/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/221212.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Monday, December 12, 2022, Vol. 23, No. 241 Headlines A R G E N T I N A ARGENTINA: IMF Clears Way for Latest US$6B Disbursement B E R M U D A FLY LEASING: Moody's Lowers CFR to Caa1 & Alters Outlook to Stable B R A Z I L BRAZIL: IDB OKs $128M-Loan to Improve Sanitation in Joinville VALE SA: Plans to Increase Iron Production to 320M Tons in 2023 C O L O M B I A OLEODUCTO CENTRAL: Fitch Affirms BB+ LongTerm IDRs, Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: ABA's Inflation Target a Pillar of Stability DOMINICAN REPUBLIC: Fitch Affirms Foreign Currency IDR at 'BB-' J A M A I C A JAMAICA: Local Insurance Rates Deemed Too Low for Profitability M E X I C O CEMEX SAB: S&P Ups ICR to 'BB+' on Lower Leverage, Outlook Stable T R I N I D A D A N D T O B A G O CL FIN'L: CLICO to Resume Insurance Sales X X X X X X X X [*] BOND PRICING: For the Week Dec. 5 to Dec. 9, 2022 - - - - - ================= A R G E N T I N A ================= ARGENTINA: IMF Clears Way for Latest US$6B Disbursement ------------------------------------------------------- Buenos Aires Times reports that the International Monetary Fund (IMF) has paved the way for the disbursement of US$6 billion in fresh funds for Argentina after confirming that staff have reached an agreement with President Alberto Fernandez's government on the third review of its multi-billion-dollar aid package. Last March, the multilateral lender approved a new debt assistance program for Argentina's troubled economy totaling just US$44 billion and spanning 30 months, according to Buenos Aires Times. "Prudent macroeconomic management and efforts to mobilize external financing are supporting stability," the IMF said in a statement confirming that Argentina had cleared the latest review, the report notes. The agreement between the staff and the Argentine authorities "is subject to approval by the IMF's executive board" at a meeting later this month and "once the review is completed, Argentina will have access to about US$6 billion," said the Fund, the report relays. The IMF praised Argentina, saying that the government "is restoring fiscal order, moderating inflation, improving the trade balance, and strengthening reserve coverage," the report relays. But the lender warned that while progress has been made "macroeconomic conditions are still fragile and strong program implementation is essential going forward," according to the statement signed by Luis Cubeddu, deputy director of the IMF's Western Hemisphere department, and Ashvin Ahuja, mission chief for Argentina, the report notes. The country is struggling with runaway inflation, which has totaled 76.6 percent since Jantuary. Price hikes are "Argentina's main drama," Economy Minister Sergio Massa said recently, the report discloses. The IMF said it is committed to maintaining measures "to support a gradual reduction in annual inflation from around 95 percent by end-2022 to 60 percent by end-2023," the report says. Both parties agreed that key program targets, particularly those related to the fiscal deficit and net international reserves, would remain unchanged for the remainder of 2022 and 2023 to anchor "credibility," the report discloses. President Fernandez's government has made commitments to the multilateral lender, promising to increase the Central Bank's international reserves and reduce Argentina's fiscal deficit from three percent of gross domestic product in 2021 to 2.5 percent this year, followed by 1.9 percent in 2023 and 0.9 percent in 2024, the report notes. Cubeddu and Ahuja said that "despite challenges, including the war in Ukraine, all quantitative performance targets were met by the end of September," pointing to controls on expenditure and steps taken to improve the targeting of subsidies via segmentation schemes. IMF technicians highlighted that "net international reserves are set to increase by US$9.8 billion by the end of 2023," yet repeated its concerns that temporary exchange rate measures "should be minimized in the future as they are not substitutes for prudent macroeconomic policies," the report discloses. Argentina's recent debt restructuring agreement with the Paris Club group of wealthy creditors to reschedule a US$2-billion repayment and efforts to mobilize official external financing routes were among the other actions praised by the Fund's staff, the report says. Finally, the IMF called on Argentina to continue its efforts to strengthen financial management, improve the peso-denominated public debt market, and take advantage of the export potential of strategic sectors, such as energy, the report notes. Negotiations with the Argentine officials took place in an "open and constructive" atmosphere, both face-to-face and virtually, said Cubeddu and Ahuja, who said they were grateful for the government's commitment "to strengthen stability and promote inclusive and sustainable growth," 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. ============= B E R M U D A ============= FLY LEASING: Moody's Lowers CFR to Caa1 & Alters Outlook to Stable ------------------------------------------------------------------ Moody's Investors Service has downgraded Fly Leasing Limited's (FLY) corporate family rating to Caa1 from B3 and its senior unsecured rating to Caa3 from Caa2. Moody's also downgraded the backed term loan ratings of Fly Funding II S.a.r.l. to B3 from B2. Moody's changed the outlooks for both entities to stable from negative. Additionally, FLY recently repurchased approximately $100 million of unsecured bonds at a substantial discount in the secondary market. Moody's views a meaningful amount of debt repurchased at a substantial discount to be a distressed exchange and a limited default. After the repurchase, the amount of remaining bonds outstanding is $299 million, maturing in October 2024. Downgrades: Issuer: Fly Leasing Limited Corporate Family Rating, Downgraded to Caa1 from B3 Senior Unsecured Regular Bond/Debenture, Downgraded to Caa3 from Caa2 Issuer: Fly Funding II S.a.r.l. Gtd Senior Secured 1st Lien Term Loan, Downgraded to B3 from B2 Outlook Actions: Issuer: Fly Leasing Limited Outlook, Changed To Stable From Negative Issuer: Fly Funding II S.a.r.l. Outlook, Changed To Stable From Negative RATINGS RATIONALE Moody's downgrade of FLY's ratings was driven by the company's diminished prospects for servicing its debt with cash flows from its existing fleet, and a greater reliance on the value of its aircraft to meet its financial obligations over time. As of September 30, 2022, FLY had approximately $35 million of unrestricted cash on hand (subsequent to the third quarter results, the sponsor contributed $90 million of capital, approximately $40 million of which was used to repurchase a portion of unsecured bonds) and Moody's expects it to be challenged to generate positive free cash flow in the next 12 months given the company's substantial term loan amortization payment requirements that come due over this period. The company's financial flexibility is further limited by its high reliance on secured funding, leaving very little in the form of unencumbered assets, and its lack of a committed revolving credit facility. While Moody's believes that there is residual value from the assets securing FLY's existing financing arrangements to support the recovery of the remaining senior unsecured obligations in the event of default, certain secured borrowings maturing subsequent to the senior unsecured bonds may create a timing issue for the senior unsecured bondholders to achieve the expected recovery. Of note, the Fly Funding II S.a.r.l. term loan and Magellan Acquisition Limited facility mature in August and December of 2025, respectively, while the remaining senior unsecured bonds outstanding mature in October 2024. Additionally, the recently executed AASET 2021-1 asset-backed securitization transaction has an expected final payment date of October 16, 2028 and a final maturity date of November 16, 2041. FLY recently repurchased approximately $100 million in senior unsecured bonds. After the repurchase, the company has $299 million of bonds outstanding due October 15, 2024. The company has limited cash ($34.8 million as of September 30, 2022), but the sponsor, Carlyle Aviation, has been using capital from its SASOF International Master V Fund L.P. to provide additional liquidity to the company and to repurchase a portion of the outstanding bonds. FLY has a $93 million term loan (FLY Alladin Acquisition facility) maturing on June 15, 2023, which it must address in the next six months. And while FLY has substantially reduced the balance of the term loan from $206.3 million in the last nine months, primarily from the proceeds of a recent securitization, the prospects of refinancing the remaining balance are uncertain given the state of debt capital markets and the nature of the collateral securing this term loan, which is currently leased to one customer. Moody's also anticipates that FLY's Moody's-adjusted debt-to-EBITDA leverage (8.2x for the last 12 months through September 2022) will remain elevated but will moderately improve due to debt repayment through required amortization. In the third quarter, FLY utilized the proceeds from its securitization program to reduce the term loans' balance. FLY's stable outlook reflects Moody's expectation that, despite the company's challenging operating performance, the value of the aircraft, given expectations of sustained air travel demand over time, will provide repayment capacity for its existing creditors. The B3 rating for the secured term loan obligation is one notch above FLY's Caa1 CFR, reflecting the loans' security interest in aircraft as well as the loss-absorbing benefit that accrues to the loans from FLY's senior unsecured notes. FLY's senior unsecured notes' Caa3 rating is two notches below FLY's CFR, reflecting the notes' structural subordination in the group's capital structure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS The ratings could be upgraded if FLY's liquidity position improves from the cash flows of the remaining fleet and sustained air travel demand results in significantly better aircraft values, resulting in better-than-expected recovery prospects. The ratings could be downgraded if Moody's expectations surrounding the likelihood of default and recovery weaken further, including through a pre-emptive restructuring of debt obligations. This could be precipitated by further deterioration in liquidity or the inability to sell aircraft on favorable terms. Incorporated in Bermuda, FLY is a lessor of commercial aircraft and engines owned by an affiliate of Carlyle Aviation since August 2021. As of September 30, 2022, the company had 67 aircraft and seven engines on lease and one aircraft off-lease and had managed assets of $1.8 billion. Carlyle Aviation is a multi-strategy aviation investment manager with assets under management of $10.2 billion, which owns and manages a fleet of 308 aircraft. The principal methodology used in these ratings was Finance Companies Methodology published in November 2019. =========== B R A Z I L =========== BRAZIL: IDB OKs $128M-Loan to Improve Sanitation in Joinville ------------------------------------------------------------- The Inter-American Development Bank (IDB) has approved a $128 million loan to improve environmental and public health conditions for residents of the Brazilian municipality of Joinville by increasing their access to sustainable water and sanitation services. These enhanced water supply services will directly benefit approximately 605,000 people who are already connected to the system, plus an additional 80,000 new users. The program will build new reservoirs, stations, and drinking water treatment plants and expand existing wastewater collection and treatment systems in the municipality. The investment strategy also aims to strengthen the business approach of the implementing agency, Companhia Aguas de Joinville, helping it achieve its goals of sustainably providing universal access to water and sanitation services. To ensure that changes are long-lasting, the program will help the company modernize and streamline operations, which will create more resilient systems, boost service quality and efficiency, and lead to greater financial benefits. It will also take specific steps to minimize water loss and optimize energy consumption. Additionally, the company will receive support to accelerate its digital transformation, scale up innovative technological solutions, and better manage water resources through payments for environmental services. Finally, the program will include gender inclusion actions to improve the circumstances of women and families who use the company's services. The operation is aligned with the IDB Group's country strategy for Brazil for 2019–2022, specifically the priority areas of improving the business climate and narrowing gaps in sustainable infrastructure to enhance competitiveness. The program will cost a total $136 million, of which $128 million will be funded by the IDB and $8 million by local partners. The loan will be disbursed over the course of five years, with a 25-year repayment term, a 5.5-year grace period, and a SOFR-based interest rate. 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). VALE SA: Plans to Increase Iron Production to 320M Tons in 2023 --------------------------------------------------------------- Richard Mann at Rio Times Online reports that Brazilian miner Vale, the world's largest iron ore producer, and exporter, plans to manufacture between 310 and 320 million tons of iron ore in 2023, surpassing the 310 million tons forecast for this year, the company disclosed. In an online event with investors, Vale announced a forecast to produce between 340 and 360 million tons of iron in 2026 and exceed 360 million tons in 2030, according to Rio Times Online. For its part, the production of iron balls in 2023 was estimated to be between 36 and 40 million tons, higher than the 33 million expected for this year, the report relays. About Vale SA Vale S.A. is a Brazilian multinational corporation engaged in metals and mining and one of the largest logistics operators in Brazil. As reported in the Troubled Company Reporter-Latin America in September 2019, Moody's Investors Service affirmed Vale S.A.'s Ba1 senior unsecured ratings and the ratings on the debt issues of Vale Overseas Limited, fully and unconditionally guaranteed by Vale S.A. Moody's also affirmed the Ba2 senior unsecured ratings of Vale Canada Ltd. The outlook changed to stable from negative. At the same time, Moody's America Latina Ltda. affirmed Vale's Ba1/Aaa.br corporate family rating and the Ba1/Aaa.br ratings on its senior unsecured notes. The outlook changed to stable from negative. =============== C O L O M B I A =============== OLEODUCTO CENTRAL: Fitch Affirms BB+ LongTerm IDRs, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Oleoducto Central S.A. (OCENSA) at 'BB+'. The Rating Outlook is Stable. OCENSA's ratings reflect the linkage with the credit profile of Ecopetrol S.A. (BB+/Stable), which indirectly owns 72.648% of OCENSA. Fitch believes operational synergies and strategic ties between both entities to be important enough to create economic incentives for Ecopetrol to effectively support OCENSA if needed. The ratings incorporate the company's strong competitive position as the largest and most reliable crude oil transportation company in Colombia, which gives it cost advantages over its main competitors. OCENSA's moderate exposure to volume risk and the regulated nature of the business provide stability to its cash flow generation metrics and minimize margin volatility. KEY RATING DRIVERS Linkage to Ecopetrol: OCENSA's ratings reflect its linkage to the credit profile of Ecopetrol, the largest crude oil producer in Colombia. In terms of operational synergies, OCENSA's operations are an integral part of Ecopetrol's core business, which represents OCENSA's main off-taker. Ecopetrol heavily relies on OCENSA's infrastructure to transport crude oil from production fields to its refineries and export terminal. Fitch considers OCENSA strategically important for Ecopetrol, transporting 86% of its crude oil production during 1H2022. Strong Competitive Position: OCENSA is the largest crude oil transportation company in Colombia, connecting the most important oil basins with the country's main crude oil export terminal, also acting as a gateway to the country's largest refineries. The company represents the most important and reliable crude oil transportation system for Ecopetrol and Colombia, transporting 73% of the country's oil production and 62% of oil exports during 1H2022. The geographic location of the assets makes it less vulnerable to attacks and increases the reliability of the system. High utilization rates give OCENSA cost advantages over its main competitors and positively affects the stability of cash flow. Conservative Capital Structure: Fitch forecasts OCENSA's leverage will remain below 0.5x and does not anticipate pressures on its credit metrics. The company's demonstrated ability to generate strong and consistent operating cash flow allows it to fund capex without resorting to significant use of debt. Fitch expects the company's cash flow from operations (CFO) will be strong enough to fund capex requirements and meet dividend payments without pressuring its capital structure. OCENSA's financial debt was mainly concentrated in its USD500 million seven-year senior unsecured notes due 2027 as of Sept. 30, 2022. Consistent and Predictable CFO: The company's revenue profile provides stability to cash flow measures and helps minimize profit margin volatility. CFO benefits from the regulated nature of the crude oil transportation tariffs in Colombia, which is fixed in U.S. dollars, adjusted by inflation and reviewed every four years. Most of OCENSA's revenues are tied to fee-based and fixed-price arrangements through ship-and-pay contracts with no direct exposure to commodity prices. Roughly 25% of the company's revenues comes from ship-or-pay contracts linked to additional capacity of 135 thousand barrels per day (kbpd). CFO is also positively affected by the exposure of OCENSA to Ecopetrol, which makes up more than 80% of the company's total revenues. Manageable Volume Risk: OCENSA is exposed to volume risk, but Fitch believes this risk is manageable, based on the demonstrated resilience to different oil price cycles. The low availability of alternative transportation systems and the non-programmed interruptions of Cano Limon-Covenas pipeline system (CLC) has historically favored OCENSA's volumes. Transported volumes increased to 541 kbpd during 1H2022 from 513 kbpd during 1H2021 as crude oil production recovered to 748 kbpd from 730 kbpd during the same periods. Approximately 150,000 barrels in total corresponded to reversals from CLC pipeline during 2H2022. DERIVATION SUMMARY OCENSA's ratings compare well relative to tolling-based natural gas peers in the region, such as Transportadora de Gas Internacional S.A. ESP (TGI; BBB/Stable) and Transportadora de gas del Peru, S.A. (TGP; BBB+/Negative) due to stable and predictable cash flow generation. OCENSA has a stronger financial profile, with leverage of 0.5x in the rating horizon, which offsets higher exposure to volume risk, given its greater reliance on take-and-pay contracts relative to peers. Fitch considers TGI and TGP to have lower business risk resulting from a solid long-term contractual structure and low or no exposure to commodity prices or volume risk. OCENSA's ratings remain three notches below TGP and two notches below TGI, even though TGP and TGI have less conservative capital structures. TGP has a stronger business profile with revenue derived from long-term ship-or-pay contracts with an average remaining life of around 12 years. TGI's average contract length is four years, which reduces revenue visibility compared with TGP. TGI is rated in line with its parent, Grupo Energia Bogota S.A. E.S.P. (GEB; BBB/Stable), and maintains a strong linkage to GEB. OCENSA's ratings reflect strong operational and strategic ties to Ecopetrol. Therefore, Fitch considers unlikely that both companies will have different credit profiles. KEY ASSUMPTIONS - Volumes for ship-and-pay contracts grows 1% in 2022 and 1.5% from 2023. - Volumes for ship-and-pay contracts according to negotiated terms with off-takers. - Current tariffs remain valid through 2023. - Capex intensity equivalent to 4% of revenue. - Dividend pay-outs of 100%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade of Ecopetrol's credit ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downgrade of Ecopetrol's credit ratings. - A weakening of the company's linkage with Ecopetrol and material deterioration of OCENSA's capital structure. LIQUIDITY AND DEBT STRUCTURE Liquidity Not a Concern: The company's strong liquidity position is supported by cash on hand, strong internal cash flow generation and favorable debt maturities. As of June 30, 2022, OCENSA had COP386 billion of cash on hand, COP3.0 trillion of CFO and no short-term maturities. Fitch expects CFO to average COP3 trillion through the medium term, although a significant proportion of this cash flow will likely be up streamed to shareholders through dividend distributions. Fitch expects OCENSA to generate neutral to positive FCF in the short to medium term, given the absence of sizable capex. ISSUER PROFILE OCENSA is Colombia's largest crude oil transportation company, with pipelines covering 836 km underground and 12 km underwater. It connects Colombia's most prolific oil basins and main crude oil export terminal and is a gateway to the country's largest refineries. PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS OCENSA's ratings are linked to the credit profile of Ecopetrol. 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 ----------- ------ ----- Oleoducto Central S.A. (OCENSA) LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: ABA's Inflation Target a Pillar of Stability ---------------------------------------------------------------- Dominican Today reports that the Association of Multiple Banks of the Dominican Republic (ABA) emphasized the importance of the Central Bank of the Dominican Republic's (BCRD) inflation targeting scheme in generating certainty in economic and financial agents and price stability for the sake of a business climate conducive to domestic and foreign investment. The ABA emphasized the importance of assuming the commitment to maintain inflation in the target range of 4%, beginning in 2012, except when inflationary pressures have a high imported component, as in the case of the post-covid situation and geopolitical conflicts that have generated supply and demand shocks, according to Dominican Today. In a press release, he stated that "the commitment and efforts to achieve the inflation target have been the compass of monetary policy, guiding the Dominican economy towards levels of sustained growth and peaks in the region over the last decade," the report notes. He also stated that economic growth is necessary to meet the social requirements and well-being of the population, and that stability in the country is required for this, the report relays. Similarly, the union stated that this monetary policy has ensured the promotion of both domestic and foreign investment, the report discloses. "Economic stability is one of the primary inputs that investors consider when developing business plans, along with clear market rules, private security, legal security, and social stability," according to the ABA, the report says. He recalled that, according to recent Central Bank data, average inflation fell from 13.0 to 3.5% over the last decade, providing certainty for establishing new businesses and expanding existing ones, the report says. The entity that brings together the country's multiple banks recognized the importance of maintaining the country's efforts to meet the Dominican Republic's inflation target, thus contributing to the generation of jobs and wealth among the population, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'.The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative.S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said.A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. DOMINICAN REPUBLIC: Fitch Affirms Foreign Currency IDR at 'BB-' --------------------------------------------------------------- Fitch Ratings has affirmed Dominican Republic's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Rating Outlook. KEY RATING DRIVERS Stable Outlook: Dominican Republic's ratings are supported by a track record of robust economic growth, a diversified export structure, high per-capita GDP and social indicators, and governance scores that compare favorably to peers' after sustained improvement in the past decade. They are constrained by fiscal weaknesses including a high interest burden and subsidization of a loss-making electricity sector, improved but still relatively narrow external liquidity buffers, lingering weaknesses in the macroeconomic policy framework, and heavy sovereign reliance on external bond market financing that could pose a vulnerability amid tighter global conditions. Resilient Activity: Fitch projects real GDP will grow 4.8% in 2022, above the 'BB' median of 4.2%, reflecting a strong carryover effect from 2021 and intra-year momentum that has moderated but been resilient to global shocks. A booming tourism sector (arrivals have surged past their 2019 levels) has led growth this year, while domestic demand has cooled somewhat but remains supported by a strong labor market, high credit growth, and a robust investment pipeline. Fitch projects growth will decelerate to 3.7% in 2023 as a result of the global economic slowdown and the lagged effect of monetary tightening, but remain broadly resilient given favorable investment dynamics. Investment/GDP above 30% is the highest in the Latin America and Caribbean region, supporting strong medium-term growth prospects. Cooling Inflation, Strong Peso: Inflation was already high for several years going into 2022 and was lifted further by global price pressures to 9.6% yoy in April, but has since fallen to 8.2% as of October. Government subsidies to contain fuel, electricity and food prices have avoided a larger rise in inflation this year. Monetary tightening (550bps in cumulative hikes to 8.5% in the past year) has also contained price pressures primarily by helping strengthen the peso, which appreciated 8% in the year through August before gradually depreciating. Monetary tightening has yet to restrain growth in credit, which has accelerated to 19% yoy as of October. External Pressures: Fitch projects the current account deficit (CAD) to jump to 5.9% of GDP in 2022 from 2.9% in 2021, as sharply higher oil import costs and strong non-oil import demand more than offset buoyant tourism inflows, and fall gradually in 2023-2024 as oil prices moderate. Foreign-direct investment remains favorable but no longer fully funds the higher CAD, after having done so amply for most of the past decade. This has rendered external finances more reliant on capital inflows, which have been strong in 2022 (reflected in peso appreciation), though this could pose a vulnerability amid tighter global financial conditions. International reserves around USD13 billion remain above pre-pandemic levels, though they have fallen back to a somewhat low level in terms of coverage of current external payments to 3.5 months (below the BB median of 5.2), offering relatively limited room for maneuver in the context of a managed exchange-rate regime. Fiscal Deficit in Check: Fitch projects the non-financial public sector deficit will rise to 3.1% of GDP in 2022 from 2.5% in 2021, below the 'BB' median of 4.6%. Subsidies to contain fuel, electricity, and food prices have entailed a cost of around 1pp, while a growing salary bill (wages and headcount), falloff in extraordinary receipts, and resumption of central-bank recapitalization transfers have also put pressure on the deficit. These factors have mostly been offset by buoyant tax collections, however, which could reflect structural gains from improved tax administration. Fitch expects the deficit to remain stable in 2023, with some upside risk should the prospect of competitive 2024 elections entail spending pressures, though the administration has proven itself willing to adjust to keep deficits in check. Electricity Burden: The weak electricity sector remains a key fiscal vulnerability, as the government has had to plug an operational deficit among distributors that is on track to reach 1.4% of GDP, its highest level since 2014. Higher global fuel prices have lifted generation costs in the country's thermal-dependent electricity matrix, and these have not been passed through to end-users due to the authorities' decision to suspend tariff hikes envisioned in its Electricity Pact. A rising share of electricity invoiced but not collected and electricity losses (both technical and theft-related) that remain high (above 30%) are also increasing financial difficulties. On the other hand, important progress has been made in enhancing the reliability of electricity supply, improving the timeliness of payments in the sector, and cleaning up legacy debts. Sovereign External Financing Reliance: The sovereign's high external funding needs (budgeted at USD4.2 billion in 2023, including USD3.4 billion in net funding and USD0.8 billion in amortizations) and heavy reliance on Eurobond issuance pose a challenge in the context of much higher and more volatile global rates. However, a sizeable cash buffer offers flexibility to tap markets strategically, and there is scope for increased borrowing from multilaterals (which has been negligible in the past decade) to avoid risks of bond market saturation. Domestic bond issuance has continued despite further increases in already high real rates, and represents 25% of net borrowing this year. Stable Debt: Fitch projects debt/GDP will decline to 47.1% of GDP in 2022 and remain stable around 48% thereafter, below the 'BB' median of around 54%, as improvement in the primary balance and normalization in real GDP growth to its high trend pace balance higher interest rates and lower inflation. Interest/revenue is projected to fall back to its pre-pandemic level of around 19% in 2022, but this remains one of the highest levels in the 'BB' category and will rise further due to the higher costs of new borrowing and rising benchmarks on variable-rate debt (12% of the total). Fitch expects the foreign-currency share of debt to rise to 75% in 2023, well above the 'BB' median of 52%. Improved Governance: Dominican Republic's composite Worldwide Governance Indicator (WGI) rose from the 37th to 50th percentile in the decade through 2021 - one of the biggest improvements of all Fitch-rated sovereigns - reflecting progress on efforts to strengthen institutions (judicial independence, budgetary and procurement transparency, property rights) and a successful vaccination campaign. Other initiatives have proven more difficult, such as a tax reform the Abinader administration scrapped last year, and Fitch expects a portfolio of 18 structural reforms and plans to establish a fiscal rule could be hard to advance before approaching elections in 2024. ESG - Governance: Dominican Republic has ESG Relevance Scores (RS) of '5[+]' and '5', respectively, for Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the WGI have in its proprietary Sovereign Rating Model (SRM). Dominican Republic has a medium WGI ranking at the 49.9 percentile, reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity and rule of law and a fairly high degree of corruption. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - Public Finances: Deterioration of the government debt/GDP and interest/revenues ratios, for example, through the loosening of fiscal policy, lower-than-expected growth, or financial losses of the public electric utilities. - External Finances: Further deterioration of the external position that results in erosion of external liquidity buffers. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Public finances: Implementation of policy measures that strengthen fiscal flexibility, local-currency financing access, and the balance sheet of the government and/or central bank. - Macro: Entrenchment of the central bank's inflation-targeting regime resulting in greater monetary policy credibility and effectiveness. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Dominican Republic a score equivalent to a rating of 'BB' on the Long-Term Foreign-Currency (LT FC) IDR scale. Fitch's sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its Qualitative Overlay (QO), relative to SRM data and output, as follows: - Public Finances: -1 notch to reflect structural fiscal vulnerabilities stemming from a relatively low tax take, budgetary rigidity and vulnerability posed by a heavily-subsidized electricity sector, and contingent liabilities related to the large market debt and sizeable quasi-fiscal deficit of the central bank. Fitch has removed the +1 notch previously assigned to Macroeconomic Performance and Policies to offset the temporary negative effect on the SRM output of higher GDP volatility due to the pandemic shock, which remains considerable but has narrowed. This is also offset by persisting shortcomings in the policy framework including a weak central-bank balance sheet and external liquidity position that is fairly limited in the context of a managed exchange rate. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. ESG CONSIDERATIONS Dominican Republic has an ESG Relevance Score of '5[+]' for Political Stability and Rights as the WGIs have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Dominican Republic has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile. Dominican Republic has an ESG Relevance Score of '5' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as the WGIs have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Dominican Republic has a percentile rank below 50 for the respective WGIs, this has a negative impact on the credit profile. Dominican Republic has an ESG Relevance Score of '4[+]' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the WGIs is relevant to the rating and a rating driver. As Dominican Republic has a percentile rank above 50 for the respective WGI, this has a positive impact on the credit profile. Dominican Republic has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Dominican Republic, as for all sovereigns. As Dominican Republic has a fairly recent restructuring of public debt in 2005, this has a negative impact on the credit profile. Except for the matters discussed above, the highest level of ESG credit relevance, if present, 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 to the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Dominican Republic LT IDR BB- Affirmed BB- ST IDR B Affirmed B LC LT IDR BB- Affirmed BB- LC ST IDR B Affirmed B Country Ceiling BB- Affirmed BB- senior unsecured LT BB- Affirmed BB- ============= J A M A I C A ============= JAMAICA: Local Insurance Rates Deemed Too Low for Profitability --------------------------------------------------------------- RJR News reports that global insurance companies have deemed local insurance rates to be too low, which could threaten the profitability of the market, and force some reinsurance firms to leave the market. That revelation was made by Hugh Barbanell, Senior Managing Director at international insurance firm AON Insurance, according to RJR News. Adressing a press briefing, Mr. Barbanell said some rates may have to see increases of more than 20 per cent, the report relays. "You guys are in the headlights a bit because your rates have not been adequate. And reinsurers have been pressuring for the last couple of years to push up rates, but between the market dynamics, it just was not happening," he explained, the report notes. Mr. Barbanell said reinsurance companies are finding it difficult to add more financial capacity, the report relays. "And with the constraints on their capacity and the shortage of capacity in the market, there will be a flight when you have an event. That capital then gets locked up after the event, and there's no additional capital that the retro markets can get, shrinking the level of capacity they can give to reinsurers," he noted, the report discloses. The AON Insurance senior managing director said although multiple building projects are ongoing and this will increase the need for insurance, the companies in Jamaica just "cannot get that additional capacity at this time," the report adds. As reported in the Troubled Company Reporter-Latin America in March 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== M E X I C O =========== CEMEX SAB: S&P Ups ICR to 'BB+' on Lower Leverage, Outlook Stable ----------------------------------------------------------------- On Dec. 8, 2022, S&P Global Ratings raised its global scale ratings on the Mexican cement producer CEMEX S.A.B. de C.V. and on its subsidiaries to 'BB+' from 'BB'. S&P also raised its national scale ratings to 'mxAA-/mxA-1+' from 'mxA/mxA-1'. At the same time, S&P raised its issue-level rating on the company's senior unsecured notes to 'BB+' from 'BB' and on its perpetual bond to 'B+' from 'B'. The recovery rating on the rated senior debt remains at '3'. S&P said, "The stable outlook reflects our view that CEMEX will manage persistent economic headwinds, including inflationary pressures on input costs such as energy and transportation, enabling credit metrics to be in line with the current rating level. "For more than a decade, the priority of CEMEX's financial policy has been to reduce leverage. Following a period of stagnant EBITDA growth, CEMEX implemented a series of actions to accelerate the improvement in credit metrics, particularly after the pandemic's outbreak. Under its "operation resilience" initiative, the company was able to protect operating capabilities and profitability, and now it's increasingly focusing on decarbonization goals as part of the sustainability plan. In this context, we expect the company to prioritize financial discipline and that the implementation of strategic objectives wouldn't compromise its deleveraging trajectory." ===================================== T R I N I D A D A N D T O B A G O ===================================== CL FIN'L: CLICO to Resume Insurance Sales ----------------------------------------- Anthony Wilson at Trinidad Express reports that executive chair of Colonial Life Insurance Company (Trinidad) Limited (Clico), Clair Gomez-Miller, said that the insurance company intends to start selling new policies and annuities once it gets a license from the Central Bank. Speaking at a news conference at the Central Bank, five days after that institution relinquished control of CLICO, Gomez-Miller said the insurance company has been closed for new business since 2014, which she linked to the decision to sell its insurance portfolio, according to Trinidad Express. "It means to say that for us to survive going forward, we must start new business. So CLICO will be starting new business as soon as we get our licence to do so," from the Central Bank, she said in her presentation at the news conference, the report notes. "We have the confidence, the capacity and the willingness to get that license, so that we can start doing new business," the report relays. The Central Bank took control of CLICO in February 2009, following the collapse of its parent company CL Financial the previous month, the report discloses. The Government eventually injected over $18 billion into CLICO, the report relays. The Central Bank relinquished control of the insurer on December 1, citing that the conditions, which led to CLICO being placed under Central Bank control, no longer existed, the report notes. The executive chair of CLICO said she does not think the company will start selling new business in 2023 "because we want to make sure that as we move into that territory, we have a solid foundation and we know exactly what it is we are going to be doing," the report relays. Asked about the governance structure of CLICO in the future, Gomez-Miller said the current directors of the company will remain in place until the company's annual meeting of shareholders in April or May 2023, the report says. At that time, the shareholders will make decisions on the directors, the report discloses. CLICO's shareholders are its parent, CL Financial, which owns 51 per cent, and Corporation Sole, with 49 per cent, the report relays. CL Financial was placed into liquidation in September 2017, following a petition to the High Court by Finance Minister, Colm Imbert, the report notes. "We would expect that the liquidators would have at least one director on the board of CLICO. If not, they will be doing continuous oversight," said Gomez-Miller, adding: "The liquidators need to look at the fact that there is an $11 billion claim that we are dealing with them for CLICO. There must be some sort of arms-length separation . . . " the report relays. Gomez-Miller confirmed a report that the company has not repaid all of the money it owes the State, the report discloses. She said CLICO has repaid $14.8 billion in principal and $2.47 billion in interest, totalling $17.27 billion. CLICO, therefore, owes the State $1.068 billion, including additional interest, the report relays. That sum will be repaid when the company sells some of its stake in Methanol Holdings International Ltd (MHIL), the Oman-based methanol producer, of which CLICO owns 56.53 per cent, with the balance being held by the Proman group, which is headquartered in Switzerland, the report notes. In accordance with the shareholders agreement that established MHIL, the shares are being offered to Proman, the report relays. CLICO is planning to reduce its shareholding in MHIL to just under 20 per cent, in accordance with the 2020 Insurance Act, the report notes. Questioned about why the Central Bank chose to exit CLICO when on December 1, when the insurance company was solvent and able to repay the Government since 2019, Central Bank Governor, Dr Alvin Hilaire said: "Everything is a question of balance. Emergency control is supposed to be temporary and short. We would have liked to leave as early as possible . . . .We could have left before, but we are not looking at the profitability of the company alone. We are looking at the governance structure, capacity to move things forward and the stability of the financial system . . . " the report relays. Sale of Insurance Portfolio Following a recommendation in the 2015 CLICO resolution plan, the Central Bank started a process to dispose of the traditional portfolio of CLICO, the report notes. The Central Bank announced on September 30, 2019, that Sagicor Life was the preferred bidder for the CLICO's traditional portfolio, the report relays. The process was challenged by Maritime Life Caribbean, which brought judicial review proceedings against the Central Bank, along with an injunction stopping the sale of the portfolio, the report relays. In October 2022, the Privy Council found in Maritime's favour, determining that the insurance company did have a case to bring judicial review proceedings against the Bank, the report says. Asked about the sale of CLICO's traditional portfolio, Gomez-Miller said: "As we move forward, the portfolio cannot remain in suspension and you and I know the justice system in this country, the report notes. "The substantive motion is now going to start, so you are talking about the next five to ten years before a decision can be made in court . . . , the report relays. "CLICO cannot continue to not do new business. We must understand this. So it means to say a business decision will have to be made by the board supported by the shareholders as to what we are going to do with the insurance portfolio, the report notes. "The matter will have to be addressed betwee n Sagicor and CLICO because there is a live contract right now. There is a sale and purchase agreement that we signed in 2019. That has been kept alive," the report discloses. Gomez-Miller said the insurer made a claim of $11 billion against CLICO, the report adds. About CL Financial/CLICO CL Financial was one of the largest privately held conglomerate in Trinidad and Tobago. It was originally founded as an insurance company and has since expanded to be the holding company for a diverse group of companies and subsidiaries. CL Financial is the parent company of Colonial Life Insurance Company (Trinidad) Limited (Clico). CLICO is now the Company's insurance division. CL Financial however experienced a liquidity crisis in 2009 that resulted in a "bail out" agreement by which the government of Trinidad and Tobago loaned the company funds ($7.3 billion as of December 2010) to maintain its ability to operate, and obtained a majority of seats on the company's board of directors. The companies to be bailed out were: CL Financial Ltd (CLF); Colonial Life Insurance Company Ltd (CLICO); Caribbean Money Market Brokers Ltd (CMMB); Clico Investment Bank (CIB) and British American Insurance Company (Trinidad) Ltd (BAICO). As reported in the Troubled Company Reporter-Latin America in July 2017, CL Financial Limited shareholders vowed to pay back a TT$15 billion (US$2.2 billion) debt to the Trinidad Government. =============== X X X X X X X X =============== [*] BOND PRICING: For the Week Dec. 5 to Dec. 9, 2022 ----------------------------------------------------- Issuer Name Cpn Price Maturity Country Curr ----------- --- ----- -------- ------- --- Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD Noble Holding Internat 6.1 62.0 3/1/2041 KY USD City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD Fospar S/A 6.5 1.2 5/15/2026 BR BRL Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Esval SA 3.5 49.9 2/15/2026 CL CLP Sylph Ltd 2.4 65.1 9/25/2036 KY USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL Automotores Gildemeist 6.8 54.9 1/15/2023 CL USD Noble Holding Internat 6.2 62.2 8/1/2040 KY USD Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD Noble Holding Internat 5.3 60.5 3/15/2042 KY USD Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD Province of Santa Fe 6.9 74.7 11/1/2027 AR USD Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR Provincia del Chubut A 4.5 2208 3/30/2021 AR USD Province of Santa Fe 6.9 75.2 11/1/2027 AR USD Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. 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 * * *