/raid1/www/Hosts/bankrupt/TCRLA_Public/221207.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, December 7, 2022, Vol. 23, No. 238
Headlines
A R G E N T I N A
ARGENTINA: Central Bank Poised to Hold Key Rate at 75% Into 2023
ARGENTINA: Fuel Suppliers Join Gov't. Price Control Scheme
B R A Z I L
BRAZIL: Average Wage Rose 2.9% in October
C A Y M A N I S L A N D S
FALCON GROUP: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable
C O L O M B I A
BANCO DAVIVIENDA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable
BANCO DE BOGOTA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable
BANCOLOMBIA SA: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
CORPORACION FINANCIERA: Fitch Affirms LongTerm IDRs at 'BB+'
FRONTERA ENERGY: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
E L S A L V A D O R
EL SALVADOR: S&P Affirms 'CCC+' Long-Term SCR, Outlook Negative
G U Y A N A
GUYANA: Signs First Sale Agreement on Carbon Credits
H O N D U R A S
HONDURAS: IDB OKs $50-Mil. Loan to Strengthen Customs Management
M E X I C O
AXTEL SAB: Fitch Lowers LongTerm IDRs to 'BB-', Outlook Negative
FINANCIERA INDEPENDENCIA: Fitch Affirms LT IDR at 'BB-'
P A N A M A
BANCO DE OCCIDENTE: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
P E R U
CAMPOSOL HOLDING: Fitch Cuts LongTerm IDRs to 'B+', Outlook Stable
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Companies Must Learn From Mishaps
X X X X X X X X
LATAM: Guyana Displaces Dominican with Highest Foreign Investment
- - - - -
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A R G E N T I N A
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ARGENTINA: Central Bank Poised to Hold Key Rate at 75% Into 2023
----------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
Argentina's central bank expects to keep its key interest rate
unchanged at 75% until at least early next year as internal
indicators show that monthly inflation is cooling.
The central bank board is seeing slower monthly price gains in
November and is preparing to hold its key rate if that forecast is
confirmed, said people who asked not to be named because the
discussions are private, according to globalinsolvency.com.
The estimates the central bank tracks suggest monthly inflation
could slow to about 5.5% in November, down from 6.3% in October,
the report notes. Argentina's strategy to curb one of the highest
inflation rates in the world has combined orthodox with unorthodox
measures, including reinforcing price freeze programs while the
central bank raised rates to a high of 75% in September, the report
relays.
BCRA, as the central bank is known, has held borrowing costs
unchanged since then, even as annual inflation continues rising and
is expected to reach 100% by the end of the year, 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: Fuel Suppliers Join Gov't. Price Control Scheme
----------------------------------------------------------
Buenos Aires Times reports that extending its price control scheme
to tamp down inflation, the government has reached a major
agreement with oil firms to cap price increases at four percent a
month until February, with a 3.8 percent hike to come in March.
The agreement is part of a wider government effort to stabilise
runaway inflation, which has totaled 76.6 percent since the turn of
the year, according to Buenos Aires Times.
President Alberto Fernandez's government recently introduced a new
price control scheme with the support of food and drink suppliers
and supermarkets which will also limit increases over the summer,
the report notes. Some 2,000 basic necessities will have their
prices frozen, with four percent increases approved for another
30,000 items, the report relays.
This new understanding to tackle petrol prices at the pump will
"significantly lower inflation, which is Argentina's main drama,"
Economy Minister Sergio Massa said in a statement announcing the
measure, the report notes.
The last petrol increase authorized by the government, also four
percent, kicked in on October 1. According to the government's
Energy Secretariat, gasoline prices have risen 45 percent over the
last 12 months, the report discloses.
Argentina's consumer price index registered an increase of 6.3
percent in October. Inflation has totaled 88 per cent over the last
12 calendar months, one of the highest rates in the world, the
report relays.
Massa's announcement means that fuel prices have now been
incorporated into his brand new 'Precios Justos' program, the
report notes. The signing of this part of the agreement took place
with representatives from state-owned oil firm YPF and
private-sector companies Shell, Axion and Puma in attendance, the
report says.
"The state is also committed to temporarily reducing taxes on fuel
imports in order to guarantee supplies for the agricultural
sectors," Massa said, 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
===========
BRAZIL: Average Wage Rose 2.9% in October
-----------------------------------------
Richard Mann at Rio Times Online reports that the actual income
received by workers in Brazil grew 2.9% in the quarter ending in
October, compared with the previous three months, and reached
BRL2,754 or US$520.
The data were released by IBGE (Brazilian Institute of Geography
and Statistics), according to Rio Times Online.
With the evolution for the 4th month in a row, the PNAD Continuous
figures show that the accurate usual income mass reached BRL269.5
billion, a record in the historical series that began in 2012, 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 A Y M A N I S L A N D S
===========================
FALCON GROUP: Moody's Affirms 'Ba1' CFR, Outlook Remains Stable
---------------------------------------------------------------
Moody's Investors Service has affirmed the Ba1 corporate family
rating and the long-term issuer ratings of Falcon Group Holdings
(Cayman) Limited ('Falcon'). The outlook on the issuer remains
stable.
Falcon provides inventory finance and supply chain management
solutions to multinational corporate clients across different
jurisdictions. The company largely acts as an intermediary,
providing short term financing to both suppliers and buyers with
clients coming from a wide range of sectors. Falcon retains minimal
credit risk to suppliers of goods or ultimate buyers, largely
laying off credit risk to relationship and correspondent banks or
credit insurers.
RATINGS RATIONALE
AFFIRMATION OF CFR AND ISSUER RATINGS
The affirmation of Falcon's CFR and issuer ratings at Ba1 reflects
Falcon's maintenance of a stable credit profile as the company
accelerates the shift of its business mix away from emerging market
small and medium size corporates towards larger multinational
firms, characterized by higher credit quality. Despite the fact
that the new clients will generate lower risk adjusted margins, the
expectation is that this shift will result in a higher level of
recurring volumes. During 2022 the acceleration of the
repositioning of its business model through the termination of
existing client relationships but without the full replacement with
new clients constrained Falcon's revenue and thus profitability.
The agency expects Falcon's profitability to gradually to revert to
its historical levels as it onboards additional key clients
resulting in increasing economies of scale. Historically, Falcon's
profitability has been relatively strong and stable, supported by
operational efficiency and low credit losses, despite low fee
margins. The company has a solid capital base and is primarily
equity funded, which provides a solid loss cushion against tail
risk arising from any breach of contract related charges or
temporarily unhedged credit risk. Falcon has limited debt
borrowings and has been broadening its key partner banks
facilitating its refinancing needs.
Under this strategy, Moody's believes Falcon is now less exposed to
credit risk and should be able to generate more sustainable and
less volatile earnings going forward. In addition, the shift in its
target customer profile is resulting in increased: (1) geographic
diversification to stronger economies, (2) exposure to listed or
investment grade large cap clientele with stronger governance
standards and (3) broader and deeper client financing
relationships. However, while this strategic shift is being
executed, the dominance of key large multi-national clients in its
revenue stream currently elevates Falcon's revenue concentration
risk, a risk which, in Moody's view, will only decline over the
medium term. As a result, Moody's introduced a one notch negative
concentration risk adjustment in Falcon's credit assessment.
Offsetting this credit driver however, Moody's has removed the
negative adjustment for keyman risk in Falcon's credit assessment
reflecting proactive actions the company has taken over the years
to enhance its risk and governance framework, to mitigate the
potential for undue influence on the Board and risk appetite of the
firm by the controlling shareholder, to define and document clear
business management continuity and succession planning processes
and to increase the number of experienced independent non-executive
directors on its Board.
In addition to reflecting these drivers in the firm's CFR, the
rating agency captures the strengthening of governance framework
under the governance profile assessment of Falcon under its
Environmental Social and Governance (ESG) framework.
RATIONALE FOR THE STABLE OUTLOOK
The stable outlook reflects Moody's expectation that the company
will transition its franchise positioning towards multinational
corporates successfully, with revenue concentration risk reducing
over time, and that the company's financial performance in terms of
profitability will strengthen to its previous levels, over the
outlook period.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Falcon's CFR could be upgraded if it maintains a low-risk business
model, and restores profitability while establishing a longer track
record under its revised strategy with focus on a higher quality
and higher volume client base. In addition, an increase in the
granularity of Falcon's revenue stream, maintenance of strong
equity levels with no material debt reliance and further expansion
of its refinancing counterparties could result in an upgrade of
Falcon's CFR over medium term.
The CFR could come under downward pressure due to a significant
increase in leverage beyond Moody's expectations or a considerable
decline in profitability and cash flow from operations, stemming
from higher than expected credit losses or decreasing margins. The
issuer ratings may be downgraded if the group were to issue a
material amount of secured recourse debt, or other more senior
funding lines that would increase expected loss for unsecured
creditors.
LIST OF AFFECTED RATINGS
Issuer: Falcon Group Holdings (Cayman) Limited
Affirmations:
Long-term Corporate Family Rating, affirmed Ba1
Long-term Issuer Ratings, affirmed Ba1
Outlook Action:
Outlook remains Stable
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
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C O L O M B I A
===============
BANCO DAVIVIENDA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Banco Davivienda S.A.'s Long-Term Local
and Foreign Currency Issuer Default Ratings (IDRs) at 'BB+'. The
Rating Outlook for the Long-Term IDRs is Stable. Fitch has also
affirmed Grupo Bolivar S.A.'s (GB) National Long-Term Ratings at
'AAA(col)'/Stable.
KEY RATING DRIVERS
Viability Rating Drives Issuer Default Ratings: Davivienda's IDRs
are driven by the bank's VR and consider its intrinsic strength, as
reflected in its sound company profile due to its domestic
franchise as the second largest bank in Colombia and its adequate
franchise in Central America, where its business also operates. The
VR is in line with the implied VR.
The Rating Outlook on the Long-Term IDRs is Stable. Despite
operating environment (OE) pressures, which include a slowdown of
GDP, high inflation, as well as domestic macro and political
uncertainty, Davivienda's core financial metrics have sufficient
headroom to maintain its current ratings.
Fitch expects the operating environment for Colombian banks to
remain stable and consistent with the 'bb' factor score, despite
its expectation for slowing GDP growth in 2023 and a sharp rise in
interest rates throughout 2022 to address high inflation. Fitch
believes sustained capitalization, improving profitability and
lower loan impairment charges provide sufficient resilience to face
stress for the banks.
Consolidated Franchise: Davivienda has a leading franchise in the
Colombian mortgage and retail segments and ranks among the top
players in Corporates and the Central American market, which
explains its business profile score of 'bbb-'. The bank's business
model benefits from geographical and revenues diversification, as
well as continuous efforts to develop cutting edge digital
technologies, generating stable earnings over time.
Sound Asset Quality: Fitch expects asset quality pressures over the
near term due to the bank's higher exposure to consumer loans and a
challenging OE for 2023. However, loan deterioration should move
around 4% at YE 2023 above 2.9% at September 2022, and is not
expected to be a relevance source of risk under Davivienda's rating
horizon, as the bank has shown resilience throughout economic
cycles, proactively monitored its clients and has excess of loan
loss allowances (LLA) to absorb further pressures. In addition,
moderate risk concentrations by debtor and economic sector and real
guarantees partially mitigate risks from the OE. Central America
asset quality is expected to remain stable.
Resilient Profitability: Davivienda's profitability is underpinned
by its resilient performance supported by adequate cost control, a
consolidated franchise and geographical diversification. Fitch
expects profitability core metric ratio of operating profit to RWAs
contract to 2.1% at YE 2023 from roughly 2.5% at YE 2022 and
maintain the score in the 'bb' range. High interest rates during
first part of 2023 should benefit Davivienda's net interest margin
(NIM) but are likely to be offset partly by higher funding costs,
limited business growth, a rise in impairment expenses, and
inflation will continue pressure operating expenses in fiscal 2023
as well.
Adequate Capital Metrics: Fitch views the bank's capital as
sufficient considering its relatively ample loan loss reserves,
good asset quality, recurrent earnings generation and adequate risk
management. Asset growth, profit recovery and currency depreciation
have driven the capital's performance during 2022. The agency
expects common equity Tier 1 (CET1) ratio to remain around 11% over
the next two years with a capital score of 'bb-', commensurate with
its planned growth and financial performance. CET1 plus additional
Tier 1 ratio was 12.8% at September 2022; hybrids provided an
additional buffer and enhanced the total regulatory metric to
16.2%at the same period.
Diversified and Stable Funding: Davivienda boasts a wide deposit
base of well-diversified, stable and relatively low-cost funds and
good liquidity. Fitch expects deposit base and regular access to
capital markets continue boosting loan growth. Conservative
liquidity policies and a consolidated market position will allow to
fulfil regulatory liquidity ratios above 100%. The factor score
remains at 'bb+'. Its loans-to-deposits ratio of around 122% at
September 2022 exceeded the peer average, as the bank utilizes
longer tenor funding that helps better match its assets and
liabilities structure. Davivienda's subsidiaries are funded
independently in their home markets and must be self-sufficient to
avoid contagion effect.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
VR, IDRs AND NATIONAL RATINGS
- Davivienda's VRs and IDRs are sensitive to a material
deterioration in the local operating environment or a negative
sovereign rating action;
- The ratings could be downgraded from a continued deterioration of
the operating environment that leads to a significant deterioration
of the asset quality and/or profitability (Operating profit to RWA
consistently below 1.5%), resulting in an erosion of capital
cushions if the CET1 ratio falls consistently below 10%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
VR, IDRS AND NATIONAL RATINGS
- Given the limitations of the operating environment, a ratings
upgrade is unlikely in the medium term;
- Over the longer term, the rating could be upgraded by the
confluence of an improvement of the OE and the bank's financial
profile.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Davivienda's AT1 notes are rated four notches below Davivienda's
VR. The notching reflects the notes' higher loss severity in light
of their deep subordination, and additional non-performance risk
relative to the VR, given the high write-down trigger of CET1 at
5.125% and full discretion to cancel coupons. The debt has thus
been affirmed due to the affirmation of Davivienda's VR.
Davivienda's local subordinated debt is rated two notches below its
National Long-Term rating; two notches for loss severity (-2) and
zero notches for non-performance risk (0), given the terms of the
issuances (plain-vanilla subordinated debt).
Davivienda's local senior unsecured bonds are rated at the same
level as the bank's National Long-Term rating, considering the
absence of credit enhancement or any subordination feature.
GB's local senior unsecured bonds are rated at the same level as
the bank's National Long-Term rating, considering the absence of
credit enhancement or any subordination feature.
GOVERNMENT SUPPORT RATING
The bank's Government Support rating of 'bb' reflects Davivienda's
size, systemic importance and the country's historical support
policy. Fitch believes there is a high probability of sovereign
support. Colombia's ability to provide such support is reflected in
the sovereign's Long-Term IDR (BB+/Stable).
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
- Davivienda junior subordinated debt ratings will mirror any
action on the bank's VR.
--Davivienda local senior debt ratings would move in line with its
National Long-Term rating.
- Davivienda local subordinated debt ratings would move in line
with its National Long-Term rating.
- GB local senior debt ratings would move in line with its National
Long-Term rating.
- Davivienda's GS are potentially sensitive to any change in
assumptions as to the propensity or ability of Colombia to provide
timely support to the bank.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
GRUPO BOLIVAR NATIONAL RATINGS AND SENIOR DEBT
GB's national ratings reflect the creditworthiness of its main
subsidiary, Banco Davivienda. GB's ratings are aligned with
Davivienda's because of its low double leverage (June 2022: 107%)
supported by a high level of earnings retention and strong cash
flow metrics that sufficiently meet its debt service requirements.
Fitch expects a prudent dividend flow the companies to the holding
due to the effects of the economic slowdown for 2023. However, it
considers that GB's prudent liquidity management, as well as the
flexibility of the investment plans and contingency plans sustains
a projected cash flow that sufficiently covers the debt service for
the next years.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
- GB's national ratings will mirror any action taken on
Davivienda's national ratings. Additionally, a substantial increase
of GB's leverage (double leverage above 120%) or a decline in the
dividend flows from the operating companies that result in a
sustained deterioration of its debt coverage ratios could pressure
GB's ratings.
- GB's national scale ratings are at the highest level on the
national scale; therefore, they cannot be upgraded.
VR ADJUSTMENTS
- The Business Profile score has been assigned above the implied
score due to the following adjustment reason(s): Business Model
(positive).
- The Capitalization & Leverage score has been assigned above the
implied score due to the following adjustment reason(s): Core
Capital Calculation (positive).
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
----------- ------ -----
Grupo Bolivar
S.A. Natl LT AAA(col) Affirmed AAA(col)
Natl ST F1+(col) Affirmed F1+(col)
senior
unsecured Natl LT AAA(col) Affirmed AAA(col)
Banco Davivienda
S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Viability bb+ Affirmed bb+
Government Support bb Affirmed bb
junior
subordinated LT B Affirmed B
senior
unsecured Natl LT AAA(col)Affirmed AAA(col)
subordinated Natl LT AA(col) Affirmed AA(col)
BANCO DE BOGOTA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Banco de Bogota S.A. (Bogota) and its
holding company, Grupo Aval Acciones y Valores S.A. (Grupo Aval)
international ratings. Fitch has affirmed Bogota's Viability Rating
(VR) and Long-Term (LT) Foreign and Local Currency Issuer Default
Ratings (IDRs) at 'bb+' and 'BB+', respectively. The Rating Outlook
for the LT IDRs is Stable as Fitch does not anticipate a material
impact on the bank's financial profile from any pressures on the
operating environment or a higher than expected deceleration in
economic growth.
KEY RATING DRIVERS
VR AND IDRS
BOGOTA
Viability Rating Drives Rating: Bogota's VR is influenced by its
business profile, which is underpinned by its leading franchise.
The bank's ratings also consider its consistent financial
performance, reasonable credit and risk policies and its ample and
diversified funding base. Capitalization remains the bank's main
credit weakness relative to international peers.
Leading Franchise: Bogota is Colombia's third-largest bank by
assets and by deposits, with 12.3% and 12.2% market shares,
respectively, at June 30, 2022; the second largest by net income
with a 25.9% market share; and third-largest by loans at 11.4%.
Given its size, the bank is a systemically important financial
institution in Colombia. Bogota also consolidates Multibank, a
Panamanian subsidiary which was acquired in 2020 with a market
share by assets, loans and deposits of 4.1%, 3.8% and 3.4%
respectively, at June 2022. In March, 2022 the proposed BAC Holding
International Corp (formerly Leasing Bogota S.A. Panama - LBP)
spin-off was completed, as expected since 2021.
BAC Spin-off: After BAC's spin-off, loan quality ratios at the
consolidated level moved closer to those of the Colombian
operations since they have a higher NPL ratio compared with that of
Central America. Bogota's asset quality is in line with its local
peers' and includes controlled charge-off ratios.
Improving Asset Quality: Bogota's loan portfolio quality remains
sound. The 90-day NPLs, after the BAC spin-off, reached 3.4% at
Sept. 30, 2022. This was due to better-than-expected performance of
consumer loans after finalizing the relief period in Panama and
Colombia and especially from improvement in corporate and
commercial loans. The loan loss reserve coverage ratio was 1.6x at
September 2022. Fitch expects the ratio to remain stable or
slightly improve during the short to medium term.
Resilient Profitability: Bogota's performance in 2021 and by 2Q22
improved due to decreasing loan impairment charges from the
coronavirus pandemic and from gains related to the Porvenir
deconsolidation and BAC spin-off. The bank's operating profit/RWA
of 2.9% at 2Q22 remains above the 2.45% average for the
pre-spin-off period 2018-2021. Fitch expects this ratio to return
to levels close to the 2.0%-2.5% range in the short to mid-term
amid a stable operating environment, sustained or slightly
decreasing loan growth, stable margins and lower loan impairment
charges.
Capital After Spin-off: Bogota's capital has been maintained
through sustained profitability and moderate dividend policies.
Common equity tier 1 (CET1) was 10.1% at 3Q22, a level slightly
below to that prior of the spin-off (Dec. 21: 10.21%). Bogota's
consolidated equity at September 2022 decreased 33.4% from
September 2021 after the Porvenir deconsolidation and BAC spin-off.
These actions had double effect in the ratio numerator because of
the respective one-off income in 2021 and 2022 in addition to a
lower amount of capital at the consolidated level. The main effect
in the denominator comes from lower RWA.
Capital ratios for Bogota are likely to improve during the short to
mid-term as profitability is expected to remain sound and due to
the current effect the available for sale portfolio has on the
capital from ORI, which should revert in 2023. In addition,
diversification, and improving income from equity method coming
from Corficolombiana and Porvenir as well as from its remaining
investment in BAC should sustain the bank's profitability and,
consequently, its capitalization during the remainder of 2022 and
in 2023.
Wide, Stable Funding: Bogota boasts an ample, well-diversified and
low-cost depositor base that funds all of its lending activities.
Its loan to customer deposits ratio compares favorably with local
and regional peers, although the spin-off resulted in a ratio
closer to the one of its Colombian operations. In Fitch's opinion,
Bogota's liquidity and liquidity management are appropriate for the
risks the bank faces. For the second quarter of 2022, deposits grew
9.5% QOQ, supported especially in time deposits (+23.2% QOQ). This
is explained in part by the new NSFR regulation in Colombia.
Bogota's loan to customer deposits ratio remains relatively stable,
even after the BAC spin-off and is better than that of local peers,
due to having about 76% of customer deposit in its funding mix. In
Fitch's opinion, Bogota's liquidity position and liquidity
management are appropriate for the risks the bank faces and are
better than its peers'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Bogota's VRs and IDRs are sensitive to a material deterioration
in the local operating environment or a negative sovereign rating
action;
- The ratings could be downgraded from an extended deterioration of
the operating environment that leads to a significant deterioration
of the asset quality and/or profitability (operating profit to RWA
consistently below 1.5%), resulting in an erosion of capital
cushions if the CET1 ratio falls consistently below 10%;
- After the announcement to spin-off BAC Holding International
Corp. (former Leasing Bogotá S.A. Panama - LBP), Fitch expects
Bogota's financial ratios to remain commensurate with its current
rating even taking into consideration potential changes, especially
in the bank's capitalization and asset quality levels after BAC's
spin-off. Potential financial ratios variations will be monitored
by Fitch and could take several months to become clear. However, if
there is eventually a material change in Fitch's assessment of the
capital adequacy and/or double leverage of Bogota or Grupo Aval
during or after the completion of the corporate reorganization,
this could potentially trigger a negative rating action, although
this is not the baseline scenario.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Given the limitations of the operating environment, a ratings
upgrade is unlikely in the medium term;
- Over the longer term, an improvement in the operating environment
along with improvement of capital metrics and profitability after
BAC spin-off could be positive for creditworthiness.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SENIOR AND SUBORDINATED DEBT
BOGOTA
Bogota's senior unsecured obligations are rated at the same level
than the bank's IDR. Its subordinated debt is rated two notches
below the bank's VR.
GOVERNMENT SUPPORT RATING
BOGOTA
Bogota's GSR of 'bb', reflects the agency's estimation of a
moderate probability of sovereign support, if required, given the
bank's systemic importance. The ability of the sovereign to provide
support is based on its 'BB+'/Stable rating.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The ratings of Bogota's debt would move in line with the bank's
IDRs and VR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The ratings of Bogota's debt would move in line with the bank's
IDRs and VR.
Factors that could, individually or collectively, lead to negative
rating action/downgrade
- Bogota's GSRs would be affected if Fitch changes its assessment
of the government's ability and/or willingness to support the bank
Factors that could, individually or collectively, lead to positive
rating action/upgrade
- Bogota's GSRs would be affected if Fitch changes its assessment
of the government's ability and/or willingness to support the bank
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
GRUPO AVAL ACCIONES Y VALORES S.A. (GRUPO AVAL)
Strong, Competitive Position: Grupo Aval's ratings are driven by
the business and financial profile of its main operating
subsidiary, Bogota. Low double leverage, good cash flow metrics and
a sound competitive position in multiple markets also support Grupo
Aval's ratings. The holding strategy and operations continue to
remain under Fitch's expectations after the BAC spin-off in March
2022.
Improving Consolidated Performance: On a consolidated basis, asset
quality has improved, with consolidated 90-days NPL of 3.2% at
September 2022. 6.8% of the total gross loans remained under the
relief program at June 2022, improving from pre-spin-off 10.3% at
September 2021. The holding company's operating profit to estimated
risk weighted assets (RWA) ratio has returned to pre-pandemic
levels (4.65% at June 2022) thanks to improving cost of risk and
gains from the BAC-spin-off.
Evolving Double Leverage: On an unconsolidated basis, Grupo Aval's
double leverage is moderate (1.12x at June 2022 or 1.25x when
including subordinated loans to subsidiaries). This ratio is has
remained close to Fitch's expectations after the BAC spin-off and
is expected to return to levels below 1.20x in the short term.
GOVERNMENT SUPPORT RATING
GRUPO AVAL
As the focus of regulators is on protecting banks' depositors, not
their shareholders, it is not likely that they would support a bank
holding company. Hence, Grupo Aval's GSR was assigned an 'ns' (no
support) rating.
SENIOR AND SUBORDINATED DEBT
GRUPO AVAL LIMITED
The ratings for Grupo Aval Limited's senior unsecured debt are
aligned with those of Grupo Aval, as this entity guarantees the
senior bonds issued by the former.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
GRUPO AVAL and GRUPO AVAL LIMITED
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Grupo Aval's IDR would remain at the same level as Bogota's and
would move in tandem with any rating actions on its main operating
subsidiary. However, the relativity between these two entities'
ratings could also be affected in the event of a material and
sustained increase in Grupo Aval's double-leverage metrics
(consistently above 1.2x), but also considering the holding
company's liquidity position and its management. Additionally, a
change in the dividend flows from the operating companies or debt
levels at the holding company that affects its debt coverage ratios
could also be detrimental to its ratings.
- The ratings for Grupo Aval Limited's senior unsecured debt would
move in line with Grupo Aval's IDRs.
GOVERNMENT SUPPORT RATING
- Grupo Aval's GSRs would be affected if Fitch changes its
assessment of the government's ability and/or willingness to
support the bank or the holding company.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Grupo Aval's IDR would remain at the same level as Bogota's and
would move in tandem with any rating actions on its main operating
subsidiary.
- The ratings for Grupo Aval Limited's senior unsecured debt would
move in line with Grupo Aval's IDRs
GOVERNMENT SUPPORT RATING
- Grupo Aval's GSRs would be affected if Fitch changes its
assessment of the government's ability and/or willingness to
support the bank or the holding company.
VR ADJUSTMENTS
VR ADJUSTMENTS
BOGOTA
The Capitalization and Leverage score has been assigned above the
implied score due to the following adjustment reason: Reserve
Coverage and Asset valuation.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
Entity/Debt Rating Prior
----------- ------ -----
Banco de Bogota,
S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Viability bb+ Affirmed bb+
Government Support bb Affirmed bb
senior unsecured LT BB+ Affirmed BB+
subordinated LT BB- Affirmed BB-
Grupo Aval Acciones
y Valores S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Government Support ns Affirmed ns
Grupo Aval Limited
senior unsecured LT BB+ Affirmed BB+
BANCOLOMBIA SA: Fitch Affirms LongTerm IDR at 'BB+', Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed the international ratings for
Bancolombia S.A., certain local and foreign subsidiaries, and a
related entity. Fitch has affirmed Bancolombia's Long-Term Local
and Foreign Currency Issuer Default Rating (IDR) at 'BB+' with a
Stable Outlook and its Viability Rating (VR) at 'bb+'.
KEY RATING DRIVERS
Bancolombia's VR, or standalone creditworthiness, drives its
Long-Term IDR. The VR considers Bancolombia's robust company
profile due to its leading market share within the Colombian market
and its adequate franchise in the Central America region.
The Outlook on the Long-Term IDRs is Stable. Despite operating
environment (OE) pressures, which include a slowdown on the GDP,
high inflation, and domestic macro and political uncertainty,
Bancolombia's core financial metrics have sufficient headroom to
maintain its current ratings.
Stable Operating Environment: Fitch expects the OE for Colombian
banks to remain stable and consistent with the 'bb' factor score,
despite our expectation for slowing GDP growth in 2023 and a sharp
rise in interest rates throughout 2022 to address high inflation.
Fitch believes sustained capitalization, improving profitability,
and lower loan impairment charges provide sufficient resilience to
face stress.
Strong Business Profile: Bancolombia is Colombia's largest bank in
terms of assets and loans, with a market share on an unconsolidated
basis of 24.6% and 24.7%, respectively, at the end of August 2022.
The bank's business model benefits from geographical and revenue
diversification and stable earnings over time.
Improved Asset Quality: At 3Q22, the 90-day NPL ratio improved to
2.4% (YE 2021: 2.9%), positioning favorably amongst its peers and
also compared to the entity's pre-pandemic levels mainly due to
more conservative underwriting assessments as credit growth has
focused primarily on pre-approved loans. Stage 3 loans also reduced
to 5.7% of total loans at 3Q22 from 7.2% at YE 2021. The sound loan
loss allowances coverage of impaired loans of 242.4% at 3Q22 also
supports the bank's loan portfolio. Fitch expects some
deterioration in the NPL ratio in 2023 due to a less favorable OE
and the season of consumer loans, but it will remain commensurate
to its rating category (bank's impaired loans forecast: 3.0%).
Solid Profitability: The operating profit-to-risk-weighted assets
ratio improved to 3.7% as of 3Q22 from 2.7% at YE 2021, mainly as a
result of the significant reduction of the loan impairment charges
related to the adjustments of expected loss estimations due to
better than expected economic growth, as well as the excess of
reserves holding. The higher net interest margin resulting from
interest rate hikes also benefited profitability. Fitch expects
lower profitability in 2023, reflecting one-digit loan growth and
higher cost of credit; however, it will remain adequate and
sustained by higher margins (Fitch's core profitability metric
forecast: 2.8%).
Lower Capitalization: Bancolombia's CET1 reduced to 10.0% at 3Q22
from 11.9% at YE 2021, mainly reflecting the Colombian peso
depreciation and loan growth. This ratio is still better than
pre-pandemic levels (YE 2019: 9.6%) due to the adoption of Basel
III guidelines. In addition, loan loss allowances for impaired
loans are sound and better than domestic peers, which further
supports the bank's loss absorption capacity. Fitch does not
anticipate significant pressures in capitalization metrics in 2023
and believes that will remain adequate driven by lower assets
growth (Fitch's CET1 forecast: 10.5%).
Sound Liquidity: Bancolombia's liquidity position is sound and has
strengthened as core deposits grew by 13% at 3Q22, reflecting
adequate liquidity in the banking system. The loan-to-deposit ratio
increased to 109.5% at 3Q22 compared to 104.7% at YE 2021. Fitch
expects liquidity to remain sound in 2023, reflecting moderate loan
growth and the bank's benefits from having the largest deposit
market share in the country and access to local and global capital
and debt markets (Fitch's loan to deposits ratio: 107.3%).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
- VRs and IDRs are sensitive to a material deterioration in the
local OE or a negative sovereign rating action;
- The ratings could be downgraded from a continued deterioration of
the OE that leads to a significant deterioration of the asset
quality and/or profitability (operating profit to RWA consistently
below 1.5%), that leads to a sustained decrease in the CET1 ratio
below 10%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IDRS, VR, NATIONAL RATINGS AND SENIOR DEBT
- Given the limitations of the OE, a ratings upgrade is unlikely in
the medium term for Bancolombia;
- Over the longer term, an improvement in the OE along with the
restoration of capital metrics could be positive for
creditworthiness.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The local Tier II capital subordinated notes are rated two notches
below Bancolombia's VR of 'bb+' and national rating of 'AAA' and
reflect loss severity exclusively. There is no notching due to
incremental non-performance risk. Notwithstanding, these securities
rank pari passu with other existing subordinated indebtedness and
the loss severity notching is wider on the proposed notes due to
the existence of a full write-down feature, which is not contained
in other outstanding subordinated debt.
Some other Tier II capital subordinated notes are rated three
notches below Bancolombia's national rating of 'AAA' and reflect
loss severity exclusively. There is no notching due to incremental
nonperformance risk. These notes consider transfer and
convertibility risk.
GOVERNMENT SUPPORT RATING (GSR)
The GSR of 'bb' reflects moderate probability of support being
forthcoming because of uncertainties about the ability or
propensity of the potential provider of support to do so. The
ability of the sovereign to provide support is based on its 'BB+'
Long-Term IDRs.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
SUBORDINATED DEBT
- Subordinated debt ratings will mirror any action on the bank's VR
and national long-term rating.
- The subordinated debt ratings are sensitive to a change in
Bancolombia's VR or national long-term rating. The ratings are also
sensitive to a wider notching from the anchor rating if there is a
change in Fitch's view on the non-performance of these instruments
on a going concern basis, which is not the baseline scenario.
GSR
- Bancolombia's GSR would be affected by a positive change in
Colombia's ability or willingness to support the bank.
- Bancolombia's GSR would be affected by a negative change in
Colombia's ability or willingness to support the bank.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
BP, BPR, TUYA, FIDUCOLOMBIA, AND VB
IDRs, NATIONAL RATINGS, and SENIOR DEBT
The ratings of Bancolombia Panama SA (BP), Bancolombia Puerto Rico
Internacional Inc. (BPR), Compania de Financiamiento Tuya S.A.
(Tuya), Fiduciaria Bancolombia S.A. (Fiducolombia) and Valores
Bancolombia S.A. (VB) reflect the potential support they would
receive from Bancolombia should it be required. In Fitch's view,
these entities are an integral part of its parent's business model
and core to its strategy, and therefore their ratings mirror those
of Bancolombia. Fitch also incorporates in its support rationale
the negative reputational implications of a potential default of
BP, BPR, Fiducolombia and BV for the parent. In the case of Tuya,
Fitch also considers the support track record of the parent toward
the entity.
SUBORDINATED DEBT
The subordinated bond issuance rating could be downgraded if Tuya's
long-term national rating is downgraded. The rating is also
sensitive to a higher differentiation from the national long-term
rating, or if there is a change in Fitch's perception of default on
these instruments.
SHAREHOLDER SUPPORT RATINGS
The SSR of 'bb+' for BP and BPR reflects moderate probability of
support being forthcoming because of uncertainties about the
ability or propensity of the potential provider of support to do
so. Fitch believes that these entities are core to the parent's
business strategy and regional expansion. Bancolombia's ability to
support these entities is reflected in its 'BB+' IDR.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
BP, BPR, Tuya, Fiducolombia, and VB
IDRs and SENIOR DEBT
- The IDRs and senior debt of BP and BPR are support-driven and
aligned with its parent's ratings. Therefore, these ratings would
mirror any changes in Bancolombia's IDRs.
SHAREHOLDER SUPPORT RATING (SSR)
- BP and BPR's SSR would be affected if Fitch changes its
assessment of its parents' willingness and/or ability to provide
support.
NATIONAL RATINGS
- The national scale ratings of Tuya, Fiducolombia, and VB are at
the highest level on the national scale; therefore, they cannot be
upgraded.
SUBORDINATED DEBT
- Subordinated debt ratings will mirror any action on the entity's
national long-term rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
BP, BPR, Tuya, Fiducolombia, and VB
IDRs and SENIOR DEBT
- The IDRs and senior debt of BP and BPR are support-driven and
aligned with its parent's ratings. Therefore, these ratings would
mirror any changes in Bancolombia's IDRs.
SSR
- BP and BPR's SSR would be affected if Fitch changes its
assessment of its parents' willingness and/or ability to provide
support.
NATIONAL RATINGS
- A negative change in the capacity or propensity of Bancolombia to
provide support to Tuya, Fiducolombiana or VB could pressure
creditworthiness.
SUBORDINATED DEBT
- Tuya's subordinated bond issuance rating could be downgraded if
the long-term national rating is downgraded. The rating is also
sensitive to a higher differentiation from the national long-term
rating, or if there is a change in Fitch's perception of default on
these instruments.
VR ADJUSTMENTS
- The Capitalization & Leverage score has been assigned above the
implied score due to the following adjustment reason(s): Core
Capital Calculation (positive).
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
----------- ------ -----
Bancolombia
(Panama) S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Shareholder Support bb+ Affirmed bb+
long-term
deposits LT BB+ Affirmed BB+
short-term
deposits ST B Affirmed B
Valores
Bancolombia S.A. Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Bancolombia S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Viability bb+ Affirmed bb+
Government Support bb Affirmed bb
senior
unsecured LT BB+ Affirmed BB+
subordinated LT BB- Affirmed BB-
senior
unsecured Natl LT AAA(col)Affirmed AAA(col)
subordinated Natl LT AA(col) Affirmed AA(col)
subordinated Natl LT AA-(col)Affirmed AA-(col)
Compania de
Financiamiento
Tuya S.A. Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
subordinated Natl LT AA(col) Affirmed AA(col)
Fiduciaria
Bancolombia S.A. Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Bancolombia
Puerto Rico
Internacional Inc. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Shareholder Support bb+ Affirmed bb+
CORPORACION FINANCIERA: Fitch Affirms LongTerm IDRs at 'BB+'
------------------------------------------------------------
Fitch Ratings has affirmed Corporacion Financiera Colombiana S.A.
(Corficolombiana) international and national ratings. Fitch has
affirmed Corficolombiana's Viability Rating (VR) and Long-Term (LT)
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'bb+'
and 'BB+', respectively. The Rating Outlook for the LT IDRs is
Stable. Fitch has also affirmed long-term and short-term national
rating of Corficolombiana and Fiduciaria Corficolombiana S.A at
'AAA(col)' and 'F1+(col)' respectively.
KEY RATING DRIVERS
IDR Driven by VR: Corficolombiana's IDRs are driven by its VR,
which reflects its strong business profile. The ratings also
consider Corficolombiana's stable financial profile. Fitch does not
anticipate a material impact on the bank's financial profile from
any remaining pressures on the operating environment. Under Fitch's
current assessment, Corficolombiana's IDR will likely remain at the
level determined by its own VR, or at the same level as its main
shareholder and its controlling company, whichever is higher.
Strong Business Profile: Corficolombiana is an investment-holding
company that controls or holds significant interests in various
companies in Colombia and abroad. The entity's equity investment
policy is focused on low risk, consistent dividend-generating
companies. Corficolombiana profitability and capital metrics have
sustained sound in spite of the current challenges in the operating
environment.
Capital Investments: Corficolombiana's main asset exposure arise
from its capital investments, since assets related to concession
contracts are the most important asset of the corporation,
representing 54.91% of total assets (both financial an intangible
associated to concessions). These investments are concentrated by
industry but diversified by company and in 2021 all of its
investments evidenced a recovery in their operations aligned with
economic recovery experienced after the pandemic.
High Profitability Levels: Corficolombiana has historically
maintained high profitability levels. The company's main revenue
stream is earnings driven from concession contracts. Profitability
levels have improved due to an adequate dynamic of its capital
investments; in 2Q22 net income over average total equity increased
to 24.67% from 14.52%, and operating profit over risk-weighted
asset also improved to 22.46% from 16.82% as of YE 2021. Fitch
expects profitability levels to remain stable in the mid-term with
a slight decrease due to a lower expected economic growth.
Stable Capitalization and Leverage: Corficolombiana has
historically maintained very moderate leverage at a consolidated
level. Consolidated equity to assets ratio has historically been
near to 30% (2Q22: 29.24%), evidencing stability among economic
cycles. Regarding capitalization levels, Corficolombiana's common
equity Tier 1 ratio of 48.34% remains high (YE 2021: 51.17%), which
is considerate adequate by Fitch, given its business model.
Funding Structure aligned with Business Model: Corficolombiana's
funding comes mainly from long-term financial obligations (35.38%
of total funding) driven from loans taken with financial
institutions for the fulfilment and development of infrastructure
projects. Other relevant sources of funding are customer deposits
(24.25%), mainly term deposits with a maturity of more than five
years, and issuances of senior unsecured debt (23.59%). Pension
funds, insurance companies, financial institutions and large
corporation's treasury departments are Corficolombiana's usual
counterparties. Money market funding represent 16.77% of total
funding, comprised mainly by repos and sell-buy backs.
SHAREHOLDER SUPPORT RATING
The entity's Shareholder Support Rating (SSR) of 'bb+' reflects its
importance to the strategy and business of the parent and its main
shareholder. In Fitch's opinion, support for Corficolombiana would
come from its main shareholder. Its ability to support
Corficolombiana is reflected in its 'BB+'/Stable rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Corficolombiana's VR is sensitive to any rating action on
Colombia´s sovereign ratings or a material deterioration in the
local operating environment. However, if the VR were downgraded,
the IDR could become support-driven and remain equalized to its
main shareholder's, given Fitch's "higher of" approach and its
assessment of the subsidiary being core for Grupo Aval. In this
latter case, the Outlook or Rating Watch would mirror that of the
parent;
- Corficolombiana's SSRs would be affected if Fitch changes its
assessment of the respective parents' willingness and/or ability to
provide support.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- There is limited upside potential for Corficolombiana's ratings
given the sovereign's current rating and Outlook.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SENIOR AND SUBORDINATED DEBT
Corficolombiana's Senior Unsecured obligations are rated at the
same level than the bank's long-term national-scale rating.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
- Corficolombiana senior unsecured obligations will mirror any
changes on its long-term national scale rating.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
FIDUCIARIA CORFICOLOMBIANA
Fiduciaria Corficolombiana S.A.'s national ratings reflect the
potential support it would receive from its parent,
Corficolombiana, should it be required. In Fitch's view, Fiduciaria
Corficolombiana is integral part of its parent's business models
and core to its strategy. Fitch also incorporates in its support
view the negative reputational implications of a potential
subsidiary default for its parent.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
- There is limited upside potential for Fiduciaria
Corficolombiana's ratings given the sovereign's current rating and
Outlook;
- Fiduciaria Corficolombiana's ratings will mirror any changes on
its long-term national scale rating.
VR ADJUSTMENTS
The Funding and Liquidity score has been assigned below implied
score due to the following adjustment reason: Deposit Structure
(negative).
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
----------- ------ -----
Fiduciaria
Corficolombiana
S.A. Natl LT AAA(col) Affirmed AAA(col)
Natl ST F1+(col) Affirmed F1+(col)
Corporacion
Financiera
Colombiana S.A.
(Corficolombiana)LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Viability bb+ Affirmed bb+
Shareholder Support bb+ Affirmed bb+
senior
unsecured Natl LT AAA(col)Affirmed AAA(col)
FRONTERA ENERGY: Fitch Affirms LongTerm IDRs at 'B', Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed Frontera Energy Corporation's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B'. In
addition, Fitch has affirmed Frontera's senior unsecured notes at
'B'/'RR4'. The Rating Outlook is Stable.
Frontera's ratings and Outlook reflect its small and concentrated
production profile, fixed production costs, and gross leverage,
which is defined as total debt to EBITDA, of 0.8x as of the LTM
September 2022. The company had Proved Developed Producing (PDP)
reserve life of 2.3 years and 1P reserve life of 8.6 years applying
2021 year-end reserve figures. Fitch forecasts the company's total
debt to 1P of USD4.30boe and USD16.00boe per PDP of reserve by YE
2022.
KEY RATING DRIVERS
Small Production Profile and Reserve Life: Frontera's ratings are
constrained by its production size. Fitch expects Frontera's
production to be close to 42,000 boed in 2022, and average increase
to 50,000 boed between 2023-2025, approximately evenly split
between light and heavy crude. The increase in production will be
supported by the company's development and near-field exploration
portfolio in Colombia and exploration portfolios in Ecuador.
The ratings incorporate Frontera's weak PDP reserve life of 2.3
years as of YE 2021, the lowest among Colombian peers, and its
concentrated production profile, where Quifa represents nearly 40%
of daily production (16,150 boed), followed by Guatiquia at almost
22% (8,949 boed) and CPE-6 12% (4,916 boed). The company operates
all three blocks and owns 100% of both Guatiquia and CPE-6, and has
a joint venture, working interest of 60%, with Ecopetrol for
Quifa.
Fixed Cost Production Profile: Frontera has a fixed production
profile that limits its financial flexibility. The company's
half-cycle cost is estimated at USD29boe in 2022, in line with 2021
and 2020. The high production cost is mostly due to its fixed
transportation cost, which is estimated to average USD9.5boe
(gross) per annum over the rated horizons. Fitch expects the
company to hedge a minimum 40% of total production to offset the
higher costs and protect it from price volatility.
Leverage Profile: Frontera's gross leverage, defined as total
debt/EBITDA, is strong for its rating category. Fitch estimates
gross leverage will be 0.7x in 2022, assuming an EBITDA of USD659
million and total debt of USD508 million. Fitch expects total
debt/proved developed producing (PDP) to be USD16.00/boe by YE
2022, which is high for its rating category, and total debt/1P to
be USD4.30 in 2022. Fitch estimates EBITDA/ interest paid to be
14.1x in 2022 and average over 12.0x over the rated horizon.
Free Cash Flow Negative: Frontera is expected to be free cash flow
negative throughout the rating horizon, due to its high capex
costs. Capex is estimated to average $20 boe per annum between 2022
through 2025, and Fitch assumes it will be financed with internally
generated cash flows. Capex costs are mostly attributed to
developmental capex to replenish reserves and expand its PDP
reserve life, which is the lowest amongst its Colombian peers at
2.3 years. This high capex spending limits the company's financial
flexibility to scale back investments during volatile pricing
environments, which occurred in 2020. Frontera's strong liquidity
supports it investment plan.
DERIVATION SUMMARY
Frontera Energy's credit and business profile are comparable to
other small independent oil producers in Colombia. The ratings of
Geopark Limited (B+/Stable), SierraCol Energy Limited (B+/Stable),
and Gran Tierra Energy International Holdings Ltd. (B/Stable) are
all constrained to the 'B' category or below, given the inherent
operational risk associated with small scale and low
diversification of oil and gas production.
Frontera's production profile compares favorably with other 'B'
rated Colombian oil exploration and production companies. Over the
rated horizon, Fitch expects Frontera's production will average
48,000boed in line with Geopark and higher than SierraCol at 40,000
boed as well as Gran Tierra at 38,000 boed. Frontera's PDP reserve
life is 2.3 years and 8.6 years for 1P in 2021 is below Geopark at
4.2 years for PDP and 6.7 years for 1P and SierraCol at 4.7 years
for PDP and 7.1 years for 1P, while Gran Tierra is at 4.3 years for
PDP and 6.9 years for 1P.
Frontera's half-cycle production cost was USD29.0/boe in 2021 and
full-cycle cost was USD42.6/boe higher than Geopark, which is the
lowest cost producer in the region at USD14.9/boe and USD28.6/boe,
SierraCol at USD19.9/boe and USD28.5/boe, and Gran Tierra at $25.
0/boe and USD40.2/boe. Frontera's higher production cost is mainly
attributed to a fixed transportation cost (gross) estimated to
average USD9.6/boe.
Fitch expects Frontera's strong capital structure's gross leverage
will average 1.0x over the rated horizon and total debt/PDP of
USD14.4/boe and total debt/1P of USD3.9/boe. Geopark is forecast to
have higher gross leverage of 1.5x, but stronger debt/PDP of
USD8.5/boe and 1P of USD3.4/boe and SierraCol's metrics are similar
at 1.0x, USD9.3/boe and USD6.4/boe, respectively. While Gran
Tierra's metrics are at 2.0x, USD13.0/boe and USD8.2/boe,
respectively.
KEY ASSUMPTIONS
- Fitch's price deck for Brent oil prices of USD100 in 2022, USD85
in 2023, USD65 in 2024 and USD53 in 2025;
- Vasconia discount of USD5 per barrel of crude oil (bbl) over the
rated horizon;
- Gross Production of 41,600boed in 2022; average of 50,300boed
between 2023-2025;
- Gross Production costs averaging USD11.3/barrel;
- Gross Transportation costs averaging USD9.5/barrel;
- Gross SG&A cost averaging USD4.0/barrel;
- Average annual capex of USD325 million between 2022-2025;
- No dividends payments over the rated horizon;
- Annual dividends received from ODL of USD35 million per year
through 2025;
- Stock repurchase of USD90 million in 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net production maintained at 45,000boed or more, while
maintaining a 1P reserve life of seven years or greater and PDP
reserve life of at least four years;
- Maintain a conservative financial profile with gross leverage of
2.5x or below and total debt/1P reserves of USD8/boe or below.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sustainable production size declines to below 30,000boed;
- 1P reserve life declines to below seven years on a sustained
basis;
- A significant deterioration of credit metrics to total
debt/EBITDA of 3.0x or more;
- A persistently weak oil and gas pricing environment that impairs
the longer-term value of its reserve base;
- Sustained deterioration in liquidity and operating profile,
particularly in conjunction with more aggressive dividend
distributions than previously anticipated.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Fitch views the company's liquidity position as
strong, supported by cash on hand and a manageable debt
amortization profile. As of Sept. 30, 2022, Frontera reported
USD253.6 million of unrestricted cash and USD55.6 million of
separate restricted cash. This liquidity position is robust
compared $128.5 million of short-term debt.
ISSUER PROFILE
Frontera Energy Corporation is an oil and gas company incorporated
in Canada with operations in Latin America, primarily in Colombia
with assets in Guyana.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Frontera Energy
Corporation LT IDR B Affirmed B
LC LT IDR B Affirmed B
senior
unsecured LT B Affirmed RR4 B
=====================
E L S A L V A D O R
=====================
EL SALVADOR: S&P Affirms 'CCC+' Long-Term SCR, Outlook Negative
---------------------------------------------------------------
On Dec. 5, 2022, S&P Global Ratings affirmed its 'CCC+' long-term
foreign and local currency sovereign credit ratings and its 'C'
short-term foreign and local currency sovereign credit ratings on
El Salvador. The outlook on the long-term ratings remains negative.
Our transfer and convertibility assessment remains 'AAA'.
Outlook
The negative outlook reflects the at least one-in-three chance of a
downgrade over the next six to 18 months if the government does not
make adequate progress in filling its substantial financing gap.
S&P believes the government could tap alternative sources of
liquidity to meet its debt service payments over the next 12
months. However, delays in obtaining more funding, as well as in
undertaking corrective fiscal measures to reduce deficits, could
hurt investor confidence and make it more difficult for the
government to continue covering its financing gap. Depending on
debt management and economic outcomes, the government's liquidity
and financing needs might see a positive or negative impact,
leading to a rating action.
Downside scenario
S&P could lower the ratings over the next six to 18 months if the
government's ability to secure adequate funding for its fiscal
deficits and rollover needs or its capacity to undertake fiscal
adjustment to stabilize its very high debt burden weaken. Higher
refinancing risks, poor debt management, or signs of the government
being less willing to service its debt would also lead to a
downgrade.
Upside scenario
In contrast, S&P could revise the outlook to stable over the next
six to 18 months if the combination of improved debt management,
continued economic recovery, and greater clarity about fiscal
policies reduces the medium-term financing gap.
Rationale
On Nov. 29, the government of El Salvador announced a second debt
repurchase offer to buy back up to $74 million of two sovereign
bonds maturing 2023 and 2025. Following the first debt repurchase
in September 2022, there is an outstanding amount of $667 million
for the bond due in 2023 and $367 million for the one due 2025. The
government offered to buy back the 2023 bond at 95 cents on the
dollar and the 2025 bond at 62 cents on the dollar--only marginally
above market prices and the prices offered in the first operation.
S&P understands that investors who do not accept the offer will
maintain the right to receive the full payment amount at each
bond's maturity date.
S&P considers the transaction an opportunistic debt restructuring
and akin to a liability management operation. It remains our
expectation, consistent with its rating actions in June and
September 2022, that the government will meet its debt service
payments over the next 12 months.
In addition to showing somewhat better fiscal performance recently,
El Salvador has potential sources of liquidity that include
official funding, pension reform, and the use of the remaining
portion of the IMF's special drawing rights, among other measures.
The government has already increased domestic debt issuances to
local banks, aided by lowering their deposit reserve requirements
in October 2022. S&P assumes the government will continue to show
willingness to service its debt and seek to avoid potential
negative consequences of a debt default prior to the 2024
presidential election.
The 'CCC+' ratings on El Salvador reflect the country's fiscal and
external vulnerabilities, as well as its dependence on favorable
economic conditions to meet its financial commitments. The
government's high financing needs and heavy reliance on short-term
domestic debt have exacerbated rollover risk amid narrowing
financing options.
The ratings also incorporate the country's institutional
weaknesses, reflected in the long-standing difficulty of predicting
policy responses amid poor checks and balances, low per capita GDP
at $4,800, and only moderate GDP growth due to persistently low
investment. In addition, the sovereign has weak public finances and
a very high debt burden, at around 80% of GDP. El Salvador also
lacks monetary flexibility because of dollarization, which has
continued even after the government's decision to accept bitcoin as
an alternative legal tender. Monetary inflexibility increases the
risks embedded in the high debt burden.
Ratings List
RATINGS AFFIRMED
EL SALVADOR
Sovereign Credit Rating CCC+/Negative/C
Transfer & Convertibility Assessment
Local Currency AAA
EL SALVADOR
Senior Unsecured CCC+
===========
G U Y A N A
===========
GUYANA: Signs First Sale Agreement on Carbon Credits
----------------------------------------------------
RJR News reports that Guyana has signed its first sale agreement on
carbon credits.
President Dr. Irfan Ali announced that the Hess Corporation, based
in the United States, will contribute US$750 million to the
conservation of the Amazon rainforest through a special carbon
credit scheme, according to RJR News.
Dr Ali says the company, which is devoted to exploring oil, gas,
and energy solutions will buy 2.5 million carbon credits annually,
covering the period 2016–2030, the report notes.
Earlier, Vice President Bharrat Jagdeo said Guyana will be the only
country in the world that will boast the Architecture for REDD+
Transactions (ART) credit, the report relays.
ART is a global initiative that seeks to incentivize governments to
reduce emissions from deforestation and forest degradation, as well
as restore forests and protect intact forests, the report
discloses.
A total of 33.47 million credits, known specifically as REDD+
Environmental Excellence Standard (TREES) credits, are available to
buyers, the report adds.
===============
H O N D U R A S
===============
HONDURAS: IDB OKs $50-Mil. Loan to Strengthen Customs Management
----------------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $50 million
loan to increase customs collection and customs controls in
Honduras. The operation will foster trade and boost the country's
economic growth and competitiveness.
The program's goal is to improve the efficiency of Honduras's
Customs Administration (ADUANAS), which was set up in 2020, by
strengthening management and institutional governance.
It will also support control processes, automation and the use of
technologies to reduce fiscal fraud. It will increase the
information technology resilience of customs operational management
by modernizing its technological infrastructure and developing an
information security strategy.
The project will benefit the country by equipping customs with
innovative tools to improve its revenue collection capacity and
contribute to financing public policies. Foreign trade operators
will also benefit from gaining access to higher-quality customs
services.
Foreign trade plays a key role in the country's economy, accounting
for about 88% of gross domestic product. In 2021, Honduran trade
reached $25.25 billion, of which 40% were exports and 60% imports.
Honduras faces competitiveness and logistics performance
challenges. According to cross-border trade data from the World
Economic Forum, in 2020 it took 108 hours in the country to comply
with export border procedures and 96 hours for import procedures,
compared to an average in Latin America and the Caribbean of 55 and
56 hours, respectively. The number of inspections increases the
time and costs of foreign trade.
The $50 million loan, from the IDB's ordinary capital, has a for a
40-year term, with a 5.5-year grace period and interest based on
SOFR.
===========
M E X I C O
===========
AXTEL SAB: Fitch Lowers LongTerm IDRs to 'BB-', Outlook Negative
----------------------------------------------------------------
Fitch Ratings has downgraded Axtel, S.A.B de C.V.'s Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) to 'BB-'
from 'BB'. Fitch has also downgraded Axtel's National Long-Term
Rating to 'A-(mex) from 'A(mex)', and the 2024 USD senior unsecured
notes to 'BB-'. The Rating Outlook has been revised to Negative
from Stable.
The downgrade and Negative Outlook reflect continued weakness in
the company's government services business and headwinds to the
infrastructure business. Both have heavily weighed on EBITDA in
recent quarters, leading to a deterioration in the firm's credit
profile. A backdrop of macroeconomic weakness and challenging
competitive dynamics cloud the company's ability to recover to a
stronger credit profile over the rating horizon. Additionally,
uncertain conditions in credit markets constrain ratings.
KEY RATING DRIVERS
Weakened Credit Profile: Expiring federal government contracts,
delays in the implementation of new enterprise contracts, loss of
income from a key infrastructure customer, and a challenging macro
and competitive environment have resulted in a deterioration in
revenues and margins for Axtel. While the company has gradually
reduced its net debt, net leverage has risen in recent quarters,
reflecting the deterioration in operating performance. Fitch
expects Net debt/EBITDA to reach 3.9x in fiscal 2022 before
improving modestly to 3.7x in fiscal 2023. Moreover, the company's
weakened credit profile has led to greater uncertainty in
refinancing its 2024 notes.
Infrastructure Recovery Unclear: YTD through September 2022,
revenue from Axtel's infrastructure unit (Axnet) has fallen 13% yoy
in peso terms, driven mainly by timing of expirations of dark fiber
contracts, along with lost revenue from Altan Redes, a key
customer. Additionally, growth opportunities from 5G-related
fiber-to-the-tower and fiber-to-the-datacenter have been slower
than expected to materialize.
Weak revenue in Axtel's profitable infrastructure business has
weighed on overall margins. Macro uncertainty and competition cloud
the outlook for a steady recovery in the business over the
short-to-medium term. Growth in 5G and demands for neutral network
infrastructure providers could present opportunities for the
business longer-term but lack of visibility constrain the outlook
over the rating horizon.
Steady Enterprise, Weak Government Services: Enterprise services
within Axtel's services unit (Alestra) has been a bright spot in
performance. While legacy voice services continue to decline, cloud
and cybersecurity solutions have been growing rapidly as Axtel is
able to meet growing secular demand for these solutions with its
broad array of services, amidst a competitive industry. In
contrast, revenues from government services have continued to
deteriorate, driven by shifting federal government priorities in IT
and telecom spending. A growing focus on new federal entities and
state government services could help partially offset these
headwinds, but these initiatives are still in early stages and are
unlikely to move the needle in the short term.
Deteriorating Free Cash Flow: In spite of operational headwinds,
relative stability of the B2B business and capex flexibility have
enabled the company to generate positive FCF, which Fitch projects
to exceed MXN560 million in fiscal 2022, but turn flat to negative
thereafter as modest EBITDA growth is expected to be offset by
greater capex needs and higher cash interest paid following the
company's refinancing. Fitch does not anticipate Axtel to pay cash
taxes or make shareholder distributions over the next few years.
Small Scale in Competitive Market: Axtel operates in a competitive
landscape that will constrain its ratings to the 'BB' category. In
fixed enterprise telecom services, Axtel is the second largest
participant, competing with Telefonos de Mexico S.A.B. de C.V.
(Telmex; A-/Positive), which has maintained a dominant market
position in the Mexican market. Axtel's market share is smaller in
IT services, but the competitive position is more balanced, given
the fragmented nature of that segment.
Spin-off from Alfa: Axtel's ratings were unaffected by the June
2022 announcement that Axtel would be spun off from its parent,
Alfa (BBB-/Stable), as Axtel was rated on a standalone basis given
weak legal, strategic, and operational support incentives from
Alfa. In July, shareholders of Alfa agreed to the proposed
spin-off, with these shareholders owning a stake in a newly created
entity, Controladora Axtel, which will own the stake previously
owned by Alfa, and will be listed on the Mexican Stock Exchange
slated to be completed by the end of 2022. While the board of
directors, management team, policies and internal controls will
remain unchanged, Axtel will continue to be rated on a standalone
basis.
DERIVATION SUMMARY
Axtel has lower financial leverage compared with WOM S.A. (WOM;
BB-/Stable). Axtel and WOM are relatively undiversified carriers,
both service-wise and geographically. WOM benefits from the
relative health of the Chilean operating environment, as well as
the more balanced market, while Axtel's revenues are exposed to the
slowing Mexican economy and operates in an environment dominated by
a larger competitor. Axtel's relatively stable B2B service business
consistently has generated positive FCF, whereas WOM's FCF is
frequently negative.
Axtel has less service and geographical diversification than Cable
& Wireless Communications Limited (CWC; BB-/Stable). CWC also has
greater scale and a stronger market position, as it operates
primarily in a series of duopoly markets, which supports stronger
EBITDA margins than Axtel's. However, CWC exhibits a weaker
financial profile.
Axtel's business profile could be considered similar to Empresa de
Telecomunicaciones de Bogota's (ETB, BB+/Stable), in that both are
small scale undiversified fixed-line providers. ETB benefits from
lower net leverage. Both companies are undergoing transitions, as
ETB attempts to reorient its product portfolio around fiber-based
solutions.
Relative to CWC's sister company, VTR Finance BV (B/Rating Watch
Negative), Axtel has a more comparable business position, given the
two companies' scale, fixed-line telecom focus, and lack of
geographic, product and service diversification. While VTR has a
stronger competitive position in the Chilean broadband and pay-TV
market, Axtel benefits from lower leverage than VTR.
Axtel's ratings are not influenced by Mexico's Country Ceiling
(BBB+). Fitch rates Axtel on a standalone basis, and does not give
any uplift due to parent/subsidiary linkages with Alfa S.A.B. de
C.V. (BBB-/Stable).
KEY ASSUMPTIONS
- Revenues of MXN10.8 billion in 2022, growing 2%-3% thereafter;
- EBITDA margins compressing in 2022 due to continued weakness in
government and setbacks in the infrastructure business, partially
recovering in 2023 as the government business shows some greater
stability and EBITDA from the Axnet unit partially recovers from
2022 headwinds;
- Higher cash interest paid following refinancing pressuring FFO;
- Stable working capital, with no cash taxes expected near term;
- Capital intensity of 13%-14%;
- No shareholder distributions anticipated over the rating
horizon.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Total Debt/EBITDA below 3.0x or net debt/EBITDA below 2.5x,
supported by stable and growing EBITDA margins and cash flow.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Total Debt/EBITDA sustained above 4.0x or net debt/EBITDA
sustained above 3.5x;
- Prolonged deterioration in revenues and EBITDA resulting from
macroeconomic headwinds and competitive pressures;
- Large shareholder distributions preventing continued
deleveraging.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity, Refinancing Uncertainty: As of Sept. 30, 2022,
Axtel had readily available cash and equivalents of MXN1.5 billion,
against short-term debt of MXN487 million. In 3Q22, Axtel
repurchased an additional USD17 million of its senior notes due
2024, leaving USD423 million in principal remaining. Axtel's
liquidity is supported by its positive FCF and a revolving credit
facility, although the company faces a difficult market environment
as it aims to execute on refinancing its 2024 senior notes.
ISSUER PROFILE
Axtel S.A.B. de C.V. (BB/Stable) is a Mexican provider of
telecommunications and information technology (IT) services to
corporate and government clients. Axtel is unique among Fitch-rated
telecoms companies in Latin America, which tend to derive most of
their revenue from retail consumers.
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
----------- ------ -----
Axtel, S.A.B.
de C.V. LT IDR BB- Downgrade BB
LC LT IDR BB- Downgrade BB
Natl LT A-(mex) Downgrade A(mex)
senior
unsecured LT BB- Downgrade BB
FINANCIERA INDEPENDENCIA: Fitch Affirms LT IDR at 'BB-'
-------------------------------------------------------
Fitch Ratings has affirmed Financiera Independencia, S.A.B. de
C.V., SOFOM, E.N.R.'s (Findep) Long-Term Foreign and Local Currency
Issuer Default Ratings (IDRs) and global senior unsecured debt at
'BB-' and Short-Term Local and Foreign Currency IDRs at 'B'. The
Rating Outlook on the Long-Term rating is Stable. In addition,
Fitch has affirmed the Long- and Short- Term National Scale ratings
of Findep and its subsidiary Apoyo Economico Familiar S.A. de C.V.,
SOFOM, E.N.R.'s (AEF) at 'A-(mex)' and 'F1(mex)', respectively. The
Rating Outlooks on the Long-Term national scale ratings are
Stable.
KEY RATING DRIVERS
Findep's IDRs and national ratings reflect with high importance its
business profile and funding liquidity and coverage assessments,
both at 'bb-'. The ratings also reflect with moderate importance
the relatively low tangible leverage, controlled asset quality and
strengthened profitability. For the assessment of the financial
profile, Fitch considers an operating environment (OE) score of
'bbb-' above other Mexican NBFIs, benefited by Findep's meaningful
operation in the United States.
Recognized Franchise: Findep's recognized franchise and its
relative geographical diversification in the microfinance sector
partly offsets the higher risk of its business model. Findep's
business model is oriented to unsecured consumer and microfinance
loans for a low-income population that does not have access to
credits from commercial banks. Business growth in the U.S.
accelerated in the past two years through its subsidiary Apoyo
Financiero Inc. (AFI), which serves mostly the Hispanic community
in California, Texas and Arizona, offering unsecured loans through
digital mechanisms.
Upcoming Maturity Concentration in 2024: Fitch has revised downward
and increased the relative importance of its assessment of Findep's
funding liquidity and coverage to reflect the material
concentration in maturities in July 2024, arising from the payment
of around USD165 million outstanding from its international bond.
Fitch believes Findep's funding structure may tend towards secured
funding in response global and local investors lower appetite for
the non-bank financial institutions sector.
As of 3Q22, Findep reduced its metric of unsecured debt to total
debt to 55.4% (2021: 72.1%), due to the lower outstanding debt of
its global bond. As of 3Q22, Findep exhibited reasonable liquidity,
given that its cash covered around 0.6x the payments due in the
next 12 months.
Meaningful international operations: Fitch assess Findep's OE at
'bbb-' with stable trend and moderate importance. Fitch considers a
blended approach that incorporates the entity's operations in
Mexico and United States(55.6% and 44.4% as of September 2022,
respectively), which results in a better evaluation compared to
other Mexican NBFIs. Fitch expects this operating environment score
to remain at its current level given the company's intention to
continue its U.S. operation.
Low Leverage Compared to Peers: Findep's tangible leverage remains
a rating strength at 1.9x as of September 2022, driven by improved
profitability and earnings retention. Findep's tangible leverage
compares favorably with similarly rated peers and is commensurate
with the intrinsic risks of the business model. In Fitch's view,
Findep's capital position can absorb the company's double-digit
growth projections and remain consistent with the current ratings.
The agency's scenario considers sustained profitability and earning
retention.
Strengthened Profitability: During 2021 and as of 3Q22, Findep has
strengthened its profitability and has reached pre-pandemic levels.
Profitability ratios have benefited from a digital transformation
strategy that has allowed Findep to reduce, to some extent, the
cost structure. As of 3Q22, the metric of pre-tax profit to average
assets was 7.9%, above the 6.4% at the end of 2021 and higher than
the average of the last four years of around 3.5%. Fitch expects
profitability will remain at similar levels if the entity achieves
its growth objectives.
Controlled Delinquency Metric: Findep has controlled its write-offs
adjusted NPL metric. As of 3Q22, the adjusted delinquency ratio
considering charge-offs of the previous 12 months was around 17%,
above the 15.2% at the end of 2021, but below pre-pandemic levels.
As of 3Q22, the core delinquency metric was around 6% (the legacy
metric was 4.9% according information provided by the company),
above the 4.4% at the end of 2021, which was impacted by the CNBV
implementation. The high level of impaired loans is due to its
served niche. Fitch expects asset quality pressures to remain
moderate and asset quality metrics to remain consistent with its
rating level.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to proactively address 12 months ahead of the 2024 bond
maturity through refinancing;
- A material deterioration in the company's asset quality;
- Profitability ratios consistently below 1%;
- A sustained increase in the debt/tangible equity ratio
consistently above 5.5x;
- A relevant deterioration of Findep's business prospects and
diversification, which could result in a change on Fitch's
assessment of its business profile and operating environment.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A significant and sustained improvement in the company's overall
financial profile, particularly a profitability metric consistently
above 7% and an asset quality metric significantly lower than
current metrics;
- A material strengthening of Findep's franchise and business model
consistency, provided that there are no refinancing and liquidity
risks.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
Debt Rating: Findep's global debt issuance rating is in line with
its respective corporate rating level, as the debt is senior
unsecured.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
Senior unsecured debt ratings would mirror any changes in Findep's
IDRs or could be downgraded below Findep's IDR if the level of
unencumbered assets substantially deteriorates, subordinating
bondholders to other debt.
SUBSIDIARY AND AFFILIATE RATINGS: KEY RATING DRIVERS
Subsidiary Ratings: AEF national ratings are equalized to Findep's,
driven by Fitch's opinion on the group's ability and propensity to
support the subsidiary. Fitch's opinion on support considers with
high importance AEF's relevant role to the consolidated operation
providing credits it its core sector and market, the considerable
integration to Findep and funding fungibility.
SUBSIDIARY AND AFFILIATE RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of Findep's national ratings.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- If Findep's ratings are downgraded or Fitch reduces its
evaluation of the entity's strategic importance to the parent.
SUMMARY OF FINANCIAL ADJUSTMENTS
Pre-paid expenses and other deferred assets were reclassified as
intangibles and deducted from equity to reflect their low loss
absorption capacity.
ESG CONSIDERATIONS
Findep has an ESG Relevance Score of '4' for Customer Welfare -
Fair Messaging, Privacy & Data Security as its business model has
high lending rates to unbanked, lower-income segments of the
population which exposes Findep to relatively high regulatory,
legal and reputational risks. This has a negative impact on the
credit profile and is relevant to the rating in conjunction with
other factors.
Findep has an ESG Relevance Score of '4' for Exposure to Social
Impacts given that its business model (individual loans to
low-income segments) is exposed to shifts of consumer or social
preferences or to measures that the government could take to
increase financial inclusion. This has a negative impact on the
credit profile and is relevant to the rating in conjunction with
other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Financiera
Independencia,
S.A.B. de C.V.,
SOFOM, E.N.R. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT A-(mex)Affirmed A-(mex)
Natl ST F1(mex)Affirmed F1(mex)
senior unsecured LT BB- Affirmed BB-
Apoyo Economico
Familiar S. A. de
C. V., Sociedad
Financiera de Objeto
Multiple, E. N. R. Natl LT A-(mex)Affirmed A-(mex)
Natl ST F1(mex)Affirmed F1(mex)
===========
P A N A M A
===========
BANCO DE OCCIDENTE: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Banco de Occidente S.A. (Occidente) and
its subsidiaries international and national ratings. Fitch has
affirmed Occidente's Viability Rating (VR) at 'bb+' and Foreign and
Local Currency Long- and Short-Term Issuer Default Ratings (IDRs)
at 'BB+' and 'B', respectively. At the same time, Fitch affirmed
the national ratings at 'AAA(col)' and 'F1+(col). The Rating
Outlook on the long-term ratings is Stable.
KEY RATING DRIVERS
VR, IDRs and National Ratings
Occidente's IDRs are driven by its VR of 'bb+' which is one notch
above its implied 'bb' due to the high influence of Fitch's
assessment of the bank's business profile underpinned by its
consistent business model that focuses on less riskier segments and
its well-recognized regional market position. The ratings also
consider Occidente's modest profitability and capital ratios.
The bank's good asset quality reflects the bank's conservative risk
profile. As of June 2022, the NPL ratio improved to 3.1% from a YE
2021 four-year average of 3.7% while reserve coverage improved to
162.4% from 152.7% in YE 2021. After the COVID-driven asset
deterioration in 2020, the bank has managed to improve collections
and metrics now resemble pre-pandemic levels, which Fitch believes
will be sustained in the future. Relatively moderate to low
concentration per borrower is also a positive.
Occidente's tightening of its net interest margin due to increased
interest rates has constrained its profits. The bank's 1H22
operating profit to risk-weighted assets (RWAs) ratio is a modest
1.4%, in line with its four-year average ratio. Relatively high
loan impairment charges also pressure the operating income. Fitch
believes that the bank's ratio will remain below 2% given the
expected continuation of external pressures such as high interest
rates and inflation, coupled with its funding structure, which
relies in institutional clients.
While Occidente's capital ratios are relatively tight, the bank
benefits from ordinary support from its parent, Grupo Aval (GA). As
of June 2022, Occidente's CET1 to RWAs ratio was 10.3%, which
declined from 11.1% in December 2021. The bank's rapid growth and
recurrent dividend payment policy, constrain capitalization.
Positively, its ample reserve coverage improves its loan loss
absorption capacity. Fitch believes that capital ratios will remain
relatively tight given the bank's aggressive credit growth plans
and the expected modest internal capital generation. Nonetheless,
Fitch believes that, if required, capital from its parent would be
forthcoming.
The bank's main source of funding is customers deposits, mainly
institutional clients; while they prove to be stable, the costs
demanded are higher compared to a wide retail base. As of June
2022, the bank's loans to customer deposits ratio is 104.7%, which
compares similar to other local and international peers. Other
sources of funding are local bond issues and bilateral loans. Fitch
does not anticipate structural changes to Occidente's funding
profile.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Occidente's VR and IDRs could be downgraded by a significant
deterioration of asset quality and profitability ratios that no
longer reflect the bank's good business profile; specifically, an
operating profit to RWAs ratio consistently below 1% and NPL ratio
above 5%.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade is unlikely in the foreseeable future given the
constrains of the operating environment.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
NA
Occidente's SSR of 'bb+' reflects Fitch's view of high probability
of support from GA, if needed, given its role as one of the most
important subsidiaries for GA, as the group's second largest bank.
In Fitch's opinion, Occidente is core for GA's strategy and
institutional support should be forthcoming, if required. GA has a
consistent track record of support for its subsidiaries and its
ability to support them is illustrated by its 'BB+'/Outlook Stable
rating.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
NA
Occidente's SSR would be affected if Fitch changes its assessment
of GA willingness and/or ability to provide support.
SUBSIDIARIES & AFFILIATES: KEY RATING DRIVERS
BANCO DE OCCIDENTE (PANAMA), S.A. (BOP)
BOP's IDRs are aligned to Occidente's as they reflect the potential
support it would receive from Occidente should it be required. The
parent's ability to support its Panamanian subsidiary is primarily
based on Occidente's IDR of 'BB+'/Stable Outlook. BOP's IDRs also
reflect the importance of the subsidiary in expanding Occidente's
international presence while maximizing synergies with GA,
Occidente's and BOPs ultimate parent. Furthermore, Occidente's
propensity to support its Panamanian subsidiary is considered high
by Fitch given the reputational risk associated at the parent level
associated with a default at the subsidiary level. Additionally,
Occidente's expected support to BOP is bolstered by the operational
synergies and alignment of risk controls and business practices.
FIDUCIARIA DE OCCIDENTE S.A. (Fiduoccidente)
Fiduocciente national ratings are support driven and therefore are
aligned to Occidente's ratings. In Fitch's view, Fiduoccidente is a
core subsidiary to Occidente's business model and strategy, which
constitutes a high propensity of either direct or indirect support.
A default from this entity would constitute a high reputational
risk to its parent.
SUBSIDIARIES AND AFFILIATES: RATING SENSITIVITIES
BOP
- IDRs would change if Fitch's assessment of its parent's ability
and/or willingness to support BOP changes. In general, the IDRs
would move in line with those of its parent.
Fiduoccidente
- A downgrade could come from a variation in Occidente's ability or
propensity of support or if its national ratings were downgraded.
VR ADJUSTMENTS
The VR of 'bb+' has been assigned above the 'bb' implied due to a
positive adjustment driven by the bank's business profile which is
assessed at 'bb+'.
The Capitalization and Leverage score of 'bb-' has been assigned
above the implied category of 'b' due to a positive adjustment for
ordinary support.
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
----------- ------ -----
Banco de Occidente
(Panama), S. A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
Shareholder Support bb+ Affirmed bb+
Fiduciaria de
Occidente S.A. Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Banco de
Occidente S.A. LT IDR BB+ Affirmed BB+
ST IDR B Affirmed B
LC LT IDR BB+ Affirmed BB+
LC ST IDR B Affirmed B
Natl LT AAA(col)Affirmed AAA(col)
Natl ST F1+(col)Affirmed F1+(col)
Viability bb+ Affirmed bb+
Shareholder Support bb+ Affirmed bb+
=======
P E R U
=======
CAMPOSOL HOLDING: Fitch Cuts LongTerm IDRs to 'B+', Outlook Stable
------------------------------------------------------------------
Fitch Ratings has downgraded Camposol Holding PLC (Camposol) and
Camposol S.A.'s Long-Term Foreign and Local Currency Issuer Default
Ratings to 'B+' from 'BB-'. Fitch has also downgraded Camposol
S.A.'s senior unsecured notes at to 'B+'/'RR4' from 'BB-'. The
Rating Outlook is Stable.
The rating downgrade reflects higher net leverage and profit
volatility than initially expected, as well as high short-term
debt. The Stable Outlook reflects Fitch's view that the company
will be able to generate positive FCF, roll-over working capital
lines and reduce net leverage over the next two years.
Camposol S.A.'s ratings are the same as the holding company,
Camposol Holding PLC. Camposol S.A. is fully-owned by Camposol, and
is the main cash generator of the group. The holding company has no
debt, and the bond issued by Camposol S.A. is guaranteed by
Camposol Holding PLC.
KEY RATING DRIVERS
Higher Expected Leverage: Fitch forecasts net debt/EBITDA to be
close to 7.0x in 2022, which is considered high for the ratings,
and move toward 4.0x-3.5x in 2023, and lower in 2024, based on
higher EBITDA, and lower capex and dividends. Net leverage in 2022
was impacted by higher ocean freight and logistic costs (about
USD32 million for the nine-month to Sept. 30, 2022) and lower
blueberry and avocado prices.
Total volumes increased by about 11% for the nine-months in 2022,
driven by blueberries' higher yields. Fitch expects EBITDA of about
USD80 million (excluding IFRS 16 adjustment) in 2022 in line with
LTM 3Q22 EBITDA, and forecasts a rebound of EBITDA to about USD120
million based on lower freight and logistic costs and higher
volumes, as new crops entering the productive phase start to
mature. Nearly 76% of planted fields were in the productive phase
as of 3Q22.
Decreased Investments: Fitch's base case forecasts capex to reach
approximately USD35 million and no dividend payment in 2023 (about
USD63 million in capex estimated for 2022). The company's operating
cash flow comes predominately from Peru, while the contribution of
overseas operations remains limited as planted crops need time to
reach maturity in countries such as Colombia and Uruguay.
Profitability from investments abroad is expected to materialize
only in the medium term.
Leading Position in Peru: Camposol benefits from its position as
the leading agro-industrial company in Peru, developed through the
vertically integrated production of food products such as avocados,
blueberries, and other produces (tangerines, mangoes, grapes). The
company's profitability is enhanced by its control of the value
chain, consisting of research and product development, growing
fields, processing facilities and sales and distribution channels.
As it produces fresh fruits, the company is also positioned well in
the worldwide trend toward consuming healthy and more convenient
products. Blueberries, avocados and other products represented 62%,
21%, and 18% of total gross profit, respectively, in 2021. Revenues
come 55% from the United States, 31% from Europe and 12% from Asia
as of 3Q22.
Exposure to Price and Climatic Risks: Rating constraints include
Camposol's exposure to price and production yield fluctuations.
External factors such as the El Nino/La Nina weather phenomena,
geopolitical conflicts which could cause logistical issues, also
are negatively factored into the company's ratings.
DERIVATION SUMMARY
Camposol's 'B+' rating reflects the company's medium-sized
operational scale and the geographic concentration of its
production base, which is weak compared with other commodity
traders and processors such as Bunge Limited (BBB/Stable).
Camposol's business profile is distinct in Fitch's commodity rated
portfolio considering its products sold (avocados, blueberries and
others); other peers are mainly in the sugar and ethanol segments,
operating with less diversification.
The company operates in a high business risk commodity industry,
where performance is subject to external shocks such as disruption
in logistics, climatic events, natural disasters and potential
supply and demand imbalances, creating yield and price volatility.
KEY ASSUMPTIONS
- EBITDA of about USD80 million impacted by ocean freight and
logistic costs and lower crop prices in 2022;
- Capex of about USD63 million and USD35 million respectively in
2022 and 2023;
- Net leverage of about 7x in 2022 and moving toward 3.5x-4x in
2023.
KEY RECOVERY RATING ASSUMPTIONS
Fitch believes that a debt restructuring would like occur under a
stress economic conditions and external shocks such as climatic
events or lack of access to certain exports markets Therefore,
Fitch has performed a going concern recovery analysis for Camposol
that assumes that the company would be reorganized rather than
liquidated.
Key going-concern assumptions are:
Camposol would have a going- concern EBITDA of about USD74 million
and a distressed multiple of 5x due to the exposure to the
agri-business sector and factors such as climatic events, logistic
issues, potential strikes or a shut-down of exports markets. The
recovery performed under this scenario resulted in a recovery level
of 'RR3'. Because of the Fitch's 'RR4' soft cap for Peru, which is
outlined in criteria, Camposol's Recovery Rating has been capped at
'RR4' reflecting average recovery prospects.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Improved geographic diversification of the production base;
- Net leverage below 2.5x on a sustained basis;
- Strong positive FCF.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Net leverage above 3.5x by 2024 and going forwards;
- EBITDA coverage below 2x;
- Negative FCF and weak liquidity.
LIQUIDITY AND DEBT STRUCTURE
Manageable Liquidity: Camposol's liquidity is manageable due to
cash on hand (USD28 million), the company's access to the local
market to finance and roll-over working capital credit lines, and
unused available bank lines (about USD105 million) as of 3Q22. Debt
is mainly comprised of working capital lines (USD187 million) and
the company's USD350 million unsecured notes due in 2027.
ISSUER PROFILE
Camposol is the leading agro-industrial company in Peru. It is
involved in the harvesting, processing and marketing of
high-quality agricultural products such as avocados, blueberries
and others (tangerines, mangoes, grapes), which are exported to
Europe, the United States of America and Asia. The company is
vertically integrated in Peru, offering fresh and frozen products.
ESG CONSIDERATIONS
Camposol has a Relevance Score of '4' in Governance Structure for
ownership concentration. The shareholder's strong influence upon
management could result in decisions detrimental to the company's
creditors. This has a negative impact on the credit profile, and is
relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Camposol Holding PLC LT IDR B+ Downgrade BB-
LC LT IDR B+ Downgrade BB-
Camposol S.A. LT IDR B+ Downgrade BB-
LC LT IDR B+ Downgrade BB-
senior unsecured LT B+ Downgrade RR4 BB-
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Companies Must Learn From Mishaps
----------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that health Safety,
Security & Environment (HSSE) are particularly important for
industrial companies, including those in the energy sector and this
is why TOSL Engineering ensures proper policies and procedures are
implemented for the safety of all workers.
Earlier this month, the company, located in Marabella, won three
out of four American Chamber of Commerce (AMCHAMTT) HSSE awards in
the categories for: Most improved OSH/Environment Performance;
Outstanding OSH & Environment Project and Excellence in HSE. OSH is
an acronym for Organizational Safety and Health, according to
Trinidad Express.
Over the past 40 years, the company has served many industries
which include oil and gas, petrochemicals, manufacturing, power and
utilities, marine and shipping, food and beverage, construction,
water and wastewater, to name a few, the report notes.
In an interview, managing director Ricardo Mahadeo said TOSL is the
largest local engineering and integrated solutions provider
servicing the Caribbean region and HSSE is of paramount importance,
the report relays.
Mahadeo, who started with the company in 2018, said that the
industry expects good HSSE performance and a minimum of recordable
incidents, the report says.
"Contractors are sometimes asked to down a man or leave a site if
they have too many incidents. We were surprised to find out that
some of our clients are shifting their attitude when looking at
incidents and adopting the Human and Organisational Performance
(HOP) operating philosophy, which is guided by five principles:
people make mistakes; blame fixes nothing; context drives
behaviour; learning is vital and response matters," he explained,
the report notes.
Asked how the future looks for HSSE and what are some of the
opportunities that exist for energy services contractors, Mahadeo
said contractors need to be educated about the new skills that are
required, the report relays.
"In the past (pre 1990s), this happened when foreign contractors
came to Trinidad and Tobago to execute projects. In 2022, we can
use the Internet to find potential partners and do market research
during this early phase to position ourselves. We can expect when
these new projects start, there will be an exchange of know-how and
expertise similar to when the first platforms and petrochemical
plants were built. Contractors need to be receptive to these new
opportunities and willing to swiftly change mindsets," he remarked,
the report discloses.
Furthermore, the executive noted that the public can expect even
more stringent HSSE standards within the energy industry,
especially with respect to environmental sustainability, the report
notes.
"Particular emphasis will be placed on reducing your carbon
footprint. Almost all of the upstream businesses in Trinidad have
committed to reducing their carbon emissions in the race to Net
Zero by 2050. Local contractors need to understand how their carbon
footprint will affect their clients' Net Zero goals, in particular
within the supply chain, and start taking steps to
reduce/mitigate/manage carbon emissions to transition to the
clients' expectations," Mahadeo acknowledged, the report relays.
TOSL has 330 employees throughout the various sectors the company
services, which dictates a whole-of-company approach to remedial
action, the report discloses.
"We have identified areas where we have seen increased incidents
and we have introduced a roving inspector, who has scheduled visits
to clients' sites to ensure our procedures are in compliance. Where
we do find variances, we incorporate corrective actions across our
business," said Mahadeo, the report relays.
Questioned on whether there has been any Health Safety and
Environment (HSE) mishaps at TOSL over the years, the executive
said the local engineering company, has had accidents and near
misses in the past, the report notes.
"We consider most to have been preventable, but we also understand
that we are on a journey along the HSE culture. We have been
proactive with the implementation of our risk controls measures to
ensure we manage incidents to prevent recurrence. The strength of
an HSE Management system is demonstrated on how effectively we
respond to incidents and near misses," he outlined, the report
relays.
According to Mahadeo, he believes the company is learning from its
incidents and near misses as it has implemented effective remedial
programs, the report discloses.
"For example, to significantly reduce dropped objects, TOSL
launched an awareness campaign companywide to 'stop the drop'. Our
HSE performance indicated that as an organisation we were having
frequent near misses related to dropped objects. In our attempt to
control this risk and ensure corrective actions were implemented,"
he stated, the report relays.
As an organisation, Mahadeo said it is always effectively improving
our safety culture, the report discloses.
"We were able to identify these dropped object incidents and
implement a system to mitigate the risks and reduce the potential
of having an accident. This is evident by the reduction in dropped
objects after the implementation of the dropped objects campaign,"
he said, the report notes.
Managing Covid-19
With respect to how the company coped with the pandemic over the
two and half-year period, the managing director said planning for
the pandemic commenced as early as January 2020, when the World
Health Organisation declared Covid-19 a global health emergency,
the report relays.
He said TOSL's management team assembled a Covid Steering Committee
to initiate the management of the change process, assessing risks
posed to all personnel, transmission routes and the national and
global status of the disease. An Emergency Response Plan (ERP) was
finalised and implemented by March 3, 2020 to minimise/mitigate
potential impacts, the report says.
"A strategy was devised to maintain business continuity. TOSL
identified critical functions within the organisation and ensured
cross training of employees. Departments were segregated into
different buildings and employees were placed on a rotation system.
Executive Management was engaged in communicating and reinforcing
the new ways of work to all staff. TOSL continued to review the
ERP in accordance with local legislation and international
guidelines," he highlighted, the report notes.
As the new year approaches, Mahadeo said TOSL is pivoting from its
traditional products and services to conceptualise and deliver
energy efficiency, waste-to-energy processing and carbon management
projects to its clients across the region, the report relays.
"Our major goal is to ensure environmental sustainability whilst
trading carbon credits from environmentally friendly or plant
efficiency improvement projects to assist in meeting our global
2050 target. With the added revenue the client may decide to
proceed with a project which now has at least a marginal positive
return and which allows them to achieve their ESG (Environmental,
Social, and Governance) goals," he emphasized, the report says.
History of TOSL
The founder and chief executive officer Emeritus Shazan Ali led
TOSL from 1982 to 2017, the report recalls. During this time the
company became ISO 9001 and STOW certified, the report notes. TOSL
has also been the recipient of the Excellence in Corporate
Governance Award from the Energy Chamber of Trinidad and Tobago,
won the Excellence in Business Award, under the category Excellence
in Quality, which is hosted by Republic Bank and the Business
Development Company Limited and captured the award for Medium
Company of the Year in the Services Category from the Couva/ Pt
Lisas Chamber of Commerce, the report relays.
TOSL also acquired international membership of Transparent Agents
and Contracting Entities (TRACE) and has implemented its Corporate
Whistleblowing Hotline which is provided by report it (USA), the
report adds.
===============
X X X X X X X X
===============
LATAM: Guyana Displaces Dominican with Highest Foreign Investment
-----------------------------------------------------------------
Dominican Today reports that according to a recent ECLAC report,
foreign direct investment (FDI) flows to the Dominican Republic
increased by 21% in 2021, totaling 3.1 billion dollars, the highest
level since 2017.
However, Guyana was the Caribbean country with the highest amount
of growth last year, surpassing Quisqueya, which had previously led
the subregion in investment receipts, according to Dominican Today.
The report "Foreign Direct Investment in Latin America and the
Caribbean," released by the Economic Commission for Latin America
and the Caribbean (Cepal), shows that FDI inflows into the
Caribbean increased by 19.4% in 2021, owing primarily to capital
inflows into the Guyana hydrocarbons sector and an increase in FDI
in the Dominican Republic, Dominican Today notes.
According to the document, Guyana is now the main destination for
FDI in the subregion, accounting for 50% of inflows, followed by
the Dominican Republic (35%), Dominican Today relays. "The COVID-19
crisis severely impacted the Caribbean economies with a tourism
vocation, but they have already achieved levels of foreign
investment that are 24% higher than those of 2019," notes ECLAC,
Dominican Today discloses.
While investment in the tourism and hotel sectors has begun to pick
up in the Dominican Republic, he notes that other countries, such
as Jamaica and Barbados, have demonstrated their potential in the
business process outsourcing sector, attracting investment from
companies in the industry, the report adds.
*********
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
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2022. All rights reserved. ISSN 1529-2746.
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