/raid1/www/Hosts/bankrupt/TCRLA_Public/221104.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
Friday, November 4, 2022, Vol. 23, No. 215
Headlines
A R G E N T I N A
ARGENTINA: Brazil Seeks Wheat in Other Countries After Shortfall
GAUCHO GROUP: Board Approves $0.20 Floor Price on Notes Conversion
D O M I N I C A N R E P U B L I C
[*] DOMINICAN REPUBLIC: Have Extensive Trade Relations With Spain
M E X I C O
TRUST 2400-GICSA: Fitch Affirms BB+ Rating on A-1 MXN Debt
P E R U
PERU: IDB Approves $150M-Loan to Provide Better Sanitation Services
[*] Fitch Takes Actions on Peruvian Entities on Outlook Revision
P U E R T O R I C O
J.J.W. METAL: Court Junks Carolina Bid to Dismiss Adversary Case
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A R G E N T I N A
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ARGENTINA: Brazil Seeks Wheat in Other Countries After Shortfall
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Richard Mann at Rio Times Online reports that a shortfall of wheat
crops in Argentina by adverse weather conditions such as drought
and frost will lead Brazil to seek more significant volumes of
grain from alternative sources, such as the United States, Canada,
and Russia, to meet their needs, evaluated market experts.
In the last commercial year (2021/22, August/July), Brazil imported
only about 155 thousand tons from countries outside Mercosur after
having bought almost 900 thousand tons in the USA, Canada, and
Russia in the previous year, according to data from the Brazilian
government, according to Rio Times Online.
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.
GAUCHO GROUP: Board Approves $0.20 Floor Price on Notes Conversion
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The Board of Directors of Gaucho Group Holdings, Inc. approved an
offering of a series of 7% convertible promissory notes to
accredited investors on Oct. 4, 2022 and amended the offering on
Oct. 19, 2022, as disclosed by the Company in its current reports
on Forms 8-K filed with the Securities and Exchange Commission.
On Oct. 22, 2022, the Board of Directors of the Company approved
the inclusion of a $0.20 floor price on conversion of the Notes as
required by Nasdaq rules. Upon conversion, if applicable, the
price per Unit will be based on a conversion price of the lesser
of, but in no event lower than $0.20: (i) $0.21 per Unit; and (ii)
the three-day volume weighted average closing price (VWAP) of the
Company's common stock beginning on the date that is two days prior
to the conversion date. Assuming full subscription of the Notes,
conversion of the Notes at $0.20, and exercise of all of the
underlying warrants, the Company will raise up to $5,250,000. All
other terms of the Notes remain the same.
As of Oct. 24, 2022, the Company had issued convertible promissory
notes with an aggregate principal amount of $889,000.
About Gaucho Group
Headquartered in New York, NY, Gaucho Group Holdings, Inc. --
http://www.algodongroup.com-- was incorporated on April 5, 1999.
Effective Oct. 1, 2018, the Company changed its name from Algodon
Wines & Luxury Development, Inc. to Algodon Group, Inc., and
effective March 11, 2019, the Company changed its name from Algodon
Group, Inc. to Gaucho Group Holdings, Inc. Through its
wholly-owned subsidiaries, GGH invests in, develops and operates
real estate projects in Argentina. GGH operates a hotel, golf and
tennis resort, vineyard and producing winery in addition to
developing residential lots located near the resort. In 2016, GGH
formed a new subsidiary and in 2018, established an e-commerce
platform for the manufacture and sale of high-end fashion and
accessories. The activities in Argentina are conducted through its
operating entities: InvestProperty Group, LLC, Algodon Global
Properties, LLC, The Algodon - Recoleta S.R.L, Algodon Properties
II S.R.L., and Algodon Wine Estates S.R.L. Algodon distributes its
wines in Europe through its United Kingdom entity, Algodon Europe,
LTD.
Gaucho Group reported a net loss of $2.39 million for the year
ended Dec. 31, 2021, a net loss of $5.78 million for the year ended
Dec. 31, 2020, and a net loss of $6.96 million for the year ended
Dec. 31, 2019. As of June 30, 2022, the Company had $25.01 million
in total assets, $10.25 million in total liabilities and $14.75
million in total stockholders' equity.
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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: Have Extensive Trade Relations With Spain
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Dominican Today reports that the Dominican Republic and Spain have
an important trade and cooperative exchange, but it could be
improved because the Dominican Republic purchases more from Spain
than it sells, which is simply a deficit that needs to be closed.
Despite this, Spain is currently carrying out 68 projects in the
nation for a total of 42 million euros and 110 million euros in
financial operations, as explained by Antonio Perez Hernández, the
ambassador of Spain to the Dominican Republic, at the opening
ceremony of the first Spain-Dominican Republic business forum,
which was presided over by President Luis Abinader, according to
Dominican Today.
Our collaboration has had and continues to have a significant
impact, paying particular attention to reducing economic and
geographic inequities, institutional strengthening, and the defense
of inclusivity and feminism, the report notes.
The diplomat stated, "I think Spain is a benchmark on all these
issues," but not before pointing out that the Dominican Republic is
improving in terms of democracy and stability. As Spain is the
Dominican Republic's top trading partner in Europe, Mario Pujols,
executive vice president of the Association of Industries of the
Dominican Republic (AIRD), was in charge of outlining the Dominican
reality to Spain, the report relays.
The Dominican Republic exports about 69 million dollars to Spain, a
country that has imported ten times that amount in goods, according
to Pujols, who spoke at the event, the report discloses. However,
Spain has a trade deficit of more than 555 million dollars, the
report notes. Pujols used his platform to call on Spanish
businesspeople to invest more money in the country's economy in
order to improve the numbers and reduce the deficit, 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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TRUST 2400-GICSA: Fitch Affirms BB+ Rating on A-1 MXN Debt
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Fitch Ratings has affirmed the international and national scale
ratings assigned to the notes issued by Fideicomiso Irrevocable y
Traslativo de Dominio Numero 2400 (Trust 2400 - Sponsored by
GICSA). The Rating Outlook is revised to Stable from Negative on
all existing ratings.
The Stable Outlook reflects easing of short-term pressures from the
pandemic and GICSA's debt restructure (operational risk). The
observed recovery is in line with Fitch's assumptions, the cash
flow generation over the past eight months and expectations of a
stable asset performance support the Stable Outlook.
Entity/Debt Rating Prior
----------- ------ -----
Trust 2400 (Sponsored
by GICSA)
A-1 MXN
XS2094574584 LT BB+sf Affirmed BB+sf
A-1 MXN
XS2094574584 Natl LT AA(mex)vra Affirmed AA(mex)vra
A-1 USD
89835RAA2 LT BB+sf Affirmed BB+sf
A-1 USD
89835RAA2 Natl LT AA(mex)vra Affirmed AA(mex)vra
A-2 MXN
XS2094576282 LT BBsf Affirmed BBsf
A-2 MXN
XS2094576282 Natl LT A+(mex)vra Affirmed A+(mex)vra
KEY RATING DRIVERS
Recovering Property Cash Flow: Property cash flow has been
improving since last review and is expected to recover to Fitch's
long-term assumptions. Although average collection during the first
eight months of 2022 remains around 20% below the observed
collection during the first three months of issuance (1Q20), it was
10% above the average collection during 2021. Considering cash flow
generation has been stable for the past six months, Fitch's
stabilized annual net cash flow (NCF) was maintained at MXN1,211.6
million.
Occupancy Still Impacted: As of 2Q22, reported occupancy was 88.6%
and adjusted occupancy was 85.0% (last review: 87.5% and 82%,
respectively). The portfolio continues to be concentrated in
office, entertainment and fashion, sectors which experienced higher
impact during the pandemic given the increase in remote working,
preference for streaming platforms and shifts to online shopping.
Although occupancy continues to gradually increase, the exposure to
vulnerable sectors keeps constraining it and partially explains why
the transaction shows a slower recovery than its rated peers.
According to the servicer (Desarrolladora 2054, S.A.P.I. de C.V.,
primary servicer, not rated by Fitch), the office sector remains
uncertain, thus, continue to pressure occupancy.
Solid Transaction Structure: Since last review, reported MXN debt
service coverage ratio (DSCR) has gradually increased, as of 2Q22,
it reached 1.48x from the 1.41x in 3Q21. While reported USD DSCR
was 2.40x, level well above the minimum of 1.85x. Positively,
transaction structure protects the notes from performance
deterioration with triggers linked to debt service coverage,
occupancy rates and remaining lease terms. Additional structural
features include principal subordination for A-1 tranches and
liquidity reserves for all tranches (fully funded as of August 2022
covering three interest payments). The transaction will start
amortizing in 2023, following a back-loaded amortization schedule
that ends two years prior to final legal maturity.
Unchanged Leverage: Fitch's property value remains unchanged since
last review at MXN12,238.4 million. The value considers a cap rate
of 9.9% since issuance and Fitch's stabilized NCF calculation.
Considering the amortization period has not started and the notes
balance remains unchanged since the closing date, loan to value
(LTV) for A-1 tranches is 75.2% and 80.1% the for A-2 tranche, same
as last review. Using Fitch's stabilized NCF assumption and
expected debt service, Fitch calculated the average DSCR for A-1
tranches and the A-2 tranche is 1.17x and 1.09x, respectively.
Operational Risk Adequately Mitigated: Exposure to operational risk
is mitigated by the replacement arrangements in place and the
availability of a replacement servicer considered in legal
documents. Since last review, Grupo GICSA, S.A.B. de C.V. (GICSA:
sponsor and parent company of the primary servicer), eased its
short-term liquidity pressures reducing the exposure to servicer
disruption risk the transaction faced last review. GICSA is an
experienced entity in the Mexican real estate market and has proved
adequate servicing capabilities.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The ratings could be downgraded if occupancy rates and cash flow
generation deteriorate below Fitch's expectations, resulting in a
consistent use of reserves and lower debt coverage levels.
Increased operational risks that negatively impact the
transaction's collection levels and or limit liquidity could also
derive in a negative rating action.
A downgrade of the sovereign could result in a rating action on the
notes.
Fitch analyzed the rating sensitivity to changes to Fitch's NCF in
up and down environments, results show ratings would not be
resilient to a decrease of 10% in the NCF leading to a downgrade of
at least one notch. While a decrease of 20% or higher in the NCF,
could lead to a multiple notch downgrade.
Fitch has revised global economic outlook forecasts as a result of
the Ukraine War and related economic sanctions. Downside risks have
increased and Fitch has published an assessment of the potential
rating and asset performance impact of a plausible, but
worse-than-expected, adverse stagflation scenario on Fitch's major
SF and CVB sub-sectors (What a Stagflation Scenario Would Mean for
Global Structured Finance). Fitch expects that under a high
inflation scenario, Mexican CMBS transactions could experience
renegotiations or cancelations, therefore, Fitch will closely
monitor performance.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Sustainable cash flow growth resulting from higher-than-estimated
occupancy rates, higher collection and increase in rent income
could derive a higher Fitch NCF; thus, lower LTV levels, higher
debt coverage and may lead to a positive rating action as long as
operational risk is mitigated.
DATA ADEQUACY
The data used for the development of the rating included the
following information from the following sources:
- Email communication and Management calls via conference calls
with the Primary Servicer/sponsor/property manager as of October
2022;
- Officers Certificate from the Manager 2Q22;
- Interim Statements 2Q22;
- Certificate from the Issuer Trust 2Q22;
- Master servicer report 2Q22;
- Additional Information provided by GICSA such as monthly
collection and Interest Reserves as of August 2022;
- Rent Roll as of August 2022 provided by primary servicer.
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.
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P E R U
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PERU: IDB Approves $150M-Loan to Provide Better Sanitation Services
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The Inter-American Development Bank (IDB) approved a $150 million
loan to expand water and sanitation services for rural populations
in Peru, while also promoting the quality and sustainable use of
these services.
The public works will connect homes, healthcare centers, schools,
and social organizations to drinking water and sanitation services.
The program will also make the systems it builds more sustainable
by keeping beneficiaries informed and having them validate
decisions throughout the process.
To achieve these aims, the project will strengthen the capacities
of the Sanitation Administration Councils and seek to give
traditionally excluded groups, like women, more opportunities to
participate and lead service delivery.
The program will also support the development of innovative
technological tools to enhance the operational efficiency and
management of the Ministry of Housing, Construction, and
Sanitation, which will implement the project through the National
Rural Sanitation Program.
The designs will include climate considerations, with
drought-resistant solutions and low carbon sanitation systems. They
will also incorporate inclusive infrastructure - by building
universally accessible bathrooms - as well as environmental and
social management measures.
In Peru, there is a 17-percentage point gap between urban and rural
access to drinking water. In the area of sanitation, 95% of people
in urban areas have access to the public sewer system, while only
78% in rural areas have access to this service.
The program costs a total of $232.2 million, of which $150 million
will be financed by the IDB and $82.2 million through local
contributions. The loan will be disbursed over a period of six
years, and has a 15-year repayment period, a seven-year grace
period, and an interest rate based on the Secured Overnight
Financing Rate (SOFR).
[*] Fitch Takes Actions on Peruvian Entities on Outlook Revision
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Fitch Ratings has taken selected actions on Peruvian Financial
Institutions (FI) following the sovereign's Rating Outlook revision
to Negative. The review also follows Fitch's Outlook adjustment on
its 'bbb-' Operating Environment (OE) assessment for Peruvian banks
to Negative from Stable.
Fitch revised the Outlook on the sovereign's Long-Term (LT) Issuer
Default Ratings (IDR) to Negative as a deterioration in political
stability and government effectiveness has increased downside risks
to Peru's ratings. In the Fitch's view, weaker governance poses
greater downside risks to investment and economic growth.
Fitch also revised the Outlook on the OE score to negative as a
slowdown in economic and loan growth, an increase in borrowing
costs and persistent political uncertainty are detracting from
Peruvian banking sector activity. However, sustained
capitalization, improving profitability and lower loan impairment
charges provide sufficient resilience to face stress from political
uncertainty and external shocks.
This review includes Peruvian FIs with Viability Ratings (VR) and
IDRs rated at the same level, or one or two notches below the
sovereign as these ratings are sensitive to OE deterioration, or
further sovereign rating actions. Furthermore, the agency will not
rate Peruvian FIs higher than the sovereign rating, based on their
current intrinsic credit profiles, except for those with highly
rated parents. Fitch has affirmed all of the ratings for the
Peruvian FIs included in this review.
KEY RATING DRIVERS
Corporacion Financiera de Desarrollo S.A. (Cofide)
Cofide's LT and Short-Term (ST) IDRs are fully aligned with the
sovereign, reflecting Fitch's assessment of the government's
willingness and capacity to provide timely support if needed. In
Fitch's view, Cofide is a key policy bank for the government, as it
is critical in implementing economic and social development
policies. Peru's ability to offer support is reflected in its
sovereign rating (BBB/Negative). Although the government does not
extend an explicit guarantee, ratings are equalized given that the
state is the majority shareholder and the bank has operational and
financial synergies with the public administration.
In Fitch's opinion, the bank's Government Support Rating (GSR) of
'bbb', in line with the sovereign, reflects the high propensity of
the Peruvian government to support, given the bank's ownership
structure and policy role.
PRIVATE SECTOR BANKS
BCP, INTERBANK & BANBIF
Banco de Credito del Peru S.A. (BCP), Banco Internacional del Peru
S.A.A. (Interbank), and Banco Interamericano de Finanzas S.A.
(Banbif)'s VRs drive their IDRs, and therefore, are sensitive to a
change in either the OE or the sovereign's IDRs. The Negative
Outlook revision on the IDRs mirrors the revision of the Outlook on
Peru's ratings, as these banks are constrained by the sovereign's
ratings based on their current intrinsic credit profiles.
Banco BBVA Peru (BP)
After the change in the sovereign Outlook and the consequent
revision of the OE, BP's IDRs became support-driven and are rated
one notch below its parent, Banco Bilbao Vizcaya Argentaria (BBVA
S.A.; BBB+/Stable), given Fitch's "higher of" approach. As a
result, the Outlook on BP's 'BBB' LT IDRs remains Stable, in line
with its parent's Outlooks. The Peruvian operations are part of
BBVA's presence in Latin America, and Fitch believes that BP is of
strategic importance to the BBVA Group's business dynamics,
underpinning the bank's Shareholder Support Rating (SSR) of 'bbb'.
Therefore, Fitch anticipates support from the parent should be
forthcoming, if required.
South America is considered a key market for BBVA globally,
becoming an important part of revenues. Peru is strategic for BBVA
in Spain as it is the second largest bank in the country and the
largest among foreign banks. BBVA S.A. owns 46.12% of BP. A
one-notch downgrade on the Peruvian sovereign´s ratings would not
lead to a similar action on BP's IDRs and its SSR and subordinated
debt rating as they are not capped by the sovereign.
SCOTIABANK PERU S.A.
Scotiabank Peru S.A. (SBP)'s IDRs are based on expected support
from its parent. Based on the subsidiary's role in the group and
its integration with the parent, Fitch considers SBP a
strategically important subsidiary for Bank of Nova Scotia (BNS;
AA-/Stable), underpinning the bank's SSR of 'bbb+'. SBP's LT FC IDR
is capped by the country risks related to transfer and
convertibility reflected in the Country Ceiling of 'BBB+' and
constrains Fitch's assessment of the ability of the shareholder to
support its subsidiary. SBP's Local Currency (LC) IDR is consistent
with a maximum uplift of two notches above Peru's sovereign rating.
The Outlook revision to Negative on SBP's LT Foreign Currency (FC)
and LC IDRs mirrors the Outlook revision on the sovereign's LT
IDRs.
CREDICORP LTD.
Credicorp Ltd (Credicorp)'s IDRs are driven primarily by the IDRs
of its main subsidiary, BCP, which has a strong business and
financial profile. The LT IDR and Outlook are equalized to BCP's
due to the low double leverage at the holding company, strong
liquidity management at Credicorp, 97% subsidiary ownership of BCP,
and the long track record of significant dividend flows that
provide the bulk of Credicorp's liquidity. The senior global debt
rating is at the same level as Credicorp's LT IDRs, as the
likelihood of a default of the notes is the same as Credicorp's.
The ST IDRs were affirmed at 'F2', aligned to those of BCP, as
Fitch believes liquidity is highly fungible among Credicorp and
BCP.
INTERCORP FINANCIAL SERVICES INC. (IFS)
The ratings assigned to Intercorp Financial Sevices Inc. (IFS)
reflect the business and financial profile of its main operating
subsidiary, Interbank. The LT IDRs were affirmed at one notch below
those of Interbank, reflecting IFS's separate jurisdiction
(Panama), the lack of regulatory focus on IFS on a consolidated
basis, and the potential for regulatory restriction of liquidity
upstreaming to IFS in the event of solvency pressures at Interbank.
The Outlook on the LT IDRs was revised to Negative from Stable, in
line with Interbank's Outlook.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
COFIDE
- Cofide's ratings will mirror any potential negative change in
Peru's sovereign ratings;
- Although not a baseline scenario, Cofide's ratings could change
if Fitch perceives a decrease in the bank's strategic importance to
the government's public policies.
PRIVATE SECTOR BANKS
BCP, INTERBANK & BANBIF
- BCP, Interbank and BanBif's IDRs are sensitive to a material
deterioration in the local OE or a negative sovereign rating
action;
-- The ratings of these banks could also be pressured by a material
deterioration of asset quality and profitability metrics due to the
disruption of economic activity as a result of to the political
turmoil;
- BCP's VRs could be negatively affected if the banks' asset
quality deteriorates significantly and causes a sustained decline
in the banks' operating profits to risk-weighted asset (RWA) ratio
to below 2.5% and in the bank's FCC/adjusted RWA ratio to less than
10% (assuming the maintenance of excess reserves and non-core loss
absorbing capital) for more than four consecutive quarters;
- Interbank's VR could be downgraded if the bank's asset quality
deteriorates significantly causing a sustained decline of the
bank's operating performance to less than 2.0% of RWA, and if
Interbank's loss absorption capacity is further pressured, either
in the form of an FCC ratio below 10% or a relevant decline in
reserve coverage for more than four consecutive quarters;
- Banbif's ratings could be downgraded if the FCC ratio falls
consistently below 8%, especially considering the bank's tighter
internal capital generation (i.e. retained earnings);
- BCP, Interbank and Banbif's GSR would be affected if Fitch
negatively changes its assessment of the government's ability
and/or willingness to support the bank. Banbif's GSR also could be
downgraded if the bank loses material market share in terms of
loans and customer deposits.
Banco BBVA Peru
- BP's IDR and Outlook will remain one notch below its parent, BBVA
S.A. IDR or equivalent to its VR, whichever is higher, but subject
to sovereign rating and Country Ceiling considerations;
- A negative rating action on BBVA SA would result in a similar
action on BP;
- Any negative rating action on the sovereign or in Fitch's OE
assessment would also lead to a similar action on BP's VR;
- BP's VR could be negatively affected if the bank's asset quality
deteriorates significantly causing a sustained decline of the
bank's operating performance and capital cushions (a sustained
decline in the bank's FCC/adjusted RWA ratio to less than 10%
assuming the maintenance of excess reserves and non-core loss
absorbing capital or operating profit to RWA below 2.5%);
Scotiabank Peru
- Under Fitch's current support assessment and a multiple notch
downgrade scenario from BNS, SBP's IDRs will likely remain at the
level determined by its own VR or one notch below its parent's IDR,
whichever is higher, but subject to sovereign rating and Country
Ceiling considerations.
- Pressure on SBP's VR could arise from a significant asset quality
or profitability deterioration that erodes SBP's reserve and
capital cushion, specifically, operating profit/RWA sustained below
its historical average of 2.0% and an FCC ratio below 10%.
Credicorp
- Credicorp's IDRs would remain at the same level as BCP's and
would move in tandem with any rating actions on its main operating
subsidiary. However, the relativity between these two entities'
ratings could also be affected and the holding company downgraded,
in the event of a material and sustained increase in Credicorp's
double-leverage metrics (above 1.2x), and if Fitch perceives a
material weakening of the holding company's liquidity position and
its management;
- Additionally, a change in the dividend flows from the operating
companies or debt levels at the holding company that affects its
debt coverage ratios could also be detrimental to Credicorp's
ratings.
IFS
- IFS's ratings are sensitive to a change in Interbank's ratings;
- A reduction on the importance of Interbank's role in the group or
increase in the complexity of the group's structure;
- A material and consistent increase in IFS's common equity double
leverage above 120% or deterioration in its standalone liquidity
profile.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Cofide
- An upgrade is highly unlikely in the near future as the IDRs are
constrained by the sovereign rating;
- Positive Rating actions on Cofide will mirror any potential
positive change in Peru's sovereign rating.
PRIVATE SECTOR BANKS
BCP, INTERBANK & BANBIF
- BCP, Interbank and BanBif's IDRs currently have a Negative
Outlook, which makes an upgrade highly unlikely over the rating
horizon as the banks' IDRs are constrained by the sovereign
rating.
- Over the medium term, BCP, Interbank and BanBif's ratings could
be upgraded by the confluence of an improvement of the OE and the
banks' financial profiles;
- Positive rating actions could occur if BanBif demonstrates a
capacity to sustain improvements in earnings and asset quality
metrics, while also maintaining an FCC ratio greater than 10% amid
the relatively faster loan growth that the bank could have within a
better OE.
Banco BBVA Peru
- BP's IDR will likely remain at the level determined by its own
VR, or one notch below the parent's IDR subject to sovereign rating
and Country Ceiling considerations, whichever is higher. Upside
potential for the VR is limited in the near future, as reflected by
the OE assessment and Outlook.
Scotiabank Peru
- A rating upgrade of SBP's LT LC IDR is unlikely over the rating
horizon. Over the medium term, this rating could be upgraded if the
parent's ratings are upgraded, or if Fitch's support assessment of
SBP changes to an equalization of its IDRs with those of the
parent, but it is subject to constraints on the maximum uplift
above the sovereign rating.
- While unlikely in the current OE, SBP's LT FC IDR would be
upgraded if Peru's sovereign rating and Country Ceiling are
upgraded.
Credicorp
- Credicorp's ratings are sensitive to a change in BCP's ratings;
IFS
- IFS's ratings are sensitive to a change in Interbank's ratings;
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SENIOR AND SUBORDINATED DEBT
Fitch affirmed the senior debt issuances at the same level as its
LT IDRs, as the notes' likelihood of default is the same as
Cofide's.
Cofide's plain vanilla subordinated bonds are rated two notches
below its IDR to reflect a higher loss in case of default and no
additional notches for non-performance as Fitch views the
probability of non-performance as equivalent to that of Cofide's
senior bonds.
BCP, BP, Interbank, Credicorp and IFS senior debt were affirmed at
the same level as its LT IDRs, as the notes' likelihood of default
is the same as the respective entity.
BCP and Interbank's subordinated debt were affirmed two notches
below the VR, reflecting the baseline notching for loss severity.
SBP's subordinated debt was affirmed one notch below what Fitch
considers the appropriate anchor rating, the bank's own
support-driven LT FC IDR.
BP's subordinated debt was affirmed two notches below what Fitch
considers the appropriate anchor rating, the bank's own
support-driven LT FC IDR.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
- The Senior and Subordinated notes' ratings are sensitive to any
changes in Cofide's IDRs.
- BCP, BP, Interbank, Credicorp and IFS's senior debt ratings would
move in line with their respective LT IDRs;
- BCP and Interbank's subordinated debt ratings will mirror any
action on the banks' respective VRs;
- SBP and BP subordinated debt ratings would move in line with
their respective anchor rating, the banks' support-driven LT FC
IDRs.
VR ADJUSTMENTS
BCP
The OE score has been assigned above the implied score due to the
following adjustment reason: Sovereign Rating (positive);
The Capitalization and Leverage score has been assigned above the
implied score due to the following adjustment reason: Reserve
Coverage and Asset Valuation (positive);
BP
The OE score has been assigned above the implied score due to the
following adjustment reason: Sovereign Rating (positive);
The Capitalization and Leverage score has been assigned above the
implied score due to the following adjustment reason: Capital
Flexibility and Ordinary Support (positive);
SBP
The OE score has been assigned above the implied score due to the
following adjustment reason: Sovereign Rating (positive);
Interbank
The OE score has been assigned above the implied score due to the
following adjustment reason: Sovereign Rating (positive);
The Capitalization and Leverage score has been assigned above the
implied score due to the following adjustment reason: Reserve
Coverage and Asset Valuation (positive);
Banbif
The OE score has been assigned above the implied score due to the
following adjustment reason: Sovereign Rating (positive).
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
- BBVA Peru ratings are support driven by Banco Bilbao Vizcaya
Argentaria S.A.;
- Scotiabank Peru ratings are support by BNS;
- Cofide's ratings are support driven by Peru;
- Credicorp Ltd ratings are support driven by Banco de Credito del
Peru;
- Intercorp Financial Services Inc are support driven by
Interbank.
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,
due to either their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Banco Interamericano
de Finanzas S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Viability bb+ Affirmed bb+
Government Support bb- Affirmed bb-
Credicorp Ltd. LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
senior unsecured LT BBB Affirmed BBB
Banco BBVA Peru LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
LC LT IDR BBB Affirmed BBB
LC ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Shareholder Support bbb Affirmed bbb
subordinated LT BB+ Affirmed BB+
Corporacion Financiera
de Desarrollo S.A.
(COFIDE) LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
LC LT IDR BBB Affirmed BBB
LC ST IDR F2 Affirmed F2
Government Support bbb Affirmed bbb
senior unsecured LT BBB Affirmed BBB
subordinated LT BB+ Affirmed BB+
Intercorp Financial
Services Inc LT IDR BBB- Affirmed BBB-
ST IDR F3 Affirmed F3
LC LT IDR BBB- Affirmed BBB-
LC ST IDR F3 Affirmed F3
senior unsecured LT BBB- Affirmed BBB-
Banco Internacional
del Peru S.A.A.
– Interbank LT IDR BBB Affirmed BBB
ST IDR F3 Affirmed F3
LC LT IDR BBB Affirmed BBB
LC ST IDR F3 Affirmed F3
Viability bbb Affirmed bbb
Government Support bbb- Affirmed bbb-
senior unsecured LT BBB Affirmed BBB
subordinated LT BB+ Affirmed BB+
Banco de Credito
del Peru S.A. LT IDR BBB Affirmed BBB
ST IDR F2 Affirmed F2
LC LT IDR BBB Affirmed BBB
LC ST IDR F2 Affirmed F2
Viability bbb Affirmed bbb
Government Support bbb- Affirmed bbb-
senior unsecured LT BBB Affirmed BBB
Scotiabank Peru
S.A.A. LT IDR BBB+ Affirmed BBB+
ST IDR F1 Affirmed F1
LC LT IDR A- Affirmed A-
LC ST IDR F1 Affirmed F1
Viability bbb Affirmed bbb
Shareholder Support bbb+ Affirmed bbb+
subordinated LT BBB Affirmed BBB
=====================
P U E R T O R I C O
=====================
J.J.W. METAL: Court Junks Carolina Bid to Dismiss Adversary Case
----------------------------------------------------------------
In the adversary case titled IN RE: JJW METAL CORP., Chapter 11,
Debtor(s). JJW METAL CORP., Plaintiff(s). MUNICIPIO AUTONOMO DE
CAROLINA, Defendant(s), Adversary Case No. 22-00030-EAG, (Bankr.
D.P.R.), Bankruptcy Judge EDWARD A. GODOY denies the motion to
dismiss filed by the defendant, Municipio Autonomo de Carolina
("Carolina") and grants the motion to amend the complaint of JJW
Metal Corp.
JJW Metal filed this adversary proceeding against Carolina on May
17, 2022, requesting damages for violation of the automatic stay
and to enjoin Carolina from going forward with a local court
action
to shut down JJW Metal's operations.
Carolina moves for the dismissal of the complaint for lack of
subject-matter jurisdiction based on its res judicata argument.
Carolina contends that the Puerto Rico Court of Appeals has
already
ruled regarding the inapplicability of the automatic stay to the
state court action. Carolina argues that the Puerto Rico Court of
Appeals' determination has res judicata effect and is binding on
the bankruptcy court.
The Court points out that by virtue of the power vested in them by
Congress, federal courts have the final authority to determine the
scope and applicability of the automatic stay. Consequently, the
Puerto Rico Court of Appeal's determination on the automatic stay
is not binding on this court.
Carolina further moves to dismiss on the ground that JJW Metal has
failed to state a claim upon which relief should be granted.
Carolina presents matters outside of the pleadings and the record,
which the Court excludes. The Court also denies Carolina's Rule
12(b)(6) request.
After the filing of the motion to dismiss (on July 11, 2022), JJW
Metal had 21 days to amend its complaint as a matter of course.
That term expired on August 1, 2022. The Court finds that the
one-month delay in filing the amended complaint was not excessive
and does not cause an undue prejudice to Carolina.
In its amended complaint, JJW Metal alleges that Carolina's
violation of the automatic stay commenced during the time when the
stay of section 362(a) was in place. JJW Metal claims that the
stay
prevented the enforcement of a consent judgement entered prior to
the commencement of the bankruptcy case. Additionally, JJW Metal
alleges that any action stayed at the filing of the bankruptcy
petition continues to be stayed pursuant to the injunctive
provisions of Article 12.3 of its confirmed plan.
A full-text copy of the OPINION AND ORDER dated Oct. 25, 2022, is
available at https://tinyurl.com/4f5wunkc from Leagle.com.
About J.J.W. Metal Corp.
Palmer, P.R.-based J.J.W. Metal Corp. sought protection under
Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No.
20-04536)
on Nov. 23, 2020. Jorge Rodriguez Quinones, president, signed the
petition. At the time of the filing, the Debtor disclosed total
assets of $1,649,341 and total liabilities of $1,750,865.
Judge Edward A. Godoy oversees the case.
The Debtor tapped Charles A. Cuprill, P.S.C., Law Offices as
bankruptcy counsel; Luis R. Carrasquillo & Co. P.S.C. as financial
consultant; and Gino Negretti Lavergne, Esq., Frank Inserni Milam,
Esq., and Arroyo Cruz Law Office PSC as special counsel. Risk
Assessment & Management (RAM) Group, Inc., Arturo Vazquez Cancel,
and ISFPE, LLC serve as the Debtor's environmental consultants.
*********
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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