/raid1/www/Hosts/bankrupt/TCRLA_Public/221003.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Monday, October 3, 2022, Vol. 23, No. 191
Headlines
A R G E N T I N A
ARGENTINA: Moody's Affirms 'Ca' Issuer Ratings, Outlook Stable
YPF SA: Investors Dodge Argentina Bond Pain by Buying Up Firm
C H I L E
CHILE: To Issue $12 Billion in Debt in 2023
LATAM AIRLINES: Goldman Sachs Kicks Off Loan for Chapter 11 Exit
C O L O M B I A
GRUPO SURA: S&P Affirms 'BB+' Issuer Credit Rating, Outlook Stable
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Event Can Generate Losses of US$1.1 Billion
M E X I C O
MEXICO: Central Bank Raises Interest Rate to All-Time High
P U E R T O R I C O
PUERTO RICO: Mediators Ask 60-Day Deadline for PREPA Exit Plan
X X X X X X X X
LATAM: CARICOM Launches Initiative to Facilitate Trade
[*] BOND PRICING: For the Week Sept. 19 to Sept. 23, 2022
- - - - -
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A R G E N T I N A
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ARGENTINA: Moody's Affirms 'Ca' Issuer Ratings, Outlook Stable
--------------------------------------------------------------
Moody's Investors Service has affirmed the Government of
Argentina's Ca foreign-currency and local-currency long-term issuer
and senior unsecured ratings and the (P)Ca senior unsecured ratings
for shelf registrations. Argentina's short-term issuer rating was
also affirmed at Not Prime (NP). The outlook remains stable.
The decision to affirm the Ca ratings balances Argentina's limited
market access, weak governance, and history of recurrent debt
restructurings with recent efforts to marshal fiscal and monetary
measures to start addressing underlying macroeconomic imbalances in
the context of the IMF program that was approved earlier this
year.
At this rating level, the stable outlook implies that overall
credit conditions are unlikely to improve materially and,
consequently, expected losses remain aligned with those associated
with a Ca rating.
The local-currency and foreign-currency ceilings remain unchanged.
The Caa1 local-currency ceiling is three notches above the
sovereign rating reflecting the degree of government intervention
in the economy and the comparatively low respect for the rule of
law. The Caa3 foreign-currency ceiling is two notches below the
local currency ceiling and reflects the high risk of transfer and
convertibility controls in the event of a default.
RATINGS RATIONALE
Argentina has a long history of credit-negative policymaking and
currently faces a series of macroeconomic challenges that are
likely to prolong existing credit risks. Lack of market access and
persistent macroeconomic imbalances continue to undermine the
sovereign credit profile. Even though Argentina has signed an
Extended Fund Facility with the IMF, lack of political consensus
over the pace and direction of fiscal consolidation will likely
hinder the government's ability to consistently meet targets over
the span of the program.
Lack of adequate and consistent market access remains one of
Argentina's major credit constraints affecting both
foreign-currency and local-currency obligations. A history of
recurrent defaults and a weak institutional framework limit access
to cross-border funding. And years of high inflation and
confiscation of domestic savings have led to a comparatively
underdeveloped financial system, conditions that restrict access to
peso funding.
Inflation is a perennial issue for Argentina. In August, monthly
inflation was 7% and inflation over the prior 12 months reached
78.5%. Moody's projects inflation will reach 85% in 2022 and 80% in
2023, with upside risks to both projections. Inflation is highly
susceptible to exchange rate shocks and an abrupt devaluation, such
as one triggered by lack of sufficient international reserves to
defend the currency, would push inflation even higher.
International reserves stood at $37.6 billion on September 21. This
represents a $1 billion increase since earlier in the month after
the government announced more favorable conditions to certain
exporters that sold dollars to the central bank to boost overall
reserves. But usable reserves are much lower. The gross number
includes currency swaps, certain private sector deposits, and
official bilateral loans. Excluding these items leaves Argentina
with net reserves of less than $2 billion.
Earlier this year Argentina signed a new a 30-month $44 billion
Extended Fund Facility (EFF) with the IMF. On September 19 the IMF
announced it had reached a staff level agreement on the second
review of the EFF. Full compliance with the EFF targets will
require continuing with fiscal consolidation in 2023, a
presidential election year. This will be a significant challenge to
Argentina given political differences within the governing
coalition on the pace of fiscal consolidation. Moody's estimates
that the primary deficit for 2022 and 2023 will breach the IMF
targets, reaching 2.7% and 2.3% of GDP respectively.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectations that overall
credit conditions are unlikely to materially improve and,
consequently, expected losses will remain aligned with those
associated with a Ca rating, which incorporates losses in the order
of 65% to investors.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Argentina's ESG Credit Impact score is very highly negative
(CIS-5), reflecting its very weak governance profile and limited
resilience because of high debt metrics, as well as its moderately
negative exposure to social and environmental risks.
Moody's assesses Argentina's exposure to environmental risks as
moderately negative (E-3), reflecting the risks that water stress,
other physical climate risks, and the loss of natural capital pose
to this agricultural exporter. In 2018, a major drought was the key
driver of an economic recession, and heat and water risks will
remain a credit challenge.
Exposure to social risks is moderately negative (S-3), balancing
high levels of exposure to labor and income-related risks with
moderate demographic, housing and health and safety pressures.
Argentina has a history of low job creation and macroeconomic
instability that has increased domestic poverty. The country
benefits from comparatively strong educational outcomes.
The influence of governance on Argentina's credit profile is very
highly negative (G-5), reflecting the impact of the long-standing
severe governance challenges that have in the past led to
inconsistent policymaking and debt defaults. Years of unpredictable
and unsustainable fiscal and monetary policy frameworks have
repeatedly resulted in domestic and external macroeconomic
imbalances that leave the economy highly susceptible to economic
shocks.
GDP per capita (PPP basis, US$): 23,597 (2021) (also known as Per
Capita Income)
Real GDP growth (% change): 10.4% (2021) (also known as GDP
Growth)
Inflation Rate (CPI, % change Dec/Dec): 50.9% (2021)
Gen. Gov. Financial Balance/GDP: -3.6% (2021) (also known as Fiscal
Balance)
Current Account Balance/GDP: 1.4% (2021) (also known as External
Balance)
External debt/GDP: 55% (2021)
Economic resiliency: b2
Default history: At least one default event (on bonds and/or loans)
has been recorded since 1983.
On September 22, 2022, a rating committee was called to discuss the
rating of the Argentina, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have not materially changed. The
issuer's institutions and governance strength, have not materially
changed. The issuer's governance and/or management, have materially
decreased. The issuer's susceptibility to event risks has not
materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A positive rating action would require clear evidence of will and
ability on the part of the authorities to set a credible policy
path that leads to a significant and sustained reduction in
macroeconomic imbalances, such that access to the capital markets
is restored. Moody's would downgrade Argentina's rating if it
considered underlying credit conditions were likely to lead to debt
restructurings in which losses to bondholders could exceed the 65%
mark.
The principal methodology used in these ratings was Sovereign
Ratings Methodology published in November 2019.
YPF SA: Investors Dodge Argentina Bond Pain by Buying Up Firm
-------------------------------------------------------------
Scott Squires at Bloomberg News reports that investors are scoring
some of the best returns in emerging markets by dumping battered
Argentine sovereign bonds to buy the nation's corporate and
provincial notes.
While debt from the federal government has tumbled more than 35
percent this year to some 20 cents on the dollar, bonds issued by
state controlled oil company YPF SA have returned as much as 18
percent. Notes sold by provinces like Mendoza and Cordoba have
returned about seven percent, according to Bloomberg News.
The returns are among the best in developing nations and stand out
all the more when considering that globally, dollar-denominated
corporate bonds have lost more than 17 percent this year, Bloomberg
News notes. Argentina is also one of the rare places where a
corporate bond yields less than a sovereign, with YPF notes due in
2029 paying 18 percent versus 27 percent for similar-maturity
government notes, Bloomberg News discloses.
The divergence in Argentina underscores that although investors are
pessimistic on the country's ability to attract investment, damp
inflation and revive growth before presidential elections in
October 2023, they're confident its companies and provincial
governments can hang on, Bloomberg News says. Bond buyers see many
of them as savvy financial managers able to roll with the turmoil,
according to Edwin Gutierrez, the head of emerging-market sovereign
debt at Abrdn, Bloomberg News notes.
"There's definitely a survivor bias with Argentina corporates,"
Gutierrez said from London, where Abrdn has trimmed its holdings of
Argentine sovereign bonds while holding onto company securities,
Bloomberg News notes. "These are the guys who have managed to
survive despite anything the government throws at them," he added.
When the sovereign couldn't pay its bonds during the pandemic amid
dwindling reserves, soaring inflation and a severe lockdown that
brought the economy to a halt, many Argentine companies and
provinces soon followed the federal government into default,
Bloomberg News discloses. Since then, Argentina's policy makers
haven't been able to put the economy on a sustainable growth path,
leading to bets that another debt crisis is all but inevitable
within the next few years, Bloomberg News relays.
The smaller Argentine issuers used the relief created by their
restructurings to shore up balance sheets, Bloomberg News relays.
The provinces of Mendoza and Cordoba are seen by investors as
fiscally sound, Bloomberg News notes. Provinces such as Chubut and
Neuquen benefit from the fact that they're energy producers that
get revenue in dollars and are able to shield that income from the
government's foreign-exchange controls, Bloomberg News says.
YPF also used some of the savings from its restructuring to boost
capital investments, shoring up its production capacity for years
to come, Bloomberg News relays.
"Although the credit quality of corporate bonds in some cases is
greatly affected by the sovereign, companies have been forced to
make twice the effort to rebuild a track record of profitability,"
said Maria Moyano Hidalgo, a senior corporate research strategist
at Adcap in Buenos Aires, Bloomberg News notes. "That has allowed
corporates to enjoy wide spreads over sovereign prices," she
added.
Jason Trujillo, a senior portfolio manager at Invesco in Atlanta,
added that another positive for the smaller issuers is that their
debt tends to be shorter term and not as vulnerable to losses from
rising global interest rates, Bloomberg News discloses.
To be sure, Argentine companies and provinces aren't immune from
the country's struggles, and their rally may not have much further
to go, given that inflation is on track to approach 100 percent
this year and the nation's currency reserves have dwindled to a
six-year low, Bloomberg News relays. The government has made it
difficult for borrowers to access dollars in the past, and there's
the chance those restrictions could be tightened further, Bloomberg
News notes.
Economy Minister Sergio Massa has tried to boost reserves by
incentivizing agriculture exporters to sell their stocks faster,
and by working to get Argentina's US$44.5-billion lending programme
with the International Monetary Fund back on track, but it's
unclear how successful those efforts will be, Bloomberg News
notes.
"We have been involved with YPF but remain cautious on the other
corporate, including provinces, given the continued challenging
backdrop," said Siby Thomas, a research analyst at T. Rowe Price in
Baltimore, Bloomberg News relays. "Argentine names have generally
done well, though a large part of that is due to the idiosyncratic
nature of the story at a time when rising rates are driving total
returns," he added.
For traders who must invest in Argentina but want to avoid
sovereign bonds, notes from YPF and the provinces may be the only
place to go, Bloomberg News notes.
"It's hard to talk about 'winning' in Argentina," said Ray Zucaro,
chief investment officer at RVX Asset Management in Miami, who owns
YPF bonds. "But the nation's corporate and quasi sovereign bonds
are definitely a way to hide," Bloomberg News adds.
YPF SA is an energy company, operating a fully integrated oil and
gas chain with leading market positions across the domestic
upstream and downstream segments.
* * *
As reported in the Troubled Company Reporter-Latin America on Jun
8, 2022, S&P Global Ratings affirmed its 'CCC+' ratings on
Argentine integrated oil and gas producer YPF S.A.
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C H I L E
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CHILE: To Issue $12 Billion in Debt in 2023
-------------------------------------------
globalinsolvency.com, citing Reuters, reports that Finance Minister
Mario Marcel said Chile estimates it will issue $12 billion in
total debt next year and the largest budget increases will be in
social protection and science and technology.
"So we're cutting (issuance) by half, reflecting the fact that we
will have an overall balance that will be considerably stronger
than what people thought we would have," said Marcel, adding most
of it will be to refinance maturing issues, the report notes.
The minister is confident Chile will soon make a dent on inflation,
running at double digits, the report relays.
"We're particularly confident in terms of curbing inflation earlier
than other countries," he said, citing an early and consistent
monetary policy tightening that began in mid-July 2021, the report
adds.
LATAM AIRLINES: Goldman Sachs Kicks Off Loan for Chapter 11 Exit
----------------------------------------------------------------
Jill R. Shah and Jeannine Amodeo of Bloomberg News report that a
group of banks led by Goldman Sachs Group Inc. launched a leveraged
loan sale that will support Latam Airlines Group SA's exit from
bankruptcy.
The $750 million term loan will repay existing debtor-in-possession
facilities and cover general corporate purposes, according to a
person familiar with the matter, who asked not to be identified
discussing a private transaction.
The Santiago-based airline company won court approval for a
restructuring in June after a struggle to win lender support.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/-- is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is
the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
===============
C O L O M B I A
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GRUPO SURA: S&P Affirms 'BB+' Issuer Credit Rating, Outlook Stable
------------------------------------------------------------------
S&P Global Ratings, on Sept. 28, 2022, affirmed its 'BB+' issuer
credit and issue-level ratings on Grupo de Inversiones Suramericana
S.A. (Grupo Sura), a Colombia-based holding company.
The stable outlook in the next 12-24 months mirrors that on
Colombia. Moreover, the outlook reflects S&P's expectations of
higher dividends from its main subsidiaries following a better
financial performance and that the group will maintain a cash flow
adequacy ratio above 2.0x and a loan-to-value (LTV) ratio below
20%.
Grupo Gilinski (not rated), through its subsidiaries (Jgbd Holding
and Nugil SAS), has started a series of public takeover bids on
Grupo Sura, Grupo Nutresa, and Grupo Argos since November 2021.
After three public takeover bids of Grupo Sura, Grupo Gilinski
acquired 38.0% of common shares, and for Grupo Nutresa, it acquired
31.1% shares. S&P said, "We believe that the new shareholder
composition won't affect Grupo Sura's governance structure because
none of Grupo Sura's shareholders have a controlling ownership over
the company. Moreover, we don't forecast any potential changes in
the company's financial policy that could potentially affect Grupo
Sura's leverage."
Historically, SUAM was the strongest investee company in Grupo
Sura's portfolio of assets, mainly driven by its strong competitive
advantage as a pension fund in Latin America with leading presence
in seven countries, about $142 billion AUMs (assets under
management), a solid customer base of 22.6 million retail and 471
institutional clients, and three business lines with leverage well
below 3.0x. After the recent public takeover bids in Nutresa, where
Grupo Gilinski acquired 31.1% shares and two of seven possible
board seats, Nutresa gained weighting in the portfolio value (21%
from 14% historically). This stemmed from a significant increase in
its share prices, which after three bidding rounds (the last of
which ended May 16, 2022), stabilized between COP38,000 and
COP40,000 per share. Shares have remained at these prices for
almost four months (from a historical price per share of
COP20,000-COP25,000). At the same time, SUAM's weighting in the
portfolio fell to 29% (from 34% historically). Though Nutresa has
good credit quality, it's still behind the scale, diversity, and
the financial performance of SUAM. S&P said, "Therefore, we revised
our assessment of Grupo Sura's business risk profile to fair from
satisfactory, leading us to revise downward the SACP to 'bbb-' from
'bbb'. This doesn't affect our issuer credit ratings on the company
because we already cap the rating on Grupo Sura by the 'BB+'
foreign currency sovereign rating."
Share prices of Bancolombia (BB+/Stable/B), Grupo Argos (not
rated), and Nutresa (not rated)--together Grupo Sura's listed
companies--have been increasing for the last year as their
performances have improved. S&P said, "We expect Bancolombia to
continue having credit growth and high margins, derived from higher
interest rates, that will lift profitability above that in previous
years. Grupo Argos and Nutresa have benefited from the recent
public takeover bids that have taken place along the last year that
have reflected the companies' steady performance (EBITDA for these
subsidiaries closed the first half of 2022 at about 18% and 27%,
respectively, higher than the same period last year). These events
have led to a market value increase of about 12% for Bancolombia,
30% for Grupo Argos, and 64% for Grupo Nutresa year-on-year, in
turn leading Grupo Sura's portfolio value to rise to $7.6 billion
as of June 2022 (from $6.6 billion in June 2021; a 14% increase).
Moreover, we don't expect that the company will incur additional
debt in the upcoming years, leading to an LTV ratio below 20%. In
addition, driven by these subsidiaries' financial performance, we
expect higher dividend distribution to Grupo Sura, with inflows of
about $254 million in 2022 and $395 million in 2023, leading to a
cash flow adequacy ratio above 2.0x."
As of June 2022, Grupo Sura has a weak cash position of about $9.2
million (similar to historical levels) and short-term debt
maturities of about $100 million, which will tighten its liquidity
for the next 12 months. S&P said, "However, we expect dividend
inflows from its subsidiaries to be above previous years (above
$300 million for the next few years), allowing the company to meet
its obligations for the next six months. Moreover, the company has
well-established relationships with banks, including Bancolombia,
which is the group's bank, allowing it to obtain credit lines. We
also think that Grupo Sura's flexibility on dividend payments will
help preserve liquidity."
ESG credit indicators: E-2, S-2, G-2
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D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Event Can Generate Losses of US$1.1 Billion
---------------------------------------------------------------
Dominican Today reports that according to estimates in an analysis
published by the Central Bank, the Dominican Republic is facing an
economic recovery process that will take about 15 months. This
situation presents new challenges for the financial system, which
is also starting to register higher delinquency rates due to the
impact it causes in the productive sectors, according to Dominican
Today.
In a recent report from the institution titled 2021 Financial
Stability Report, depending on the percentage of the country's
territory where the natural event happens, the economic damages
from an atmospheric event in 2016 were estimated to be roughly $1.1
billion, or 1.5% of GDP, the report notes.
It should be emphasized that the authors of the investigation
estimated the effect of this type of phenomena on Dominican
economic activity using night photos and a wind farm model, the
report relays. Agriculture, tourism, and mining are some of the
industries that are most at risk from the onslaught of cyclones,
the report relays. These industries directly affect the populace
by lowering production of some products for mass consumption,
deterring visitors from visiting, and lowering exports, the report
says.
The document states that financial entities can reduce the risk of
a climate impact by incorporating analyses of previous
circumstances that allow them to quantify the damages and, as a
result, delimit preventive and investment actions, even though
"economic models cannot accurately anticipate the possible impact
of risks related to climate issues," the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican Today related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'. The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative. S&P also affirmed
its 'BB-' long-term foreign and local currency sovereign credit
ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said. A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
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M E X I C O
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MEXICO: Central Bank Raises Interest Rate to All-Time High
----------------------------------------------------------
Richard Mann at Rio Times Online reports that the Board of
Governors of Mexico's Central Bank (Banxico) voted unanimously to
raise interest rates to a record high of 9.25%.
This marks the third consecutive 0.75 percentage point increase in
the key interest rate to curb inflation by the unanimous vote of
its five members, according to Rio Times Online.
Given the "environment of heightened uncertainty, accumulated
inflationary pressures from the pandemic and the geopolitical
conflict, and the possibility of greater effects on inflation (. .
. ) [the Governing Board] unanimously decided, in the presence of
all of its members, to raise the target for the overnight rate by
75 basis points to a level of 9.25%," the state bank said in a
statement on its monetary policy decision, the report notes.
The interest rate has never been this high in Latin America's
second-largest economy since the Mexican monetary authority
introduced the instrument as an operational target in 2008, the
report adds.
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P U E R T O R I C O
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PUERTO RICO: Mediators Ask 60-Day Deadline for PREPA Exit Plan
--------------------------------------------------------------
The mediators who had been overseeing talks aimed at creating a
restructuring plan for Puerto Rico's electric utility asked a
federal judge on Thursday, September 22, 2022, to restart the
stalled talks and set a 60-day deadline for the island's fiscal
oversight board to file a reorganization plan for the agency.
The Puerto Rico Electric Power Authority owes $8.26 billion in bond
principal, more than $700 million in fuel line of credit loans, as
well as other debt. It has been in Title III bankruptcy since
summer 2017.
The Mediation Team -- comprised of Honorable Shelley C. Chapman as
lead mediator, Honorable Robert D. Drain, and Honorable Brendan L.
Shannon -- was formed to facilitate negotiations among stakeholders
in PREPA's Title III Case.
In a filing on Sept. 22, the Mediation Team indicated its
willingness to continue to oversee Mediation and provided a
proposal regarding the parameters for further mediation.
"Recognizing that the litigation schedule is of direct importance
to the conduct of the Mediation, although also subject to other
considerations that are beyond the Mediation Team's remit, the
Mediation Team believes that the prospects of a successful
Mediation will be greatly enhanced if the litigation schedule
adopted by the Court provides for (a) the Oversight Board's filing
within 60 days a proposed plan of adjustment and related disclosure
statement that contemplates alternative plan treatment depending on
the outcome of the primary lien and claim disputes (a "Toggle
Plan"), (b) the litigation of those disputes in the context of the
Oversight Board's request for confirmation of the Toggle Plan, and
(c) a hearing on the Oversight Board's request to confirm the
Toggle Plan, consistent with an expedited litigation schedule, to
be held no later than June, 2023," the Mediation Team said.
The Official Committee of Unsecured Creditors in response said that
it should be allowed to participate in negotiations and that these
two threshold issues should be litigated first before the deadlines
are set:
(1) whether the PREPA bondholders' security interest is limited
to funds actually deposited into specified accounts held by the
PREPA bond trustee (in the amount of approximately $8.8 million as
of PREPA's petition date); and
(2) whether the PREPA bonds are non-recourse obligations such
that, in accordance with section 927 of the Bankruptcy Code, the
PREPA bondholders have no claim against, and are not entitled to
distributions from, PREPA for any difference between the face
amount of the bonds and the funds on deposit in the specified
account.
Meanwhile, the Financial Oversight and Management Board for Puerto
Rico, as sole Title III representative of PREPA, said that while it
is supportive of continued mediation, it has issues with the
proposed 60-day plan deadline.
"In the big picture, the Bondholders' allowable claim, whether
secured or unsecured, has profound implications for what can be
paid to all other constituencies. The Bondholders propound a claim
in excess of $8 billion without postpetition interest and more than
$10.5 billion with postpetition interest included. If any material
portion of the $8 billion claim is not allowable, it has a dramatic
impact on what PREPA will pay all other allowed claims. There are
too many potential outcomes of the Bondholders' ultimately
allowable secured and unsecured claims for there to be a 'toggle
plan.' We would need multiple toggles! So, the concept is
impracticable as a factual matter," the Oversight Board said.
"It remains the Oversight Board's strong preference to file a
consensual plan, at least in part, and as it currently stands, the
Oversight Board does not have a deal with any major creditor
constituency to serve as an impaired accepting class for a plan.
Because mediation has taken a "staged" approach focusing solely on
the Bondholders' claims, the Oversight Board has not had the
opportunity to complete its negotiations with PREPA's unions or
retiree system, or to meaningfully engage with other creditor
constituencies. The Oversight Board should be given the
opportunity to reach consensus with other parties before it files a
nonconsensual plan," the Oversight Board added.
The Oversight Board said it can commit to filing a proposed plan of
adjustment within 45 days of the earlier of (i) a restructuring
support agreement with a major creditor constituency, or (ii) the
Title III Court's adjudication of the Amended Lien Challenge.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States that's facing a massive bond debt of $70 billion,
a 68% debt-to-GDP ratio and negative economic growth in nine of the
last 10 years.
The Commonwealth of Puerto Rico has sought bankruptcy protection,
aiming to restructure its massive $74 billion debt-load and $49
billion in pension obligations.
The debt restructuring petition was filed by Puerto Rico's
financial oversight board in U.S. District Court in Puerto Rico
(Case No. 17-01578) on May 3, 2017, and was made under Title III of
2016's U.S. Congressional rescue law known as the Puerto Rico
Oversight, Management, and Economic Stability Act ('PROMESA').
The Financial Oversight and Management Board later commenced Title
III cases for the Puerto Rico Sales Tax Financing Corporation
(COFINA) on May 5, 2017, and the Employees Retirement System (ERS)
and the Puerto Rico Highways and Transportation Authority (HTA) on
May 21, 2017. On July 2, 2017, a Title III case was commenced for
the Puerto Rico Electric Power Authority ("PREPA").
U.S. Chief Justice John Roberts has appointed U.S. District Judge
Laura Taylor Swain to oversee the Title III cases. The Honorable
Judith Dein, a United States Magistrate Judge for the District of
Massachusetts, has been designated to preside over matters that may
be referred to her by Judge Swain, including discovery disputes,
and management of other pretrial proceedings.
Joint administration of the Title III cases, under Lead Case No.
17-3283, was granted on June 29, 2017.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets, as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at
O'Neill & Borges are on-board as attorneys.
McKinsey & Co. is the Board's strategic consultant, Ernst & Young
is the Board's financial advisor, and Citigroup Global Markets Inc.
is the Board's municipal investment banker.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains a case web site at
https://cases.primeclerk.com/puertorico
Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA,
and PREPA.
O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico
Fiscal Agency and Financial Advisory Authority (AAFAF), the agency
responsible for negotiations with bondholders.
The Oversight Board named Professor Nancy B. Rapoport as fee
examiner and to chair a committee to review professionals' fees.
* * *
The two Title III plans of adjustment have been confirmed to date,
for the Commonwealth and COFINA debtors.
===============
X X X X X X X X
===============
LATAM: CARICOM Launches Initiative to Facilitate Trade
------------------------------------------------------
RJR News reports that CARICOM launched a new regional platform to
facilitate intra-regional trade in goods and agricultural
products.
The initiative, dubbed "CIMSUPRO" - CARICOM Market Place and
Suspension Procedure- will register suppliers and buyers of goods
originating in CARICOM, according to RJR News.
CARICOM chairman Chandrikapersad said CIMSUPRO provides a platform,
where entrepreneurs can offer their products, from raw materials,
to finished goods, the report notes.
[*] BOND PRICING: For the Week Sept. 19 to Sept. 23, 2022
---------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Esval SA 3.5 49.9 2/15/2026 CL CLP
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Provincia del Chubut A 4.5 2208 3/30/2021 AR USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
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Chapman, Editors.
Copyright 2022. All rights reserved. ISSN 1529-2746.
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