/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/220705.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 Tuesday, July 5, 2022, Vol. 23, No. 127 Headlines A R G E N T I N A ARCOR SAIC: Fitch Affirms 'B/B+' IDRs, Outlook Stable ARGENTINA: Economy Minister Resigns as Divisions Grow B R A Z I L BRAZIL: Sao Paulo to Reduce VAT on Gasoline [*] BRAZIL: Sao Paulo Already Admits Not to Hold "Carnival in July" C O L O M B I A COLOMBIA: Finances Still Not in Order Says Fiscal Rule Committee D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Exp Realty Bets on the Dominican Market J A M A I C A JAMAICA DIVERSIFIED: Fitch Hikes Rating on 2020-1 Notes to BB+ JAMAICA: Investors Have Confidence in Economy, Says Holness P E R U MINSUR SA: S&P Affirms 'BB+' Issuer Credit Rating, Outlook Pos. P U E R T O R I C O PUERTO RICO: PREPA Mediators Ask Another Mediation Extension - - - - - ================= A R G E N T I N A ================= ARCOR SAIC: Fitch Affirms 'B/B+' IDRs, Outlook Stable ----------------------------------------------------- Fitch Ratings has affirmed Arcor S.A.I.C.'s Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) at 'B' and its LT Local Currency (LC) IDR at 'B+'. The Rating Outlook is Stable. Fitch has also affirmed Arcor's LT senior unsecured bond rating at 'B'/'RR4'. Arcor's 'B' FC IDR is one notch higher than Argentina's 'B-' Country Ceiling rating. This reflects Fitch's expectations that the company will be able to cover its hard currency interest expense with a combination of cash held abroad, export earnings and cash flow from subsidiaries outside of Argentina. The ratings also incorporate Fitch's assumption that the company will address refinancing of its 2023 bond maturity by the end of 2022. KEY RATING DRIVERS Strong Business Position: Arcor's 'B+' LC IDR reflects the company's strong business position as a leading Latin American producer of confectionary and cookie products. The company's vertical integration ensures the quality of supplies as well as the availability of main inputs. Arcor's brand names and distribution platform support its leading market shares in chocolates, candies, cookies and packaging in Argentina, its main market. Argentina, including exports to third parties, contributed 72% of sales and 81% of EBITDA in 2021. The company's brands reach consumers in over 100 countries, but the majority of the other revenue and EBITDA came from the Andean region (12% and 10%, respectively) and Brazil (8% and 2%, respectively). FC IDR Rated Above Country Ceiling: Fitch's criteria for rating FC IDRs higher than an issuer's applicable Country Ceiling evaluates the relationship between 12 months of foreign currency debt service and cash held abroad, cash generated by exports, undrawn committed credit lines and cash flow from foreign operations. If the ratio derived from the sum of these factors covers debt service by more than 1.0x-1.5x for 12 months, the issuer's FC IDR may be notched one level above the applicable Country Ceiling. For Arcor, Fitch projects the ratio will comfortably exceed this threshold in the next 12 months. Low Leverage: Fitch expects Arcor's debt/ EBITDA to be stable at around 2.7x in 2022 (2.7x in 2021). Arcor's EBITDA improved to USD309 million from USD287 million in 2020. Much of this improvement was due to good performance outside Argentina, in particular in the Andean region where sales increased by 42% in USD terms and EBITDA margins improved from 2.2% in 2020 to 9.3% in 2021. Overall margins, nonetheless, were under pressure as raw materials and other production costs experienced the effects of inflation. These were partially mitigated by exchange rate gains and effective pricing strategies. Fitch expects the company's EBITDA margin in 2022 to remain pressured by cost inflation but stay between 10%-11%. Fitch expects Arcor to be able to refinance its USD500 million bond due in July 2023. Capex should remain moderate at about USD50 million (USD38 million in 2020). Arcor and Bagley Call Option: Arcor S.A.I.C. and Bagley Argentina, S.A. together own about 49% of the shares of Mastellone Hermanos Sociedad Anonima (CC), a leading dairy producer in Argentina, for a total investment of USD134 million. Arcor has a call option for Mastellone's outstanding corporate stock that started in 2020 and lasts until 2025. Mastellone also has a put option during the same period. Fitch sees Mastellone as strategic for Arcor in the long term. DERIVATION SUMMARY Arcor's 'B' FC IDR is well-positioned in its rating, given the company's vertically integrated model as a leading Latin American producer of confectionary and cookie products, paired with the group's export capacity and presence in several Latin American countries outside of Argentina. A business profile constraint is Arcor's moderate size relative to other large consumer goods companies, such as Nestle SA (A+/Stable) or Grupo Bimbo, S.A.B. De CV (BBB/Stable), which have global presences. To increase its regional presence, Arcor has grown organically and non-organically and entered into partnerships. However, the company's operations remain significantly concentrated with Argentina representing 81% of EBITDA. Fitch estimates Arcor's Debt to EBITDA was around 2.7x in 2021 and expects it to trend towards 2.5x within the ratings horizon. This compares favorably to its investment-grade peers like Alicorp S.A.A.(BBB/Stable), Bimbo, and Nestle, which all have gross leverage ratios within similar ranges. Arcor has lower gross leverage than Kraft Heinz Corporation's (BBB-/Stable), which Fitch expects to be around 4x in 2022. In terms of profitability, Arcor's projected 2022 EBITDA margins compare to Alicorp's at around 10%. The company's margins lag the rest of its peers, which Fitch projects at approximately 12% for Bimbo, 19% for Nestle, and 22.7% for KHC in 2022. KEY ASSUMPTIONS -- Revenue growth driven by inflation & real GDP growth; -- EBITDA of approximately USD325 million in 2022; -- Capex of about USD50 million for 2022 and 2023; -- Dividends between USD50 - USD55 million for 2022 and 2023; -- Debt/EBITDA approximately 2.7x in 2022. RATING SENSITIVITIES Developments That May, Individually or Collectively, Lead to Positive Rating Action: -- An upgrade of Argentina's sovereign rating would lead to an upgrade of Arcor's FC IDR, given the high level of cash generated from Argentine operations; -- Gross debt/EBITDA below 2.5x on a sustained basis could lead to a change of the Outlook or an upgrade of the LC IDR; -- Strong liquidity position and access to international markets to refinance the 2023 bond. Developments That May, Individually or Collectively, Lead to Negative Rating Action: -- Inability to successfully refinance the 2023 bond by year end; -- Debt/EBITDA above 4.0x on a sustained basis could lead to a downgrade of Arcor's LC IDR; -- Exports, cash abroad and committed bank lines not covering hard currency interest expense and debt amortization by 1.0x1.5x over 12 months could lead to a downgrade of the FC IDR; -- A downgrade of Argentina's Country Ceiling would likely lead to a negative action on the FC IDR or Outlook. 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 Manageable Liquidity: As of YE 2021, Arcor had ARS19.4 billion of cash and cash equivalents and short-term debt of ARS25 billion, which is about 30% of total debt. Approximately 71% of total debt was in U.S. dollars. As of Q1 2022, short-term maturities remain relatively the same but represent 26% of total debt. Most of the short-term debt is bank debt and local bonds. The company has strong access to bank lines to finance exports and local sources of financing to manage short-term debt. The USD500 million senior unsecured note is due in July 2023. Capital controls pose a risk to all Argentine companies seeking to refinance USD denominated bonds. Nevertheless, Argentinean companies have been able to refinance their debt ahead of their maturities, and Fitch expects Arcor to be able to do the same before the end of the year. ISSUER PROFILE Arcor is a leading Latin American producer of confectionary products and cookie products. The company operates industrial plants and distribution centers in Argentina, Brazil, Chile, Peru, Mexico, and Angola. Arcor is a leader in the Argentine market and has an extensive international sales network with offices around the world. 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 ---- ------ -------- ----- Arcor S.A.I.C. LT IDR B Affirmed B LC LT IDR B+ Affirmed B+ senior unsecured LT B Affirmed RR4 B ARGENTINA: Economy Minister Resigns as Divisions Grow ----------------------------------------------------- Buenos Aires Times reports that Argentina's Economy Minister Martin Guzman resigned marking the biggest departure of President Alberto Fernandez's government after infighting within the ruling coalition escalated. Guzman announced his decision in a seven-page letter published on Twitter, according to Buenos Aires Times. No replacement was immediately announced. The minister had come under pressure as Argentines battle heightened inflation of more than 60 percent, the report notes. The shake-up also raises doubts over whether Argentina can comply with a US$44-billion program with the International Monetary Fund, whose goals and objectives for the second half are seen by private economists view as too challenging to reach, the report relays. Guzman, a 39-year-old economist who conducted research at Columbia University alongside Nobel Prize winner Joseph Stiglitz, lost support over the last months from the far-left wing of the Frente de Todos coalition led by Vice-President Cristina Fernandez de Kirchner, the report discloses. Lawmakers loyal to her in Congress voted against the IMF agreement he negotiated, even though the deal was approved with ample backing, the report says. Complaints against Guzman had billowed recently with Fernandez de Kirchner herself slamming the government's management of inflation, the currency market and reserves in a May speech, the report relays. In a speech ahead of the publication of Guzman's resignation letter, she once again criticised economic policy, the report discloses. In his exit note, Guzman called for a "political agreement within the governing coalition," the report says "That will allow whoever replaces me to have the ability to manage centrally the tools of macroeconomic policy that will be necessary to continue the advances we've made and the challenges ahead," he wrote, the report relays. Under Pressure Over his almost 31-month tenure, Guzman restructured US$66 billion of international bonds with private creditors in 2020 and spearheaded talks for a refinancing of an IMF deal inked by the prior administration, the report notes. While both deals bought the government time to repay Wall Street and the Washington-based lender, neither accomplished a boost in investor confidence, the report discloses. The nation's bond prices remain in distressed territory, above 20 cents on the dollar, and the country's parallel exchange rate - which indicates local confidence amid capital controls - slumped to a record low of 252 pesos per dollar, the report relays. Guzman was expected to travel to France ahead of a July 6 meeting to continue negotiations over US$2 billion owed to a group of creditor nations known as the Paris Club, the report says. In addition to the challenges of curbing inflation and rolling over a growing pile of local debt, Guzman was also tasked in the near-term with overseeing the reduction of energy subsidies through a process of segmenting fees based on income, a socially sensitive move that would allow the government to meet spending reductions necessary for the IMF plan, the report notes. Guzman also cut the government's fiscal deficit last year after it ballooned at the peak of the pandemic in 2020, the report recalls. Fernandez de Kirchner heavily criticised that belt tightening in September, after the ruling coalition lost control of the Senate in midterm elections, the report notes. Fractured Coalition One of the president's most loyal ministers, Guzman's resignation lays bare the government's internal divide between Fernandez and Fernandez de Kirchner, the report relays. The president last month was forced to ask Productive Development Minister Matias Kulfas to resign, after he allegedly criticized members of the coalition in text messages to the press, the report relays. Guzman had butted heads with some of his own deputies loyal to Fernandez de Kirchner, the report discloses. In May 2021, local press reported a policy rift between Guzman and a junior official in the Energy Ministry who Guzman requested be fired, the report says. As the top economic policymaker, Guzman had control over the Energy Ministry, but the official, aligned with Fernandez de Kirchner, allegedly refused to quit and stayed in his post, the report notes. Since the government sealed the IMF deal, Fernandez's focus has also shifted toward economic issues that have been spearheaded by other ministries, the report relays. In March, the president declared a "war on inflation" and told ministers to take "all measures necessary" to combat elevated inflation but price gains continued escalating, the report notes. While Guzman played a role in the inflation strategy, measures on prices were mostly led by officials close to Fernandez de Kirchner, the report discloses. Other Economy Ministry officials including Finance Undersecretary Ramiro Tosi, Tax Undersecretary Roberto Arias and Institutional Relations Undersecretary Rodrigo Ruete also presented their resignations, 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. =========== B R A Z I L =========== BRAZIL: Sao Paulo to Reduce VAT on Gasoline ------------------------------------------- Rio Times Online reports that the governor of Sao Paulo, Rodrigo Garcia (PSDB), announced that the state will immediately reduce the VAT tax rates (ICMS) on gasoline from 25% to 18%, which may cause a reduction in the price at the pumps. The loss of revenue with the measure reaches R$4.4 billion (US$840 million) and will reduce state investments in education and health, according to Rio Times Online. As reported in the Troubled Company Reporter-Latin America on June 17, 2022, S&P Global Ratings affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. [*] BRAZIL: Sao Paulo Already Admits Not to Hold "Carnival in July" ------------------------------------------------------------------- Rio Times Online reports that Sao Paulo's street carnival, known as Esquenta Carnaval, scheduled for July 16 and 17, is in danger of not taking place. The mayor Ricardo Nunes said Thursday, 30, that if there is no private sponsorship to finance the event, "the city will not put public money" to sponsor the parades of blocks, according to Rio Times Online. A new tender for sponsorship has been opened, for which companies must apply by July 7, the report notes. The opening of a new tender was decided because no company was interested in the first tender, the report relays. Mayor Ricardo Nunes stated that City Hall will not provide public funds unless there is private sponsorship to finance the event, the report adds. As reported in the Troubled Company Reporter-Latin America on June 17, 2022, S&P Global Ratings affirmed its 'BB-/B' long- and short-term foreign and local currency sovereign credit ratings on Brazil. =============== C O L O M B I A =============== COLOMBIA: Finances Still Not in Order Says Fiscal Rule Committee ---------------------------------------------------------------- globalinsolvency.com, citing Reuters, reports that Colombia's fiscal rule committee said the country's finances are still not in order despite upticks in predicted tax revenue, and there is risk of an eventual increase in debt and spending. The expert Autonomous Fiscal Rule Committee (CARF), charged with evaluating public finances, added in a statement there should be a change in the country's accounting to include fuel subsidy deficit, according to globalinsolvency.com. The committee applauded a government projection this month that the central government deficit will fall this year to 5.6% of gross domestic product, about $18.1 billion, from a previous estimate of 6.2% of GDP, about $20.1 billion, as the economy recovers and higher oil prices boost national income, the report notes. Finances remain fragile due to more spending during the coronavirus pandemic, the committee said, the report relays. "The house is not in order," it added. Despite these good results, the deficits produced in the years of the pandemic, the depreciation of the peso and inflation have taken government debt to historically high levels, to the point where it would not be prudent to increase debt," the CARF said, the report notes. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Exp Realty Bets on the Dominican Market ----------------------------------------------------------- Dominican Today reports that the Dominican Republic stands out as having a substantial market for residential properties in the tourism sector. With a substantial market for residential properties in the tourism sector, easy international access, and attractive incentives for foreign investment, the Dominican Republic is the ideal market to expand Exp Realty, the first global brokerage agency to go from a physical establishment to one based on the cloud, according to Dominican Today. This was expressed by the president of Exp Global, Michael Valdes, announcing that this brand is establishing itself in the country under the eXp Dominican Republic brand, a fully digital real estate business model, the report notes. "As we continue to grow in the Caribbean and Latin America, there has been a lot of interest from agents in the Dominican Republic, and it feels like the perfect next step in expanding our footprint," Valdes said, the report relays. Among the novelties that Exp offers to agents are wealth opportunities such as revenue share programs and stock equity; Cloud premise environment, no office fees, work from anywhere; real-time support; live training, more than 50 hours of weekly online training; equity reward, for meeting production targets; access to professional services, among other facilities, the report notes. Business Models Marbel Lugo, a broker in the country, is in charge of guiding and offering all the information needed by those interested in being part of eXp Dominican Republic, the report relays. She stressed that the company's goal is to provide Dominican real estate agents with a better quality of life through a new business model, the report notes. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican Today related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'. The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative. S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said. A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. ============= J A M A I C A ============= JAMAICA DIVERSIFIED: Fitch Hikes Rating on 2020-1 Notes to BB+ -------------------------------------------------------------- Fitch Ratings has upgraded the issue-specific ratings assigned to all outstanding series of notes issued by Jamaica Merchant Voucher Receivables Limited and Jamaica Diversified Payment Rights Company to 'BBB-' and 'BB+', from 'BB+' and 'BB', respectively. The Rating Outlook on the notes remains Stable. DEBT RATING PRIOR ---- ------ ----- Jamaica Merchant Voucher Receivables Limited 2015-1 470170AB7 LT BBB- Upgrade BB+ 2016-1 470170AD3 LT BBB- Upgrade BB+ Jamaica Diversified Payment Rights Company (DPR) (NCB) 2020-1 47015PAD0 LT BB+ Upgrade BB TRANSACTION SUMMARY Jamaica Merchant Voucher Receivables Limited (JMVR) is backed by future flows due from Visa International Service Association (Visa) and MasterCard International Incorporated (MasterCard) related to international merchant vouchers (MV) acquired by National Commercial Bank Jamaica Ltd. (NCBJ) in Jamaica. Jamaica Diversified Payment Rights Co. (JDPR) is backed by existing and future USD-denominated diversified payment rights (DPRs) originated by NCBJ. DPRs are defined as electronic or other messages used by financial institutions to instruct NCBJ to make payment to a beneficiary. The majority of DPRs are processed by designated depository banks (DDBs) that have executed agreements obligating them to send payments to accounts controlled by the transaction trustee. Fitch's ratings address timely payment of interest and principal on a quarterly basis. KEY RATING DRIVERS Future Flow Rating Driven by Originator's Credit Quality: On Jan. 24, 2022, Fitch affirmed NCBJ's Long-Term (LT) Local Currency (LC) Issuer Default Rating (IDR) at 'B+' and revised the Rating Outlook to Stable from Negative. The revision of the Outlook to Stable mirrors the Jamaican sovereign's Rating Outlook due to the assignment of a Government Support Rating (GSR) at the level of the sovereign. The bank's Viability Rating (VR) remains at 'b+'. NCBJ's LT LC IDR is driven by its VR, which is influenced by the sovereign rating and broader operating environment considerations. Strong Going Concern Assessment (GCA): Fitch uses a GCA score to gauge the likelihood that the originator of a future flow transaction will stay in operation through the transaction's life. NCBJ's GCA score of 'GC1' reflects its systemic importance as Jamaica's largest bank. Notching Uplift from IDR: The 'GC1' score allows for a maximum rating uplift of six notches from the bank's IDR, pursuant to Fitch's future flow methodology. However, given Fitch reserves the maximum uplift for originators rated at the lower end of the rating scale, the rating uplift for the MV and DPR programs are currently four notches and three notches, respectively. Furthermore, the DPR program's notching uplift is one notch less than that of the MV program as DPR flows are more concentrated than that of the MV program and are therefore viewed as comparably more volatile. Future Flow Debt Size Not a Constraint: NCBJ's total future flow debt represents 6.6% of the bank's total funding and 17.0% of non-deposit funding when considering the current outstanding balance on both programs ($375.6 million) as of May 2022 and utilizing YTD September 2021 consolidated financials. Although Fitch considers these ratios to be moderate, yet small enough to allow for the maximum uplift, Fitch reserves the maximum uplift for originators rated at the lower end of the rating scale. Coverage Levels Commensurate with Assigned Rating: Historical coverage levels and performance of the MV program support the increased notching differential of the rating of the program's outstanding notes from the rating of the originator. When considering average rolling quarterly flows for the MV program over the last five years (June 2017 - May 2022) and the maximum periodic debt service over the life of the program, Fitch's projected quarterly DSCR is 6.9x. Flows have remained resilient throughout the life of the program in spite of the macroeconomic pressures brought on by external events including natural disasters and financial crises. Most recently, flows remained resilient while experiencing the macroeconomic impacts from the coronavirus pandemic, and remained sufficient to cover debt service obligations. Moreover, the transaction can withstand a drop in flows of approximately 85.5% and still cover the maximum quarterly debt service obligation, further highlighting the strength of the flows. Coverage Levels Commensurate with Assigned Rating: Historical coverage levels and performance of the DPR program support the increased notching differential of the rating on the outstanding DPR backed notes from the rating of the originator. When considering average rolling quarterly DDB flows over the last five years (June 2017 - May 2022) and the maximum periodic debt service over the life of the program, Fitch's projected quarterly DSCR is 65.8x. Flows have remained resilient throughout the life of the program including in most recent years when despite experiencing the macroeconomic impacts brought on by the coronavirus pandemic, coverage levels remained more than sufficient to meet debt service obligations. Moreover, the transaction can withstand a drop in flows of approximately 98.5% and still cover the maximum quarterly debt service obligation. However, due to concentrations in DPR flows from affiliates of NCBJ, and entities with high domestically originated, government-related and/or capital flows, it has been determined that the notching differential for the DPR program will be one notch less than that of the MV program whose flows are comparatively less volatile. Sovereign/Diversion Risks Reduced: The structure mitigates certain sovereign risks by collecting cash flows offshore until collection of periodic debt service amount. Fitch believes diversion risk is partially mitigated by the consent & agreements or acknowledgments signed by Visa and MasterCard (in the case of the MV program) or designated depositary banks (in the case of the DPR program). RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: -- The transaction ratings are sensitive to changes in the credit quality of NCBJ. A deterioration of the credit quality of the sovereign and/or NCBJ by multiple notches is likely to pose a constraint to the rating of the outstanding series of notes for both programs from their current level. -- The transaction ratings are sensitive to the performance of the securitized business lines. The base case DSCR for the merchant voucher program and DPR program are approximately 6.9x and 65.8x respectively, and should therefore be able to withstand a decline in cash flows in the absence of other issues. However, significant declines in flows could lead to a negative rating action. -- The transaction's ratings are sensitive to the ability of the credit card acquiring and DPR business line to continue operating, as reflected by the GCA score, and changes in the sovereign environment and ratings assigned to the Jamaican sovereign. Changes in Fitch's view of the bank's GCA score can lead to a change in the transaction's rating. Additionally, the MV program could also be sensitive to significant changes in the credit quality of Visa or Mastercard to a lesser extent. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings. Factors that could, individually or collectively, lead to positive rating action/upgrade: -- The main constraint to the program ratings is the originator's rating and NCBJ's operating environment. If a positive rating action/upgrade occurs, Fitch will consider whether the same uplift could be maintained or if it should be further tempered in accordance with criteria. -- Fitch has revised global economic outlook forecasts as a result of the Ukraine War and related economic sanctions. Downside risks have increased and Fitch has published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB sub-sectors ("What a Stagflation Scenario Would Mean for Global Structured Finance"). Fitch expects LatAm's Global Cross-Sector's financial future flow transactions in the assumed adverse scenario to experience "Virtually No Impact" indicating a low risk for rating changes. BEST/WORST CASE RATING SCENARIO International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven 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 seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. 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. JAMAICA: Investors Have Confidence in Economy, Says Holness ----------------------------------------------------------- RJR News reports that Prime Minister Andrew Holness said the opening of new businesses and the expansion of existing ones are indicators of the confidence investors and local businesses have in the Jamaican economy. Addressing the opening of the Isratech Supercentre in Kendal, Manchester, Mr. Holness referenced a Business Process Outsourcing Centre in Mandeville, for which he broke ground recently, and a multi-billion dollar facility currently under construction, as examples of investor confidence, according to RJR News. He says Isratech Jamaica, which manufactures PVC pipes for local and overseas use, also plans to further expand its operations, the report notes. Mr. Holness urged Jamaicans to be patient as the government seeks to maintain a strong economy, while taking steps to cushion the economic impact on the more vulnerable in the society, the report relays. As reported in the Troubled Company Reporter-Latin America in March 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. ======= P E R U ======= MINSUR SA: S&P Affirms 'BB+' Issuer Credit Rating, Outlook Pos. --------------------------------------------------------------- S&P Global Ratings, on June 29, 2022, affirmed its 'BB+' issuer credit and issue-level ratings on Peru-based Miner Minsur S.A. S&P said, "The positive outlook for the next 6-12 months reflects our view that the integration of the new mining unit will enhance the company's revenue and profitability across economic cycles. We expect the leverage metric of less than 1.5x. Moreover, we expect the company's commitment to maintain a conservative financial policy, with no relevant capex, leading to free operating cash flow (FOCF) to debt above 45% on a sustained basis for the following quarters as well as conservative dividend payments." Given Mina Justa's rapid ramp-up, the company has diversified to copper, tin, and gold production (39%, 51%, and 6% of total revenue, respectively) from mainly tin and gold (71% and 21%) originally. Although Minsur's operations are mostly in Peru (about 90% of total revenue come from this country), with Mina Justa's incorporation, the number of mines Minsur now operates rose to four from three--San Rafael, Pucamarca, Pitinga, and Mina Justa--along with two smelters/refinery plants (Pisco and Pirapora), and a B2 tailings plant. S&P said, "Given a wider asset and metals portfolio, we believe the company will generate stronger revenue and EBITDA, particularly thanks to historically high metals prices. We expect to see a strong financial performance even through economic downturns and complex political conditions with conservative capex and dividend payments." S&P said, "As of March 2022, most metals prices have reached decade-high levels due to the global economic recovery from the pandemic and the Russia-Ukraine conflict that aggravated the supply-chain constraints. As a result, the outlook for most metals for 2022 and 2023 has vastly improved, in our view. This is the case for Minsur's main metals, tin (51% of total revenues) and copper (39%) that are likely to remain at high levels of about $41,000 per metric ton (MT) and above $9,500/MT, respectively, in the following year. Coupled with the production from Mina Justa's and San Rafael mine, we expect these prices to help Minsur's revenue to grow 30% in 2022 and to mitigate the impact of a likely 6.2% revenue decrease in 2023. Despite exceptionally high price cycle currently, we expect Minsur to post a resilient financial performance under economic strains. "Minsur successfully integrated the Marcobre project (Mina Justa) into its operations, tripling revenue to $2 billion, boosting EBITDA and EBITDA margins, and considerably improving financial metrics, including debt to EBITDA to 0.9x and FOCF to debt of 40.8% as of December 2021. Moreover, we expect Mina Justa's output to increase on higher ore grades (currently at 0.68%, higher than the industry average of 0.50%) and from the mining unit operating at its full capacity, helping Minsur to deleverage to about 0.4x in 2022 and 0.2x in 2023. Therefore, we expect debt reduction to be independent from price fluctuations and economic cycles. In addition, the expected cash cost through the mine's life of $1.35 - $1.44 per pound positions Minsur in the second quartile of the global cash cost curve, enabling the company's EBITDA margin to rise to about 63% for the following years." ESG credit indicators: E-3, S-3, G-2 ===================== P U E R T O R I C O ===================== PUERTO RICO: PREPA Mediators Ask Another Mediation Extension ------------------------------------------------------------ Robert Slavin of The Bond Buyer reports that mediators for the Puerto Rico Electric Power Authority asked bankruptcy judge Laura Taylor Swain for another month extension in the mediation, which would bring it to Aug. 1, 2022. When Gov. Pedro Pierluisi ended the last restructuring deal (Restructuring Support Agreement), in early March, Swain asked for quick action to negotiate a new one, with a proposed plan of adjustment due by May 2, 2022. Soon thereafter, she changed the filing goal to June 1, 2022. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States that's facing a massive bond debt of $70 billion, a 68% debt-to-GDP ratio and negative economic growth in nine of the last 10 years. The Commonwealth of Puerto Rico has sought bankruptcy protection, aiming to restructure its massive $74 billion debt-load and $49 billion in pension obligations. The debt restructuring petition was filed by Puerto Rico's financial oversight board in U.S. District Court in Puerto Rico (Case No. 17-01578) on May 3, 2017, and was made under Title III of 2016's U.S. Congressional rescue law known as the Puerto Rico Oversight, Management, and Economic Stability Act ('PROMESA'). The Financial Oversight and Management Board later commenced Title III cases for the Puerto Rico Sales Tax Financing Corporation (COFINA) on May 5, 2017, and the Employees Retirement System (ERS) and the Puerto Rico Highways and Transportation Authority (HTA) on May 21, 2017. On July 2, 2017, a Title III case was commenced for the Puerto Rico Electric Power Authority ("PREPA"). U.S. Chief Justice John Roberts has appointed U.S. District Judge Laura Taylor Swain to oversee the Title III cases. The Honorable Judith Dein, a United States Magistrate Judge for the District of Massachusetts, has been designated to preside over matters that may be referred to her by Judge Swain, including discovery disputes, and management of other pretrial proceedings. Joint administration of the Title III cases, under Lead Case No. 17-3283, was granted on June 29, 2017. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets, as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at O'Neill & Borges are on-board as attorneys. McKinsey & Co. is the Board's strategic consultant, Ernst & Young is the Board's financial advisor, and Citigroup Global Markets Inc. is the Board's municipal investment banker. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains a case web site at https://cases.primeclerk.com/puertorico Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA, and PREPA. O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), the agency responsible for negotiations with bondholders. The Oversight Board named Professor Nancy B. Rapoport as fee examiner and to chair a committee to review professionals' fees. * * * The two Title III plans of adjustment have been confirmed to date, for the Commonwealth and COFINA debtors. ********* 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 * * *