/raid1/www/Hosts/bankrupt/TCRLA_Public/220714.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, July 14, 2022, Vol. 23, No. 134
Headlines
A R G E N T I N A
ARGENTINA: IDB OKs $150 Mil-Loan to Improve Living Conditions
B R A Z I L
PETROBRAS: Egan-Jones Hikes Sr. Unsecured Ratings to BB+
C A Y M A N I S L A N D S
MODERN LAND: Chapter 15 Case Summary
C H I L E
GUACOLDA ENERGIA: S&P Lowers ICR to 'B-', Outlook Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Electricity Rates Increase
DOMINICAN REPUBLIC: Shows Resilience to Global Shocks, IMF Says
M E X I C O
BANCO MERCANTIL: S&P Withdraws 'BB-' Rating on $350MM Hybrid Notes
MEXICO: Joins Forces with IDB to Promote Nearshoring
PETROLEOS MEXICANOS: Moody's Cuts CFR & Sr. Unsecured Notes to B1
P A R A G U A Y
PARAGUAY: Will Take New Economic Actions
P U E R T O R I C O
UNIVERSAL DOOR: Taps Fuentes Law Offices as Bankruptcy Counsel
- - - - -
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A R G E N T I N A
=================
ARGENTINA: IDB OKs $150 Mil-Loan to Improve Living Conditions
-------------------------------------------------------------
The Inter-American Development Bank (IDB) has approved a $150
million loan to improve the living conditions of households in
Argentina's vulnerable communities. The funds will help boost land
tenure security for beneficiary families, improve basic
infrastructure, and promote community development. The project's
goal is to enhance the quality of life and foster urban and social
inclusion of disadvantaged homes in these settlements.
The program, which has a special focus on people's rights to land,
will finance activities leading to the rehabilitation of assisted
areas through legal procedures. It will also provide residents of
those areas with legal instruments that confer ownership, and
promote relocation away from high climate volatility areas.
In addition, the program will finance basic infrastructure works,
such as the construction of drinking water, sewerage, natural gas,
and electricity networks, as well as parks and green and
recreational areas incorporating gender and diversity
considerations.
The loan will benefit 50,000 households in 39 different
settlements. The program's main impact indicators will be a rise in
the average value of property in the areas under intervention and a
drop in the percentage of qualitative housing deficit. Other
elements that will be taken into account include residents' degree
of satisfaction with community amenities and the percentage of
higher vulnerability groups whose members feel safe in their areas
of residence.
The program is in line with Vision 2025, the IDB Group's roadmap to
speed up Latin America and the Caribbean's recovery and inclusive
and sustainable growth, particularly because it seeks to promote
social progress and cover all basic necessities, such as access to
housing and quality public services, including water, sanitation,
and electricity.
The US$150 million IDB loan is for a 25-year term, with a 5.5-year
grace period and interest rate based on SOFR.
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B R A Z I L
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PETROBRAS: Egan-Jones Hikes Sr. Unsecured Ratings to BB+
--------------------------------------------------------
Egan-Jones Ratings Company July 8, 2022, upgraded the foreign
currency and local currency senior unsecured ratings on debt issued
by Petroleo Brasileiro S.A. - Petrobras to BB+ from BB.
Headquartered in Rio de Janeiro, Brazil, Petroleo Brasileiro S.A. -
Petrobras explores for and produces oil and natural gas.
===========================
C A Y M A N I S L A N D S
===========================
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
Business Description: Modern Land 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
People's Republic of China and the United
States.
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
Case No.: 22-10707
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, New York 10019
Tel: (212) 839-5300
Fax: (212) 839-5599
Email: agrossi@sidley.com
- and -
Juliana 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 petition is available for free
at PacerMonitor.com at https://bit.ly/3NNLQ0N
=========
C H I L E
=========
GUACOLDA ENERGIA: S&P Lowers ICR to 'B-', Outlook Negative
----------------------------------------------------------
S&P Global Ratings lowered its issuer credit and issue-level
ratings on Guacolda Energia to 'B-' from 'B' and maintained the
negative outlook on the ratings.
The negative outlook reflects the likelihood of a further downgrade
in the next 12 months if the expected cash deficit for debt
repayment continues to widen. This could be the result of
higher-than-expected operating needs and/or an aggressive financial
strategy, including unexpected dividend payments
S&P said, "As part of our November 2021 downgrade of the company,
we assumed that it would face a cash deficit of nearly $150 million
for the repayment of its bond at maturity. However, we updated our
projections given the higher coal prices and now expect a narrower
cash balance by the end of 2022. Therefore, we now forecast deficit
of about $200 million by mid-2025, which could widen further in
case of unexpected dividend distributions, given that financial
covenants don't limit them.
Thermal coal price assumptions for 2022 have increased
significantly since our last revision to $180/metric ton (mt), from
$120/mt amid mounting concerns over global energy supplies fueled
by the Russia-Ukraine conflict and the escalating sanctions imposed
on Russia. Although Guacolda's power purchase agreements (PPAs)
have a pass-through mechanism to adjust for fuel prices, it has a
lag of three to six months, which requires the company to increase
its working capital needs. In addition, we expect Guacolda to
increase its exposure to the spot market as its PPAs expire, which
could also add volatility to the company's cash flows. Although our
expectations for debt to EBITDA remain in line with our previous
one at about 6.0x, S&P projects that higher coal prices to put
additional pressure on Guacolda's cash position, and consequently,
erode its capacity to repay debt in the medium term.
Guacolda operates in dynamic and rapidly changing industry
conditions. The country aims to phase out coal from its energy
matrix by 2040, transitioning to cleaner sources. The higher
volatility in spot prices due to the drought and increased fuel
prices underscore that Chile's electricity industry still relies on
generation through non-renewable sources. S&P said, "As a result,
we now don't expect Guacolda's plant to stop operating prior to
2030. The industry is also considering options to extend the life
of these assets while reducing carbon emissions, although these
studies are at early stages. Nevertheless, such a shift is
favorable for the company, given that we now expect it to continue
generating cash flows beyond 2025, potentially helping Guacolda to
refinance its bond, although there's uncertainty over the company's
strategy to do so."
ESG credit indicators: E-5, S-2, G-3
Environmental, social, and governance (ESG) credit factors for this
downgrade:
-- Climate transition risks
-- Risk management, culture, and oversight
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Electricity Rates Increase
----------------------------------------------
Dominican Today reports that a report made by Listin Diario
revealed how the announcement of the Minister of Energy and Mines,
Antonio Almonte, marked the fourth occasion since last year in
which an increase in the national electricity tariff was made.
Since the beginning of July, the weight of the interests has been
felt in the clamor of the neighborhoods where the leaders of
families and merchants do not cease to express their regret and the
headache which means to them "to pay more for a bad service,"
according to Dominican Today.
"Now we are doing well. Before, we already paid dearly and we had
many blackouts, now we pay more dearly, and we continue to have the
same blackouts," said Raul, a resident of Ensanche Luperon, the
report notes.
The high cost of recharging at the electric box hurts most when the
residents of sectors such as 27 de Febrero and Capotillo allege
that the rapid consumption of the kilowatts they buy is even less
value for their money which decreases in the absence of the energy
itself, the report relays.
"One recharges 50 kilowatts now, the electricity goes out, and when
it arrives again without having used it, you already have 45
kilowatts, the report notes.
According to what had been referred by Antonio Almonte during an
interview a few days ago, the cost of the electricity tariff
increased by 9%, which means that the population now pays between
100 and 140 pesos more, 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: Shows Resilience to Global Shocks, IMF Says
---------------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
concluded the Article IV consultation [1] with the Dominican
Republic and considered and endorsed the staff appraisal without a
meeting.
The Dominican Republic continued to show remarkable resilience to
global shocks, supported by sound policies, monetary policy
support, a nimble COVID vaccination campaign and a well-attuned
reopening that allowed the economy to make the most of the global
rebound last year. This resilience and strong signals of policy
sustainability are placing the Dominican economy in a good position
to face emerging global challenges going forward.
The economy recovered strongly from the pandemic, despite global
factors that created challenges in terms of inflation. Real GDP
increased by 12.3 percent in 2021, amid broad sectoral growth
-including a notable recovery in tourism, with arrivals exceeding
2019 levels since last fall. By end-2021, output was 5 percent
above pre-pandemic levels, consistent with strong employment
growth. Inflation convergence is taking longer than
envisaged-headline inflation exceeds the target range due primarily
to high inflation in the United States, higher global energy and
food prices, and supply chain disruptions. The external position
was sound, with the current account financed by FDI and a
significant accumulation of reserves. The financial system remains
resilient and continues to support the economy despite the
unwinding of pandemic-related regulatory flexibility.
The outlook points to a continued recovery, though global
developments pose risks. GDP growth would converge to its potential
and inflation would return to the target range by next year as the
impact of global shocks recedes, in the context of financial
stability and a sound external position. As for risks, the war in
Ukraine may have a stronger-than-expected effect on global growth
and inflation. The pandemic, while well-contained in the Dominican
Republic, may downgrade growth in other regions. And monetary
policy tightening in the United States may have a
stronger-than-expected impact on capital flows. The authorities
have responded with temporary measures while maintaining budget
discipline through expenditure control and executing proactive
debt-management that reduced financing risks. The central bank has
begun a normalization of monetary policy; absorbing liquidity and
increasing the monetary policy rate.
Executive Board Assessment
In concluding the 2022 Article IV Consultation with the Dominican
Republic, Executive Directors endorsed staff's appraisal, as
follows:
As in the past, the Dominican Republic's economy showed remarkable
resilience. Sound policies that supported stability and maintained
good market access, an effective health campaign and well-attuned
re-opening-including to tourism-allowed the Dominican Republic to
make the most of the global rebound and to limit scarring and the
increase in poverty. The strong, broad-based recovery-with GDP at
end-2021 about 5 percent above pre-pandemic levels-allowed a
front-loaded fiscal consolidation and the normalization of monetary
policy to address inflationary pressures.
Strong growth momentum and a well-sequenced policy response
continue to help the Dominican Republic face a challenging global
environment. Amid abating global tailwinds, growth should converge
to its longer-term trend. Supply shocks have driven inflation
higher than previously projected, but fiscal measures are easing
the impact while the normalization of monetary policy should allow
inflation convergence to the target over the policy horizon. Risks
are mainly associated with the war in Ukraine and the tightening of
global financial conditions. The main impact from the war is
expected to take place through higher commodity prices-direct trade
and financial linkages are limited-while global financial
conditions may have a stronger-than-expected impact on capital
flows. The front-loaded fiscal consolidation, timely debt issuance
and pro-active debt management help reduce vulnerabilities through
lower near-term financing needs. Overall, this provides some space
to face downside risks.
The external position is broadly in line with fundamentals and
desirable policies. Exports and remittances grew robustly, while
higher domestic demand and commodity prices increased the current
account deficit-which nonetheless remained fully financed by
resilient FDI-the external position is assessed as sustainable,
with international reserves up strongly, improving reserve
adequacy. The real exchange rate appreciated slightly in 2021 and
remains broadly in line with fundamentals.
Economic policies-fiscal prudence, temporary commodity price
mitigation measures, and monetary policy tightening-remain
appropriate. Expenditure rationalization and tax administration
efforts will help maintain a gradual fiscal consolidation, putting
public debt on a stronger downward trajectory than previously
projected while protecting investment and social spending. The use
of temporary fiscal measures to contain the impact of commodity
price shocks on domestic fuel and food prices is appropriate, as
well as continuing with electricity sector reforms and improved
targeting of subsidies and social assistance. Ongoing monetary and
prudential policy normalization are warranted to maintain inflation
expectations anchored and moderate financial risk-taking,
respectively.
The exit from the financial regulatory response to the pandemic has
been appropriate and the financial system proved its resilience.
The exit was well designed and remains based on intensive
monitoring and transparency in the assessment of asset quality.
Going forward, the system would benefit from implementing higher
international standards of supervision and regulation, enhancing
the macroprudential and crisis management toolkit, and
strengthening the regulatory framework for credit and savings
cooperatives financial oversight.
Well-sequenced reform implementation can help strengthen
medium-term policies. The authorities continue taking steps to
strengthen policy frameworks, in particular by enhancing public
financial management and transparency. This will pave the way for
the introduction of fiscal responsibility legislation to better
anchor medium-term policies and further secure debt sustainability.
Together with ongoing reforms in the electricity sector, enhanced
policy frameworks can build consensus for future revenue
mobilization initiatives that create space for needed investment in
infrastructure and human capital. An agreed roadmap for central
bank recapitalization can also help by enhancing financial and
institutional independence.
Reforms to foster inclusive growth and improved social outcomes
remain critical. Ongoing efforts to improving governance, securing
stable, competitive, and sustainable energy supply, building
climate change resilience, and tackling other productivity
bottlenecks-e.g., modernizing the labor code, increasing years and
quality of education, and narrowing skills gaps in labor
markets-along with enhanced effectiveness of social programs
continue to be critical for sustainable and more equitable growth.
Further efforts to address social issues-such as reducing regional
and gender inequality-would also help making growth more
inclusive.
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.
===========
M E X I C O
===========
BANCO MERCANTIL: S&P Withdraws 'BB-' Rating on $350MM Hybrid Notes
------------------------------------------------------------------
S&P Global Ratings withdrew its 'BB-' issue-level rating on Banco
Mercantil del Norte S.A. Institucion de Banca Multiple Grupo
Financiero Banorte's (Banorte; BBB/Stable/A-2) perpetual callable
subordinated non-preferred non-cumulative Tier 1 capital notes of
up to $350 million with the interest rate of 6.875%. The bank's
Grand Cayman Branch issued these notes on July 6, 2017. The
withdrawal is a result of the notes' amortization.
S&P said, "Even though we viewed these notes as having intermediate
equity content, the total amortization has no relevant impact on
Banorte's risk-adjusted capital (RAC) ratio. This is because -- in
accordance with our criteria -- a hybrid capital instrument with
intermediate equity content is eligible to be included in the total
adjusted capital (TAC) calculation until the aggregate amount of
all instruments with intermediate equity content is equivalent to
up to 33% of the bank's adjusted common equity (ACE). As of March
31, 2022, despite the amortization of these notes, Banorte's
outstanding hybrid capital issuances with intermediate equity
content already exceeded our 33% threshold of its ACE base. These
hybrid capital notes represented less than 4% of the bank's TAC as
of March 31, 2022. Therefore, given these factors, our forecasted
RAC ratio remains unchanged and doesn't affect our assessment of
Banorte's capital and earnings, which we currently assess as
strong. We forecast our RAC ratio for Banorte to be 12%-13% for the
next two years."
MEXICO: Joins Forces with IDB to Promote Nearshoring
----------------------------------------------------
The Inter-American Development Bank (IDB) announced support for
plans by the government of Mexico to promote nearshoring, or the
relocation of companies closer to end markets, to help foster
sustainable development, especially in the country's
south-southeastern states.
In a joint news conference with Mexico's Finance and Public Credit
Undersecretary Gabriel Yorio, IDB Vice President for Countries
Richard Martinez emphasized the commitment of the Bank and its
private-sector arm, IDB Invest, to help Mexico take advantage of
enormous new opportunities resulting from the reconfiguration of
global supply chains.
Over the next three years, IDB Invest can provide an estimated
$1.75 billion to $2.25 billion in short- and long-term financing
and mobilized resources for new industrial parks, investment in
anchor companies (including relocation expenses) and for developing
innovative mechanisms to finance small and midsize companies (SMEs)
working in global supply chains.
According to preliminary data from an IDB study, nearshoring could
add $78 billion annually in additional exports from Latin America
and the Caribbean in the near and medium term. Mexico could see the
biggest gains, adding $35.3 billion annually in exports of goods
alone.
"Latin America today has a unique opportunity to attract
investment, and nowhere is this opportunity bigger than in Mexico.
That's due to its geographical location, the United
States-Mexico-Canada Agreement (USMCA), its abundant human talent,
the complexity of its products, and its growing participation in
global supply chains," said Vice President MartÃnez. "It is an
honor for us at the IDB Group to partner with Mexico's government
to promote nearshoring policies to contribute to the whole
country's sustainable growth."
On July 7, Vice President MartÃnez will embark on a two-day visit
to the Tehuantepec Isthmus's interoceanic corridor alongside with
officials from Mexico's Finance Secretariat; IDB Invest CEO James
P. Scriven; IDB General Manager of the Country Department for
Central America, Haiti, Mexico, Panama and the Dominican Republic,
Fernando Quevedo; and the IDB Group's Representative in Mexico,
Ernesto Stein.
The visit will identify concrete opportunities for the IDB Group to
support Mexican government initiatives for regional growth by
attracting investment and fostering the development of industrial
parks and logistics platforms, strengthening the insertion of SMEs
into global supply chains, supporting talent development and
territorial planning, and helping reduce social and economic gaps.
Mexico's South-Southeast region lags the rest of the country in
several areas. The poverty rate is approximately 59%, compared to
27% in the North, whereas work productivity is half that of the
North. Other challenges include lower productive capacity, wider
gender gaps in the labor market, and a higher degree of difficulty
adapting to climate change.
Integrating the region into global supply chains will help close
social and productivity gaps, attract investment, and create new
opportunities in areas including manufacturing and agribusiness.
PETROLEOS MEXICANOS: Moody's Cuts CFR & Sr. Unsecured Notes to B1
-----------------------------------------------------------------
Moody's Investors Service downgraded Petroleos Mexicanos' (PEMEX)
corporate family rating and the senior unsecured ratings on the
company's existing notes, as well as the ratings based on PEMEX's
guarantee, to B1 from Ba3. Moody's also affirmed PEMEX's Baseline
Credit Assessment (BCA), which reflects its standalone credit
strength, at caa3. These rating actions were triggered by Moody's
announcement on July 8, 2022 that it had downgraded its ratings on
the Government of Mexico's to Baa2 from Baa1 and changed the
outlook on the government's ratings to stable from negative. The
outlook on Pemex's ratings is now stable.
Affirmations:
Issuer: Petroleos Mexicanos
Baseline Credit Assessment, Affirmed caa3
Downgrades:
Issuer: Petroleos Mexicanos
Corporate Family Rating, Downgraded to B1 from Ba3
Senior Unsecured Medium-Term Note Program, Downgraded to (P)B1
from (P)Ba3
Senior Unsecured Regular Bond/Debenture, Downgraded to B1 from
Ba3
Issuer: Pemex Project Funding Master Trust
Senior Unsecured Medium-Term Note Program, Downgraded to (P)B1
from (P)Ba3
Senior Unsecured Regular Bond/Debenture, Downgraded to B1 from
Ba3
Outlook Actions:
Issuer: Pemex Project Funding Master Trust
Outlook, Changed To Stable From Negative
Issuer: Petroleos Mexicanos
Outlook, Changed To Stable From Negative
RATINGS RATIONALE
The downgrade on PEMEX's ratings to B1 from Ba3 was prompted by the
downgrade of Mexico's rating, given the critical importance of the
government's financial strength and support in the assessment of
PEMEX's credit profile due to its high liquidity risk. The action
also considered PEMEX's high debt maturities in 2022-24 and Moody's
expectations for continued negative free cash flow and the need for
large amounts of external funding given persistent loses at the
company's refining business, the necessity to maintain capex at
least at current levels to sustain production and reserves stable,
and high interest expenses. The action also took into account that
PEMEX's access to the capital markets is currently limited given
its high intrinsic credit risk.
Elevated oil prices in 2022-23 in comparison with 2020-21 levels
will support higher cash generation at PEMEX's exploration and
production (E&P) business in the period but will simultaneously
increase royalties and operating costs at the refining business.
Although oil and gas production growth has been below management
targets, it is positive that, since 2019, PEMEX has been successful
in maintaining production and reserves relatively stable. However,
Moody's estimates that, in 2022-24, the company will only be able
to sustain production and reserves at current levels given its
inability to invest larger sums of capital in E&P.
PEMEX's B1 rating takes into consideration Moody's joint default
analysis, which includes the rating agency's assumptions of very
high government support in case of need and very high default
correlation between PEMEX and the Government of Mexico, resulting
in five notches of uplift from the company's caa3 BCA. Since 2016,
and most importantly and increasingly from 2019 to 2021, the
government has supported PEMEX in various ways, including capital
injections, tax reductions, and early redemption of notes
receivable from the government. Moody's assumes that the
government, as promised, will continue to fund PEMEX's cash needs
and help the company to comply with its debt amortization
obligations of $5.1 billion in 2022, $7.5 billion in 2023, and $8.9
billion in 2024, as of March 2022.
PEMEX has weak liquidity and is highly dependent on government
support. On March 31, 2022 the company had $2.4 billion in cash and
no availability under its committed revolving credit facilities to
address debt maturities. In addition, Moody's estimates that PEMEX
will have substantial negative free cash flow in the next 12-18
months, driven by insufficient operating cash generation to pay
interest expenses, taxes, and capital spending.
The stable outlook on PEMEX's ratings is based on Moody's
expectation that the company's business strategy and financial
profile will remain unchanged in the next 12-18 months; it also
considers the current stable outlook on Mexico's ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A downgrade of Mexico's Baa2 rating would likely result in a
downgrade of PEMEX's rating. For an affirmation of PEMEX's B1
rating following a sovereign downgrade, the company's BCA would
have to substantially improve. Because PEMEX's rating is highly
dependent on support from the Government of Mexico, a change in
Moody's assumptions about government support and its timeliness
could lead to a downgrade of PEMEX's rating. A lowering of the BCA
could also lead to a downgrade of PEMEX's rating. Factors that
could lead to a lower BCA include material increases in net debt,
an operating performance worse than forecasted, reserve declines
and decreases in reserve life.
Conversely, an upgrade of Mexico's Baa2 rating could result in an
upgrade of PEMEX's rating given the importance of the government in
providing support to the company's liquidity needs. In addition,
factors that could lead to a higher BCA and potentially a higher
rating for PEMEX would include its ability to strengthen its
liquidity position and internally fund sufficient capital
reinvestment to fully replace reserves, deliver modest production
growth and generate free cash flow for debt reduction.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
PEMEX's ESG Credit Impact Score is very highly negative (CIS-5). In
addition to having very high environmental risk exposure and high
social risk exposure, PEMEX has very high governance risk,
including weak financial strategy and risk management, weak board
structure, and policies and procedures.
PEMEX has a very highly negative exposure to environmental risk
(E-5 Issuer Profile Score) mainly driven by very high carbon
transition risk, high natural capital risk, high water management
risk, and high waste and pollution risk. Integrated companies with
high exposure to upstream business will face increasing pressure
over time, particularly oil producers, as decarbonization efforts
and the transition towards cleaner energy continues.
PEMEX has a very highly negative exposure to social risks (S-5
Issuer Profile Score) mainly driven by health and safety,
responsible production, and demographic & societal pressures. Other
drivers include weak customer relations and high human capital
risk.
Governance risks are very highly negative (G-5 Issuer Profile
Score) and linked primarily to financial strategy and risk
management, in addition to board structure, policies and
procedures, and track record. There is very high risk related to
liquidity and leverage. PEMEX has significant ownership
concentration.
The methodologies used in these ratings were Integrated Oil and Gas
Methodology published in September 2019.
Founded in 1938, PEMEX is Mexico's national oil company, with fully
integrated operations in oil and gas exploration and production,
refining, distribution and retail marketing, as well as
petrochemicals. PEMEX is also a leading crude oil exporter, around
60% of its crude is exported to various countries, mainly to the US
and Asia. In the three months ended March 31, 2022 the company
produced an average of 1,755 thousand barrels of per day of crude
oil (excluding partners).
===============
P A R A G U A Y
===============
PARAGUAY: Will Take New Economic Actions
----------------------------------------
Rocco Caldero at Rio Times Online reports that Paraguay's
President, Mario Abdo Benitez, met with members of the National
Economic Team (EEN) to analyze new palliative economic actions.
After the meeting led by the Minister of Finance, Oscar Llamosas,
the President spoke to the media and stated that each of the
economic measures to be adopted would imply a global injection of
between US$1.2 billion and US$1.3 billion, according to Rio Times
Online.
=====================
P U E R T O R I C O
=====================
UNIVERSAL DOOR: Taps Fuentes Law Offices as Bankruptcy Counsel
--------------------------------------------------------------
Universal Door and Window Manufacture Inc. seeks approval from the
U.S. Bankruptcy Court for the District of Puerto Rico to employ the
Fuentes Law Offices, LLC as bankruptcy counsel.
The Debtor requires legal advice regarding its duties under the
Bankruptcy Code and other legal services related to its Chapter 11
case.
Alexis Fuentes-Hernandez, Esq., the firm's attorney, charges $250
per hour, plus expenses. His firm received the sum of $11,738 as
retainer.
In a court filing, Mr. Fuentes-Hernandez disclosed that he is a
"disinterested person" as defined in Section 101(14) of the
Bankruptcy Code.
Mr. Fuentes-Hernandez maintains an office at:
Alexis Fuentes-Hernandez, Esq.
Fuentes Law Offices, LLC
P.O. Box 9022726
San Juan, PR 00902-2726
Tel: (787) 722-5215, 5216
Fax: (787) 722-5206
Email: alex@fuentes-law.com
About Universal Door
Universal Door and Window Manufacture, Inc., a company based in San
Sebastian, P.R., sought protection under Chapter 11 of the
Bankruptcy Code (Bankr. D. P.R. Case No. 22-01961) on July 5, 2022,
disclosing $1.54 million in assets and $2.86 million in
liabilities. Judge Enrique S. Lamoutte oversees the case.
Alexis Fuentes-Hernandez, Esq., at Fuentes Law Offices, LLC and CPA
Luis R. Carrasquillo & Co., P.S.C. serve as the Debtor's legal
counsel and financial consultant, respectively.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Chapman, Editors.
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