/raid1/www/Hosts/bankrupt/TCRLA_Public/221115.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
Tuesday, November 15, 2022, Vol. 23, No. 222
Headlines
A N T I G U A A N D B A R B U D A
LIAT: Dominica PM Speaks of Airline's Collapse
A R G E N T I N A
ARGENTINA: Will Sign Tax Info Exchange Deal w/ US Soon, Says AFIP
CHUBUT PROVINCE: Fitch Affirms LongTerm IDRs at 'CC'
NEUQUEN PROVINCE: Fitch Affirms LongTerm IDRs at 'CC'
[*] Fitch Lowers IDRs for Chaco & Salta Provinces to 'CCC-'
B A H A M A S
FTX TRADING: Commences Chapter 11 as CEO Bankman-Fried Resigns
FTX TRADING: FDM Assets Frozen by Bahamas Regulators
B E R M U D A
NABORS INDUSTRIES: Moody's Hikes CFR to B2 & Unsecured Bond to B3
B R A Z I L
ALTERA INFRASTRUCTURE: Updates Altera Parent Equity Interests
BRAZIL: Automotive Production Rises 15.1% Year-On-Year in October
C H I L E
WOM SA: Fitch Affirms LongTerm IDRs at 'BB-', Outlook Stable
C O L O M B I A
MEDELLIN CITY: Fitch Affirms LongTerm IDRs at 'BB+', Outlook Stable
J A M A I C A
JAMAICA: Customs Addresses Concerns About Port Delays
N I C A R A G U A
NICARAGUA: Continues Rate Hikes
P U E R T O R I C O
STONEMOR INC: Completes Merger With Axar Subsidiary
- - - - -
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A N T I G U A A N D B A R B U D A
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LIAT: Dominica PM Speaks of Airline's Collapse
----------------------------------------------
Trinidad Express reports that intra-regional air transportation
needs to be addressed, as it's hurting every single economy,
especially countries that heavily rely on tourism. Those were the
passionate sentiments from Dominican Prime Minister Roosevelt
Skerrit, as he spoke about the collapse of regional airline LIAT,
according to Trinidad Express.
For those who live in the Southern Caribbean, the airline has
restarted operations on a scaled-down basis and is not servicing
several territories within that geographical space, the report
relays.
Speaking to regional media at the World Creole Music Festival late
last month, Skerrit made it clear that regional travel is a major
problem and when his government was saying the Caribbean needs to
invest in LIAT, many were upset by the statement, the report
notes.
"Dominica, along with three other countries, understood the
importance of LIAT and that it was a public good. There is no
private entity that is going to solve our regional travel
problems," he said, the report relays.
"Governments must invest in this airline and the Government of
Dominica is committed to be part of the new LIAT, or any company
that is willing to play the role that the airline played for so
many decades. While we all miss LIAT, we also were very critical of
it," Skerrit outlined, the report discloses.
According to the Prime Minister, there needs to be a conversation
on what the airline needs to do to simplify the process of getting
from one island to another, the report says.
"How many planes do we need, how much does it cost? What kind of
board structure needs to be put in place and let's get it going?
It's not reinventing the wheel. It is money and commitment, that is
needed.
"As I said, Dominica is ready to put money on the table. If we have
to lease a plane, as part of the contribution, we will do so.
"Caribbean countries play a huge role in regional tourism and we
need to get from one point to the other, so proper construction is
needed for the regional airline to be back up and running," he
acknowledged, the report says.
Speaking to regional media last month's meetings of the
International Monetary Fund and the World Bank in Washington, DC,
St Vincent and the Grenadines' Minister of Finance, Camillo
Gonsalves, said LIAT had a pre-existing condition and the
governments of the region did not see beyond the challenge of the
day -- meaning the impact resulting from the mitigation measures
such as the border closures from Covid-19, the report notes.
Those measures resulted in no flights entering or exiting the
islands, the report discloses.
Gonsalves was also adamant that the previous structure of the
company, where the cost of supporting it was borne exclusively by a
handful of countries -- Antigua and Barbuda, Barbados, Dominica and
St Vincent and the Grenadines -- is no longer sustainable, the
report relays.
"Other countries could not be freeriders in the process. Every
country has to chip in if we are going to have an effective
regional travel solution," Gonsalves stressed, the report
discloses.
Campaign For More T&T Visitors
Dominica has intensified its campaign to attract more visitors from
Trinidad and Tobago to the nature island, by increasing the length
of stay through Caribbean Airlines Limited (CAL), the report
relays.
The Discover Dominica Authority launched a campaign earlier this
year, inviting T&T nationals to make Dominica one of their
destination choices to visit, the report notes.
"Dominica is a new and undiscovered destination that offers a
diverse range of experiences -- from unspoiled nature to thrilling
land and sea adventures to relaxing, therapeutic activities, rich
culture, and flavorful creole cuisine," the report discloses.
"The nature island is the ideal way to get away from the hectic
pace of life in Trinidad and its stresses," the campaign release
said, the report relays.
The Express Business was invited to visit the island last month. In
an interview, Discover Dominica Authority (CCA) chief executive
officer Colin Piper said one of the reasons for targeting T&T
nationals, for the island's World Creole Music Festival and to
vacation, is the fact that T&T is the largest English-speaking
Caribbean market in close proximity to Dominica, the report
relays.
Piper indicated to make the journey more palatable, the authority
recently worked with CAL to fly to Dominica on Thursdays and return
on Mondays, the report says.
"Before, the return date was Saturday, so the stay until Monday
makes the destination more marketable, especially for hotels and
tour operators," he said, the report notes.
"To come for two nights, was not economical. You can also do CAL
from Barbados and use other airlines to get to Dominica, as well,"
Piper remarked, the report discloses.
However, he did admit that intra-regional travel is very difficult
right now, as it has not normalized to pre-pandemic levels, the
report relays.
"The loss of LIAT now means a lot of capacity is no longer
available. While CAL, Inter-Caribbean and Air Antilles are trying
to service the region, there needs to be more dialogue on how they
can make it more seamless and easier for people to move around. The
more people move around to various islands, the economic levels can
increase," Piper explained, the report relates.
Asked whether Dominica has seen a decrease in visitors, due to the
intra-regional travel woes, he said the island has not recovered
from the pandemic, in terms of numbers, the report relays. Piper
indicated that arrivals are about 60 per cent and the DDA is
hopeful by 2023 it would climb to pre-pandemic levels, the report
discloses.
"We continue to work with the airlines, to put in capacity and to
ensure a flight is available for when the traveller needs it," he
said, the report notes.
With things opening back up since the pandemic, Piper said the
citizens were really ecstatic to have the World Creole Music
Festival back up and running after a two year hiatus, the report
relays.
The DDA executive noted about 10,000 people would have attended the
three-day festival which ended on October 30, the report notes.
According to Piper, 6,500 people came from St Lucia, Martinique and
Guadeloupe to enjoy the event, the report discloses. He said the
government invested over US$4 million in this year's festival, as
it is beneficial to the economy and the ordinary man also benefits,
the report says.
"This is our major tourism driver and many Caribbean countries look
forward to the event every year, as we try to have top performers
on our cast," Piper added. The Prime Minister also encouraged more
T&T nationals to visit the island for the festival and for
vacation, the report relays.
"We would love for you to come and see what Dominica has to offer
and this invitation is also for other Caribbean countries. Dominica
is unlike any other island in the Caribbean," Skerrit boasted, the
report notes.
IMF on Dominica
The report relays that in the press release following the 2021
Article IV Consultation with the Dominica authorities, the staff of
International Monetary Fund (IMF) wrote:
"The Covid-19 pandemic took a heavy toll at the Dominican economy.
GDP is estimated to have contracted by 11 per cent in 2020 and is
expected to recover modestly to 3.7 per cent in 2021.
The output decline, driven by a sharp reduction in tourism and
related sectors, was contained by strong growth in the construction
sector stemming from the large public investment programme through
2020-21, financed by exceptionally high revenue from the
Citizenship by Investment (CBI) programme
"Despite record CBI revenue, the sharp decline in tax revenue and
increase in health spending and social transfers led to large
fiscal deficits in 2020 and 2021 and caused public debt to peak at
an estimated 106 per cent of GDP in 2020.
The current account deficit estimate remained high at around 30 per
cent of GDP in 2020-21, owing to the loss of tourism exports and an
increase in imports related to higher public investment and
commodity prices—despite a decline in private demand for imports
. . ..
"In the medium term, growth is expected to recover underpinned by
the return of tourism, expanding hotel capacity, and high public
investment in infrastructure resilient to natural disasters
financed by CBI revenue.
"Risks are skewed to the downside and include renewed worldwide and
domestic Covid-19 contagion waves, CBI revenue and/or official
financing below projected levels, which would slow public
investment and economic activity.
Weakness in the financial sector, particularly the credit unions,
could amplify downside risks."
About LIAT
LIAT Ltd., formerly known as Leeward Islands Air Transport
or LIAT, is an airline headquartered on the grounds of V. C. Bird
International Airport in Antigua. It operates high-frequency
inter-island scheduled services serving 15 destinations in the
Caribbean. The airline's main base is VC Bird International
Airport, Antigua and Barbuda, with bases at Grantley Adams
International Airport, Barbados and Piarco International Airport,
Trinidad and Tobago.
The airline is owned by seven Caribbean governments, with three
being the major shareholders: Barbados, Antigua & Barbuda and St.
Vincent and the Grenadines along with Dominica(94.7 %); other
Caribbean governments, private shareholders and employees (5.3%).
In the last few years, LIAT has been challenged with financial
difficulties, often needing additional funding as the airline
dealt
with the high cost of operations. In November 2016, the Barbados
government defended LIAT's operations, even as opposition
legislators called for a cessation of the business. In early
2015,
LIAT offered early retirement packages to employees in efforts to
downsize. In 2014, LIAT knew it had to deal with unprofitable
routes to make operations viable. In the third quarter of 2013,
the airline's top management was shaken, with news Chief Executive
Officer Captain Ian Brunton's sudden resignation.
LIAT's current chief executive officer is Julie Reifer-Jones,
chairman is Jean Holder, and chief financial officer is Rojer
Inglis.
Dr. Ralph Gonsalves, prime minister of St. Vincent & the
Grenadines, serves as chairman of LIAT shareholders.
=================
A R G E N T I N A
=================
ARGENTINA: Will Sign Tax Info Exchange Deal w/ US Soon, Says AFIP
-----------------------------------------------------------------
Buenos Aires Times reports that the head of Argentina's tax agency
says he is confident that the government will sign an agreement
with the United States government regarding the exchange of tax
information this month.
Speaking to a local radio station, AFIP head Carlos Castagneto said
that he expects the deal to be inked in November, according to
Buenos Aires Times. The move will allow the authorities to
investigate undeclared foreign currency holdings, which officials
believe could total more than US$100 billion, the report notes.
"We are about to sign the agreement. The agreement has already
come and gone several times and we have reached an agreement with
our counterparts," said Castagneto, the report relaus.
"There is at least US$100 billion undeclared and to that we must
add the assets, which are also part of the agreement," he remarked,
the report notes.
Castagneto also said that the investigations into the payment of
tax by companies will be deepened, insisting there is no relation
between what companies and individuals pay, the report discloses.
"Commercial companies account for 52 percent of tax payments and
human beings, plus the self-employed and freelancers, 30 percent.
The equation is unreasonable given that everyone pays 35 percent,"
Castagneto explained, the report relays.
The head of the AFIP recalled that after a series of analyses
carried out by the technical teams, a total of 222 companies were
found to have paid "zero" income tax and therefore investigations
had been expanded, the report notes.
Castagneto said that "there is a group of companies that are paying
very little income tax," the report relays. He claimed that there
are cases in which firms were paying between four and six percent
of the 35 percent that should be paid, the report discloses.
The AFIP official also revealed that tax agency authorities had
identified "fraudulent manoeuvres in manufacturing and cigarette
companies" that had seen the state's coffers lose out on "almost
one billion pesos in tax evasion," the report relays.
He said cigarettes for sale would soon move from the existing
manually stamped system to "a digital system so that each pack is
registered with the agency," the report notes.
"We see a lot of tobacco smuggling, with this system we are going
to eradicate evasion with respect to the marketing and production
of cigarettes," said Castagneto, 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.
CHUBUT PROVINCE: Fitch Affirms LongTerm IDRs at 'CC'
----------------------------------------------------
Fitch Ratings has affirmed the Province of Chubut's Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'CC'.
Chubut's standalone credit profile (SCP) is assessed at 'cc'. In
addition, Fitch has affirmed Chubut's senior secured step-up notes
of USD650 million due in 2030 (Bocade) at 'CC'.
Fitch relied on its rating definitions to position Chubut's ratings
and standalone credit profile. The rating action reflects Chubut's
pressured debt service cover ratio over the next 12-24 months,
reflecting high debt service requirements despite adequate
operating balances, and exposure to foreign exchange risk.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' 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 (2022-2024), due to lower revenue, higher expenditure, or
an unexpected rise in liabilities or debt-service requirements.
All Argentine LRGs have a 'Vulnerable' risk profile captured in
Fitch's 'Weaker' KRF assessments. Argentine LRGs operate in a
context of a weak institutional revenue framework and
sustainability, high expenditure structures, and tight liquidity
and FX debt risks.
Revenue Robustness: 'Weaker'
The 'Weak' revenue robustness assessment considers the country's
complex and imbalanced fiscal framework for LRGs with no
equalization funding. Weak and volatile national economic
performance is also factored into Fitch's revenue robustness KRF
assessment.
Chubut's revenue structure highlights a moderate fiscal autonomy
and reliance on cyclical oil & gas royalties and transfers from a
'CCC-' sovereign. Transfer from the national government amounted to
40% of operating revenues in 2021, while royalties amounted to
26.5%. Own-source tax collection represented 22.4% of operating
revenues. The more balanced revenue composition relative to
Argentine peers is undermined by the dependency towards commodity
sales, which is highly cyclical.
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. The weak macroeconomic environment also
limits LRGs' ability to increase tax rates and expand tax bases to
boost their local operating revenues.
The Province of Chubut's ability to generate additional revenue in
response to possible economic downturns is limited by its high
dependency on royalties. Legislation on royalties is defined at the
national level and provinces' influence is limited. Chubut's
affordability of revenue increases is also constrained by the
moderate income of residents by international standards and
social-political sensitivity to tax increases; income metrics in
Chubut are distorted by a high economic dependence on non-renewable
resources.
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. This is further
exacerbated by the nation's recent standby agreement with the IMF
in 2022. Hence, predictability of non-mandatory transfers is
clouded, especially the retaking of additional fiscal consolidation
agreements, new fiscal reform initiatives or changes to the
national subsidies scheme where provinces could be negatively
impacted from larger expenditure responsibilities.
Chubut's operating balance has been quite volatile across the
years, reflecting its dependency towards oil royalties. Despite the
recent improvement of operating margins, pressure to adjust payroll
to past inflation is likely to lead to real growth of opex in the
coming years.
Expenditure Adjustability: 'Weaker'
For argentine subnationals, infrastructure needs and expenditure
responsibilities are deemed as high, with leeway or flexibility to
cut expenses viewed as low. National capital expenditure (capex) is
low and insufficient translating capex burdens to LRGs. Province of
Chubut capex to total expenditure ratio average at 12.2% for
2017-2021.
Staff cost in 2020 corresponded to 60.4% of total expenditures,
translating into a high expenditure rigidity for the Province of
Chubut. This further limits the ability of the province to perform
expenditure cuts.
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.
At YE 2021, the Province of Chubut direct debt totaled ARS 101
billion. Approximately 68% of debt is denominated in foreign
currency. Exposure to FX risk and capital controls are a
significant fragility of Argentine LRGs. The province also
currently has approximately ARS 3.5 billion of short-term debt.
There is significant maturity concentration in the 2023-2028
period. The Distressed Debt Exchange (DDE) of Chubut's senior
secured bonds created some fiscal space for 2021-2022, but from the
next year onwards, capital repayments will be more sizable. These
bonds count with pledged royalty revenues as collateral.
Liabilities & Liquidity Flexibility: 'Weaker'
For liquidity, Argentine LRGs rely mainly on their own unrestricted
cash. This KRF assessment considers that in Fitch's view, the
Argentine national framework in place regarding liquidity support
and funding available to subnationals is 'Weaker', as there are no
formal emergency liquidity support mechanisms established. The
current context of national capital controls is another risk
captured in the liquidity flexibility assessment, as the imposition
of exchange regulations could ultimately affect LRGs' ability to
fulfill their financial obligations.
Debt Sustainability: 'a 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 YE 2024. Fitch
analyzed debt sustainability metrics to evaluate Chubut specific
debt repayment capacity and its liquidity position in this short
rating case horizon.
The Province of Chubut's 'a' debt sustainability score considers a
'aa' primary payback ratio of 6x for 2024 under Fitch's rating
case. The assessment also considers the 'aaa' fiscal debt burden of
43.8% and an override from the 'b' actual debt service coverage
ratio (ADSCR) of 0.5x in 2024. Fitch classifies Chubut as a type B
LRG, as it covers debt service from cash flows on an annual basis.
DERIVATION SUMMARY
The Province of Chubut's 'cc' SCP reflects rating definitions that
consider the province's very high level of credit risk, given its
pressured debt service coverage ratio over the next 12-24 months.
Chubut's risk profile is assessed as 'Vulnerable', while its debt
sustainability is assessed 'a'. Chubut's SCP also factors in a
comparison with national and international peers. The province´s
IDRs are not affected by any other factors.
Debt ratings
The Province of Chubut's senior secured step-up notes of USD650
million due in 2030 (Bocade) are positioned at 'CC', the same level
as the province's IDRs. The bonds benefit from pledged revenues of
oil royalties. Nonetheless, given the challenging macroeconomic
context and recent history of a DDE, credit enhancements are not
reflected in the bond rating.
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: 'a'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap: 'CCC- (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 77.6% for 2022-2024;
- Operating expenditure average growth of 86.8% for 2022-2024;
- Average net capital balance of around minus ARS46.6 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 ARS174.7per U.S.
dollar for 2022, ARS325.4 per U.S. dollar for 2023, ARS543.1 per
U.S. dollar for 2024.
- Consumer price inflation (annual average % change) of 71.6% for
2022, 95% for 2023, 77% for 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Sustained operating balances that strengthen debt metrics with
actual debt service coverage ratio (ADSCR) above 1x for the first
two years of the projected horizon under Fitch's rating case.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the coming years, including evidence of
increased refinancing risk or transfer and convertibility risk in
its local and foreign currency debt.
ISSUER PROFILE
Chubut is located in the Patagonian region of Argentina, where
socioeconomic indicators tend to be better than the national
average. Chubut's economy is based on services. The province is in
a strategic geographic position and is the country's largest
oil-producing province.
SUMMARY OF FINANCIAL ADJUSTMENTS
No material adjustments were made to figures reported by the
province.
ESG CONSIDERATIONS
ESG-Social: Fitch has revised the Province of Chubut's ESG
Relevance Score for Labor Relations & Practices to '3' from '4' as
Chubut has remained current on its payroll bill in the last year
and is expected to continue to fund salaries moving forward. This
means this ESG issue is credit-neutral or has only a minimal credit
impact on the rating, either due to its nature or the way in which
it is being managed by the entity.
ESG - Environmental: Chubut has an ESG Relevance Score of '4' for
Biodiversity and Natural Resource Management due to the province's
significant economic and financial exposure to the volatile
hydrocarbon sector, which negatively impacts the credit profile and
is relevant to the rating in conjunction with other factors.
ESG - Governance: The province has an ESG Relevance Score of '4'
for Rule of Law, Institutional and Regulatory Quality and Control
of Corruption reflecting the negative impact of the weak regulatory
framework and national policies of the sovereign on the province's
governance in conjunction with other factors.
ESG - Governance: The province has an ESG Relevance Score of '4'
for Creditor Rights. Chubut concluded its DDE in December 2020 and
has complied with the negotiated terms throughout 2021 and 2022.
However, the DDE continues to weigh on its credit profile and there
is a very high risk in the issuer's ability to cover debt service,
therefore, the Creditor Rights issue is relevant to the rating 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.
Entity/Debt Rating Prior
----------- ------ -----
Chubut, Province of LT IDR CC Affirmed CC
LC LT IDR CC Affirmed CC
senior secured LT CC Affirmed CC
NEUQUEN PROVINCE: Fitch Affirms LongTerm IDRs at 'CC'
-----------------------------------------------------
Fitch Ratings has affirmed the Province of Neuquen's (PN) Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'CC'.
Additionally, Fitch has maintained Neuquen's Standalone Credit
Profile (SCP) at 'cc'.
In addition, Fitch has also affirmed at 'CC' the province's issue
ratings, which include TICADE senior secured step-up notes for an
original USD348.69 million due May 12, 2030 and an outstanding of
USD301.7 million, and TIDENEU senior unsecured step-up notes with a
current outstanding of USD377.16 million due April 27, 2030. The
bonds are rated at the same level as the province's IDRs.
Fitch relied on its rating definitions to position the province's
SCP and ratings. The rating affirmation considers the current
context of macroeconomic vulnerability as well as debt refinancing
risks that remain reflected in an actual debt service coverage
ratio (ADSCR) expected to remain below 1x in the next 12 months and
in Fitch's 2022-2024 horizon.
KEY RATING DRIVERS
Risk Profile: 'Vulnerable'
The 'Vulnerable' assessment, for all Argentine local and regional
governments (LRGs) 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
due to lower revenue, higher expenditure, or an unexpected rise in
liabilities or debt-service requirements. LRGs in Argentina operate
in a context of a weak institutional revenue framework, high
expenditure structures, tight liquidity and FX risks.
Revenue Robustness: 'Weaker'
The assessment considers the province's local revenue dependency on
the hydrocarbon sector (highly cyclical economic activity) and the
country's complex and imbalanced fiscal framework for LRGs.
Neuquen has a lower reliance on federal transfers from the
co-participation regime, with current transfers at around 26.7% of
total revenues in YE 2021 from a 'CCC-' sovereign counterparty.
After a real-term decrease of federal co-participation in 2020 of
around 3.6%, in 2021 transfers recovered 7.2% due to Argentina's
economic rebound of 10.3%. In 2022 economic inertia coupled with
inflation dynamics are translating into a real term growth of
around 9%.
Revenue Adjustability: 'Weaker'
For Argentine LRGs, local revenue adjustability is perceived as
low, and challenged by the country's large and distortive tax
burden and high inflation that impacts affordability.
Hydrocarbon royalties represented 30.6% of Neuquen's YE 2021
operating revenues. Commodity-based revenues add cyclicality and
volatility to the finances of Neuquen, as local taxes are also
highly concentrated in the sector. These revenues have influence of
exogenous determinants, like local and external market conditions
and national regulation.
During 2021, economic and price recovery and higher
non-conventional oil production led to an increase of 31% in
provincial crude oil and of 38.8% as of September 2022. While gas
production remained on a flatter trajectory in 2021, it increased
22.5% during 2022 and is projected to grow in the medium term due
to national gasoduct investments. Production increases led to a
real term increase of around 38.2% in hydrocarbon royalty revenues.
In 2022, royalties continue performing favorably, however, the
national context and regulation results in royalties being linked
to prices below global market benchmarks.
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.
Neuquen's budgetary performance is volatile due to its
commodity-based economy, and a track record of opex growing close
to-and above average inflation in some years. In 2021, due to the
economic rebound of the hydrocarbon sector, its operating balance
recovered towards 15.6% of operating revenues (2020: 4.0%). Neuquen
is among the provinces that did not transfer their pension scheme
to the nation, thus when considering the weight of this additional
burden the operating balance stands at 10.7%.
June 2022 data reflects real term opex growth above operating
revenues (16.5% versus 10.9%) in a context of inflation
accelerating at historically high levels, thus Fitch estimates that
for 2022-2024 the province's operating balance will average around
2.9%. Budgetary risks remain from the growing pension deficit
weight and salary pressures due to high inflation, weakening
expenditure predictability.
Expenditure Adjustability: 'Weaker'
Neuquen's ratio of staff expenses in its opex structure is high at
67.1% in 2021; with opex totaling around 86.9% of total
expenditure. On average, in 2017-2021, only a low 10% of total
expenditure corresponds to capex. Due to high infrastructure needs,
there is not much leeway to adjust capex as infrastructure works
are relevant for hydrocarbon sector development.
Liabilities and Liquidity Robustness: 'Weaker'
In YE 2021 direct debt totaled ARS132.1 billion, mostly denominated
in foreign currency (79%), and total debt grew 24.8% relative to
2020 mainly due to currency depreciation. In June 2022, debt
totaled ARS151.7 billion.
The debt relief from Neuquen's 2020 distressed debt exchanges
(DDEs) resulted in an improved ADSCR at YE 2021 above 1x; however,
in the short to medium term, liquidity and refinancing risks remain
due to higher debt amortizations and interest step-ups in 2023 and
steeping in 2024-on, which will pressure debt coverage levels. Due
to expected lower operating balances and FX pressures, ADSCR is
projected to hover around 0.4x in average in 2022-2024, signaling
refinancing risks and driving the qualitative positioning of
Neuquen's current rating.
Neuquen's TICADE notes are secured with hydrocarbon royalties,
which are linked to the U.S. dollar and payable monthly in
Argentine pesos. TICADE's 2021-2022 coverage levels have been above
the transaction's 1.35x required level.
Liabilities and Liquidity Flexibility: 'Weaker'
For liquidity, Argentine provinces rely mainly on their own
unrestricted cash. For cash imbalances, Neuquen has issued short to
medium term Treasury bills with an outstanding of ARS13.9 billion
as of June 2022. At YE 2021, Neuquen's cash totaled ARS15 billion
with a 2.2x liquidity coverage ratio reflecting a better liquidity
stance during the year due to economic recovery, however, in a
context of economic deceleration in 2023-2024 coupled with
expenditure pressures would converge liquidity to structurally
tight and weak levels towards the medium term.
In 2021, according to law No. 3269 that became effective Jan. 1,
2022, the province created a stabilization and development fund
that includes an anticyclical sub-fund. In 2022, the fund ascends
to ARS5.0 billion, however, its use is not considered as available
in the current context of positive hydrocarbon revenue and sector
performance.
Debt sustainability: 'b' category
Debt sustainability is of 'b', resulting from a 'b' payback ratio
and a 'b' coverage ratio assessment. In Fitch's rating case
(2022-2024), the primary metric of payback will be between 10x-26x
with a score of 'b', reflecting the province's weak and volatile
operating balances and growing expenditure pressures in a context
of high inflation pressures. ADSCR is expected below 1.0x; a 'b'
score, resulting in a final 'b' assessment.
DERIVATION SUMMARY
Neuquen's 'cc' SCP is derived from a 'Vulnerable' Risk Profile and
a 'b' debt sustainability score, but also reflects its very high
level of credit risk, including the risk that a default of some
kind is probable. The SCP considers comparison with peers,
including the Provinces of Chubut and La Rioja. Fitch does not
apply any asymmetric risk or extraordinary support from upper-tier
government. The rating is based on Fitch's rating definitions.
Fitch classifies Province of Neuquen as a type B LRG, as it covers
debt service from cash flow on an annual basis.
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: 'b' category
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 77.6% for 2022-2024;
- Operating expenditure average growth of 87% for 2022-2024;
- Average net capital balance of around minus ARS27.2 billion
during 2022-2024;
- Cost of debt considers non-cash debt movements due to currency
depreciation with an average exchange rate of ARS174.7 per U.S.
dollar for 2022, ARS325.4 for 2023 and ARS543.1 for 2024;
- Consumer price inflation (annual average % change) of 71.6% for
2022, 95% for 2023, 77% for 2024.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An improved operating balance that strengthens the actual debt
service coverage ratio above 1.0x on a sustained basis, fueled by a
containment in the operating expenditure front.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the short to medium term, including evidence
of increased refinancing risk in its local and foreign currency
debt; as well as any regulatory restrictions to access FX by LRGs.
ISSUER PROFILE
Neuquen is located in the southwestern region of Argentina. The
province's economy is highly concentrated in the hydrocarbon
sector, contributing to around 39% of national crude oil production
and 62.9% of natural gas production in 2021.
ESG CONSIDERATIONS
Neuquen, Province of has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact of a weak regulatory framework and
national policies on the province's governance, which negatively
affects the credit profile and is relevant to the rating in
conjunction with other factors.
Neuquen, Province of has an ESG Relevance Score of '4' for
Biodiversity and Natural Resource Management due to the province's
significant economic and financial concentration in the volatile
hydrocarbon sector, which negatively influences the credit profile
and is relevant to the rating in conjunction with other factors
Neuquen, Province of has an ESG Relevance Score of '4' for Creditor
Rights, as despite the entity´s improved willingness to service
and repay its debt obligations, the 2020 DDE continues to weigh on
its credit profile and debt coverage is expected to remain
pressured, therefore, the issue of Creditor Rights remains relevant
to the rating 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.
Entity/Debt Rating Prior
----------- ------ -----
Neuquen, Province of LT IDR CC Affirmed CC
LC LT IDR CC Affirmed CC
senior unsecured LT CC Affirmed CC
senior secured LT CC Affirmed CC
[*] Fitch Lowers IDRs for Chaco & Salta Provinces to 'CCC-'
-----------------------------------------------------------
Fitch Ratings has downgraded the Long-Term Foreign Currency (FC)
and Local Currency (LC) Issuer Default Ratings (IDRs) for Province
of Chaco and Province of Salta to 'CCC-' from 'CCC'. The Standalone
Credit Profiles (SCPs) remain at 'ccc', and the IDRs are capped by
the sovereign rating.
Additionally, Fitch has downgraded to 'CCC-' from 'CCC' Chaco's
step-up USD262.6 million senior unsecured notes due 2028 and
Salta's amended USD357.4 million senior unsecured step-up notes due
in 2027. The bonds are rated at the same level as the provinces'
IDRs.
KEY RATING DRIVERS
The downgrades are due to Fitch's recent rating action on
Argentina's sovereign rating on Oct. 26, 2022.
The provinces' ratings are capped by the sovereign's ratings. Their
SCPs, risk profile and debt sustainability assessments remain as
published in their latest rating action commentary (RAC).
Province of Chaco and Province of Salta do not meet the conditions
stipulated in Fitch's LRG criteria that would allow them to be
rated above a sovereign that is rated below 'B-'; therefore they
are capped by the sovereign rating of 'CCC-'.
DERIVATION SUMMARY
Chaco's and Salta's SCPs are assessed at 'ccc', reflecting a
combination of vulnerable risk profile and debt sustainability in
the 'aa' category. Additionally, in line with Fitch's methodology
for SCP of 'ccc' or below, Fitch weighs quantitative and
qualitative nuances against national and international peers. Fitch
relied on its rating definitions to position these ratings.
Fitch does not apply any asymmetric risk or ad-hoc support from the
central government and assesses intergovernmental financing as
neutral to the province's ratings. Nevertheless, the province's
IDRs reflect the exposure to macroeconomic vulnerabilities and
unpredictable regulatory framework that prevail in Argentina.
KEY ASSUMPTIONS
Qualitative Assumptions
Qualitative assumptions and assessments for Province of Chaco and
Province of Salta are as follows:
Province of Chaco and Province of Salta
- 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.
- Budget Loans or Ad-Hoc Support: n/a
- Asymmetric Risk: n/a
- Sovereign Cap: 'CCC-'
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. 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. Fitch's rating case is based
on the 2016-2020 figures and 2021-2023 projected ratios.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
For Chaco and Salta:
- IDRs are capped by the sovereign rating. Argentina's IDR upgrade
would lead to a corresponding rating action on the entities if
their SCPs remain at 'ccc'.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
For Chaco and Salta:
- Signs of deeper liquidity stress that could compromise debt
repayment capacity in the next 12 months of the projected horizon,
including evidence of increased refinancing risks or any regulatory
impositions that hinder debt servicing of external debt.
- Policy or budgetary uncertainties that deteriorate operating
margins and drive debt service coverage ratio below 1.0x;
- Additional expenditure risks that increase volatility of
operating balances and deteriorate ADSCR relative to Argentine LRG
peers;
- Any formal announcement by the province or its agent that is
assessed as a distressed debt exchange (DDE) under Fitch's rating
definitions.
ESG CONSIDERATIONS
Province of Chaco
Chaco, Province of has an ESG Relevance Score of '4' for Rule of
Law, Institutional & Regulatory Quality, Control of Corruption
reflecting the negative impact of a weak regulatory framework and
national policies have over the province, which has a negative
impact on the credit profile, and is relevant to the rating in
conjunction with other factors.
Chaco, Province of has an ESG Relevance Score of '4' for Creditor
Rights due to the 2021 DDE, which has a negative impact on the
credit profile, and is relevant to the ratings in conjunction with
other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Province of Salta
Salta has an ESG relevance score of '4' for Rule of Law,
Institutional & Regulatory Quality, Control of Corruption as it
presents weak management practices and regulations toward its
financial obligations, which has a negative impact on the credit
profile, and is relevant to the ratings in conjunction with other
factors.
Salta has an ESG Score of '4' for Creditor Rights due to the 2021
DDE, which has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Salta, Province of LT IDR CCC- Downgrade CCC
LC LT IDR CCC- Downgrade CCC
senior unsecured LT CCC- Downgrade CCC
Chaco, Province of LT IDR CCC- Downgrade CCC
LC LT IDR CCC- Downgrade CCC
senior unsecured LT CCC- Downgrade CCC
=============
B A H A M A S
=============
FTX TRADING: Commences Chapter 11 as CEO Bankman-Fried Resigns
--------------------------------------------------------------
FTX Trading Ltd. (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a. FTX US), Alameda Research Ltd. and approximately 130
additional affiliated companies, together comprising the FTX Group,
have commenced voluntary proceedings under Chapter 11 of the United
States Bankruptcy Code in the District of Delaware to begin an
orderly process to review and monetize assets for the benefit of
all global stakeholders.
FTX and more than 130 related companies sought court protection
without filing any of the usual court motions or explanatory
documents seen in a big US insolvency case. The companies' main
court docket contains only a
23-page bare-bones petition.
According to Reuters, Bankman-Fried shared a document with
investors on Nov. 10 showing FTX had $13.86 billion in liabilities
and $14.6 billion in assets. However, only $900 million of those
assets were liquid, leading to the cash crunch that ended with the
company filing for bankruptcy. Reuters was able to review the
document.
Financial Times, which also saw the investment materials, reports
the largest portion of those liquid assets listed on a FTX
international balance sheet dated Nov. 10 was $470 million of
Robinhood shares owned by a vehicle not listed in the bankruptcy
filing.
"The immediate relief of Chapter 11 is appropriate to provide the
FTX Group the opportunity to assess its situation and develop a
process to maximize recoveries for stakeholders," said new CEO John
J. Ray III. "The FTX Group has valuable assets that can only be
effectively administered in an organized, joint process. I want to
ensure every employee, customer, creditor, contract party,
stockholder, investor, governmental authority and other stakeholder
that we are going to conduct this effort with diligence,
thoroughness and transparency. Stakeholders should understand that
events have been fast-moving and the new team is engaged only
recently. Stakeholders should review the materials filed on the
docket of the proceedings over the coming days for more
information."
The turmoil hit already-struggling cryptocurrency markets,
sending bitcoin to two-year lows. Bitcoin dropped after FTX's
announcement and was down 4.3% at $16,803 on Friday, Nov. 11, 2022,
afternoon.
CEO's Exit
FTX also announced Sam Bankman-Fried has resigned his role as Chief
Executive Officer and will remain to assist in an orderly
transition.
The Associated Press notes Mr. Bankman-Fried was recently estimated
to be worth $23 billion and has been a prominent political donor to
Democrats. His net worth has all but evaporated, according to
Forbes and Bloomberg, which closely track the net worth of the
world's richest people.
"I'm piecing together all of the details, but I was shocked to see
things unravel the way they did earlier. I will, soon,
write up a more complete post on the play by play, but I want to
make sure that I get it right when I do," Bankman-Fried tweeted.
Mr. Ray III has been appointed as the new CEO of the FTX Group.
According to the announcement, many employees of the FTX Group in
various countries are expected to continue with the FTX Group and
assist Mr. Ray and independent professionals in its operations
during the Chapter 11 proceedings.
Reuters notes Mr. Ray, 63, oversaw the liquidation of Enron after
its bankruptcy filing and served as the senior officer of what
became Enron Creditors Recovery Corp. He also led the bankruptcy
restructuring at Nortel Networks.
FTX Collapse
FTX's collapse follows the bankruptcy filings of Three Arrows
Capital, Voyager Digital, and Celsius Network, after the collapse
of major tokens terraUSD and luna in May 2022 created domino
effects throughout the crypto industry. The total value, or market
cap, of the largest 100 cryptocurrencies was $2.7 trillion on
November 2021 but in early September 2022, the aggregate value of
the cryptocurrency market sank below $1 trillion for the first time
since 2020.
Just this September, FTX outbid digital asset investment firm Wave
Financial for the assets of Voyager Digital. Voyager was set to
seek court approval this December of its Chapter 11 plan that's
backed by a $1.422 billion sale transaction with FTX US. Voyager
account holders owed $1.76 billion were to recover 72 cents on the
dollar of their claims and were to be transitioned into the FTX
platform. But Voyager has scrapped those plans following FTX's
collapse.
Reuters reports FTX had struggled to raise billions to stave off
collapse as traders rushed to withdraw $6 billion from the platform
in just 72 hours and rival exchange Binance abandoned a proposed
rescue deal. According to The Wall Street Journal, Mr.
Bankman-Fried tweeted Nov. 10, 2022, that FTX paused customer
withdrawals after it was hit with roughly $5 billion worth of
withdrawal requests.
The crisis forced FTX to scramble for an emergency investment. FTX
struck a deal to sell itself to its giant rival Binance, but
Binance walked away from the deal the next day.
"As a result of corporate due diligence, as well as the latest news
reports regarding mishandled customer funds and alleged US agency
investigations, we have decided that we will not pursue the
potential acquisition of http://FTX.com,"Binance tweeted Nov. 10.
FTX, Reuters recounts, raised $400 million from investors in
January, valuing the company at $32 billion. It attracted money
from investors such as Singapore state investor Temasek and the
Ontario Teachers' Pension Plan as well as celebrities and sports
stars.
Financial Times' Antoine Gara, Kadhim Shubber and Joshua Oliver
report that the investment materials show FTX Trading have
liabilities of $8.9 billion, the biggest portion of which is $5.1
billion of US dollar balances. FT says the vast majority of FTX
Trading's recorded assets are either illiquid venture capital
investments or crypto tokens that are not widely traded.
Financial Times notes the platform's biggest asset as of Nov. 10
was $2.2 billion worth of a cryptocurrency called Serum. FT points
out Serum's total market value was $88 million on Nov. 12,
according to data provider CryptoCompare, suggesting FTX's
holdings
would be worth far less if sold into the market. CryptoCompare's
figures take into account the coin's liquidity, according to FT.
Financial Times also reports Bankman-Fried was looking to sell the
$472 million of Robinhood shares in privately negotiated deals he
was arranging on the messaging app Signal, according to a person
directly involved in the negotiations. That source said the
Robinhood shares were held by an Antigua and Barbuda entity called
Emergent Fidelity, which is personally controlled by Bankman-Fried,
according to US securities filings. Emergent Fidelity is not among
the entities that sought bankruptcy protection.
The source told FT Bankman-Fried was entertaining offers at an
about 20% discount to Robinhood’s volume-weighted average
price,
or about $9 per share. The investor ultimately declined to buy due
to perceived legal risks, FT says.
FT further reports the second-biggest liquid asset was $200 million
of cash held with Ledger Prime, a crypto investment firm owned by
Alameda.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
On Nov. 10, 2022, the Securities Commission of The Bahamas froze
assets of FTX Digital Markets Ltd. and related parties, suspended
their registration, and applied to the Supreme Court of The Bahamas
for the appointment of a provisional liquidator for FDM. Mr. Brian
Simms, K.C. (Lennox Paton Counsel and Attorney-at Law) was
appointed as provisional liquidator.
On Nov. 10, 2022, FTX Trading Ltd (d/b/a FTX.com), West Realm
Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and
approximately 135 additional affiliated companies commenced
voluntary Chapter 11 bankruptcy proceedings (Bankr. D. Del. Lead
Case No. 22-11068).
FTX Trading and its affiliates each listed $10 billion to $50
million in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
The Hon. John T. Dorsey is the case judge.
Adam G. Landis, Esq., at Landis Rath & Cobb LLP in Wilmington
serves as FTX Group's local bankruptcy counsel.Â
Joshua A. Sussberg, Esq., at Kirkland represents Voyager, and a
trio of lawyers at Sullivan & Cromwell represent West Realm.Â
John J. Ray III assumed the role as the company's CEO following Sam
Bankman-Fried's resignation.
Lawyers at Paul Weiss represent Mr. Bankman-Fried or the 135
debtors or both.
FTX TRADING: FDM Assets Frozen by Bahamas Regulators
----------------------------------------------------
The Securities Commission of The Bahamas announced Nov. 10, 2022,
that it took action to freeze assets of FTX Digital Markets and
related parties. The Commission also suspended the registration and
applied to the Supreme Court of The Bahamas for the appointment of
a provisional liquidator of FTX Digital Markets Ltd. (FDM).
Mr. Brian Simms, K.C. (Lennox Paton Counsel and Attorney-at Law)
was appointed as provisional liquidator. Additionally, the powers
of the directors of FDM have been suspended and no assets of FDM,
client assets or trust assets held by FDM, can be transferred,
assigned or otherwise dealt with, without the written approval of
the provisional liquidator.
The Commission said it is aware of public statements suggesting
that clients' assets were mishandled, mismanaged and/or transferred
to Alameda Research. Based on the Commission's information, any
such actions would have been contrary to normal governance, without
client consent and potentially unlawful.
Since the unfolding of events involving FDM, the Commission has
proactively dealt with the situation and continues to do so. The
Commission determined that the prudent course of action was to put
FDM into provisional liquidation to preserve assets and stabilize
the company.
The Commission is committed to working with the provisional
liquidator to endeavour to obtain the best possible outcome for the
customers and other stakeholders of FTX.
No Withdrawals Authorized
The Securities Commission of The Bahamas notes of the statement
made by FTX representatives which advised "Per Bahamian HQ's
regulation and regulators, we have begun to facilitate the
withdrawals of Bahamian funds. As such, you may have seen some
withdrawals processed by FTX recently as we complied with the
regulators".
The Commission clarified Nov. 12 it has not directed, authorized
or suggested to FTX Digital Markets Ltd. the prioritization of
withdrawals for Bahamian clients. The Commission further notes
those transactions may be characterized as voidable preferences
under the insolvency regime and consequently result in clawing back
funds from Bahamian customers. In any event, the Commission does
not condone the preferential treatment of any investor or client of
FTX Digital Markets Ltd. or otherwise.
The Securities Commission of The Bahamas is a statutory body
established in 1995 pursuant to the Securities Board Act, 1995.
The Commission is responsible for the administration of the SIA,
2011 and the Investment Funds Act, 2019 (IFA), which provides for
the supervision and regulation of the activities of the investment
funds, securities and capital markets.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
On Nov. 10, 2022, FTX Trading Ltd (d/b/a FTX.com), West Realm
Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and
approximately 135 additional affiliated companies commenced
voluntary Chapter 11 bankruptcy proceedings (Bankr. D. Del. Lead
Case No. 22-11068).
FTX Trading and its affiliates each listed $10 billion to $50
million in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
The Hon. John T. Dorsey is the case judge.
Adam G. Landis, Esq., at Landis Rath & Cobb LLP in Wilmington
serves as FTX Group's local bankruptcy counsel.Â
Joshua A. Sussberg, Esq., at Kirkland represents Voyager, and a
trio of lawyers at Sullivan & Cromwell represent West Realm.Â
John J. Ray III assumed the role as the company's CEO following Sam
Bankman-Fried's resignation.
Lawyers at Paul Weiss represent Mr. Bankman-Fried or the 135
debtors or both.
=============
B E R M U D A
=============
NABORS INDUSTRIES: Moody's Hikes CFR to B2 & Unsecured Bond to B3
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of Nabors Industries
Ltd., including its Corporate Family Rating to B2 from B3 and the
ratings on Nabors' and Nabors Industries, Inc.'s (NII) existing
notes. Nabors' Speculative Grade Liquidity Rating was upgraded to
SGL-2 from SGL-3. The rating outlook remains positive for Nabors
and NII.
"The upgrade of Nabors' credit ratings reflects the improving
industry conditions for drillers and Moody's expectation the
company will generate higher free cash flow in 2023," stated James
Wilkins, Moody's Vice President. "The company's leverage has
declined meaningfully in 2022 as a result of higher earnings and
modest debt reduction."
The following summarizes the ratings activity.
Upgrades:
Issuer: Nabors Industries Ltd.
Corporate Family Rating, Upgraded to B2 from B3
Probability of Default Rating, Upgraded to B2-PD from B3-PD
Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to
B3 (LGD4) from Caa1 (LGD4)
Issuer: Nabors Industries, Inc.
Gtd Senior Unsecured Conv./Exch. Bond/Debenture, Upgraded to
Caa1 (LGD6) from Caa2 (LGD5)
Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to B1
(LGD3)
from B3 (LGD3)
Gtd Senior Unsecured Regular Bond/Debenture, Upgraded to Caa1
(LGD6)
from Caa2 (LGD5)
Outlook Actions:
Issuer: Nabors Industries Ltd.
Outlook, Remains Positive
Issuer: Nabors Industries, Inc.
Outlook, Remains Positive
RATINGS RATIONALE
The upgrade of Nabors Industries Ltd.'s CFR to B2 reflects steady
improvements to its credit metrics supported by the favorable
drilling industry environment. Drillers experienced a lag in the
rebound in margins compared to E&P companies since the 2020
downturn, but have realized material increases in pricing in 2022.
Moody's expects further improvements in demand for rigs and pricing
into 2023. The industry is demonstrating capital discipline in
adding rigs to the market that is supporting higher pricing and
profit margins. Nabors generated positive free cash flow in the
second and third quarters 2022 and modestly reduced its net debt in
the first nine months of 2022. Higher earnings and lower debt
resulted in a decline in Nabors' leverage (debt to EBITDA) to 4.1x
as of September 30, 2022, from 6.7x at year-end 2021.
The CFR also reflects the cyclical and competitive nature of the
drilling industry with pricing and rig utilization rates not
supporting free cash flow generation throughout industry cycles,
and its high financial leverage and upcoming debt maturity profile
in 2023-2025. The credit profile is supported by Nabors' large
scale, high quality rig fleet, long-standing contractual
relationship with some of the world's largest oil companies, and a
strong and diversified international footprint. The company's
relationship with its largest customer, Saudi Arabian Oil Company
(Saudi Aramco, A1 stable), will continue to provide a base level of
earnings and stability.
The rated NII senior unsecured notes have a parent guarantee from
Nabors Industries Ltd., lack subsidiary guarantees and rank junior
to all other classes of debt in the capital structure, and hence
are rated Caa1, two notches below the CFR. NII has a senior secured
revolving credit facility (unrated) that has a priority claim over
Nabors' assets relative to the super priority guaranteed notes
(SPGNs) given the lower tier notes guarantors will be contractually
subordinated in right of payment with respect to the lower tier
notes guarantor's guarantee of the revolving credit facility. In
addition to having a downstream guarantee from the parent (Nabors),
the SPGNs have upstream guarantees from certain lower tier
subsidiaries that are closer to Nabors' assets relative to the
guarantors of the priority guaranteed senior unsecured notes (PGNs)
that were previously issued by Nabors Industries Ltd. NII's legacy
senior unsecured notes do not have any subsidiary guarantees. The
SPGNs are rated B1, which Moody's views as more appropriate than
the rating suggested by Moody's Loss Given Default for
Speculative-Grade Companies methodology. The 2026 and 2028
guaranteed unsecured notes (PGNs) issued by Nabors are rated B3,
one notch below the CFR, given their structurally subordinated
position to the revolver and the SPGNs.
The SGL-2 rating reflects Moody's expectation Nabors will have good
liquidity through 2023 supported by cash and short-term
investments, meaningful free cash flow, and availability under its
credit facilities. As of September 30, 2022, Nabors had $425
million of unrestricted cash and short-term investments, of which
$306 million was held at a joint-venture and was not readily
accessible. The $350 million revolving credit facility was undrawn
and had letters of credit totaling $64.8 million outstanding as of
September 30, 2022. Availability is subject to a minimum collateral
coverage threshold requirement. The credit agreement matures
January 21, 2026, but is subject to multiple springing maturity
dates, if certain amounts of each notes issue remain outstanding
before the notes' maturity dates. Nabors had $73 million of notes
maturing in 2023 and $177 million maturing in 2024, which Moody's
expects the company to be able to address and avoid any
acceleration of the revolver maturity. The revolver financial
covenants include a minimum interest coverage ratio (EBITDA /
interest expense, 1.875x for the quarter ended September 30, 2022,
tightening to 2.75x for the quarter ended June 30, 2024) and a
minimum guarantor value, requiring guarantors and their
subsidiaries to own at least 90% of the consolidated PP&E of the
company. Nabors should be able to comply with its credit agreement
financial covenants through 2023.
The company also has an accounts receivable facility that allows it
to sell up to $250 million of receivables, subject to the amount of
eligible receivables. As of September 30, 2022, $167 million of
receivables had been sold. The facility matures on August 13, 2024,
but the maturity date can be accelerated if certain amounts of
notes remain outstanding at various dates before the notes'
maturity dates, which Moody's does not expect to be an issue.
The positive outlook reflects Moody's expectation that Nabors will
continue to make progress toward its goal of reducing debt and
extending maturities as global drilling activity continues to
improve through 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade could be considered if Nabors generates free cash flow
consistently and achieves meaningful debt reduction, leading to a
sustained debt/EBITDA ratio below 4x in a stable to improving
industry environment. The ratings could be downgraded if
debt/EBITDA rises above 5.5x, refinancing risk increases or the
company generates material negative free cash flow eroding its
liquidity cushion.
The principal methodology used in these ratings was Oilfield
Services published in August 2021.
Nabors Industries Ltd., a Bermuda-incorporated entity, is one of
the largest global land drilling contractors with operations in
nearly two dozen countries and several offshore markets. Nabors
Industries, Inc. is a wholly owned subsidiary of Nabors Industries
Ltd.
===========
B R A Z I L
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ALTERA INFRASTRUCTURE: Updates Altera Parent Equity Interests
-------------------------------------------------------------
Altera Infrastructure L.P., et al., submitted a Third Amended Joint
Chapter 11 Plan of Reorganization dated November 3, 2022.
The Debtors propose this joint chapter 11 plan of reorganization
for the resolution of the outstanding claims against, and equity
interests in, the Debtors.
Class 13 consists of all Existing Common Equity Interests in Altera
Parent. On the Effective Date, each Existing Common Equity Interest
in Altera Parent shall be cancelled, released, and extinguished
without any distribution, and will be of no further force or
effect, and each holder of an Existing Common Equity Interest in
Altera Parent shall not receive or retain any distribution,
property, or other value on account of its Existing Common Equity
Interest in Altera Parent. Class 13 is Impaired under the Plan.
Like in the prior iteration of the Plan, each holder of a General
Unsecured Claim at Debtors other than Altera Parent and Altera
Finance Corp. shall receive, at the Debtors' option and with the
consent of the Consenting Sponsor: (a) payment in full in Cash; (b)
reinstatement pursuant to section 1124 of the Bankruptcy Code; or
(c) such other treatment rendering such Claim unimpaired in
accordance with section 1124 of the Bankruptcy Code.
Each of the Credit Agreement Claims shall be Allowed in the
following principal amounts (which, for avoidance of doubt, does
not include accrued and unpaid interest, fees, costs, and expenses
as of the Petition Date): (a) Credit Agreement Claims arising under
or in connection with the Knarr Facility, $290,624,999.90; (b)
Credit Agreement Claims arising under or in connection with the
Petrojarl I Facility, $43,750,000.00; (c) Credit Agreement Claims
arising under or in connection with the Gina Krog Facility,
$52,026,864.56; (d) Credit Agreement Claims arising under or in
connection with the Suksan Salamander Facility, $12,500,000.00; (e)
Credit Agreement Claims arising under or in connection with the
Arendal Facility, $8,500,000.00; (f) Credit Agreement Claims
arising under or in connection with the 6x ALP Facility,
$42,544,000.00; and (g) Credit Agreement Claims arising under or in
connection with the 4x ALP Facilities, $101,705,413.00.
The Debtors and the Reorganized Debtors, as applicable, shall fund
distributions under the Plan with: (1) Cash on hand, including Cash
from operations, the DIP Facility, and the proceeds of the Rights
Offering; (2) the New Common Stock; (3) the New GP Common Stock and
(4) the New Warrants, as applicable.
A full-text copy of the Third Amended Joint Plan dated November 3,
2022, is available at https://bit.ly/3EgZI2a from PacerMonitor.com
at no charge.
Proposed Co-Counsel to the Debtors:
Matthew D. Cavenaugh, Esq.
Kristhy M. Peguero, Esq.
Rebecca Blake Chaikin, Esq.
Victoria N. Argeroplos, Esq.
JACKSON WALKER LLP
1401 McKinney Street, Suite 1900
Houston, TX 77010
Telephone: (713) 752-4200
Facsimile: (713) 752-4221
E-mail: mcavenaugh@jw.com
kpeguero@jw.com
rchaikin@jw.com
vargeroplos@jw.com
- and -
Joshua A. Sussberg, Esq.
Brian Schartz, Esq.
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, NY 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
E-mail: joshua.sussberg@kirkland.com
brian.schartz@kirkland.com
- and -
John R. Luze, Esq.
300 North LaSalle
Chicago, IL 60654
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
E-mail: john.luze@kirkland.com
About Altera Infrastructure L.P.
Westhill, United Kingdom-based Altera Infrastructure L.P. (NYSE:
ALIN-A) is a global energy infrastructure services partnership
primarily focused on the ownership and operation of critical
infrastructure assets in the offshore oil regions of the North Sea,
Brazil and the East Coast of Canada. Altera has consolidated assets
of approximately $3.8 billion comprised of 44 vessels, including
floating production, storage and offloading (FPSO) units, shuttle
tankers, floating storage and offtake (FSO) units, long-distance
towing and offshore installation vessels and a unit for maintenance
and safety (UMS). The majority of Altera's fleet is employed on
medium-term, stable contracts.
After agreeing to a debt-for-equity plan with bank lenders and
owner Brookfield, Altera Infrastructure LP and 37 affiliates sought
Chapter 11 protection (Bankr. S.D. Texas Lead Case No. 22-90130) on
Aug. 12, 2022. Judge Marvin Isgur oversees the cases.
As of the petition date, the Debtors were liable for approximately
$1.6 billion in aggregate principal amount of funded debt.
Kirkland & Ellis LLP, Jackson Walker LLP, and Quinn Emanuel
Urquhart & Sullivan LLP serve as the Debtors' lead counsel, local
counsel, and special counsel, respectively. The Debtors also
tapped Evercore Group LLC as investment banker and
PricewaterhouseCoopers LLP as tax compliance, tax consulting, and
accounting advisory services provider. David Rush, senior managing
director at FTI Consulting, Inc., serves as restructuring advisor
to the Debtors. Stretto is the claims agent.
The DIP Lenders are represented by Paul, Weiss, Rifkind, Wharton &
Garrison LLP, as counsel to the DIP Lenders, Ducera Partners LLC,
as financial advisor, and Porter & Hedges LLP, as their Texas
counsel.
The U.S. Trustee for Region 7 appointed an official committee of
unsecured creditors on Aug. 22, 2022. The unsecured creditors
committee tapped Friedman Kaplan Seiler & Adelman, LLP and
Pachulski Stang Ziehl & Jones, LLP as legal counsel; and
AlixPartners, LLP as financial advisor.
A committee of coordinators was appointed under and as defined in
the appointment letter originally dated May 6, 2022, among Altera
Infrastructure LP and each member of the CoCom. The CoCom is
represented by Norton Rose Fulbright US, LLP and Norton Rose
Fulbright, LLP as legal counsel and PJT Partners (UK) Ltd. As
financial advisor.
The Noteholder Ad Hoc Group tapped Vinson & Elkins LLP and
Wachtell, Lipton, Rosen & Katz as its attorneys.
BRAZIL: Automotive Production Rises 15.1% Year-On-Year in October
-----------------------------------------------------------------
Richard Mann at Rio Times Online reports that vehicle production in
Brazil, Latin America's leading economy, increased 15.1 percent in
October compared to the same month last year, the National
Association of Automobile Manufacturers (Anfavea) reported.
Brazilian factories produced 206,044 units in October, compared to
178,965 in the same month of 2021, Anfavea disclosed to the press
in Sao Paulo, according to Rio Times Online.
Vehicle production fell by 0.8 percent compared to September, while
in the accumulated period between January and October, it advanced
by 7.1 percent, the report notes.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Jair Bolsonaro is the current president, having
been sworn in on Jan. 1, 2019.
In July 2022, Fitch Ratings affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and revised the Rating
Outlook to Stable from Negative. In June 2022, S&P Global Ratings
also affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. Moody's, in April
2022, affirmed Brazil's long-term Ba2 issuer ratings and senior
unsecured bond ratings, (P)Ba2 senior unsecured shelf ratings, and
maintained the stable outlook. On the other had, DBRS, in August
2022, confirmed Brazil's Long-Term Foreign and Local Currency
Issuer Ratings at BB (low).
=========
C H I L E
=========
WOM SA: Fitch Affirms LongTerm IDRs at 'BB-', Outlook Stable
------------------------------------------------------------
Fitch Ratings has affirmed WOM S.A.'s ratings, including the
Long-Term Foreign Currency Issuer Default Rating (IDR), the Local
Currency IDR, and the 2024 and 2028 unsecured
U.S.-dollar-denominated notes issued by Kenbourne Invest S.A. at
'BB-'. The Rating Outlook is Stable.
These rating actions reflect WOM's commitment to maintaining a
steady credit profile following the outcome of the previously
announced tender offer and consent solicitation and the tower
sale-and-leaseback transaction, as well as its growing market
shares supported by recent investments in the company's spectrum
and network that should translate into improved EBITDAR over time.
The ratings are tempered by the competitive pressures of the
Chilean market and the group's negative FCF generation from
dividends and elevated capex to support network investments.
KEY RATING DRIVERS
Tower Sales Neutral: WOM announced that it had reached an agreement
with Phoenix Tower International (PTI), a global tower
infrastructure operator, to sell 3,800 of its towers to PTI during
July. As part of the agreement, PTI acquired 2,334 of WOM's
existing towers at the closing, with an additional 1,466 towers to
be constructed by 2024. WOM will receive USD930 million in proceeds
in total from the transaction, most of which will be received in
2022 with the remainder over the next two years. Through an
announced tender offer, a portion of the initial proceeds has gone
toward debt repayment.
High Leverage: As leases have now become a meaningful portion of
WOM's overall financial obligations with 100% of towers now leased,
a supplemental lease-adjusted net leverage metric is considered in
assessing the company's leverage. Fitch's base case is that
lease-adjusted net leverage will trend down over the next few years
from 5.5x toward 4.5x. Keys to deleveraging will be the company's
ability to grow EBITDAR as anticipated as well as the use of
additional proceeds from the tower sale that are expected to come
in 2023 and 2024.
Steady Growth Prospects: Fitch forecasts WOM to grow revenues from
CLP611 billion in 2021 to CLP780 billion in 2024, driven by network
investments to aid post-paid migration and support stable ARPUs in
a competitive Chilean market. While Fitch forecasts EBITDA to
contract modestly over the rating horizon due to higher lease
expense, EBITDAR is expected to grow from CLP184 billion in 2021 to
over CLP260 billion over the same period due to improvements in
scale.
Proven Track-Record: Since WOM launched in mid-2015, the company
has scaled rapidly, reaching over 7.0 million customers, more than
half of which are post-paid. The company has taken market share
from larger incumbents through its disruptive marketing campaign,
based on brand recognition, gigabyte-per-CLP value and retail
experience. Fitch expects the company's longer-term market share to
grow to approximately 25% from 21% as of June 2022, supporting
slower but more profitable growth as the company nears its market
share targets. WOM has a solid growth plan, backed by its
experienced management team and shareholder. Novator has experience
running telecommunications ventures in both developed and
developing markets, and executed its growth strategy while
demonstrating a path to profitability.
Competitive Telecom Market: The Chilean telecom market remains very
competitive, as incumbent operators have had to cut prices and
improve service to defend market share, pressuring margins and cash
flows. Fitch expects industry-wide mobile ARPUs to remain pressured
in the near term, although WOM's value proposition and lower
blended ARPUs could mitigate these concerns to a degree. The market
is relatively mature, although the ongoing migration from prepaid
to post-paid, and the attendant growth in data consumption, present
opportunities. The company's expansion into FTTH is largely neutral
for the ratings as that initiative is still in its infancy.
DERIVATION SUMMARY
WOM's ratings reflect the company's short but impressive track
record in Chile and Fitch's expectation that the company will
maintain moderately high amounts of leverage. WOM has higher
leverage than Chilean rival Telefonica Moviles Chile
(BBB+/Negative), and less scale and service diversification. WOM is
expected to carry higher net leverage over the medium term than
mobile leader Entel (BBB/Stable) as a result of its 5G investments.
Like WOM, Entel entered a new market, causing subscriber attrition
and price competition. However, WOM was quicker to generate
positive EBITDA and deleverage organically.
Chilean fixed-line provider VTR (B/Rating Watch Negative) is
similar to WOM in scale, while VTR's market position in fixed
telecom services has quickly deteriorated in recent years,
resulting in a weakened credit profile. Uncertainty surrounding
VTR's JV with Claro Chile has additionally weighed on VTR's credit
profile.
KEY ASSUMPTIONS
- Subscribers grow to over 8 million by FY 2024, with greater than
50% being postpaid consumers; service ARPUs flat to slightly down
over the rating horizon; some minor contribution (5%-10% of
revenues) from the fiber optic network;
- Revenues growing from CLP611 billion to CLP780 billion from 2021
to 2024;
- EBITDA margins declining from 22% to 17% reflecting the
incremental lease expense;
- EBITDAR margins (fully excluding leases) improving from 30% to
34% on improvements in scale;
- Capex (including payments related to the 2021 spectrum
acquisition) of 30% of revenue in 2022; around 20%-25% in 2023 and
2024; 10%-15% thereafter;
- Net leverage (fully expensing leases) approaching 3.0x;
- Net leverage (fully capitalizing leases) trending toward 4.5x.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Deleveraging toward 3.0x net debt/EBITDA or 3.5x lease-adjusted
net leverage on a sustained basis, with consistent growth in EBITDA
and pre-dividend FCF, supported by improved competitive position
and scale.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Substantial deterioration in ARPUs and/or stagnation in
competitive position, resulting in net debt/EBITDA above 4.0x or
lease-adjusted net leverage above 4.5x on a sustained basis.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: WOM has adequate liquidity, with its manageable
amortization schedule balanced by its high investment needs. As of
June 30, WOM had CLP86 billion of cash, with no significant
maturities until the 2024 USD510 million notes. As part of the
previously announced tower sale and leaseback transaction, WOM has
received approximately USD670 million on Aug. 12 with the remaining
proceeds expected to be received over the next couple of years.
Additionally, WOM has announced the results of its previously
announced tender offer and consent solicitation, agreeing to pay
total dividends of USD340 million, while repurchasing USD285
million face value of its bonds through the tender offer. Fitch
anticipates strongly negative FCF in 2022, due to the
aforementioned dividends and elevated capex, which constrains
financial flexibility to a degree.
ISSUER PROFILE
WOM S.A. is a Chilean telecommunications provider whose primary
business is the provision of mobile services. The company was
formed in 2015 after Novator Partners LLP purchased Nextel Chile
S.A.'s assets out of bankruptcy.
SUMMARY OF FINANCIAL ADJUSTMENTS
Lease Obligations: When appropriate to the issuer's business model,
Fitch may present additional ratios to supplement the standard
approach.
WOM's rental expense is high compared with its telecom peers given
its primary focus on mobile telecom service and the rental of all
of the company's towers following the recent tower sale. Fitch
supplements WOM's standard unadjusted credit metrics with
lease-adjusted metrics. As part of these adjustments, Fitch
excludes right of use asset amortization and interest associated
with leases from EBITDA. Fitch capitalizes the annual lease charge
using a standard 7x multiple for Chilean issuers to create a debt
equivalent.
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.
Entity/Debt Rating Prior
----------- ------ -----
WOM S.A. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Kenbourne Invest S.A.
senior unsecured LT BB- Affirmed BB-
===============
C O L O M B I A
===============
MEDELLIN CITY: Fitch Affirms LongTerm IDRs at 'BB+', Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed City of Medellin's ratings as follows:
- Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB+';
Outlook Stable;
- Long-Term Local Currency IDR at 'BB+'; Outlook Stable;
- National Long-Term Rating (NLTR) at 'AAA(col)'; Outlook Stable;
- NLTR of the senior unsecured notes for COP248,560 million issued
in 2014 at 'AAA(col)';
- National Short-Term (NSTR) Rating at 'F1+(col)'.
The city's Standalone Credit Profile (SCP) is assessed at 'bb+'.
The rating affirmations reflect Fitch's expectations that
Medellin's debt sustainability metrics will hold steady within a
score of 'a' over a five-year period under rating case (2022-2026),
based on adequate financial performance and prudent debt
management. In comparison with some Colombian municipalities,
Medellin's debt metrics have remained stable in 2017-2021. Medellin
benefits significantly from ongoing surpluses transferred by
Empresas Publicas de Medellin E.S.P. (EPM; BB+ Rating Watch
Negative), as they enable the city to budget and maintain high
levels of capex and social investment. Fitch continues assessing
Medellin's risk profile as 'Low Midrange'.
KEY RATING DRIVERS
Risk Profile: 'Low Midrange'
Medellin's risk profile at 'Low Midrange' results from a
combination of five key risk factors at 'Midrange' and one at
'Weaker', reflecting a moderately high risk relative to
international peers that the issuer may see its ability to cover
debt service with the operating balance weaken unexpectedly over
the forecast horizon (2022-2026) either because of
lower-than-expected revenue or expenditure overshooting
expectations, or because of an unanticipated rise in liabilities or
debt-service requirements.
Revenue Robustness: 'Midrange'
Medellin's operating revenue is mostly made up of predictable,
growing and stable revenues such as property tax (IPU), tax on
industry and commerce (ICA) and transfers from the Colombian state
(BB+/Stable). Medellin's strong socio-economic profile allows for a
high tax collection capacity. Own-source revenues accounted for
55.3% of total revenues on average between 2017 and 2021. Property
tax collection and national transfers have risen steadily in the
period 2017-2021. ICA bounced back by 10.3% in 2021 underpinned by
economic recovery. Over the course of 2022, Medellin's tax revenues
have picked up above inflation (+19.4% in nominal terms yoy).
EPM's surpluses transferred to Medellin continued to be significant
in 2021 (COP1.4 trillion) and accounted for roughly 23% of total
revenues on average in 2017-2021. This gives the city a relevant
fiscal advantage of financing operating expenditure with respect to
other Colombian subnationals. Fitch will continue to monitor EPM's
surpluses performance, given that an important portion of
Medellin's social investment has been financed with them.
Medellin's revenue robustness is also considered as 'Midrange'
because of its high financial autonomy, considering the earmarked
nature of transfers as well as the uncertainty about the
sovereign's fiscal situation. Transfers averaged 31.5% of total
revenues in 2017-2021.
Revenue Adjustability: 'Midrange'
Given the relatively high proportion of local collection of total
revenues, Medellin's ability to cover a reasonably expected revenue
decline is estimated to be above 50%. Medellin can set the rates
for most of its taxes within the limits established by National
Law. Besides, it has property tax rates that are way below the
legal limit and its taxpayers can relatively easily afford
potential rate hikes due to a broad economic diversification which,
in turn, limits risks of taxpayer concentration.
In 2021, Medellin's tax revenue rebounded by 10.5% yoy underpinned
by the reduction of the past due portfolio, cadastral values
updating, and a progressive increase of ICA tariff to financial
entities. By 2022, cadastral values continue increasing and,
mainly, property tax rate limit was risen to 13.62% from 3.5%. ICA
tariffs for financial institutions keep climbing. In addition, tax
payers' willingness to pay is stimulated through payment
facilities.
Expenditure Sustainability: 'Midrange'
Medellin's main responsibilities are the provision of basic
services mainly addressed with transfers. In 2017-2021, operating
expenditure (opex) growth has been highly controlled; hence,
Medellin's operating margins have been stable and averaged 18.9%.
Deflated operating expenditure growth had been close to deflated
operating revenue growth in that period. In 2021, capex calculated
by Fitch increased by 10% due to a higher operating balance and
higher social investment financed with EPM's surpluses.
Expenditure Adjustability: 'Midrange'
Medellin's expenditure structure is relatively flexible despite the
limited ability to cut some transfers earmarked for health and
education. It has moderate expenditure adjustability, given that
from 2017 to 2021 opex was slightly above 55.9% of total
expenditure; while capex accounted for 42.5% on average. Capex
level is moderate financed with current balance and a significant
amount of EPM's resources, which denotes a moderate margin to cut
expenditure.
In addition, transfers from the General System of Participations
(SGP) and some own-source revenues retain their specific
destination either by law or by other administrative acts, which
supports their inflexibility. The margin for reducing or relaxing
spending cuts is moderate, given that capex financed with current
balance is higher than 10%. Future Budget Allocations (FBA,
authorizations against tax revenues in future budgets for paying
certain expenses) also adds some inflexibility to the expenditure
structure. For 2023, FBA approved were of COP520.4 billion
(equivalent to around 7% of total expenditure projected in that
year).
Liabilities & Liquidity Robustness: 'Midrange'
The Law 2155/2021 increased the solvency and sustainability limits
as from 2021, thus, Medellin increased its indebtedness capacity
and will take up to COP200 billion in 2022. As of August 2022,
Medellin's outstanding long-term debt balance was COP2.1 trillion.
Around 31% of Medellin's long-term debt was denominated in foreign
currency (taken with AFD) and close to 69% was tied to a floating
interest rate. FX depreciation has affected slightly its debt
stock. The bonds' outstanding balance was COP248.6 billion,
accounting for 11.8% of long-term debt. In 2023, Medellin will take
COP221.6 billion.
Metro Ligero de la Via 80 project is being financed with bank loans
proceeds contracted by Metro de Medellin, which amounted to an
overall amount of COP2.2 trillion. There will be several
disbursements during the grace period (2022-2025). Principal
payments will be made during the first quarter of each year from
2026 through 2035. By 2031, approximately 85% of the debt will be
covered. This will be afforded with resources stemmed from Medellin
and the National Government and the payment commitment was enacted
through FBAs: 70% by the national government and 30% by Medellin.
Medellin has not pledged any specific resources to cover its FBAs
and will be able to use any kind of revenue for it (own-source
revenues, credit proceeds or EPM's surpluses). Between 2021 and
2034, Medellín has the commitment of FBA for an estimated of
COP961.4 billion in current pesos. The maximum total contribution
of the Nation in current pesos charged to the budget for the period
2024-2029 will be COP3.1 trillion.
Liabilities & Liquidity Flexibility: 'Weaker'
Fitch considers that Medellin has an adequate liquidity management,
as it has both a sound liquidity position and better access to
short/long-term loans with local banks. However, the counterparty
risk of potential liquidity providers for Medellin will be mostly
below investment grade, given the sovereign credit environment.
Finally, the Colombian government does not provide emergency
liquidity support when LRGs are under pressure. Finally, at
year-end the entity presents a high percentage of restricted cash
moderating its liquidity position.
Debt Sustainability: 'a category'
Medellin's debt sustainability score of 'a' is the result of a
payback ratio score of 'aa' (averaging 6.7x in 2022-2026) adjusted
one category downwards because of the weaker score of its actual
debt service coverage ratio (ADSCR) and fiscal debt burden. Fitch
expects ADSCR to reach an average of 1.8x in 2024-2026 (score of
'a') and the fiscal debt burden will level off at around 100%
(score of 'a'). Fitch's rating case scenario considers additional
indebtedness up to the maximum allowed by law. It also includes an
estimated portion of the financing associated with the Metro Ligero
Avenida 80 project as other debt considered by Fitch.
Fitch includes in its analysis how Medellin recognizes the former
obligation with the national government for Medellin's metro
infrastructure financing, and considers it an intergovernmental
obligation. Thus, excluding this financial obligation, Fitch
calculates enhanced debt metrics. The enhanced payback ratio
averaged 3.6x in 2022-2026 and the synthetic coverage ratio
averaged 2.5x in the last three projected years. These ratios would
be used to assess a subsequent improvement on the SCP if there were
a deterioration in the SCP due to a lower debt sustainability
score.
DERIVATION SUMMARY
Medellin's IDRs are based on its SCP, which is assessed at 'bb+',
reflecting a combination of a 'Low Midrange' risk profile and debt
sustainability metrics assessed in the 'a' category under Fitch's
rating case. The SCP also factors in a comparison of Medellin with
Colombian international peers such as Barranquilla (BB/Stable) or
Bogota (BB+/Stable), which have sharply increased its debt levels
in recent years. The city of Buzau in Romania and the State of
Yucatan in Mexico compares in line with Medellin's risk profile and
debt metrics. In respect of national scale, Medellin's debt metrics
are similar to those of Antioquia Department (AAA[col]), which
presents the same intergovernmental debt as Medellin. No other
factors affect the ratings. The NLTR of 'AAA(col)' is derived from
the 'BB+' IDR, while the NSTR of 'F1+(col)' is derived from the
NLTR.
Short-Term Ratings
National short-term rating, assessed at 'F1+(col)'. This derives
from the NLTR.
National Ratings
In respect of national scale, Antioquia Department (AAA(col)) also
shares similar debt metrics as Medellin and the same Metro de
Medellin's financial obligation.
Qualitative Assumptions:
- Risk Profile: 'Low Midrange';
- Revenue Robustness: 'Midrange';
- Revenue Adjustability: 'Midrange';
- Expenditure Sustainability: 'Midrange';
- Expenditure Adjustability: 'Midrange';
- Liabilities and Liquidity Robustness: 'Midrange';
- Liabilities and Liquidity Flexibility: 'Weaker';
- Debt sustainability: 'a';
- Asymmetric Risk: 'N/A';
- Sovereign Cap: 'N/A'.
Risk Profile:
Revenue Robustness:
Revenue Adjustability:
Expenditure Sustainability:
Expenditure Adjustability:
Liabilities and Liquidity Robustness:
Liabilities and Liquidity Flexibility:
Debt sustainability:
Support (Budget Loans):
Support (Ad Hoc):
Asymmetric Risk:
Sovereign Cap:
Sovereign Floor:
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 2022-2026 projected
ratios. The key assumptions for the scenario include:
- 7% CAGR of operating revenue;
- 7.7% CAGR of operating expenditure;
- Annual capex of COP3 trillion on average;
- Debt level considers Medellin´s projections and additional
potential long-term debt as per regulatory limits;
- Apparent cost of debt: average of 7.4% over the rating horizon;
considering the share of fixed interest rate debt (compound average
rate of 4%);
- Capital revenue is linked to projected EPM's financial surpluses;
hence it will be COP1.5 trillion in 2021, COP1.8 trillion in 2022,
COP2 trillion in 2023 and as from 2024 it will increase according
to inflation rate.
- Fitch's adjusted debt includes an estimate of Medellin's
obligations with the national government for the financing of the
original infrastructure of the city's metro system.
- Adjusted debt includes an estimated share of the financing for
Metro Ligero de la Via 80 project as other Fitch classified debt;
- Interest expenditure does not include that related to
intergovernmental debt.
Issuer Profile
The City of Medellin is considered Colombia's second-most important
city, contributing approximately 7.3% of GDP. Medellin's GDP
recovered by 12.9% in 2021, after declining 5.5% in 2020 due to the
pandemic. Its GDP per head is higher than the national average.
Medellin became a special district in Science, Technology and
innovation last year. Medellin seeks to attract more private
investment related to Information and communications technology
(ICT) through fiscal incentives. Fitch classifies Medellin, as for
all Colombian LRGs, as type B as it covers debt service from its
cash flow on an annual basis.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- If the enhanced payback ratio is close to 9.0x coupled with an
enhanced synthetic debt service coverage ratio (DSCR) below 1.5x,
under Fitch's rating case.
- A downgrade of Colombia's IDR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Colombia's IDR upgrade would lead to a corresponding rating
action on Medellin. National ratings are at the highest level, so
positive rating action are not possible.
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.
Entity/Debt Rating Prior
----------- ------ -----
City of Medellin LT IDR BB+ Affirmed BB+
LC LT IDR BB+ Affirmed BB+
Natl LT AAA(col) Affirmed AAA(col)
Natl ST F1+(col) Affirmed F1+(col)
senior unsecured Natl LT AAA(col) Affirmed AAA(col)
=============
J A M A I C A
=============
JAMAICA: Customs Addresses Concerns About Port Delays
-----------------------------------------------------
Javaughn Keyes at RJR News reports that the Jamaica Customs Agency
(JCA) has responded to the concerns regarding what some customs
brokers have described as a slower turn-around time at the ports
due to increased processing.
Marlon Lowe, Deputy CEO in charge of Border Protection at Jamaica
Customs, insists that 80 per cent of goods are cleared at the ports
shortly after arrival, according to RJR News. But he reasoned that
delays are often due to port side issues, the report relays.
"We really have a logistics problem at our ports. The warehouses
are small, they rely heavily on labour and so, if one vessel comes
that shouldn't come, you have a problem. And what happened in the
last few weeks and days is that you have had two mega vessels that
came at one of the ports, and the port doesn't have the capacity to
deal with that," he explained, the report discloses.
Another issue Mr. Lowe identified that could cause delays is the
non-compliance by some customs brokers, the report relays.
"When you follow the rules and comply with Customs, Customs have
less interest in you. When the rules are not being followed,
declarations are not being done properly, goods are not being
packed properly, they are not being labeled, we are not getting the
advanced manifests in time, you are going to have issues with
Customs," he said, noting that about half of the imports that come
into the country are "released within minutes," the report
discloses.
Acting Deputy CEO of Operations at Jamaica Customs Selina Clarke
Graham said, despite the increased vigilance, the agency has not
changed how it processes containers, the report relays.
The agency said the risk management tools have helped to clamp down
on a number of illicit operators and shipments, the report notes.
But as the high season gets in full gear, the agency said it is
prepared to do what it takes to boost efficiency, and at the same
time maintain protocols, the report discloses.
Some customs brokers have complained that the apparent delay in
clearing goods at the ports could affect packages coming in for
Christmas, the report relays.
Speaking in Parliament, Finance Minister Dr. Nigel Clarke said the
government is looking at measures to address the issue, 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.
=================
N I C A R A G U A
=================
NICARAGUA: Continues Rate Hikes
-------------------------------
Jamaica Observer reports that ANCO Central de Nicaragua (BCN) hiked
its key policy rate for a sixth time since the start of the year,
moving that rate upwards by 50 basis points to 6.5 per cent. Since
the start of the year, Nicaragua's central bank has hiked its
policy rate by 300 basis points or 3 per cent, the report relays.
However, in the press release announcing the rate hike, BCN did not
say why rates were being increased, the report discloses.
Unlike other central banks which are increasing interest rates to
move inflation back within a target range, Nicaragua's policy rates
target a particular exchange rate, the report relays. However, the
Nicaraguan currency, the cordoba, has remained largely stable
against the US dollar over the past year, the report notes.
Inflation was, however, measured at 11.5 per cent in September, the
report says. A year ago it was 6.4 per cent, the report relays.
The September 2022 rate was down from 12.15 per cent in August, the
report discloses. The projecting is that price increases will
average 10 per cent in Nicaragua this year, the report says.
On November 3, the central bank reported that remittances sent to
Nicaragua from January to September came to US$2.26 billion, the
report relays. This was up 45 per cent from the prior year, the
report discloses.
Political unrest and COVID-19 caused three years of recession, with
the economy only returning to growth in 2021, posting a 10.3 per
cent expansion according to the International Monetary Fund (IMF),
the report relays. The IMF expects the country's economy to
continue expanding this year, but at a slower rate of 4 per cent,
the report says.
The central bank's board controls monetary policy. Governor
Leonardo Ovidio Reyes Ramirez presides over the board, which
includes the finance minister and four other members, the report
notes. The US Government placed sanctions on Nicaragua in November
2018 after the Government violently suppressed protests, the report
relays. The US extended these sanctions to Reyes in June 2021, the
report adds.
=====================
P U E R T O R I C O
=====================
STONEMOR INC: Completes Merger With Axar Subsidiary
---------------------------------------------------
StoneMor Inc. announced the completion of the merger contemplated
by the previously announced Agreement and Plan of Merger, dated as
of May 24, 2022, by and among the Company, Axar Cemetery Parent
Corp., a Delaware corporation and an indirect wholly-owned
subsidiary of Axar Capital Management, LP, and Axar Cemetery Merger
Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), pursuant to which Merger Sub was merged with
and into the Company, with the Company surviving the Merger as the
surviving corporation and becoming a wholly-owned subsidiary of
Parent.
At a special meeting of the Company's stockholders held on Nov. 1,
2022, the proposal to adopt the Merger Agreement was approved by
(i) holders of a majority of the issued and outstanding shares of
the Company's common stock at the close of business on Sept. 15,
2022 and (b) holders of a majority of the issued and outstanding
shares of the Company's common stock on the Record Date other than
(i) shares of common stock held by Parent and its wholly-owned
subsidiaries or beneficially owned by any affiliate of Parent and
(ii) shares of common stock held by members of the Company's Board
of Directors, the officers of the Company (as defined by Rule
16-1(f) under the Securities Exchange Act of 1934, as amended) and
any immediate family members of a Board member or officer.
The Merger became effective at 4:05 p.m. EDT on Nov. 3, 2022. No
stockholder validly demanded appraisal of such stockholder's shares
pursuant to Section 262 of the Delaware General Corporation Law.
At the Effective Time, each outstanding share of common stock,
other than (i) Axar Shares and (ii) shares of common stock held by
the Company was cancelled and converted into the right to receive
$3.50 in cash per share, without interest. As a result of the
Merger, the Company became an indirect wholly-owned subsidiary of
Axar. The Company's common stock was delisted from and, as of
prior to the opening of trading on Nov. 4, 2022, no longer trades
on, the New York Stock Exchange. The Company intends to file with
the Securities and Exchange Commission a notice on Form 15 of
termination of registration of the Common Stock, and suspension of
the Company's reporting obligations, under the Exchange Act.
At the Effective Time, each holder of outstanding shares of Common
Stock, other than the Axar Shares and the Treasury Shares, ceased
to have any rights as a stockholder of the Company other than the
right to receive the Merger Consideration. Stockholders will
receive a letter of transmittal and instructions on how to
surrender their share certificates in exchange for the Merger
Consideration. Stockholders should wait to receive the letter of
transmittal before surrendering their share certificates.
Stockholders of the Company that hold shares in street name will
receive the Merger Consideration in their brokerage or similar
accounts.
In connection with the consummation of the Merger, effective as of
the Effective Time, Andrew Axelrod, Spencer E. Goldenberg, David
Miller and Joseph M. Redling were appointed by Parent to serve as
directors of the Surviving Corporation. Accordingly, at the
Effective Time, Stephen J. Negrotti, Kevin D. Patrick and Patricia
D. Wellenbach ceased to be directors of the Company.
In addition, the Company's executive officers as of the Effective
Time became the initial executive officers of the Surviving
Corporation, except that Lilly Donohue was appointed by Parent to
succeed Joseph M. Redling as president and chief executive officer
of the Surviving Corporation.
Ms. Donohue, age 50, served as chief executive officer of Holiday
Retirement, an independent senior living owner and operator, from
2016 to 2022. She also currently serves as a member of the Board
of Directors of Synthesis Health Inc., a radiology software company
focused on superior patient and practice outcomes, the Dean's
Advisory Board of Boston University's Questrom School of Business,
and the Senior Living Management Advisory Board of University of
Central Florida's Rosen College of Hospitality Management.
Previously, Ms. Donohue served for over 18 years in various roles
at Fortress Investment Group, a leading investment firm, including
as president of Fortress Investment Group China, and before that as
managing director and member of the Management Committee. Ms.
Donohue holds a B.S. in Business Administration from Boston
University.
About StoneMor Inc.
StoneMor Inc. (http://www.stonemor.com),headquartered in Bensalem,
Pennsylvania, is an owner and operator of cemeteries and funeral
homes in the United States, with 304 cemeteries and 72 funeral
homes in 24 states and Puerto Rico. StoneMor's cemetery products
and services, which are sold on both a pre-need (before death) and
at-need (at death) basis, include: burial lots, lawn and mausoleum
crypts, burial vaults, caskets, memorials, and all services which
provide for the installation of this merchandise.
StoneMor reported a net loss of $55.28 million for the year ended
Dec. 31, 2021, a net loss of $8.36 million for the year ended Dec.
31, 2020, and a net loss of $151.94 million for the year ended Dec.
31, 2019. As of June 30, 2022, the Company had $1.80 billion in
total assets, $1.97 billion in total liabilities, and a total
stockholders' deficit of $174.67 million.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2022. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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Information contained herein is obtained from sources believed to
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of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *