including Millicom International Cellular S.A. (BB+/Stable), and Cable & Wireless Communications Limited (BB-/Stable). Digicel's business profile is relatively less diversified on a service basis, given its reliance on mobile and a position in generally poorer countries with significant exchange rate volatility. The aggressive corporate governance resulting in two debt restructurings is a negative for the group's ratings. Under Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the agency caps Digicel's debt instruments at 'RR4'; therefore, the instruments' ratings are capped at the issuers' IDRs. KEY ASSUMPTIONS -- Sales in the Caribbean trending toward USD2.0 billion in 2025 from USD1.7 billion in 2021; -- EBITDA margins around 37%; -- Cash interest of USD330 million in 2023 declining USD290 million in 2024, cash taxes of USD100 million/year to USD85 million; -- Average capex of around USD270 million/year to USD300 million/year; -- Refinancing and debt issuances out of DIFL. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: -- Faster than expected growth in mobile service revenues leading to EBITDA expansion coupled with net leverage declining toward 5.0x; -- Successful refinancing of outstanding debt without a material reduction of the original terms, such as but not limited to, a reduction to principal and/or interest or fees. Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade may occur if, in Fitch's judgment, a default of some kind appears probable or a default or default-like process has begun, which would be represented by a 'CC' or 'C' rating. 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 The company faces USD925 million in notes maturing in March 2023 at DL. This compares with USD415 million of consolidated DGHL cash as of December 2021, of which USD243 million is at DIFL and its subsidiaries. Of DGHL's consolidated USD5.7 billion of financial debt, USD2.9 billion is at the DIFL level, USD925 million at the DL level and USD1.7 billion at the DGHL level. In addition, there are USD77 million of debt at Digicel Pacific Limited and other debt and accrued interest. The DIFL debt comprises USD356 million of unsecured notes, USD250 million of subordinated loans, USD1.2 billion of secured notes and USD1.0 billion of term loans. The DL debt mainly comprises USD925 million of unsecured notes and DGHL debt comprises USD1.0 billion of secured notes, USD425 million of unsecured notes and USD206million of subordinated convertible PIK notes. ISSUER PROFILE Digicel is a diversified telecom operator that provides mobile and fixed-line services to consumers and businesses in the Caribbean and South Pacific regions. ESG CONSIDERATIONS Digicel Group Holdings Limited has an Environmental, Social and Corporate Governance (ESG) Relevance Score (RS) of '5' for Group Structure due to its complex group structure and incorporation status in dozens of countries, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. Digicel Group Holdings Limited has an ESG RS of '5' for Governance Structure due to the concentrated nature of its decision and willingness to restructure debt, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. Digicel Group Holdings Limited has an ESG RS of '4' for Exposure to Environmental Impacts due to its presence in a hurricane prone region, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Digicel Group Holdings Limited has an ESG RS of '4' for Financial Transparency due to the company's relatively opaque financial strategy and willingness to restructure debt, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. DEBT RATING RECOVERY PRIOR ---- ------ -------- ----- Digicel International LT IDR B- Affirmed B- Finance Limited senior unsecured LT B- Affirmed RR4 B- junior subordinated LT B- Affirmed RR4 B- senior secured LT B- Affirmed RR4 B- Digicel Group LT IDR CCC Affirmed CCC Holdings Limited senior unsecured LT CC Affirmed RR6 CC subordinated LT CC Affirmed RR6 CC senior secured LT CCC Affirmed RR4 CCC Digicel Limited LT IDR CCC+ Downgrade B- senior unsecured LT CCC+ Downgrade RR4 B- ======= P E R U ======= NEXA RESOURCES: S&P Withdraws 'BB+' LT Issuer Credit Rating ----------------------------------------------------------- S&P Global Ratings withdrew its 'BB+' long-term issuer credit and issue-level ratings on Nexa Resources Peru S.A.A. (NRP) at the company's request following the repurchase of its 2023 corporate bond. As of March 28, 2022, NRP completed a redemption and early cancellation of all of its outstanding $128.47 million 4.625% senior unsecured bond due 2023. ===================== P U E R T O R I C O ===================== CAPETE CORPORATION: Case Summary & Six Unsecured Creditors ---------------------------------------------------------- Debtor: Capete Corporation d/b/a Motel Oriente Carr 181 KM 2.9 Quernado Ward San Lorenzo, PR 00754 Business Description: Capete Corporation is part of the traveler accommodation industry. Chapter 11 Petition Date: May 9, 2022 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 22-01314 Debtor's Counsel: Wigberto Lugo Mender, Esq. LUGO MENDER GROUP, LLC 100 Carr. 165 Suite 501 Guaynabo, PR 00968-8052 Tel: (787) 707-0404 E-mail: wigberto@lugomender.com Total Assets: $991,713 Total Liabilities: $4,997,599 The petition was signed by Margaro Rivera Guzman, president. A full-text copy of the petition containing, among other items, a list of the Debtor's six unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/LYZZ5SQ/Capete_Corporation__prbke-22-01314__0001.0.pdf?mcid=tGE4TAMA MAM CORPORATION: Case Summary & 15 Unsecured Creditors ------------------------------------------------------ Debtor: MAM Corporation d/b/a Motel Linda Vista Carr 31 KM 11.1 Rico Blanco Ward Naguabo, PR 00718 Business Description: MAM Corporation is part of the traveler accommodation industry. Chapter 11 Petition Date: May 9, 2022 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 22-01315 Debtor's Counsel: Wigberto Lugo Mender, Esq. LUGO MENDER GROUP, LLC 100 Carr. 165 Suite 501 Guaynabo, PR 00968-8052 Tel: (787) 707-0404 E-mail: wlugo@lugomender.com Estimated Assets: $500,000 to $1 million Estimated Liabilities: $1 million to $10 million The petition was signed by Agustin Rivera Guzman, president. A full-text copy of the petition containing, among other items, a list of the Debtor's 15 unsecured creditors is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/ICHAADA/MAM_CORPORATION__prbke-22-01315__0001.0.pdf?mcid=tGE4TAMA ============= U R U G U A Y ============= CASA FINANCIERA: Fitch Affirms 'CCC' LongTerm IDRs -------------------------------------------------- Fitch Ratings has affirmed Provincia Casa Financiera's (Provincia) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'CCC'. KEY RATING DRIVERS Provincia is a branch of Banco de la Provincia de Buenos Aires (BAPRO) and part of the same legal entity. Therefore, Provincia's IDRs reflect Fitch's opinion of BAPRO's stand-alone credit profile, which does not take support into consideration. Argentina's volatile operating environment, the bank's leading franchise and systemic importance in Argentina and the Province of Buenos Aires, with the second largest market share in terms of deposits and the fourth in terms of loans as of October 2021, highly influence BAPRO's credit profile. Fitch also takes into account the bank's ample liquidity, as well as its low capital base, weaker asset quality relative to domestic peers and high exposure to the public sector. BAPRO and Provincia are wholly owned by the government of the Province of Buenos Aires. BAPRO's liabilities (including those of its branches abroad) are guaranteed by the Province of Buenos Aires. In Uruguay, Provincia is small due to its narrow business focus. Its legal status as a casa financiera differs from a banking license because it is not allowed to raise resident deposits and has much lower regulatory costs. Provincia has not initiated any credit activity since 2020 because BAPRO was in the process of analyzing its strategy for its international operations. Provincia expects to resume its lending activity in 2H22. As part of the same legal entity, Provincia is fully integrated with its head office's structure, strategies, corporate governance practices, and risk management policies and procedures. It operates through one office and reports to the CEO of BAPRO. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade of the sovereign rating of Argentina will result in the same action on BAPRO and, therefore, Provincia; -- The IDRs would be pressured by a significant deterioration in BAPRO's financial profile caused by a deterioration in the Argentine operating environment; -- Any policy announcement in Argentina that would be detrimental to either BAPRO or Provincia's ability to service their obligations would be negative for their creditworthiness. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The IDRs could benefit from an upgrade of Argentina's sovereign rating. 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. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS Provincia is a full Branch of Banco de la Provincia de Buenos Aires (Bapro) and part of the same legal entity. Therefore, Provincia's IDRs reflect Fitch's opinion on Bapro's stand-alone credit profile, which does not take support into consideration. DEBT RATING PRIOR ---- ------ ----- Provincia Casa LT IDR CCC Affirmed CCC Financiera LC LT IDR CCC Affirmed CCC SUCURSAL URUGUAY: Fitch Affirms 'CCC' LongTerm IDRs --------------------------------------------------- Fitch Ratings has affirmed Banco de la Nacion Argentina's (Sucursal Uruguay) (BNAUY) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) at 'CCC'. KEY RATING DRIVERS BNAUY is a full branch of Banco de la Nacion Argentina (BNA) and part of the same legal entity. Its IDRs reflect Fitch's opinion on BNA's standalone credit profile (SCP), which does not take support into consideration. BNA is fully owned by the Argentine state and its liabilities (including its branches abroad) are guaranteed by the sovereign. In Fitch's view, BNA's creditworthiness is highly influenced by Argentina's volatile operating environment. In addition, BNA has a leading franchise and systemic importance in Argentina as the largest bank in terms of loans and deposits. In turn, BNAUY is the smallest bank in Uruguay due to its narrow business focus. It is fully integrated with the head office's structure, strategies, corporate governance practices and risk management procedures, and it operates through one main office. BNAUY has volatile profitability, a fairly liquid balance sheet, adequate capitalization and limited lending activity. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- A downgrade would be triggered by a downgrade of Argentina's sovereign rating; -- The IDRs would also be pressured by a significant deterioration in BNA's financial profile caused by a deterioration in the Argentine operating environment; -- Any policy announcement in Argentina that would be detrimental to either BNA or BNAUY´s ability to service their obligations would be negative for their creditworthiness. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The IDRs of BNAUY would benefit from an upgrade of Argentina's sovereign rating. 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. RATING PRIOR ------ ----- Banco de la Nacion Argentina (Sucursal Uruguay) LT IDR CCC Affirmed CCC LC LT IDR CCC Affirmed CCC ================= V E N E Z U E L A ================= VENEZUELA: Leisure & Fashion on Board Economic Recovery Train ------------------------------------------------------------- EFE News reports that the fashion and leisure industries in Venezuela have gotten on board the economic recovery train that got under way during the second half of 2021 and which the Caracas government hopes will pull the country out of its crisis. These sectors, which were among the hardest hit during the Covid-19 pandemic, are now taking advantage of the economic expansion to recover some of the losses they accumulated due to the cancellation of concerts, theater events, festivals and parades, according to EFE News. As reported in the Troubled Company Reporter-Latin America on Sep. 22, 2021, S&P Global Ratings withdrew its 'SD/D' foreign currency sovereign credit ratings and 'CCC-/C' local currency ratings on Venezuela due to lack of sufficient information. At the same time, S&P withdrew its 'D' issue rating on 15 bonds. =============== X X X X X X X X =============== LATAM: Do Not Hike Wages to Match Inflation, Says Haynes -------------------------------------------------------- Asha Javeed at Trinidad Express reports that as inflation rates climb throughout the Caribbean, Governor of the Central Bank of Barbados, Cleviston Haynes is cautious about wage adjustments to match it. "A wage adjustment to match inflation is really not the first best option for us," Haynes said at an inflation discussion hosted by the Central Bank of Barbados, according to Trinidad Express. Haynes said that once wages increase, there will be increased prices across the board, the report notes. He observed that in Barbados, they had experienced this in the late 70s early 80s "where we tried to match the price increases with the wages and all you had really was very high inflation until probably the late 80s," the report discloses. Caribbean economist Marla Dukharan observed that the pressure of higher prices is universal but it affects those at the lower income levels and those with fixed incomes like pensioners disproportionately, the report relays. "And in these cases, I think the State must intervene to ensure that the disadvantaged among us are supported appropriately," she said, the report notes. Haynes explained that the lower income bracket will be greatly impacted by inflation "because they spend more of their time and more of their income on food than those who have higher incomes," the report relays. Haynes said the region is importing inflation as 40% of imports in the region are related to food and energy, the report notes. "So if you have significant price increases in those areas, then that gets fed into our economies because the Caribbean economy is interdependent with the rest of the world," he added. "And what you have to appreciate here is that the supply shock that we are facing right now is impacting largely food and impacting energy. The high-ticket items have been food and energy and that is what really is driving the inflation rate." "In some countries, the focus is not on the headline inflation rate but really on what they call the core inflation rate, that is you take out food and energy because those are the things that you really have very little control over, and then you try to focus on the underlying inflation rate," Governor Haynes explained, the report discloses. "So in terms of how we address the impact of these prices on the average citizen is really to be able to frame targeted measures that are perhaps time bound because the food increases and the energy price increases are really likely to be transitory," he said, the report relays. He observed that oil prices are traditionally volatile and that the expectation is that it will taper off at the end of the year or in 2023, the report discloses. "So we run the danger of trying to have wage increases that are adapting to inflation, which is a temporary cycle. And when these things change, you already embedded those wage increases in and therefore they're more difficult to reverse. "So you need, I think, transfers perhaps that are time bound. So you may be doing it for a particular period of time, so as to be able to allow people to be able to adapt, but it's not a permanent feature of the government's expenditure or tax or tax system," he said, the report notes. Governor of the Bank of Jamaica Richard Byles echoed the sentiment, the report relays. Byles said in Jamaica, for the month of March, the country recorded 11.3 per cent inflation, with 76 per cent of it being attributed to food and energy, the report discloses. "So I think that Governor (Haynes) has made a really important point in managing wage expectations which are genuine and need to be met. We need to do it in creative ways that allows for when inflation deflates or when we have deflation, that we're not stopped with these high costs up at the top," he added. Dukharan said that wage adjustments should match productivity, the report says. "Wage earners who are currently engaged in salary negotiations or unions negotiating on their behalf will likely ask for wage increases commensurate with inflation. "However, one thing important to remember is that in the absence of increases in productivity, wage increases that simply reflect inflation and which are completely delinked from performance, will only serve to make whatever you are producing uncompetitive over time and drive you out of the market, which doesn't benefit anyone. We have to ensure that when we are negotiating for higher wages, we are also adding higher value," she said, the report notes. With the US inflation rate at a 40-year high, the US Central Bank announced its biggest rate increase, lifting its benchmark interest rate by half a percentage point, to a range of 0.75 per cent to 1 per cent after a smaller rise in March, the report discloses. India's central bank also announced a surprise increase to its benchmark rate, the report says. Meanwhile, Australia's central bank recently enacted its first interest rate hike in more than a decade, the report relays. "Inflation is much too high and we understand the hardship it is causing," Federal Reserve chairman Jerome Powell had said in a press conference in Washington, the report notes. "We are moving expeditiously to bring it back down," it added. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *