/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/221128.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, November 28, 2022, Vol. 23, No. 231 Headlines B R A Z I L BRAZIL: October Saw Sharpest Fall in Corporate Credit Demand PETROLEO BRASILEIRO: Devalues 23% Since 2nd Round of Elections D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Fuel Price Subsidies Prevented Social Protests E C U A D O R ECUADOR DIVERSIFIED: Fitch Alters B+ Loan Rating Outlook to Stable J A M A I C A VICTORIA MUTUAL: Supreme Court Approves Restructuring P A R A G U A Y RUTAS 2 AND 7: S&P Affirms 'BB' Rating on Series 2019-1 Notes T R I N I D A D A N D T O B A G O TRINIDAD & TOBAGO: Deloitte Sues OWTU's Patriotic Energies U R U G U A Y ACI AIRPORT: Fitch Affirms 'BB+' Rating on $246.2M Sr. Sec. Notes URUGUAY: Gets $90M-IDB Loan to Improve Subnational Fiscal Mgmt. X X X X X X X X LATAM: Caricom Stakeholders Welcome Loss and Damage Fund [*] BOND PRICING: For the Week Nov. 21 to Nov. 25, 2022 - - - - - =========== B R A Z I L =========== BRAZIL: October Saw Sharpest Fall in Corporate Credit Demand ------------------------------------------------------------ Richard Mann at Rio Times Online reports that data from a survey conducted by Serasa Experian show that October saw the sharpest fall of the year in corporate demand for credit, with a reduction of 16.4%, which demonstrates a sign of a slowdown in the Brazilian economy, motivated in part by the high level of interest rates. The data are from the Business Demand for Credit Indicator, released Nov. 24, according to Rio Times Online. The highlight of the drop was the Micro and Small Enterprises (MSEs), which had a drop of 16.9% in the credit search, the report relays. Medium-sized companies had a reduction of 1.4%, 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). PETROLEO BRASILEIRO: Devalues 23% Since 2nd Round of Elections -------------------------------------------------------------------- Rio Times Online reports that Petroleo Brasileiro S.A. (Petrobras) lost 23% or BRL103.6 billion in market value since the 2022 elections, from BRL48.7 billion to BRL345.1 billion. Preferred shares fell 25.5% in the period up to the close of Nov. 24, according to Rio Times Online. Common shares fell 21.4%, the report relays. Common shares recovered by 3.9% compared to the close of Nov. 23, 2022, the report discloses. Preferred shares increased by 0.1%, the report relays. The most recent reduction, of 12.9% (preferred shares) and 10.6% (common shares), took place on Nov. 22 after the UBS bank downgraded Petrobras' recommendation and reduced the share target price, the report adds. Headquartered in Rio de Janeiro, Brazil, Petroleo Brasileiro S.A. Petrobras explores for and produces oil and natural gas. As reported in the Troubled Company Reporter-Latin America, Egan-Jones Ratings Company July 8, 2022, upgraded the foreign currency and local currency senior unsecured ratings on debt issued by Petroleo Brasileiro S.A. - Petrobras to BB+ from BB. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Fuel Price Subsidies Prevented Social Protests ------------------------------------------------------------------ Dominican Today reports that the Dominican Government's allocation of funds for fuel subsidies with the goal of controlling the rise in commodity prices was a "wise" measure and an investment in "social peace" that not only contained inflation but also prevented populist protests. This was stated by economist Henri Hebrard at the Society of Fuel and Derivatives Companies (SEC) thematic breakfast "Energy Outlook in the Dominican Republic, Hydrocarbons and Other Alternatives," where he indicated that these decisions also helped to maintain the investment climate and that economic growth was resilient, according to Dominican Today. However, he stated that fuel consumption has not decreased, but rather increased significantly, and that, while the prices of the main hydrocarbons are frozen, the prices of their derivatives continue to rise, the report notes. "We will close between 74 and 75 million barrels of oil for national consumption this year." "It was between 71 and 72 million barrels in the middle of the year," he said, the report relays. According to the business consultant, every dollar that a barrel of oil rises in the international market costs the Dominican Republic around US$75 million in imports, which is why the General State Budget for 2023 includes a large item for that line, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'. The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative. S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said. A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. ============= E C U A D O R ============= ECUADOR DIVERSIFIED: Fitch Alters B+ Loan Rating Outlook to Stable ------------------------------------------------------------------ Fitch Ratings has affirmed the outstanding series 2020-1 loans originated by Ecuador Diversified Payment Rights (DPR) at 'B+'. The Rating Outlook has been revised to Stable from Negative. The rating action reflects Fitch's view of the credit quality of the originator, Banco del Pacifico S.A. (BdP). Entity/Debt Rating Prior ----------- ------ ----- Ecuador Diversified Payment Rights 2020-1 G2921#AA9 LT B+ Affirmed B+ TRANSACTION SUMMARY The future flow program is backed by U.S.-dollar-denominated, existing and future DPRs originated in the U.S. by BdP of Ecuador. The majority of DPRs are processed by designated depository banks (DDBs) that executed account agreements (AAs). KEY RATING DRIVERS Future Flow (FF) Rating Driven by Originator's Credit Quality: The rating of this future flow transaction is tied to the credit quality of the originator, BdP. The Ecuadorian sovereign rating and broader operating environment have a moderate influence on Fitch's view of BdP credit quality. Fitch believes that although the bank is government owned and has a relevant market share and local franchise, there is no reasonable assumption of support being forthcoming from the sovereign, due to Ecuador's limited financial flexibility. Consequently, Fitch's view of BdP's credit quality is driven by the bank's intrinsic strength. Going Concern Assessment (GCA) Score Supports Notching Differential: Fitch uses a GCA score to gauge the likelihood that the originator of a future flow transaction will stay in operation throughout the transaction's life. Fitch assigned a going concern assessment (GCA) score of 'GC1' to Banco BdP, based on the bank's systemic importance and its state-owned shareholder. The score allows for a maximum of six notches above the Local Currency Issuer Default Rating (IDR) of the originator; however, additional factors limit the maximum uplift. Factors Limit Notching Differential: The 'GC1' score allows for a maximum six-notch rating uplift from the bank's IDR, pursuant to Fitch's future flow methodology. However, uplift is tempered to two notches from BdP's IDR due to factors mentioned below, including Ecuador's lack of last resort lender, large beneficiary concentration and high future flow debt relative to total funding. Relatively High Future Flow Debt: Total future flow debt including the DPR series 2020-1 loan represents approximately 3.2% of BdP's total funding and 38.8% of non-deposit funding utilizing financials as of Dec. 2021. Fitch believes the ratio of future flow debt to overall non-deposit funding is relatively high and will not allow the financial future flow ratings up to the maximum uplift indicated by the GCA score. Coverage Levels Commensurate with Assigned Rating: Historical coverage levels and the DPR program's performance support the notching differential of the rating on the outstanding DPR backed notes from the originator's rating. When considering average rolling quarterly DDB flows over the last three years (July 2019 - June 2022) and the remaining maximum periodic debt service over the life of the program (including Fitch's 'B+' interest rate stress), Fitch's projected quarterly DSCR is 19.2x. Flows have remained resilient throughout the life of the program including in most recent years, when despite pandemic-related macroeconomic impacts, coverage levels remained sufficient to meet debt service obligations. Nevertheless, notching is tempered given the DPR program's exposure to large payment orders and capital flows, which Fitch believes are more volatile and less reliable than export and remittance flows. No Lender of Last Resort: Ecuador is a dollarized economy without a true lender of last resort. While certain mechanisms are in place to help fend off a banking system crisis, this limits the notching differential of the transaction. Redirection/Diversion Risk: The structure mitigates certain sovereign risks by collecting cash flows offshore until collection of the periodic debt service amount, allowing the transaction to be rated over the sovereign country ceiling. Fitch believes payment diversion risk is partially mitigated by the AAs signed by the three correspondent banks processing the vast majority of USD DPR flows. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - The transaction ratings are sensitive to changes in BdP's credit quality. A deterioration in BP's credit quality is likely to pose a constraint on the transaction's current rating. - The transaction's ratings are sensitive to the DPR business line's ability to continue operating, as reflected by the GCA score and a change in Fitch's view on the bank's GCA score, which can lead to a change in the transaction's rating. Additionally, the transaction rating is sensitive to the securitized business line's performance. The quarterly minimum unadjusted DSCR is estimated at 19.2x and should therefore withstand a moderate decline in cash flows in the absence of other issues. However, significant declines in flows could lead to a negative rating action. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings. - No company is immune to the economic and political conditions of its home country. Political risks and the potential for sovereign interference may increase as a sovereign's rating is downgraded. However, the underlying structure and transaction enhancements mitigate these risks to a level consistent with the assigned rating. - Fitch revised its "Global Economic Outlook" forecasts as a result of the European gas crisis, high inflation and a sharp acceleration in the pace of global monetary policy tightening. Downside risks have increased, and Fitch published an assessment of the potential rating and asset performance impact of a plausible, but worse-than-expected, adverse stagflation scenario on Fitch's major SF and CVB subsectors ("What a Stagflation Scenario Would Mean for Global Structured Finance") in April 2022. Factors that could, individually or collectively, lead to positive rating action/upgrade: Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: The main constraint to the program rating is the originator's rating and BdP's operating environment. If a positive ration action/upgrade occurs, Fitch will consider whether the same uplift could be maintained or if it should be further tempered in accordance with criteria. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS The future flow ratings are driven by the credit quality of Banco del Pacifico S.A. 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. ============= J A M A I C A ============= VICTORIA MUTUAL: Supreme Court Approves Restructuring ----------------------------------------------------- RJR News reports that the Supreme Court has approved the Schemes of Arrangement for the restructuring of Victoria Mutual Building Society (VMBS) and its subsidiaries. The order was issued on Thursday, November 24. The restructuring will see the establishment of a new financial holding company, VM Financial Group Limited and a non-financial holding company, VM Innovations Limited, according to RJR News . Both companies will be held under a mutual holding company to be called VM Group Limited, the report notes. The group says the Schemes of Arrangement will enhance its ability to raise capital and fund its growth targets, the report relays. VM Group continues to be wholly-owned by its members. The Scheme is being implemented to ensure compliance with the Banking Services Act, which requires a corporate group that includes both financial and non-financial businesses to be reorganized by separating the financial and non-financial companies, the report adds. =============== P A R A G U A Y =============== RUTAS 2 AND 7: S&P Affirms 'BB' Rating on Series 2019-1 Notes ------------------------------------------------------------- S&P Global Ratings affirmed its 'BB' rating on Rutas 2 And 7 Finance Ltd.'s series 2019-1 notes. The issuance is a repackaged security backed by construction payment obligations (e.g., Pagos Diferidos por Inversion, or PDIs) issued by the Paraguayan Ministry of Public Works and Communications to finance the design and construction of a national route, PY02, in the Republic of Paraguay. The PDIs correspond to unconditional and irrevocable obligations of the government of Paraguay to periodically reimburse the public-private partnership contractor. The note issuance will fund the costs derived from the design, construction, rehabilitation, operation, and maintenance of national route PY02, which was previously divided into National Routes 2 and 7. S&P 'BB' rating reflects the credit quality of the PDIs, which it believes is at the same level of its foreign currency rating on the Republic of Paraguay (BB/Stable/B). Although there are no explicit cross-default mechanisms associated with these certificates, in S&P's view, this equalization takes into consideration the following strengths of the PDIs: -- The obligation provides funding for projects of significant importance to Paraguay. -- The Ministry of Finance is responsible for the payment, as the Public Private Partnership law approved in 2013 establishes its responsibility to fund 100% of annual debt service payments in a specific payment trust. -- Although the obligations are not directly included in the debt metrics, they benefit from a mandatory budgetary allocation to be made by the Ministry of Finance, which is responsible for payment upon the completion of the specific milestones through a dedicated trust. -- There is no evidence of political resistance related to the project. ===================================== T R I N I D A D A N D T O B A G O ===================================== TRINIDAD & TOBAGO: Deloitte Sues OWTU's Patriotic Energies ---------------------------------------------------------- Asha Javeed at Trinidad Express reports that professional services firm Deloitte is suing the country's largest trade union, Oilfields Workers' Trade Union (OWTU) for millions in outstanding fees. The Express Business understands that the fees relate to services that the firm rendered to the OWTU when its company, Patriotic Energies and Technologies, was bidding for Petrotrin's mothballed oil refinery at Pointe-a-Pierre, according to Trinidad Express. The trade union's attempt to acquire the refinery spanned about three years--2019 to 2021--and three unsuccessful bids by the OWTU to secure the rights to own and operate the refinery, the report notes. After missing deadlines to settle the sums owed, Deloitte opted for legal action against the OWTU and Patriotic, the report relays. However, the Express Business understands that the OWTU initiated bankruptcy proceedings for Patriotic and filed to have the legal documents sealed, the report relays. The OWTU is being represented by Douglas Mendes SC. Ozzie Warwick, the OWTU's chief education and research officer, told the Express Business that the union remains in discussion with Deloitte and is attempting to have the matter settled, the report discloses. "We are in discussions over it. It relates to the whole acquisition process," he added. Warwick was unable to expand on further questions by the Express Business about the timeline to settle the debt, the OWTU's ability to repay the debt and the possibly that the OWTU itself was at risk of being placed in bankruptcy as a result, the report notes. Warwick is the incorporator of Patriotic and one of two directors of the company, according to its filing with the T&T Company Registry. The other director is Richard Lee, who is the general secretary of the trade union. Patriotic was incorporated on November 30, 2018, the report says. Calls and questions to OWTU President General Ancel Roget were unanswered. Deloitte declined to comment. The refinery was mothballed in October 2018 following the restructuring of Petrotrin, which involved the retrenchment of 4,700 workers, the report relays. Petrotrin was replaced by oil producer Heritage Petroleum, fuel importer Paria Fuel, refinery owner Guaracara Refining and the legacy company, the report discloses. Since then, Patriotic has been the front line bidder for the refinery but its financial proposals for taking over the refinery were rejected three times by a Government-appointed committee and subsequently, the Cabinet, the report notes. On September 20, 2019, Finance Minister Colm Imbert had announced that a company owned by the OWTU was preferred bidder to own and operate the refinery with a US$700 million offer, the report relays. In its first proposal, Patriotic had offered upfront cash consideration of US$700 million plus US$300 million for the non-core assets of the company, the report says. On reflection, Cabinet decided to grant Patriotic a three-year moratorium on all payments of principal and interest, towards the purchase of the refinery and a further ten years, at a fair-market interest rate, to complete the payment of the sum of US$700 million it offered for the refinery, the report discloses. The Government appointed a committee headed by former permanent secretary in the Ministry of Finance Vishnu Dhanpaul, to lead negotiations in which both parties signed non-disclosure agreements, the report says. In a subsequent interview in late 2019, Imbert said the Patriotic would be able to restart the refinery in less than 12 months since it won't immediately have to raise the US$700 million payment, the report relays. In November 2019, Patriotic delivered its detailed acquisition proposal to the Cabinet-appointed committee, the report notes. "In this regard, the union now awaits a response from the evaluation committee on or before the end of the month. The OWTU is confident that its company, Patriotic, stands ready to move to the next stage of fully completing the acquisition process in a timely manner for the benefit of all citizen of Trinidad and Tobago," the company said in a release at that time, the report relays. Patriotic had hoped to begin operations in early 2020, the report relays. On January 12, 2020, an inter-ministerial committee, comprising then Minister in the Office of the Prime Minister and now Energy Minister, Stuart Young, former energy minister the late Franklin Khan, and then Minister of Public Utilities, Robert Le Hunte was put together to look at the proposal, the report notes. In February 2020, Dr. Rowley told the Parliament there was a slight hold-up on Patriotic's end as the company requested additional data on the plant, the report says. The OWTU denied this. But in a statement the Ministry of Energy said that on January 15, 2020, the Cabinet appointed sub-committee, members of the evaluation team and technocrats from the Ministry had a meeting with Patriotic, in which Patriotic wanted to conduct a detailed inspection of the refinery amongst other things before it proceeded with the negotiations, the report relays. In April 2020, Khan had said the Covid-19 pandemic had delayed negotiations between the two parties, the report notes. "As far as we are concerned, the deal is still on," he had told the Express Business at that time. "It's been kept back because there was supposed to be a scheduled walk through with technical people from their investors but then our borders closed because of the Covid situation and the travel restrictions have lead to a set back. We will see how it unfolds but as far as we are concerned, everything is as it was before," he had said, the report says. In September 2020, Rowley told the Spotlight on the Budget and Economy the OWTU had until October to conclude negotiations to acquire the refinery, the report discloses. Dr. Rowley said there was a date specific deadline of October for a contractual conclusion and that the Government expected to get a specific response in a specific time, the report relays. On October 31, 2020, Government rejected Patriotic's offer, the report says. At the time, Khan said Patriotic failed to address three key issues: the first priority lien on the asset (the issue of pledging of the assets); the purchase price financing and the restart financing, the report relays. Following this announcement, Roget requested that the original evaluation committee, which had analysed the bids in August and September 2019, should be reconvened to evaluate Patriotic's final offer, the report discloses. The Prime Minister acquiesced and directed that the committee should re-examine all Patriotic's final submissions and make a recommendation to Cabinet by November 30, the report notes. Patriotic's final offer was for an upfront payment of US$500 million for the refinery and the fuel trading assets, the report relays. The committee concluded Patriotic's relationship with Trafigura to fund the process of restarting the refinery was "workable," but to initially buy the plant, the RBC/Patriotic configuration was not, the report notes. Khan said the evaluation committee was of the view that, the financial relationship between Patriotic and RBC was unworkable; the financial relationship between Patriotic and Trafigura was one which could be considered workable and it was not advisable or feasible for Government to finance the removal of the lien on the assets of Paria and Guaracara for the purpose of facilitating a sale to Patriotic, the report says. In addition, it was not feasible for the Government to fund the removal of the US$500 million lien on the refinery, the report discloses. The liens (debt) of the assets has been the sticking point, the report relays. There have been no additional RFP's issued for the refinery following the rejection of OWTU's bid, the report notes. As it stands, the refinery remains mothballed, the report adds. ============= U R U G U A Y ============= ACI AIRPORT: Fitch Affirms 'BB+' Rating on $246.2M Sr. Sec. Notes ----------------------------------------------------------------- Fitch Ratings affirmed the 'BB+' ratings to ACI Airport SudAmerica, S.A.'s $246.2 million senior secured notes (2021 notes) due in 2034 and its $14.6million senior secured notes (2015 and 2020 notes) due in 2032. The Rating Outlook remains Negative. RATING RATIONALE The ratings are driven by Carrasco International Airport's (MVD) strategic but modest traffic base and its strong Origin & Destination profile, with passenger traffic still recovering from the effects of coronavirus pandemic. The concession extension granted up to 2053 allowed the issuer to refinance its debt, adding significant liquidity enhancement including an extended principal grace period, an interest payment account (IPA) of USD 21.5 million (as of October 2022) and a six-month debt service reserve account (DSRA), which is funded with Letter of Credits (LOC) at closing. The debt is at HoldCo level and benefits from a springing guarantee from the OpCo. The notes' scheduled and target amortization provides flexibility to the transaction in case of additional stress. Under Fitch's rating case, DSCR minimum and average are 1.05x and 1.66x (2024-2034), respectively; the airport would not need to draw any amount of its DSRA due to the IPA and up to USD15 million available in an unsecured working capital facility. Under the severe downside case, which assumes a slower traffic growth until 2026, DSCRs would be lower averaging 1.39x (2024-2034), but no draws on the DSRA would be necessary. The current metrics until 2024 added to available liquidity are consistent with a 'BB+' rating, according to the applicable criteria. The Negative Outlook on the notes reflects concerns about the speed of traffic growth in Uruguay as a consequence of the sluggish economic and air travel performance that is anticipated abroad. A slower growth could drain the liquidity embedded in the structure. KEY RATING DRIVERS Main Uruguayan Airport, Modest Catchment Area [Revenue Risk - Volume: Midrange]: Located in Uruguay's capital city of Montevideo, MVD is the main international gateway to Uruguay with approximately 85% of the country's flights and a catchment area with 3.4 million people. As a result, its traffic has primarily been from international passengers traveling from Argentina, Chile, Brazil as well as Spain. MVD is almost exclusively an O&D airport with less than 1% of passengers transferring to other destinations. The carrier concentration is moderate, with Copa Airlines (not rated) and LATAM Airline Group S.A. (LATAM; rated BBB-(cl)) accounting for 22% and 21% of the passengers respectively. The new six regional airports added to the concession are not expected to increase the overall traffic base. Inflation and Exchange Adjusted Tariffs [Revenue Risk - Price: Midrange]: Revenues are 95% denominated in USD, mostly in the form of regulated passenger tariffs adjusted by a global index that considers foreign exchange and inflation rates. Tariffs cannot decrease under the concession adjustment scheme, and increases must be approved by the Uruguayan government pursuant to a decree. Commercial revenues derived from the airport's duty-free, restaurant, among other concessions are not regulated but are also influenced by traffic patterns. Well Defined CAPEX Plan for Regional Airports [Infrastructure Development & Renewal: Stronger]: The concession includes six regional airports and some certain investment obligations expected to be funded with Montevideo's cash flow generation. According to the technical advisor's analysis (ALG), the investments are considered simple and are capped at USD 67 million per the concession contract extension. Under the concession agreement, there is an obligation to build a new taxiway in MVD, which is triggered by volume or shall be completed up to 2033. The MVD current capacity of 4.5 million passengers per year is well above Fitch's Rating Case forecast over the next 10 years. No other significant mandatory investments are needed in the remaining concession term. Debt at HoldCo Level with Enhanced Liquidity Features [Debt Structure: Midrange]: The notes are fixed-rate and fully amortizing over the life of the debt and benefit from a springing guarantee. Debt benefits from a six-month DSRA, funded by a standby letter of credit, and a USD 21.5 million IPA (as of October 2022), which supports interest payment up to November 2023 during the principal grace period that ends in May 2025. The notes will benefit from a legal amortization schedule complemented by a partial cash sweep up to a target debt balance. Failure to meet the target debt balance is not an event of default, therein providing flexibility to the transaction in the event that certain years perform below original expectations. Financial Profile: Under Fitch's Rating Case, the Project's DSCR profile (considering mandatory amortizations only) from 2024 to 2034 is strong, with a minimum and average of 1.05x and 1.66x, respectively from 2024 to 2034. In 2023, the DSCR is expected to be below one and 2021 notes' interest payments will be paid with the IPA. The minimum DSCR has reduced in comparison with Fitch's rating case from the rating assignment. This is expected to occur in 2024, and its reduction reflects higher opex expected by the issuer for this year. Despite average DSCR is considered strong for the assigned rating, the DSCRs until 2024 combined with the liquidity embedded in the structure are considered adequate for the assigned rating. PEER GROUP Sociedad Concessionaria Operadora Aeroportuaria Internacional, S.A. (OPAIN), the concessionaire of El Dorado International Airport in Bogota (BB+/Outlook Negative), is a peer for ACI in Fitch's LATAM airport portfolio. Both airports are the main gateways in their respective countries, but OPAIN has a stronger traffic profile, a larger O&D base, and less dependence on international traffic. OPAIN's DSCR profile of 1.3x after 2023 is consistent with its 'BB+' rating, but its current Negative Outlook reflects uncertainty about the pace of traffic recovery, where a slower recovery could reduce the project's ability to comply with its operational and financial obligations. ACI's rating reflects flexibility to mitigate these two main risks, similar to the protections embedded in OPAIN's debt structure. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Reduced traffic growth leading to further liquidity deterioration; - Usage of the resources of the DSRA. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Continuous traffic growth indicating less dependency on structure liquidity could lead to a Stable Outlook; - Down payment from the duty-free operator due to contract extension in 2023. CREDIT UPDATE Traffic has been recovering since the Uruguayan government fully reopened its boarders, including foreigners, in November 2021. The volume reached 61% compared to pre-pandemic levels considering January to September 2022 accrued basis. The traffic volume in 2022 is above to Fitch's rating case and Fitch's severe downside case, which were projected at 59% and 50% respectively compared to 2019. Furthermore, traffic has being increasing gradually along 2022 in a monthly basis. In September 2022 the traffic corresponded 70% of September 2019 figures. Revenues reached USD 32.0 million in 2021, and USD 32.2 million in the 1H2022, above Fitch's rating cases by 28.1% and 19.5% respectively. Operating Expenses in 2021 were in line with Fitch's rating case, but 22.9% above in the 1H2022. This is mainly because variable costs are applied according to PAX recovery, and Opex increased as PAX were higher than expected. Consequently, EBITDA outperformed Fitch's rating case projections. Capex for the 1H 2022 was USD 3.6 million, of which USD 3.3 million corresponded to the new airports and USD 0.4 million were allocated in MVD's needs. It is low compared to the USD 13 million schedule for FY2022, mainly because executive projects took more time than expected. In addition to that, there have been certain delays in expropriation in Carmelo, where the investments are concentrated in the 2022. In 2022, the Uruguayan government approved a tax benefit in connection to the investment plan to improve the airports facilities. The tax benefit reduces the income tax over the next years enhancing the coverage metrics from 2027 awards. FINANCIAL ANALYSIS Fitch did not differentiate between its base and rating case assumptions, given the level of uncertainty about future traffic performance. Rating case traffic in 2022 has been assumed to be equal to projections received by management, about 65% of 2019 levels. Thereafter, rating case traffic reaches 85% of 2019 levels in 2023, until fully recovering to 2019 levels in 2024. Fitch has continued to include a severe downside case within its financial analysis for ACI due to heightened uncertainty concerning future traffic performance and the airport's international traffic concentration, which increases its dependence on other countries' economic recoveries. The severe downside case represents a slower traffic growth than the rating case. Traffic levels under this case are: 65% of 2019 levels in 2022, 74% in 2023, 89% in 2024, 94% in 2025, until fully recovering to 2019 levels in 2026. Under both the rating and severe downside case, Fitch has also assumed a 5% stress in opex for the new airports, as a potential margin of error in comparison to the cost budget. Macroeconomic assumptions such as inflation and foreign exchange were also updated in line with Fitch's Sovereigns group's forecasts as of September 2022. Fitch did not consider any down payment from the duty-free operator in 2023 related to an expected contract extension. The projections assume the current conditions will be maintained. In the Rating Case, minimum and average DSCRs from 2024 to 2034 are 1.05x and 1.66x, respectively. In the severe downside case, minimum and average DSCRs, for the same period, are 1.05x and 1.39x, respectively. SECURITY The security package supporting the 2021 notes is typical for project finance and includes a pledge of the shares of the OpCo and a covenant to issue a guarantee from the entity; a pledge of the shares of Cerealsur S.A., direct owner of PDS's shares, and a guarantee from the entity; all of the issuer's shares; and all present and future payments, proceeds and claims of any kind with respect to the foregoing, in a pari-pasu basis with the remaining 2015 and 2020 notes, and a pledge over account into which all dividends and distributions from PdS to Cerealsur and from Cerealsur to the Issuer are deposited. The 2021 notes benefit from a six-month DSRA, funded by a standby letter of credit, and a prefunded Interest Payment Account (IPA) of USD 21.5 million, as of October 2022. 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 ----------- ------ ----- ACI Airport SudAmerica, S.A. ACI Airport SudAmerica, S.A. /Senior Secured Debt/1 LT LT BB+ Affirmed BB+ ACI Airport SudAmerica, S.A. /Senior Secured Debt/2 LT LT BB+ Affirmed BB+ URUGUAY: Gets $90M-IDB Loan to Improve Subnational Fiscal Mgmt. ---------------------------------------------------------------- The Inter-American Development Bank (IDB) approved a $90 million loan to support Uruguay's push to enhance the fiscal management and public investment quality of its departmental governments. This is the second operation under a conditional credit line for investment projects (CCLIP) that aims to strengthen departmental financial management, make public service management more efficient through digitization, and facilitate access to sustainable and inclusive public infrastructure. The initiative extends an IDB commitment to strengthening subnational fiscal management in Uruguay that spans more than three decades. The first $75 million CCLIP operation, approved in 2016, helped departmental governments systematize and digitize fiscal management and public investment processes at the departmental level. This second operation aims to build on this work, expanding departmental e-government and incorporating information and communication technologies into key public services such as lighting or waste collection. The five-year project is expected to significantly broaden the type of investments that incorporate climate criteria. The financing will also foster public investment by departmental governments that is aligned with gender equity and diversity goals. More efficient departmental public investment is expected to make real estate appreciate more quickly in areas adjacent to public investment projects in the departments of Uruguay that benefit from the program. In the area of financial management, the program aims to enhance transparency and efficiency by strengthening public assets and subnational debt management systems. The project will also help departmental governments develop their own green revenue streams and analyze public service delivery from a climate change lens. The $90 million IDB loan has a 24.5-year term, with a six-year grace period and an interest rate based on the SOFR. The government of Uruguay will contribute an additional $18 million in local counterpart funds. =============== X X X X X X X X =============== LATAM: Caricom Stakeholders Welcome Loss and Damage Fund -------------------------------------------------------- Jamaica Observer reports that small island developing states (SIDS) across Caricom have welcomed the decision to establish a loss and damage response fund recently agreed at the United Nations Climate Conference (COP27) held in Egypt. Labelled a breakthrough decision, the agreement to establish a loss and damage fund stems from existing international negotiations and follows years of deliberations, according to Jamaica Observer. It also backs the call for financial support to help developing countries respond to post-climate-related impacts, including livelihood loss, with loss and damage added to the COP agenda for the first time, the report notes. "We have literally exhausted all of our efforts to bring home the climate action commitments our vulnerable people desperately need," said Molwyn Joseph, government minister in Antigua and Barbuda and chair of the Alliance of Small Island Developing States (AOSIS), in a statement following the agreement at the conference, the report relays. "AOSIS and our fellow developing countries have toiled for the past thirty years to be heard on this issue. AOSIS has worked tirelessly this year to build consensus, devise a clear loss and damage response fund proposal, and ensure the commitment of the international community to come to COP27 and negotiate on this issue in good faith," he added, the report discloses. AOSIS is a regional organsisation that has represented the interests of some 39 SIDS and low-lying coastal developing states for more than two decades in climate negotiations and sustainable development processes, the report relays. "Our ministers and negotiators have endured sleepless nights and endless days in an intense series of negotiations, determined to secure the establishment of a loss and damage response fund, keep '1.5' alive, and advance ambition on critical mitigation and adaptation plans," Joseph stated, the report relays. In a Panos Caribbean news release, stakeholders noted that even as they celebrate the win, they are mindful of the work ahead to operationalise the fund, the report discloses. According to Dr Colin Young, executive director of the Caribbean Community Climate Change Centre, while the hard-fought-for loss and damage decision is certainly welcomed, it is now time to ensure that the operation of the fund benefits SIDS and other developing countries, the report relays. "The details will need to be worked out, the criteria established, and the sources identified. The design of the fund must be fit for purpose and not repeat the mistakes of other funds that are very difficult to access and take years," he stated, the report notes. UnaMay Gordon, former principal director for the Climate Change Division of Jamaica, and who has herself been on the frontline at many global climate negotiations, agreed. "This was a great step forward, but it is the first step. Eyes will now focus on construction of the transitional committee and the beginning of their deliberations. I do hope the fight for loss and damage gets easier from here on," the report relays. AOSIS, which has long championed financial support for loss and damage in the developing world in supporting calls for the design and operationalization of the fund, said it should include important concepts such as "climate justice" when taking action to address climate change as outlined in the Paris Agreement; and underscoring the need for the operating entity that is built to provide predictable support for ex-post response to loss and damage, the report discloses. Aside from that, the entity further maintained that the programming of support should take a "country-owned, country-driven, gender-responsive approach" and "with operational modalities that realise enhanced direct access, especially through existing regional and national entities," the report adds. [*] BOND PRICING: For the Week Nov. 21 to Nov. 25, 2022 ------------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Noble Holding Internat 6.2 62.2 8/1/2040 KY USD Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD Noble Holding Internat 5.3 60.5 3/15/2042 KY USD Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY Esval SA 3.5 49.9 2/15/2026 CL CLP Noble Holding Internat 6.1 62.0 3/1/2041 KY USD City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD Sylph Ltd 2.4 65.1 9/25/2036 KY USD Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR Fospar S/A 6.5 1.2 5/15/2026 BR BRL Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD Provincia del Chubut A 4.5 2208 3/30/2021 AR USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. 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