/raid1/www/Hosts/bankrupt/TCRLA_Public/220829.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 29, 2022, Vol. 23, No. 166
Headlines
A R G E N T I N A
ARGENTINA: Debt Has Grown Almost US$3 Bil. a Month for Last Year
ARGENTINA: Next Round of IMF Talks Complicated by Weak Reserves
TELECOM ARGENTINA: Fitch Affirms 'B-/B' IDRs, Outlook Stable
B R A Z I L
BRAZIL: Minister Wants to Set Industry Tax to Zero
E C U A D O R
ECUADOR: Fitch Affirms 'B-' Foreign Currency IDR, Outlook Stable
M E X I C O
GRUPO MEXICO: ASARCO’ Refinery Shutdown due to Freight Costs
OPERADORA DE SERVICIOS: Moody's Affirms 'Ba2' CFR, Outlook Stable
TOTAL PLAY: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
P E R U
COMPANIA DE MINAS: Moody's Cuts CFR & Sr. Unsecured Ratings to B2
P U E R T O R I C O
SEARS HOLDINGS: Faegre Drinker Represents Admin Claimants
V E N E Z U E L A
VENEZUELA: Siemens to Help Rebuild Electricity Grid
X X X X X X X X
[*] BOND PRICING: For the Week Aug. 22 to Aug. 26, 2022
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Debt Has Grown Almost US$3 Bil. a Month for Last Year
----------------------------------------------------------------
Fabian Quinta at Buenos Aires Times reports that between the end of
this month and the beginning of September, Economy Minister Sergio
Massa will be paying a visit to the United States to renegotiate
with the International Monetary Fund (IMF) the debt conditions
which the government signed in March.
Last month's fiscal data yielded a fiscal deficit close to 3.2
percent of Gross Domestic Product, according to Buenos Aires Times.
To reach the target figure of US$8.125 billion of net reserves
established in the agreement with the IMF from the US$2.325 billion
of March, the Central Bank would have to buy a further US$5.8
billion by December, something which hardly seems feasible, Buenos
Aires Times notes.
But the debt to the IMF is not the Argentine state's biggest,
Buenos Aires Times relays. According to the latest data published
by the Finance Secretariat to which Perfil had access, that was
US$43.308 billion last month, well below the peso debt which (when
adjusted to inflation) reached US$55.141 billion.
The report also gave last month's gross debt in a normal situation
of payment as US$378.307 billion as against the US$342.56 billion
of the same month last year when Martin Guzman was economy
minister, Buenos Aires Times says.
In other words, debt has grown by a monthly average of US$2.978
billion in the last 12 months, Buenos Aires Times relates.
Just between June and July, debt increased by the equivalent of
US$2.262 billion, representing monthly growth of 0.6 percent,
Buenos Aires Times discloses.
The variation is explained by a reduction of US$2.248 billion of
debt in foreign currency and an increase of "peso" debt of US$4.51
billion in its dollar equivalent, says Buenos Aires Times.
Controversy
According to Buenos Aires Times, the debt issue in pesos as opposed
to dollars has triggered more than one controversy since Massa
became economy minister.
Former productive development minister Matías Kulfas aimed his
fire at former Economy Minister Nicolas Dujovne and former Central
Bank governor Guido Sandleris when he affirmed: "It is perhaps too
late to understand the rock-bottom handling of the public debt left
by the Mauricio Macri government."
Both men were officials in ex-president Macri's 2015-2019
administration, Buenos Aires Times relays.
Buenos Aires Times discloses that Kulfas, via his Twitter account,
highlighted: "Peso debt is not the same thing as dollar debt. Debt
between public sectors is not the same thing as foreign debt to the
IMF," adding: "Any ordinary citizen can understand perfectly well
the difference between peso and dollar debt. It’s like going into
debt with your wife, husband or brother versus going into debt with
a bank. The only people who do not understand that difference are
the economists of Juntos por el Cambio."
The reply of Sandleris ran: "If you owe 20 to your brother and 20
to the bank and only recognise the latter, apart from shitting on
your brother, you’re a liar," notes Buenos Aires Times.
In any event, last month's debt of US$378.307 billion is US$58
billion above the US$320.525 billion left by the Macri government
at the end of 2019 despite the debt swap with private creditors
concluded in September, 2020, the renewal of the loan of US$44.8
billion from the IMF last March and deferment of payments to the
Paris Club of US$2.4 billion until 2024, Buenos Aires Times 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
Aug. 12, 2022, S&P Global Ratings affirmed its foreign and
local-currency sovereign credit ratings of 'CCC+/C' on the
Republic of Argentina. The outlook remains stable. S&P also
affirmed its national scale 'raBBB-' rating and its 'CCC+' transfer
and convertibility assessment. S&P said the stable outlook reflects
the challenges in managing pronounced economic imbalances ahead of
the 2023 national elections given disagreement on policy within the
government coalition and financing pressures in the local market.
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.
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.
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: Next Round of IMF Talks Complicated by Weak Reserves
---------------------------------------------------------------
Buenos Aires Times reports that it's a question of accountancy but
also real-life banknotes - namely whether the incoming dollars
obtained come from exports, advances or linked to a debt which will
have to be paid at some point.
Those are the famous debates over whether the reserves are net or
liquid or not, according to Buenos Aires Times. It might seem like
just semantics at this point, although it could perfectly well be
the core of the discussion and the decisive point when Argentina's
economic team sits down with officials responding to Kristalina
Georgieva at the International Monetary Fund (IMF), the report
notes.
In a few weeks, the IMF will begin its second review of Argentina's
US$44.5-billion debt deal, on whose approval will depend the
remittance to meet the next debt payment of over US$6 billion, the
report discloses. Even if there is finally fumata bianca, the
battle ahead is not to be underestimated, the report says.
The government is already taking it for granted that there will be
plenty of tension although it has one ace in its favour - being
concentrated on the second quarter when Martín Guzman was steering
the economy and will not be around to take all the blame, the
report notes. Instead, the negotiator will be Economy Minister
Sergio Massa who will be taking all the responsibility for the
third review (covering a period still in progress) and where there
will be far more tension, the report says.
As from September, the IMF will be aiming its missiles at runaway
inflation but especially at the feeble reserves of the Central Bank
under Miguel Pesce, who has been engaging in creative accountancy
and betting on the Chinese currency swap, harvest dollars being
cashed and reduced energy spending now at a monthly US$2.4 billion,
the report relays. And also the Repos (repurchase agreements)
which the government hopes to be signing soon with European, Asian
and North American Banks to repurchase debt and boost reserves, the
report notes. It would be a mechanism (still under discussion)
similar to that used in 2016 but aiming at a longer term, the
report discloses.
It is further hoped that tranches from international organizations
pending from the first half of the year can be accelerated to the
tune of a few billion dollars, the report notes. The Central Bank
also looks to maintain a position to buy which it claims to have
sustained since this government took power in late 2019 although if
inflation were lower, the capital controls could be more solidly
applied, the report relays.
The economic cabinet sees data which it considers encouraging in
the balance of trade, the report relays. For example, in the
second week of this month the soy harvest began to be cashed with
the new special 70/30 exchange rate, permitting these agricultural
transactions to be maintained at a daily average of US$160 million
this month, the report notes.
From the perspective of the economic cabinet, the trump card will
be the signals as to fiscal austerity, promising to reduce the red
ink to 2.5 percent of gross domestic product by the end of the
year, the report discloses. But it is precisely there where the
tensions within the ruling coalition come into play because not all
sectors want to be tied down to cuts in funding, the report notes.
The other indicator under IMF scrutiny will be without doubt
inflation, the report relays. As in the case of Central Bank
reserves, that future scrutiny stands to be more complex than the
review of second quarter accounts beginning next month although
when it comes to prices, they are likely to take a more benevolent
view, given the global surge in inflation due to the pandemic and
the energy costs of the ongoing war in Europe, the report
discloses.
In reality, that international context would give the IMF more
scope for benevolence in its final statement, the report notes.
But when it comes to the reserves, more than in the case of
double-digit inflation (a national phenomenon), that rhetorical
clemency would become more difficult to sustain domestically in
terms of political endorsements and internal audits, 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
Aug. 12, 2022, S&P Global Ratings affirmed its foreign and
local-currency sovereign credit ratings of 'CCC+/C' on the
Republic of Argentina. The outlook remains stable. S&P also
affirmed its national scale 'raBBB-' rating and its 'CCC+' transfer
and convertibility assessment. S&P said the stable outlook reflects
the challenges in managing pronounced economic imbalances ahead of
the 2023 national elections given disagreement on policy within the
government coalition and financing pressures in the local market.
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.
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.
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.
TELECOM ARGENTINA: Fitch Affirms 'B-/B' IDRs, Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed all of Telecom Argentina S.A.'s ratings,
including its Long-Term Foreign Currency Issuer Default Rating
(IDR) at 'B-', Long-Term Local Currency IDR at 'B', and instrument
ratings at 'B-'/'RR4'. The Rating Outlook is Stable.
The ratings reflect Fitch's expectation that the company will be
able to continue passing along the effects of Argentine peso
depreciation and inflation as Argentinian courts continue to extend
an injunction against price freezes. The majority of the company's
operations and assets are in Argentina, an operating environment
characterized by macroeconomic instability. The company has
demonstrated an ability to pass through inflation effects to
consumers, somewhat blunting macroeconomic concerns.
The company benefits from a robust financial and operational
profile, underpinned by its operational cash flow generation,
relatively conservative capital structure, and strong competitive
position in both fixed and mobile services.
KEY RATING DRIVERS
Country Ceiling Limits Foreign Currency Ratings: Telecom
Argentina's Long-Term Foreign Currency IDR is constrained by
Argentina's 'B-' Country Ceiling. Fitch believes that the company's
default would most likely be driven by transfer and convertibility
restrictions, not by a material deterioration of the company's
operating profile.
Strong Operator, Weak Operating Environment: Telecom Argentina is
the country's leading integrated operator, with strong competitive
positions in both fixed and mobile services. The company's strong
product offerings and brand recognition support its robust cash
flow. The company has historically weathered the turbulent
macroeconomic environment by increasing service prices to offset
rising operating expenses, enabling it to maintain strong credit
metrics.
Courts Maintain Price-Setting Independence: In 2021, Argentine
courts ruled in favor of Telecom Argentina and against ENACOM
regarding the company's ability to raise prices with inflation,
following government efforts to freeze or control telecom service
prices. The courts have since continued to extend the injunction
against price freezes, most recently in April 2022 for an
additional six months.
Telecom Argentina has continued to raise prices on a quarterly
basis, albeit at a rate below prevailing inflation given recent
higher than anticipated realized inflation. Fitch expects the
company to increase prices as necessary to pass through the
majority of Argentine peso depreciation and inflation. This should
allow the company to maintain a healthy EBITDA margin near 30% and
net leverage at or below 2.0x over the coming years.
Financial Profile in Line with IG Peers: Telecom Argentina's
financial structure ranks among the strongest of Fitch-rated
telecom companies in the region, due to the company's conservative
capital structure and positive cash flow. Fitch forecasts net
debt/EBITDA of approximately 1.6x-2.0x over the rating horizon, in
line with stronger investment-grade operators throughout the
region. Fitch estimates that the company will refinance upcoming
maturities over the medium term as necessary and maintain debt
around USD2.0 billion.
Moderate Financial Flexibility: Despite ongoing uncertainty
regarding capital controls in Argentina, the company has
consistently accessed international debt markets on an unsecured
basis. Fitch expects refinancing risk to remain manageable, despite
the company's relatively short-dated amortization profile. The
company's liquidity position is further supported by its
operational cash flow generation, as well as the high proportion of
its cash balances in dollars, which provide a natural hedge to
foreign exchange risk. Fitch does not expect shareholder
distributions to compromise the company's liquidity.
DERIVATION SUMMARY
Telecom Argentina's speculative ratings compare with those of other
Argentine issuers YPF S.A. (CCC) and Arcor S.A.I.C. (B/Stable),
which have solid business and capital structures, but have ratings
that are restricted by the difficulties of operating in Argentina
amid high inflation and government imposed capital controls.
Arcor's ratings are higher than those of YPF and Telecom Argentina
due to its operations in Brazil and the cash it holds abroad in its
foreign subsidiaries.
The company's business and financial profile are in line, or
superior to, diversified investment grade telecom operators
including Telefonica Moviles Chile S.A. (BBB+/Stable), UNE EPM
Telecomunicaciones S.A. (BBB-/Stable), and Colombia
Telecomunicaciones (BBB-/Stable). Telecom Argentina has either a
more conservative capital structure, or a stronger market position,
or both. Ultimately, the Foreign and Local Currency IDRs will
remain driven by the difficult Argentine operating environment.
KEY ASSUMPTIONS
-- The company is able to pass on the majority of inflation to
consumers each year;
-- Net leverage around 1.6x-2.0x;
-- EBITDA margins below 30%;
-- Capital intensity around 15%-17%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Telecom Argentina's Foreign Currency IDR is bound by
Argentina's 'B-' Country Ceiling; therefore, an upgrade of the
Argentine sovereign rating and concurrent upgrade of the
Argentine Country Ceiling would result in an upgrade;
-- Telecom Argentina's Local Currency IDR is constrained by the
difficult Argentine operating environment; therefore, a
decrease in macroeconomic turmoil would result in an upgrade.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Telecom Argentina's Foreign Currency IDR is bound by
Argentina's 'B-' Country Ceiling; therefore, a downgrade of
the Argentine sovereign rating and concurrent downgrade of the
sovereign's Country Ceiling would result in a downgrade;
-- An increase in regulatory interference that inhibits the
company's ability to pass through inflationary effects and
devaluation could result in a downgrade.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity, Reduced Refi Risk: Telecom Argentina has
adequate liquidity, with cash of ARS26 billion against short-term
debt of ARS70 billion as of June 2022. The majority of Telecom
Argentina's cash and debt are U.S. dollar denominated. In July
2022, the company secured a new USD184.5 million loan from the
International Finance Corporation (IFC), and repaid its USD140
million syndicated term loan. The risk of Argentine capital
controls will continue to constrain the company's ratings. The
company has some operations in Paraguay and Uruguay, but Fitch does
not consider these substantial enough to circumvent Argentina's
'B-' County Ceiling.
Telecom Argentina's liquidity and financial flexibility are
supported by the company's robust cash flow generation, which Fitch
expects to cover capex. Telecom Argentina's refinancing risk is
manageable. The company has a long history of refinancing and
rolling over bank debt and international agency (e.g. IFC) loans.
After repaying the syndicated term loan in July, the remainder of
maturities in 2022 is primarily Local Currency debt.
The company's net leverage, at around 1.9x, has been consistent
throughout the last few years in spite of the macroeconomic turmoil
in Argentina. Fitch expects the company to maintain debt of around
USD2 billion over the coming years. The company's ability to pass
on inflationary effects to consumers has been critical for its
ability to maintain cash flow generation, despite the majority of
capex being U.S. dollar denominated.
ISSUER PROFILE
Telecom Argentina S.A. is the largest integrated telecommunications
services provider in Argentina, offering broadband, pay TV and
fixed and mobile telecommunications services throughout the
country.
SUMMARY OF FINANCIAL ADJUSTMENTS
Standard lease adjustments
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
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 Prior
------ -----
Telecom Argentina S.A.
LT IDR B- Affirmed B-
LC LT IDR B Affirmed B
senior unsecured LT B- Affirmed RR4 B-
===========
B R A Z I L
===========
BRAZIL: Minister Wants to Set Industry Tax to Zero
--------------------------------------------------
Rio Times Online reports that Brazilian Economy Minister Paulo
Guedes said that he intends to set the IPI (industrial products
tax) to zero. He said the government would reduce and simplify
taxes to improve the business environment, according to Rio Times
Online.
Guedes also said the unemployment rate should drop to nearly 8% by
the end of the year, the report notes. He was speaking at an event
organized by Aclame (Association of the Middle Class), the report
relays.
The minister said he wanted to open the economy to the outside
world and that he had reduced the Mercosur tariff by 10%, 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
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.
DBRS Inc. confirmed Brazil's Long-Term Foreign and Local Currency
Issuer Ratings at BB (low) on Aug 12, 2022. 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.
=============
E C U A D O R
=============
ECUADOR: Fitch Affirms 'B-' Foreign Currency IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Ecuador's Long-Term Foreign Currency
Issuer Default Rating (IDR) at 'B-'. The Rating Outlook is Stable.
KEY RATING DRIVERS
Stable Outlook: Ecuador's 'B-' rating balances relatively high
per-capita income, a strengthened external liquidity position, and
a favorable debt service profile following a 2020 restructuring
with weak economic growth (pre- and post-pandemic), a poor debt
repayment record, and heightened political risks stemming from
recent instability. The Stable Outlook balances a substantial and
better-than-expected fiscal improvement in recent years with rising
social and political challenges that could pressure public
finances, complicate recovery of external market access, and hinder
structural reforms likely needed for a stronger, more sustainable
growth path.
Fiscal Improvement, But Risks Ahead: Fitch expects the central
government deficit to fall to USD2.1 billion in 2022 (1.8% of GDP)
from USD4.1 billion in 2021 due to higher oil prices and the yield
from a recent tax reform. Fitch's projection incorporates the loss
in oil revenues due to production disruptions during recent
protests and the new fiscal measures to end them, but are somewhat
better than the government and EFF projections given their
conservative revenue assumptions.
Fitch expects the deficit to widen after 2022 due to an expected
fall in oil prices and additional spending, including legally
mandated increases in teacher salaries, pledged outlays to address
a deteriorating security situation, and step-up coupon payments on
restructured bonds. Spending pressures emanating from the
government's ongoing negotiations with social groups pose an
additional fiscal risk. Plans to targeted fuel subsidies could
provide significant fiscal savings, though progress is subject to
difficult political negotiations with indigenous groups.
Financing Challenges: Fitch expects the central government to meet
its 2022 financing needs of USD9.7 billion (9.1% of GDP) without
access to external markets, owing to disbursements from the IMF and
other multilaterals. Fitch expects the financing outlook will
become more challenging after 2022 due to a higher projected
deficit and required debt repayments to the central bank. Financing
sources could become more limited as IMF disbursements end, while
the sovereign's ability to regain access to external markets
remains uncertain, and borrowing capacity in the local capital
market is small.
Ongoing arbitration cases between Ecuador and foreign-oil and gas
firms pose contingent liability risks that could add to financing
needs, as highlighted by the recent freezing of the sovereign's
accounts in Luxembourg for its non-payment of a USD374 million
settlement to French oil firm Perenco (though Fitch expects this
will be settled in 2022). On the upside, governments attempt to
reprofile USD5 billion (11% of total external debt) in loans to
China could reduce financing needs.
Stabilizing Public Debt: Fitch projects general government debt
(encompassing non-financial public sector loans and bonds, and
including several debt-like liabilities not included in official
figures) to fall to 62.9% of GDP in 2022, in line with the current
'B' median of 62.7%. Fitch forecasts debt to remain stable over the
subsequent few years as the deficit rises somewhat and GDP growth
moderates to its low trend pace. General government
interest/revenues is projected to continue falling to 4.2% in 2022,
relative to the peer median of 11.9%, from a historical high of
10.2% in 2020 due to the relief from the bond restructuring, and
increase to 4.8% in 2023 and 5.5% in 2024 as coupons on
restructured bonds step up.
Rising Political Uncertainties: Ongoing social and political
difficulties are hindering President Guillermo Lasso's
administration's ability to carry out its liberal economic agenda.
After large-scale protests in June, the government agreed to fiscal
relief measures (oil subsidies, healthcare spending, and social
bonds) and started negotiations with social groups on other issues.
The left-leaning National Assembly voted to impeach Lasso and has
formed a majority that is openly hostile to the administration on
economic priorities and institutional matters.
Despite these challenges, the government has kept its EFF program
with the IMF on track, notably by delivering a tax reform via
decree. However, political volatility is likely remain, making
prospects of recovery of market access more remote. It also clouds
prospects for a successor program with the IMF after the EFF ends
this year, making it unclear if a strong fiscal anchor and
financing support will remain in place going forward.
Growth Slows to Trend: Fitch projects Ecuador's economy to grow by
3.2% in 2022 (from 4.2% in 2021), reflecting strong private
consumption supported by high credit growth, but restrained by
investment that is recovering but far below pre-pandemic levels.
Fitch expects growth to slow to 2.5% in 2023 and 1.9% in 2024,
around its trend pace.
Greater private investment is needed to support growth in the
context of narrow fiscal space for public investment, but appears
unlikely in the near term. Fitch believes the Lasso administration
faces challenges enacting major structural reforms to improve the
labor market and address other key competitiveness issues. In
addition, the prospects for legislative approval of several
free-trade agreements under negotiation are also unclear. There is
substantial growth potential in oil and mining, which the
administration has scope to develop via executive action rather
than legislation; however, Fitch believes these prospects will be
tested by political uncertainties and environmentalist's demands.
External Liquidity Improvement: Fitch projects current account
surpluses of around 2.8% of GDP in 2022 to 2024, reflecting a
notable structural external improvement relative to the
pre-pandemic deficit position. The current account surplus and
multilateral loan disbursements have lifted BCE reserves to over
USD9 billion as of mid-August. The BCE's stronger liquidity
position has solidified the foundations of Ecuador's dollarization
regime. Reserves are projected to cover 12.8% of broad money in
2022, relative to 5.1% in 2019. Guided by the 2021 Defense of
Dollarization Law, efforts are underway to further improve external
liquidity by reversing past financial operations that undermined
the BCE's balance sheet.
ESG - Governance: Ecuador has an ESG Relevance Score (RS) of '5'
for both Political Stability and Rights and for the Rule of Law,
Institutional and Regulatory Quality and Control of Corruption.
These scores reflect the high weight that the World Bank Governance
Indicators (WBGI) have in Fitch's proprietary Sovereign Rating
Model. Ecuador has a low WBGI percentile ranking at 33 reflecting a
rising political uncertainty, moderate voice and accountability,
moderately weak control of corruption and government effectiveness,
and a weak rule of law and regulatory quality.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Public Finances: Intensification of financing stress due to
failure to sustain gains from fiscal consolidation efforts or
secure adequate financing once IMF disbursements ends, posing
a risk to sovereign repayment capacity.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Public Finances: Fiscal consolidation that supports a
sustained reduction in government financing needs and a
downward trajectory for general government debt/GDP over the
medium term, and improvement in financing access.
- Macro: Increased confidence in policymaking and further
progress on reforms that could support stronger medium-term
economic growth prospects.
-- External Finances: Preservation of higher central bank
reserves that bolster the underpinnings of the dollarization
regime.
SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)
Fitch's proprietary SRM assigns Ecuador a score equivalent to a 'B'
rating on the Long-Term Foreign Currency IDR scale.
Fitch's sovereign rating committee adjusted the output from the SRM
to arrive at the final Long-Term Foreign Currency IDR by applying
it QO, relative to SRM data and output, as follows:
-- Public Finances: -1 notch, to reflect fiscal and financing
challenges that persist given uncertainty around fiscal
consolidation plans, the magnitude of support from official
creditors as IMF disbursements end, and the sovereign's
ability to re-access external markets.
Fitch's SRM is the agency's proprietary multiple regression rating
model that employs 18 variables based on three-year centered
averages, including one year of forecasts, to produce a score
equivalent to a Long-Term Foreign Currency IDR. Fitch's QO is a
forward-looking qualitative framework designed to allow for
adjustment to the SRM output to assign the final rating, reflecting
factors within Fitch's criteria that are not fully quantifiable
and/or not fully reflected in the SRM.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Ecuador has an ESG Relevance Score of '5' for Political Stability
and Rights as WBGI have the highest weight in Fitch's SRM and are
therefore highly relevant to the rating and a key rating driver
with a high weight. As Ecuador has a percentile rank below 50 for
the respective governance Indicator, this has a negative impact on
the credit profile.
Ecuador has an ESG Relevance Score of '5' for Rule of Law,
Institutional & Regulatory Quality and Control of Corruption as
WBGI have the highest weight in Fitch's SRM and are therefore
highly relevant to the rating and a key rating driver with a high
weight. As Ecuador has a percentile rank below 50 for the
respective governance indicator, this has a negative impact on the
credit profile.
Ecuador has an ESG Relevance Score of '4' for Human Rights and
Political Freedoms as the Voice and Accountability pillar of the
WBGI is relevant to the rating and a rating driver. As Ecuador has
a percentile rank below 50 for the respective governance indicator,
this has a negative impact on the credit profile.
Ecuador has an ESG Relevance Score of '4' for Creditor Rights as
willingness to service and repay debt is relevant to the rating and
is a rating driver for Ecuador, as for all sovereigns. As Ecuador
has a fairly recent restructuring of public debt in 2020, this has
a negative impact on the credit profile.
Except for the matters discussed above, the highest level of ESG
credit relevance, if present, 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 to the way in which they
are being managed by the entity.
Rating Prior
------ -----
Ecuador
LT IDR B- Affirmed B-
ST IDR B Affirmed B
Country Ceiling B- Affirmed B-
senior unsecured LT B- Affirmed B-
===========
M E X I C O
===========
GRUPO MEXICO: ASARCO’ Refinery Shutdown due to Freight Costs
--------------------------------------------------------------
KyLeah Frazier at newschannel10.com reports that ASARCO has
announced that it will indefinitely shutdown, but states that they
will continue to care and maintain the Amarillo Refinery.
According to ASARCO’s parent company, Grupo Mexico, on Aug. 18,
employees were provided a letter mentioning the economics of
continuing operations of the rod line are challenging, the report
notes.
The ASARCO letter states the freight costs have increased the
overall cost of producing rod, according to newschannel10.com.
The letter also states the rod line has consistently been
experiencing a low level of availability due to frequent
interruptions in product including, ongoing maintenance issues and
frequent manpower shortfalls, the report notes.
About Grupo Mexico
Grupo Mexico SA de C.V. -- http://www.grupomexico.com/-- through
its ownership of Asarco and the Southern Peru Copper Company,
is the world's third largest copper producer, fourth
largest silver producer and fifth largest producer of zinc and
molybdenum.
* * *
As of August 14, 2010, Grupo Mexico continues to carry Fitch's
BB+ Issuer Default ratings.
OPERADORA DE SERVICIOS: Moody's Affirms 'Ba2' CFR, Outlook Stable
-----------------------------------------------------------------
Moody's Investors Service has affirmed Operadora de Servicios Mega,
S.A. de C.V., SOFOM, E.R. (Mega) Ba2/Not Prime long- and short-term
global local and foreign currency issuer ratings, its Ba2 long-term
global foreign currency senior unsecured debt rating and its Ba2
long-term Corporate Family Rating. The outlook remains stable.
The following ratings were affirmed:
Long-term global local currency issuer rating of Ba2
Short-term global local currency issuer rating of Not Prime
Long-term global foreign currency issuer rating of Ba2
Short-term global foreign currency issuer rating of Not Prime
Long-term global foreign currency senior unsecured debt rating of
Ba2
Corporate Family Rating of Ba2
Outlook: Remains Stable
RATINGS RATIONALE
The affirmation of Mega's Ba2 ratings reflects the company's well
established business profile, focused on financing small and medium
size companies in Mexico, supporting its historically good asset
quality metrics and sufficient capital position historically
enhanced by recurring earnings generation. Mega has reported
improvement in the liquidity metrics over the past two years, with
debt coverage ratio increasing to 162% in June 2022, from 10.5% in
2019. Efforts around funding diversification and liquidity
strengthening will help to mitigate the company's vulnerability to
challenging funding conditions and profitability headwinds. Mega's
corporate governance structure has laso improved following the
acquisition of a minority stake by Deutsche Investitions- und
Entwicklungsgesellschaft mbH (DEG) in 2017 and its status as a
regulated finance company in Mexico, that is subject to the Mexican
Financial Institutions' Regulator (Comisión Nacional Bancaria y de
Valores) supervision, reinforces the company's best practices,
compared to unregulated peers in the country.
The rating affirmation also considers the absence of maturity
concentration between 2022 and 2024, which offsets liquidity
pressures arising from currently tighter market conditions in
Mexico. Over the past two years, management has been actively
seeking to diversify its funding sources, including by increasing
the tenor of its obligations in the domestic and foreign markets,
and by reducing the concentration on short-term bank lines. This
strategy improved its liquidity profile, and helped to maintain
high level of liquid assets well above 100% of its short-term debt
maturities throughout 2022. In addition, and following the issuance
of a five-year $500 million senior unsecured debt in 2020, Mega was
able to increase the mix of interbank facilities, reducing the
concentration risk, which allowed the company to repurchase 20% of
the senior notes to date. In March 2022, Mega also issued a 2027
MXN3 billion sustainability bond (GFMEGA 22X) in the domestic
market, another source of funding diversification that lowers its
vulnerability to heigthened volatility in global markets. Mega's
low reliance on secured debt acts as an additional mitigant against
weaker investors' sentiment and provides further financial
flexibility, if needed.
Mega's ratings also incorporate its good asset quality metrics
supported by high granularity of its loan book with low average
ticket per customer, that results in low delinquency and
charge-offs levels, compared to peers' average. While the
acceleration in loan growth that reached 24% in the 12 months
trailing June 2022 has been a concern in a scenario of rising
inflation and weakened economic activity in Mexico, the company
focuses on providing leasing products to industry sectors that are
highly correlated with the Mexican exporting supply chains, mainly
to the US, and which had benefited from strong activity. The
consistent asset quality ratios and adequate levels of reserves
against loan losses, compared to peers in the segment, are also
supported by its prudent underwriting standards. Mega have reported
relatively low levels of nonperforming loans (NPLs) compared with
those of its peers, that ranged between 1.7% to 2.6% of gross loans
over the past 4 years (2.3% in June 2022), as well as track record
of low charge-offs, below 0.8% of gross loans, which are shielded
by an adeqaute reserve coverage that reached 124% of non-performing
loans in June 2022.
On the other hand, Mega's core earning generation has weakened
during the first six months of 2022 affected by the high holding of
low-yielding liquid assets and amid the higher interest rate
environment that pressured the cost of funding. Interest income
decreased 1.4% in the first six months of 2022 from a year earlier,
while interest expense grew 7.3% during the same period. Moody's
highlights that the company's earnings generation will remain
constrained during the outlook horizon, while partly benefited by
continued growth of business volumes that should sustain a sound
commercial-sales margin. In the first six months of 2022, one-off
gains arising from the repurchase of bonds were the main
contributor to its 1.55% net income to tangible managed assets,
while excluding these gains, net income would have been negative.
The stable outlook on Mega's ratings reflects Moody's view that the
Ba2 will continue to be supported by prudent risk management and
vigilant liquidity position that will withstand current challenges
in the absence of debt maturity concentrations over the outlook
horizon.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward positive pressure on Mega's ratings could exert from
progress for the lessor's funding strategy ahead of its
international bond maturity in 2025, evidenced by its ability to
effectively refinance and renew its credit lines with banks.
Moreover, it would be positive for Mega's unsecured debtholders, if
secured debt does not increase and affects current funding mix, and
the company moderates origination in favor of maintaining high
liquidity buffers in times of challenging market condition. In
addition, upward rating movements would also be supported by
improvement in core earnings generation, that would strengthen
capitalization levels and loss-absorption capacity.
Downward pressure on Mega's ratings could increase if refinancing
risks increase in the short-term, evidenced by the company's
inability to renew its banking credit lines in the second half of
2022 and in 2023. This scenario would raise significant concerns
around the refinancing risks related to its international debt
maturity in 2025. The ratings could be downgraded if the company's
short-term maturities coverage by liquid assets falls below 100%,
which would lessen the progress made by the company in terms of its
liquidity profile since 2020.
At the same time, a material deterioration of the lessor's asset
risks leading to a decline in collections, potentially arising from
its single borrower concentrations in riskier SMEs, and Mega's
inability to stabilize its core earnings generation, that would
ultimately hurt capitalization, could add further pressure to the
Ba2 ratings.
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
TOTAL PLAY: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Total Play Telecomunicaciones S.A. de
C.V. (Total Play) Long-Term Foreign and Local Currency Issuer
Default Ratings (IDRs) at 'BB-'. In addition, Fitch has also
affirmed the company's senior unsecured debt ratings at 'BB-'. The
Rating Outlook is Stable.
Total Play benefits from the stable and recurrent revenue of the
Pay-TV and broadband business. The company's intensive network
investment positions it as an important player in the industry in
terms of scale and market share. Total Play has rapidly increased
its subscribers base maintaining a higher ARPU than its competitors
due to a higher value service offering. Total Play´s negative FCF
generation will remain uncurbed in 2022 as the company completes
its network expansion plan and is expected to become neutral in
2023, as capex will be more aligned to subscriber growth.
KEY RATING DRIVERS
Profitability Continuously Improving: The company has undergone
solid revenue and EBITDA expansion in recent years, backed by
extensive network deployment that has increased its homes passed,
business scale and profitability. Increased network penetration is
key to growing revenues and expanding margins. Network penetration
is expected to increase to 25% as of YE2022 versus 13.9% in 2018
(Adjusted per Inegi 2020 Census), while EBITDA margins are expected
to be around 42% as of YE2022 versus 28% in 2018.
The company's strategy of cross selling telecom services and
offering differentiated services should lead to improved margins
over the medium term. Bundling offers help increase margins through
efficiencies and reduced churn. The company´s network is 100%
fiber optic; this allows it to offer a better experience with
faster star-up times and high image quality.
Improving Scale: Total Play has positioned itself as an important
player in the industry in terms of network coverage, homes passed
and RGU. The company has managed to maintain strong growth despite
operating in a competitive industry. During the last five years,
the company has more than tripled its RGUs, while maintaining a
higher ARPU than its competitors due to its higher value service
offering. Additionally, during 2022 the company plans to increase
the number of homes passed to around 17.2 million (adjusted per
Inegi 2020 Census).
Competitive Industry: Fitch expects that growth momentum will
continue over the medium term as penetration of pay-TV and
broadband market in Mexico remains low at 58% and 62%,
respectively, according to IFT (Insituto Federal de
Telecomunicaciones) as of YE 2020. Total Play´s aggressive capex
in recent years for network deployment and coverage expansion
should bode well for its network competitiveness.
The integrated nature of the bundled video, voice and broadband
services, in conjunction with the low level of broadband access in
Mexico could contain churn levels; however, going forward, the
growing list of alternatives and low-cost streaming content
options, more competition and network deployment of the other
important players in the industry and the weakening in the economic
environment could accelerate churn.
Service and Customer diversification: Total Play has a balanced
revenue mix and customer and service diversification. As of June
2022, 76% of the company's revenue comes from the residential
segment and 24% from the Enterprise segment. Around 59% of the
residential subscribers are from triple play packages; in addition,
in the enterprise segment, 49% of the revenue comes from corporate
customers while 51% comes from government entities. The company has
rapidly grown the RGU of its residential segment from 2.8 million
RGU at YE2018 to 10.3 million as of June 2022.
FCF Turnaround: Fitch forecasts Total Play's FCF generation to turn
neutral in 2023 as the company expects to complete its major
network deployment in 2022. Going forward, capex should be more
aligned to the increase in number of subscribers, resulting in a
capex to revenue ratio falling from over 64% in 2021 to 40% in 2022
and to 32% in 2023. This level of capex should be comfortably
covered by Total Play´s cashflow from operations, which Fitch
estimates to be about MXN 14-17 billion in both 2022 and 2023.Fitch
does not expect any dividend payment during the next two years.
This should enable Total Play to generate FCF, increase its
financial flexibility and reduce its leverage levels.
Gradual Deleveraging: The company's continued EBITDA improvements
should limit any further increase in leverage and help gradually
reduce it over the long term. Fitch expects that Total Play
leverage ratio calculated as total debt/EBITDA (Pre-IFRS16) to be
around 3.6x by YE2022. As the operating margins continue to
improve, mainly backed by an increase in subscribers, Fitch expects
the company's leverage ratio to continue trending down to around
2.7x in YE2023.
FX Exposure: Total Play's financial structure is exposed to foreign
exchange risk, as its cashflow generation in mainly MXN denominated
and 61% of its debt is denominated in foreign currency, as of June
30, 2022. The company has hedged the principal and coupon payments
of its U.S.-dollar-denominated 2025 Senior Notes and the
Yuan-denominated China EXIM Bank loan, as well as the coupon
payments of the 2028 senior notes to align the company's cashflow
generation with its debt service requirements.
DERIVATION SUMMARY
Total Play's 'BB-' ratings reflect the company's market position
and capital structure versus its peers in the rating category. This
is somewhat offset by its improving operating performance, its
network quality and the low broadband penetration in Mexico.
Compared with the consolidated Mexican rival Televisa, which has a
more diversified business, Total Play has higher leverage levels,
smaller market share and lower network penetration. Televisa has
expanded its broadband subscribers over the last few years, gaining
market share from America Movil, who has not been granted a pay-TV
licence due to its market position in the Mexican telecom
industry.
Total Play's financial structure is deemed broadly in line with VTR
Finance N.V. (BB-/Negative), which is a leading Chilean cable
operator. VTR benefits from the Chilean operating environment, the
company reached the first place in Pay TV services with 30% of
market share and second place in broadband with 28%. VTR has a long
track record of stable cash flow generation.
Cable and Wireless (C&W; BB-/Stable) has a weaker financial
structure than Total Play, but better service and geographical
diversification. C&W benefits from its operations in a series of
mostly duopoly markets (excluding Panama mobile). Also, the
company's revenue mix per service is well balanced, with mobile
accounting for approximately 24% of total sales, fixed-line with
27% and business to business with 49% of revenues in 2021. C&W
strengths are tempered by Limited Latin America Ltd.'s (LLA)
financial management, which limits any material deleveraging.
KEY ASSUMPTIONS
-- Revenue growth to continue close to 26% in 2022 and 24% in
2023 due to the company's strategy of increasing the network
penetration ratio;
-- EBITDA margins of 42% in 2022 improving to 44% in 2023;
-- Capex to revenues ratio at around 40% during 2022 and 32% in
2023, capex should be more aligned to customer increases;
-- Negative FCF generation in 2022; turning neutral in 2023;
-- No dividend payments in 2022 and 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Leverage level calculated as total debt/EBITDA (Pre- IFRS16)
below 3.0x;
-- Positive FCF generation thought the cycle;
-- Liquidity ratio calculated as (cash + undrawn portion of
committed facilities+ FCF)/ 12-month debt maturities
consistently above 1.0x;
-- Larger scale and market share.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Weak operating performance;
-- Loss of market share;
-- Debt-funded acquisitions that change the company´s capital
structure;
-- Leverage level above 4.5x on a sustained basis;
-- Unfavorable regulatory changes;
-- Weaker liquidity position.
LIQUIDITY AND DEBT STRUCTURE
Liquidity to Improve: Liquidity should improve as the company FCF
generation becomes neutral to positive. As of June 2022, liquidity
was tight as Total Play´s readily available-cash balance was
MXN3.5 billion versus short-term debt of MXN8.1 billion. Fitch
expects the company will refinance and extend the maturity of its
short-term debt with a combination of bank and capital markets
debt.
Short-term debt is comprised of short term Certificados Bursatiles
issuances for MXN2.0 billion, MXN1.2 billion of bank debt, MXN1.4
billion in accounts receivable-backed financing and MXN1.7 billion
in capital leases. Fitch includes nonrecourse factoring of accounts
payable of approximately MXN1,825 million in its debt calculations.
The factoring adjustment allows Fitch to compare issuers that may
use different sources of funding, as immediate replacement funding
is required if the payables financing shuts down.
ISSUER PROFILE
Total Play Telecomunicaciones S.A. de C.V. (BB-/Stable) is a
Mexican provider of fixedtelecommunications services to residential
and enterprise customers including government entities. The company
offers pay-television, fixed-broadband and fixed-voice services
through its competitive fiber-to-the-home (FTTH) via a gigabit
passive-optical network (GPON) network.
ESG CONSIDERATIONS
Total Play Telecomunicaciones, S.A. de C.V. has an ESG Relevance
Score of '4' for Governance Structure resulting from its ownership
concentration and Grupo Salinas' aggressive treatment toward
different stakeholders and arrangements with related companies that
benefit shareholders, but affect creditors' interests, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
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.
=======
P E R U
=======
COMPANIA DE MINAS: Moody's Cuts CFR & Sr. Unsecured Ratings to B2
-----------------------------------------------------------------
Moody's Investors Service downgraded Compania de Minas
Buenaventura S.A.A.'s (Buenaventura) corporate family rating and
senior unsecured ratings to B2 from B1. The ratings outlook remains
stable.
The downgrade reflects the expectation that Buenaventura's credit
metrics will remain weak compared to Moody's original expectations
and similarly rated peers; with high leverage at above 6x, weak
interest coverage ratios below 1x and negative free cash flow
generation, which better positions the company in the B2 rating
category. In addition, the rating action incorporates the company's
revised production estimates that reflect the effects of extended
suspension of operations in Uchucchacua, lower than expected
production in El Brocal following the landslide in March, and
higher costs across its operating units.
Buenaventura managed to improve its liquidity after repaying the
syndicated facility in February 2022; however, higher capex related
to San Gabriel, coupled with weaker operating profit will drive
negative fee cash flow eroding liquidity in 2023 onwards. While the
company has a balanced portfolio of base and precious metals the
current cost structure had limited flexibility to withstand
additional setbacks. These operational challenges combined with
difficult economic environment including volatile metals prices and
market conditions, as well as supply chain disruptions, limits
visibility on the company's deleveraging path.
Social and environmental considerations are material to the rating
action. The company's E-5 and S-5 scores already reflect the
company's inherent exposure to local political and community
protests, the reliance on natural capital, the physical damage that
mining can cause including health and safety considerations related
to the landslide in El Brocal.
Downgrades:
Issuer: Compania de Minas Buenaventura S.A.A.
Corporate Family Rating, Downgraded to B2 from B1
Senior Unsecured Regular Bond/Debenture, Downgraded to B2 from B1
Outlook Actions:
Issuer: Compania de Minas Buenaventura S.A.A.
Outlook, Remains Stable
RATINGS RATIONALE
Buenaventura currently does not have projects that will reach the
production phase before 2025 to increase its production, helping
mitigate volatility in prices and production. Moody's assumes
medium-term price sensitivities of $1,300-$1,600 per ounce of gold,
$17-$21 per ounce of silver and $3-$4 per pound of copper; however,
Buenaventura's lead, zinc and copper production volumes remain
volatile and costs increasing.
The strike in Uchucchacua that started in September 2021, was
followed by the company's decision to request an extended
suspension of operations to focus on improving profitability at
this unit. Uchucchacua operated in 2021 with a cost applicable to
sales of $28.73 per ounce generating negative EBITDA and free cash
flow, the longer than expected loss in production volumes will have
a negative impact on the company's operating results. Buenaventura
is currently doing underground development and mine preparation
aiming at restart the mine only in the fourth quarter of 2023 with
an improved cost position; however, in the meantime there will be
no revenues coming from this unit.
The open pit at El Brocal operating unit, was affected by a
landslide that occurred in March 2022, resulting in the death of
three workers. While the cause of the landslide is under
investigation, this event triggered a change of the mine plan
increasing costs related to the rehabilitation following the
accident and prompting the need to use low-grade stock piles to
supply the processing plant. At the same time, the underground
copper mine, faces inflationary pressures, as well as additional
development costs including infrastructure to ramp up the
underground mine.
On top of this, Buenaventura is dealing with social issues that
could delay San Gabriel project, if not addressed soon.
Buenaventura reported that this situation has not had any negative
implication in the timeline of the project; however, given the
company's limited life of mine and the lack of any new projects
contributing significant EBITDA before 2024, there is limited
flexibility in the company's growth investments, including
exploration and development expenses; which Moody's believes will
drive negative free cash flow through 2024 eroding liquidity.
Buenaventura's analysis considers the company's cash balance at
$326 million as of June 2022, negative free cash flow due to the
investments in San Gabriel and dividends from Cerro Verde, which
Buenaventura expects at around $120 million per year in 2023 and
2024. These cash sources will be sufficient to address
Buenaventura's debt maturities and interest servicing needs through
the end of 2023. However, the cash burn associated with the
construction of San Gabriel and absent the restart of operations in
Uchucchacua or operational improvement in the remaining operating
units, will continue pressuring the company's credit metrics and
liquidity.
The stable outlook reflects Moody's expectation that Buenaventura's
credit metrics will remain commensurate with B2 rating category and
that the company's production levels will continue to increase from
2022 levels as a result of the ramp up in El Brocal underground
mine and restart of operations in Uchacchacua.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade would require Buenaventura to record a sustainable
improvement in its cost position, enabling the company to better
weather significant declines in metal prices and maintain a stable
EBIT margin, at least around 8%, with leverage below 4x. Should the
company manage to secure sources of liquidity enough to meet the
gap related to the investment at San Gabriel, would also be
positive.
Buenaventura's rating could be downgraded if the company is not
able to improve its profitability and financial profile. Negative
pressure could also arise if the company is unable to increase its
production from current levels or experiences further operating
challenges at its mines, leading to liquidity deterioration.
Quantitatively, leverage (Moody's-adjusted debt/EBITDA)
consistently above 4.5x could result in a downgrade.
The principal methodology used in these ratings was Mining
published in October 2021.
Headquartered in Lima, Peru, Buenaventura is a mining company
engaged in the exploration, mining and processing of gold, silver,
copper, zinc and lead in Peru. In addition to five wholly owned and
two majority-owned mines, the company also has a 19.58% stake in
Cerro Verde, one of the world's largest copper mines; and a 40.1%
stake in Coimolache, which owns the Tantahuatay gold mine that
Buenaventura operates. Buenaventura is controlled by the Benavides
family (27% of the voting stock), and is listed on the New York
Stock Exchange and the Lima Stock Exchange. For the 12 months that
ended June 2022, the company generated $857 million in revenue and
Moody's adjusted leverage of 5.3x.
=====================
P U E R T O R I C O
=====================
SEARS HOLDINGS: Faegre Drinker Represents Admin Claimants
---------------------------------------------------------
In the Chapter 11 cases of Sears Holdings Corporation, et al., the
law firm of Faegre Drinker Biddle & Reath LLP submitted a verified
statement under Rule 2019 of the Federal Rules of Bankruptcy
Procedure, to disclose that it is representing Whitebox
Multi-Strategy Partners, LP; Whitebox Asymmetric Partners, LP; Hain
Capital Investors Master Fund, Ltd. and Cherokee Debt Acquisition,
LLC.
On August 5, 2022, the Ad Hoc Group of Admin Claimants
retained Faegre Drinker to represent it in its application for
entry of an order allowing as an administrative priority claim, and
authorizing the Debtors to reimburse, the reasonable fees and
expenses incurred by the Ad Hoc Group of Admin Claimants for making
a substantial contribution in these Chapter 11 Cases.
Upon information and belief formed after due inquiry, Faegre
Drinker does not hold any disclosable economic interests in
relation to the Debtors.
As of Aug. 19, 2022, members of the Ad Hoc Group of Admin Claimants
and their disclosable economic interests are:
Whitebox Multi-Strategy Partners, LP
c/o Whitebox Advisors LLC
3033 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
* Allowed Administrative Expense Claim in the face amount of
$22,488,697.63, a general unsecured claim in the amount of
$3,959,554.30 and Pro Rata Portion of Substantial Contribution
Claim for $750,000
Whitebox Asymmetric Partners, LP
c/o Whitebox Advisors LLC
3033 Excelsior Blvd., Suite 500
Minneapolis, MN 55416
* Pro Rata Portion of Substantial Contribution Claim for $750,000
Hain Capital Investors Master Fund, Ltd.
Meadows Office Complex
301 Route 17 North
Rutherford, NJ 07070
* Allowed Administrative Expense Claim in the face amount of
$9,010,639.33 and Pro Rata Portion of Substantial Contribution
Claim for $750,000
Cherokee Debt Acquisition, LLC
c/o Cherokee Acquisition
1384 Broadway, Suite 906
New York, NY 10018
* Allowed Administrative Expense Claim in the face amount of
$533,555.00, a general unsecured claim in the amount of
$157,304.40 and Pro Rata Portion of Substantial Contribution
Claim for $750,000
Counsel to Whitebox Multi-Strategy Partners, LP; Whitebox
Asymmetric Partners, LP; Hain Capital Investors Master Fund, Ltd.
and; Cherokee Debt Acquisition, LLC can be reached at:
FAEGRE DRINKER BIDDLE & REATH LLP
James H. Millar, Esq.
Brian P. Morgan, Esq.
1177 Avenue of the Americas, 41st Floor
New York, NY 10036-2714
Tel: (212) 248-3140
Fax: (212) 248-3141
E-mail: James.Millar@faegredrinker.com
Brian.Morgan@faegredrinker.com
A copy of the Rule 2019 filing is available at
https://bit.ly/3cqKZGC at no extra charge.
About Sears Holdings Corp.
Sears Holdings Corporation -- http://www.searsholdings.com/--
began as a mail ordering catalog company in 1887 and became the
world's largest retailer in the 1960s. At its peak, Sears was
present in almost every big mall across the U.S., and sold
everything from toys and auto parts to mail-order homes. Sears
claims to be a market leader in the appliance, tool, lawn and
garden, fitness equipment, and automotive repair and maintenance
retail sectors.
Sears and Kmart merged to form Sears Holdings in 2005 when they had
3,500 US stores between them. Kmart emerged in 2005 from its own
bankruptcy.
Unable to keep up with online stores and other brick-and-mortar
retailers, a long series of store closings left it with 687 retail
stores in 49 states, Guam, Puerto Rico, and the U.S. Virgin as of
mid-October 2018. At that time, the Company employed 68,000
individuals.
As of Aug. 4, 2018, Sears Holdings had $6.93 billion in total
assets against $11.33 billion in total liabilities.
Unable to cover a $134 million debt payment due Oct. 15, 2018,
Sears Holdings Corporation and 49 subsidiaries sought Chapter 11
protection (Bankr. S.D.N.Y. Lead Case No. 18-23538) on Oct. 15,
2018. The Hon. Robert D. Drain is the case judge.
The Debtors tapped Weil, Gotshal & Manges LLP as legal counsel;
M-III Partners as restructuring advisor; Lazard Freres & Co. LLC as
investment banker; DLA Piper LLP as real estate advisor; and Prime
Clerk as claims and noticing agent.
The U.S. Trustee for Region 2 appointed nine creditors, including
the Pension Benefit Guaranty Corp., and landlord Simon Property
Group, L.P., to serve on the official committee of unsecured
creditors. The committee tapped Akin Gump Strauss Hauer & Feld LLP
as legal counsel; FTI Consulting as financial advisor; and Houlihan
Lokey Capital, Inc. as investment banker.
The U.S. Trustee for Region 2 on July 9, 2019, appointed five
retirees to serve on the committee representing retirees with life
insurance benefits in the Chapter 11 cases.
=================
V E N E Z U E L A
=================
VENEZUELA: Siemens to Help Rebuild Electricity Grid
---------------------------------------------------
Fabiola Zerpa at Bloomberg News reports that Venezuela is in talks
with the global energy giant Siemens Energy AG to repair power
plants as part of a government plan to rebuild a crumbling
electricity grid plagued by constant blackouts and a lack of
maintenance.
Siemens is working with the government on potential contracts aimed
at repairing gas- and diesel-burning generation facilities that
serve the capital, Caracas, as well as those that supply
electricity to infrastructure used by the oil industry, according
to the company’s business manager in the country, Eric Soto,
reports Bloomberg News.
The German company was granted licenses by the US Treasury to work
with the state-owned Petroleos de Venezuela SA, which owns the
plants, via third parties and with the power utility Corpoelec,
Soto said, the report relays. It marks the rare deal in which an
international company is prepared to work with President Nicolas
Maduro's government, which is under stiff US economic sanctions,
the report notes.
The repairs could boost power generation at two plants that sum up
1,000 megawatts capacity for Caracas, helping it overcome regular
blackouts and years of rationing, as well as improve power supply
in oil-producing areas hit by outages, the report discloses.
As Venezuela's economy begins a slow rebound, Maduro is attempting
to rebuild the country's generation system with a plan to invest
around $1.5 billion to recover some 9,000 megawatts of production
by 2025, according to a Corpoelec document seen by Bloomberg. The
grid, highly dependent on the huge Guri hydroelectric facility in
southern Venezuela that produces as much as 80% of the power, has
been ravaged by years of mismanagement, the report relays.
Although Guri and other hydro- and thermoelectric plants have the
capacity to produce roughly 32,000 megawatts of electricity, the
system has trouble meeting the current demand of around 10,500
megawatts, according to Nelson Hernandez, an energy consultant in
Caracas, the report relays. Due to a deteriorated distribution
grid and dysfunctional power plants, rolling blackouts and rations
are common, especially in poor neighborhoods of Caracas and in
smaller cities throughout the country, the report notes. In 2019,
Venezuelans were left without power for days due to a nationwide
blackout, recalls the report.
The shortages also suppress production at PDVSA, which has to
regularly shut down production at oil fields due to the lack of
power for the pumping units, the report says.
One of the US licenses, granted in June, allows Siemens to work
with Corpoelec on thermoelectric plants in Miranda state but
prevents it from increasing capacity, Soto said, the report relays.
A second license, which expires in October, authorizes Siemens to
sell and repair components at PDVSA-owned power plants, the report
notes. It carries similar limitations.
The German company has been present in Venezuela for 60 years, and
roughly half of the country's thermoelectric plants use
Siemens-owned technology, with the other half using General
Electric Co. technology, the report discloses. Siemens also
produces many of the components at power substations, which are in
need of repairs, Soto said, the report adds.
As reported in the Troubled Company Reporter-Latin America in
September 2021, S&P Global Ratings withdrew its 'SD/D' foreign
currency sovereign credit ratings and 'CCC-/C' local currency
ratings on Venezuela due to lack of sufficient information. At the
same time, S&P withdrew its 'D' issue rating on 15 bonds.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Aug. 22 to Aug. 26, 2022
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
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
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
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
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 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
Esval SA 3.5 49.9 2/15/2026 CL CLP
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
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
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.
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 * * *