/raid1/www/Hosts/bankrupt/TCRLA_Public/220520.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, May 20, 2022, Vol. 23, No. 95
Headlines
A R G E N T I N A
STONEWAY CAPITAL: SCC Power Buys Facilities in Argentina
C H I L E
LATAM AIRLINES: Wants Plan Confirmed Over Few Objections
C U B A
CUBA: US to Ease Sanctions
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: IMF Calls for the Return of Inflation Range
DOMINICAN REPUBLIC: IMF Urges Focus on Inflation And Debt
G U A T E M A L A
BANCO G&T: Fitch Alters Outlook on 'BB-' IDRs to Positive
J A M A I C A
VM INVESTMENTS: Post Tax Earnings Profits Drops 91% to $8.2MM
P A R A G U A Y
PARAGUAY: S&P Affirms 'BB/B' Sovereign Credit Ratings
P U E R T O R I C O
E.R.G. INCORPORADO: Motel Salinas Now a Subchapter V Debtor
- - - - -
=================
A R G E N T I N A
=================
STONEWAY CAPITAL: SCC Power Buys Facilities in Argentina
--------------------------------------------------------
SCC Power plc ("SCC Power") announced May 17, 2022, that, together
with related entities, it has acquired the business enterprise of
Stoneway Capital Corporation ("Stoneway"), consisting of four power
generation facilities located in Argentina with an aggregate
installed capacity of 737 MW.
The acquisition and restructuring transactions were effected
pursuant to the chapter 11 plan (the "Chapter 11 Plan") and the
plan of arrangement pursuant to the Canada Business Corporations
Act (the "CBCA Plan" and, together with the Chapter 11 Plan, the
"Plans") of Stoneway and its affiliated debtors-in-possession,
which went effective on May 17, 2022.
As consideration for the assets, SCC Power issued to certain
creditors and interest holders of Stoneway U.S.$17,861,000 6.000%
Secured First Lien Notes due 2028, U.S.$310,000,000 8.000% Secured
Second Lien Notes due 2028 and U.S.$200,000,000 4.000% Secured
Third Lien Notes due 2032. The first interest payment under the
notes is due on September 15, 2022.
Hernan Walker, representative of MSU, stated: "We have a great
challenge ahead as we focus on stabilizing the operations and
enhance cash flow generation in order to maximize value to all
stakeholders."
SCC Power was represented in the acquisition and restructuring by
Simpson Thacher & Bartlett LLP, Maples and Calder, McCarthy
Tatrault LLP, Stewart McKelvey and Tavarone, Rovelli, Salim &
Miani.
Stoneway was represented in the acquisition and restructuring by
Shearman & Sterling LLP, Bennett Jones LLP, Bomchil, Carey Olsen
and Lazard Frares & Co. LLC.
The ad hoc group of holders (and their investment advisors,
sub-advisors, and managers with discretionary authority) of
Stoneway Capital Corporation's 10.000% senior secured notes due
2027 was represented by Cleary Gottlieb Steen & Hamilton LLP,
Osler, Hoskin & Harcourt LLP, Bruchou, Fernandez Madero &
Lombardi, Conyers Dill & Pearman and Rothschild & Co. US Inc.
The lenders under the mezzanine loan were represented by Dechert
LLP, Goodmans LLP, and Walkers.
UMB Bank NA, as US Trustee and Collateral Agent, and TMF Trust
Argentina S.A., as Argentine Collateral Trustee, were represented
by Perkins Coie LLP and Marval O'Farrell & Mairal, respectively.
About SCC Power
SCC Power is a public limited company organized under the laws of
England and Wales wholly controlled by the Stoneway Custody
Statutory Trust, whose ultimate beneficiary is MSU Energy Holding
Ltd.
About MSU Energy Holding
MSU Energy Holding Ltd, based in the United Kingdom, is the
controlling shareholder of MSU Energy S.A., an Argentine power
generator which owns and operates three state-of-the-art combined
cycle plants with an aggregate installed capacity of 750MW.
About Stoneway Capital Corp.
Stoneway Capital Corporation is a limited corporation incorporated
in New Brunswick, Canada, formed for the purpose of owning and
operating, through its Argentine subsidiaries, power generation
projects that will provide electricity to the wholesale electricity
markets in Argentina. The Argentine subsidiaries operate four
power-generating plants in Argentina that provide electricity to
the wholesale electricity market in Argentina.
Stoneway is 100% owned by GRM Energy Investment Limited.
On Oct. 8, 2020, Stoneway commenced proceedings under the Canada
Business Corporations Act (the "CBCA"). The Debtors were well on
the way toward closing the consensual restructuring when on Dec. 4,
2020, the Argentine Supreme Court issued a decision in a noise
discharge dispute involving one of the Generation Facilities
located in Pilar, Argentina. The Argentine Supreme Court decision
created significant uncertainty as it overturned a ruling by the
federal appeals court in San Martin, Buenos Aires.
As a result of the looming expiration of a informal standstill
arrangement, the Debtors commenced chapter 11 cases in the U.S. to
put the automatic stay in place, maintain the status quo pending
resolution of the various issues in Argentina, and ensure that
neither the Indenture Trustee nor the Argentine Trustee takes any
action that could be detrimental or value destructive to the
Company.
Stoneway Capital Ltd. and five related entities, including Stoneway
Capital Corp., sought Chapter 11 bankruptcy protection (Bankr.
S.D.N.Y. Case No. 21-10646) on April 7, 2021. Stoneway estimated
liabilities of $1 billion to $10 billion and assets of $500 million
to $1 billion.
Judge James L. Garrity, Jr. oversees the cases.
The Debtors tapped Shearman & Sterling LLP as bankruptcy counsel,
Bennett Jones LLP as Canadian counsel, Lazard Freres & Co. LLC as
investment banker, and RSM Canada LLP as tax services provider.
Prime Clerk, LLC is the claims agent and administrative advisor.
On Feb. 10, 2022, the Debtors filed their proposed joint Chapter 11
plan and disclosure statement with the court.
=========
C H I L E
=========
LATAM AIRLINES: Wants Plan Confirmed Over Few Objections
--------------------------------------------------------
LATAM Airlines Group S.A., et al., submitted a memorandum in
support of confirmation of their Joint Plan of Reorganization.
Nearly two years to the date of the Debtors' Initial Petition Date
following the sudden and precipitous decline of their world-class
business as a result of the COVID-19 pandemic, the Debtors are
poised to emerge from bankruptcy with the company's stature as one
of the world's leading airlines intact. Thanks to tremendous
efforts by the Debtors, their management, directors and employees
and advisors, the Debtors have stabilized their business,
right-sized their operations for the future and developed a
comprehensive plan of reorganization that can be confirmed by this
Court and implemented in the United States and other jurisdictions
where the Debtors operate. While many issues in these proceedings
have been hard-fought, the Debtors are proud of their remarkable
achievement after extensive good-faith, arm's-length
negotiations (including through Court-ordered mediation overseen by
retired Bankruptcy Judge Allan Gropper) with various of the
Debtors' key constituencies, the Plan has garnered overwhelming
support at the ballot box, and its most vocal objectors have now
joined in support.
The Plan provides for a multi-billion-dollar capital infusion that
will further strengthen LATAM's balance sheet, through the issuance
of the New Convertible Notes in the principal amount of over $9
billion, in the aggregate, by Reorganized LATAM Parent, as well as
by an equity rights offering in an amount of $800 million of new
common stock of Reorganized LATAM Parent, $400 million of which
shall be backstopped by the Commitment Creditors in their capacity
as ERO New Common Stock Backstop Parties. The Plan further
provides for the Exit Financing which includes $2.25 billion of new
Exit Notes/Loan and a $500 million revolving credit facility, which
shall be undrawn at emergence.
In all, the Plan is now supported by the Committee, BancoEstado,
the Parent GUC Ad Hoc Group, the Initial W&C Creditor Group Parties
and shareholders holding more than half of LATAM Parent's equity.
And it has been accepted by all Classes of Claims that were
entitled to vote on the Plan. In total, Holders of over $3.8
billion of Claims voted to accept the Plan, representing 81.52% of
the total dollar amount of all votes tabulated on the Plan and
65.62% in number.
To be sure, a few objections remain. The A&P Ad Hoc Group largely
wants to re-litigate the Court's approval of the backstop
arrangements. Dissatisfied with their 100% cash recovery on their
claims, the TLA Claimholders object that more was not taken from
the pockets of less fortunate unsecured creditors to pay them more
than a hundred million dollars in post-petition interest at default
rates. Columbus Hill argues on behalf of a group of minority
shareholders of LATAM Parent that even though a majority of
shareholders support the Plan, Chilean courts will not respect this
Court's confirmation order. And the U.S. Trustee has made its rote
objection to plan releases that has been rejected time and again by
courts in this district, as well as arguing that notwithstanding
the overwhelming support of all constituencies, this Court should
nonetheless deny confirmation altogether because of issues the U.S.
Trustee has with the Debtors' agreements with a small minority of
prior creditors. None of these objections have any merit. So that
the Court can be convinced that all of the legal requirements for
confirmation have been satisfied, this reply will not only address
the arguments made by the few remaining objectors but also those
that have been withdrawn.
The case for confirmation here is compelling, support for the Plan
is widespread and the Debtors are eager to emerge from bankruptcy
and continue the company's upward trajectory. As a global airline
that did not receive billions of dollars of government aid to
weather the COVID-19 storm, the Debtors' healthy emergence from
Chapter 11 will be a true success story.
A full text copy of the Memorandum is available at
https://cases.ra.kroll.com/LATAM/Home-DownloadPDF?id1=MjEzOTQyMQ==&id2=-1
Counsel for the Debtors:
Richard J. Cooper, Esq.
Lisa M. Schweitzer, Esq.
Luka A. Barefoot, Esq.
Thomas S. Kessler, Esq.
CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2000
Facsimile: (212) 225-3999
A copy of the Plan dated May 4, 2022, is available at
https://bit.ly/38e2GXQ from Kroll, the claims agent.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
=======
C U B A
=======
CUBA: US to Ease Sanctions
--------------------------
RJR News reports that US officials have announced plans to ease
tough sanctions imposed on Cuba by former President Donald Trump.
Under new measures approved by the Biden administration,
restrictions on family remittances and travel to the island will be
eased, according to RJR News.
The processing of US visas for Cubans will also be speeded up, the
report notes.
State Department spokesman Ned Price said the move would allow
Cuban citizens to pursue a life free from government oppression,
the report relays.
The loosening of sanctions will see a cap on family remittances -
funds sent by migrants in the US to family members in Cuba -
removed, the report discloses.
Previously migrants were prevented from sending more than $1,000
every three months, the report adds.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: IMF Calls for the Return of Inflation Range
---------------------------------------------------------------
Dominican Today reports that in the short term, policy priorities
should seek to ensure the return of the inflation rate to the
target range and maintain a downward trajectory in public debt
while supporting the vulnerable population against the impact of
global shocks.
The statement is in the conclusions of the International Monetary
Fund (IMF) mission that visited the country for the Article IV 2022
Consultation, which reiterated that the DR economy continued to
demonstrate remarkable resilience to global shocks, which was
underpinned by appropriate policies including monetary policy
support, and agile covid vaccination campaign and a reopening that
allowed it to take full advantage of last year's global economic
recovery, according to Dominican Today.
The mission of the international organization, headed by Esteban
Vesperoni, understands that the pace of the monetary policy
tightening cycle should depend on the evolution of domestic and
external economic indicators to keep inflationary expectations
anchored, safeguarding the well-earned credibility of the inflation
targeting regime, the report notes.
"The fiscal policy response to the impact of global shocks on
inflation should continue to rely on temporary measures included in
the budget while improving its targeting where feasible. Inclusive
fiscal consolidation can ensure the declining trend of public debt,
the report relays.
Fipetur defines the DR as a world reference in tourism management
in times of crisis, the report discloses.
He notes that a plan with well-sequenced reforms, some of which are
already underway, should foster inclusive growth in the medium
term, the report notes.
He says there should be a strengthening of policy and regulatory
frameworks, tax revenues, and reforms to support growth and
progress in social areas, the report says.
Support
The mission supports reforms to the electricity sector, ensuring
reliable electricity supply, reducing fiscal transfers to the
industry, and improving the quality of public spending, the report
notes.
It also supports reforms to the policy framework that seek to
promote more efficient public administration, the report
discloses.
"The electricity sector has been a burden on public finances in the
past and the Electricity Pact gives the authorities a mandate to
improve governance in the electricity sector, create conditions
that facilitate investment, and implement reforms to tariffs and
the subsidy system, which have the potential to ensure the
sustainability of the sector," the mission said, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican Today related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'. The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative. S&P also affirmed
its 'BB-' long-term foreign and local currency sovereign credit
ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said. A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
DOMINICAN REPUBLIC: IMF Urges Focus on Inflation And Debt
---------------------------------------------------------
Dominican Today reports that the International Monetary Fund (IMF)
team that completed a visit to the Dominican Republic published its
conclusions, among which it recommends that, in the short term, the
country's policy priorities should seek to guarantee the return of
the inflation rate to the target range and maintain a downward
trajectory in public debt, while supporting the vulnerable
population against the impact of global shocks.
In a statement published the mission reiterated its assessment that
the local economy "has shown a vigorous recovery after the
pandemic, despite global factors that have generated challenges in
terms of inflation" and that it has shown "remarkable resilience
based on appropriate policies, including the support of monetary
policy," according to Dominican Today.
However, he indicated that "the pace of the monetary policy
adjustment cycle should depend on the evolution of internal and
external economic indicators, with the aim of keeping inflationary
expectations anchored and safeguarding the well-earned credibility
of the inflation targeting regime," 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.
=================
G U A T E M A L A
=================
BANCO G&T: Fitch Alters Outlook on 'BB-' IDRs to Positive
---------------------------------------------------------
Fitch Ratings has revised Banco G&T Continental S.A.'s (G&TC)
Rating Outlook to Positive from Stable and has affirmed its
Long-Term (LT) Foreign Currency (FC) and Local Currency (LC) Issuer
Default Ratings (IDRs) at 'BB-' and its Viability Rating at 'bb-'.
Fitch has also revised G&TC's LT National Outlook to Positive from
Stable and has affirmed the bank's LT National Scale ratings at
'AA-(gtm)'.
The Outlook revision for G&TC parallels the same action on
Guatemala's 'b+' operating environment (OE) assessment, following
Fitch's revision of Guatemala's sovereign Outlook to Positive from
Stable. The revision was due to better than expected macroeconomic
conditions in the country given the strong economic recovery and
Fitch's expectation that this will foster continuity of the banking
system's sound financial profile. Improvements in the OE assessment
and an upgrade of Guatemala's sovereign rating would continue to
encourage G&TC's business performance.
The Positive Outlook also considers G&TC's improvement in its
financial profile and Fitch's expectation that this trend will
continue, particularly in terms of asset quality and profitability,
while the bank would maintain its sound capitalization and funding
profile.
Fitch has also withdrawn G&TC's Support Rating (SR) of '4' and
Support Rating Floor of 'B+' as they are no longer relevant to the
agency's coverage following the publication of Fitch's updated Bank
Rating Criteria on Nov. 12, 2021. In line with the updated
criteria, Fitch has assigned G&TC a Government SR (GSR) of 'b+'.
KEY RATING DRIVERS
Intrinsic Profile: G&TC's IDRs and National ratings are driven by
its intrinsic profile, as reflected in its VR of bb-, which is at
the level of the sovereign rating. The bank's VR is above its
implied VR of 'b+' due to its risk profile of 'bb-', which is a
high influence rating driver. G&TC's risk profile considers the
bank's prudent underwriting policies and effective risk controls,
evidenced in its recent improvements in its asset quality metrics,
while maintaining good reserves coverage, controlled COVID-19 loans
and credit growth aligned with the banking system average. Fitch
believes G&TC's prudential controls will continue to effectively
manage its portfolio risks, in light of the expected credit growth
over the short to medium term.
Stable OE: G&TC's VR also considers the OE, the bank's sound and
consistent business profile, and its financial profile. The
better-than-expected macroeconomics conditions in the local OE,
together with real GDP growth of 8% in 2021, and expected 3.8% in
2022, would continue to influence the Guatemalan bank's business
conditions and financial performance.
Solid Business Profile: G&TC's business profile considers its
consistent corporate-oriented model, which should continue to
exhibit consistent performance over the ratings horizon. Its
franchise in the Guatemalan financial market is strong, although
moderate compared with higher-rated regional peers.
Improved Asset Quality: G&TC's asset quality metrics continue to
improve. Its loans overdue above 90 days metric decreased to 1% as
of December 2021 (2020 end: 1.6%), which is lower than pre-pandemic
levels (2016-2019 average: 2.1%) and is also lower than some
similarly rated local peers. Its loan loss allowances metric
increased to around 350% from 265% in 2020 as part of the bank's
risk framework. The bank's prudent credit control initiatives and
underwriting policies along with the expected favorable economic
trend in the OE should continue to support G&TC's portfolio
quality.
Higher Profits from Business Growth: The bank's profitability also
continues to increase, particularly in 2021 due to its loan book
dynamism, reduced interest expenses and lower impairment charges.
As of December 2021, its operating profits represented 2.4% of its
risk weighted assets (RWA), an increase from the 2017-2020 average
metric of 1.4% and comparable to some similarly rated local peers.
Considering the bank's sound business position and the expected
credit dynamism from the economic recovery in the OE, Fitch
estimates G&TC may continue with similar profitability levels in
the foreseeable future.
Consistent Capitalization: G&TC's equity position continues to
improve as its equity has increased from partial retention of
earnings in recent years, including profits from last year. As of
December 2021, its FCC ratio reached 16.4% (2017-2020 average:
13.5%), which is above some peers at the same rating level and
indicates an improved ability to absorb unexpected losses. Fitch
believes G&TC will continue exhibiting stable capitalization levels
from its expected profitability and partial income retention.
Strong Funding Profile: G&TC's funding profile is underpinned by
its strong deposits base, which also increased during the pandemic
supported by its well-positioned franchise, although this effect
was also observed at the banking system level. As of December 2021,
its loan to deposit ratio was close to 54%, which maintains the
improving trend observed in recent periods (2017-2020 average:
61.8%). Fitch believes G&TC's funding profile will continue to
benefit from its good deposit market share and appropriate
liquidity (liquid assets represented close to 66% of deposits as of
the same period). This would support moderate asset growth
prospects over the short to medium term.
Limited Probability of Support: G&TC's GSR of 'b+' reflects Fitch's
opinion about the limited probability of support being forthcoming
for the bank from the sovereign, if needed and indicates the
minimum level to which the entity's Long-Term IDR could fall if
Fitch does not change its view in potential support. Fitch's
assessment is based on the sovereign ability to provide support, as
reflected in its rating and the small relative size of the banking
system respect to the Guatemalan economy. The GSR also reflects the
bank's systemic importance in the local market and its
deposit-based funding. As of December 2021, the bank's market share
in assets and deposits was around 14%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/upgrade:
-- G&TC's IDRs and National Ratings Outlook would be revised to
Stable in case of similar action on the sovereign rating and
OE or if the bank's current financial performance is not
sustained over the ratings horizon;
-- G&TC's IDRs, VR and National Ratings would be downgraded in a
scenario of a significant deterioration of asset quality,
which increases the bank's impairment levels, and results in a
sustained decline in the bank's operating profits to risk
weighted assets ratio consistently below 1% and FCC ratio
continuously below 10%;
-- G&TC's IDRs and GSR are also sensitive to a downgrade of the
sovereign rating.
Factors that could, individually or collectively, lead to positive
rating action/downgrade:
-- G&T's IDRs and VR would be upgraded in the event of an upgrade
of Guatemala's sovereign rating and improvement of the OE, and
in case of proven consistency and consolidation of its current
asset quality and profitability metrics, while maintaining
similar levels in its FCC ratio and sustained funding profile.
The GSR could be upgraded if Guatemala's sovereign rating is
upgraded;
-- G&TC's National Scale Ratings could be upgraded if the bank
proves consistency and consolidation of its current asset
quality and profitability metrics while maintaining its
current FCC ratio and funding profile levels.
VR ADJUSTMENTS
The VR of 'bb-' has been assigned above the implied VR of 'b+' due
to the following adjustment reason: Risk Profile (positive).
Fitch assigned the Business Profile score at 'bb-', which is above
the 'b' category implied score due to the following adjustment
reason: Business Model (positive), Market Position (positive).
Fitch assigned the Funding and Liquidity score at 'bb-', which is
above the 'b' category implied score due to the following
adjustment reason: Deposits Structure (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
Fitch reclassified prepaid expenses and other deferred assets as
intangible assets and deducted them from total equity since the
agency believes they have low capacity to absorb losses.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
G&TC's GSR is linked to the sovereign rating of Guatemala.
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.
=============
J A M A I C A
=============
VM INVESTMENTS: Post Tax Earnings Profits Drops 91% to $8.2MM
-------------------------------------------------------------
RJR News reports that despite an increase in revenue, VM
Investments' profit declined during its first quarter ended March.
Post tax earnings were down 91 percent at $8.2 million, according
to RJR News.
VM Investments says the decline was mainly due to a reduction in
gains from investment activities which dropped 63 per cent, the
report relays.
The bond market also saw a general decline as central banks began
tightening monetary policy through increased interest rates, the
report notes.
VM Investments says it is positioned for a rebound with the
relaxation of containment measures and the resumption of tourism
activities, the report adds.
===============
P A R A G U A Y
===============
PARAGUAY: S&P Affirms 'BB/B' Sovereign Credit Ratings
-----------------------------------------------------
S&P Global Ratings affirmed its 'BB/B' long- and short-term foreign
and local currency sovereign credit ratings on Paraguay. The
outlook remains stable. S&P's transfer and convertibility
assessment remains 'BB+'.
Outlook
The stable outlook indicates S&P's view that economic growth
prospects for the coming years should remain strong, despite damage
caused by the recent drought. Both fiscal and external balances
will suffer from the weather shock this year, but the government's
commitment to fiscal consolidation should limit the impact and
prevent a deterioration of Paraguay's external profile and its
government debt burden.
Downside scenario
S&P could lower the rating over the next six to 18 months if
worse-than-expected economic performance or an unexpectedly poor
policy response undermines Paraguay's long-term GDP growth
trajectory and significantly worsens its fiscal and external
profiles. Large and persistent fiscal deficits financed by external
debt could increase the country's narrow net external debt and
raise its vulnerability to external shocks, leading to a
downgrade.
Upside scenario
S&P could raise the rating over the next 12-18 months if stronger
resilience to external or climate shocks translates into
faster-than-expected economic growth. Stronger growth could help
the government to achieve its ambitious fiscal correction path
while tackling its long-standing infrastructure needs. At the same
time, a consistent reduction in the level of dollarization of the
financial system could improve monetary flexibility, leading to an
upgrade.
Rationale
S&P's ratings are based on Paraguay's limited fiscal and external
imbalances and a still-low, though vulnerable, debt burden. The
ratings also incorporate weaknesses such as low GDP per capita and
weak institutions. That said, predictability of economic policy has
been better in recent years, as seen in a track record of
macroeconomic stability despite repeated external shocks (falling
commodity prices, pandemic, and drought) and political tensions
between the executive and legislative branches of government.
Institutional and economic profile: Political stability and
continuity in economic policies over the next three years should
contribute to a fast economic recovery after recent shocks
-- S&P expects a severe drought will set back economic recovery,
with GDP contracting 1% this year.
-- Favorable commodity prices should contribute to stronger growth
in the next couple of years, boosting GDP per capita to around
$6,500 by 2025.
-- S&P expects Paraguay to maintain macroeconomic stability during
and after national elections in 2023.
Paraguay's economic performance is vulnerable to weather-related
risks and commodity prices, despite progress in diversifying the
economy over the last decade. A significant hit to the agriculture
and energy sectors will set back the rapid recovery of 2021. S&P
expects a contraction of 1%, down from 4.2% GDP growth in 2021. The
drought that lingered through the critical soy season in the last
quarter of 2021 caused significant damage to crops. Paraguay is one
of the largest soybean exporters in the world (soybeans and
subproducts make up 10% of GDP and 30% of exports). The drought has
also affected the electricity and water sectors, which account for
nearly 8% of GDP.
GDP is likely to expand 5% in 2023 thanks to rebounding
agricultural output and continued high prices. Moreover, public and
private investment projects should enhance Paraguay's economic
prospects. S&P expects growth to average 4% and GDP per capita to
reach $6,500 by 2025. Per capita income and living standards have
improved significantly over the past decade or so, partly owing to
a commodity boom. However, periodic external shocks have resulted
in currency depreciation, dampening the per capita income metric
measured in U.S. dollars.
Paraguay's government has been dominated by the Colorado Party,
which has held the presidency since 2013 (and during 1954-2008).
S&P expects broad continuity in fiscal, monetary, and other
economic policies following the national elections in 2023. The
country's governing institutions have slowly matured in recent
years, with greater predictability and continuity in economic
policies across changes in administration. Moderate economic
management has supported sustained growth, low government debt, and
a strong external profile.
Moreover, legislation passed over the last decade, such as the
Fiscal Responsibility Law, has helped institutionalize those
practices. Sovereign debt management has also improved since the
issuance of Paraguay's first international bond in 2013. However,
Paraguay ranks poorly in terms of economic and human development.
Almost 27% of the population lives in poverty, and over 70% of
workers are in the informal sector. The country's physical
infrastructure is weak, and the level of perceived corruption is
high.
Flexibility and performance profile: Moderate fiscal deficits will
be mostly funded by external lending, slightly deteriorating
Paraguay's external profile
-- Economic recovery and the withdrawal of pandemic support
measures cut the fiscal deficit in 2021, but we expect fiscal
consolidation to be gradual in the coming years.
-- The economic downturn caused by drought will weigh on 2022
fiscal and external balances.
-- Monetary policy and the flexible exchange rate should help
absorb negative shocks.
S&P expects the general government deficit to gradually decline and
average 2.6% of GDP in 2022-2025, from 3.5% in 2021. The strong
economic recovery in 2021 helped the government to lower the fiscal
deficit even more than targeted last year. However, the economic
downturn will limit space for further consolidation this year.
The drop in production of the binational hydroelectrical companies
that operate two massive dams is hurting royalties that they pay to
the government. Nontax revenues -- which generally average 15% of
central government revenues -- fell 12% through April.
Additionally, following a strong performance during the first
quarter of 2022, tax revenues will likely decelerate in the coming
months due to the economic downturn. Extraordinary relief measures
introduced during the pandemic have been almost fully retired. As a
result, it could be difficult for the government to make further
cuts in spending. Over the last five years, Paraguay has been
increasing its public works to tackle long-standing infrastructure
needs.
Any increases in government revenues are likely to come from
efficiency gains and broadening of the tax base rather than tax
increases in the coming couple of years. However, the government
could gain revenue from the renegotiation of the Itaipu dam treaty
with Brazil in 2023. The negotiations could result in lower power
tariffs, which could improve the financial health of
government-owned electricity company ANDE (Administracion Nacional
de Electricidad). As a result, S&P expects the change in net
general government debt to average about 3.4% of GDP in 2022-2025,
narrowing from the average 7.3% temporary increase in 2020-2021
(this assumes no meaningful increase in royalties).
Net general government debt could rise to 26% of GDP in 2022 and
stabilize below 30%. S&P does not incorporate central bank debt in
our calculation of general government debt. The government's
growing issuance of foreign currency debt has increased its
exposure to exchange-rate movements, as about 87% of the public
sector's debt stock is denominated in foreign currency. The
currency exposure is only partially mitigated by dollar-denominated
royalty inflows from the two large hydroelectric dams. Furthermore,
a significant share of external debt is held by nonresidents,
adding further risk to potential sudden changes in investor
confidence and capital outflows.
The combination of external debt issuance and lost soybean exports
is likely to worsen Paraguay's external metrics. S&P expects narrow
net external debt to rise to about 40% of current account receipts
(CAR) in 2022, from 22% in 2020-2021. However, gross external
liquidity ratios have remained strong and stable, with gross
external financing needs estimated at 77% of CAR and usable
reserves, given that much of external debt has long maturities or
is owed to official creditors. Paraguay has boosted international
reserves through debt issuances. Such external assets now reach
about $9.9 billion, about 25% of GDP.
The current account deficit will likely grow to 3.9% of GDP, from
less than 1% in 2021, given the collapse in soy exports and import
price increases. Paraguay is a net importer of oil, with imports
representing 3.5% of GDP. Moreover, higher logistical costs and
fertilizer prices will boost imports. That said, S&P expects a
strong rebound in exports as weather conditions improve and prices
are expected to remain high during 2023.
Monetary policy reforms and Paraguay's flexible exchange rate have
helped to absorb negative external shocks and gradually boost the
country's economic resilience. The central bank occasionally
intervenes in the foreign exchange market to dampen volatility
without targeting the exchange rate. Since the adoption of the
inflation-targeting regime in 2011, Paraguay has kept inflation in
line with the central bank target and has slowly strengthened its
supervision of the financial system. However, food and oil price
increases have affected inflation recently, which has remained
above the bank's target of 4% plus/minus 2%. The central bank has
raised interest rates 600 basis points since August 2021. S&P
expects inflation to decelerate toward the end of the year and
average 6% for 2022 before declining to the target of 4% by 2024.
In accordance with S&P's relevant policies and procedures, the
Rating Committee was composed of analysts that are qualified to
vote in the committee, with sufficient experience to convey the
appropriate level of knowledge and understanding of the methodology
applicable. At the onset of the committee, the chair confirmed that
the information provided to the Rating Committee by the primary
analyst had been distributed in a timely manner and was sufficient
for Committee members to make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and
critical issues in accordance with the relevant criteria.
Qualitative and quantitative risk factors were considered and
discussed, looking at track-record and forecasts.
The committee's assessment of the key rating factors is reflected
in the Ratings Score Snapshot above.
The chair ensured every voting member was given the opportunity to
articulate his/her opinion. The chair or designee reviewed the
draft report to ensure consistency with the Committee decision. The
views and the decision of the rating committee are summarized in
the above rationale and outlook. The weighting of all rating
factors is described in the methodology used in this rating
action.
Ratings List
RATINGS AFFIRMED
PARAGUAY
Sovereign Credit Rating BB/Stable/B
Transfer & Convertibility Assessment
Local Currency BB+
Senior Unsecured BB
=====================
P U E R T O R I C O
=====================
E.R.G. INCORPORADO: Motel Salinas Now a Subchapter V Debtor
-----------------------------------------------------------
E.R.G. Incorporado, doing business as Motel Salinas, filed for
chapter 11 protection in Puerto Rico, without stating a reason.
According court filings, E.R.G. Incorporado estimates between 1 and
49 unsecured creditors. The petition states that funds will be
available to unsecured creditors.
A telephonic meeting of creditors under 11 U.S.C. Sec. 341(a) is
slated for June 13, 2022 at 9:00 a.m.
About E.R.G. Incorporado
E.R.G. Incorporado, doing business as Motel Salinas, is part of the
traveler accommodation industry.
E.R.G. Incorporado filed a petition for relief under Subchapter V
of Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No.
22-01272) on May 3, 2022. In the petition filed by Modesto Rivera
Guzman, as president, E.R.G. estimated assets between $500,000 and
$1 million and estimated liabilities between $1 million and $10
million. The case is assigned to Honorable Bankruptcy Judge Maria
De Los Angeles Gonzalez.
Alexis A. Betancourt Vincenty, of Lugo Mender Group LLC, is the
Debtor's counsel.
Carlos G. Garcia Miranda has been appointed as Subchapter V
trustee.
*********
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 * * *