/raid1/www/Hosts/bankrupt/TCRLA_Public/220922.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Thursday, September 22, 2022, Vol. 23, No. 184
Headlines
A R G E N T I N A
ARGENTINA: Economic & Social Situation Fragile, IMF Director Says
ARGENTINA: Inflation Woes Continue, Prices Up 7% in August
BUENOS AIRES: Fitch Affirms 'B-' LongTerm IDRs, Outlook Stable
CORDOBA: Fitch Upgrades LongTerm IDRs to CCC+
MAXUS ENERGY: 3rd Circuit Won't Disqualify White & Case From Case
SANTA FE: Fitch Affirms B- LongTerm IDRs, Outlook Stable
B O L I V I A
BOLIVIA: Economic Recovery Has Been Faster Than Expected, IMF Says
B R A Z I L
JBS SA: Announces Results of Tender Offer of 6.5% Sr Notes Due 2029
SUL AMERICA: Fitch Keeps 'BB-' LongTerm IDRs on Positive Watch
E C U A D O R
ECUADOR: Authorities Extend State of Emergency in Guayaquil
E L S A L V A D O R
EL SALVADOR: Launches Debt Buyback Program Amid Bitcoin Bond
J A M A I C A
JAMAICA: Earns Less From Exports Up to May
M E X I C O
MEXARREND SAPI: Discloses Refinancing of 2022 Bond
[*] CEMEX SAB: Reaffirms Commitment to United Nation's Dev't Goals
V E N E Z U E L A
EMTRASUR: Court Rules Crew of Grounded Plane Can Leave Argentina
- - - - -
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A R G E N T I N A
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ARGENTINA: Economic & Social Situation Fragile, IMF Director Says
-----------------------------------------------------------------
The Managing Director of the International Monetary Fund,
Kristalina Georgieva, met on Sept. 12, 2022, with Sergio Massa,
Minister of Economy of Argentina, in Washington D.C. The meeting
took place after a fruitful week of face-to-face technical meetings
in the context of the second review of the program under the IMF's
Extended Arrangement with Argentina. After the meeting, Ms.
Georgieva issued the following statement:
"I had a very positive meeting with Minister Massa, after a week of
highly professional and productive discussions between our
technical teams. We exchanged views on the fragile economic and
social situation in Argentina, which is also affected by the
complex global economic context. We discussed the impact of
Russia's invasion of Ukraine on the global economy and commodity
prices, as well as the consequent fiscal and balance of payments
implications for many developing economies.
"I congratulated Minister Massa for his appointment and his
expanded portfolio, and for the strong steps that he and his
economic team have taken to stabilize the markets and reverse a
scenario of high volatility. The Minister expressed his clear
intention to mobilize external support, intensify efforts to
stabilize the economy, and secure sustainable and inclusive growth,
under the principles of fiscal order and improved reserve
coverage.
"I welcomed his strong commitment and drive to achieve the goals of
the program-which will remain unchanged-and the conclusive progress
made in critical areas, including:
- The macroeconomic framework, which was updated to reflect recent
economic developments and the difficult international context.
- The fiscal parameters and underlying policies to secure the
existing primary deficit targets of 2.5% of GDP in 2022 and 1.9% of
GDP in 2023, with an emphasis on improved targeting of energy,
transport, and water subsidies, along with better prioritization of
spending and strict budget management.
- The solid and consistent implementation of the monetary policy
framework to ensure the current objective of sustaining positive
real interest rates, which is also necessary to tackle inflation
and mobilize domestic financing, as well as ensure external
competitiveness.
- Reserve accumulation , which will be promoted by the overall
policy framework, in addition to specific measures (such as the
temporary incentive regime for agro-exports) to strengthen the
trade balance.
- The structural agenda, where greater focus will be placed in
reviewing corporate tax incentives and combating tax evasion and
money laundering, including through efforts to promote information
exchanges and international cooperation."
"Our teams will continue the meetings virtually this week with the
aim of concluding staff level agreement in the coming days."
First Deputy Managing Director Gita Gopinath, and Western
Hemisphere Department Director Ilan Goldfajn also participated in
discussions with Minister Massa, Central Bank President Pesce, and
his team over the course of the past week.
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: Inflation Woes Continue, Prices Up 7% in August
----------------------------------------------------------
Buenos Aires Times reports that Argentina's inflation woes
continue: consumer prices jumped a massive seven percent in August,
official data reveals, and have risen 56.4 percent since the start
of the year.
The country's inflation rate remains amongst the highest in the
world, data published by the INDEC national statistics bureau
confirmed, according to Buenos Aires Times.
Argentina's consumer price index (CPI) has recorded an increase of
78.5 percent over the last 12 months, and given the meteoric
trajectory, experts and analysts are expecting the 2022 annual
figure to end up breaking the triple-digit mark, the report notes.
Extraordinary government measures to rein in runaway inflation and
the raising of the Central Bank's reference rate to 69.5 percent in
August have proved to tamp down runaway price hikes, the report
relays.
Upon taking office last month, Economy Minister Sergio Massa
announced that combating inflation represents his and the country's
greatest challenge, the report discloses. Among other decisions,
he pivoted on the government's loose monetary policy and
drastically reduced the subsidies of public services, the report
notes.
There appears to be unanimous agreement within the private sector
regarding the devastating severity of the crisis, the report says.
The latest market survey of expectations of the 30 largest
consultants and banks in the country, carried out by the Central
Bank, yielded an average estimate of an annual CPI increase of 95
percent, the report notes. Many private analysts, however, are
anticipating that the 100 percent barrier will be broken, the
report relays.
INDEC said in a statement that the seven percent rise recorded in
August represented a slight easing from the 7.4 percent figure
posted in July, which was the highest monthly index of the last 20
years, the report discloses.
Hot Spots
Not all products have been hit the same, the report notes. The
segments of the consumer goods market that saw the greatest
increases in August were clothing and footwear (9.9 percent) and
domestic appliances (8.4 percent), according to INDEC's report, the
report discloses.
A sharp rise in the price of prepaid medicine services was also
highlighted, which pushed the healthcare sector up 5.7 percent,
while hikes in water and electricity services impacted housing and
utilities, which rose 5.5 percent, the report relays.
Transportation rose 6.8 percent, which experts attributed to a jump
in public transport fares - higher in the Greater Buenos Aires
region - and the recent rise in fuel prices, the report says.
Argentina, Latin America's third-largest economy, has been
experiencing high inflation for years, the report relays. In 2021,
the consumer price index recorded hikes of 50.9 percent for the
calendar year, the report says.
August's seven percent figure - the third consecutive month above
six percent - "confirms that we are in a new inflationary regime,"
said Eugenio Mari, chief economist of the Fundacion Libertad y
Progreso think-tank, the report notes.
"This triggered annual inflation to 78.5 percent, the highest since
the hyperinflation of 1990," he observed, the report discloses.
"This behaviour occurs with core inflation running at 78.4 percent
per year, while regulated prices rise at a rate of 59.7 percent. In
other words, there are prices that continue to be stepped on to
moderate the rise in the general index. Closing 2022 with
three-digit inflation is a scenario that is becoming more and more
likely," added Mari, the report relays.
"Already in the INDEC measurement for August, several rises above
100 percent begin to appear; clothing and footwear recorded
three-digit year-over-year increases in all regions, and the
category of restaurants and hotels also did in Greater Buenos Aires
and the Northeast," said the chief economist of the foundation led
by Aldo Abram, the report says.
Gloom at The Grocery
Putting food on the table is where many Argentines feel
inflationary pressures most acutely, the report relays.
The 10 products at the grocery store that increased the most during
August are as follows: onions, which took first place by far with
60 percent, followed by potatoes (32.3 percent), sweet potatoes
(31.7 percent), tomatoes (19.4 percent), sunflower oil (18.3
percent), sugar (17.2 percent), bleach (15.9 percent), cotton (15.3
percent), bananas (15.1 percent), and squash (14.2 percent), the
report notes.
The only product that became less expensive in August was lettuce,
which decreased in price by 18.1 percent, according to INDEC, 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.
BUENOS AIRES: Fitch Affirms 'B-' LongTerm IDRs, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed the City of Buenos Aires' (CBA)
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
at 'B-' with a Stable Rating Outlook and Short-Term IDRs at 'B'.
Fitch also affirmed the city's euro medium-term note program (EMTN)
and series 12 7.50% senior unsecured notes at 'B-'. CBA's
stand-alone credit profile (SCP) remains at 'b+'. The IDR is capped
by Argentina's 'B-' Country Ceiling.
CBA continues to meet Fitch's criteria requirements to be rated at
'B-', above the 'CCC'/Under Criteria Observation (UCO) sovereign
rating: having a strong budget, no need to undertake external
refinancing of debt, and sufficient liquidity.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' assessment, for all Argentine local and regional
governments (LRGs), reflects Fitch's view of a very high risk of
the issuer's ability to cover debt service with the operating
balance weakening unexpectedly over the scenario horizon due to
lower revenue, higher expenditure, or an unexpected rise in
liabilities or debt-service requirements.
Revenue Robustness: 'Midrange'
This Key Rating Factor (KRF) is 'Midrange' due to the resiliency of
CBA's revenue structure and high fiscal autonomy in the context of
volatile national economic performance and also due to its strong
estimated GDP per capita (USD32,094) in the national (USD10,771)
and international context. Even within a national complex and
imbalanced fiscal framework for LRGs, compared with argentine LRGs
and similar to other international peers (like Lagos State,
Nigeria), CBA has a high revenue autonomy due to its local economy
based in the services sector, and therefore a low reliance on
federal transfers.
The share of federal revenues that stem from a 'CCC' sovereign
counterparty decreased from 23.8% in 2020 to 17.3% in 2021 due to
Federal Law no. 27606 that returned CBA's federal co-participation
coefficient share to 1.4%. The measure affects federal revenue
predictability and risk, but overall CBA's recovery of local
revenues in 2021 and 2022 reflect its strong revenue structure.
Revenue Adjustability: 'Weaker'
For Argentine LRGs, Fitch considers that local revenue
adjustability is low, and, challenged by the country's large and
distortive tax burden and the weak macroeconomy, that impact
affordability. National GDP recovered 10.3% in real terms during
2021. In 2022, economic inertia from recovery is still benefiting
local tax collection. During 2021, the city's local taxes increased
14.3% in real terms and in June 2022 they continued increasing
around 11.8%. CBA's economic importance translated into a high tax
revenue/total revenue ratio of 78% in YE 2021.
Expenditure Sustainability: 'Weaker'
Argentine LRGs have high expenditure responsibilities, in a context
of structurally high inflation. The country's fiscal regime is
structurally imbalanced regarding revenue-expenditure
decentralization.
Local economic strengths and revenue growth above inflation and
expenditure dynamics benefited CBA's budgetary performance during
2021. The city's operating balance improved to 16.5% of operating
revenues (2020: 9.3%). Due to economic inertia and the city's
prudent budgetary control and planning, June 2022 data shows a
continued improvement in operating margins to around 31.4%
(compared with 24.1% in June 2021).
CBA has managed to contain opex growth relative to inflationary
pressures. Fitch assumes that due to historically high inflation in
2022, re-composition of expenditures to a level closer to inflation
will occur towards the medium term. CBA's operating balance is
estimated to average around 8.9% in 2022-2024.
Expenditure Adjustability: 'Weaker'
For Argentine subnationals, infrastructure needs and expenditure
responsibilities are deemed as high, with leeway to cut expenses
viewed as low. CBA's capex/total expenditure averaged 19.6% during
2017-2019 and decreased to 11.5% in 2020 due to the pandemic. Capex
levels recovered to 12.7% in 2021 and continue reflecting CBA's
capacity for some budgetary adjustments. In 2021, opex represented
80% of total expenditure and staff expenses remained controlled at
43.4%, close to the historical average of 44.2% for 2017-2020.
Liabilities and Liquidity Robustness: 'Weaker'
Unhedged foreign currency debt exposure is an important weakness
considered, along with the weak national framework for debt and
liquidity and underdeveloped local market. The assessment also
considers a 'CCC' sovereign that restructured its debt during 2020,
thus curtailing external market access to LRGs. CBA did not engage
in any debt restructuring processes like other argentine LRGs did
in 2020-2021.
CBA's debt is mostly composed of issuances and multilateral loans.
At YE 2021, direct debt totaled ARS271.7 billion, with an increase
of around 7.6% relative to 2020 due to currency depreciation.
During 2021 CBA timely amortized its Feb. 19, 2021 capital maturity
of USD170 million from its series 11 bond that matured on that
date.
CBA's above average local market access and medium-term debt
planning allowed the city's percentage of unhedged foreign currency
debt to decrease from 95% in 2014 toward 60% at YE 2021. CBA has no
significant U.S. dollar capital maturities until June 1, 2025 for
USD296.6 million and other USD debt payments that together amount
to around USD350 million in that year.
Liabilities and Liquidity Flexibility: 'Weaker'
For liquidity, Argentine LRGs rely mainly on their own unrestricted
cash. In YE 2021, CBA's unrestricted cash totaled around ARS42.3
billion (2020: ARS29.4 billion), and at June 2022 around ARS63.2
billion. CBA's liquidity coverage ratio averaged 1.6x during
2017-2021 and Fitch projects it to remain mainly unchanged for
2022-2024.
Debt sustainability: 'aa' category
The score considers a 'aaa' primary payback ratio of 3.6x for 2024
under Fitch's rating case. Also, the 'aaa' fiscal debt burden of
18.2% and an override from the 'aa' actual debt service coverage
ratio (ADSCR) of 1.3x also towards 2024, considering the city's
local economic recovery, budgetary balance, and smoother debt
maturity profile, which presents no external refinancing risks
until 2025. The projected ADSCR remains aligned with the city's
2017-2021 average of 1.4x.
DERIVATION SUMMARY
CBA's 'b+' SCP is derived from a 'Vulnerable' risk profile and 'aa'
debt sustainability score. The SCP notch specific derivation also
considers comparison with international peers, including Argentine,
Ukraine and Nigerian peers. Fitch does not apply any asymmetric
risk or extraordinary support from upper-tier government. CBA meets
Fitch's criteria requirements to be rated at 'B- ', which is above
the current sovereign 'CCC'/UCO rating, the Long-Term Foreign
Currency IDR is capped by Argentina's 'B-' Country Ceiling, which
results in an IDR of 'B-'. The short-term rating of 'B' is derived
from CBA's Long-Term IDR.
KEY ASSUMPTIONS
Qualitative assumptions:
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Midrange'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt sustainability: 'aa'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap: 'B-' (Country Ceiling)
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific:
Fitch's rating case scenario is a "through-the-cycle" scenario,
which incorporates a combination of revenue, cost and financial
risk stresses. It is based on the 2017-2021 figures and 2022-2024
projected ratios. The key assumptions for Fitch's rating case
scenario include:
-- Operating revenue average growth of 59.5% for 2022-2024;
-- Operating expenditure average growth of 66.5% for 2022-2024;
-- Average net capital balance of around minus ARS119.173 billion
during 2022-2024;
-- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS135.4 per U.S.
dollar for 2022, ARS222.6 for 2023 and ARS346.5 for 2024;
-- Consumer price inflation (annual average % change) of 68.3%
for 2022, 66.3% for 2023, 54.5% for 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade on Argentina's Country Ceiling above 'B-' could
positively benefit CBA's ratings provided that their payback ratio
remains below 5x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade of Argentina's Country Ceiling would negatively
affect CBA's ratings as well as any regulatory restrictions to
access FX by LRGs. The SCP could be lowered in the b category if
CBA's operating balance and liquidity deteriorate triggering a
sustained actual debt service coverage level below 1.0x and if the
payback ratio exceeds 9.0x resulting in a debt sustainability score
lower than 'a' in Fitch's rating case.
ISSUER PROFILE
CBA is Argentina's federal capital and the country's most important
social and economic center. The city represents approximately 20.6%
of the country's GDP, and the surrounding province generates an
additional 31.7% of the national GDP.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Debt Rating Prior
---- ------ -----
Buenos Aires, City of
LT IDR B- Affirmed B-
ST IDR B Affirmed B
LC LT IDR B- Affirmed B-
LC ST IDR B Affirmed B
senior unsecured
LT B- Affirmed B-
CORDOBA: Fitch Upgrades LongTerm IDRs to CCC+
---------------------------------------------
Fitch Ratings has upgraded Province of Cordoba's Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) to 'CCC+' from
'CCC'. Fitch also upgraded to 'CCC+' from 'CCC' Cordoba's step-up
USD709.4 million senior unsecured notes due 2025, step-up USD510.0
million senior unsecured notes due 2027, and step-up USD450.0
million senior unsecured notes due 2029. The bonds are rated at the
same level as the province's IDRs.
Cordoba now meets Fitch's criteria requirements to be rated above
the 'CCC' sovereign rating: maintain a strong budget, no need to
undertake external refinancing of debt over the following one or
two years, and have sufficient liquidity available to service its
debt. These are underpinned by Cordoba's sound budgetary
performance, debt service coverage ratio, and liquidity coverage
ratio remaining in line with Fitch's rating case assumptions in the
next two years; and the expectation that no regulatory restrictions
to access foreign exchange (FX) by local and regional governments
(LRGs) are implemented by the federal government.
The province's standalone credit profile (SCP) was assessed at
'b-'. Despite adequate management practices, Fitch applies an
asymmetric risk that lowers Cordoba's IDR by one notch from its SCP
due to low governance linked to the 2021 distressed debt exchange
(DDE) process triggered by its bullet payment of USD725 million
amid a sovereign restructuring process and curtailment of external
market access for the provinces. This leads to Cordoba's IDR being
at 'CCC+' one notch above Argentina's sovereign rating of 'CCC',
Under Criteria Observation.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
Fitch assesses the province's Risk Profile as 'Vulnerable' in line
with other Fitch-rated Argentine LRGs. Cordoba's risk profile
combines all six factors assessed at Weaker (revenue, expenditure,
and debt and liquidity frameworks) and considers the sovereign
IDR.
The assessment reflects Fitch's view that there is a very high risk
of the issuer's ability to cover debt service with the operating
balance weakening unexpectedly over the scenario horizon
(2022-2025) due to lower revenue, higher expenditure, or an
unexpected rise in liabilities or debt-service requirement
Revenue Robustness: 'Weaker'
The assessment reflects the evolving nature of the national fiscal
framework, dependence on a 'CCC' sovereign counterparty risk for
54.3% (three year-average) of its total revenue, amid an adverse
macroeconomic environment riddled with higher inflation. To date,
as per law, federal co-participation transfers have never been
interrupted to provinces. Cordoba's wealth metrics are moderately
above the national average, yet lags international peers.
Operating revenue is mostly made up of taxes, including turnover
tax, which made up 33.8% of operating revenue in 2021, and stamp
duty, which made up 4.0%. At YE 2021, federal non-earmarked
transfers (coparticipaciones) grew 8.0% in real terms amid an
inter-annual inflation rate of 50.9%. As of August 2022, national
transfers to Cordoba increased 74% yoy in nominal terms but only
2.0% in real terms in a macroeconomic context where inter-annual
inflation reached 71% in July 2022.
Revenue Adjustability: 'Weaker'
Cordoba's ability to generate additional revenue in response to
possible economic downturns is limited, like all Fitch-rated
Argentine LRGs. Fitch considers that local revenue adjustability is
low and is challenged by the country's large and distortive tax
burden. The negative macroeconomic environment further limits the
province's ability to increase tax rates and expand tax bases to
boost its local operating revenues. Structurally high inflation
also constantly erodes real-term revenue growth and affects
affordability. On its rating case, Fitch expects operating revenues
to increase below the average inflation rate for 2022-2025.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities,
including healthcare, education, security, social security,
inter-urban transportation and other services. The country's fiscal
regime is structurally imbalanced regarding revenue-expenditure
decentralization, this is further exacerbated by the nation's
recent standby agreement with the IMF in 2022.
Cordoba's track-record of prudent fiscal policies and expenditure
controls are hindered by Argentina's structurally high inflation
pressuring expenditures. Despite the pandemic, operating balance
increased in 2021 reaching 23.7% of operating revenue. The province
has historically shown satisfactory operating margins; five
year-average 20.1%. On its rating case, Fitch expects a
re-composition of expenditure closer to inflation levels, with an
average operating margin of 14.5% for 2022-2025.
Another factor affecting expenditure sustainability is the funding
of social security institutions, which include provincial pension
funds that add additional pressure to budgetary performance.
Federal funding to mitigate provincial pension deficits is subject
to yearly budgetary allocation, which is unpredictable and
discretionary. Cordoba did not transfer its pension scheme to the
nation. The annual pension deficit has been partially mitigated by
funding transfers from the National Administration of Social
Security since 2016. Cordoba approved pension reform in May 2020
that could ease the pressure, but expenditure risks remain in the
short term. If social security institution financial performance is
included, the province's operating balance for 2021 would be 17.8%,
versus 23.7% without it.
Expenditure Adjustability: 'Weaker'
For argentine subnationals, infrastructure needs and expenditure
responsibilities are deemed high, with leeway to cut expenses
viewed as low. National capital expenditure (capex) is low and
insufficient translating capex burdens to LRGs. Capex levels
recovered to 12.7% in 2021 and continue reflecting Cordoba's
capacity for some budgetary adjustments to accommodate other opex
pressures. In 2021, opex represented 84.7% of total expenditure and
staff expenses remained controlled at 41.6%, below to the
historical average of 43.3% for 2017-2020. Cordoba's main capital
expenditure projects are on areas deemed as key for the economic
and social development of the province; such as hospitals, schools,
water and sewage, internet access, and roads.
Liabilities and Liquidity Robustness: 'Weaker'
Capital market discipline is hindered by a protracted macroeconomic
context, and currently heightened by a 'CCC' rated sovereign.
Unhedged foreign currency debt exposure is an important structural
weakness considered in this KRF assessment. However, limited local
capital markets led LRGs to issue debt in foreign currency, causing
this structural reliance on external markets for financing, because
local currency options generally carry higher financial costs and
shorter terms due to the high-inflation environment. Additionally,
financial obligations are characterized by medium-term maturity of
less than 10 years.
By YE 2021, direct debt increased by about 14.1% underpinned by
currency depreciation, totaling around ARS263.9 billion.
Approximately 94.8% of Cordoba's direct debt is denominated in
foreign currency and is unhedged, mainly in U.S. dollars, which is
a rating risk in the current environment of high inflation and
currency depreciation. However, 92.5% of its total debt has fixed
interest rates. The external market remains closed; hence the
province is looking at multilateral and commercial sources of
funding to accomplish its capex program; such as the Latin American
Development Bank (formerly known as CAF), Inter-American
Development Bank, and Deutsche Bank.
The DDE provides some external debt service relief for the province
until 2023, when repayments are due. One of the major achievements,
among others, was the reprofiling of its international financial
debt to semi-annual amortizing payments from bullet payments. Over
the next three years, principal payments on their USD notes range
from USD37.5 million in 2022, USD273.9 million in 2023 and 2024,
and USD401.4 million in 2025. Fitch considers that Cordoba has
sufficient liquidity available to make these payments. However, the
'CCC+' IDRs reflect challenges ahead that could hinder the
province's repayment capacity, such as the province's inability to
access external markets to address financing needs.
Liabilities and Liquidity Flexibility: 'Weaker'
Fitch perceives the Argentine national framework in place for
liquidity support and funding available to subnationals as
'Weaker', as there are no formal emergency liquidity support or
bail-out mechanisms established. Consolidated cash positions of
ARS108 billion in 2021 covered 52.9% of annual personnel
expenditures; as of March 2022, cash positions stood at ARS180
billion. Cordoba has shown historically good liquidity coverage
metrics averaging over the last five years, 4.7x (2021: 5.8x). The
economic lockdown triggered by coronavirus didn't hindered
operating balance and liquidity metrics. In its rating case, Fitch
expects total cash will remain stable at around 13.2% of total
revenue (2019-2021 average: 15.1%).
Debt sustainability: 'aa' category
Considering the current sovereign 'CCC' rating level, curtailment
of the external market amid a volatile macroeconomic and regulatory
context, Fitch is only projecting a rating case for YE 2025. Debt
sustainability metrics are analyzed to evaluate Province of
Cordoba-specific debt repayment capacity and its liquidity
position.
Under Fitch's rating case scenario (2022-2025), the debt payback
ratio (net adjusted debt-to-operating balance), the primary metric
of debt sustainability, will remain below 5.0x by 2025 (2021:
1.2x), which corresponds to a 'aaa' assessment. In addition, actual
debt service coverage ratio (operating balance-to-debt service),
secondary metric of debt sustainability, at 1.8x in 2025 (4.1x in
2021), leading to an 'a' assessment. The overall debt
sustainability score at 'aa' is underpinned by the medium-term
maturity of debt in tandem with high refinancing risks stemming
from a 'CCC' macroeconomic environment where transfer and
convertibility risks prevail.
ESG -- Creditor Rights: Cordoba concluded a DDE in January 2021.
The agreement granted Cordoba debt service relief after amending
its amortization profile to semiannual installments from bullet
payments; however, this impacted bondholders. Therefore, creditor
rights remain a key rating driver.
DERIVATION SUMMARY
Fitch has relied on its rating definitions to position the
province's IDRs at 'CCC+'. Cordoba's SCP is assessed at 'b-',
reflecting a combination of vulnerable risk profile and debt
sustainability in the 'aa' category. The SCP also factors in
national and international peer comparison, in particular city of
Buenos Aires (B-/Stable), province of Santa Fe (B-/Stable), Yerevan
City (B+/Stable) and Kaduna State (B/Stable). Despite adequate
management practices in place, Fitch applies an asymmetric risk
that lowers Cordoba's IDR by one notch from its SCP due to low
governance linked to the 2021 DDE process. This leads to Cordoba's
IDRs being at 'CCC+', one notch above Argentina sovereign IDRs
(CCC, Under Criteria Observation).
KEY ASSUMPTIONS
Qualitative Assumptions
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt Sustainability: 'aa' category
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: '-1'
Sovereign Cap: 'Yes' (Country Ceiling)
Sovereign Floor: 'N/A'
Quantitative Assumptions - Issuer Specific:
In line with its LRG criteria, for an entity with base case
financial profile indicating an SCP of 'b' or below, the base case
analysis alone may be sufficient to evaluate the risk of default
and transition for the debt. Therefore, in the case of Cordoba,
Fitch's base case is the rating case which already incorporates a
very stressful scenario. It is based on 2017-2021 figures and on
updated figures as of April 2022. The key assumptions for the
scenario include:
-- Operating revenue average growth of 57.7% for 2022-2025;
-- Operating expenditure average growth of 64.4% for 2022-2025;
-- Average net capital balance of around minus ARS246.5 billion
during 2022-2025 dependent on financing from multilateral official
creditors, national agencies or foreign commercial banks;
-- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS135.4 per U.S.
dollar for 2022, ARS222.6 per U.S. dollar for 2023, ARS346.5 per
U.S. dollar for 2024, and ARS387.0 per U.S. dollar for 2025.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade on Argentina's Country Ceiling above 'B-' could
positively benefit Cordoba's ratings if debt sustainability metrics
remain in line with projections of a payback ratio below 5.0x and
actual debt service coverage ratio above 1.0x, under Fitch's rating
case;
-- If the impact in the SCP of the asymmetric risk wears off due
to lessen refinancing risks.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade of Argentina's Country Ceiling below 'CCC+' would
negatively affect Cordoba's rating; as well as any regulatory
restrictions to access FX by LRGs;
-- The SCP could be lowered if Cordoba's operating balance
deteriorates triggering an increase in the payback ratio above 5x
in tandem with a sustained actual debt service coverage ratio below
2.0x resulting in a debt sustainability score lower than 'aa' in
Fitch's rating case.
-- Refinancing risks underpinned by an inability to tap the
international capital market could compromise debt repayment
capacity in the coming years.
ISSUER PROFILE
The Province of Cordoba is located in the central region of
Argentina. Cordoba's economy is diversified and is based on primary
and industrial goods, as well as services (66.9% of the province's
gross domestic product). The province produces agricultural
products such as soybean, corn, wheat and peanuts. Cordoba's
industrial sector is centered in the car and auto parts industry
and the agro-industrial sector. The province's economic structure
allows it to be less exposed to commodity prices, but its economic
cycle resembles that of the sovereign.
SUMMARY OF FINANCIAL ADJUSTMENTS
No material adjustments were made to figures reported by the
province.
ESG CONSIDERATIONS
Cordoba has an ESG Relevance Score of '5' for Creditor Rights, due
to the province's 2021 DDE. This event has limited the current
rating assignment from a higher rating level and, therefore,
creditor rights remains a key rating driver.
The province has an ESG Relevance Score of '4' for Rule of Law,
Institutional and Regulatory Quality, Control of Corruption,
reflecting the negative impact the weak regulatory framework and
national policies of the sovereign have over the province 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.
Debt Rating Prior
---- ------ -----
Cordoba, Province of
LT IDR CCC+ Upgrade CCC
LC LT IDR CCC+ Upgrade CCC
senior unsecured LT CCC+ Upgrade CCC
MAXUS ENERGY: 3rd Circuit Won't Disqualify White & Case From Case
-----------------------------------------------------------------
A former Sidley Austin LLP attorney who previously represented a
party involved in a bankruptcy dispute before moving to White &
Case LLP, which represents the opposing party, did not create a
conflict meriting disqualification of the latter firm from the
case, the Third Circuit ruled in a precedential opinion Sept. 9,
2022.
A three-judge panel of the court upheld a bankruptcy judge's denial
of a motion from Argentine energy company YPF SA to disqualify
White & Case from the Chapter 11 proceedings of its subsidiary, oil
exploration firm Maxus Energy Corp.
This case stems from the Chapter 11 bankruptcy of Maxus Energy
Corporation. In 2018, Maxus Liquidating Trustsued Maxus's parents,
YPF S.A., YPF International S.A., YPF Holdings, Inc., and CLH
Holdings, Inc., asserting fraudulent conveyance and alter ego
claims. White & Case represented the Trust from the start. Sidley
Austin LLP represents YPF. Cleary Gottlieb Steen & Hamilton LLP
represents YPF on issues related to the Motion to Disqualify and
the appeal.
Boelter was a partner in Sidley's restructuring group. She
participated in Sidley's initial pitch to represent YPF. She
helped negotiate the engagement letter, worked with others on
certain motions, was admitted pro hac vice in the proceeding, was
copied on email correspondence with YPF, attended several meetings,
and was considered by YPF executives as "an integral part" of its
legal team. She billed a total 300 hours to the YPF
representation, mostly early on.
Thomas Lauria is a partner in White & Case's restructuring group.
Lauria did not record any time related to the case. He was listed
as counsel for one of Maxus's creditors during the Chapter 11
proceedings, but he never entered an appearance. Boelter started
dating Lauria in 2017, before she pitched Sidley to YPF. In late
2018, Boelter and Lauria's relationship became exclusive, and they
lived together starting in 2019. Sidley knew of the relationship,
but it is unclear from the record whether YPF knew. While engaged
to marry Lauria, Boelter moved to his firm, White & Case. When she
did so, White & Case followed the Model Rules. From
the start, Boelter went through a standard conflict-screening
process. White & Case implemented an ethical wall, which both
parties agree qualifies as a screen, beginning on Boelter's first
day; obtained her acknowledgment that she would comply with it; and
periodically certified her compliance. White & Case did not give
any portion of its fee from the YPF adversary proceeding to
Boelter. White & Case gave YPF written notice of Boelter's
employment the day she began with the firm. The letter explained
the nature of White & Case's screen and included a statement of
the firm's and of Boelter's compliance with the Model Rules. White
& Case also stated that review may be available before a tribunal.
The firm agreed to respond promptly to any written inquiries or
objections about the screening procedures. In fact, it provided
additional information to YPF attorneys in their later discussions.
Boelter says she never breached the screen.
YPF never thought any screen could be good enough.
So it moved to disqualify White & Case from representing the
Trust.
The Bankruptcy Court denied the motion after applying a
multifactored test, holding that exceptional circumstances did not
exist to impute Boelter's conflict to the entire firm despite a
screen. YPF then moved for direct appeal, which the Bankruptcy
Court granted. The U.S. Court of Appeals for the Third Circuit
authorized YPF's appeal.
"Jessica Lauria, Boelter ("Boelter"), moved from a law firm
representing one party in a bankruptcy dispute to the firm
representing the opposing party. Boelter's then fiance also worked
for the new firm. The American Bar Association's Model Rules of
Professional Conduct, incorporated by the Bankruptcy Court's local
rules, imputes Boelter's conflict to her new firm unless she, among
other things, "is timely screened from any participation in the
matter and is apportioned no part of the fee therefrom." Model
Rules of Pro. Conduct r. 1.10(a)(2) (Am. Bar Ass'n, 2020). The new
firm, White & Case LLP, timely screened Boelter. But Boelter's
former client moved to disqualify White & Case, arguing that a
screen was not enough. The Bankruptcy Court denied the motion,
holding White & Case's screen was sufficient to prevent Boelter's
conflict from being imputed to the entire firm. Because the Model
Rules state that a timely screen, together with certain other
requirements, prevents conflict imputation, we will affirm the
Bankruptcy Court," Circuit Judge Porter said in his opinion.
"As other courts have done, the Bankruptcy Court incorporated an
external set of disqualification standards, in this case the Model
Rules. See Bankr. D. Del. R. 9010-1(f); cf., e.g., United States v.
Miller, 624 F.2d 1198, 1200 (3d Cir. 1980). Without a challenge to
that incorporation, our analysis proceeds under those rules.
Although a court may still use its inherent authority to disqualify
counsel or a firm for reasons beyond those in the incorporated
rules, we are satisfied that in these circumstances the Model Rules
suffice and no need exists to invoke inherent authority to address
additional considerations."
A copy of the opinion is available at:
https://www2.ca3.uscourts.gov/opinarch/212496p.pdf
About Maxus Energy Corporation
Maxus Energy Corporation and four of its subsidiaries filed
voluntary petitions for reorganization under Chapter 11 (Bankr. D.
Del. Lead Case No. 16-11501) on June 17, 2016. The Debtors engaged
Young Conaway Stargatt & Taylor, LLP, as local counsel, Morrison &
Foerster LLP as general bankruptcy counsel, Zolfo Cooper, LLC, as
financial advisor and Prime Clerk LLC as claims and noticing
agent.
The Debtors hired Keen-Summit Capital Partners LLC as real estate
broker. The Debtors also engaged Hilco Steambank to market and sell
their internet protocol numbers and other internet number
resources, and EnergyNet.com to market and sell the Debtors'
rights, title, and interest in and to the oil and gas properties.
On July 7, 2016, the United States Trustee for the District of
Delaware filed Notice of Appointment of Committee of Unsecured
Creditors. The Committee selected Schulte Roth & Zabell LLP as
counsel, and Cole Schotz as Delaware co-counsel. Berkeley Research
Group, LLC, serves as financial advisor for the Committee.
Andrew Vara, acting U.S. Trustee for Region 3, appointed the
following to a committee of retirees: John Leslie Jackson, Sr.,
Gerald G. Carlton, and Robert E. Garbesi. The Retirees Committee
retained Akin Gump Strauss Hauer & Feld LLP as counsel and Ashby &
Geddes, P.A., as co-counsel.
SANTA FE: Fitch Affirms B- LongTerm IDRs, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed the Province of Santa Fe, Argentina's
(PSF) Long-Term Foreign- and Local-Currency Issuer Default Ratings
(IDRs) at 'B-' with a Stable Rating Outlook. Fitch has also
affirmed at 'B-' Santa Fe's 7% senior unsecured notes for USD250
million due 2023 and 6.9% senior unsecured notes for USD250 million
due 2027. PSF's standalone credit profile (SCP) is assessed at 'b-'
based on peer comparisons.
The affirmations reflect Fitch's expectations that PSF will
maintain solid debt metrics and no significant external refinancing
needs because of a low level of indebtedness and adequate operating
margins over the next three years (2022-2024). This latter is based
on stable operating margins showed in 2017-2021. PSF also has
enough liquidity to avoid a default evidenced in good liquidity
coverage ratios. Therefore, the province meets all the conditions
to be rated above the sovereign's rating of 'CCC /UCO' and aligned
with Argentina's Country Ceiling. This indicates that the province
could remain current on its debt obligations even in the context of
a sovereign default or quasi-default situation.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' assessment reflects Fitch's view of a very high
risk of the issuer's ability to cover debt service with the
operating balance weakening unexpectedly over the scenario horizon
(2022-2024) due to lower revenue, higher expenditure or an
unexpected rise in liabilities or debt-service requirements.
Revenue Robustness: 'Weaker'
PSF's revenue robustness, assessed as 'Weaker', reflects its high
dependence on federal transfers, with transfers representing around
62.4% (5Y average) of operating revenues from 2017 to 2021. These
federal transfers are automatic from the co-participation
tax-sharing regime, which stem from an 'CCC' rated sovereign
counterparty. The latter is compounded by the country's modest
economic growth prospects.
Weak and volatile national economic performance is also factored
into the revenue robustness assessment. Despite Argentina's
sovereign defaults, federal automatic co-participation has not been
interrupted since the law was enacted. Fitch expects that even in a
distress/ or default scenario Argentina would continue to pay the
daily transfers of co-participation, which are non-discretionary
and automatic.
Revenue Adjustability: 'Weaker'
Local revenue adjustability is low and challenged by the country's
large and distortive tax burden. The negative macroeconomic
environment further limits the province's ability to increase tax
rates and expand tax bases to boost its local operating revenues.
Structural high inflation also constantly erodes real-term revenue
growth and affects affordability.
Provincial jurisdictions have legal autonomy to set tax rates, in
particular turnover tax. Tax collection accounted for 29.7% of
total consolidated provincial revenues in 2021, reflecting low
fiscal autonomy and reliance on federal transfers from the
co-participation regime. In 2021 PSF's tax revenue performance was
less dynamic than that of other provinces, but it was one of the
least affected in 2020 by the pandemic. Over the course of 2022 (2Q
2022) PSF's tax collection has decreased slightly in real terms.
Expenditure Sustainability: 'Weaker'
Argentine provinces have high expenditure responsibilities,
including healthcare, education, water, transportation and other
services. The country's fiscal regime is structurally imbalanced
regarding revenue-expenditure decentralization. Spending
decentralization could continue to rise in light of the recent
sovereign debt distress and the coronavirus pandemic, adding more
expenditure and fiscal pressure to subnational governments.
PSF along with some other entities, has fiscal prudence policies
and expenditure controls. However, Argentina's structurally high
inflation pressures expenditures. PSF's operating margins have
remained steady, averaging 13.8% over the last five years. In
addition, PSF is among the provinces that did not transfer their
pension scheme to the nation. It is responsible for any shortfall
pension deficit funding that represents an additional expenditure
burden and risk for its operating balance results. When considering
the weight of the pension deficit the operating margin dropped to
6.1% from 14.5% in 2021.
Since 2016, the deficit began to be partially financed by the
national government through Administracion Nacional de la Seguridad
Social (ANSES; National Social Security Administration). Budgetary
risks and uncertainty on the nation's support to cover such a
deficit prevail after the nation's recent IMF agreement, weakening
expenditure predictability. In June 2021, PSF closed the 2019
Bilateral Agreement through which ANSES recognized the financing of
85.8% of the deficit, the difference between the real deficit and
advances have a refund scheme, which alleviates fiscal accounts,
although the province must always finance these differences in
advance.
Expenditure Adjustability: 'Weaker'
Fitch views leeway or flexibility to cut expenses for PSF as weak
relative to international peers, considering that only 8.9% of
consolidated provincial total expenditures corresponded to capex in
2021 (average of 11.8% in 2017-2021). PSF has very high
infrastructure needs, thus increasing capex does not necessarily
translate into economic growth due to the infrastructure lag,
reflecting limited flexibility to adjust expenditures. In 2021,
opex accounted for 89.5% of total expenditure and staff expenses
remained controlled at 45.8%, below the historical average of 48.6%
for 2017-2020. In June 2022, capex grew 33% in real terms as opex
has increased in line with inflation.
Liabilities & Liquidity Robustness: 'Weaker'
There is a weak national framework for debt and liquidity
management and an underdeveloped local financial market, which led
Argentine LRGs to issue debt in foreign currency, causing this
structural reliance on external markets for financing.
Despite PSF's leverage is very low (payback ratio at 0.4x and
fiscal debt burden at 6% in 2021), approximately 78.5% of Santa
Fe's direct debt is denominated in foreign currency, unhedged and
mainly in U.S. dollars, which increases the risks in the current
environment of high inflation and currency depreciation and leading
this factor to 'weaker'. Regardless, the majority of PSF's debt has
fixed interest rates (76.3% of its direct debt).
Despite the recently distressed 'CCC' rated sovereign that
restructured its debt during 2020, which restricted external market
access to LRGs, PSF remained current on its obligation and did not
engage in any debt restructuring processes unlike most rated
Argentine LRGs. On March 23, 2022, PSF covered the corresponding
instalment of USD125 million timely (50% of Santa Fe's 7% senior
unsecured notes). The next principal payment will be on March 23,
2023, which Fitch will monitor.
The external market remains closed; hence the province is looking
at multilateral and commercial sources of funding to accomplish its
capex program; such as the Latin American Development Bank
(formerly known as CAF). In 2022 the province obtained a financing
from this financial institution for USD 100 million geared towards
the program of "Santa Fe + Conectada" in order to provide free
internet access for its citizens.
Liabilities & Liquidity Flexibility: 'Weaker'
Fitch perceives the Argentine national framework in place regarding
liquidity support and funding available to subnationals as
'Weaker', as there are no formal emergency liquidity support
mechanisms established. The national government can support LRGs in
liquidity distress on a case-by-case basis in the form of a
friendly creditor, such as the availability of some programs and
loans to provinces from federal trust funds, and also through
co-participation advancements. However, the current macroeconomic
environment constrains the predictability, size and timing of this
support. The Argentine government's 'CCC' ratings drive the
assessment of such support to 'Weaker', considering the
counterparty risk.
Santa Fe's unrestricted cash of ARS56,407 million at YE 2021, which
covered around 12.4% of opex. In both 2021 and 2022 the province
subscribed a short-term treasury bills program in an amount of
around ARS7 billion. However, no amount has been disbursed to date.
PSF's liquidity coverage ratio averaged 11.7x during 2017-2021, and
Fitch projects it will remain mainly unchanged for 2022-2024.
Debt Sustainability: 'aa category'
Considering the current 'CCC' sovereign rating and curtailment of
the external market amid a volatile macroeconomic and regulatory
context, Fitch is only projecting a rating case for YE2024. Fitch
analyzed debt sustainability metrics to evaluate PSF-specific debt
repayment capacity and its liquidity position in this short rating
case horizon.
PSF's 'aa' debt sustainability score considers a 'aaa' primary
payback ratio of 2.0x for 2024 under Fitch's rating case. The
assessment also considers the 'aaa' fiscal debt burden of 6.6% and
an override stemming from the 'a' actual debt service coverage
ratio (ADSCR) of 1.6x in 2023, when Santa Fe's 7% senior unsecured
notes for USD250 million matures.
DERIVATION SUMMARY
Santa Fe's SCP of 'b-' resulting from a combination of a
'Vulnerable' risk profile and a debt sustainability assessment of
'aa'. The SCP factors in international peer comparisons, such as
cities in Turkey or Nigeria. Santa Fe's ratings are not affected by
any other factors. PSF meets Fitch's criteria requirements to be
rated at 'B- ', which is above the current sovereign 'CCC' (UCO)
rating, and so the LT FC IDR is aligned with Argentina's 'B-'
country ceiling, which results in an IDR of 'B-'.
Debt Ratings
To finance major capital projects and tackle infrastructure lag,
PSF issued notes for USD500 million through two USD250 million
placements.
The first one, placed in October 2016, accrues a 6.9% rate, payable
on a semi-annual basis, with a final maturity of 11 years, with
three annual instalments of USD83.3 million in the last three years
(2025, 2026 and 2027).
The second tranche, placed in March 2017, accrues a 7.0% rate,
payable on a semi-annual basis, with a final maturity of six years,
with two annual instalments of USD125 million in the last two years
(2022, 2023).
KEY ASSUMPTIONS
Risk Profile: 'Vulnerable'
Revenue Robustness: 'Weaker'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Weaker'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Weaker'
Liabilities and Liquidity Flexibility: 'Weaker'
Debt sustainability: 'aa'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap: 'B- (aligned to Country Ceiling)'
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2017-2021 figures and 2022-2024 projected
ratios. The key assumptions for the scenario include:
-- Operating revenue average growth of 59.4% for 2022-2024;
-- Operating expenditure average growth of 66% for 2022-2024;
-- Average net capital balance of around minus ARS93.9 billion
during 2022-2024 dependent on financing from multilateral
official creditors, national agencies or foreign commercial
banks;
-- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS135.4 per
U.S. dollar for 2022, ARS222.6 per U.S. dollar for 2023,
ARS346.5 per U.S. dollar for 2024.
-- Consumer price inflation (annual average % change) of 68.3%
for 2022, 66.3% for 2023, 54.5% for 2024.
Summary of Financial Adjustments
No material adjustments were made to figures reported by the
province.
Issuer Profile
PSF's economy is the third-largest nationally and is relatively
broad, diverse and stable, making it resilient to most external
economic shocks, such as weaker commodity prices. Its economy is
strongly linked to the external sector. Agricultural manufacturing
and primary commodities mainly account for all exports, although
the contribution of industrial manufacturing has grown in recent
years.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A downgrade of Argentina's Country Ceiling would negatively
affect PSF's ratings as well as any introduction of
regulatory impediments for the LRG to access FX.
-- The IDR could be downgraded if the ADSCR drops below 1.0x in
tandem with a liquidity coverage ratio below 1.0x underpinned
by lower operating margins and unrestricted cash; regardless
of whether the payback ratio remains below 5x. Thus, PSF will
not meet all the conditions to be rated above the sovereign.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- An upgrade of Argentina's Country Ceiling combined with a
PSF's debt service coverage ratio above 2x from Fitch's
forward-looking scenario of 1.6x in 2023, could positively
affect PSF's ratings provided that its payback ratio remains
below 5x.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Debt Rating Prior
---- ------ -----
Santa Fe, Province of
LT IDR B- Affirmed B-
LC LT IDR B- Affirmed B-
senior unsecured LT B- Affirmed B-
=============
B O L I V I A
=============
BOLIVIA: Economic Recovery Has Been Faster Than Expected, IMF Says
------------------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
concluded the Article IV consultation 1 with Bolivia on September
14, 2022 and endorsed the staff appraisal without a meeting on a
lapse-of-time basis.
While the Covid-19 pandemic has continued to cause disruptions and
tragic loss of life in Bolivia, the economic recovery from the
pandemic-driven downturn has been faster than expected. Following a
contraction of 8.7 percent in 2020, the economy recorded growth of
6.1 percent in 2021, led by mining, construction, and agriculture.
Higher global commodity prices have boosted export receipts,
helping to raise the current account to a surplus of 2 percent of
GDP in 2021. Inflation has been low, at 1.9 percent yoy in June
2022, supported by strong domestic food production, the boliviano's
de facto peg to the U.S. dollar, and subsidies and price controls
for fuel and food.
Increased revenues from the mining sector and the unwinding of
several pandemic-related emergency measures contributed to a
reduction of the fiscal deficit, from 12.7 percent of GDP in 2020
to a still-high 9.3 percent of GDP in 2021. Although higher prices
for Bolivia's natural gas exports have provided some fiscal
support, this effect has been outweighed by a decline in natural
gas output and the additional subsidy expenditures needed to
maintain fixed retail fuel prices. More than one-third of the
fiscal deficit has been financed by the central bank, pressuring
Bolivia's stock of international reserves, which have declined from
US$5.28 billion at the end of 2020 to US$4.3 billion at end-July
2022.
Growth is projected at 3.8 percent yoy in 2022, slower than in 2021
but sufficient to bring GDP back to its pre-pandemic level by late
in the year. Sustained elevated commodity prices will continue to
boost mining and agricultural receipts. Inflation is projected to
rise to 4.2 percent yoy by the end of the year, as international
prices partially feed through to food and energy. The high cost of
maintaining fuel subsidies, estimated at 3.7 percent of GDP, is
projected to push the fiscal deficit of 8.5 percent of GDP in 2022,
close to the level of the previous year.
Risks to the outlook include uncertainties over the impact of the
war in Ukraine, including the possibility of higher energy prices,
which could raise subsidy costs and feed domestic inflation. With
its substantial financing needs, Bolivia also faces risks from
changes in external financial conditions associated with a global
tightening cycle. Although the financial sector appears to have
come out of the pandemic in satisfactory condition, vulnerabilities
built up during a period of blanket loan deferrals may yet emerge.
A resurgence of the pandemic could have negative effects on public
health and economic growth.
Executive Board Assessment
In concluding the 2022 Article IV consultation with Bolivia,
Executive Directors endorsed the staff's appraisal, as follows:
Bolivia has made great strides in reducing poverty. Per capita GDP
has more than tripled since 2005, while social programs and higher
wages have improved income distribution. From 2000 to 2021, the
poverty rate fell from 66.4 to 36.3 percent, extreme poverty
declined from 45.3 to 11.1 percent, life expectancy rose from 62 to
72 years, and the primary school completion rate increased from 84
to 99 percent. These were major and enduring achievements.
A meaningful fiscal adjustment will be required to restore debt
sustainability, eliminate monetary financing, and rebuild
international reserves. If Bolivia chooses to retain its exchange
rate peg, restoration of macro sustainability will require reducing
the primary deficit to around 1.5 percent of GDP through a credible
medium-term plan. The government would need to restrain
expenditures, including by eliminating the second supplementary
year-end bonus ("doble aguinaldo"), constraining the growth in
public sector wages, limiting the growth in public investment, and
scaling back subsidies. The tax base can be broadened by addressing
informality, strengthening tax and customs administration (through
IT modernization and improved governance), and adjusting tax policy
to increase personal income taxes on higher income households.
Bolivia's external position is moderately weaker than the level
implied by fundamentals and desirable policies.
Fuel subsidy reductions will need to be combined with compensation
for the poorest deciles of the population. Successful
implementation of an increase in domestic fuel prices will require
recycling a portion of the budgetary savings to cash transfer
programs that are targeted to the poorest deciles of the
populations. An effective communication strategy will be critical
to raise awareness of the regressive nature of energy subsidies and
the benefits of shifting to market-based pricing of energy combined
with targeted cash transfers.
Bolivia would benefit from greater central bank independence and a
carefully sequenced transition to a more flexible exchange rate.
Greater central bank independence and institutional capacity would
support macro and financial stability, and facilitate exchange rate
adjustments, when needed. Increased exchange rate flexibility would
help preserve international reserves, reduce the current exchange
rate overvaluation, and provide net welfare gains. Adoption of a
flexible exchange rate alongside an inflation targeting monetary
framework would substantially increase resilience to market shocks.
This transition should be prepared and communicated carefully,
coordinated with other macroeconomic policy measures, and
accompanied by institutional independence for the central bank.
The BCB should reduce its dependence on currency swaps as a source
of reserves. If fiscal reforms can be put in place, balance of
payments pressures should subside and reserves can be built from
external sovereign borrowing and direct purchases on the market so
as to reduce the reliance on swap arrangements with commercial
banks. In addition, steadily lengthening the maturity of those
swaps that do remain would help lessen vulnerabilities. If needed,
other mechanisms could be adopted to ensure that domestic liquidity
remains adequate.
The growing interdependence of the pension system and the
government should be monitored. Consideration should be given to
diversifying pension fund assets into a wider range of assets -
potentially including foreign currency assets - to raise average
returns and diversify exposure. However, this would need to be
preceded by a transition to professional and independent management
of pension fund portfolios and would, even then, need to be pursued
carefully so as not to exacerbate external imbalances and
vulnerabilities.
In the wake of the substantial loan restructuring during the
pandemic, banks' loan books should be carefully monitored, to
quickly identify signs of a deterioration in credit quality. In
addition, a range of credit quotas and interest rate caps continue
to constrain bank profitability; they should be gradually phased
out. The regulator should closely monitor banks' capital adequacy
and liquidity positions and further progress in anti-money
laundering initiatives should be pursued ahead of the FATF
assessment that is expected to begin later this year.
Programs to reduce smuggling and informality would help to improve
governance. The aim should be to shift this activity into the
formal economy, broaden the tax base, and improve the ability to
track economic developments. Reforms to tax and customs
administration can help by tracking goods and improving compliance
with import procedures. These efforts will play an important role
in improving governance, where several priority reform areas
remain.
Supply side reforms are needed to boost investment in hydrocarbons
and mining and encourage the development of new industries. The
hydrocarbons law should be reformed to incentivize new investments
and to scale back existing requirements for producers to sell below
cost to the domestic market. The mining laws should be revised to
incentivize private investment in lithium and other sectors. Other
reforms, including the loosening of export limits and price
controls, the use of international arbitration, the development of
a one-stop shop to assist foreign investors, and the removal of
credit quotas and interest rate ceilings would all be welcome.
Bolivia should increase the share of electricity generation from
renewable energy and facilitate an increase in green investments.
Bolivia can expand on its recent NDC commitments by setting clear
emissions targets, accelerating the development of the nation's
lithium resources, and presenting itself as a destination for green
investment.
As reported in the Troubled Company Reporter-Latin America in March
2022, S&P Global Ratings assigned its 'B+' issue rating to
Bolivia's US$850 million senior unsecured notes. The 7.5% notes
will mature in 2030.
===========
B R A Z I L
===========
JBS SA: Announces Results of Tender Offer of 6.5% Sr Notes Due 2029
-------------------------------------------------------------------
JBS USA Food Company announced on Sept. 20, 2022 the expiration and
results of its previously announced cash tender offer (the "Tender
Offer") for any and all of the outstanding U.S.$350.0 million
aggregate principal amount of 6.500% Senior Notes due 2029 (the
"Notes") issued by JBS USA Lux S.A., JBS USA Food Company and JBS
USA Finance, Inc. The Tender Offer was made pursuant to an Offer
to Purchase, dated September 12, 2022 (the "Offer to Purchase") and
the related Notice of Guaranteed Delivery (the "Notice of
Guaranteed Delivery" and together with the Offer to Purchase, the
"Offer Documents").
As reported by D.F. King & Co., Inc., the information agent and
tender agent for the Tender Offer, as of 5:00 p.m., New York City
time, on September 20, 2022 (such date and time, the "Expiration
Time"), U.S.$269,186,000 in aggregate principal amount of the
Notes, representing approximately 76.9% of the outstanding Notes,
had been validly tendered (and not validly withdrawn) pursuant to
the Tender Offer. This amount does not include U.S.$32,579,000
aggregate principal amount of the Notes from holders who have
submitted a Notice of Guaranteed Delivery in accordance with the
guaranteed delivery procedures described in the Offer Documents.
Holders who (i) validly tendered their Notes and did not validly
withdraw on or before the Expiration Time or (ii) delivered a
properly completed and duly executed Notice of Guaranteed Delivery
and all of the other required documents on or before the Expiration
Time and validly tender (and do not withdraw) their Notes prior to
5:00 p.m., New York City time, on September 22, 2022, and whose
Notes are accepted for purchase by JBS USA Food Company, will
receive the "Tender Offer Consideration" indicated in the table
below. In addition, accrued and unpaid interest on the Notes
accepted for purchase from the most recent interest payment date of
the Notes up to, but not including, the settlement date, which is
expected to be September 26, 2022 (the "Settlement Date"), will be
paid in cash on the Settlement Date or the Guaranteed Delivery
Settlement Date (as defined below), as applicable. With respect to
any Notes tendered and accepted for purchase pursuant to the
guaranteed delivery procedures, the holders thereof will receive
payment of the Tender Offer Consideration for such accepted Notes
(to the extent that such Notes were not delivered prior to the
Expiration Time) on the guaranteed delivery settlement date, which
is expected to be September 26, 2022 (the "Guaranteed Delivery
Settlement Date").
Certain information regarding the Notes and the terms of the Tender
Offer is summarized as.
Description of
Notes: 6.500% Senior
Notes due 2029
CUSIP/ISIN: 46590XAA4,
L56608AA7 and
L56608AD1/
US46590XAA46,
USL56608AA73 and
USL56608AD13
Outstanding Principal
Amount of Notes: US$350,000,000
Targeted Tender Amount: Any and All
Tender Offer
Consideration: US$1,050.00(1)
(1) The amount to be paid for each U.S.$1,000 principal amount of
Notes validly tendered (and not validly withdrawn) and accepted for
purchase, not including accrued and unpaid interest on the Notes
accepted for purchase from the
most recent interest payment date of the Notes up to, but not
including, the Settlement Date.
JBS USA Food Company's obligation to accept for purchase, and to
pay for, Notes validly tendered and not validly withdrawn pursuant
to the Tender Offer is conditioned upon the satisfaction or, when
applicable, waiver of certain conditions, which are more fully
described in the Offer to Purchase, including, among others, a
financing condition as described in the Offer to Purchase. JBS USA
Food Company is making the Tender Offer only in those jurisdictions
where it is legal to do so.
Barclays Capital Inc., BMO Capital Markets Corp., Mizuho Securities
USA LLC, RBC Capital Markets, LLC and Truist Securities, Inc. are
acting as dealer managers for the Tender Offer and can be contacted
at their respective telephone numbers set forth on the back cover
page of Offer to Purchase with questions regarding the Tender
Offer.
The Offer Documents are available electronically at
www.dfking.com/jbs-tenderoffer Copies of the Offer Documents are
also available to holders of Notes from D.F. King & Co., Inc., the
information agent and the tender agent for the Tender Offer.
Requests for copies of the Offer Documents should be directed to
D.F. King & Co., Inc. at +1 (800) 967-7574 (toll free), +1 (212)
269-5550 (collect) or jbs@dfking.com
None of the Offer Documents nor any related documents have been
filed with the U.S. Securities and Exchange Commission, nor have
any such documents been filed with or reviewed by any federal or
state securities commission or regulatory authority of any country.
No authority has passed upon the accuracy or adequacy of the Offer
Documents or any related documents, and it is unlawful and may be a
criminal offense to make any representation to the contrary.
The Tender Offer has been made solely on the terms and conditions
set forth in the Offer Documents. Under no circumstances shall
this press release constitute an offer to buy or the solicitation
of an offer to sell the Notes or any other securities of JBS S.A.
or any of its subsidiaries, including JBS USA Food Company. The
Tender Offer is not being made to, nor will JBS USA Food Company
accept tenders of Notes from, holders in any jurisdiction in which
the Tender Offer or the acceptance thereof would not be in
compliance with the securities of blue sky laws of such
jurisdiction. No recommendation is made as to whether holders
should tender their Notes. Holders should carefully read the Offer
Documents because they contain important information, including the
various terms and conditions of the Tender Offer.
About JBS USA Lux S.A.
JBS USA Lux S.A. is one of the world's largest producers of beef,
pork, chicken and packaged food products. In terms of daily
production capacity, JBS USA Lux S.A. is among the leading beef
producers and the second-largest pork and chicken producer in the
United States. In Australia, JBS USA Lux S.A. is the leading
producer of beef, lamb and packaged foods and the second largest
producer of salmon. JBS USA Lux S.A. prepares, packages and
delivers fresh, value-added and branded beef, pork, chicken, and
lamb products to customers in more than 150 countries on six
continents. JBS USA Lux S.A. is an indirect, wholly-owned
subsidiary of JBS S.A., the largest protein company and the largest
food company in the world in terms of net revenue.
SUL AMERICA: Fitch Keeps 'BB-' LongTerm IDRs on Positive Watch
--------------------------------------------------------------
Fitch Ratings maintained Long-Term Foreign and Local Currency IDRs
(Issuer Default Ratings) 'BB-' and the Long-Term National Rating
'AA-(bra)' of Sul America S.A. on Positive Watch. The Ratings are
on Positive Watch, reflecting Fitch's view of a rating advantage
based on the business combination with Rede D'Or.
KEY RATING DRIVERS
Favorable Business Profile: Sul America S.A.'s (SASA) ratings
reflect the company's favorable business profile relative to that
of other Brazilian insurers, due to its ample operating scale,
strong business franchise and diversified distribution
capabilities, despite its higher concentration in the health and
dental segment and its lack of a direct banking distribution
channel.
Operation with Rede DO'r: The Positive Watch reflects Fitch's
expectation that its insurance and asset management operations will
be supported by Rede D'Or, whose credit quality is better, under a
group credit approach.
Concentration in Health Insurance: As of June 2022, 93% of total
premiums originated from the health and dental segment, in which
SASA is the second-largest insurer, with a market share of more
than 10%.
Robust Capitalization and Leverage: SASA's capitalization and
leverage remain at comfortable levels, with a financial leverage
ratio (FLR) of 26.5%. At June 2022, total financial debt stood at
BRL3.0 billion, equivalent to 36% of equity. All financial debt is
held at the holding company level at SASA.
Financial Performance and Earnings Affected: SASA's technical
results remain solid and resilient throughout the cycles, but the
high number of COVID-19 cases and the Omicron variant continued to
affect profitability indicators with an increase in the frequency
of claims in the health segments that negatively affected their
respective loss ratios.
Exposure to Non-Investment-Grade Securities: SASA's exposure to
non-investment-grade securities is a key negative rating driver.
SASA's investment portfolio has a high concentration in government
securities similar to other Brazilian insurers. This concentration
results in a high-risk assets ratio.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
International Scale
-- The credit quality of the insurance and asset management
operations could benefit if Fitch considers the consolidated
credit quality of Rede D'Or to be superior than the current
ratings of the Insurer;
-- An improvement in Fitch's perception of SASA's business
profile and operating environment, driven by a decline in
country risk, which could positively affect Fitch's
assessment of SASA's investment and asset risk and
capitalization and credit leverage factors.
National Scale
-- The approval of the business combination transaction
agreement between SASA and Rede D'Or by the relevant
authorities;
-- A positive change in Fitch's perception of SASA's
creditworthiness with respect to other Brazilian entities
rated on the national scale;
-- A sustained improvement on SASA's technical profitability and
leverage, measured by a combined ratio and a net leverage
ratio below its previous three year-end average ratios.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
International Scale
-- The non-approval of the business transaction agreement
between SASA and Rede D'or, or the cancellation of either
parties' plans to proceed with the transaction, in which case
Fitch will likely remove the ratings from Positive Watch and
affirm them;
-- If Fitch decides that SASA's strategic importance to Rede
D'Or is not sufficient to provide any ratings uplift;
-- A downgrade in Brazil's sovereign rating (BB-/Stable), which
would lead to a worsening of Fitch's assessment of the
insurance industry profile and operating environment, which
would also deteriorate SASA's business profile, investment
and asset risk, and capitalization and leverage credit
factors;
-- A sustained and material deterioration in profitability and
leverage, measured by an ROAE below 8% and a FLR above 31%.
National Scale
-- The non-approval of the business transaction agreement
between SASA and Rede D'Or, or the cancellation of either
parties' plans to proceed with the transaction, in which case
Fitch will likely remove the ratings from Positive Watch and
affirm them;
-- An adverse change in Fitch's perception of SASA's business
profile and creditworthiness with respect to other Brazilian
entities rated on the national scale;
-- A sustained and material deterioration in technical
profitability, measured by a combined ratio above its
previous three year-end average ratios.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Debt Rating Prior
---- ------ -----
Sul America S.A.
LT IDR BB- Rating Watch Maintained BB-
ST IDR B Affirmed B
LC LT IDR BB- Rating Watch Maintained BB-
LC ST IDR B Affirmed B
Natl LT AA-(bra) Rating Watch Maintained AA-(bra)
Natl ST F1+(bra) Affirmed F1+(bra)
senior unsecured
Natl LT A+(bra) Affirmed A+(bra)
=============
E C U A D O R
=============
ECUADOR: Authorities Extend State of Emergency in Guayaquil
-----------------------------------------------------------
Juan Martinez at Rio Times Online reports that authorities in
Ecuador have extended the state of emergency in Guayaquil and the
surrounding cantons of Duran and Samborondon until at least Oct.
12.
The state of emergency provides security forces with more
flexibility to combat organized crime, according to Rio Times
Online.
It was initially declared in response to an Aug. 14 car bombing in
Guayaquil that killed five people, the report notes.
Under a state of emergency, authorities can partially suspend
certain rights and freedoms, the report relays.
Authorities may also establish security checkpoints and restrict
movement, particularly after dark, the report discloses.
Law enforcement authorities may increase patrols and/or conduct
warrantless searches of vehicles, persons, or premises, the report
notes.
Authorities may impose a curfew if they deem the situation
warranted, the report relays.
Localized disruptions to business and traffic are expected for the
duration of the state of emergency, the report relays.
Further security incidents, including additional car bombings,
cannot be ruled out in the coming days and weeks, especially as
authorities are likely to launch operations to locate and arrest
suspected criminals, the report discloses.
The Aug. 14 car bombing was the latest in a series of attacks that
have occurred in Guayaquil in recent months, the report notes.
On May 29, a car exploded outside a police station in the city, the
report relays. A similar incident occurred on Apr. 25 in front of
a prison in Guayaquil, the report adds.
=====================
E L S A L V A D O R
=====================
EL SALVADOR: Launches Debt Buyback Program Amid Bitcoin Bond
------------------------------------------------------------
Lachlan Williams at Rio Times Online reports that the government of
El Salvador disclosed that it has offered to buy back a portion of
its government bonds maturing in 2023 and 2025.
The country has set a purchase price of US$910 for the bonds
maturing in 2023 and US$540 for the bonds maturing in 2025,
according to Rio Times Online.
Each bond represents a total amount of US$800 million, the report
notes, the report relays.
When El Salvador's President Nayib Bukele unveiled the buyback plan
in July, it was seen as an attempt to combat speculation about a
possible default in the Central American country, the report
notes.
Relations with the traditional credit market were strained,
especially after El Salvador adopted Bitcoin (BTC) as a legal
tender in September 2021, the report says.
At this point, bitcoin investment in El Salvador has dropped by
about 50% since inception, representing a potential loss of US$52.4
million, according to CoinDesk data based on Bukele's
announcements, the report discloses.
El Salvador's US$1 billion bitcoin bond (also known as the "volcano
bond") does not yet have a launch date, although the country's
president announced it for November 2021, the report notes.
Last month, Paolo Ardoino, chief technology officer of Bitfinex and
Tether, who has worked closely with El Salvador on the bitcoin
securities project, said government officials told him he expected
approval in September, the report recalls.
The bond buyback offer is valid until Sept. 20, the El Salvador
government said, adding that "settlement of the validly offered and
accepted bonds is scheduled for Sept. 22." Deutsche Bank Securities
will act as manager, the report says.
The Central American country added that the offer is "subject to an
aggregate amount not to exceed US$360 million for the purchase of
the principal amount of the bonds accepted for tender and the
payment of accrued interest and any premium on such bonds," the
report adds.
=============
J A M A I C A
=============
JAMAICA: Earns Less From Exports Up to May
------------------------------------------
RJR News reports that Jamaica earned less from exports for the
first five months of this year.
The Statistical Institute of Jamaica (STATIN) says total earnings
for goods going out was US$641.4 million, according to RJR News.
This represents a 2.8 per cent decline compared with the US$660
million earned for the same period last year, the report notes.
STATIN says the lower earnings was primarily driven by a 59 per
cent reduction in the value of fuel products exported, the report
adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
M E X I C O
===========
MEXARREND SAPI: Discloses Refinancing of 2022 Bond
--------------------------------------------------
Mexarrend, leader in developing alternative credit solutions in
Latin America, announces that it has received the final approval of
a credit line with Banco Azteca for $600 million pesos, backed by
Real Estate collateral. The Company is in the process of final
documentation, and the disbursement is planned for the next couple
of weeks. Thus, Mexarrend concludes the successful refinance of its
October 2022 bond maturity.
Additionally, as previously disclosed, the Company has been using
its committed warehousing facilities with Credit Suisse and HSBC
over the last weeks and is planning additional disbursements using
its existing portfolio originated over the last months. The
abovementioned, demonstrates the effectiveness of these committed
financing structures for the growth plans of the Company,
maintaining a healthy balance sheet structure and continued access
to financing in the market. In parallel, Mexarrend is working on
the second disbursement with the U.S. International Development
Finance Corporation ("DFC") during October.
Just as in the past year, Mexarrend remains active in its
Lending-as-a-Service business, with planned transactions for
September and a solid pipeline during the fourth quarter of 2022.
This allows positive cash flow transactions for the Company,
generating fee-business and diversifying its revenue mix.
Mexarrend has a healthy financial position and has demonstrated its
strength and access to financing during turbulent times. The
Company is focused on growing its portfolio and financial
solutions, strengthening its position as a leader in alternative
financing for SMEs and promoting financial inclusion in Mexico and
the region.
About Mexarrend
Mexarrend, S.A.P.I. de C.V., has grown to become one of the largest
independent leasing (asset-based lender) companies in Mexico in the
last 25 years. The Company specializes in offering financing
solutions to rapidly growing and underserved small and medium-sized
enterprises ("SMEs") for the acquisition of productive assets and
equipment to support growth. Mexarrend provides reliable and
competitive funding sources through its four main products: capital
leases, financing, operating leases, and renting.
As reported in the Troubled Company Reporter - Latin America, Fitch
Ratings has downgraded Mexarrend, S.A.P.I. de C.V.'s (Mexarrend)
Long-Term (LT) Local and Foreign Currency Issuer Default Ratings
(IDRs) to 'B' from 'B+', and the senior unsecured LT debt rating to
'B'/'RR4' from 'B+'/'RR4'. Fitch also downgraded Mexarrend's LT
National Ratings to 'BBB-(mex)' from 'BBB+(mex)', and the
Short-Term (ST) National Ratings and the ST portion of the senior
unsecured notes program to 'F3(mex)' from 'F2(mex)'. All ratings
have been placed on Rating Watch Negative (RWN).
[*] CEMEX SAB: Reaffirms Commitment to United Nation's Dev't Goals
------------------------------------------------------------------
CEMEX, S.A.B. de C.V. is reaffirming its commitment to the United
Nation's Sustainable Development Goals (SDGs), particularly those
focused on climate action; sustainable cities and communities;
responsible consumption and production; and industry, innovation,
and infrastructure.
CEMEX's CEO, Fernando A. Gonzalez, participated in a CEO roundtable
hosted by UN Secretary-General Antonio Guterres at the UN's New
York City headquarters on Sept. 19. The roundtable included 11 CEOs
representing companies from around the globe and focused on
proposals for strengthening the private sector's commitment to the
SDGs.
"CEMEX's core purpose is to build a better, more sustainable,
future," said Fernando A. Gonzalez. "We recently agreed to
strengthen our partnership with the UN on topics aligned with our
strategy and areas of expertise including sustainable finance,
supply chain, diversity and inclusion, and a just transition to a
carbon neutral economy. Moreover, through our flagship
decarbonization program, Future in Action, we seek to lead the way
in climate action for the building materials industry."
In 2022, for the second consecutive year, the world achieved little
progress towards the SDG 2030 targets. The roundtable united
leaders from companies that are strongly contributing to the UN
Global Compact (UNGC) to discuss how to inspire ambitious and
principled business leadership committed to achieving the SDGs. The
UNGC is the world's largest corporate sustainability initiative,
and an ideal platform for the private sector to align its
strategies and operations to the SDGs.
Recent contributions to the SDGs by CEMEX include the launch of
Vertua, its lower-carbon and net-zero CO2 family of products;
agreements to clean beaches and waterways, including the Nile
River, and use the recovered waste as an alternative fuel in its
operations; a new concrete 3D printing construction solution with
the potential to reduce housing costs; and the transition of
several cement plants to renewable electricity.
CEMEX was also present at the SDG Investment Forum organized by the
UNGC's CFO Coalition. At the event, CEMEX's CFO, Maher Al-Haffar,
spoke about CEMEX's decarbonization pathway, the experience of
aligning its investments to the SDGs, and the innovations required
to deliver only net-zero concrete by 2050. Earlier this year, CEMEX
published its Green Financing Framework, which together with its
Sustainability-Linked Framework align its corporate finance
strategy to its sustainability commitments and support the
financing of SDG-aligned investments in areas such as CO2 emissions
reduction, clean electricity, energy efficiency, clean
transportation, water management, air quality, circular economy,
and waste management.
About CEMEX SAB
CEMEX, S.A.B. de C.V., is a holding company of entities which
main activities are oriented to the construction industry,
through the production, marketing, distribution and sale of
cement, ready-mix concrete, aggregates and other construction
materials. CEMEX is a public stock corporation with variable
capital (S.A.B. de C.V.) organized under the laws of the United
Mexican States, or Mexico.
* * *
As reported in the Troubled Company Reporter-Latin America in June
2022, Fitch Ratings has upgraded the foreign and local currency
Issuer Default Ratings (IDRs) of CEMEX, S.A.B. de C.V. (CEMEX) to
'BB+' from 'BB', its senior unsecured notes to 'BB+' from 'BB' and
its subordinated hybrid issuance to 'BB-' from 'B+'. Cemex's
National Long-Term rating is being upgraded to 'AA-(mex)' from
'A+(mex)', and its National Short-Term rating is affirmed at 'F1'.
The Rating Outlook is Stable.
=================
V E N E Z U E L A
=================
EMTRASUR: Court Rules Crew of Grounded Plane Can Leave Argentina
----------------------------------------------------------------
Buenos Aires Times reports that an appeals court authorized 12
crew-members from the Venezuelan plane grounded in Buenos Aires
since June, a case that also involves the United States and Iran,
to leave the country.
The Boeing 747 cargo plane, owned by Venezuelan company Emtrasur,
has been held at Ezeiza International Airport on the outskirts of
the capital since it arrived on June 8 from Mexico with a shipment
of auto parts, after having tried unsuccessfully to enter Uruguay,
according to Buenos Aires Times.
Judge Federico Villena ordered the plane be detained in light of an
investigation into the crew of 14 Venezuelans and five Iranians,
who have been held in Argentina for three months, the report
relays.
Last month, he gave the green light for 11 Venezuelans and one
Iranian to leave the country, the report discloses.
Federal Court of Appeals of La Plata confirmed the decision day,
although one resort remains for those opposition the move - it can
still be appealed to the Supreme Court in Buenos Aires Province,
the report notes.
The court also gave Judge Villena 10 more days to conclude "all
pending proceedings, the definition of the procedural situation and
the restrictions imposed on persons and things," according to the
Telam state news agency, the report says.
For now, the ban on leaving the country remains in place for the
other seven crew-members, which includes Iranian nationals
Gholamrez Ghasemi, Mohammad Khosraviaragh, Saeid Vali Zadeh and
Abdolbaset Mohamamadi, as well as Venezuelans Mario Arraga, Victor
Perez Gomez and Jose Garcia Contreras, the report notes.
The Paraguayan intelligence service has linked Ghasemi to the Al
Quds Force, a branch of the Iranian Revolutionary Guards classified
as a terrorist organization by the United States, the report
relays.
The plane first entered Argentina on June 6 from Mexico but, unable
to refuel in Buenos Aires due to US sanctions on Venezuela, it left
for Montevideo on June 8. But the Uruguayan authorities refused it
access, and it flew back to Argentina, the report discloses.
An Argentine judge then granted a request from the United States to
seize the plane on the basis that laws were broken when Iran - also
under US sanctions - sold it to Venezuela, the report notes.
The aircraft belongs to Emtrasur, a subsidiary of the Venezuelan
company Conviasa, which is under sanctions from the US Treasury
Department. It was bought a year ago from the Iranian airline Mahan
Air, the report relays.
Argentina considers the presence of Iranian travellers to be
particularly sensitive because of Interpol red alerts issued
against former Iranian leaders for their alleged role in the 1994
bombing of the AMIA Jewish community centre, which left 85 dead and
some 300 wounded, the report says.
Before travelling to Argentina, the plane had been in Paraguay in
mid-May after a trip to the island of Aruba with a cargo of
cigarettes, 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.
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S U B S C R I P T I O N I N F O R M A T I O N
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