/raid1/www/Hosts/bankrupt/TCRLA_Public/220609.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, June 9, 2022, Vol. 23, No. 109
Headlines
B E R M U D A
VALARIS LIMITED: Equinor Contract Gets Terminated
B R A Z I L
AZUL SA: Fitch Affirms 'CCC+' LT Currency IDRs, Outlook Positive
C A Y M A N I S L A N D S
MODERN LAND: Chapter 15 Case Summary
MODERN LAND: CN Developer Seeks US Recognition of Cayman Scheme
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Manufacturing Activity Falls in April
[*] DOMINICAN REPUBLIC: Urban Sprawl Grew to 81.7% in 28 Yrs.
J A M A I C A
JAMAICA: More Rate Hikes on The Horizon
N I C A R A G U A
NICARAGUA: Fitch Affirms 'B-' LongTerm Foreign Currency IDR
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B E R M U D A
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VALARIS LIMITED: Equinor Contract Gets Terminated
-------------------------------------------------
The Royal Gazette reports that offshore drilling services provider
Valaris Limited, a Bermuda exempted company, related in a prepared
statement that it has suffered business interruption.
Valaris Limited, the company that provides drilling services across
all water depths and geographies, has said that one of its
contracts had been cancelled, according to The Royal Gazette.
Valaris said: "Equinor has delivered a termination notice for the
drilling contract awarded to drillship Valaris DS-11, the report
notes.
"The termination will take effect at the end of June. Our total
contract backlog of $2.5 billion as of May 2, 2022 included
approximately $428 million related to this contract. Further
details on the Valaris DS-11 contract can be found in our latest
Fleet Status Report dated May 2, 2022," the report relays.
As a result of the contract termination, Valaris will receive an
early termination fee that is more than sufficient to cover
expenses and commitments incurred on the project, the report
discloses.
President and chief executive officer Anton Dibowitz said, "While
we are disappointed that this contract has been terminated, the
floater market and day rates have improved meaningfully since this
contract was entered into in July 2021, and we expect there will be
other attractive projects for a high specification drillship like
Valaris DS-11 with similar or earlier commencement dates," the
report adds.
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B R A Z I L
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AZUL SA: Fitch Affirms 'CCC+' LT Currency IDRs, Outlook Positive
----------------------------------------------------------------
Fitch Ratings has affirmed Azul S.A.'s (Azul) Long-Term Foreign and
Local Currency Issuer Default Ratings (IDRs) at CCC+' and its
Long-Term National Scale rating at 'B(bra)'. Fitch has also
affirmed Azul Investments LLP's senior unsecured notes due 2024 and
2026 at 'CCC+'/'RR4'. The Rating Outlook is Positive.
Azul's ratings reflect its ongoing refinancing risks in the short
to medium term, including around BRL2,7 billion of capital market
debt coming due until 2024, and the challenge to improve its
capital structure while the company remains focused on growth. The
company's operating cash flow generation has been showing
improvement as a result of solid traffic volume recovery and
capacity additions, despite the challenging fuel price
environment.
The BRL valuation and strong yields rebound have partially offset
these higher costs. The Positive Outlook reflects expectations that
Azul's credit profile will improve as it moves forward with its
refinancing strategy. The company`s ability to continue to access
credit market remains key.
KEY RATING DRIVERS
Challenge to Refinance While Maintain Growth: Azul has the
important challenge to continue with its refinancing strategy
related to its leasing obligations, aircraft financing debt and
important capital market debt at the same time it invests on its
business expansion. Azul's aggressive growth strategy is expected
to result in higher working capital needs and capex levels in the
short to medium term.
These cash outflows together with the higher lease payments,
resulted from the renegotiations during the pandemic, are going to
pressure free cash flow (FCF) generation. This will likely
challenge the company's ability to maintain its track record of
solid liquidity position without raising additional debt.
Cash Flow Pressure Fitch estimates Azul's cash flow from operations
of around BRL1,3 billion and BRL3,0 billion for 2022 and 2023, and
capex of around BRL1,9 billion and BRL2,5 billion for 2022 and
2023, respectively, leading to negative FCF of BRL570 million in
2022 and BRL684 million in 2023. These figures compare with BRL453
million of capex in 2020 and BRL310 million of negative FCF, and
BRL777 million of capex and BRL2,9 billion of negative FCF during
2021.
Operating cash flow generation has also been impacted by higher
fuel prices, partially offset by higher yields and USD dollar
devaluation. Around 60% of Azul's total costs are exposed to USD.
During 4Q21 and 1Q22, Azul's average fuel price rose 80% and 57%,
while yields increased 49% and 34%. Azul's hedges around 17% of its
fuel needs for the next 12 months.
Limited Financial Flexibility: Azul has managed to maintain strong
cash balances throughout the past quarters, and the
reduction/postponements of leasing payments were an important
relief. As of March 31, 2022, the company's readily available cash,
per Fitch's criteria, was BRL2.1 billion and it had BRL1.5 billion
of financial debt in the short term plus BRL3 billion of short
leasing obligations.
The company also faces important capital market debt maturities of
BRL700 million of local debentures by 2023 and a bullet payment of
unsecured notes (USD400 million) in 2024. The company considers it
has other sources of liquidity such as accounts receivables
(including subleases), security and maintenance deposits and the
ability to use Tudo Azul (Azul's mileage program) as collateral for
a secured debt issuance. As of March 31, 2022, Azul reported
immediate liquidity of BRL3,3 billion and total liquidity of BRL6
billion.
Sound Traffic Volume: Azul's traffic levels have been above 2019's
levels since mid-2021, giving the company's aggressive growth
strategy that has been adding capacity during past quarters. During
2021, Azul's total traffic was 2% higher than 2019. During 4Q21 and
1Q22, traffic was 15% and 23% higher than pre-pandemic levels. This
has led Azul to gain market-share over its main competitors, as
Brazil total domestic market remains below 2019 levels (-10%).
Fitch expects Azul strong domestic business position and network to
continue to benefit from a rebound in domestic air traffic in
Brazil.
Strong Domestic Market Position: Azul's credit profile benefits
from its unique regional airline market position in Brazil, with a
strong presence in underserved markets and limited route overlap
with competitors, GOL Linhas Aereas Inteligentes S.A. (GOL;
B-/Stable) and LATAM Airlines Group S.A. (D(cl)). Azul is the sole
provider of services on 77% of its routes and is one of the two
largest airline companies in Brazil, with a market share of around
33%, as measured by revenues/passenger/kilometer (RPK) in 2021. As
Brazil is the company's key market, Azul's operating results are
highly correlated to the Brazilian economy.
DERIVATION SUMMARY
Azul's Positive Outlook reflects Fitch's expectation that the
company is well positioned to benefit from a recovery of domestic
air travel demand. However, the 'CCC+' rating reflects the
continuation of ongoing refinancing risks. Azul's liquidity
position is positive and compares well with its most similarly
rated peer, GOL. Azul has higher operating leverage compared with
GOL.
Azul has a weaker position relative to global peers given its
limited geographic diversification and relatively high operating
leverage. Its strong position in the Brazilian regional market,
high operating margins and track record of strong liquidity ratios
have nevertheless been key rating drivers. These positive factors
are tempered by the company's ongoing business growth and
operational volatility related to its key market, Brazil. Foreign
exchange risk exposure is a negative credit factor for Azul
considering its limited geographic diversification; the company
implemented a currency hedge position that partially mitigates this
risk.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
-- During 2022 and 2023, Fitch's base case includes a increase in
RPK by 23% and 13%
-- Load factors around 80% during 2022 and 2023;
-- Capex of BRL1.9 billion in 2022 and BRL2,6 billion in 2023.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that AZUL would be considered a going
concern in bankruptcy and that the company would be reorganized
rather than liquidated. Fitch has assumed a 10% administrative
claim.
Going-Concern Approach: AZUL's going concern EBITDA is BRL1.35
billion which incorporates the low-end expectations of Azul's
EBITDA post-pandemic, adjusted by lease expenses, plus a discount
of 20%. This correlates to the average of BRL1.2 billion during
2016-2019 that reflects intense volatility in the airline industry
in Latin America and Brazil, and the expansion of its operations
during the past two years. The going-concern EBITDA estimate
reflects Fitch's view of a sustainable, post-reorganization EBITDA
level, upon which Fitch bases the valuation of the company. The
enterprise value (EV)/EBITDA multiple applied is 5.0x, reflecting
AZUL's strong market position in the Brazil.
Fitch applies a waterfall analysis to the post-default EV based on
the relative claims of the debt in the capital structure. The debt
waterfall assumptions consider the company's total debt at March
31, 2022. These assumptions result in a recovery rate for the
unsecured bonds within the 'RR3' range, but due to the soft cap of
Brazil at 'RR4', Azul's senior unsecured are rated at
'CCC+'/'RR4'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Material improvement in the company's debt-amortization
profile, reducing refinancing risks, associated with the
maintenance of sound liquidity position;
-- Net leverage ratios below 5.5x by 2023;
-- Maintenance of the solid rebound in the domestic air traffic
in Brazil.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A change in management's strategy with regard to holding
strong cash balances or difficulties to continue to access
credit lines;
-- Competitive pressures leading to severe loss in market-share
or yield deterioration;
-- Aggressive growth strategy leading to consolidation movement
financed with debt.
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
Good Cash Position: Azul held readily available cash of BRL2.1
billion as of March 31, 2022, per Fitch's calculation. This
compares with BRL4.5 billion of short-term debt, including BRL3.0
billion of leasing obligations. In the same period, Azul's total
debt was BRL21.7 billion. This primarily consists of BRL12.7
billion of leasing obligations, BRL1.6 billion of convertible
debentures, BRL4.7 billion of cross-border senior notes, BRL0.9
million of aircraft and engine loans, and BRL757 million in local
debentures as of March 31, 2022.
Azul does not have a committed standby credit facility, but it has
the option to issue an additional BRL500 million of debt related to
its convertible debentures. Giving the ongoing market volatility,
Azul's continuous ability to access credit/debt markets during 2022
and 2023 is key to maintaining healthy cash levels. Azul consider
its liquidity position is further enhanced by BRL1.4 billion in
account receivables, BRL1.9 billion in security deposits and
maintenance reserves, and BRL0.9 billion in long-term receivables.
Those figures are not included in Fitch's liquidity position.
ISSUER PROFILE
Azul is one of the largest local airlines in Brazil. It has an
important presence in the regional market and is the sole airline
on 77% of its routes. As of Dec. 31, 2021, 18% and 8% of its
domestic network overlapped with GOL and LATAM, respectively.
During 2021, 88% of its revenues derived from passengers and 12%
from cargo and others. Domestic market was responsible for 89% of
the revenues in the period. Azul's market share was 33.5% during
2021.
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 RECOVERY PRIOR
---- ------ -------- -----
AZUL Investments LLP
senior unsecured LT CCC+ Affirmed RR4 CCC+
Azul S.A. LT IDR CCC+ Affirmed CCC+
LC LT IDR CCC+ Affirmed CCC+
Natl LT B(bra) Affirmed B(bra)
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C A Y M A N I S L A N D S
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MODERN LAND: Chapter 15 Case Summary
------------------------------------
Chapter 15 Debtor: Modern Land (China) Co., Limited
Cricket Square, Hutchins Drive
P.O. Box 2681
Grand Cayman, KY1-1111
Cayman Islands
Case No.: 22-10707
Business Description: Modern Land was established in 2000 and
is headquartered in Beijing. It was
listed on the Hong Kong Stock Exchange
in 2013 under the stock code 1107.HK.
The Group is a real estate developer
that independently develops and operates
green technology systems and
expansion systems, and builds the iconic
brand of green technology real estate in
China-"MOMI".
Foreign Proceeding: Scheme proceedings under section 86 of
the Cayman Islands Companies Act
Chapter 15 Petition Date: June 3, 2022
Court: United States Bankruptcy Court
Southern District of New York
Judge: Hon. Martin Glenn
Foreign Representative: Zhang Peng
No. 1 Xiang He Yuan Road
Dong Cheng, Beijing
People's Republic of China
Foreign
Representative's
Counsel: Anthony Grossi, Esq.
SIDLEY AUSTIN LLP
787 Seventh Avenue
New York, NY 10019
Tel: (212) 839-5599
Email: agrossi@sidley.com
- and -
Julina Hoffman, Esq.
SIDLEY AUSTIN LLP
2021 McKinney Avenue
Suite 2000
Dallas, Texas 75201
Tel: (214) 969-3581
Fax: (214) 981-3400
Estimated Assets: Unknown
Estimated Debt: Unknown
A full-text copy of the Chapter 15 is available for free at
PacerMonitor.com at https://bit.ly/3NCkrje
MODERN LAND: CN Developer Seeks US Recognition of Cayman Scheme
---------------------------------------------------------------
Chinese property Modern Land (China) Co., Limited has filed a
Chapter 15 bankruptcy petition in the U.S. to seek recognition of
its restructuring in the Cayman Islands.
Modern Land and its bondholders have entered into a restructuring
support agreement, which sets out the terms on which the parties
would assist and facilitate the implementation of a restructuring
of existing notes via a scheme of arrangement in the Cayman Islands
and the Chapter 15 case.
Zhang Peng, executive director and president of the Debtor,
explains that a series of events have placed certain Chinese
property developers, including the Company, under financial stress
and created impediments to addressing certain payment maturities.
The financial restructuring effectuated through the Chapter 15 Case
and the corresponding Cayman Proceeding are a meaningful step to
right-size the Company's balance sheet and place it in a position
for long-term success to the benefit of the Company's employees,
creditors, customers, vendors, and all of its stakeholders.
16.77M sqm in Unsold Floor Area
The Company is a property developer focused on the development of
green, energy-saving, and eco-friendly residences in the People's
Republic of China. The Debtor is the ultimate holding company of a
group of companies comprising the Company and its subsidiaries,
including Great Trade Technology Ltd., a holding company
incorporated with limited liability in the British Virgin Islands,
the Modern Land HK Companies, and Jiu Yun Development Co., Limited,
a holding company incorporated with limited liability in Hong Kong
that carries out the business of real estate investment and
development in the PRC and the United States.
The Debtor's shares have been listed on the main board of the Stock
Exchange of Hong Kong Limited since July 12, 2013. As of December
31, 2021, the authorized share capital of the Debtor was US$80
million divided into eight billion ordinary shares of a nominal or
par value of US$0.01 each, of which 2.79 billion of the ordinary
shares were issued and fully paid.
The Company has a diversified product portfolio comprised of four
product lines: Modern MOMA; Modern Eminence MOMA; Modern Horizon
MOMA; and Modern City MOMA. Each of the four residential property
product lines are marketed under the Company's "MOMA" brand, which
the Company believes enjoys broad recognition among its customers
and has become one of the few brand names that is representative of
green building design and construction.
As of June 30, 2021, the Company, its joint ventures, and
associates had a contracted sales gross floor area of 2.08 million
square meters and aggregate unsold gross floor area of 16.77
million square meters in the PRC. During the first half of 2021,
the Company, its joint ventures, and associates purchased a total
of 20 new projects with an aggregate gross floor area of
approximately 3.56 million square feet.
$1.34 Billion of Existing Notes
As of June 30, 2021, the Company had a total indebtedness of
US$4.32 billion, including: (i) short-term borrowings of US$972.33
million; (ii) long-term borrowings of US$1.92 billion; and (iii)
bonds payable of US$1.42 billion. Additionally, as of June 30,
2021, the Company's contingent liabilities amounted to US$2.57
billion.
As part of the Company's US$1.42 billion of bonds payable, the
total principal amount outstanding under the Existing Notes is
US$1.34 billion, comprised of:
a) An aggregate principal amount of US$250 million in 12.85%
senior notes with a maturity date of October 25, 2021, issued
pursuant to an indenture dated April 25, 2019, between, the Debtor
and Citicorp International Limited, as the Existing Notes Trustee;
b) An aggregate principal amount of US$200 million in 11.8%
senior notes with a maturity date of February 26, 2022, issued
pursuant to an indenture dated February 26, 2020, between the
Debtor and Citicorp International Limited, as the Existing Notes
Trustee;
c) An aggregate principal amount of US$297 million in 11.5%
senior notes with a maturity date of November 13, 2022, issued
pursuant to an indenture dated July 13, 2020, between the Debtor
and Citicorp International Limited, as the Existing Notes Trustee;
d) An aggregate principal amount of approximately US$318.5
million in 9.8% senior notes with a maturity date of April 11,
2023, issued pursuant to an indenture dated January 11, 2021,
between the Debtor and Citicorp International Limited, as the
Existing Notes Trustee; and
e) An aggregate principal amount of approximately US$276
million in 11.95% senior notes with a maturity date of March 4,
2024, issued pursuant to an indenture dated March 4, 2020, between
the Debtor and Citicorp International Limited, as the Existing
Notes Trustee.
The Debtor is the issuer of the Existing Notes, which are the
subject of the Restructuring pursuant to the Scheme and the Chapter
15 Case. The remaining outstanding indebtedness is not being
restructured and will be unaffected by the Scheme and this Chapter
15 Case. The principal assets of the Debtor include shares in
these wholly owned subsidiaries:
a) Great Trade, a holding company incorporated with limited
liability in the British Virgin Islands which, in turn, holds 100%
of the share capital in Jiu Yun, a holding company incorporated
with limited liability in Hong Kong;
b) Modern Land (HKNo. 2) Co., Limited, Modern Land (HKNo. 3)
Co., Limited, Modern Land (HKNo. 4) Co., Limited, Modern Land
(HKNo. 6) Co., Limited, Modern Land (HKNo. 7) Co., Limited, Modern
Land (HKNo. 8) Co., Limited, Modern Land (HKNo. 9) Co., Limited,
Modern Land (HKNo. 10) Co., Limited, Modern Land (HKNo. 11) Co.,
Limited, and Modern Land (HKNo. 12) Co., Limited, all of which are
holding companies incorporated with limited liability in Hong Kong;
and
c) Modern Land (HKNo. 5) Co., Limited, a holding company
incorporated with limited liability in Hong Kong which, in turn,
holds 99% of the share capital in Modern Land (HKNo. 1) Co.,
Limited, a holding company incorporated with limited liability in
Hong Kong.
Additionally, based on the Debtor's financial data, the Company's
current assets on a consolidated basis as of June 30, 2021,
amounted to approximately US$12.49 billion. The majority of the
Company's current assets cannot be collected or converted into cash
immediately. As of June 30, 2021, these assets were located in the
PRC and United States and certain of the assets were pledged to
secure certain banking and other facilities granted to the Company
and mortgage loans granted to buyers of sold properties.
As of June 30, 2021, key items of the Company's current assets
consist of:
a) inventory of approximately US$145.79 million;
b) properties under development for sale of approximately
US$6.92 billion;
c) properties held for sale of approximately US$895 million;
d) trade and other receivables of approximately US$1.78
billion;
e) amount due from related parties of approximately US$129.27
million;
f) restricted cash of approximately US$570.69 million; and
g) bank balances and cash of approximately US$2.06 billion.
Events Preceding the Restructuring
During the second half of 2021, Chinese property developers and the
capital markets that funded the growth and development of the
sector have experienced an inflection point. Reduced bank lending
for real estate development has resulted in reduced access by
property developers to PRC capital. In addition, reduced bank
lending for buyers seeking mortgage financing, as well as buyers'
concerns about the ability of property developers to complete
projects, has resulted in reduced property sales. Adverse reaction
to these PRC events by international capital markets has limited
the Company's funding sources to address upcoming maturities.
Since the beginning of 2022, the property sector in China has
continued to experience volatility. Reduced bank lending for real
estate development, coupled with the adverse impact of COVID-19
pandemic on macroeconomic conditions and certain negative credit
events, have intensified market concerns over the operations of
Chinese property developers. As a result, Chinese property
developers have encountered greater difficulty pre-selling their
inventory.
The Company has also experienced a noticeable decline in its
aggregate contracted sales in recent months. Against the backdrop
of the adverse market conditions, the Company experienced liquidity
pressures due to limited access to external capital to refinance
its existing indebtedness and reduced cash generated from
contracted sales. As a result, the repayment arrangements of the
principal amount of the October 2021 Notes and February 2022 Notes
and the accrued but unpaid interest thereon were not met upon the
respective maturity dates of Oct. 25, 2021 and Feb. 26, 2022.
These amounts remain unpaid.
Restructuring
The Company has been actively engaging with its customers,
suppliers, creditors, and shareholders in an attempt to stabilize
its credit lines and day-to-day operations. The Company commenced
discussions with the ad hoc group of holders of the Existing Notes
as constituted from time to time who are advised by Kirkland &
Ellis LLP in exploring a consensual resolution for the Existing
Notes Events of Default.
As the Debtor disclosed on Oct. 26, 2021, the Debtor appointed
Sidley Austin LLP as its legal advisor to review its potential
options and to assist the Debtor in its debt restructuring
negotiations with the holders of the Existing Notes. On Nov. 5,
2021, the Debtor announced the appointment of Houlihan Lokey
(China) Limited as its financial advisor and invited holders of the
Existing Notes to come forward and establish contact so the Debtor
could initiate consensual restructuring discussions.
Following extensive negotiations with the Ad Hoc Group (being a
representative group of certain Scheme Creditors), the Debtor and
its advisors determined the restructuring and implementation of the
Scheme was in the best interests of the Company and those with an
economic interest in the Company, including, in particular, the
Scheme Creditors. Accordingly, the Debtor entered into a
restructuring support agreement, dated as of Feb. 25, 2022, with
certain Scheme Creditors (i.e., certain holders of the Existing
Notes).
Under the terms of the RSA, the Debtor has undertaken to pay, or
procure the payment of, on or prior to the Restructuring Effective
Date, the RSA Fees (that only represent approximately 0.16% of the
aggregate outstanding principal amount of the Existing Notes) , in
cash, to the Scheme Creditors who are parties to the RSA.
Additionally, pursuant to the Scheme, the Debtor has agreed to pay
the AHG Work Fee and AHG Legal Fees to compensate the Ad Hoc Group
and their advisors for the work, time, and risks associated with
negotiating the Restructuring and assisting to formulate the Cayman
Scheme and the terms of the Restructuring. The total amount of the
AHG Work Fee and AHG Legal Fees are anticipated to represent less
than 0.4% of the aggregate outstanding principal amount of the
Existing Notes.
As of May 31, 2022, certain Scheme Creditors holding an aggregate
principal amount of approximately US$1,083,272,000 of the Existing
Notes (representing approximately 80.75% of the aggregate
outstanding principal amount of all Existing Notes) had acceded to
the RSA. Pursuant to the terms of the Restructuring Support
Agreement, Scheme Creditors that were not already party to the RSA
as of the RSA Fee Deadline may no longer accede to it in order to
receive the RSA Fee.
Each Scheme Creditor will be entitled to receive the distribution
of its pro rata share of the following consideration in accordance
with the terms of the Scheme:
(a) US$22.916 million of cash; and
(b) The New Notes, in an aggregate principal amount equal to
the sum of (i) c.98.3% of the outstanding principal amount of the
Existing Notes held by such Scheme Creditor as of the Record Time
and (ii) the accrued and unpaid interest on the Existing Notes up
to but excluding the Restructuring Effective Date.
Pursuant to the Scheme, the Company is restructuring its existing
obligations and indebtedness under the Existing Notes Documents.
The Debtor will also be issuing new notes on the Restructuring
Effective Date, including:
(a) Senior secured notes bearing interest at 7/9% due 2023 with
an original principal amount of US$80 million to be issued by the
Debtor, guaranteed by the Subsidiary Guarantors, with Citicorp
International Limited serving as the notes trustee;
(b) Senior secured notes bearing interest at 8/10% due 2024
with an original principal amount of US$180 million to be issued by
the Debtor, guaranteed by the Subsidiary Guarantors, with Citicorp
International Limited serving as the New Notes Trustee;
(c) Senior secured notes bearing interest at 9/11% due 2025
with an original principal amount of US$300 million to be issued by
the Debtor, guaranteed by the Subsidiary Guarantors, with Citicorp
International Limited serving as the New Notes Trustee;
(d) Senior secured notes bearing interest at 9/11% due 2026
with an original principal amount of US$400 million to be issued by
the Debtor, guaranteed by the Subsidiary Guarantors, with Citicorp
International Limited serving as the New Notes Trustee; and
(e) Senior secured notes bearing interest at 9/11% due 2027
with an original principal amount of US$520.01 million to be issued
by the Debtor, guaranteed by the Subsidiary Guarantors, with
Citicorp International Limited serving as the New Notes Trustee.
On the Restructuring Effective Date, subsequent to the completion
of, among other things, the distribution of the Scheme
Consideration and the issuance of the New Notes, all outstanding
Existing Notes will be cancelled and all guarantees in connection
with the Existing Notes will be released, including the Subsidiary
Guarantors' guarantee of the Debtor's obligations under the
Existing Notes, in accordance with the Scheme.
About Modern Land
Modern Land (China) Co., Limited, was established in 2000 and is
headquartered in Beijing. It was listed on the Hong Kong Stock
Exchange in 2013 under the stock code 1107.HK. The Group is a real
estate developer that independently develops and operates green
technology systems and expansion systems, and builds the iconic
brand of green technology real estate in China-"MOMI".
On April 14, 2022, Modern Land (China) filed a petition in the
Cayman Islands commencing scheme proceedings under section 86 of
the Cayman Islands Companies Act to pursue a restructuring pursuant
to the terms of a restructuring support agreement with holders of
existing notes. Modern Land is the subject of a restructuring
proceeding entitled In the Matter of Modern Land (China) Co.,
Limited, concerning a scheme of arrangement between the Debtor and
bondholders, currently pending before the Grand Court of the Cayman
Islands, Cause Number 96 of 2022 (ASCJ).
On June 3, 2022, Modern Land (China) Co. filed a Chapter 15
bankruptcy petition (S.D.N.Y. Case No. 22-10707) to seek U.S.
recognition of its Cayman proceedings. The Hon. Martin Glenn is
the case judge. Sidley Austin LLP, led by Anthony Grossi and
Julina Hoffman, is counsel in the U.S. case. Houlihan Lokey
(China) Limited serves as the Debtor's financial advisor.
An hoc group of holders of the Company's existing notes is advised
by Kirkland & Ellis LLP
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Manufacturing Activity Falls in April
---------------------------------------------------------
Dominican Today reports that the Monthly Index of Manufacturing
Activity (IMAM) of the Association of Industries of the Dominican
Republic (AIRD) fell in April in relation to March, from 63.7 to
56.9, showing decreases in the variables of Inventory of Raw
Materials, Production Volume, Employment and Sales Volume.
The IMAM has remained above the threshold of 50.0 throughout the
past 2021 and the first four months of this year, according to
Dominican Today.
This index is a portrait of the manufacturing activity of a month
in relation to the previous one, the report discloses. It is
specified that when the IMAM is below the threshold of 50 points,
it reflects that the economic conditions and prospects of the
manufacturing sector are considered unfavorable, the report notes.
Above 50.0, the outlook is favorable, the report relays.
The IMAM fell for the first time from the 60.0 where it was located
in November of last year, but has remained above the 50.0 threshold
from January 2021 to April of this year, 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: Urban Sprawl Grew to 81.7% in 28 Yrs.
-------------------------------------------------------------
Dominican Today reports that in the last 28 years, the country's
urbanization process grew from 56.7% to 81.7% in 28 years, reaching
the average for Latin America and the Caribbean and, in the opinion
of experts, it will continue to increase, which constitutes an
opportunity for the country to regulate this growth and improve the
quality of life and habitat of the people.
This is stated in the study: "Enabling the way for the development
of prosperous cities and territories in the Dominican Republic"
carried out by specialists from the World Bank, the European Union
and the Ministry of Economy and had the purpose of contributing to
face the challenges respect to the territories and land use
policies, according to Dominican Today.
It highlights that urban areas are growing in an unplanned and
disorganized way, with little connectivity, increasing the risk of
floods and greater impact from natural events, the report notes.
It indicates that a large part of Dominicans lack adequate housing
and more than a third of the population lives in homes considered
vulnerable, 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.
=============
J A M A I C A
=============
JAMAICA: More Rate Hikes on The Horizon
---------------------------------------
David Rose at Jamaica Observer reports that the Victoria Mutual
Building Society (VMBS) has become the latest financial entity to
raise interest rates on its existing loan portfolio as the Bank of
Jamaica (BOJ) continues to increase its policy rate amid rising
inflation.
The 144-year-old mortgage lender, which had a loan portfolio of
$73.85 billion in 2020, sent out a release to its membership that
it would be hiking the interest rate on its existing loan portfolio
up to a maximum of 1.50 per cent which is set to take effect on
July 1, according to Jamaica Observer. The notice stated that this
was in light of the BOJ's actions over the last nine months which
has seen its policy rate move tenfold from 0.50 to 5.00 per cent,
the report notes.
The notice explained that the increase would result in upward loan
payment adjustments for existing variable loan customers and that
these members would be contacted individually for any concerns they
might have on the adjustments, the report discloses. VMBS had
$64.11 billion in mortgage loans with its audited financials
revealing that its surplus and reserves would decline by $17.21
million and $927.14 million, respectively, if there was supposed to
be a 100 basis point (1.00 per cent) rise in the interest rates on
Jamaican dollar and foreign currency assets and liabilities, the
report relays.
VMBS is one of two building societies in Jamaica with Scotia
Jamaica Building Society being the other. No information has been
seen on whether any credit unions have increased rates on their
existing loan portfolio, the report notes.
JN Bank Limited's rate hike of 25 to 50 basis points is set to take
effect, the report relays. This will affect mortgages, auto loans
and business loans for clients with variable rate loans, the report
notes. Sagicor Bank Jamaica Limited is raising rates on its
clients by 1.50 per cent come June 27 while First Global Bank
Limited is raising rates for its clients on July 4, the report
discloses. National Commercial Bank Jamaica Limited, the country's
largest bank by assets, had indicated that it would be raising
rates on existing products last month, but has not sent out a mass
advisory to its clients informing them of any specific rate
increase, the report says.
JMMB Bank Jamaica Limited, Bank of Nova Scotia Jamaica Limited
(BNSJ) and FirstCaribbean International Bank (Jamaica) Limited have
not announced rate hikes on their existing loan portfolios, the
report notes.
The various announcements by different financial entities of
raising rates has sent many borrowers scrambling to find out if
their loans might be affected. Even real estate dealer Gabrielle
Grant tweeted on Twitter, "Jamaican mortgage lenders are sending
out notices of interest rate increases for existing loans, the
report relays. The real estate market watches with bated breath,"
the report notes.
Grant pointed out that throughout her near decade of experience in
the industry, the script from banks was that the variable rate
loans could increase, but that they traditionally didn't raise
existing loan rates, the report discloses. She highlighted that
this was an inevitable consequence of rising inflation, and that
tradition is out of the window in these unprecedented times, the
report relays.
Average mortgage rates have declined from 10.79 per cent in March
2012 to 6.96 per cent in March 2022, the report notes. Mortgage
rates were 25.20 per cent at the start of the millennium and peaked
at 30.60 per cent in August 2000, the report relats. The average
rate declined from 25.57 per cent in October 2006 to 13.93 per cent
in November 2006, the report notes.
JMMB Group Limited's interest/dividend payments on its $28.75
billion redeemable preference share portfolio moved up by 86 per
cent from $913.05 million in March 2021 to $1.69 billion in March
2022, the report notes. This has been influenced by the inclusion
of $10 billion in newly issued preference shares in 2021, but also
the rising yields on the 180-day treasury bills for its variable
rate preference shares, the report discloses. The average yield
was 1.52 per cent in 2021 and hit 6.37 per cent in 2022, the report
says. Several other listed companies will be impacted by the rise
in the average yield on treasury bills as their interest expense
cost rises from the revaluing of the interest rate, the report
relays. Even Community & Workers of Jamaica Co-Operative Credit
Union Limited's variable rate deferred shares which were set at
7.35 per cent will reset to a rate above what it was issued for in
May 2018, the report notes. The rate was reset to 3.27 per cent in
June 2021 and is more than likely to be reset above 10.25 per cent
this month based on the May's 180 day treasury bill yield of 8.25
per cent, the report adds.
=================
N I C A R A G U A
=================
NICARAGUA: Fitch Affirms 'B-' LongTerm Foreign Currency IDR
------------------------------------------------------------
Fitch Ratings has affirmed Nicaragua's Long-Term Foreign-Currency
Issuer Default Rating (IDR) at 'B-'. The Rating Outlook is Stable.
KEY RATING DRIVERS
Ratings Affirmed: Nicaragua's 'B-' rating is supported by its
record of prudent macroeconomic policies with a framework centered
on a crawling peg, supported by a strong external liquidity
position, and favorable public debt metrics. These strengths are
balanced by low per-capita GDP, shallow local capital markets that
constrain fiscal financing flexibility, and weak governance. The
economy has remained fairly resilient to international sanctions
related to governance, having recovered faster than expected from a
long recession. However, these tensions and potential escalation
could constrain access to already limited sources of financing and
impair the investment climate.
Sanctions Increase After Election: President Daniel Ortega began
his fourth term in office in January 2022, following
internationally criticized elections in November 2021. The arrest
of more than 50 opposition figures left few credible challengers to
President Ortega. The U.S. government enacted the RENACER Act after
the election, tightening sanctions on targeted individuals and
institutions. Continued erosion in governance indicators, a
potential further tightening of sanctions, and the broader climate
of tension with major global actors pose key downside risks.
Nicaragua's Worldwide Governance Score at the 19th percentile is
among the worst in the region and 'B' category.
Growth Recovers: Growth rebounded strongly by 10.3% in 2021,
returning real GDP to its levels in 2017, after three years of
contraction, due to the 2018 social protests and the pandemic in
2020. Private consumption has been a key driver of the recovery,
supported by strong remittances (up 16% yoy in 2021 to a record
high of 15% of GDP). Investment is recovering from its dramatic
decline in 2018-2019, but still far below 2017 levels. Credit has
begun to recover, albeit slowly despite the rapid economic rebound
and significant liquidity in the banking system, as banks and
borrowers remain cautious following repeated shocks. Fitch
forecasts 3.9% growth in 2022, supported by continued strong
remittances from abroad and strong international demand and high
prices for commodities, including gold and agricultural exports.
Rising Inflation: Inflation reached 9.95% yoy in April, driven
largely by higher prices for food and fuel. In March, the
government announced a freeze in fuel prices, that it has extended
on an ad-hoc basis, which could limit further upside pressure on
inflation. The central bank (BCN) retains an accommodative monetary
policy stance with two 50 bps hike to date to 4.5%; however, the
central bank does not engage in inflation targeting, given the
crawling peg and elevated financial dollarization (around 90% of
credit and 70% of deposits).
Current Account Deficit Returns: The current account balance
shifted to a 2.3% deficit in 2021 (below 'B' median of 3.2%) from a
3.9% surplus in 2020, as strong import growth (40% yoy) driven by
recovering domestic demand and higher fuel prices more than offset
strong growth in exports and the surge in remittances to record
levels. The moderate current account deficit remains amply covered
by high FDI, which reached record levels in 2021 (primarily in
energy and mining) despite sanctions and heightened diplomatic
tensions. Fitch forecasts the current account deficit will rise to
4.0% of GDP in 2022, mainly as a result of sharply higher oil
import prices.
Reserves Strengthen: Favorable balance-of-payments dynamics have
led to a considerable increase in international reserves to USD4.3
billion as of April 2022 from USD2.4 billion in 2019, far above
their levels before the 2018 crisis. Reserve adequacy is strong, as
a share of broad money at 72%, above the median of 33% for
sovereigns with managed FX regimes, although it is closer to peer
median as a share of current external payments (5.7 months). The
sizeable external liquidity of commercial banks, and central bank
external liquidity lines, represent additional buffers.
Small Fiscal Deficit: Nicaragua's general government deficit
narrowed to 1.2% of GDP in 2021 (below 'B' median of 5.4%) after a
relatively modest deterioration to 1.8% in 2020 at the height of
the pandemic. The fiscal balance has returned to a level in line
with 2017, reflecting tax increases through a 2019 tax reform that
have paid for higher spending. Fitch projects the deficit will rise
to 1.7% in 2022, as the benefits of an economic recovery and
phase-out of pandemic spending are offset by the cost of the
subsidies to fund a fuel price freeze.
General government fiscal figures capture the deficits of the
central government of (0.7% of GDP in 2021) and the social security
institute (INSS) of 0.6%. While the latter remains a source of
pressure on public finances, Fitch expects this to be contained in
the forecast period by parametric adjustments made in 2019, and an
ongoing labor market recovery that is lifting affiliations to the
INSS.
Financing Uncertainty: U.S. sanctions and the deteriorating
governance backdrop have not precluded Nicaragua from securing
record-large support from multilaterals in 2020 and 2021, although
large disbursements from the IMF and World Bank were due to
extraordinary circumstances, including the pandemic and hurricanes.
External funding has become increasingly reliant on regional
development bank CABEI, which represented 55% of net external
financing in 2021, up from 28% in the prior decade.
Financing remains predominantly reliant on external loans, while
domestic bond issuance has been a small but somewhat more relevant
financing source since 2019. Rates on domestic sovereign bonds have
come down in the past year to 7.3% in 1Q22 from 10.8% in 1Q21 at a
five-year tenor.
Debt Steady: Debt/GDP moderated only slightly in 2021 despite the
sharp real GDP rebound and low fiscal deficit to 52.1% of GDP from
53.3% in 2020, reflecting net borrowing that has exceeded reported
deficit by a substantial margin, in part due to support provided to
financial and non-financial public entities. The authorities have
also continued to rebuild deposits to 9.3% of GDP in 2022, a
substantial increase from the dip to 6.3% in 2018. Debt and net
debt metrics are moderate relative to 'B' peers, and
interest/revenues ratio of 4.4% in 2021 is one of the lowest in the
category, reflecting the highly concessional nature of Nicaragua's
debt stock.
ESG - Governance: Nicaragua has an ESG Relevance Score (RS) of '5'
for both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption, as
is the case for all sovereigns. These scores reflect the high
weight that the Worldwide Governance Indicators have in Fitch's
proprietary Sovereign Rating Model. Nicaragua has a low WBGI
percentile ranking of 18.8%, reflecting episodes of political
violence, weak political participation rights and uneven
application of the law.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Public Finances: An inability to access external or local sources
of financing or evidence of heightened risks in meeting
debt-service payments caused, for example, by the tightening of
international sanctions.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Public Finances: Fiscal consolidation resulting in a reduction in
overall financing needs, and easing of financing constraints, for
example due to diversification of financing sources and/or rollback
of international sanctions.
Macro: A strong and sustained economic recovery and easing of
downside risks, for example, owing to reduction in international
tensions and political uncertainties.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Nicaragua a score equivalent to a
rating of 'B-' on the Long-Term Foreign-Currency IDR scale. Fitch's
sovereign rating committee did not adjust the output from the SRM
to arrive at the final Long-Term Foreign-Currency IDR.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a Long-Term Foreign-Currency IDR. Fitch's QO is a
forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating, reflecting
factors within Fitch's criteria that are not fully quantifiable
and/or not fully reflected in the SRM.
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.
ESG CONSIDERATIONS
Nicaragua has an ESG Relevance Score of '5' for Political Stability
and Rights as Worldwide Governance Indicators have the highest
weight in Fitch's SRM and are therefore highly relevant to the
rating and a key rating driver with a high weight. As Nicaragua has
a percentile rank below 50 for the respective Governance Indicator,
this has a negative impact on the credit profile.
Nicaragua has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
Worldwide Governance Indicators have the highest weight in Fitch's
SRM and are therefore highly relevant to the rating and are a key
rating driver with a high weight. As Nicaragua has a percentile
rank below 50 for the respective Governance Indicator, this has a
negative impact on the credit profile.
Nicaragua has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
Worldwide Governance Indicators is relevant to the rating and a
rating driver. As Nicaragua has a percentile rank below 50 for the
respective Governance Indicator, this has a negative impact on the
credit profile.
Nicaragua has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Nicaragua, as for all sovereigns. As
Nicaragua has a fairly recent restructuring of public debt in 2008,
this has a negative impact on the credit profile.
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
---- ------ -----
Nicaragua LT IDR B- Affirmed B-
ST IDR B Affirmed B
LC LT IDR B- Affirmed B-
LC ST IDR B Affirmed B
Country Ceiling B- Affirmed B-
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
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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.
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