/raid1/www/Hosts/bankrupt/TCRLA_Public/221123.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
Wednesday, November 23, 2022, Vol. 23, No. 228
Headlines
A R G E N T I N A
ARGENTINA: Demand for Peso Drops, Inflation Returns to Growth Path
GENERACION MEDITERRANEA: Fitch Affirms LongTerm IDRs at 'CCC-'
B A H A M A S
FTX TRADING: Experts See Regulators to be "Active as Never Before"
FTX TRADING: John Ray, New Directors to Lead Chapter 11 Process
B R A Z I L
[*] BRAZIL: Central Bank Veteran Wants to Curb Politics at the IDB
C H I L E
LATAM AIRLINES: Reaches Deal with Pilots to Avert Strike
E L S A L V A D O R
EL SALVADOR: Bukele Strengthens His Belief in Bitcoin
M E X I C O
UNIFIN FINANCIERA: Fitch Cuts IDRs to 'D' on Ongoing Restructuring
P U E R T O R I C O
SAN JORGE HOSPITAL: Taps Galindez LLC as External Auditor
V E N E Z U E L A
MERCANTIL CA: Fitch Affirms 'CC' LongTerm Issuer Default Ratings
[*] VENEZUELA: IMF Executive Board Holds Informal Briefing
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Demand for Peso Drops, Inflation Returns to Growth Path
------------------------------------------------------------------
Rio Times Online reports that the alerts are sounding in the
Government for a new stage in the fall in the demand for money.
All the country's monetary aggregates are contracting in relation
to nominal production, and despite the moderation of the money
supply, prices continue to rise with a floor of 6% per month,
according to Rio Times Online.
The failure of the Massa plan and the lack of credibility resulted
in a new shock about the vocation of people to hoard pesos in any
of its forms, either for purely transactional use or for deposit in
instruments of the financial system, the report notes. Instead,
people are increasingly betting on reliable assets like the dollar
to hedge against inflation, the report relays.
The demand for pesos measured by the monetary base decreased from
7.3% of GDP in March of this year to 5.74% at the end of September,
as confirmed by the Central Bank, the report notes.
Likewise, the demand measured by the M2 aggregate (which includes
term deposits and other accounts) collapsed from 15.3% of GDP to
13.2% between March and September, the report says.
The monetary base only registered a growth of 34.6% during the last
12 months and the currency for transactions did so by 45%, at the
same time that retail prices grew 88% and wholesale prices exceeded
80%, the report discloses.
The fact that inflation rises above the money supply indicates that
Argentines increasingly want to keep fewer pesos, the report
relays.
High-frequency indicators suggest that the demand for pesos
continued to fall up to the present, and it accelerated its
decline. The informal dollar climbed to parity of $306, while the
financial dollar Cash with Settlement (CCL) reached $324, the
report discloses.
The higher demand for dollars is nothing more than the counterpart
of the lower demand for pesos, the report notes.
For the Government, the shock on the demand for pesos constitutes a
terrible sign that threatens to spiral the level of inflation, and
completely leave the already very unreliable inflation target for
2023 out of the question, the report relays.
The Secretary for Economic Programming, Gabriel Rubinstein,
admitted that the fall in the demand for money generates a direct
inflationary effect and is similar to that of an increase in the
fiscal deficit financed with issuance. Even limiting the monetary
issue, if the demand for pesos decreases, inflation will continue
to rise without pause, the report says.
"We are experiencing a drop in the demand for money. In macro
terms, this is equivalent to increasing the deficit", explained the
Secretary, the report notes.
Even so, Rubinstein ruled out greater exchange rate or "shock"
measures since he assured that the Government does not have enough
credibility or consensus to unfold the exchange market or alter the
current scheme, the report relays. If he tried, the economist
warned that there would be a latent danger of a "Rodrigazo" and a
violent burst of inflation, 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 in the Troubled Company Reporter-Latin America on
Nov. 18, 2022, S&P Global Ratings affirmed its 'CCC+/C' foreign
currency sovereign credit ratings on Argentina. S&P lowered the
long-term local currency sovereign credit rating to 'CCC-' from
'CCC+' and the national scale rating to 'raCCC+' from 'raBBB-'.
S&P also affirmed its 'C' short-term local currency rating.
The outlook on the long-term ratings is negative. S&P's 'CCC+'
transfer and convertibility assessment is unchanged.
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.
GENERACION MEDITERRANEA: Fitch Affirms LongTerm IDRs at 'CCC-'
--------------------------------------------------------------
Fitch Ratings has affirmed Generacion Mediterranea S.A.'s (GEMSA's)
Long-Term Foreign Currency and Local Currency Issuer Default
Ratings (IDRs) at 'CCC-'. Fitch has also affirmed the senior
unsecured notes co-issued by Central Termica Roca S.A. (CTR) and
GEMSA, which are guaranteed by GEMSA at 'CCC'/'RR3'. Each of the
issuers and GEMSA are jointly and severally liable for any payment
obligations under the notes.
GEMSA's ratings continue to reflect its dependence on the country's
offtaker and electricity market coordinator, Compania
Administradora del Mercado Mayorista Electrico (CAMMESA). Fitch
believes GEMSA is vulnerable to, and can little afford, payment
delays from CAMMESA, given its expected tight FFO debt service
coverage over the next two years as it seeks to meet its financial
and commercial debt obligations.
The recovery rating of 'RR3' for GEMSA's senior unsecured bond
reflects Fitch's expectation that a potential recovery is higher
than its previous 'RR4'. The revised recovery ratings reflects
historical precedents of numerous distressed debt exchanges done by
Argentine corporates, that did not result in reduction in
principal, and the recoveries were above the implied recovery of an
'RR3' (51%-70%), and the previous recovery rating of 'RR4'
(31%-50%), even when considering the intrusive capital controls
laws. As Per Fitch's Country-Specific Treatment of Recovery
Criteria, when an issuer actually enters a distressed or defaulted
state, such as Argentina (CCC-), Fitch can assign a higher recovery
rating for an issuer instrument if it believes that recoveries in
the individual case will be consistent with a higher recovery
rating.
KEY RATING DRIVERS
High Leverage, Tight Debt Service Coverage: GEMSA's cash flow is
relatively stable and predictable provided that CAMMESA continues
to pay within its current time of about 70 days. As of 3Q22, 99% of
the company's revenue was denominated in U.S. dollars, and over 90%
of EBITDA was derived from long-term take-or-pay contracts under
Resolutions 220/2007 and 21/2016. Fitch estimates GEMSA's leverage
to peak at 8.8x in 2022, and then decline thereafter to 2.6x over
the rating horizon as the company pays off maturing obligations and
the Ezeiza and Maranzana expansion projects are completed. FFO
interest coverage will be tight at below 2.0x until 2024, when it
is projected to rise to 2.2x.
EBITDA Expected to Improve: Fitch expects GEMSA's EBITDA to improve
from ARS15.9 billion (USD114.8 million) to ARS108.4 billion (USD141
million) in 2024. CAMMESA awarded GEMSA PPAs for its Ezeiza and
Maranzana projects, both of which are combined cycle expansions
under Resolution 287/2017. Completion of the Ezeiza plant expansion
in late 2023 is estimated to generate about USD38 million in
EBITDA; completion of the Maranzana plant expansion in mid-2024 is
anticipated to generate an additional USD28 million of annual
EBITDA thereafter. GEMSA will have no further contract expirations
until December 2025, when 56MW under Resolution 220 are scheduled
to expire.
Refinancing Risk: GEMSA has a material portion of its USD912
million total debt (as of Sept. 30, 2022) in short-term maturities.
For the remainder of 2022 and 2023, the company faces USD46 million
in short-term debt and an average of USD79.5 million of debt will
mature each year over the rated horizon. This high concentration in
short-term debt coupled with elevated financing costs,
deteriorating macroeconomic conditions in Argentina, and revised
capital control rules that have been extended through 2023 exposes
the company and its Argentine peers to significant refinancing
risk.
High Counterparty Exposure: GEMSA depends on payments from CAMMESA,
which acts as an agent for an association representing electricity
generators, transmission and distribution companies, large
consumers and wholesale market participants. GEMSA is exposed to
potential delays in payment from CAMMESA. Recent payments from
CAMMESA have been received within approximately 77 days, above the
agreed upon 42 days. Fitch estimates that due to the company's
financial and commercial obligations, it cannot afford prolonged
delays in payments.
Uncertain Regulatory Environment: Fitch believes Argentina's
current economic and political environment increases the
uncertainty that the Fernandez administration will be able to
effectively implement the required electricity regulatory tariff
adjustments in order for the system to be self-sustainable. The
company operates in a highly strategic sector where the government
has a role as both the price/tariff regulator and also controls
subsidies for industry players. Fitch assumes the Fernandez
administration remains committed to and prioritizes developing a
long-term sustainable regulatory environment, moving toward a more
unregulated market and reducing the deficit.
DERIVATION SUMMARY
GEMSA's (CCC-) rated Argentine utility peers are Pampa Energia S.A.
(B-/Stable), Genneia S.A. (CCC-), AES Argentina Generacion S.A.
(CCC-) and MSU Energy (CCC-). GEMSA's ratings and those of its pure
play generation peers reflect Argentina's sovereign rating since
they all receive payments from the market coordinator, CAMMESA,
which is dependent on the government. Fitch estimates the median
gross leverage for GEMSA's Argentina utility peers to be 2.3x.
GEMSA's expected 2022 gross leverage, measured as total
debt/EBITDA, is 8.8x, weaker than Pampa Energia's 2.4x, AES
Argentina's 3.7x, Genneia's 3.4x and MSU Energy's 4.1x. GEMSA is
undertaking a combined cycle expansion at its Ezeiza and Maranzana
plants under Resolution 287/2017, similar to the ones MSU Energy
recently completed in 2020, for which GEMSA incurred an additional
USD130 million in debt in 2021. Genneia recently completed
renewable energy expansions under the RenovAr program and is now in
a deleveraging phase. GEMSA's working capital levels are vulnerable
to delays in payments from CAMMESA as it increases leverage to
begin its combined cycle expansions.
KEY ASSUMPTIONS
- Maturing debt refinanced with similar terms;
- Outstanding debt and cash flows are adjusted for expected
currency exchange rate fluctuations;
- Average FX rate of 138.71 for 2022, and 250.05 for 2023;
- Combined cycle expansions at the Maranzana and Ezeiza plants;
- No dividends paid over the rating horizon;
- Payments from CAMMESA are delayed 74 days in 2021 but are
normalized thereafter.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of the Argentine sovereign rating;
- Given the issuer's high dependence on CAMMESA subsidies from the
national treasury, any further regulatory developments leading to a
market less reliant on support from the Argentine government or a
sovereign upgrade could positively affect the company's
collections/cash flow;
- Improved access to capital markets and the successful completion
of its combined cycle expansions at its Ezeiza and Maranzana
plants.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A substantial worsening of near-term operating performance
relative to Fitch's expectations;
- A significant deterioration of credit metrics and/or significant
payment delays from CAMMESA;
- Failure to lower gross leverage to 4.0x and/or FFO interest
coverage to below 2.0x on a sustained basis, in a timely manner
after completing the Ezeiza and Maranzana expansion projects.
LIQUIDITY AND DEBT STRUCTURE
Pressured but Improved Liquidity: Fitch expects the company to
exhibit tight FFO interest coverage of 0.7x in 2022 and 2023. The
covenants of the USD336 million bond due in 2023 limit the
company's ability to pay dividends to shareholders. As of Sept. 30,
2022, the company had a cash balance (including funds invested in
marketable securities) of ARS26,157 million (USD177.6 million),
roughly 10% of which was held in U.S. dollars.
ISSUER PROFILE
GEMSA is a holding company for most of Grupo Albanesi's electricity
generation assets. GEMSA has been operating in the sector since
2004, and currently owns or participates in four generation
companies: Generacion Mediterranea S.A. (GEMSA; 900MW), Central
Termica Roca S.A. (190MW), Generacion Rosario S.A. (140MW), and
Solalban Energia S.A. (120MW).
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 Recovery Prior
----------- ------ -------- -----
Generacion
Mediterranea S.A. LT IDR CCC- Affirmed CCC-
LC LT IDR CCC- Affirmed CCC-
senior unsecured LT CCC Affirmed RR3 CCC
Central Termica
Roca S.A.
senior unsecured LT CCC Affirmed RR3 CCC
=============
B A H A M A S
=============
FTX TRADING: Experts See Regulators to be "Active as Never Before"
------------------------------------------------------------------
The sudden and spectacular crash of crypto-exchange FTX will send
long-lasting tremors through both the nation's financial regulatory
and bankruptcy landscapes, according to partners at international
law firm O'Melveny.
O'Melveny's William Pao and Daniel Shamah believe that regulators
-- including at the SEC and CFTC -- will be emboldened to shine a
light on everything that touched FTX and its former CEO, Sam
Bankman-Fried, while using FTX's dramatic demise as justification
for expanding federal protection of crypto investors. Bankruptcy
courts, meanwhile, will be tied up for years in a closely watched
process of untangling FTX's collapse, with billions of dollars in
investor funds at stake.
Mr. Pao is head of O'Melveny's Fintech Group. Based in Los Angeles,
he is a trusted advisor to cryptocurrency and blockchain companies,
emerging financial and technology businesses, as well as
traditional banks.
Mr. Pao comments: "Regulators will be emboldened by what happened
to FTX. After all, the crypto industry has lost two-thirds of its
value. Consumers and investors are hurting. Very few people will be
in position to push back. Be prepared for some very aggressive
tactics."
"This is not Terra or Celsius. FTX had so many touchpoints that its
collapse will very likely have a ripple effect on the industry.
Regulators will be active as never before. They will investigate
FTX, Sam Bankman-Fried and everything he has touched. And if you
had anything to do with FTX or SBF, there's a good chance you are
going to get a subpoena, too, because regulators will want to
understand what happened here."
"For years, we've been talking about jurisdiction and which agency
will be responsible for what. Regulators will be aggressive in
expanding their jurisdiction now. American consumers and investors
have been significantly affected by the FTX collapse. A lot of
people lost a lot of money. No agency is going to wait to
investigate."
"Enforcement is quicker and easier than new regulation. And any
criticism of enforcement-as-regulation will be softened now because
of the scope of this disaster."
"The agencies have been trying to balance protecting consumers with
encouraging innovation. This may disrupt that. With so many people
losing so much money, regulators will swing way over to the
protection side."
Mr. Shamah is co-head of O'Melveny's Bankruptcy Litigation Group.
Based in New York, he advises financial institutions, private
equity sponsors, hedge funds, and public and private companies in
navigating a host of bankruptcy and restructuring issues.
Mr. Shamah notes: "This is a naked, freefall bankruptcy. For a
company of this size to fall into bankruptcy this precipitously is
highly unusual. It will likely take years in bankruptcy court
to
sort through the fallout."
"The regulatory and litigation scrutiny FTX was already under now
shifts to the Delaware bankruptcy court, home of some of the most
complex, contested bankruptcies in history. It will take years
to
figure out what happened, and some of the people who will be tasked
with that investigation work â€" think an examiner, a creditors'
committee, or potentially even a trustee or liquidator haven't even
been appointed yet."
"Bankruptcy court is a fishbowl. Every decision FTX made in
recent weeks will be highly scrutinized by a litany of players --
committees, potentially an examiner or a trustee, other investors
-- with a range of tools at their disposal. Expect this to be a
long, expensive process that will take years to play out."
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.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from the
deal the next day amid reports on FTX regarding mishandled customer
funds and alleged US agency investigations.
At approximately 4:30 a.m. on Nov. 11, Bankman-Fried ultimately
agreed to step aside, and restructuring vet John J. Ray III was
quickly named new CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
A total of 102 entities related to FTX have filed for Chapter 11
protection.
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. According to Reuters, CEO
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.
Financial Times says 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 Hon. John T. Dorsey is the case judge.
Andrew G. Dietderich, James L. Bromley, Brian D. Glueckstein and
Alexa J. Kranzley at SULLIVAN & CROMWELL LLP in New York, serve as
the Debtors' counsel.
Adam G. Landis, Kimberly A. Brown and Matthew R. Pierce at LANDIS
RATH & COBB LLP in Wilmington serve as local bankruptcy counsel to
FTX Group.
Alvarez & Marsal North America, LLC, is the Debtors' financial
advisor.
Kroll is the claims agent, maintaining the page
https://cases.ra.kroll.com/FTX/Home-Index
Lawyers at Paul Weiss represent Mr. Bankman-Fried.
FTX TRADING: John Ray, New Directors to Lead Chapter 11 Process
---------------------------------------------------------------
FTX Trading Ltd., said in bankruptcy court filings Nov. 14, 2022,
that its team has worked around the clock since obtaining control
of the Debtors from CEO and co-founder Sam Bankman-Fried and filing
for Chapter 11 bankruptcy.
Following Bankman-Fried's exit, FTX appointed restructuring
executive John J. Ray III as CEO to secure and marshal FTX's
assets, and conduct an orderly process under centralized management
to reorganize or sell FTX's complex array of businesses,
investments and property around the world for the benefit of its
stakeholders.
In addition to Mr. Ray, new independent directors with appropriate
experience have been appointed at each of the main parent companies
in the FTX group to ensure proper governance throughout the Chapter
1l process, as follows:
* The Honorable Joseph J. Farnan, Jr. at FTX Trading Ltd.,
who
will serve as Lead Independent Director;
* Matthew A. Doheny at FTX Trading Ltd.;
* Mitchell I. Sonkin at West Realm Shires Inc.;
* Matthew R. Rosenberg at Alameda Research LLC; and
* Rishi Jain at Clifton Bay Investments LLC.
The appointment of Mr. Ray and the independent directors ensures
the Debtors can navigate the chapter 11 process independent of any
conflicts and involvement in FTX's prepetition activities.
The Debtors have engaged Alvarez & Marsal as proposed financial
advisor. In addition, the Debtors have engaged investigative,
forensic and cybersecurity experts to work with the team at
Sullivan & Cromwell.
Two Motions so Far
Four days since filing Chapter 11 petitions, the Debtors have so
far filed in Bankruptcy Court only two pleadings:
* a motion to jointly administer the Chapter 11 cases of FTX
Trading and 138 affiliates; and
* a motion to modify creditor list filing requirements, and
provide e-mail service to certain parties.
The Debtors seek approval to file a consolidated list of their top
50 creditors in lieu of a top 20 list for each Debtor on or before
November 18, 2022. The Debtors anticipate overlap among the
various Debtors' creditor lists, and the Debtors expect that the
exercise of compiling separate creditor lists for each individual
Debtor would consume an excessive amount of the Debtors' limited
time and resources at this critical time.
The Debtors have more than 100,000 creditors, most of whom are the
Debtors' customers. Because the Debtors operate an online
cryptocurrency platform, all of the Debtors' current and former
customers interact with the Debtors via e-mail. The Debtors
accordingly seek Court approval to serve notices to former and
current customers notices via e-mail.
The Debtors anticipate seeking additional relief from the Court
later. In connection with those subsequent filings, the
Debtors will provide additional information for the benefit of the
Court and parties in interest.
Unprecedented Events
Lawyers for FTX said in court filings the events that have befallen
FTX over the past week are unprecedented. Barely more than a
week ago, FTX, led by co-founder Bankman-Fried, was regarded as one
of the most respected and innovative companies in the crypto
industry.
The Debtors operated the world's second largest cryptocurrency
exchange (through its FTX.us and FTX.com platforms), operated one
of the largest market-makers in digital assets (through Alameda
Research LLC and its affiliates), and conducted diverse private
investment and other businesses.
According to the filings, FTX faced a severe liquidity crisis that
necessitated the filing of the Chapter 11 cases on an emergency
basis. Questions arose about Mr. Bankman-Fried's
leadership and the handling of FTX's complex array of assets and
businesses under his direction. As the situation became
increasingly dire, Sullivan & Cromwell and Alvarez & Marsal North
America, LLC, were engaged to provide restructuring advice and
services to FTX. At approximately 4:30 a.m., November
11, after consultation with his own legal counsel, Mr.
Bankman-Fried ultimately agreed to step aside, resulting in the
appointment of John J. Ray III, an experienced restructuring
executive, as Chief Executive Officer. Mr. Ray was delegated
all
corporate powers and authority under applicable law, including the
power to appoint independent directors and commence the Chapter 11
cases on an emergency basis.
The Chapter 11 cases were commenced soon thereafter early,
instituting the worldwide automatic stay codified in 11
U.S.C. Sec. 362. The statutory stay and its enforcement are
critical to ensuring that FTX, under the leadership of Mr. Ray, can
secure and marshal its assets, and conduct an orderly process under
centralized management to reorganize or sell FTX's complex array of
businesses, investments and property around the world for the
benefit of its stakeholders.
Immediately upon appointment, Mr. Ray began working with FTX's
external legal, turnaround, cybersecurity and forensic
investigative advisors to secure customer and debtor assets around
the world, including by removing trading and withdrawal
functionality on the exchanges and moving as many digital assets as
possible to a new cold wallet custodian while simultaneously
responding to a cyberattack that occurred on the Petition Date.
In addition to Mr. Ray, new independent directors with appropriate
experience have been appointed at each of the main parent companies
in the FTX group to ensure proper governance throughout the Chapter
1l process. The appointment of Mr. Ray and the independent
directors ensures that the Debtors can navigate the chapter 11
process independent of any conflicts and involvement in FTX's
prepetition activities.
The Debtors have engaged Alvarez & Marsal as proposed financial
advisor. An Alvarez & Marsal team on the ground is reviewing
the
Debtors' books and records and assisting with the preparation of
bankruptcy disclosures. In addition, the Debtors have engaged
investigative, forensic and cybersecurity experts to work with the
team at Sullivan & Cromwell, which includes lawyers with expertise
in regulated financial institutions, cybercrime and related
investigations.
There is substantial interest in these events among regulatory
authorities around the world. The Debtors' representatives have
been in contact over the past 72 hours with the U.S. Attorney's
Office, the U.S. Securities and Exchange Commission, the Commodity
Futures Trading Commission, and dozens of Federal, state and
international regulatory agencies, according to the Nov. 14
filing.
As stabilization of the business continues, Mr. Ray and the FTX
professionals are moving to the next phase. The Debtors are
preparing requests for necessary relief from the Bankruptcy Court
in order to move these cases forward in the most organized and
efficient manner possible under the unprecedented circumstances.
This will necessarily require some additional time. But the
Debtors are committed to maximizing value for stakeholders and
determining the future of FTX. Facts are still developing and
future filings will update and supplement this information.
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.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell
itself to its giant rival Binance, but Binance walked away from the
deal the next day amid reports on FTX regarding mishandled customer
funds and alleged US agency investigations.
At approximately 4:30 a.m. on Nov. 11, Bankman-Fried ultimately
agreed to step aside, and restructuring vet John J. Ray III was
quickly named new CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
A total of 102 entities related to FTX have filed for Chapter 11
protection.
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. According to Reuters, CEO
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.
Financial Times says 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 Hon. John T. Dorsey is the case judge.
Andrew G. Dietderich, James L. Bromley, Brian D. Glueckstein and
Alexa J. Kranzley at SULLIVAN & CROMWELL LLP in New York, serve as
the Debtors' counsel.
Adam G. Landis, Kimberly A. Brown and Matthew R. Pierce at LANDIS
RATH & COBB LLP in Wilmington serve as local bankruptcy counsel to
FTX Group.
Alvarez & Marsal North America, LLC, is the Debtors' financial
advisor.
Kroll is the claims agent, maintaining the page
https://cases.ra.kroll.com/FTX/Home-Index
Lawyers at Paul Weiss represent Mr. Bankman-Fried.
===========
B R A Z I L
===========
[*] BRAZIL: Central Bank Veteran Wants to Curb Politics at the IDB
------------------------------------------------------------------
Buenos Aires Times reports that the Brazilian former Central Bank
chief vying to lead the top development lender for Latin America
said the institution needs to overcome the region's historic
left-right political conflicts to address challenges from poverty
to climate change.
Ilan Goldfajn has an extensive career in both the public and
private sector to draw on as he seeks to lead the Inter-American
Development Bank, according to Buenos Aires Times. The
International Monetary Fund's Western Hemisphere director is on his
second stint at the lender after working on the Asia crisis of the
late 1990s, the report notes. His resume also includes time as
chief economist of Itau Unibanco Holding SA and chairman of Credit
Suisse Group AG in Brazil, the report relays.
But his nomination has been scrutinised because its comes from the
government of right-wing president Jair Bolsonaro, who leaves
office in six weeks, the report discloses. Members of leftist
President-elect Luiz Inacio Lula da Silva's transition team sought
unsuccessfully to delay the IDB vote until January so the incoming
leader could have a say regarding Brazil's candidate and vote, the
report says.
Goldfajn, 56, said that he's never been a member of a political
party and promises that if elected, projects and lending will be
driven by data, evidence and performance evaluation, the report
discloses.
"The IDB should be less ideological, more technical, more looking
at development impact," Goldfajn said in an interview in
Washington. "Choosing someone like me would send the right signal
to the region" about placing experience and ability above politics,
he said, the report relays.
The IDB is a key financial institution for Latin American and the
Caribbean, lending more than US$23 billion last year, and the
bank's presidency is one of the region's most coveted jobs, the
report notes. The election comes after a turbulent era for the
bank, the report says. In September, nations removed President
Mauricio Claver-Carone after a probe found that he probably broke
ethics rules in a romantic relationship with a top aide, the report
discloses.
US President Donald Trump in 2020 nominated Claver-Carone, a
foreign-policy adviser and architect of a hard-line approach to the
socialist government in Venezuela, to be the first American chief
in the bank's six-decade history, the report relays. He made the
push despite opposition from Argentina, Mexico and many Democrats,
the report relates. The opportunity arose in part because the
region failed to field candidates acceptable to the United States
or coalesce behind anyone amid left-right squabbling, the report
notes.
He says that if elected, his priorities for the IDB are clear:
fight inequality and improve the production and supply of food for
the region; build nations' resilience to environmental shocks and
help fossil-fuel producers responsibly transition to renewable
fuels; invest in physical and digital infrastructure to attract
private capital and innovation, the report notes.
"People always advise me not to tell the priorities, because in a
campaign, when you tell priorities, people always say 'Why don't
you say X or Y?'" Goldfajn said. "But when you're in management, if
you don't choose priorities for the budget, what you're going to
do, where you're going to go – you're not going to do anything.
And my impression is that there are too many priorities at the
bank. When everything is a 'priority,' nothing is a priority," the
report discloses.
Goldfajn earned a doctorate in economics from the Massachusetts
Institute of Technology, where Stanley Fischer, the former
vice-chairman of the Federal Reserve and number two official at the
IMF, was his adviser, the report notes. Goldfajn is on leave from
the IMF while he pursues the IDB position, and made clear in the
interview that his comments represent his own opinions and not
those of the Fund, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian
general election. He will be sworn in on January 1, 2023, as the
39th president of Brazil, succeeding Jair Bolsonaro.
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
=========
LATAM AIRLINES: Reaches Deal with Pilots to Avert Strike
--------------------------------------------------------
Reuters reports that Latam Airlines and its main pilots' union in
Chile have reached an agreement staving off a threatened strike,
the union said in a statement.
The Union of Latam Pilots (SPL), which says it represents 313 of
the airline's nearly 500 pilots, voted almost unanimously to begin
a strike, leaving a window for a mediation process mandated by
Chilean law, according to globalinsolvency.com.
"Minutes before the deadline expired for reaching a fair deal,
Latam and the SPL union managed to defuse a strike which until the
end seemed inevitable," the union said in a statement, which
provided no details of the accord, the report notes.
The union argued that due to the pandemic, 240 pilots were fired
and compensation was reduced by 30%. It said that while company
executives and other employees have since recovered 100% of their
pre-pandemic salaries, pilots continue to receive a reduced salary,
the report relays.
The largest carrier in South America, Latam Airlines announced the
completion of a years-long restructuring process after it declared
bankruptcy in 2020, the report adds.
About LATAM Airlines Group
LATAM Airlines Group S.A. -- http://www.latam.com/ --is a
pan-Latin American airline holding company involved in the
transportation of passengers and cargo and operates as one unified
business enterprise. It is the largest passenger airline in
South
America.
Before the onset of the COVID-19 pandemic, LATAM offered passenger
transport services to 145 different destinations in 26 countries,
including domestic flights in Argentina, Brazil, Chile, Colombia,
Ecuador and Peru, and international services within Latin America
as well as to Europe, the United States, the Caribbean, Oceania,
Asia and Africa.
LATAM and its 28 affiliates sought Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in
Chile, Peru, Colombia, Ecuador and the United States are part of
the Chapter 11 filing.
The Debtors disclosed $21,087,806,000 in total assets and
$17,958,629,000 in total liabilities as of Dec. 31, 2019.
The Hon. James L. Garrity, Jr., is the case judge.
The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as
bankruptcy counsel, FTI Consulting as restructuring advisor, Lee
Brock Camargo Advogados as local Brazilian litigation counsel, and
Togut, Segal & Segal LLP and Claro & Cia in Chile as special
counsel. The Boston Consulting Group, Inc. and The Boston
Consulting Group UK LLP serve as the Debtors' strategic advisors.
Prime Clerk LLC is the claims agent.
The official committee of unsecured creditors formed in the case
tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters
Jureller Southard & Stevens, LLP as conflicts counsel, UBS
Securities LLC as investment banker, and Conway MacKenzie, LLC as
financial advisor. Ferro Castro Neves Daltro & Gomide Advogados
is the committee's Brazilian counsel.
The Ad Hoc Group of LATAM Bondholders tapped White & Case LLP as
counsel.
Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew
Glenn and partner Shai Schmidt, has been retained as counsel to the
Ad Hoc Committee of Shareholders.
=====================
E L S A L V A D O R
=====================
EL SALVADOR: Bukele Strengthens His Belief in Bitcoin
-----------------------------------------------------
Rio Times Online reports that the President of El Salvador, Nayib
Bukele, has announced the purchase by the State of one bitcoin a
day as of Nov. 17, after in recent days he has defended the
commitment to this cryptocurrency in a context of falling value.
"We are going to buy one bitcoin a day starting tomorrow," Bukele
wrote in English on his Twitter account, according to Rio Times
Online.
===========
M E X I C O
===========
UNIFIN FINANCIERA: Fitch Cuts IDRs to 'D' on Ongoing Restructuring
------------------------------------------------------------------
Fitch Ratings has downgraded Unifin Financiera, S.A.B. de C.V.'s
(Unifin) Long- and Short-Term Local and Foreign Currency Issuer
Default Ratings (IDRs) to 'D' from 'RD'. Fitch has also downgraded
Unifin's Long- and Short-Term National Scale ratings to 'D(mex)'
from 'RD(mex)'. In addition, Fitch has affirmed the ratings of the
company's senior notes and hybrid securities at 'C'.
KEY RATING DRIVERS
The downgrades reflect that a bankruptcy proceeding is ongoing, as
signaled by the announcement made by the company on Nov. 8, 2022.
According to the company's press release, the First District Court
in Concurso Restructuring Proceeding Matters in Mexico City
admitted the company's voluntary petition for a restructuring
(concurso proceeding).
As of today, the company is not paying any of its creditors, its
grace periods under its debt instruments have expired and is not
originating loans or leases.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The IDRs and debt ratings cannot be downgraded as they are at the
lowest levels on Fitch's rating scales.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Fitch could reassess Unifin's credit profile and its debt
issuance ratings if a debt restructuring process is undertaken and
sufficient disclosure of the company's plans and financial
information is provided;
- The company's debt ratings are expected to move in tandem with
any changes to Unifin's IDRs.
Fitch will monitor the sufficiency of information to evaluate the
entity's creditworthiness, which could result in rating withdrawals
at the current levels if the entity does not disclose sufficient
information to Fitch and the market.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch reclassified pre-paid expenses as intangibles and deducted
from total equity due to low loss absorption capacity under
stress.
ESG CONSIDERATIONS
Fitch revised the ESG Relevance Score for Management Strategy to
'3' from '5' as it is minimally relevant in the context of Unifin's
default status.
Fitch revised the ESG Relevance Score for Financial Transparency to
'3' from '4' as it is minimally relevant in the context of Unifin's
default status.
Fitch revised the ESG Relevance Score for Governance Structure to
revise to '3' from '4' as it is minimally relevant in the context
of Unifin's default status.
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
----------- ------ -----
Unifin Financiera,
S. A. B. de C. V. LT IDR D Downgrade RD
ST IDR D Downgrade RD
LC LT IDR D Downgrade RD
LC ST IDR D Downgrade RD
Natl LT D(mex) Downgrade RD(mex)
Natl ST D(mex) Downgrade RD(mex)
senior unsecured LT C Affirmed C
subordinated LT C Affirmed C
=====================
P U E R T O R I C O
=====================
SAN JORGE HOSPITAL: Taps Galindez LLC as External Auditor
---------------------------------------------------------
San Jorge Children's Hospital, Inc. seeks approval from the U.S.
Bankruptcy Court for the District of Puerto Rico to hire Galindez,
LLC as its external auditor.
The firm's services include:
(a) audit of the Debtor's financial statements;
(b) audit of the schedules or report Law 163-2013;
(c) audit of the Schedules of Expenditures of Federal Awards;
(d) single audit for the year 2021;
(e) audit of the 2021 Retirement Plan Financial Statements
and;
(f) filing of 2021 tax returns.
The firm will be paid at these rates:
Partners $220 per hour
Directors / Sr. Tax Manager $190 per hour
Managers / Supervising Senior $180 per hour
Seniors / Semi Seniors $160 per hour
Staff $125 per hour
As disclosed in court filings, Galíndez is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
The firm can be reached through:
Julio A. Galíndez, CPA, CGMA
Galíndez, LLC
19 Cll Ponce
San Juan, PR 00917
Phone: +1 787-725-4545
Email: julio@galindezllc.com
About San Jorge Children's Hospital
San Jorge Children's Hospital, Inc. operates a hospital
specializing in pediatrics in San Juan, P.R.
San Jorge Children's Hospital filed its voluntary petition for
relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case
No. 22-02630) on Sept. 1, 2022, with between $10 million and $50
million in both assets and liabilities. Edward P. Smith, chief
operating officer, signed the petition.
Judge Maria De Los Angeles Gonzalez presides over the case.
The Debtor tapped Wigberto Lugo Mender, Esq., at Lugo Mender Group,
LLC as bankruptcy counsel and Galíndez, LLC as external auditor.
=================
V E N E Z U E L A
=================
MERCANTIL CA: Fitch Affirms 'CC' LongTerm Issuer Default Ratings
----------------------------------------------------------------
Fitch Ratings has affirmed Mercantil, C.A. Banco Universal's
(Mercantil) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) at 'CC'. Fitch expects the bank to continue meeting
its deposit obligations in the absence of government intervention,
given the bank's and the market's high level of liquidity.
KEY RATING DRIVERS
Mercantil's 'cc' Viability Rating (VR) drives its IDRs. The
operating environment highly influences the bank's VR. The analysis
of profitability ratios, risk management and asset quality under
the current operating environment and hyperinflationary conditions
is not meaningful to the ratings at this time.
Capitalization metrics remain adequate as the bank's tangible
common equity/tangible assets ratio as of Sept. 30, 2022 increased
to 13.9% from 13.2% as of Dec. 31, 2021; however, the ratio is
well-below the 32.5% reported at Dec. 31, 2020 when the bank
benefitted from unrealized gains on Mercantil's U.S.
dollar-denominated position, due to currency depreciation. Fitch
expects Mercantil to continue meeting regulatory requirements for
capitalization due to currency depreciation and the favorable risk
weighting of assets. Cash and Due from Banks accounted for slightly
over 60% of the bank's assets as of Sept. 30, 2022.
The low risk nature of the majority bank's assets continues to
limit the bank's profitability. The bank reported ROAA and ROAE
ratios of 2.3% and 19.6%, respectively as of Sept. 30, 2022.
The bank's loan portfolio accounted for nearly 27% of total assets
as of Sept. 30, 2022. The bank has remained conservative with its
risk appetite as loans only represented 35% of customer deposits as
of Sept. 30, 2022. The bulk of the bank's loans have maturities
under 60 days and are secured by some form of collateral. Aided by
the bank's low risk appetite and high inflation, the bank's level
of loan impairments as a percentage of gross loans were very low at
0.7% at Sept. 30, 2022.
Given the bank's high level of liquid assets, the negative mismatch
between short-term assets and liabilities is manageable, as long as
domestic monetary market conditions remain liquid and any potential
liberalization of capital controls is measured.
Mercantil's liquidity metrics remain satisfactory, as the bank's
customer deposits account for nearly 99% of the bank's funding at
Sept. 30, 2022, relatively unchanged from the last four years. The
bank's well-known franchise and reputation for conservative
management has attracted a stable depositor funding base. Retail
demand deposits account for the majority of Mercantil's funding
base; however, this is closely followed by deposits from SMEs and
large corporations.
Mercantil's Government Support Rating of 'ns' reflects Fitch's
expectation of no support as support from the government cannot be
relied upon given Venezuela's weak fiscal position and lack of a
consistent policy on bank support.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- While not Fitch's base case, due to capital controls and domestic
market liquidity, a persistent decline in deposits would pressure
ratings.
- A sustained decline in the bank's regulatory capital ratio,
either due to nominal growth or losses, which increases the risk of
some form of regulatory intervention, could also lead to a
downgrade.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upside potential to Mercantil's ratings is limited in the near
term due to the current operating environment.
VR ADJUSTMENTS
The adjustments to the implied viability rating factor scores that
resulted in the overall Viability Rating of 'cc' were as follows:
Operating Environment: The implied rating of 'b' was adjusted to
'cc' due to Macroeconomic Stability;
Viability Rating: The implied rating of 'bb' was adjusted to 'cc'
due to Operating Environment;
Business Profile: The implied score of 'b' was adjusted to 'cc' due
to Business Model;
Asset Quality: The implied score of 'bb' was adjusted to 'cc' due
to Underwriting Standards and Growth;
Earnings and Profitability: The implied score of 'bb' was adjusted
to 'cc' due to Revenue Diversification;
Capitalization and Leverage: The implied score of 'bb' was adjusted
to 'cc' due to Capital Flexibility and ordinary support, and also
Leverage and risk-weight calculation;
Funding and Liquidity: The implied score of 'bb' was adjusted to
'cc' due to Deposit Structure.
SUMMARY OF FINANCIAL ADJUSTMENTS
Regulatory risk-weighted assets were adjusted to reflect the risk
from compulsory loans.
ESG CONSIDERATIONS
Mercantil, C.A. Banco Universal has an ESG Relevance Score of '4'
for Financial Transparency due to distortion of financial
indicators from high inflation and limited regulatory transparency,
which has a negative impact on the credit profile, and is relevant
to the rating[s] in conjunction with other factors.
Mercantil, C.A. Banco Universal has an ESG Relevance Score of '4'
for Governance Structure, which reflects the extent to which the
regulatory framework negatively affects the operating environment
and the bank's financial performance. This has a moderately
negative impact on 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
----------- ------ -----
Mercantil, C.A.
Banco Universal LT IDR CC Affirmed CC
ST IDR C Affirmed C
LC LT IDR CC Affirmed CC
LC ST IDR C Affirmed C
Viability cc Affirmed cc
Government Support ns Affirmed ns
[*] VENEZUELA: IMF Executive Board Holds Informal Briefing
----------------------------------------------------------
In line with the standard procedures for members whose Article IV
consultations with the IMF are extensively delayed, on November 11,
2022, the Executive Board was briefed by staff on recent economic
developments in Venezuela. Informal sessions to brief the Executive
Board based on publicly available information are routinely held,
approximately every 12 months, for members whose Article IV
consultations are delayed by more than 18 months. The Article IV
consultation with Venezuela is delayed by 190 months.
As recently reported in the Troubled Company Reporter-Latin
America, Moody's Investors Service has withdrawn Venezuela's C
local currency and foreign currency ceilings.
*********
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.
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* * * End of Transmission * * *