/raid1/www/Hosts/bankrupt/TCRLA_Public/221206.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Tuesday, December 6, 2022, Vol. 23, No. 237
Headlines
A R G E N T I N A
ARGENTINA: Alerts Uruguay for "Measures" if it Advances with CPTTP
ARGENTINA: On Alert Amid Accelerating Bank Reserves Sales
B R A Z I L
BRAZIL: Expects to Produce 7.7BB Barrels of Oil in Pre-salt Area
BRAZIL: Public Debt Fell in Oct to Lowest Level Since Pre-pandemic
C O L O M B I A
FIDEICOMISO PA PACIFICO: Fitch Affirms 'BB+' Rating on $260.4M Bond
D O M I N I C A N R E P U B L I C
CENTRAL ROMANA: U.S. Bans Company Over Forced Labor
E C U A D O R
CUENCA DPR 2021-1: Fitch Affirms 'B-' Loan Rating, Outlook Stable
J A M A I C A
JAMAICA: Urged to Seek Out More Nearshoring Opportunities
P U E R T O R I C O
SAN JORGE CHILDREN'S: Commitee Taps RSM as Financial Advisor
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A R G E N T I N A
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ARGENTINA: Alerts Uruguay for "Measures" if it Advances with CPTTP
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Rio Times Online reports that the foreign ministries of Argentina,
Brazil and Paraguay issued a joint note stating that they can take
"measures" to "defend their interests" given the intention of their
other Mercosur partner, Uruguay, to present a request for adhesion
to the Comprehensive Treaty and Progressive Partnership
Trans-Pacific (CPTPP) without considering the other members of the
South American bloc.
According to a statement released by the Argentine Ministry of
Foreign Affairs, the representatives of Argentina, Brazil and
Paraguay informed Uruguay "that the three countries reserve the
right to adopt any measures they deem necessary to defend their
interests in the legal and commercial fields," the report notes.
The letter was presented by the national coordinators of the three
countries before the Mercosur Common Market Group, according to Rio
Times Online.
Uruguayan Foreign Minister Francisco Bustillo is on an official
trip to Oceania, where he plans to present in New Zealand the
formal request for Uruguay's accession to the Trans-Pacific
Agreement, as reported by President Luis Lacalle Pou during a
meeting held on November 18 with representatives of different
Uruguayan political parties, the report relays.
Through an eventual entry into the Trans-Pacific Agreement, Uruguay
would seek preferential conditions for access to markets such as
Japan, where Uruguayan beef enters with average tariffs of over
30%, the report discloses.
It also aims to obtain a better position in Asian markets against
direct competitors in agricultural products such as Australia and
New Zealand, which are already members of the CPTPP, the report
relats.
Lacalle Pou's Agenda And The Crossroads With Alberto Fernandez
The new dispute occurs days before the next Mercosur summit, which
will be on December 5 and 6 in Montevideo, the report relays. But
it is not the first time that Lacalle Pou's intention to advance an
opening agenda outside the regional bloc has generated crossroads
with his partners, the report notes.
Lacalle Pou also promotes that Uruguay advance in a Free Trade
Agreement with China and another with Turkey, the report says. In
particular, the agreement with China is the one that generated the
greatest resistance from Argentine President Alberto Fernandez, the
report relays. The president-elect of Brazil, Luiz Inacio Lula da
Silva, has not yet expressed a concrete position on the matter, the
report discloses.
The repeated requests from Uruguay to make Mercosur more flexible
generated a direct cross between Fernandez and Lacalle Pou at a
summit of presidents of the bloc held by videoconference on March
26, 2021, the report notes.
"We do not want to be anyone's burden, if we are a burden, they can
take another ship, but we are nobody's burden," Fernandez said on
that occasion before a claim by Lacalle Pou, the report says.
What Does It Mean To "Make Mercosur More Flexible"?
Uruguay understands the idea of making Mercosur "flexible" as
obtaining the consent of the bloc's partners so that one of the
members can advance in trade agreements with third countries,
without the need for the others to go hand in hand, the report
relays.
Argentina has reiterated on more than one occasion that a type of
agreement like the one promoted by Uruguay with the Asian giant
damages the founding bases of the bloc, the report notes.
Meanwhile, the Uruguayan government has signaled that it would go
ahead with its openness agenda anyway, even if the Mercosur
partners disagreed, 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.
ARGENTINA: On Alert Amid Accelerating Bank Reserves Sales
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Buenos Aires Times reports that just weeks after the relief
generated by the inflow of greenbacks from the "soy dollar"
programme calmed their fears, Argentina's economic team is on alert
due to the accelerating outflow of Central Bank reserves seen in
November.
After bringing in around US$5 billion in September thanks to Sergio
Massa's soybean dollar scheme, the Central Bank was forced to sell
US$1.5 billion in October, according to Buenos Aires Times.
The institution sold US$200 million in operations on the foreign
exchange market, the report notes. The level was below the
preceding week's US$530 million, but in November so far net sales
of almost US$1 billion has been recorded, the report relays. That
exceeds the US$730 million sold over the same period in 2021, the
report notes.
The difficulties in accumulating foreign currency coincide with a
new turn in the stabilization plan launched by Massa, the report
relays. The economy minister has gone from negotiating sectoral
benefits, provided with differential exchange rates (a dollar at
200 pesos for grain producers, for example) to restricting imports
in recent months, the report relays. He is making accessing
dollars more expensive too, lately with the launch of the Qatar
dollar, while the officialisation of the so-called 'techno dollar'
rate has been delayed, the report relays.
The implementation of a dollar at 338 pesos for credit and debit
card spending from purchases exceeding US$300 caused a reduction in
consumption prior to the start of the World Cup, the report notes.
The Central Bank's net sales for the four consecutive weeks have
also been combined with difficulties in extending peso debt
maturities and the surge in financial dollars, the report
discloses.
The spot market (CCL), which closed at 332 pesos per greenback and
reached its highest level since June, signals the disarmament of
those who had bet on peso rates and securities, after almost two
months in which the parallels were frozen, 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.
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B R A Z I L
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BRAZIL: Expects to Produce 7.7BB Barrels of Oil in Pre-salt Area
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Richard Mann at Rio Times Online reports that Brazil may reach a
production of 7.7 billion barrels of crude oil in the pre-salt area
in the period 2023-2032, sources from the sector announced at the
fifth edition of the Pre-Salt Oil Technical Forum.
The president of the state-owned Pre-Salt Petroleum (PPSA), Eduardo
Gerk, said that the figures are based on the 19 contracts already
managed by this company linked to the Ministry of Mines and Energy,
in addition to the Bacalhau and Tapi fields, according to Rio
Times Online.
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).
BRAZIL: Public Debt Fell in Oct to Lowest Level Since Pre-pandemic
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Rio Times Online reports that the gross federal government debt
(DGBB) fell to 76.8% of GDP in October.
It retreated 0.3 percentage points in relation to September and 5.6
p.p. in relation to the same month in 2021, according to Rio Times
Online.
The Central Bank released the data.
Public debt fell 3.5 percentage points in 2022, from 80.3% to 76.8%
of GDP in the period, the report relays. According to the BC, in
12 months, it retreated 5.6 percentage points, the report notes.
The federal government said the rate should be 74% in December
2022, 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 O L O M B I A
===============
FIDEICOMISO PA PACIFICO: Fitch Affirms 'BB+' Rating on $260.4M Bond
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Fitch Ratings has affirmed the following ratings of Fideicomiso
P.A. Pacifico Tres (Pacifico):
- USD260.4 million USD bonds at 'BB+';
- COP397,000 million UVR bonds at 'BB+' and 'AA+(col);
- COP300,000 million UVR loan at 'BB+' and 'AA+(col);
- COP450,000 million COP Loan A at 'AA+(col)';
- COP150,000 million COP Loan B at 'AA+(col)'.
The Rating Outlook for the international ratings is Stable. The
Outlook for the national ratings is revised to Positive from
Stable.
RATING RATIONALE
The Positive Outlook on the national ratings reflects the
satisfactory progress on construction works, with the completion of
four out of five Functional Units (UFs), with the remaining UF
close to receiving a certificate of partial completion and expected
to be completed next year. Once the project is fully operational
after the completion of UF5, the national scale ratings would be
consistent with the highest rating category, assuming its financial
profile remains stable.
The ratings are based on the low revenue risk due to the existence
of traffic top-ups and grantor payments, a strong debt structure,
characterized by several prefunded reserve accounts, distribution
tests, a cash sweep mechanism and robust liquidity mechanisms.
Under Fitch's rating case, Pacifico presents a loan life coverage
ratio (LLCR) of 1.4x, which is strong for the rating category
according to applicable criteria and revenue profile but is limited
by the credit quality of Agencia Nacional de Infraestructura (ANI).
Fitch views the latter as a credit-linked entity to the Government
of Colombia (BB+/Stable).
KEY RATING DRIVERS
Completion Risk Adequately Mitigated [Completion Risk: Stronger]:
Construction works are performed under a fixed price and with
date-certain engineering, procurement, and construction (EPC)
contracts with a consortium composed of all project sponsors
(acting directly and not through affiliates). All obligations will
be assumed on a joint and several basis. Fitch rates two out of the
three sponsors: Constructora MECO (BBB-(pan)/Outlook Negative) and
Construcciones El Condor (BBB-(col)/Rating Watch Negative).
Construction is expected to continue for at least another year,
with the most complex works already completed and a few permits
pending. Remaining works such as utilities relocation and right of
way management have been extended due to delays in expropriation
processes and the pandemic but are expected to continue to advance
at an adequate pace. According to the independent engineer, the EPC
contractor has the experience and ability to successfully develop
the project. The completion schedule is adequate, and the
performance bond and secured, multipurpose loan facility (SMF)
provide enough liquidity to cover debt service should the EPC
contractor need to be replaced.
Low Exposure to Volume Risk [Revenue Risk - Volume: Midrange]: The
project's revenues mainly consist of the ANI's contributions and
toll revenues streaming from toll collection and top-up traffic
payments. Traffic revenues are not subject to the demand of price
risk, even if traffic volumes are severely below expectations or
expected price increases are not implemented. The ANI will
periodically compensate the concessionaire if toll collections are
below the amounts established in the concession contract. The ANI
payment obligations under the concession agreement are consistent
with the credit quality of the grantor, the ANI.
Sources of revenue are subject to infrastructure availability,
service levels and quality standards, based on the fulfillment of
indicators provided in the concession agreement. There are clearly
defined, unambiguous, back-to-back penalty deduction mechanisms in
the concession agreement with robust cure periods. Deductions are
legally capped at 10%. Additionally, fines imposed on the
concessionaire, as well as penalty clauses in case of early
termination of the agreement, are limited by contract.
Inflation Adjusted Tolls [Revenue Risk - Price: Midrange] Tariffs
are annually adjusted by the inflation rate at the beginning of the
year. Toll rates are moderate, and if the net present value of toll
collections received by the 8th, 13th, 18th, and last year of the
concession is below guaranteed values, the ANI has the obligation
to cover any shortfalls, after deductions.
Adequate Maintenance Plan [Infrastructure Development and Renewal:
Midrange]: The project depends on a moderately developed capital
and maintenance plan to be implemented directly by the
concessionaire. The plan will be largely funded from project cash
flows. The concession agreement does not contemplate hand-back
requirements; however, the concessionaire is to operate and
maintain the road according to the pre-established standards at all
times. The structure includes a dynamic 12-months forward-looking
O&M reserve account for routine and periodic maintenance
expenditures.
The independent engineer believes the concessionaire has the
experience and the ability to operate the Project successfully. The
O&M plan, organizational structure and budget, appear reasonable
and in line with similar Colombian projects. The concessionaire has
a liquid support instrument equivalent to the maximum amount of O&M
expenses forecast for six months. This instrument must be issued by
a financial entity with a minimum credit rating of 'BBB-' or
'AA+(col)'.
Robust Debt Structure [Debt Structure: Stronger]: The debt is fully
amortizing, senior secured, comprising USD-, UVR- and
COP-denominated financings. USD-denominated debt, which is matched
with USD-linked currency revenues settled in COP (49% of future
budget allocations [Vigencias Futuras] are USD-linked), has also
been issued at a fixed rate. Furthermore, the transaction
contemplates a short-term hedging mechanism provided by eligible
counterparties to cover foreign exchange risk exposure fully. UVR-
and COP-denominated debt is indexed to inflation and is not exposed
to basis risk.
Structural features include multiple reserve accounts and a cash
sweep mechanism. Robust liquidity mechanisms are in place to
mitigate liquidity/budgetary risk, construction delays, and reduced
cash flow generation due to low traffic performance. The
transaction has a fully-committed revolving subordinated SMF, equal
to 15% of outstanding senior debt, in which eligible lenders have
committed to disburse funds to the project company when necessary.
Additional liquidity includes 12-months principal and interest
prefunded onshore and offshore debt service reserve accounts
(DSRA).
Financial Summary: Fitch's rating case LLCR is 1.4x, which is in
line for the rating category according to Fitch's applicable
criteria and when compared with other similarly rated transactions,
particularly in light of the project's low exposure to volume risk,
but limited to the counterparty risk rating of ANI's obligation.
Also, the debt service coverage ratio (DSCR) profile presents
levels below 1.0x in four years. However, the cash flow available
for debt service shortfall in those years are expected to be
covered with funds of the debt service reserve account and, if
needed, making use of additional liquidity sources available.
PEER GROUP
Pacifico is comparable to Fideicomiso P.A. Costera (Costera), rated
'BB+'/Stable and 'AAA(col)'/Stable. Costera is Pacifico's closest
peer, as both concessions are part of the 4G toll road program and
share volume, price, infrastructure and development/renewal, and
debt structure risk attributes. Pacifico has a slightly lower
minimum LLCR at 1.4x, compared to Costera at 1.5x; in addition,
Costera's successful completion of its construction phase supports
its higher ratings on the national scale.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Deterioration in Fitch's view regarding the ANI's credit
quality's contributions.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- For the national scale ratings, successful completion of UF5;
- Improvement in Fitch's view regarding the ANI's credit quality's
contributions.
CREDIT UPDATE
As of August 2022, the overall construction progress is 94.5%
complete, 0.55% behind the programmed progress of 95.0%. Four
Functional Units (UFs) are 100% completed, with only one UF (UF5)
pending completion. UF5 has a construction progress of almost 78%.
The IE notes that multiple issues have delayed the construction
progress of UF5, related to the relocation of an oil pipeline,
difficult rights of way (ROW) management, and difficulties to
undertake road closures as planned. The construction scheduled date
has been extended beyond Fitch's expectation of December 2021.
In June 2022, ANI granted the Concessionaire a Liability
Exculpatory Event (LEE) to extend the UF5 work plan period until
May 25, 2023, due to delays in property management. Accordingly, in
October, the lenders voted to approve an extension of the UF5
Long-Stop Date to August 2023 and the Project Completion Date to
March 2024. Although the new EPC schedule considers UF5 will be
delivered in May 2023, the Concessionaire is expecting that the
delivery of the UF5 will most probably take place until December
2023, mainly due to the relocation of the oil pipeline.
Between June and August 2022, the Concessionaire made available for
verification process 27.15Km of UF5 (58.9% of the total UF length),
in order to receive a certificate of partial completion, which they
expect will be accepted by the end of 2022.
As of September 2022, Acapulco and Supia's toll booths reached an
average annual daily traffic (AADT) of 5,687 vehicles and 4,722
vehicles, respectively, which represent 145.0% and 105.2% of the
levels observed in the same period of 2019. AADT in the Irra toll
booth reached 5,154 vehicles, while AADT in the newly opened toll
booth of Guaico reached 1,167 vehicles. Overall, traffic
performance was above Fitch's rating case expectations by 15%, with
all toll booths except for Guaico performing above expectations.
As of September 2022, toll revenue was reported at COP85.6billion;
however, the concessionaire is currently only entitled to receive
approximately 75% of the collection due to the lack of completion
in UF5, in line with Fitch's expectations. As expected, the project
received in December 2021 trapped FBAs and toll revenues associated
with UF2 that reached COP153.2 billion. In addition, the
concessionaire is expecting to receive part of the trapped toll
revenues and FBAs for UF5 at the end of 2022 once the partial
completion certificate is received.
As of August 2022, operational, maintenance and administrative
expenditures were COP70.9 billion, above Fitch's expectations of
COP44.5 billion under its rating case for the same period. This was
due to the funding of some mandatory accounts that have to do with
construction but are not considered Capex, such as land
acquisition, supervision, and contractual support. Since Fitch was
expecting construction to be completed by the end of 2022, this
funding was not considered in its cases.
FINANCIAL ANALYSIS
For all toll booths, Fitch's base case considered the actual
traffic as of September 2022. From 2023-2035, the agency assumed
traffic would grow at a CAGR of 2.0% for Supia and Irra toll
booths, 2.3% for Guaico, and 1.9% for Acapulco.
Fitch also adjusted its projections for construction delays in UF5
and expects the project to receive a certificate of completion in
December 2023. Toll rates are assumed to increase by inflation,
projected at 8.0% in 2022, 4.0% in 2023 and 2.5% afterward. O&M and
major maintenance expenses were increased by inflation plus 5.0%
and 3.0%, respectively, for every year from the concessionaire's
budget, while the performance ratio was assumed at 99.0%.
The agency assumed FBAs payment would present a three-month delay,
while the top-up payment delay would be equivalent to 18 months.
The assumptions represent the maximum days of delay permitted
before a termination event is triggered according to the concession
agreement.
Under this scenario, minimum LLCR is 1.5x, while minimum DSCR is
0.6x. Although a DSCR profile with coverages below 1.0x may reflect
short-term liquidity issues, this is not a concern for Pacifico, it
benefits from a 12-month DSRA and a subordinated multipurpose loan
facility (SMF).
Fitch's rating case assumed the same traffic for 2022 for all toll
booths than the base case. From 2023-2035, the agency assumed
traffic would grow at a CAGR of 1.3% for Guaico and Irra toll
booths, 1.2% for Acapulco and 1.1% for Supia. Fitch also assumed
the same construction delays in UF5, toll rates, inflation
projections, and FBAs payments and top-up payment delays than the
base case. O&M and major maintenance expenses were increased by
inflation plus 7.5% and 5.0%, respectively, for every year from the
concessionaire's budget, while the performance ratio was assumed at
95.0%.
Under this scenario, minimum LLCR is 1.4x, while minimum DSCR is
0.6x. Pacifico's liquidity would also be enough to address
projected DSCRs below 1.0x.
SECURITY
The secured parties benefit from a first-priority security interest
in, control over, and lien on all of the issuer rights in the
indenture trustee accounts and the funds, financial assets and
other properties deposited and to be deposited in such accounts.
Senior lenders share common collateral on a pari passu basis in
relation to all current and future debt of the project company. All
proceeds from the collateral will be paid to the intercreditor
agent, who, in turn, will distribute the monies to the secured
parties. None of the parties will have the right to take
independent enforcement in respect to the common collateral.
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
----------- ------ -----
Fideicomiso P.A.
Pacifico Tres
Fideicomiso P.A.
Pacifico Tres/Debt/
1 LT LT BB+ Affirmed BB+
Fideicomiso P.A.
Pacifico Tres/Debt/
1 Natl LT Natl LT AA+(col) Affirmed AA+(col)
===================================
D O M I N I C A N R E P U B L I C
===================================
CENTRAL ROMANA: U.S. Bans Company Over Forced Labor
---------------------------------------------------
Effective November 23, 2022, U.S. Customs and Border Protection
(CBP) personnel at all U.S. ports of entry will detain raw sugar
and sugar-based products produced in the Dominican Republic by
Central Romana Corporation Limited (Central Romana).
CBP issued a Withhold Release Order (WRO) against Central Romana
based on information that reasonably indicates the use of forced
labor in its operations. CBP identified five of the International
Labour Organization's 11 indicators of forced labor during its
investigation: abuse of vulnerability, isolation, withholding of
wages, abusive working and living conditions, and excessive
overtime.
"This Withhold Release Order demonstrates CBP's commitment to
protect human rights and international labor standards and to
promote a fair and competitive global marketplace," said CBP Acting
Commissioner Troy Miller. "The agency will continue to set a high
global standard by aggressively investigating allegations of forced
labor in U.S. supply chains and keeping tainted merchandise out of
the United States."
In its September 2022 report titled "Global Estimates of Modern
Slavery: Forced Labour and Forced Marriage," the International
Labour Organization estimates that nearly 28 million workers suffer
under conditions of forced labor worldwide. Foreign companies
exploit forced labor to sell goods below market value. It also
hurts law-abiding businesses, threatens American jobs, and exposes
consumers to unwittingly supporting unethical business practices.
The scourge of human trafficking exposes vulnerable populations to
inhumane working conditions like physical and sexual violence,
isolation, restriction of movement, withholding of wages, excessive
overtime, and more.
"CBP continues to set the international standard for ensuring that
goods made with forced labor do not enter U.S. commerce," said
AnnMarie R. Highsmith, Executive Assistant Commissioner, CBP Office
of Trade. "Manufacturers like Central Romana, who fail to abide by
our laws, will face consequences as we root out these inhumane
practices from U.S. supply chains."
This WRO on Central Romana is the latest action the United States
has taken to address forced labor and other human rights abuses
around the world. In September 2022, the U.S. Department of Labor
identified sugarcane from the Dominican Republic in its List of
Goods Produced by Child Labor or Forced Labor, and the U.S.
Department of State placed the Dominican Republic on its Tier 2
list in their July 2022 Trafficking in Persons Report. With this
WRO, CBP now oversees the enforcement of 55 WROs and 9 Findings.
Federal statute (19 U.S.C. 1307) prohibits the importation of
merchandise produced, wholly or in part, by convict labor, forced
labor, and/or indentured labor, including forced or indentured
child labor. CBP detains shipments of goods suspected of being
imported in violation of this statute. Importers of detained
shipments can export their shipments or seek to demonstrate that
the merchandise was not produced with forced labor.
Any person or organization that has reason to believe merchandise
produced with the use of forced labor is being, or is likely to be,
imported into the United States can report detailed allegations by
contacting CBP through the e-Allegations Online Trade Violations
Reporting System or by calling 1-800-BE-ALERT.
=============
E C U A D O R
=============
CUENCA DPR 2021-1: Fitch Affirms 'B-' Loan Rating, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed the outstanding series 2021-1 loan
issued by Cuenca DPR at 'B-'. The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Cuenca DPR
2021-1 G2706*AA4 LT B- Affirmed B-
TRANSACTION SUMMARY
Cuenca DPR entered into a loan agreement with various lenders to
receive a disbursement of $87.5 million as part of a new future
flow program backed by U.S. dollar-denominated existing and future
diversified payment rights (DPRs) originated by Banco del Austro
S.A. (Austro) of Ecuador. 100% of DPR flows are processed in the
U.S. by Citibank N.A. (Citibank), the sole designated depository
bank (DDB) in this transaction, that executed an account agreement
(AA) irrevocably obligating the bank to make payments to an account
controlled by the transaction trustee.
Fitch's rating addresses timely payment of interest and principal
on a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
rating of this future flow transaction is tied to the credit
quality of the originator, Banco del Austro S.A. On Nov. 21, 2022,
Fitch affirmed Austro's Long-Term Issuer Default Rating (IDR) at
'CCC+' and Viability Rating (VR) at 'ccc+'. Austro's rating action
was driven by the bank's high-risk appetite, due to its plan to
grow its assets at double digit rates in four years (2020-2024);
their asset quality, that although compares unfavorably with peers
and the banking system's average have shown an improvement
particularly regarding nonperforming loans; stable profitability
metrics and funding structure as well as adequate capitalization
metrics. Additionally, the bank's IDR and VR are sensitive to its
local operating environment, Ecuador (B-/Stable).
Notching Differential Limited by Going Concern Assessment (GCA)
Score: Fitch uses the GCA score to gauge the likelihood that the
originator of a future flow transaction will stay in operation
through the transaction's life. Fitch's Financial Institutions (FI)
group assigns a GCA score of 'GC3' to Austro, which reflects the
bank's position as the seventh largest bank in Ecuador by total
assets with a market share of 4.1% as of September 2022. Although
Austro's business model is adequately diversified, it does not have
any relevant product leadership position within Ecuador, which is
also reflected in the GCA score.
Several Factors Limit Notching Uplift from IDR: The 'GC3' score
allows for a maximum uplift of two notches from the bank's IDR,
pursuant to Fitch's future flow methodology. However, uplift is
tempered to one notch from Austro's IDR due to factors mentioned
below, including high future flow debt to non-deposit funding and
DDB concentration risk, among others.
High Future Flow Debt Relative to Balance Sheet: The future flow
issuance represents approximately 4.0% of Austro's total funding
and 42.5% of non-deposit funding, based on September 2022
financials. Fitch does not allow the maximum uplift for originators
that have future flow debt greater than 30% of the overall
non-deposit funding. Nevertheless, given the benefits of the
proposed structure and quality of flows, the agency allows for some
differentiation (one-notch) from Austro's LT IDR.
Coverage Levels Commensurate with Assigned Rating: When considering
average rolling quarterly DDB flows over the last five years
(September 2017 - September 2022) and the maximum periodic debt
service over the life of the program, including Fitch's interest
rate stress, the projected quarterly debt service coverage ratio
(DSCR) is 26.4x. Additionally, the transaction can withstand a
decrease in flows of approximately 96.2% and still cover the
proposed maximum quarterly debt service obligation. Nevertheless,
Fitch will monitor the performance of the flows as a sustained
decrease could negatively impact the assigned rating.
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.
Potential Redirection/Diversion Risk: The structure mitigates
certain sovereign risks by collecting cash flows offshore until
collection of the periodic debt service amount. In Fitch's view,
diversion risk is partially mitigated by the AA signed by the sole
DDB (Citibank) in the transaction. However, as Citibank processes
100% of DPR flows, the agency believes this exposes the transaction
to a higher degree of diversion risk relative to other Fitch-rated
DPR programs in the region, limiting the overall notching
differential.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The transaction's ratings are sensitive to changes in the credit
quality of Austro. A deterioration in the credit quality of Austro
is likely to pose a constraint to the current rating of the
transaction.
The transaction's ratings are also sensitive to the ability of the
DPR business line to continue operating, as reflected by the GCA
score, and a change in Fitch's view on the bank's GCA score could
lead to a change in the transaction's rating.
Additionally, the transaction's rating is sensitive to the
performance of the securitized business line. The expected
quarterly DSCR is approximately 26.4x, which includes Fitch's
interest rate stress, and should therefore be able to withstand a
significant decline in cash flows in the absence of other issues.
However, significant further declines in flows could lead to a
negative rating action. Fitch will analyze any changes in these
variables 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 in April 2022, 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").
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 Austro's operating environment. If upgraded, 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 rating is driven by the credit risk of Austro as
measured by its LT IDR.
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
=============
JAMAICA: Urged to Seek Out More Nearshoring Opportunities
---------------------------------------------------------
RJR News reports that President of the Jamaica Manufacturers and
Exporters Association (JMEA), John Mahfood, says there needs to be
a stronger push for nearshoring opportunities from Jamaica.
Nearshoring is when a companies shift part of their operations to a
nearby country, according to RJR News.
Mr. Mahfood says Jamaica could get a portion of that pie by helping
businesses pivot from Asian imports, the report notes.
"You can see the advantage. Shipping cost from Jamaica to Miami is
less than $2,000, to New York its $2,500 and the transit time is a
couple days, versus that uncertainty of shipping from China or the
far east," he suggested, the report relays.
But Mr. Mahfood acknowledged that there are some prohibitive
factors that need to be addressed, including high electricity
rates, the report discloses.
"It's not an easy sell to say to foreign manufacturers 'Come to
Jamaica' because our population and our market is relatively small,
so they won't have a domestic market that strong. They will have to
justify nearshoring on the basis of what they can do in terms of
selling to the region and selling to the US," he said, the report
says.
"Many years ago we did have something similar to that when we had
this 807 garment manufacturing arrangement where companies
manufactured here and shipped to the US duty free. That's something
that can still work. It's just realising that it's tough. Our
electricity cost is high but it should be pursued," insisted Mr.
Mahood, the report relays.
He was delivering the Fair Trade Commission's 20th Shirley Playfair
Lecture, the report adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=====================
P U E R T O R I C O
=====================
SAN JORGE CHILDREN'S: Commitee Taps RSM as Financial Advisor
------------------------------------------------------------
The official committee of unsecured creditors of San Jorge
Children's Hospital, Inc. seeks approval from the U.S. Bankruptcy
Court for the District of Puerto Rico to employ RSM Puerto Rico as
its financial advisor.
The firm's services include:
a. review and analysis of liquidity assessment prepared by
the
Debtor;
b. review of the reconciliation of filed proofs of claim;
c. review of the monthly operating reports prepared by the
Debtor;
d. review and analysis of the Debtor's projections;
e. review of analysis of profitability of the Debtor's
operations;
f. review of plan of reorganization or disclosure
statements;
g. review or preparation of business valuations;
h. consultation on strategic alternatives and business plans
or
options;
i. expert testimony delivery;
j. accounting assistance during negotiations with the
Debtor;
and
k. other consulting relating to various bankruptcy matters
such
as review of insolvency, feasibility forensic accounting, fraud
examination, as necessary.
The firm will be paid at these rates:
Partners $200 to $300 per hour
Managers $145 to $185 per hour
Senior $75 to $90 per hour
Staffs $65 to $75 per hour
In addition, the firm will be reimbursed for out-of-pocket expenses
incurred.
The firm will be paid a retainer in the amount of $10,000.
Doris Barroso Vicens, a managing partner at RSM Puerto Rico,
disclosed in a court filing that the firm is a "disinterested
person" as the term is defined in Section 101(14) of the Bankruptcy
Code.
The firm can be reached through:
Doris Barroso-Vicens
RSM Puerto Rico
P.O. Box 10528
San Juan, PR 00922-0528
Tel: (787) 751-6164
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 Galo‚Andez, LLC as external
auditor.
Cardona Jimenez Law Offices, P.S.C. represents the official
committee of unsecured creditors appointed in the Debtor's case
while RSM Puerto Rico serves as the committee's financial advisor.
*********
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
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.
Information contained herein is obtained from sources believed to
be reliable, but is not guaranteed.
The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
.
* * * End of Transmission * * *