/raid1/www/Hosts/bankrupt/TCRLA_Public/220815.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
Monday, August 15, 2022, Vol. 23, No. 156
Headlines
A R G E N T I N A
ARGENTINA: Asks Crop Exporters to Bring US$1 Billion
ARGENTINA: Inflation hit 7.4% in July, Highest Monthly Rate
B R A Z I L
BRAZIL: Inflation Registers Record Decline on Energy Tax Cuts
TAESA: Fitch Affirms 'BB/BBB-' LongTerm IDRs, Outlook Stable
[*] Fitch Affirms 'BB' Ratings on Notes of 2 Brazilian Issuers
C A Y M A N I S L A N D S
MODERN LAND: NY Judge Glenn Quells Ch. 15 Doubts of HK Judge
C H I L E
LATAM AIRLINES: Group Plans to Exit Chapter 11 in 4Q22
M E X I C O
PLAYA HOTELS: Posts $30.5 Million Net Income in Second Quarter
X X X X X X X X
[*] BOND PRICING: For the Week Aug. 8 to Aug. 12, 2022
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Asks Crop Exporters to Bring US$1 Billion
----------------------------------------------------
Ignacio Olivera Doll at Bloomberg News reports that Argentina's
government has asked the country's crop export and processing
companies to make sales equivalent to US$1 billion as it seeks to
bolster reserves, according to people with direct knowledge of the
discussions.
The government discussed with Ciara-Cec, a group that represents
more than 40 percent of Argentina's exports, a mechanism
implemented that aims to encourage the sale of crops and bring in
hard currency to the country, according to Bloomberg News. Members
of the association have showed willingness to cooperate but have
not said to what extent it will comply with the request, said the
people, who asked not to be named because talks are private, the
report notes.
Representatives for Ciara-Cec, the Economy Ministry and the Central
Bank did not immediately reply to a request for comment.
The move comes as Argentina's reserves fall to dangerously low
levels, the report relays. Shipments of oilseeds and grain were
worth almost US$33 billion last year, but this year sales of
soybeans that growers harvested from late-March to June have been
slower amid high inflation and bets that the government will
eventually weaken the currency, improving terms for farmers, the
report relates.
Growers sold 20.9 million metric tons through July 20 of the 44
million tons they produced, according to the government, leaving
roughly US$13 billion still to trade based on Argentine spot
prices, the report says.
While farmers have been slow to sell their crops, exporters play a
role, too. Because of so-called delayed-price contracts in
Argentina, over a third are still unpriced, the report discloses.
Companies may keep these supplies at ports until farmers lock in
prices to avoid holding a long position on the peso, the report
says.
To pressure the companies, the government has said it might delay
monthly tax returns, which would increase their costs, said one of
the people, the report relays.
In the meeting, the government executives also said the plan is for
greenbacks to enter through a new mechanism developed by the
Central Bank, the report discloses. The method proposes that crop
exporters bring dollars into the country equivalent to exports they
expect to make in the near future and hold them in a local bank
account, receiving an interest rate, the report relays. As an
incentive, the Central Bank will offer private banks a new 180-day
note, known as Nodo, allowing them to pay interest on exporters'
deposits, the report relays.
Participants of the discussions include Economy Minister Sergio
Massa, the head of customs Guillermo Michel and incoming central
bank vice-president Lisandro Cleri and the president of Ciara-Cec,
Gustavo Idigoras, the report says. Massa had said in an Aug. 3
speech that he would work to get exporters to bring in $5 billion
in the next 60 days, the report relays.
The details of the Nodo instrument will be announced, according to
one of the people, the report notes. At a board of directors
meeting, the central bank discussed changes that would avoid a
mismatch between the term of the notes and the settlement currency.
By allowing the note to be paid in pesos, international banks'
capital requirements would not be affected, the report notes.
An international bank is already receiving inquiries from large
crop exporters on the mechanisms to enter the amounts into the
country, one of the people said, 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.
Last March 25, 2022, Argentina finalized agreement with the IMF
for a new USD44 billion Extended Funding Facility (EFF) intended
to fund USD40 billion in looming repayments of the defunct
Stand-By Arrangement (SBA), with an extra USD4 billion in up-front
net financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
As reported by The Troubled Company Reporter - Latin America on
July 19, 2022, Fitch Ratings placed Argentina's Long-Term Foreign
Currency Issuer Default Rating (IDR) and Long-Term Local Currency
IDR Under Criteria Observation (UCO) following the conversion of
the agency's Exposure Draft: Sovereign Rating Criteria to final
criteria. The UCO assignment indicates that ratings may change as
a direct result of the final criteria. It does not indicate a
change in the underlying credit profile, nor does it affect
existing Rating Outlooks.
Last April 14, 2022, Fitch Ratings affirmed Argentina's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDR) at 'CCC'.
Fitch said Argentina's 'CCC' ratings reflect weak external
liquidity and pronounced macroeconomic imbalances that undermine
debt repayment capacity, and uncertainty regarding how much
progress can be made on these issues under a new IMF program.
Fitch added that it is uncertain whether the EFF will be a strong
anchor for macroeconomic stabilization. Its policy requirements
are fairly unambitious relative to other IMF programs and in
light of the economy's deep imbalances, but it faces heightened
risk nonetheless from weak political support and spill-overs
from the Russia-Ukraine war, says Fitch.
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.
DBRS has also confirmed Argentina's Long-Term Foreign Currency
Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at
CCC (high) on July 21, 2022.
ARGENTINA: Inflation hit 7.4% in July, Highest Monthly Rate
-----------------------------------------------------------
Buenos Aires Times reports that inflation continues to be
unstoppable: consumer prices increased by 7.4 percent in July
alone, breaking a 20-year record, official data has revealed.
The news, which underlines the inability of the government to stop
runaway hikes, means prices rose last month at the fastest pace
since 2002 and are up by a cumulative 46.2 percent so far in 2022,
according to Buenos Aires Times.
According to the data, released by the INDEC national statistics
bureau, Argentine families paid 71 percent more for their purchases
than in last July, notes Buenos Aires Times. Over that 12-month
period, the largest increases have been registered in clothing and
footwear (96.7 percent), restaurants and hotels (90.6 percent),
health (72.1 percent), and food (70.6 percent), the report relays.
July's figure rise was in line with the calculations of private
consultants, who are already projecting that price increases will
surpass 90 percent by 2022, the report notes. Some recent reports
have even forecast a rate of three digits, the report discloses.
This news prompted the Central Bank to raise rates again, which
placed the yield on fixed-term deposits at around 98 percent, the
report relays.
Shortly after taking office, new Economy Minister Sergio Massa had
anticipated that inflation data for July and August would be bad,
the report relays. In view of the situation, the government has
convened the Minimum Living and Mobile Wage Council (SMV) for
August 22 in order to update values, the report says. In addition,
it will try to reach a 60-day price and wage agreement with
employers and trade union confederations in order to stabilize the
social situation and provide certainty, the report notes.
Food prices are of particular concern and rose by six percent last
month alone, the report relays. The strongest increases were
observed in fruit, vegetables and grocery products, including
onions (57.9 percent), lettuce (40.5 percent), sweet potatoes (36.5
percent), sugar (30.5 percent), among others, the report notes.
Items linked to the winter holidays also had a strong impact on the
overall price increase, with recreation and culture rising 13.2
percent and restaurants and hotels up 9.8 percent, the report
discloses. Argentina, the third largest economy in Latin America,
has suffered for years from very high inflation, with prices rising
50.9 percent last year, the report says. But price increases have
soared even further this year, pushed by political instability and
global inflationary pressures following the outbreak of war in
Ukraine, the report discloses.
The consumer price index is expected to close this year with an
annualized increase of more than 90 percent, according to the most
recent survey of market expectations conducted by the Central Bank,
the report relays.
Along with soaring inflation, the nation's currency, the peso, is
also under strong pressure, despite the tightening of exchange
controls since 2019, the report notes.
The official exchange rate stood at 140.98 pesos to the dollar, but
the US currency traded at around 297 pesos to the dollar on the
black market, the report says.
As part of a massive US$44-billion debt restructuring deal,
Argentina's government committed to the International Monetary Fund
that it would reduce its fiscal deficit from three percent of GDP
in 2021 to 2.5 per cent this year, followed by 1.9 per cent in 2023
and 0.9 per cent in 2024, the report discloses.
Most analysts date back the market turbulence and the soaring
dollar to the exit of Economy Minister Martin Guzman in early July,
the report notes.
"The resignation of Guzman triggered price leaps generated not only
by the uncertainty following his exist but also by the
consolidation of a process within the government," Agustin
Berasategui, the economist of ACM consultants told PERFIL, adding:
"On the one hand, we have preventive price mark-ups trying to
protect the earnings of different sectors on the supply side in the
first instance. On the other hand, there were price lags, above
all from sectors which had problems determining their sales prices
due to the lack of information about restocking prices," the report
relays.
The Libertad y Progreso foundation had forecast a July figure of
eight percent or 47 percent inflation so far this year, the highest
cumulative figure since 1991, the report discloses.
"After the resignation of Guzman, the uncertainty surrounding
restocking costs due to the rise in financial dollars had its
consequences in price terms. Unlike other periods, the rise in
parallel exchange rates functioned as a clear mechanism for
transmitting inflationary dynamics," said Agostina Myronec de
Ecolatina, 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.
Last March 25, 2022, Argentina finalized agreement with the IMF
for a new USD44 billion Extended Funding Facility (EFF) intended
to fund USD40 billion in looming repayments of the defunct
Stand-By Arrangement (SBA), with an extra USD4 billion in up-front
net financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
As reported by The Troubled Company Reporter - Latin America on
July 19, 2022, Fitch Ratings placed Argentina's Long-Term Foreign
Currency Issuer Default Rating (IDR) and Long-Term Local Currency
IDR Under Criteria Observation (UCO) following the conversion of
the agency's Exposure Draft: Sovereign Rating Criteria to final
criteria. The UCO assignment indicates that ratings may change as
a direct result of the final criteria. It does not indicate a
change in the underlying credit profile, nor does it affect
existing Rating Outlooks.
Last April 14, 2022, Fitch Ratings affirmed Argentina's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDR) at 'CCC'.
Fitch said Argentina's 'CCC' ratings reflect weak external
liquidity and pronounced macroeconomic imbalances that undermine
debt repayment capacity, and uncertainty regarding how much
progress can be made on these issues under a new IMF program.
Fitch added that it is uncertain whether the EFF will be a strong
anchor for macroeconomic stabilization. Its policy requirements
are fairly unambitious relative to other IMF programs and in
light of the economy's deep imbalances, but it faces heightened
risk nonetheless from weak political support and spill-overs
from the Russia-Ukraine war, says Fitch.
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.
DBRS has also confirmed Argentina's Long-Term Foreign Currency
Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at
CCC (high) on July 21, 2022.
===========
B R A Z I L
===========
BRAZIL: Inflation Registers Record Decline on Energy Tax Cuts
-------------------------------------------------------------
Reuters reports that Brazil's consumer prices decreased more than
expected in July, the country's statistics agency said, with the
steepest drop ever on the benchmark IPCA index off the back of a
string of anti-inflation measures by the government and central
bank.
Prices in Latin America's largest economy fell by 0.68% last month,
the IBGE statistics agency said, according to Reuters.
It was the lowest rate recorded since inflation measurements began
in January 1980, IBGE said, the report notes.
The drop took inflation in the 12 months through July to 10.07%,
down from an increase of 11.89% the previous month, though still
far above the central bank's target of 3.5%, plus or minus 1.5
percentage point, the report relays.
IBGE research manager Pedro Kislanov said the decrease was mainly
driven by a sharp fall in transportation costs, which dropped 4.51%
following fuel tax cuts and as state-run oil company Petrobras cut
gasoline prices at its refineries, the report notes.
Housing costs also fell 1.05% in the period, IBGE added, due to tax
cuts as the same bill that lowered state tariffs levied on fuel
provided a tax cut for electricity and communication services by
including them on a list of "essential" services, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
As reported in the Troubled Company Reporter-Latin America on
Aug 12, 2022 reported that DBRS Inc. confirmed the Federative
Republic of Brazil's Long-Term Foreign and Local Currency Issuer
Ratings at BB (low). At the same time, DBRS Morningstar confirmed
the Federative Republic of Brazil's Short-term Foreign and Local
Currency Issuer Ratings at R-4. The trend on all ratings is
Stable.
July 18, 2022, Fitch Ratings has affirmed Brazil's Long-Term
Foreign Currency Issuer Default Rating at 'BB-' and revised the
Rating Outlook to Stable from Negative.
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.
Moody's Investors Service also affirmed on April 15, 2022,
Brazil's long-term Ba2 issuer ratings and senior unsecured bond
ratings, (P)Ba2 senior unsecured shelf ratings, and maintained the
stable outlook.
TAESA: Fitch Affirms 'BB/BBB-' LongTerm IDRs, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed Transmissora Alianca de Energia Eletrica
S.A.'s (Taesa) Foreign Currency (FC) and Local Currency (LC)
Long-Term (LT) Issuer Default Ratings (IDRs) at 'BB' and 'BBB-',
respectively, and its National Scale LT Rating at 'AAA(bra)'. The
Rating Outlook for the IDRs and for the corporate National Scale
rating is Stable.
Taesa's ratings reflect its low business risk relative to its
diversified portfolio of power transmission assets in Brazil, with
predictable revenues and high operating margins. The analysis
incorporates that the company will maintain its net adjusted
leverage at adequate levels around 3.5x even considering negative
FCFs due to strong capex program. Taesa's liquidity benefits from
ample access to funding and lengthened debt maturity profile.
The company's FC IDR is constrained by Brazil's country ceiling of
'BB', while Brazil's operating environment limits the LC IDR. The
Stable Outlook for the IDRs follows the same Outlook of Brazil's
'BB-' sovereign rating.
KEY RATING DRIVERS
Low Business Risk: Taesa's credit profile benefits from the low
business risk associated with Brazil's power transmission segment
in Brazil, as revenues (permitted annual revenues [PAR]) are based
on assets availability rather than volume transported. Positively,
PARs are annually adjusted by inflation indexes, which tend to
compensate cost pressures. Companies in this segment have a
diversified client base and guaranteed payment structure.
Robust Asset Portfolio: Taesa presents a strong and diversified
asset portfolio and no exposure to concession renewals over the
short-to-medium term. The company is one of the largest power
transmission companies in Brazil. It has 11,689km of transmission
lines across the country, with 1,399km under construction,
considering its stake in each project. Taesa's concessions will not
begin to expire until December 2030 and will occur on a staggered
basis over the following years.
Predictable and Robust Revenues: New projects conclusion should
allow Taesa to compensate revenue and EBITDA reductions coming from
part of its current portfolio. Concessions for transmission assets
prior to 2006 provide for a 50%-PAR reduction once the concession
completes 15 years of operation. Considering the company's
consolidated PAR of BRL2.4 billion from operational assets, the
expected gradual revenue decline until 2024 should correspond to
less than 7% of total. On the other hand, the three new projects
under development should add BRL216 million (9%) to the company's
revenues until 2026.
High exposure to concessions IGPM-indexed (about 80% of
consolidated PAR) will also strengthen the groups consolidated
results in 2022 and 2023. EBITDA, calculated through regulatory
accounting, should increase to BRL1.9 billion in 2022, from BRL1.5
billion in 2021. For 2023, Fitch expects EBITDA to grow to BRL2.0
billion, given that five new projects concluded throughout 2022
will be operational during the entire year. EBITDA margins are
high, ranging 80%-85%, characteristic of transmission companies in
Brazil.
Capex Program Pressures FCF: Based on regulatory accounting rules,
Taesa's consolidated cash flow from operations (CFFO) should remain
robust, with BRL1.4 billion in 2022 and BRL1.6 billion in 2023,
even with high interest rates in Brazil. Aggressive capex plan and
significant dividends distribution will pressure the company's FCF.
It should be negative at BRL1.0 billion in 2022 and BRL212 million
on average during 2023-2024. The base case scenario incorporates
capex of BRL529 million in 2022 and dividend distribution of 95% of
regulatory net income during the rating horizon. Taesa's
investments should peak at BRL1.1 billion in 2023 with the
construction of the two new projects recently acquired.
Moderate Leverage Ratios: The base case scenario considers that
Taesa's will manage its adjusted net leverage around 3.5x,
consistent with its current ratings. Substantial dividend payments
along with significant investment disbursements limit the company's
capacity to deleverage. Fitch forecasts Taesa's adjusted net
debt-to-adjusted EBITDA ratio of 3.9x in 2022 and 3.6x in 2023,
which compare to 3.9x in 2021. Fitch includes off balance sheet
debt related to guarantees provided as well as dividends received
from non-consolidated companies on those ratios.
Standalone Approach: Taesa's ratings are not constrained by the
credit quality of one of its shareholders, Companhia Energetica de
Minas Gerais (Cemig) (LC and FC IDRs, BB/Stable), because Cemig
shares control of Taesa with Interconexion Electrica S.A. E.S.P.
(ISA; LC and FC IDRs, BBB/Stable), and its access to Taesa's cash
is limited to dividends. The analysis does not incorporate an
expected change in its shareholder structure. Despite of Cemig's
plan to sell its stake in Taesa, the timing and final outcome are
uncertain.
DERIVATION SUMMARY
Taesa's financial profile is stronger than Latin American peers
Interconexion Electrica S.A. E.S.P. (FC IDR, BBB/Stable) and
Consorcio Transmantaro S.A. (FC IDR, BBB/Stable), in Colombia, and
Transelec S.A. (FC IDR, BBB/Stable), in Chile. All these peers have
low business risk profiles and predictable cash flow generation,
characteristic of transmission electricity companies in a regulated
industry. The main different in ratings for these companies are the
country where they generate their main revenues and the location of
assets. While Taesa's peers are in higher rated countries, its
ratings are negatively affected by Brazil's Country Ceiling of
'BB'.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
-- PARs adjusted considering inflation and, in some cases, 50%
reduction when the 15th operational year is completed;
-- Operational expenses adjusted by inflation (IPCA);
-- Minimum cash of BRL400 million;
-- Capex of BRL2.2 billion during 2022-2024;
-- Dividends corresponding to 95% of net income calculated
through regulatory accounting rules.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Positive rating action for the company's FC IDR would be
associated to an upgrade on Brazil's sovereign rating;
-- Positive rating action for the company's LC IDR would be
associated to improvements on Brazil's operating environment;
-- Upgrade not applicable to the National Scale rating as it is
at the highest level.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Negative rating action for the LC IDR would be associated to a
deterioration in Taesa's consolidated financial profile, with
net adjusted leverage above 3.5x on funds from operations net
leverage above 4.0x, both on a sustainable basis;
-- A weaker operating environment on Brazil may result on a
downgrade of the LC IDR;
-- A downgrade on Brazil's sovereign rating would result in a
similar rating action on Taesa's FC IDR;
-- A two-notches downgrade on Taesa's LC IDR would lead to a
downgrade on the National Scale rating.
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
Adequate Liquidity: Taesa should maintain a moderate liquidity
compared with short-term debt and ample access to bank credit lines
and capital markets to mitigate expected negative FCFs. By March
31, 2022, consolidated cash and marketable securities amounted to
BRL1.5 billion, compared with short-term debt of BRL1.0 billion.
The BRL1.25 billion debenture issuance in April 2022, with final
maturity in 2037, reinforced its liquidity position.
Taesa's consolidated debt has a manageable maturity profile and no
foreign exchange risk. As of March 31, 2022, the group's adjusted
total debt was BRL9.0 billion, considering BRL1.2 billion of its
proportional stake in debt guarantees of non-consolidated
subsidiaries. Its debt mainly consisted of BRL7.1 billion in
debentures, mainly concentrated at the holding level (BRL6.2
billion, or 86% of total debentures issuances).
ISSUER PROFILE
Taesa is the third largest transmission power company in Brazil
with 11,689km of lines including 1,399km under development. It has
participation in 41 concessions across the country, including four
under construction. Taesa is controlled by the Brazilian group
Cemig and ISA, which own 36.97% and 26.03% of the voting shares,
respectively.
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.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
----------- ------ -----
Transmissora LT IDR BB Affirmed BB
Alianca de Energia
Eletrica S.A.
Natl LTAAA(bra) Affirmed AAA(bra)
senior unsecured Natl LTAAA(bra) Affirmed AAA(bra)
[*] Fitch Affirms 'BB' Ratings on Notes of 2 Brazilian Issuers
--------------------------------------------------------------
Fitch Ratings has revised the Rating Outlook for two Brazilian
infrastructure sector issuers to Stable from Negative following a
similar revision to Brazil's Sovereign Rating Outlook. In addition,
Fitch has affirmed the following ratings:
-- Acu Petroleo Luxembourg S.A.R.L.'s (Acu Petroleo Luxembourg)
USD 600 million senior secured notes due in 2035 at 'BB'. The
Rating Outlook is Stable.
-- Prumo Participacoes e Investimentos S.A.'s (Prumopar) USD 350
million senior secured notes due in 2031 at 'BB'. The Rating
Outlook is Stable.
RATING RATIONALE
The Outlook revision on Açu Petroleo Luxembourg and Prumopar
ratings to Stable from Negative follow the stabilization of
Brazil's Outlook on July 14th. Both transactions are exposed to
transfer and convertibility risk, and the stabilization of the
Brazilian sovereign rating reduced the concerns of a higher risk of
controls on the transfer of foreign currency to serve the debt.
Acu Petroleo Luxembourg's metrics from 2022 to 2024 are
commensurate to its 'BB' rating, while Prumopar's metrics are
commensurate to higher ratings; nonetheless, their ratings are
constrained by Brazil's country ceiling.
KEY RATING DRIVERS
The revision of Brazil's Outlook to Stable from Negative reflects
the better-than-expected evolution of public finances amid
successive shocks in recent years since the Negative Outlook was
assigned in May 2020. Last year, Brazil recorded its first primary
fiscal surplus since 2013, highlighting revenue outperformance and
the authorities' commitment to withdraw stimulus implemented during
the pandemic.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Acu Petroleo Luxembourg S.A.R.L:
-- A negative rating action on Brazil's sovereign rating;
-- Fitch's expectations on the oil price to be below USD53 per
barrel, leading to a lower uplift on volume projections;
Prumo Participacoes e Investimentos S.A:
-- Operational disruption negatively impacting the cash flows;
-- A negative rating action on Brazil's sovereign rating.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Acu Petroleo Luxembourg S.A.R.L:
-- A strengthening of the credit profile of the Brazilian
sovereign, particularly the risk of imposing controls on
the transfer of foreign currency;
-- Fitch's expectations on the oil price to be above USD53 per
barrel, leading to a lower uplift on volume projections;
-- Success in the renewal of most of the ToP contracts that are
due in 2023.
Prumo Participacoes e Investimentos S.A:
-- A strengthening of the credit profile of the Brazilian
sovereign, particularly the risk of imposing controls on the
transfer of foreign currency.
-- Achievement of the target amortization schedule in a sustained
basis;
-- Favorable track record of operations without disruption;
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
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.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
----------- ------ -----
Prumo Participacoes
e Investimentos S/A
Prumo Participacoes LT BB Affirmed BB
e Investimentos
S/A/Notes/1 LT
Acu Petroleo
Luxembourg S.A.R.L.
Acu Petroleo LT BB Affirmed BB
Luxembourg S.A.R.L.
/Senior Secured Debt
/1 LT
===========================
C A Y M A N I S L A N D S
===========================
MODERN LAND: NY Judge Glenn Quells Ch. 15 Doubts of HK Judge
------------------------------------------------------------
James Nani of Bloomberg Law reports that global restructuring
professionals are breathing a sigh of relief after a judge
reaffirmed that a foreign restructuring can discharge debt governed
by New York law -- a common element of global insolvencies recently
brought into question by a Hong Kong judge.
Judge Martin Glenn of the US Bankruptcy Court for the Southern
District in July said his court would recognize and enforce, under
Chapter 15 of US bankruptcy law, Chinese property developer Modern
Land China Co.'s Cayman Islands court order that restructures $1.34
billion in debt governed by New York law. In doing so, Judge Glenn
helped to allay concerns raised in June by a Hong Kong judge who
suggested that a US court's recognition of a foreign company's
restructuring under Chapter 15 doesn't discharge debt under US
law.
Judge Glenn's decision in Modern Land -- a company with assets in
China and the US worth $12.49 billion as of June 2021 -- gave
renewed confidence to cross-border restructuring professionals who
had been left questioning the effectiveness of Chapter 15 for
offshore companies that use foreign courts to restructure New
York-law governed debt.
The issue, which Judge Glenn deemed "critically important," is
significant because the Hong Kong decision could have given
creditors an opportunity to go after a debtor's property in Hong
Kong, despite obtaining restructuring recognition in the US.
The decision also has broader significance because of how common
Modern Land's corporate structure is, with operations based in
China but incorporation outside of the country, with debt raised in
the US.
Additionally, the decision is notable in that it affects a large
Chinese real estate developer amid ongoing turmoil among China's
real estate industry, which accounts for about a quarter of the
world's second biggest economy.
"Those who were holding their breath a little bit in the wake of
the decisions out of the Hong Kong court can breathe a little
easier," said Michael S. Etkin, a partner at Lowenstein Sandler
LLP's Bankruptcy & Restructuring Department.
Chapter 15
The Bankruptcy Code's Chapter 15, created in 2005, is meant to help
facilitate corporate insolvencies that involve more than one
country. Generally, a debtor's main insolvency case is brought
outside of the US.
Recent high profile Chapter 15 cases include a Luckin Coffee Inc.,
which has been described as the Starbucks of China, and
Singapore-based Three Arrows Capital, a cryptocurrency hedge fund
that filed in New York last month.
Rare Earth
The uncertainty around Chapter 15 commenced in June, when Hong Kong
Justice Jonathan Harris issued a decision in the case of Rare Earth
Magnesium Technology Group Holdings Limited.
In Rare Earth, Harris said while Chapter 15 procedurally prevents a
creditor from taking action against a debtor's property in the US,
that "recognition does not appear as a matter of United States' law
to discharge the debt."
Judge Harris's opinion suggested a Hong Kong court wouldn't
recognize a reorganization approved in an offshore court then
recognized in a US bankruptcy court under Chapter 15 because, in
his view, it doesn't have a worldwide effect.
"This is a distinction to which advisers need to be alert when
dealing with transnational restructuring," Judge Harris wrote. "A
scheme in an offshore jurisdiction purporting to compromise debt
governed by United States law will not be effective in Hong Kong.
Recognition of the scheme under Chapter 15 does not constitute a
compromise of debt governed by United States law."
Judge Harris applied an English common law rule from 1890 that
declines to recognize a discharge or change of English law-governed
debt approved by a court outside of England. While US courts don't
follow that rule, it's a key international issue because it's used
in jurisdictions around the world that include Cayman Islands,
Bermuda, Canada, and Australia.
The interpretation raised concerns that creditors that didn't
participate in a foreign restructuring could go back to the Hong
Kong court to take action against a debtor despite the debtor
securing judicial recognition under Chapter 15. Dissenting
creditors could try to avoid cramdowns which allow debtors to
implement a bankruptcy plan over creditor opposition of a foreign
restructuring if they could establish a connection in Hong Kong.
"This is something that we for a long time thought was
unremarkable, but then the Hong Kong court issued this decision
that caused everybody to sit up and take notice," according to
Madlyn Gleich Primoff, a restructuring partner at Freshfields
Bruckhaus Deringer LLP.
The opinion suggested that if a global restructuring that involves
debt governed by laws in multiple countries,the debtor might have
to go to each of those jurisdictions to separately deal with it,
Primoff said. Conducting a full scale restructuring in each
jurisdiction where debt was governed, while possible, would be
expensive and inefficient, she said.
Modern Land
Judge Glenn granted Chapter 15 relief to Modern Land just six weeks
after the Rare Earth decision, which is unrelated, came out. He
recognized its Cayman restructuring, confirming the binding effect
of its discharge of New York law-governed debt and the issuing of
new notes.
His decision, which allowed for Modern Land to restructure $1.4
billion in bonds, clarified that the Rare Earth ruling isn't the
position under US or New York law, and that the court will continue
to recognize foreign cases that file in the US under Chapter 15.
As long as due process principles are observed in the foreign
jurisdiction and other comity principles are satisfied, a foreign
court can modify or discharge New York law governed debt, Glenn
found.
Those factors make Glenn's Modern Land response "huge," Primoff
said.
Though the Hong Kong court could respond again, Judge Glenn's
decision should allow restructurings of offshore companies with US
law debt to continue as they had before, Paul Apathy, a partner at
Herbert Smith Freehills LLP said.
"I think the Modern Land decision could be summarized as a return
to the understood legal position of a Chapter 15 order prior to the
uncertainty generated by the Rare Earth decision," Apathy said.
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.
=========
C H I L E
=========
LATAM AIRLINES: Group Plans to Exit Chapter 11 in 4Q22
------------------------------------------------------
globalinsolvency.com, citing ch-aviation.com reports that LATAM
Airlines Group hopes to exit chapter 11 bankruptcy protection in
the last quarter of 2022 after securing the financing plus U.S.
bankruptcy court and shareholder approval for its restructuring
plan, says Group Chief Executive Officer Roberto Alvo.
"We have closed the second quarter with significant progress in our
reorganization process under Chapter 11, and we hope to emerge from
it during the last quarter of this year, Alvo said in a statement,
according to globalinsolvency.com.
"Although the group has made advances in its operational recovery,
we continue to remain cautiously optimistic about the coming
months, closely monitoring fuel prices and macro-economic
variables, as the industry still finds itself in the midst of a
very dynamic environment," the report relays.
At an extraordinary shareholders' meeting, LATAM obtained the
necessary approval from its shareholders for the company's new
capital structure and the issuance of the financing instruments
presented in the restructuring plan, receiving the support of the
vast majority of shareholders, corresponding to 99.8% of the shares
present or represented at the meeting, which correspond to 77.5% of
the total shares with voting rights, the report notes.
This will allow LATAM to begin the final phase of regulatory
requirements in Chile for the eventual implementation of the plan.
This comes as LATAM Group reported losses of USD523.2 million for
the second quarter of 2022, the report adds.
About LATAM Airlines Group
LATAM Airlines Group S.A. is a pan-Latin American airline holding
company involved in the transportation of passengers and cargo and
operates as one unified business enterprise. It is the largest
passenger airline in South America. Before the onset of the
COVID-19 pandemic, LATAM offered passenger transport services to
145 different destinations in 26 countries, including domestic
flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru,
and international services within Latin America as well as to
Europe, the United States, the Caribbean, Oceania, Asia and
Africa.
LATAM Airlines Group and its 28 affiliates sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25,
2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United
States are part of the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as general
bankruptcy counsel; FTI Consulting as restructuring advisor;
Togut,
Segal & Segal LLP and Claro & Cia in Chile as special counsel;
PricewaterhouseCoopers Consultores Auditores SpA as independent
auditors; and Larrain Vial Servicios Profesionales Limitada as
Latin America investment banker. Prime Clerk LLC is the claims
agent.
The U.S. Trustee for Region 2 appointed a committee of unsecured
creditors on June 5, 2020. The committee is represented in the
Debtors' bankruptcy cases by Dechert, LLP. The committee also
tapped Morales & Besa LTDA to provide advice on matters related to
the Chilean and cross-border insolvency law.
===========
M E X I C O
===========
PLAYA HOTELS: Posts $30.5 Million Net Income in Second Quarter
--------------------------------------------------------------
Playa Hotels & Resorts N.V. filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q disclosing net income
of $30.53 million on $221.27 million of total revenue for the three
months ended June 30, 2022, compared to a net loss of $7.77 million
on $128.80 million of total revenue for the three months ended June
30, 2021.
For the six months ended June 30, 2022, the Company reported net
income of $73.27 million on $440.84 million of total revenue
compared to a net loss of $77.51 million on $206.55 million of
total revenue for the same period a year ago.
As of June 30, 2022, the Company had $2.10 billion in total assets,
$1.39 billion in total liabilities, and $715.84 million in total
shareholders' equity.
As of June 30, 2022, the Company held $348.8 million in cash and
cash equivalents, with no restricted cash balance. Total
interest-bearing debt was $1,115.3 million, comprised of its Senior
Secured Term Loan due 2024 and Property Loan due 2025. Effective
March 29, 2018, the Company entered into two interest rate swaps to
fix LIBOR at 2.85% on $800.0 million of its variable rate Term
Loan. As of June 30, 2022, there was no balance outstanding on our
$68.0 million Revolving Credit Facility.
Bruce D. Wardinski, chairman and CEO of Playa Hotels & Resorts,
commented, "Playa had another excellent quarter and continues to
execute on our strategy of delivering a high-quality experience at
attractive prices to both our guests and our stakeholders. Our
value proposition is resonating with guests, as our Occupancy rate
in the second quarter improved to a post-pandemic high, our NPS
scores remain at healthy levels, and our bookings pace remains
strong.
"I am very excited and encouraged by the progress in Jamaica,
reporting the highest Occupancy rate of any segment during the
second quarter as flight capacity and international passenger
arrivals into Montego Bay accelerated meaningfully. The removal of
COVID-19 related travel restrictions in April have helped both
leisure and MICE demand in Jamaica, with the segment leading the
way in bookings for 2023 in recent months. Jamaica was our best
performing segment prior to the pandemic and we continue to believe
there is room for ADR improvement as the recovery catches up with
Mexico and the Dominican Republic.
"We continued to see solid guest demand, with our second half 2022
booked revenue position remaining well ahead of last year and MICE
group bookings for 2023 building a base to carry momentum into next
year."
A full-text copy of the Form 10-Q is available for free at:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1692412/000169241222000091/plya-20220630.htm
About Playa Hotels & Resorts
Playa Hotels & Resorts N.V. is an owner, operator and developer of
all-inclusive resorts in prime beachfront locations in popular
vacation destinations in Mexico and the Caribbean. As of March 31,
2022, Playa owned and/or managed a total portfolio consisting of 22
resorts (8,366 rooms) located in Mexico, Jamaica, and the Dominican
Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancun,
Hyatt Ziva Cancun, Wyndham Alltra Cancun, Wyndham Alltra Playa del
Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva
Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns
and manages Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton
Rose Hall Resort & Spa, Jewel Grande Montego Bay Resort & Spa and
Jewel Paradise Cove Beach Resort & Spa. In the Dominican Republic,
Playa owns and manages the Hilton La Romana All-Inclusive Family
Resort, the Hilton La Romana All-Inclusive Adult Resort, Hyatt
Zilara Cap Cana and Hyatt Ziva Cap Cana. Playa owns two resorts in
the Dominican Republic that are managed by a third-party and
manages five resorts on behalf of third-party owners.
Playa Hotels reported a net loss of $89.68 million for the year
ended Dec. 31, 2021, a net loss of $262.37 million for the year
ended Dec. 31, 2020, and a net loss of $4.36 million for the year
ended Dec. 31, 2019. As of Dec. 31, 2021, the Company had $2.06
billion in total assets, $1.43 billion in total liabilities, and
$630.83 million in total shareholders' equity.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Aug. 8 to Aug. 12, 2022
------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Esval SA 3.5 49.9 2/15/2026 CL CLP
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Polarcus Ltd 5.6 71.8 7/1/2022 AE USD
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Provincia del Chubut A 4.5 2208 3/30/2021 AR USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
*********
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.
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