/raid1/www/Hosts/bankrupt/TCRLA_Public/220525.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
Wednesday, May 25, 2022, Vol. 23, No. 98
Headlines
A R G E N T I N A
ARGENTINA: Firms Cut From Dollar Access Rush to Refinance Debt
EDENOR: S&P Puts 'CCC-' ICR on CreditWatch Developing
B O L I V I A
BCP BOLIVIA: Fitch Affirms 'B' IDRs, Outlook Remains Stable
B R A Z I L
BRAZIL: Debt Falls to 78.5% of GDP in March
MARANHAO: Fitch Affirms 'BB-/B' IDRs, Outlook Negative
C H I L E
LATAM AIRLINES: Spurned Creditors Decry Lender Extreme Fratricide
G U A T E M A L A
INGENIO MAGDALENA: Fitch Withdraws BB- Rating on $350MM Bond Deal
J A M A I C A
JAMAICA: Bill Tabled to Amend Bank of Jamaica Act
P A N A M A
PANAMA: IDB OKs $20M Loan to Make Spending More Efficient
P E R U
PERU: Mining Exports Exceed US$9BB Between January & March 2022
U R U G U A Y
URUGUAY: Seeks to Seduce Investors Before Sustainable Bond Debut
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Firms Cut From Dollar Access Rush to Refinance Debt
--------------------------------------------------------------
Scott Squires at Bloomberg News reports that Argentine companies
are starting to refinance debt due next year as they lose faith the
Central Bank will roll back restrictions that limit their access to
dollars.
Firms including IRSA Inversiones y Representaciones, the nation's
largest real-estate company, and Edenor, the biggest power
distributor, have announced deals over the last few weeks to
refinance bonds coming due next year, according to Bloomberg News.
Agriculture producer Cresud and oil and gas driller Pampa Energia
also said in recent earnings calls they are considering refinancing
maturities due in 2023, the report notes.
The slew of deals reflects expectations the Central Bank will
extend a rule that requires companies to restructure or refinance
60 percent of their debt before they can access dollars to make
payments on the remainder, the report relays. The regulation,
which has been in place since 2020 and is set to expire on December
31, was designed to protect Argentina's dwindling foreign reserves.
Despite the rule, the government is still struggling to bolster its
coffers as it aims to meet fiscal targets imposed by the
International Monetary Fund, the report says.
"At this point last year, the Central Bank had bought almost US$5.2
billion in reserves while so far this year it has only purchased
US$780 million," said María Moyano Hidalgo, a corporate fixed
income analyst at Adcap in Buenos Aires. "Companies have to
consider that risk and prepare if regulations are indeed extended,"
the report discloses.
A Central Bank spokesman declined to comment.
Now may be the best time for companies to offer debt exchanges
since the Central Bank's coffers are relatively higher after the
seasonal harvest, according to Paula La Greca, a corporate fixed
income analyst at TPCG Valores in Buenos Aires, the report notes.
"Companies are trying to make their offers as attractive as
possible to get as much creditor participation as possible," La
Greca said. "This is reflected in the fact that they're offering
amortising bonds as well as good cash sweeteners," the report
says.
IRSA is offering creditors new dollar bonds due in 2028, plus a
cash sweetener, in exchange for notes from its subsidiary IRSA
Propiedades Comerciales maturing in March 2023. Edenor said on May
12 it exchanged more than US$52 million in its notes due later this
year for new ones, and paid investors a cash sweetener, the report
adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Standard & Poor's credit rating for Argentina stands at CCC+ with
stable outlook, which was a rating upgrade issued on Sept. 8,
2020.
Moody's credit rating for Argentina was last set at Ca on Sept.
28, 2020. Fitch's credit rating for Argentina was last reported on
Sept. 11, 2020 at CCC, which was a rating upgrade from CC. DBRS'
credit rating for Argentina is CCC, given on Sept. 11, 2020.
As reported by The Troubled Company Reporter - Latin American, DBRS
noted that the recent upgrade in Argentina's ratings (September
2020) follows the closing of two debt restructuring agreements
between the Argentine government and private creditors. The first
restructuring involved $65 billion in foreign-law bonds. The deal
achieved the requisite participation necessary to trigger the
collective action clauses and finalize the restructuring on 99% on
the aggregate principal outstanding of eligible bonds. DBRS added
that the debt restructurings conclude a prolonged default and
provide the government with substantial principal and interest
payment relief over the next four years.
Argentina obtained on March 25, 2022, approval from the Executive
Board of the International Monetary Fund (IMF) of a 30-month
extended arrangement under the Extended Fund Facility (EFF)
amounting to SDR 31.914 billion (equivalent to US$44 billion).
Under the new terms, Argentina secured a much-needed grace period
that postpones repayment of its debt. However, IMF warned of
exceptionally high risks to the program.
EDENOR: S&P Puts 'CCC-' ICR on CreditWatch Developing
-----------------------------------------------------
S&P Global Ratings, on May 20, 2022, placed its 'CCC-' issuer
credit and issue-level ratings on Argentine energy distribution
company, Empresa Distribuidora Y Comercializadora Norte S.A.
(Edenor) on CreditWatch with developing implications.
The CreditWatch placement reflects the uncertainty over options
that Edenor faces, and the potential for us to raise, lower, or
affirm the ratings in the next 90 days. The uncertainty relates to
the company obtaining further permission from the regulator to
access the FX market and/or its ability to get the necessary
financing in the capital markets to repay the 2022 notes in a short
period of time.
Edenor recently announced that its offer to exchange its
outstanding 9.75% notes due 2022 for the new 9.75% notes due 2025
and cash, was accepted. As of the offer's expiration date, $71.8
million of the existing notes (representing 73.25% of the aggregate
principal of $98.1 million) were tendered and accepted in the
exchange offer. Of the total amount exchanged, $41.7 million
(representing approximately 42.53% of the outstanding amount) were
tendered under option A and $30.1 million (approximately 30.72%)
were tendered under Option B.
Per $1,000 principal amount of notes tendered, each bondholder
received a $1,050 principal amount of the new notes under Option A,
or a $296.16 principal amount of the new notes and $715.23 of cash
per $1,000 principal amount of the existing notes under Option B,
along with the applicable accrued interest payment in each option.
On the settlement date, Edenor issued $52.7 million in new notes
and paid approximately $21.5 million in cash. As a result, the
company was able to extend the tenor of its debt. As of May 2022,
$26.2 million of its notes (the non-exchanged portion) are due
October 2022 and the remaining $52.7 million in 2025.
Although the company has taken a step to resolve the repayment of
the notes, reducing its short-term debt, Edenor remains exposed to
refinancing risk. According to the Argentine central bank's
regulation, domestic companies that have debt maturing by December
2022 will be allowed to access the FX market for up to 40% of the
due amount, which for Edenor was $39.2 million before the
exchange.
On the settlement date, Edenor paid $21.5 million pro-rata to the
bondholders that entered into Option B, and could now request for
permission from the regulator to access funding for the remaining
$17.7 million. However, given that the total due amount will be
$26.2 million in October 2022, the company needs to figure how to
access funding for the remaining $8.5 million. Currently, the
company is analyzing various alternatives, but it's uncertain that
Edenor will have access to funding to repay the total due amount.
Although S&P considers that it's not a large amount, the difficult
macroeconomic and market conditions in Argentina may limit the
financing options for the company.
=============
B O L I V I A
=============
BCP BOLIVIA: Fitch Affirms 'B' IDRs, Outlook Remains Stable
-----------------------------------------------------------
Fitch Ratings has affirmed Banco de Credito de Bolivia S.A.'s (BCP
Bolivia) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) and Viability Rating (VR) at 'B' and 'b-',
respectively. The Rating Outlook remains Stable.
Fitch has also withdrawn the bank's Support Rating of '4' as it is
no longer relevant to the agency's coverage following the
publication of its updated Bank Rating Criteria on Nov. 12, 2021.
In line with the updated criteria, Fitch has assigned BCP Bolivia a
Shareholder Support Rating (SSR) of 'b'.
KEY RATING DRIVERS
Support from Parent: BCP Bolivia's IDRs reflect the support it
would receive from its parent, Credicorp Ltd., if required. Fitch
believes BCP Bolivia is a strategically important subsidiary for
its parent company as it an integral part of the group since it
contributes to the geographical expansion of Credicorp and because
Bolivia is a strategic market for the holding. There is also a high
degree of integration between BCP Bolivia and its parent. The FC
IDRs are constrained by Bolivia's Country Ceiling of 'B', which
captures transfer and convertibility risks according to Fitch's
criteria.
Challenging Operating Environment: BCP Bolivia's VR is highly
influenced by the challenging and deteriorated operating
environment within a highly regulated and interventionist
framework. The outlook for the Bolivian banking system is negative
for 2022, considering the slow economic recovery of 5.4% in 2021
and the expected 2.8% in 2022, after a deep economic contraction of
8.8% in 2020. In addition, there are still grace periods granted to
debtors as part of the regulatory forbearance measures due to the
pandemic; once these measures end, Fitch expects a deterioration in
the Bolivian bank's asset quality and profitability metrics.
Good Franchise: As of YE21, BCP Bolivia was the sixth largest bank
in its market as measured by total assets, with a market share of
8.8%. The entity is 100% owned by Credicorp Ltd., the largest
financial group in Peru. BCP Bolivia benefits significantly from
the reputation, synergies, technological developments and
strategies of its shareholder; however, this has not materialized
yet into a stronger business size in the country. Historically, the
bank's branch expansion in the country has not been aggressive, as
its strategy has focused on a higher market presence with ATMs and
bank agents.
Adequate Asset Quality: BCP Bolivia impaired loan ratio improved to
0.97% in 2021 from 1.05% in 2020, driven by the regulatory and
compulsory relief measures for all the banking system and to a loan
portfolio contraction of 0.97%. The loan loss allowances ratio of
243.33% remains high due to the bank's decision to increase
impaired loan coverage to strengthen the loss absorption capacity
to support expected deteriorations. This is a conservative
approach, considering that the regulator has not required any
specific coverage levels. Aligned with the bank's forecasts, Fitch
expects asset quality metrics to deteriorate once the loans
currently under a grace period (13% of total loans as of YE21)
resume their payments.
Pressured Profitability: Due to lower impairment charges driven by
a decrease in loan growth, the bank improved its profitability
levels in 2021, despite the lower interest margin. Operating profit
to RWA ratio improved to 1.59% at YE21 from 1.02% in 2020. The
bank's income generation decreased due to the large portion of the
loan portfolio under grace period (of principal and interest),
expected to resume its payments in June 2022. As a result, a
significant portion of the loan portfolio became a non-earning
asset (13% of total loans as of YE21). Fitch believes that further
profitability pressures will result from lower business volumes, an
increase in the cost of credit, and reduced fee income due to lower
transactions.
Improving but Still Limited Capitalization Levels: Capitalization
ratios improved at YE21 mainly due to higher retained earnings but
still remained weak. The Fitch Core Capital (FCC) ratio improved to
9.76% at YE21 from 8.97% at YE20. BCP Bolivia's capitalization
compares adequately among its local peers and the system. The
regulatory capital ratio of 11.97% is above the FCC due to the
subordinated bond issuances; however, these are not considered loss
absorbing capital under Fitch's criteria. Fitch believes that
current metrics and loss absorption capacity will be tested given
the expected asset quality and profitability deterioration.
High Funding Concentration: The bank's loan to deposit ratio of
94.9% is commensurate with its rating category. Although funding
concentration is a systemic issue, Fitch believes the bank's high
funding concentration is one of its main weaknesses. BCP Bolivia's
20 largest clients represented approximately 49.86% of total
deposits at YE21. This risk is partially offset by the bank's solid
liquidity, reflected in the Liquidity Coverage Ratio and Net Stable
Funding Ratio above 100%. Liquidity risks may arise from reduced
cash flows resulting from the crisis.
Shareholder Support Rating: BCP Bolivia' SSR of 'b' reflects
Fitch's view of external support from its majority shareholder
Credicorp Ltd. if required (100% ownership). The SSR also reflects
limited probability of support being forth coming because of
significant uncertainties about the ability or propensity of the
provider of support to do so.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- BCP's VR could be negatively affected if the bank's operating
profit to risk weighted assets is consistently negative or
near to zero, if its FCC ratio falls below 7%, or from a
significant deterioration of its access to funding or its
liquidity profile;
-- IDRs and VR are also sensitive to changes in the sovereign
rating, or further deterioration on the local operating
environment. Negative rating actions on the bank's IDR will
mirror those of the sovereign. The bank's FC IDRs are
constrained by the Country Ceiling. IDRs are also sensitive to
a change in the parent's willingness to support the bank;
-- Should Bolivia's sovereign rating be downgraded, the SSR will
also be downgraded.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Rating actions on the bank's IDRs would mirror those of the
sovereign. BCP Bolivia's FC IDRs are constrained by the
Country Ceiling;
-- BCP's VR upside potential is limited given the sovereign's
current rating and unstable operating environment. Over the
medium term, ratings could be upgraded due to a improvements
in the operating environment and the financial profile of the
bank;
-- BCP Bolivia's support rating is constrained and an upgrade
could occur if there is an upgrade of the sovereign rating,
which is not likely as its Outlook is currently Stable;
-- BCP Bolivia's SSR is constrained and an upgrade is not likely.
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 revised its intangible asset calculation to factor in some
accounts by Bolivian GAAP that were classified under other assets
and other accounts receivable. The bank cannot rely on these assets
in case of a liquidation process to pay for financial obligations.
Therefore, Fitch classified prepaid and deferred expenses as
intangibles and deducted them from the Fitch Core Capital
calculation.
ESG CONSIDERATIONS
BCP Bolivia's Environmental, Social and Corporate Governance (ESG)
Relevance Score for Management Strategy of '4' reflects a track
record of high government intervention in the Bolivian banking
sector. Government intervention in the country's banking regulatory
framework challenges BCP Bolivia's ability to define and execute
its own strategy. This has a negative impact on the rating.
BCP Bolivia's ESG Relevance Score for Governance Structure is '3',
aligned with the standard scoring for all banks globally.
DEBT RATING PRIOR
---- ------ -----
Banco de Credito LT IDR B Affirmed B
de Bolivia S.A.
ST IDR B Affirmed B
LC LT IDR B Affirmed B
LC ST IDR B Affirmed B
Viability b- Affirmed b-
Support WD Withdrawn 4
Shareholder Support b New Rating
===========
B R A Z I L
===========
BRAZIL: Debt Falls to 78.5% of GDP in March
-------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazil's
government debt as a share of gross domestic product fell to 78.5%
in March, the lowest level in almost two years, with improved
revenues in states and municipalities leading to a new primary
surplus for the month.
That compares with a gross debt of 79.2% of GDP in February, to the
best result since April 2020 (78.4%), when the country was
beginning to be hit by the coronavirus pandemic, according to
globalinsolvency.com.
Booming revenue, helped by a surge in commodities, has lifted the
government's budget, while expenditures have not grown at the same
pace due to a constitutional spending cap, the report relays.
The public sector surplus excluding interest payments reached 4.3
billion reais ($846.54 million) in March, which led to a surplus
equivalent to 1.37% of GDP in the 12 months, the report discloses.
Brazil's states and municipalities posted a 11.9 billion-reais
surplus in the month, once again benefiting from larger federal
government transfers and higher fuel-related revenues, the report
relays. State-owned companies recorded a 242 million-reais surplus
and the central government posted a 7.8 billion-reais deficit, 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).
MARANHAO: Fitch Affirms 'BB-/B' IDRs, Outlook Negative
------------------------------------------------------
Fitch Ratings has affirmed the Brazilian State of Maranhao's
(Maranhao) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) at 'BB-' with a Negative Rating Outlook and its
Short-Term Foreign and Local Currency IDR at 'B'. The Outlook
reflects the sovereign Outlook of Negative. Fitch has also affirmed
Maranhao's National Long-Term Rating at 'AA-(bra)' with a Stable
Outlook and its National Short-Term Rating at 'F1+'. Fitch assess
Maranhao's SCP at 'bb-'.
Maranhao remains current on its external debt. The state complied
with the last amortization schedule in January 2022 and still has
three significant semi-annual amortizations to service between July
2022 and July 2023. Robust operational margins have strengthened
the state's capacity to service its debt and counterbalance
liquidity pressures in the short term. Exchange rate depreciation
could increase debt service burden in the next two years.
Maranhao's Standalone Credit Profile is at the same level as the
sovereign IDR, and Fitch does not currently reflect sovereign
support in Maranhao's IDRs. However, Brazilian LRGs benefit from
support in the form of intergovernmental debt with more favorable
conditions, including debt service postponement during periods of
financial distress. Subnational governments in Brazil also have the
capacity to join a Fiscal Recovery Regime to restructure their debt
service profiles while committing to fiscal austerity measures. The
process to join the Fiscal Recovery Regime involves long
negotiations with the Ministry of Finance and is optional.
KEY RATING DRIVERS
Risk Profile
Weaker
The Weaker assessment reflects Fitch's view of a high risk relative
to international peers that the issuer's ability to cover debt
service with the operating balance may weaken unexpectedly over the
forecast horizon (2022-2026) due to lower revenue, higher
expenditure, or even an unexpected rise in liabilities or debt or
debt-service requirement.
Revenue Robustness
Weaker
The Brazilian tax collection framework transfers to states and
municipalities a large share of the responsibility to collect
taxes. Constitutional transfers exist as a mechanism to compensate
poorer entities. For that reason, a high dependency towards
transfers is a weak feature for Brazilian LRGs.
The transfers ratio (transfers to operating revenues) is an
important metric to assess revenue robustness. Fitch classifies
LRGs in Brazil that report a transfer ratio above or equal to 40%
as 'Weaker' and those with a ratio below 40% as 'Midrange'.
Maranhao reports a relatively high dependency towards the federal
government, with transfer at 43% of operating revenues, which
drives this factor to Weaker.
Revenue Adjustability
Weaker
Brazilian states and municipalities have a low capacity level for
revenue increase in response to downturn. There is low
affordability of additional taxation given that tax tariffs are
close to the constitutional national ceiling and a small number of
taxpayers represent a large share of tax collection, driving this
factor to weaker.
The 10 largest tax payers corresponded to around 36.5% of total
ICMS tax collection in Maranhao in 2021, aligned with previous
years. This creates a challenging environment for Maranhao to
expand own revenues collection during a downturn, leading this
factor to 'weaker'.
Maranhao is amongst the poorest states in Brazil, with per capita
GDP amounting to 0.39x the national per capita GDP in 2019. The
state also reports high poverty rates, with 52% of the population
living below the poverty line in 2019. Low per capita income and
high poverty create challenges for further tax increases given that
a significant share of the population spends all its income in
basic items, essential for their survival. The main state tax,
ICMS, is levied on consumption, what makes it a regressive tax that
is heavier on the poor.
Expenditure Sustainability
Midrange
Brazilian states are responsible for healthcare, education and law
enforcement. Expenditure tends to grow with revenues as a result of
earmarked revenues. This results in a procyclical behavior in good
times, as periods of high revenue growth result in a similar
behavior for expenditures.
Maranhao presents moderate control over expenditure growth, with
sound margins. In fact, operating margins averaged 10.6% in the
2017-2021 period. The state is current on its payroll bill and has
no significant delays for the payment of suppliers.
Expenditure Adjustability
Weaker
Fitch assesses the state's ability to reduce spending in response
of shrinking revenue as weak. As per the Brazilian Constitution,
there is low affordability of expenditure reduction especially in
salaries. As a result, whenever there is an unpredictable reduction
in revenues, operating expenditure does not follow automatically.
In addition, there is high share of inflexible costs since there is
close to 90% share of mandatory and committed expenditures.
Consequently, capex represents on average 8% of state's total
expenditures for the 2017-2021 period, also corroborating to weaker
assessment.
Liabilities and Liquidity Robustness
Weaker
There is a moderate national framework for debt and liquidity
management, and the federal government guarantees all U.S. dollar
denominated debt of the state. As of December 2021, external debt
represented 18.3% of Maranhao's total debt. There is a significant
maturity concentration in the years of 2022 and 2023, creating
liquidity pressures for Maranhao. Debt directly owed to the federal
government represented 12.8% of total debt. Access to new loans is
limited and mostly relies on federal guaranteed debt with national
public banks or multilateral organizations. There is moderate
off-balance sheet risk from the pension system, which together with
the other factors described above, drive this factor to 'Weaker'.
Liabilities and Liquidity Flexibility
Weaker
A framework exists to provide emergency liquidity support from the
federal government via the granting of extended maturity over the
federal debt portion. Maranhao liquidity levels have deteriorated
between 2020 and 2021. The state is rated 'C' under the CAPAG for
its liquidity metric, with financial obligations at 112% of cash
availability as of November 2021, driving this factor to Weaker.
Debt Sustainability
aa category
Debt sustainability is assessed as 'aa'. Due to significant debt
service payments in the short-term and related liquidity pressures,
the debt sustainability assessment focuses on metrics for
2022-2023. Fitch's rating case forward-looking scenario indicates
that the payback ratio (net direct risk to operating balance), the
primary metric of the debt sustainability assessment, will reach an
average of 3x for the 2022-2023 period, which is aligned with a
'aaa' assessment. The actual debt service coverage ratio, the
secondary metric, is projected at 1.4x for the average of
2022-2023, aligned with a 'bbb' assessment. Due to the weaker
coverage ratio, three categories below the primary metric, Fitch
applies an override and assess the overall debt sustainability at
'aa'.
DERIVATION SUMMARY
State of Maranhao's SCP is assessed at 'bb-', reflecting a
combination of a 'Weaker' risk profile and debt sustainability
metrics assessed in the 'aa' category under Fitch's rating case
scenario. The SCP, positioned at 'bb-', also reflects the mix of
key risk factors as well as its primary and secondary metrics
compared to peers. The state's IDRs are not affected by any other
rating factors and are assessed at 'BB-', with a negative outlook,
which reflects the sovereign outlook. Maranhao's national scale
rating is mapped at 'AA-(bra)' following a national peer
comparison.
KEY ASSUMPTIONS
Qualitative assumptions
Risk profile: Weaker
Revenue Robustness: weaker
Revenue Adjustability: weaker
Expenditure Sustainability: midrange
Expenditure Adjustability: weaker
Liabilities and Liquidity Robustness: weaker
Liabilities and Liquidity Flexibility: weaker
Debt Sustainability: aa
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2017-2021 figures and 2022-2026 projected
ratios. The key assumptions for the scenario include:
-- Yoy [6.4]% increase in operating revenue on average in 2022-
2026;
-- Yoy [8.0]% increase in operating spending on average in 2022-
2026;
-- Net capital balance of - BRL 1,742 million on average in 2022-
2026;
-- Cost of debt: 7.2% in 2022, 7% in 2023; 5.5% in 2024 and 5% in
2025-2026.
Quantitative assumptions - Sovereign Related
Figures as per Fitch's sovereign actual for 2021 and forecast for
2023, respectively (no weights and changes since the last review
are included as none of these assumptions was material to the
rating action).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive rating action on Maranhao's IDR could result from an
improvement of its SCP in conjunction with a Sovereign action
of upgrade, since the State is aligned with the sovereign.
-- Maranhao's SCP could improve if it's ADSCR improves to above
2x and its payback ratio remains below 5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade of Brazil's IDRs (BB-/Negative) would negatively
affect Maranhao's IDRs;
-- Maranhao's Long-Term IDRs could be downgraded if its SCP
deteriorates on a sustained basis in Fitch's rating case
scenario. This could happen if the state deteriorates its
operating balance or increase its debt resulting in an
increase of payback ratio above 5x, and ADSCR remains below
1.5x.
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.
LIQUIDITY AND DEBT STRUCTURE
Maranhao reported Direct Debt of BRL6,711 million as of December
2021, of which 18.3% in foreign currency and 12.8% of
intergovernmental debt related to the debt restructuring program of
the 90s.
Foreign debt is mainly owed to the Bank of America (BofA) and
creates liquidity pressures in the short-term. The outstanding
balance of the debt owed to BofA amounted to BRL1,112.6 million as
of December 2021 and should be fully amortized by July 2023 in four
semi-annual instalments (January 2022, July 2022, January 2023 and
July 2023). The first instalment of January 2021 was already paid
for. This debt is exposed to exchange rate risk. Market
expectations for monetary tightening in developed economies,
aligned with global geopolitical instability and political
uncertainty domestically led to significant fluctuations in the FX
market.
ISSUER PROFILE
The state of Maranhao is classified by Fitch as a Type B LRG, which
is required to cover debt service from cash flow on an annual
basis. Maranhao is home to roughly 7 million, corresponding to
around 3% of the Brazilian population. Its revenue sources are
strongly influenced by transfers from the national government. The
main spending responsibilities cover education, healthcare and law
enforcement. According to budgetary regulation, Maranhao has the
right to borrow on the domestic market and externally, subject to
Federal Government approval. Maranhao per capita GDP is equivalent
to 39% of national per capita GDP.
ESG CONSIDERATIONS
ESG Social - The State of Maranhao has an ESG Relevance Score of
'4' for 'Human Development, Health and Education' due to its Human
Development Index (calculated as a geometric average of health,
education and income) close to the bottom of the ranking among
Brazilian states, which has a negative impact on the credit
profile, and is relevant to the rating in conjunction with other
factors.
ESG Social - The State of Maranhao has ESG Relevance Score of '4'
for Population Demographics. The score reflects the negative weight
the state's poverty rate has on its revenue raising ability, which
has a negative impact on the credit profile, and is relevant to the
rating in conjunction with other factors.
ESG Governance - Fitch has revised the State of Maranhao ESG Score
for Creditor's Right to '3' from '4' due to the state's compliance
with external debt service payments since the credit event of July
23, 2020. Back then the Bank of America amortization instalment was
serviced by federal guarantee. The state has complied with all
payments since then.
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.
=========
C H I L E
=========
LATAM AIRLINES: Spurned Creditors Decry Lender Extreme Fratricide
-----------------------------------------------------------------
Jeremy Hill of Bloomberg News reports a lawyer for a group of
aggrieved money managers insisted on May 20 that Latam Airlines
Group SA's bankruptcy exit proposal should be struck down because
it's an extreme example of the so-called lender-on-lender violence
running rampant in credit investing.
The Chilean airline plans to raise some $5 billion by issuing
convertible notes and shares to its creditors and shareholders so
it can exit bankruptcy. A group of investment funds led by
SVPGlobal, Sculptor Capital Management and Sixth Street Partners is
in line to own Latam Airlines as a result.
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.
=================
G U A T E M A L A
=================
INGENIO MAGDALENA: Fitch Withdraws BB- Rating on $350MM Bond Deal
-----------------------------------------------------------------
Fitch Ratings has withdrawn the 'BB-' rating of Ingenio Magdalena
S.A. (IMSA) and co-borrowers' proposed $350 million bond
transaction. Co-borrowers under the proposed notes were IMSA and
its main electricity and ethanol subsidiaries Biomass Energy, S.A.
and Mag Alcoholes, S.A. IMSA refinanced its debt in full through a
syndicated loan in March 2022.
Fitch has withdrawn the ratings because Ingenio Magdalena S.A. is
no longer issuing the proposed bonds.
KEY RATING DRIVERS
Key Rating Drivers do not apply as the rating has been withdrawn.
ISSUER PROFILE
IMSA is Guatemala's leading domestic producer and exporter of
refined sugar. The company crushes, on average, 6.5 million tons of
sugarcane per year. The remaining sugar cane, bagasse and coal are
used to generate approximately 1,200 Gwh of electricity equivalent
to 6% of Guatemala's total electricity consumption.
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
=============
JAMAICA: Bill Tabled to Amend Bank of Jamaica Act
-------------------------------------------------
RJR News reports that a bill to amend the Bank of Jamaica Act was
tabled by Finance Minister Dr. Nigel Clarke.
The proposed amendments will make Jamaica's central bank digital
currency, Jam-Dex, legal tender, according to RJR News.
The central bank indicated a delay in the full rollout as the
amendments to the BoJ Act were not yet passed, the report notes.
The central bank digital currency is to be officially launched this
quarter, the report adds.
As reported in the Troubled Company Reporter-Latin America on March
11, 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
P A N A M A
===========
PANAMA: IDB OKs $20M Loan to Make Spending More Efficient
---------------------------------------------------------
Panama will increase the efficiency and equity of its spending by
implementing its Smart Fiscal Ecosystem with a $20 million loan
from the Inter-American Development Bank (IDB).
The data ecosystem will enable government agencies to share
high-quality information in a secure and confidential way. It will
also feature algorithms that analyze third-party databases in real
time, helping agencies identify beneficiaries of social programs,
verify eligibility and obligations, and take other actions.
Panama will launch a governance plan as it implements the system,
to include designing and instituting an expenditure-quality unit,
overhauling positions and functions, hiring a budget specialist
with a gender and diversity approach, and managing digital tools.
The project will also develop algorithms and methods to better
identify and measure spending leakages. Additionally, it will
establish databases to better identify vulnerable groups such as
women and indigenous persons among the economically active
population as well as informal workers in regional databases to
inform policies to better target job and social transfer programs.
In the area of technology management, IDB financing will help
Panama with data governance and interoperability needs for the
Smart Fiscal Ecosystem, identify and purchase energy-efficient and
low-carbon technological infrastructure equipment, and develop and
deploy an information security and privacy model, as well as
cybersecurity protocols.
The Panamanian population, companies and government will be the
program's beneficiaries. Vulnerable populations, especially women
and indigenous people, will benefit from cross-checking data for
reports that will help channel resources to those who need them
most.
Public officials will benefit from better information, processes,
regulations and tools to manage public resources, as the project
enhances the capacity of the state.
This operation aligns with the Vision 2025, the IDB's roadmap for
achieving recovery and sustainable, inclusive growth in Latin
America and the Caribbean. It is also in line with the IDB Group
Strategy with Panama for 2021-2024.
The $20 million IDB loan has a 15-year amortization term, a
4.5-year grace period and an interest rate based on the Secured
Overnight Financing Rate. It will require government approval.
=======
P E R U
=======
PERU: Mining Exports Exceed US$9BB Between January & March 2022
---------------------------------------------------------------
Rio Times Online reports that the Ministry of Energy and Mines
(Minem) of Peru indicated that, during the first quarter of 2022,
metallic and non-metallic mining exports reached the figure of
US$9.579 billion, reflecting an increase of 9.7% compared to the
same period of 2021.
According to figures from the General Directorate for Mining
Promotion and Sustainability (DGPSM) of Minem, the results as of
March 2022 show the mining subsector with 57% of total Peruvian
exports, of which 55.8% correspond to metallic mining products and
1.2% non-metallic mining products, the report notes.
Figures from the Central Reserve Bank (BCR) also indicate that, in
March 2022, mining products totaled US$3.181 billion dollars, which
meant a growth of 2.2% compared to the same month last year,
according to Rio Times Online.
=============
U R U G U A Y
=============
URUGUAY: Seeks to Seduce Investors Before Sustainable Bond Debut
----------------------------------------------------------------
Rio Times Online reports that according to a senior member of the
government's economic team, Uruguay plans to issue a new type of
Sustainability Linked Bond (SLB) as soon as the third quarter of
this year, when it accesses global debt markets for the first
time.
Uruguay's Ministry of Economy and Finance is working on the final
technical aspects, said the director of Economic Policy, according
to Rio Times Online.
*********
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 * * *