/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/221209.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 Friday, December 9, 2022, Vol. 23, No. 240 Headlines A R G E N T I N A ARGENTINA: Reaches Staff-Level Deal with IMF on EFE Third Review GAUCHO GROUP: Signs Exchange Agreement With Noteholders MSU ENERGY: Fitch Affirms LongTerm Issuer Default Ratings at 'CCC-' B O L I V I A BANCO MERCANTIL SANTA CRUZ: S&P Cuts LT ICR to 'B', Outlook Stable B R A Z I L BRAZIL: Posts Positive Balance of US$6.7BB in Trade in November PETROBRAS SA: Will Invest US$78 Billion in the Next 5 Years H O N D U R A S HONDURAS: IDB OKs $75M Loan to Strengthen Social Protection System M E X I C O CREDITO REAL: Said to be in Talks With Bondholders P U E R T O R I C O PUERTO RICO: Judge Rejects Stay of HTA Plan of Adjustment T R I N I D A D A N D T O B A G O TOBAGO HOUSE: Moody's Withdraws 'Ba2' Issuer Rating - - - - - ================= A R G E N T I N A ================= ARGENTINA: Reaches Staff-Level Deal with IMF on EFE Third Review ---------------------------------------------------------------- An International Monetary Fund (IMF) team, led by Luis Cubeddu, Deputy Director of the Western Hemisphere Department and Ashvin Ahuja, Mission Chief for Argentina, conducted in-person and virtual meetings with the Argentine authorities to discuss policies on the third review of the extended arrangement under the Extended Fund Facility (EFF). Mr. Cubeddu and Mr. Ahuja issued the following statement in Washington, D.C. at the conclusion of those meetings: "IMF staff and the Argentine authorities have reached staff-level agreement on an updated macroeconomic framework and associated policies necessary to complete the third review under Argentina's 30-month EFF arrangement. The agreement is subject to approval by the IMF Executive Board, which is expected to meet this month. Upon completion of the review, Argentina will have access to about US$ 6 billion (SDR 4.5 billion). "The review focused on assessing recent progress in program implementation and on reaching understandings on policies to further strengthen macroeconomic stability in the context of a more challenging backdrop. It was agreed that key program objectives—including those related to the primary fiscal deficit and net international reserves—would remain unchanged during the remainder of 2022 and through 2023 to continue to anchor policy making and credibility. In addition, there were discussions on the need for policies to adapt as needed in the event that external and domestic risks materialize. "Despite challenges, including from the war in Ukraine, all quantitative performance criteria through end-September 2022 were met, including the primary fiscal deficit on account of strong expenditure controls and actions to improve the targeting of subsidies and social assistance. A debt restructuring agreement was recently reached with Paris Club creditors, and efforts to mobilize net official financing have intensified. Actions by the new economic team are starting to bear fruit—inflation is moderating (albeit from high levels), and the trade balance is improving, largely on account of a healthy slowdown in domestic demand and imports. Moreover, the authorities remain on track to meet the end-2022 program targets. "While progress has been made, macroeconomic conditions remain fragile and steadfast program implementation will be essential going forward. In particular, it will be critical to continue the fiscal consolidation process which envisages a reduction of the primary fiscal deficit from 2.5 percent of GDP in 2022 to 1.9 percent of GDP in 2023. This should be underpinned by efforts to continue to mobilize revenue, strengthen expenditure controls, and improve in a timely fashion the targeting of subsidies and social assistance, while providing space for priority social and infrastructure spending. "The monetary and FX policy framework should continue to deliver positive real policy interest rates and an improvement in external competitiveness. These actions should continue to encourage the demand for peso assets, ensure a reduction in monetary financing in line with program targets, and support a gradual reduction in annual inflation -- from around 95 percent by end-2022 to 60 percent by end-2023. Moreover, maintaining a proactive domestic debt strategy remains essential to mobilize domestic financing and improve market functioning. "Tighter macroeconomic policies should also support a further improvement in the current account balance, which combined with ongoing efforts to mobilize external financing, should strengthen reserve coverage—net international reserves are programmed to increase by US$9.8 billion by end-2023. While temporary administrative FX measure have been adopted as imbalances are being addressed, they should be minimized going forward, as they are not a substitute for sound macroeconomic policy. "On the structural side, continued efforts are needed to strengthen public financial management, the peso government debt market, AML/CFT frameworks, and the net export potential of strategic sectors, particularly in energy. The forthcoming international information exchange agreement with the United States could support revenue mobilization and reserve accumulation. "We thank the Argentinean authorities for the open and constructive discussions and welcome their continued commitment to strengthen stability and promote inclusive and sustainable growth." 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. GAUCHO GROUP: Signs Exchange Agreement With Noteholders ------------------------------------------------------- Gaucho Group Holdings, Inc. and certain investors entered into an exchange agreement on Nov. 30, 2022, in order to amend and waive certain provisions of the Securities Purchase Agreement dated November 3, 2021, and exchange $100 in aggregate principal amount of each of the senior secured convertible notes (the Existing Notes), on the basis and subject to the terms and conditions set forth in the Exchange Agreement, for warrants to purchase up to 43,814 shares of the Company's Common Stock at an exercise price of $2.40 and warrants to purchase up to 43,814 shares of the Company's Common Stock at an exercise price of $6.00 (subject to customary adjustment upon subdivision or combination of the common stock). The Exchange Agreement extends the maturity date of the Existing Notes from Nov. 9, 2022 to Feb. 9, 2023 and waives all other payments due until Feb. 9, 2023. The Warrants are immediately exercisable and may be exercised at any time, and from time to time, on or before the third anniversary of the date of issuance. The Warrant includes a "blocker" provision that, subject to certain exceptions described in the Warrant, prevents the Investors from exercising the Warrant to the extent such exercise would result in the Investors together with certain affiliates beneficially owning in excess of 4.99% of the Common Stock outstanding immediately after giving effect to such exercise. As previously reported on the Company's Current Report on Form 8-K filed on Nov. 8, 2021, Gaucho Group and the investors entered into the Securities Purchase Agreement and the Company issued to the investors certain senior secured convertible notes. About Gaucho Group Headquartered in New York, NY, Gaucho Group Holdings, Inc. -- http://www.algodongroup.com --was incorporated on April 5, 1999. Effective Oct. 1, 2018, the Company changed its name from Algodon Wines & Luxury Development, Inc. to Algodon Group, Inc., and effective March 11, 2019, the Company changed its name from Algodon Group, Inc. to Gaucho Group Holdings, Inc. Through its wholly-owned subsidiaries, GGH invests in, develops and operates real estate projects in Argentina. GGH operates a hotel, golf and tennis resort, vineyard and producing winery in addition to developing residential lots located near the resort. In 2016, GGH formed a new subsidiary and in 2018, established an e-commerce platform for the manufacture and sale of high-end fashion and accessories. The activities in Argentina are conducted through its operating entities: InvestProperty Group, LLC, Algodon Global Properties, LLC, The Algodon - Recoleta S.R.L, Algodon Properties II S.R.L., and Algodon Wine Estates S.R.L. Algodon distributes its wines in Europe through its United Kingdom entity, Algodon Europe, LTD. Gaucho Group reported a net loss of $2.39 million for the year ended Dec. 31, 2021, a net loss of $5.78 million for the year ended Dec. 31, 2020, and a net loss of $6.96 million for the year ended Dec. 31, 2019. As of Sept. 30, 2022, the Company had $25.39 million in total assets, $6.86 million in total liabilities, and $18.53 million in total stockholders' equity. MSU ENERGY: Fitch Affirms LongTerm Issuer Default Ratings at 'CCC-' ------------------------------------------------------------------- Fitch Ratings has affirmed the Long-Term Foreign Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs) of MSU Energy S.A. (MSU Energy) at 'CCC-' and the rating of its USD600 million senior secured notes due 2025 at 'CCC'/'RR3'. Similar to its Argentine peers, the ratings reflect the company's exposure to the uncertain local operating and regulatory environment for generation companies along with the electricity system's high dependence on government subsidies. MSU Energy's ratings continue to reflect its dependence on the country's offtaker and electricity market coordinator, Compania Administradora del Mercado Mayorista Electrico (CAMMESA). MSU Energy remains exposed to payment delays from CAMMESA, given its amortizing debt. Fitch expects MSU Energy's 2022 leverage to be 4.8x with a continued deleveraging trend to 2.3x by 2025 due to the expected amortization of the company's USD250 million private notes. The recovery rating of 'RR3' for MSU Energy's senior secured notes reflects Fitch's expectation that a potential recovery is higher than its previous 'RR4'. The revised recovery rating reflects historical precedents of numerous distressed debt exchanges done by Argentine corporates, that did not result in a reduction of principal, and the recoveries were above the implied recovery of an 'RR3' (51%-70%), and the previous recovery rating of 'RR4' (31%-50%), even when considering the intrusive capital controls laws. As Per Fitch's Country-Specific Treatment of Recovery Criteria, when an issuer actually enters a distressed or defaulted state, such as Argentina (CCC-), Fitch can assign a higher recovery rating for an issuer instrument if it believes that recoveries in the individual case will be consistent with a higher recovery rating. KEY RATING DRIVERS Heightened Counterparty Exposure: MSU Energy depends on payments from CAMMESA, which acts as an agent for an association representing electricity generators, transmission, distribution and large consumers or the wholesale market participants known as Mercado Mayorista Electrico. CAMMESA is currently paying invoices within 66 days, which is higher than the contracted payment period of 42 days. Fitch expects continued improvement in collections as CAMMESA collections averaged 108% in 3Q22 and overdue receivables to MSU declined to USD18.7 million from USD24.3 million in 2Q22. Deleveraging Trajectory: Fitch estimates MSU Energy's total debt/EBITDA for 2022 will decline to 4.8x from 5.1x in 2021 during the second full year of operation for its combined cycle expansions. Leverage is forecasted to decline further to 4.0x and 3.6x, respectively in 2023 and 2024, which can be attributed to the company's amortization of its USD250 million private notes due 2024. Fitch expects 2022 FFO-interest coverage of 2.4x. An improvement to 3.0x is expected in 2023, due to the aforementioned increased cash flow and debt reduction over time. A further improvement is possible if MSU refinances its 2024 notes, which currently pay interest of 90-day LIBOR plus 12.5%. Stable Cash Flow: MSU Energy's cash flow generation is relatively stable and predictable if CAMMESA payments are received in a timely manner and power purchase agreement (PPA) terms are not significantly altered. Fitch estimates 60% of the company's EBITDA is related to Resolution 21/2016, as of 3Q22, which is U.S.-dollar denominated for a 10-year period ending in 2027, with the remaining 40% attributable to Resolution 287/17 for 15 years. The company is not expected to have exposure to changes in base energy until 2027, the country's regulatory framework for uncontracted generators, given that MSU began operations in 2017. Uncertain Regulatory Environment: The Argentine electricity sector continues to be challenged by central bank capital controls and sovereign risk, despite otherwise strong sector credit fundamentals. Capital controls were recently extended until Dec. 31, 2023, and will continue to restrict issuers' access to the foreign exchange market to pay off U.S. dollar-denominated debt. Furthermore, in June 2022, the government implemented a tariff segmentation scheme for residential electricity and gas users based on income. Subsidies for the highest income level are expected to be eliminated by YE 2022. The government subsidizes generation costs not covered by end users. Given rapid inflation of over 80%, Fitch believes end-user tariffs will need to be adjusted by more than the planned 40% in Argentine pesos in 2022 for the system to be self-sustaining. DERIVATION SUMMARY MSU Energy's FC and LC IDRs of 'CCC-' is in line with those of local Argentine peers, all of which are exposed to Argentina's regulatory risk and operating environment as electricity generation companies dependent upon the electricity market coordinator, CAMMESA, as their counterparty. MSU Energy's rated Argentine utility peers are AES Argentina Generacion S.A. (CCC-), Generacion Mediterranea S.A. (GEMSA; CCC-), Capex S.A. (CCC+), Pampa Energia S.A. (B-/Stable) and Genneia S.A. (CCC-). The ratings also reflect the Argentina electricity sector's increased reliance on government subsidies primarily due to Argentine peso depreciation, which increases counterparty risk for the country's generation companies. MSU Energy's successful completion of its three combined-cycle expansions in 2020 under Resolution 287 provide a significant boost to the company's cash flow generation. Fitch estimates MSU Energy's 2022 leverage, measured as gross debt/EBITDA, will be 4.8x, which is weaker than peers such as Capex at 2.3x, AES Argentina at 3.7x, Pampa Energia at 2.4x, Genneia at 3.4x and lower than GEMSA's dollar-based leverage of 4.8x. Fitch expects MSU Energy to deleverage to 4.0x and 3.6x in 2023 and 2024, respectively, as increased cash flow from the expansions is used to pay down amortizing debt. Similar to MSU Energy, GEMSA has begun the first of its two combined-cycle expansions awarded under Resolution 287 and recently incurred additional debt of USD130 million to fund the project. KEY ASSUMPTIONS - 750MW of total installed capacity with 250MW each at the General Rojo, Barker and Villa Maria plants; - Simple cycle PPAs granted under SEE 21/2016 with a fixed payment rate (USD/MW-month) of USD20,233 and variable payment rate (USD/MWh) of USD8.50 for natural gas and USD7.70 for fuel oil; - Combined cycle PPAs granted under Resolution 287/2017 with a fixed payment rate (USD/MW-month) of USD19,561 and variable payment rate (USD/MWh) of USD10.60 for natural gas and USD7.70 for fuel oil; - Capacity payments will be received from CAMMESA within 66 days of invoice; - Maintenance capex of USD5 million per year; 25k overhaul on eight turbines (USD25 million) in 2023 and on four turbines (USD15 million) in 2024. - Recovery Rating Assumptions: In the event of a default by the issuer, Fitch assumes a -30% EBITDA change, a 5.0x going concern enterprise value multiple and 10% administrative claims. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade of the Argentine sovereign rating; - Given the issuer's high dependence on CAMMESA subsidies from the national treasury, any further regulatory developments leading to a market less reliant on support from the Argentine government or a sovereign upgrade could positively affect the company's collections/cash flow. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A substantial worsening of near-term operating performance relative to Fitch's expectations; - A significant deterioration of credit metrics and/or significant payment delays from CAMMESA; - Sustained leverage above 4.2x over the rated horizon. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Fitch believes MSU Energy's increased cash flow and small working capital loans will allow it to pay the remaining USD25 million amortization due in 2022 on its 2024 private notes. The payment schedule for the notes is well-timed to coincide with the increased cash flow the company began receiving in 2H20. As of September 2022, MSU Energy had cash and equivalents of approximately USD49 million and available credit lines of USD45 million with local and regional banks. Despite its improving liquidity, MSU remains vulnerable to significant payment delays from its main offtaker, CAMMESA, which is currently settling invoices within 66 days, above the contractually agreed upon 42 days. ISSUER PROFILE MSU Energy is an Argentine electric power company that currently has 750 megawatts (MW) of electric generating capacity, evenly distributed among its three power plants: General Rojo, Barker and Villa Maria. The 10-year PPAs for the simple cycle were granted in 2016 under the regulation SEE RES 21/2016 by the group MSU Energy. In 2017 Rojo, Barker and Villa Maria were awarded with an additional 15-year PPA to close the cycle. This additional PPA expanded the nominal capacity of each plant to 250MW from 150MW. All three combined cycle conversions were completed in 2020. 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 ----------- ------ -------- ----- MSU Energy S.A. LT IDR CCC- Affirmed CCC- LC LT IDR CCC- Affirmed CCC- senior secured LT CCC Affirmed RR3 CCC ============= B O L I V I A ============= BANCO MERCANTIL SANTA CRUZ: S&P Cuts LT ICR to 'B', Outlook Stable ------------------------------------------------------------------ S&P Global Ratings lowered its long-term issuer credit rating on domestic lender Banco Mercantil Santa Cruz (BMSC) to 'B' from 'B+' after a similar action on Bolivia. In addition, S&P affirmed the 'B' short-term issuer credit rating on the bank. The outlook on the long-term rating is now stable. On Dec. 6, 2022, S&P Global Ratings lowered the long-term foreign and local currency sovereign credit ratings on Bolivia to 'B' from 'B+' because the country's once large fiscal and external buffers have steadily deteriorated. The deepening political impasse increases uncertainty about the capacity to implement timely and forceful corrective policies to reduce economic vulnerabilities. S&P's ratings on Bolivia limit those on domestic banks because it doesn't consider that they could withstand a sovereign default scenario, given their large exposure to the country in the form of loans and securities. Therefore, the downgrade of Bolivia resulted in the same action on BMSC. The downgrade of Bolivia reflects increasing vulnerabilities from persistent and sizable fiscal deficits that have pushed net government debt above 60% of GDP and worsened the country's external profile. International reserves have fallen consistently in the last two years, despite record export values amid the recent commodity boom. Bolivia's external financing needs are set to continue increasing amid less supportive commodity prices, reduced export capacity of the gas sector, and exchange rate rigidity. Moreover, political challenges have worsened with increasing regional tensions and divisions within the ruling coalition. The political impasse raises risk of further erosion of external liquidity amid tight external market conditions. S&P said, "BMSC's individual credit fundamentals remain unchanged in our view, and its SACP--excluding the influence of the sovereign--is still 'bb-', above the rating on Bolivia. We expect the bank to maintain a solid business position in the Bolivian financial system and diversified revenue, which results in stable income generation. However, government-directed lending continues to pressure the bank and the industry's earnings. We expect BMSC's capitalization to remain limited in 2022-2024 with a risk-adjusted capital (RAC) ratio slightly above 3%. Our RAC ratios on Bolivia-based banks are influenced by high risk charges due to substantial sovereign risks. Although the bank's asset quality is worsening this year after loan moratoriums were lifted, they remain manageable thanks to conservative provisioning policy and well-collateralized loan portfolio. In addition, we believe BMSC's stable deposit base and liquidity would enable it to withstand stressed scenarios better than smaller and less liquid financial institutions. "S&P Global Ratings revised its BICRA industry risk trend on Bolivia to negative from stable. Our revision doesn't result in a weaker industry risk assessment, change in Bolivia's BICRA group, or of its current 'b+' anchor. The trend revision also doesn't immediately affect our ratings on BMSC. In addition, if the negative trend were to materialize, prompting the downward revision of our industry risk score, it wouldn't impact the rating on the bank. "The revision of our BICRA industry risk trend to negative reflects the challenges to the banking industry amid higher sovereign risks. In particular, we believe lower economic growth and rising fiscal imbalances could depress the industry's performance, further pressuring the already narrow profits due to directed lending and loan moratorium laws. In addition, we believe there could be some deposit instability in 2023-2024, given the potential uncertainties among depositors amid a weakening fixed-exchange rate regime. However, we highlight that authorities have made considerable progress in reducing the share of dollar-denominated liabilities, which help mitigate deposit volatility. In addition, banks keep adequate liquidity on their balance sheets and the central bank continue to act as the lender of last resort." ESG credit indicators: E-2, S-2, G-3 S&P said, "Governance factors are a moderately negative consideration in our credit rating analysis of BMSC. The Financial Law enacted in 2013 gives the Bolivian government the power to set interest rates and to direct lending to specific sectors (60% of banks' credit portfolios are directed to productive sectors and to low-income housing). Such interference in banks' business strategy is leading to market distortions and pressuring earnings in the banking system, which we capture in our BICRA on the country." =========== B R A Z I L =========== BRAZIL: Posts Positive Balance of US$6.7BB in Trade in November --------------------------------------------------------------- Richard Mann at Rio Times Online reports that the Foreign Trade Secretariat of the Ministry of Economy announced that Brazil's trade balance registered a surplus of US$6.67 billion in November this year. The report notes that according to the federal government, in November: -- Exports totaled US$28.16 billion; and -- Imports, US$21.49 billion. The report relays that the balance disclosed by the Ministry of Economy represents a high of 709.1% in nominal compared with the same month in 2021, when the balance had a deficit of US$1.1 b 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). PETROBRAS SA: Will Invest US$78 Billion in the Next 5 Years ----------------------------------------------------------- Richard Mann at Rio Times Online reports that Petrobras intends to invest US$78 billion in the next five years, according to the state-owned company's strategic plan for the 2023 to 2027 period, released on Nov. 30. The amount is 15% above the average of previous plans, according to Rio Times Online. In addition to the US$78 billion, another US$20 billion will be spent on contracting platform ships for oil and natural gas production, the report notes. According to Petrobras, this represents a resumption of the pre-covid level of investments, the report relays. Petrobras' strategic plan focuses on the oil and natural gas exploration and production sector, the report adds. Headquartered in Rio de Janeiro, Brazil, Petroleo Brasileiro S.A. Petrobras explores for and produces oil and natural gas. As reported in the Troubled Company Reporter-Latin America on July 22, 2022, Fitch Ratings has affirmed Petrobras' BB- Long-Term Issuer Default Rating. In addition, Fitch has revised the Rating Outlook to Stable from Negative following a similar revision to Brazil's Sovereign Rating Outlook. Egan-Jones Ratings Company on July 8, 2022, upgraded the foreign currency and local currency senior unsecured ratings on debt issued by Petrobras to BB+ from BB. =============== H O N D U R A S =============== HONDURAS: IDB OKs $75M Loan to Strengthen Social Protection System ------------------------------------------------------------------ The Inter-American Development Bank (IDB) approved a $75.9 million loan to improve living conditions in households in the areas of Honduras with the highest rates of extreme poverty, and to cultivate human capital and self-management capacity in those households. The project plans to use conditional cash transfers to boost the minimum income of participating households and protect that income against external climate, economic, and health shocks. The initiative will also strengthen the Social Protection System and services for improving the long-term conditions and capacities of the poorest households, prioritizing the geographical areas targeted by the Solidarity Network Program. This operation is designed to benefit 50,000 households in extreme poverty through conditional cash transfers, as well as 165,000 children through nutrition and early child development programs. It also aims to benefit 6000 school-aged children through the stay-in-school program and 1,000 youth who will receive comprehensive support. The operation will indirectly benefit 350,000 households in extreme poverty by strengthening the Social Protection System's service model. In the area of health, the loan aims to improve the use and range of health and nutrition services for women (especially young pregnant women) and for children ages 0 to 6. In terms of education, the goal of the operation is to strengthen elementary educational services by working to keep children in school until at least seventh grade. It also aims to bolster comprehensive support services for young people (ages 14 to 19). In addition to the COVID-19 pandemic, Honduras was also recently hit by two category 4 hurricanes (Eda and Iota), which significantly dampened its economic activity. The $75.9 million IDB loan will be disbursed over the course of four years. =========== M E X I C O =========== CREDITO REAL: Said to be in Talks With Bondholders -------------------------------------------------- Reuters reported that troubled Mexican non-bank lender Credito Real (CREAL.MX) is in negotiations with foreign bondholders, prompting creditors to delay their request for an involuntary U.S. bankruptcy hearing, according to two sources close to the matter. Credito Real collapsed after defaulting a 170 million Swiss franc ($176 million) bond in February 2022, prompting bonds to shed 99% of their value. The negotiations centered on the establishment of assets the company still had left and are viable for recovery, giving a rare chance for transparency, one source directly involved told Reuters. The person added that while the talks did not constitute negotiations yet, there was chance they could develop into them. "It's a first step (to a deal)," the person said, noting that the bankruptcy proceedings in a Delaware court -- originally scheduled for early October -- would depend on the outcome of the talks. Credito Real said it opposes entering Chapter 11 proceedings, which would force the company out of the Mexican jurisdiction where its liquidation has been centered so far. That process has seen the company settle its debts with local banks first. Foreign bond holders have appealed and are weighing further legal action in Mexico to recoup losses. Large groups like British asset manager Abrdn and Los Angeles-based DoubleLine Capital are among those who hold bonds in the company, according to Refinitiv data. Bondholders face an uphill struggle as the most exposed unsecured creditor group. The default by Credito Real, along with AlphaCredit and Unifin (UNIFINA.MX), have made banks less willing to finance non-bank lenders, analysts say, prompting fears about the non-bank sector in Mexico. About Credito Real SAB Credito Real SAB de CV SOFOM ENR is a Mexico-based company that provides consumer financing. Credito is Mexico's biggest payroll lender and second largest non-bank lender after Real Unifin. Credito Real provides loans, either by providing direct financing to consumers or by establishing financing programs with consumer financing dealers that sell to Credito Real the collection rights from consumer financing products. It also provides financing directly to individuals that are employed by corporations with payroll deduction agreements with consumer financing dealers authorized by Credito Real. Credito Real operates through a number of subsidiaries, including AFS Acceptance LLC. Three alleged creditors signed a petition to send Credito Real to Chapter 11 bankruptcy on June 22, 2022 (Bankr. S.D.N.Y. Case No. 22-10842). Institutional Multiple Investment Fund LLC, of Boston, Massachusetts; Banco Monex, S.A., of Mexico, and Solitaire Fund, of Liechtenstein, who claim to own an aggregate $8 million of unsecured bond debt, signed the involuntary Chapter 11 petition. David H. Botter, Esq., at Akin Gump Strauss Hauer & Feld LLP is advising the three bondholders. Despite efforts by bondholders to force the company to pursue a Chapter 11 restructuring in the U.S., the Debtor opted to pursue proceedings in Mexico instead. On June 28, 2022, Angel Francisco Romanos Berrondo, one of the Debtor's shareholders and the former CEO of Credito Real, filed a petition, in his capacity as a shareholder, with the Mexican Court seeking to commence the Mexican Liquidation Proceeding. On June 30, 2022, the Mexican Court entered an order commencing the dissolution and liquidation proceedings for the Company and appointing Mr. Fernando Alonso-de-Florida Rivero as the Mexican Liquidator. The liquidator for Credito Real filed a Chapter 15 bankruptcy petition (Bankr. D. Del. Case No. 22-10630) on July 14, 2022, to seek U.S. recognition of the Mexican proceedings. The petition was signed by Robert Wagstaff, the foreign representative of the liquidator. Richards, Layton & Finger, P.A., led by John Henry Knight, is counsel in the U.S. case. ===================== P U E R T O R I C O ===================== PUERTO RICO: Judge Rejects Stay of HTA Plan of Adjustment --------------------------------------------------------- Robert Slavin of The Bond Buyer reports that U.S. District Court for the Southern District of New York Judge Laura Taylor Swain declined a request for a stay on the implementation of HTA's plan of adjustment. According to John Mudd, the attorney who represented the group, the present and ex-HTA employees that sought the stay, will turn to the U.S. Court of Appeals for the First District to appeal the ruling. Mudd and the group, called the Vazquez Velazquez Group, appealed the plan of adjustment's treatment of its members in late October 2022. Judge Swain approved the plan of adjustment on Oct. 12, but it has not yet been implemented. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States that's facing a massive bond debt of $70 billion, a 68% debt-to-GDP ratio and negative economic growth in nine of the last 10 years. The Commonwealth of Puerto Rico has sought bankruptcy protection, aiming to restructure its massive $74 billion debt load and $49 billion in pension obligations. The debt restructuring petition was filed by Puerto Rico's financial oversight board in U.S. District Court in Puerto Rico (Case No. 17-01578) on May 3, 2017, and was made under Title III of 2016's U.S. Congressional rescue law known as the Puerto Rico Oversight, Management, and Economic Stability Act ('PROMESA'). The Financial Oversight and Management Board later commenced Title III cases for the Puerto Rico Sales Tax Financing Corporation (COFINA) on May 5, 2017, and the Employees Retirement System (ERS) and the Puerto Rico Highways and Transportation Authority (HTA) on May 21, 2017. On July 2, 2017, a Title III case was commenced for the Puerto Rico Electric Power Authority ("PREPA"). U.S. Chief Justice John Roberts has appointed U.S. District Judge Laura Taylor Swain to oversee the Title III cases. The Honorable Judith Dein, a United States Magistrate Judge for the District of Massachusetts, has been designated to preside over matters that may be referred to her by Judge Swain, including discovery disputes, and management of other pretrial proceedings. Joint administration of the Title III cases, under Lead Case No. 17-3283, was granted on June 29, 2017. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets, as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose; and Hermann D. Bauer, Esq., at O'Neill & Borges are on-board as attorneys. McKinsey & Co. is the Board's strategic consultant, Ernst & Young is the Board's financial advisor, and Citigroup Global Markets Inc. is the Board's municipal investment banker. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains a case web site at https://cases.primeclerk.com/puertorico Epiq Bankruptcy Solutions LLC is the service agent for ERS, HTA, and PREPA. O'Melveny & Myers LLP is counsel to the Commonwealth's Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF), the agency responsible for negotiations with bondholders. The Oversight Board named Professor Nancy B. Rapoport as fee examiner and to chair a committee to review professionals' fees. * * * Title III plans of adjustment have been confirmed for the Commonwealth, COFINA, and HTA. On Jan. 18, 2022, the Title III Court entered its findings of fact and conclusions of law confirming the Commonwealth's Eighth Amended Plan. On March 15, 2022, the Plan became effective. As of the Effective Date, the Commonwealth's Plan reduced total funded debt obligations from $34.3 billion of prepetition debt to only $7.4 billion, representing a total debt reduction of 78%. This debt reduction will also reduce the Commonwealth's maximum annual debt service (inclusive of COFINA debt service) from $4.2 billion to $1.15 billion, representing a total debt service reduction of 73%. ===================================== T R I N I D A D A N D T O B A G O ===================================== TOBAGO HOUSE: Moody's Withdraws 'Ba2' Issuer Rating --------------------------------------------------- Moody's Investors Service has withdrawn Tobago House of Assembly's (THA) Ba2 issuer rating and ba3 Baseline Credit Assessment (BCA). Prior to the withdrawal, the rating outlook on THA was stable. Withdrawals: Issuer: Tobago House of Assembly Issuer Rating, Withdrawn, previously rated Ba2 Baseline Credit Assessment, Withdrawn, previously rated ba3 Outlook Actions: Issuer: Tobago House of Assembly Outlook, Changed To Rating Withdrawn From Stable RATINGS RATIONALE Moody's has decided to withdraw the rating for its own business reasons. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2022. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *