/raid1/www/Hosts/bankrupt/TCRLA_Public/221219.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 19, 2022, Vol. 23, No. 246
Headlines
A R G E N T I N A
ARGENTINA: Sees Inflation Bouncing Back Slightly in December
B R A Z I L
BRAZIL: Future Minister Has Huge Debt with Public Coffers and More
BRAZIL: Minister Haddad Talks About Ending Spending Cap
BRF SA: S&P Downgrades ICR to 'BB-', Outlook Stable
GLOBO COMUNICACAO: Fitch Affirms Foreign Currency IDR at 'BB'
TUPY SA: Fitch Hikes LongTerm IDRs to 'BB+', Outlook Stable
C O L O M B I A
COLOMBIA: Employment Will be on the Ropes After Wage Increase
M E X I C O
FAST RADIUS: Bankruptcy Court Approves Assets Sale to SyBridge
T R I N I D A D A N D T O B A G O
CARIBBEAN AIRLINES: Airbridge Fares to Go up From January 1
SAN JUAN BUSINESS: President, Board Resign
X X X X X X X X
[*] BOND PRICING: For the Week Dec. 12 to Dec. 16, 2022
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A R G E N T I N A
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ARGENTINA: Sees Inflation Bouncing Back Slightly in December
------------------------------------------------------------
Patrick Gillespie & Ignacio Olivera Doll at Bloomberg News report
that Argentina's Central Bank forecast monthly inflation to
accelerate slightly in December on seasonal effects but that won't
derail a disinflation process expected for the country during early
2023, a top policymaker said.
November monthly inflation data should show price gains of close to
five percent, down from 6.3 percent in October, sustaining the
Central Bank's strategy to hold its benchmark rate at 75 percent,
according to the official, who asked not to be named discussing
internal scenarios, according to Bloomberg News.
Private economists expect Argentina to post 5.9 percent inflation
for November compared to October, according to the median forecast
in a Bloomberg survey.
The senior official sees monthly price hikes picking up steam again
in December, but remaining below six percent, driven by Argentines
spending on the Christmas holiday season and receiving an extra,
semi-annual pay cheque, the report notes. Food prices often get
marked up significantly in the last month of the year too, the
report relays.
Inflation is expected to slowly cool again in the early months of
2023, the official added, citing impacts of the government's
short-term price control agreements with food and industrial
sectors, high interest rates and an attempt to reduce money
printing to finance government spending, the report discloses.
A Central Bank spokesman declined to comment.
Argentina faces one of the highest inflation rates in the world,
with annual price increases expected to reach 100 percent by the
end of the year, the report relays. The government's fiscal
deficit remains a chronic issue with international credit markets
shut off to the crisis-prone economy after a default in 2020, the
report relays.
The Central Bank has increased its key rate from 38 percent a year
ago to 75 percent in September, keeping it unchanged since then as
it sees the monthly inflation data slowing, the report notes.
Argentina's currency strategy came under the spotlight last weekend
after President Alberto Fernandez said in an interview with a local
newspaper he wanted to close the gap between Argentina's multiple
exchange rates, the report relays. The Central Bank official ruled
out an abrupt devaluation and said any currency strategy would be
gradual to prevent inflation from spiking further, the report
adds.
About Argentina
Argentina is a country located mostly in the southern half of
South America. Its capital is Buenos Aires. Alberto Angel
Fernandez is the current president of Argentina after winning
the October 2019 general election. He succeeded Mauricio
Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019, according to the World Bank. Historically, however,
its economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Last March 25, 2022, Argentina finalized agreement with the IMF
for a new USD44 billion Extended Funding Facility (EFF) intended
to fund USD40 billion in looming repayments of the defunct
Stand-By Arrangement (SBA), with an extra USD4 billion in up-front
net financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
As reported in the Troubled Company Reporter-Latin America on
Nov. 18, 2022, S&P Global Ratings affirmed its 'CCC+/C' foreign
currency sovereign credit ratings on Argentina. S&P lowered the
long-term local currency sovereign credit rating to 'CCC-' from
'CCC+' and the national scale rating to 'raCCC+' from 'raBBB-'.
S&P also affirmed its 'C' short-term local currency rating.
The outlook on the long-term ratings is negative. S&P's 'CCC+'
transfer and convertibility assessment is unchanged.
Last April 14, 2022, Fitch Ratings affirmed Argentina's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDR) at 'CCC'.
Fitch said Argentina's 'CCC' ratings reflect weak external
liquidity and pronounced macroeconomic imbalances that undermine
debt repayment capacity, and uncertainty regarding how much
progress can be made on these issues under a new IMF program.
On July 19, 2022, Fitch Ratings placed Argentina's Long-Term
Foreign Currency Issuer Default Rating (IDR) and Long-Term Local
Currency IDR Under Criteria Observation (UCO) following the
conversion of the agency's Exposure Draft: Sovereign Rating
Criteria to final criteria. The UCO assignment indicates that
ratings may change as a direct result of the final criteria. It
does not indicate a change in the underlying credit profile, nor
does it affect existing Rating Outlooks.
Moody's credit rating for Argentina was last set at Ca on
Sept. 28, 2020.
DBRS has also confirmed Argentina's Long-Term Foreign Currency
Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at
CCC (high) on July 21, 2022.
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B R A Z I L
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BRAZIL: Future Minister Has Huge Debt with Public Coffers and More
------------------------------------------------------------------
Rio Times Online reports that Lula da Silva's future minister of
Culture (MinC), Margareth Menezes, has not even taken office and
may already be a problem for the next government.
This is because Margareth's NGO, which carries out social projects,
has problems in court, according to Rio Times Online.
In December 2020, the Federal Court of Accounts (TCU) condemned the
Associacao Fabrica Cultural to return about BRL340 (US$64) thousand
to the public coffers, the report relays.
The amount refers to irregularities detected in an agreement signed
in 2010, the last year of Lula's government, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He will be sworn in on January 1, 2023,
as the 39th president of Brazil, succeeding Jair Bolsonaro.
In July 2022, Fitch Ratings affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and revised the Rating
Outlook to Stable from Negative. In June 2022, S&P Global
Ratings also affirmed its 'BB-/B' long- and short-term foreign and
local currency sovereign credit ratings on Brazil. Moody's, in
April 2022, affirmed Brazil's long-term Ba2 issuer ratings and
senior unsecured bond ratings, (P)Ba2 senior unsecured shelf
ratings, and maintained the stable outlook. On the other had,
DBRS, in August 2022, confirmed Brazil's Long-Term Foreign and
Local Currency Issuer Ratings at BB (low).
BRAZIL: Minister Haddad Talks About Ending Spending Cap
-------------------------------------------------------
Adele Cardin at Rio Times Online reports that after attacking the
spending cap, the future Minister of Finance, Fernando Haddad (PT,
progressive-globalist), doubled down and defended replacing the
fiscal austerity mechanism.
"Everyone knew it was a precarious way out; it was not
sustainable," he said in an interview with GloboNews, according to
Rio Times Online.
In place of the mechanism, Haddad wants to put a "new fiscal
anchor" at the beginning of the year, to be done by complementary
law, and also promised to "unlock" Public-Private Partnerships as a
means to make investments, the report relays.
The president will present the proposal at the beginning of next
year, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He will be sworn in on January 1, 2023,
as the 39th president of Brazil, succeeding Jair Bolsonaro.
In July 2022, Fitch Ratings affirmed Brazil's Long-Term Foreign
Currency Issuer Default Rating at 'BB-' and revised the Rating
Outlook to Stable from Negative. In June 2022, S&P Global
Ratings also affirmed its 'BB-/B' long- and short-term foreign and
local currency sovereign credit ratings on Brazil. Moody's, in
April 2022, affirmed Brazil's long-term Ba2 issuer ratings and
senior unsecured bond ratings, (P)Ba2 senior unsecured shelf
ratings, and maintained the stable outlook. On the other had,
DBRS, in August 2022, confirmed Brazil's Long-Term Foreign and
Local Currency Issuer Ratings at BB (low).
BRF SA: S&P Downgrades ICR to 'BB-', Outlook Stable
---------------------------------------------------
On Dec. 15, 2022, S&P Global Ratings downgraded Brazil-based food
company BRF S.A. to 'BB-' from 'BB' on global scale and to 'brAA+'
from 'brAAA' on national scale. S&P also lowered the issue-level
rating to 'BB-' from 'BB', with the recovery rating remaining at
'3'.
The stable outlook on BRF reflects that, although leverage will
start decreasing in the first quarter of 2023 thanks to
cost-cutting initiatives and lower capital expenditures (capex),
still high cost inflation and higher working capital requirements
could delay this trend.
BRF's margins in Brazil, operations which account for slightly more
than half of total revenue, have been much weaker than historical
levels and below those of peers. The company's exports and Halal
business, however, have performed better. Still, consolidated
margins in the first quarter of 2022 were only 1.5%, given negative
EBITDA in Brazil as the company had to adjust its chain of
production given a drop in demand, while margins in Brazil
recovered to only 6%-7% in the second and third quarters. The Halal
unit posted a vigorous recovery in the second quarter, with margins
above 20%, given that Ukraine's poultry exports decreased after the
conflict began, along with tight global poultry supply because of
the cases of bird flu in Europe and the U.S. However, margins in
the Halal division have normalized in the third quarter of 2022 to
about 12% as the Middle Eastern market was oversupplied and price
adjustments were harder to implement. BRF's exports have also
performed much better than its sales in the domestic market, with
margins above 12%, given record-high prices in a tight global
market and the still weak Brazilian real. However, BRF has lost
some export market share in the third quarter, which has limited
its gains.
The company's new management, mostly appointed by the new board on
which Marfrig exerts a significant influence, is putting a new plan
in place to improve margins. This includes cost-cutting initiatives
and efficiency gains across the company's entire integrated
production chain, which could lift margins in the future. For
instance, BRF is adjusting its inventory levels in the fourth
quarter to prevent significant discounts in early 2023, when
seasonality is usually weaker, amid Brazil's slow economic growth.
In the longer term, if the company is unable to raise margins to
the double-digit area and continues to underperform its peers, we
could revise downward its stand-alone credit profile (SACP)
further.
S&P said, "Given forecasted low margins in the fourth quarter of
2022, we expect leverage to tick up to close to 5.0x by year-end
but decrease in the first quarter of 2023 given a very weak
comparison with the same period of 2022. For the remainder of 2023,
we expect margins to rise to about 9%, but still below historical
levels of 12%-13%. This would result in leverage metrics of about
4.0x in fiscal 2023, with low free operating cash flows (FOCF) even
as the company curtails capex to below R$3 billion in 2023. Given
that the recovery should take much longer to occur, we revised our
financial risk profile on BRF to aggressive from significant.
"We continue to factor a potential support from Marfrig in our
analysis on BRF, given Marfrig's 33.27% stake in BRF and the
subsequent majority it has obtained on BRF's board (including the
chairman) after the March 28, 2022, election. However, we consider
that such level of support would be available in some scenarios but
is less clear in a sovereign-default scenario. On March 31, 2022,
when we affirmed our ratings on BRF, we misstated in the outlook
section that should BRF's SACP drop to 'bb-', the ratings would be
kept at 'BB' given Marfrig's support. This isn't the case, however,
when the support prompts the company to be rated above the
sovereign rating (Brazil [BB-/Stable/--]) and we view BRF as a
moderately strategic subsidiary. Therefore, the final rating on BRF
remains capped at Brazil's level, despite the potential support
from Marfrig."
ESG credit indicators: E-3, S-2, G-3
S&P said, "Environmental factors are a moderately negative
consideration in our credit rating analysis of BRF. The
above-average environmental risk, in line with that for the
agribusiness sector, stems from exposure to weather patterns, which
bring volatility to harvest yields. For instance, we estimate that
corn and soybean meal represent over a third of BRF's costs, and
the droughts recurrently impact global grain production and harvest
volumes and prices, pressuring the company's EBITDA margins.
Governance factors are a moderately negative consideration as well.
BRF is still under investigation since 2017 (the "Carne Fraca" and
"Trapaça" investigations) for alleged bribery of food sanitation
inspectors. There's a lack of visibility over future liabilities.
However, risks have diminished following the closing of the
investigation by the U.S. Securities and Exchange Commission and
Department of Justice that didn't result in criminal charges or
restrictions on BRF's operations. In addition, the class action was
settled."
GLOBO COMUNICACAO: Fitch Affirms Foreign Currency IDR at 'BB'
-------------------------------------------------------------
Fitch Ratings has affirmed Globo Comunicacao e Participacoes S.A.'s
Long-Term Foreign Currency Issuer Default Rating (IDR) and USD
unsecured notes at 'BB'. In addition, Fitch has affirmed Globo's
Long-Term Local Currency IDR at 'BBB-' and National Scale rating at
'AAA(bra)'. The Rating Outlook for the FC IDR and National Scale
rating is Stable. The Rating Outlook of the LC IDR was revised to
Negative from Stable.
The Negative Outlook on the LC IDR reflects Globo's challenges to
resume high single digit to double digit EBITDA margins and robust
cash flows competition on the advertising market remains high. In
addition, results on the content business continue to face
reduction on pay-TV subscription base in Brazil and still negative,
although improving, performance on Globoplay. Globo's net cash and
strong competitive position within the Brazilian media sector are
important drivers of the ratings, partially offsetting the pressure
on the company's operating performance.
KEY RATING DRIVERS
Low Margins, Positive FCF: Globo's EBITDA margins are forecast in
the mid-single digits over the rating horizon due to the
challenging environment for the sector and the higher operating
cost base from scaling the company's streaming platform. The base
case scenario considers net revenues and EBITDA of BRL15 billion to
BRL16 billion range in 2023-2024 with EBITDA margins of 5%-6%.
The rescheduling of season 2020 games to 2021 increased the sports
rights amortization in 2021 and negatively affected EBITDA that
year while unprofitable FIFA World Cup broadcasts should affect
EBITDA in 2022, which Fitch expects will be close to neutral. The
company's free cash flow (FCF) margin is forecasted in the
low-to-mid single digits despite the weak EBITDA generation mainly
due to net financial income from Globo's cash position.
Challenging Sector Environment: Globo faces intense competition for
advertising and content/programming revenues as well as challenges
offering new and attractive platforms to viewers and advertisers.
The Brazilian pay-TV market has shrunk, with 14.7 million
subscribers at 3Q22, down by 25% from 19.5 million in 2014.
Globo's strategy to address the market changes and the decline of
its traditional TV broadcasting business included the launch of its
Globoplay subscription video on demand service. Subscriptions for
Globoplay have grown quickly at 27% per year in the in the last two
years. An additional two to three years of growth at this pace will
be needed for this platform to gain sufficient scale.
Strong Financial Position: Globo has one of the region's strongest
financial structures, backed by its net cash position. Globo's cash
and equivalents of BRL14.6 billion is substantially higher than its
total debt of BRL5.7 billion. The company is expected to maintain a
solid cash position in the BRL8 billion to BRL10billion or higher
over the rating horizon without adding meaningful debt. The size of
the cash position provides the company with significant financial
flexibility. The company also has the flexibility to delay or
reduce dividend payments.
Robust Business Position: Globo's strong business position as
Brazil's leading media company is an important pillar for the
ratings. The company has a TV broadcasting audience share of around
35%, with a 38% share during prime time. Globo also has several
major channels to distribute produced content. Globoplay is
expanding its subscriber base through partnerships and bundled
offerings, which should continue to play an important strategic
role for Globo.
Country Ceiling Constrains Foreign Currency IDR: Globo's Foreign
Currency IDR and USD notes' ratings are constrained by Brazil's
'BB' Country Ceiling. The vast majority of Globo's revenues are
denominated in Brazilian reals, with insufficient U.S.
dollar-denominated revenue to pierce Brazil's Country Ceiling,
absent consistently holding larger cash balances abroad or offshore
credit facilities.
DERIVATION SUMMARY
Globo is well-positioned relative to its Latin American peers such
as TV Azteca, S.A.B. de C.V.(RD) in terms of market position,
content production and financial profile. Compared with U.S.-based
investment-grade media companies such as Paramount Global
(BBB/Stable), Globo's higher reliance on cyclical advertising
revenue generation is a weakness, as there is a declining
percentage spent on Brazilian television broadcast advertising
space and pay-TV penetration. This lack of cash flow
diversification is offset by its materially stronger capital
structure. Globo's Foreign Currency IDR is constrained by Brazil's
Country Ceiling, which reflects Brazil's sovereign rating and
Fitch's assessment of higher transfer and convertibility risk.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
- Revenue in the BRL15 billion to BRL16 billion in 2023-2024;
- EBITDA margins between 5% and 6% in 2023 and 2024;
- Average annual capital expenditures of around BRL200 million to
BRL300 million;
- No material incremental debt added to the capital structure.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade of the Foreign Currency IDR would depend on an upgrade
to Brazil's Country Ceiling;
- An upgrade of the Local Currency IDR is unlikely, absent a
significant improvement in its operating performance.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Brazil's Foreign Currency IDR would likely result
in a negative rating action for Globo's Foreign Currency IDR and
U.S. dollar-denominated notes;
- A downgrade to the Local Currency IDR could occur if there is a
significant deterioration in the company's liquidity and/or there
is sustained pressure of profitability in the low-single digit
range.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Globo has a net cash position, with total debt of
BRL5.7 billion and Fitch-adjusted cash and cash equivalents of
BRL13.9 billion as of Sept. 30, 2022. Practically all of the
company's debt consists of four USD-denominated senior unsecured
notes due in 2025, 2027, 2030, and 2032. Approximately 85% of
Globo's debt matures in 2030 and 2032.The remaining debt
liabilities comprise BRL-denominated bank credit notes and
commercial paper, maturing until 2024.
The company raised USD400 million in 2032 notes in January 2022 and
used the proceeds to fund a partial tender for the 2025 and 2027
notes. Globo hedges its operational and financial exposure to
foreign currency considering a 24-month period ahead and has
entered into a swap to CDI for USD800 million of its notes due 2030
and 2032 notes to maturity.
ISSUER PROFILE
Globo is the largest media group in Brazil, operating through the
leading broadcast television and pay-TV networks. The company also
owns and operates a streaming platform (Globoplay) focused on
Brazilian users. Globo is owned by the Marinho family.
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
----------- ------ -----
Globo Comunicacao e
Participacoes S.A. LT IDR BB Affirmed BB
LC LT IDR BBB- Affirmed BBB-
Natl LT AAA(bra)Affirmed AAA(bra)
senior unsecured LT BB Affirmed BB
TUPY SA: Fitch Hikes LongTerm IDRs to 'BB+', Outlook Stable
-----------------------------------------------------------
Fitch Ratings has upgraded Tupy S.A.'s Long-Term Foreign and Local
Currency Issuer Default Ratings to 'BB+' from 'BB' and Long-Term
National Scale Rating to 'AAA(bra)' from 'AA(bra)'. Fitch has also
upgraded Tupy Overseas S.A.'s USD375 million senior unsecured notes
due 2031 and guaranteed by Tupy to 'BB+' from 'BB'. The Rating
Watch Positive has been removed. The Rating Outlook for the
corporate ratings is Stable.
The ratings upgrade reflects the improved scale, diversification
and expected credit metrics resulting from the recent acquisitions
of Teksid's operations in 2021 and MWM from Navistar Inc. in 2022.
Ratings remain constrained by Tupy's relatively small scale and
moderate geographic diversification when compared with other global
auto parts companies. The high cyclicality and competitive
environment of the auto industry also limits ratings.
The ratings incorporate Tupy's strong market position in the
production of high-value-added cast iron structural components,
such as engine blocks and cylinder heads, its long-term
relationships with original equipment manufacturers (OEMs), and the
significant use of its products in transportation, infrastructure
and agricultural machinery. Fitch's analysis also incorporates
Tupy's capacity to maintain adequate operating margins during
adverse economic environments. Tupy's flexibility to rapidly adjust
production, high proportion of variable costs as well as its
conservative capital structure and disciplined liquidity management
were also embedded in its ratings.
KEY RATING DRIVERS
Strengthened Business Profile: Fitch expects Tupy's BRL855 million
enterprise value (~4x EBITDA) acquisition of MWM to increase the
company's scale, product value-add and overall diversification. MWM
is a market leader in the production, machining, assembly and
supply chain management for third-party engines in Brazil. The
company estimates over 20% of trucks in the country carry engines
assembled by MWM.
The new operations will allow Tupy to offer customers
contract-based manufacturing and engineering services, providing
potentially more stable revenue streams. The transaction also
allows access to other relevant sectors including industrial power
generators (gensets), biofuel solutions, marine engines, and engine
spare parts. Through MWM's energy generation businesses, Tupy
expects to venture into providing all-encompassing decarbonization
solutions to the agricultural and industrial sectors in Brazil.
Cyclical Industry and Competition: Tupy is exposed to the highly
cyclical and competitive auto industry, which is affected by
macroeconomic cycles, volatility in raw-material prices,
particularly scrap and steel, as well as by technological shifts,
fuel alternatives and stringent legislation on CO2 emissions. As
inherent to a Tier-1 supplier, Tupy's three largest customers
account for 46% of sales and contracts have no minimum volume, in
spite of their long-term nature. Positively, Tupy supplies a
variety of structural components to each customer in different
countries, making shifting cost considerably high. Capital
intensity is high in the industry, particularly for manufacturers
of high-added-value products such as Tupy, which results in high
barriers to entry.
Gains In Scale To Offset Lower Margins: Fitch expects the company
to significantly grow its scale over the ratings horizon in spite
of its recent acquisitions lower margins. As of 3Q22 LTM revenues
reached BRL9.6 billion, an increase of 35% from BRL7.1 billion in
2021. EBITDA is also up 34% going from BRL740 million in 2021 to
over BRL1 billion as of LTM 3Q22. Fitch estimated EBITDA Margin as
of LTM 3Q22 improved to 10.8% versus 10.4% as of 2021. MWM EBITDA
margins are projected at 6.5% of revenues which are lower than
Tupy's historical average, but are more stable according to the
company.
Tupy has reported LTM revenues for MWM to be roughly BRL3.2 billion
as of 3Q22. Based on this, Fitch estimates and additional BRL200
million in EBITDA and combined revenues of around BRL13 billion.
Although overall margins may initially decrease, the added scale
should improve credit metrics over time. Fitch forecasts margins to
gradually improve post-acquisition of MWM on a consolidated basis
as Tupy realizes synergies and economies of scale from the newly
incorporated operations.
Conservative Capital Structure: Fitch expects Tupy to preserve a
conservative capital structure consistent with the company's
financial policies. Fitch forecasts net leverage to increase to 2x
in 2022 on a proforma basis following the completion of the MWM
merger. Fitch expects Tupy to be FCF negative in 2022, neutral in
2023 and return to positive FCFs in 2024. The company should
gradually de-lever below 2.5x gross and 2x net as EBITDA rises over
the ratings horizon.
Threats from Electric Vehicles: Fitch believes risks associated to
demand for lowering carbon emissions globally are manageable for
Tupy. Around 86% of its revenues derive from commercial vehicles,
including heavy commercial and heavy machinery, which demand power,
strength and autonomy. In its view, traditional electric
powertrains that run on batteries are less suitable for such
vehicles. Fitch believes that there will be several fuel
alternatives more efficient than electricity for heavy machinery,
including hydrogen fuel-cell technology. Many Fitch-rated truck
manufacturers in Europe are banking on this technology.
The inclusion of MWMs energy and decarbonization products and
solutions should allow Tupy to access opportunities in other
alternative energy sources, in particular, in the biofuels sector.
Although the potential for more stringent environmental policies in
large economies could disrupt market share dynamics over time,
near-term credit implications for legacy auto suppliers should be
limited.
Mexican Country Ceiling Applied: In line with Fitch's Non-Financial
Corporates Exceeding the Country Ceiling Rating Criteria, Tupy's
ratings are not constrained by Brazil's 'BB' Country Ceiling, given
the company's operating cash flows from assets in Mexico and from
maintaining cash in hard currency. Hence, Mexico's 'BBB+' Country
Ceiling is applicable to Tupy's ratings.
DERIVATION SUMMARY
Ratings of auto parts companies are usually constrained by the
sector's volatility, capital and labour intensity characteristics,
and natural client concentration. Tupy's low leverage and strong
liquidity compares well with its peers. The 'BB+' rating reflects
its small scale and moderate diversification, as well as its high
exposure to OEMs.
Tupy's credit profile is stronger than that of Tenneco Inc.
(B/Stable). Tenneco's rating reflects its significantly more
leveraged capital structure. Tupy ratings compare to Dana
Incorporated (DAN; BB+/Negative). DAN's leverage metrics are higher
than Tupy's, but it is a leading global supplier of driveline
components for light, commercial and off-road vehicles, with
significant larger scale and diversification. Metalsa, S.A. de C.V.
(BBB-/ Stable) and Nemak, S.A.B. de C.V. (BBB-/Stable) are rated at
investment grade due to their conservative capital structures,
larger scale and wider geographic diversification. However, with
the acquisitions of Teksid assets and MWM, Tupy has significantly
increased its scale and overall diversification reducing the gap
with its Mexican counterparts.
KEY ASSUMPTIONS
- MWM consolidated starting Dec. 1, 2022;
- Domestic volumes to grow with Brazilian GDP and foreign volumes
with U.S. and Eurozone GDPs;
- Gradual dilution of fixed expenses following gains of scale;
- Prices increase in line with inflation and benefited by
pass-through pricing;
- BRL to USD at 5.2 in 2022, as per Fitch's forecast;
- CAPEX of approximately BRL330 million and BRL580 million in 2022
and 2023 respectively;
- Working capital requirements normalize to historical averages
gradually;
- Dividend pay-out ratio of 25% within the ratings horizon.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Further improvement of Tupy's geographic footprint, client
diversification, and scale while materially improving FCF;
- EBITDA gross leverage below sustained below 2x;
- EBITDA net leverage consistently below 1.5x;
- Maintenance of robust liquidity.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- EBITDA gross leverage sustained above 2.5x;
- EBITDA net leverage consistently above 2x;
- Deterioration of robust liquidity.
LIQUIDITY AND DEBT STRUCTURE
Strong Liquidity: Fitch expects Tupy to maintain strong liquidity
during the rating horizon as part of its conservative financial
policy. The company ended the 3Q22 with close to BRL2 billion in
cash and cash equivalents in comparison to BRL173 million in
short-term debt. Tupy issued BRL1 billion in debentures in
September 2022 to finance the acquisition of MWM for BRL855 million
which was concluded on Nov. 30, 2022. Although debt and debt
service increase materially with the issuance, the larger scale of
the company means that liquidity and overall leverage remain stable
and with an improving trend. MWM is being acquired without debt and
cash balances will be reimbursed to seller.
Tupy exchanged its USD350 million bond due 2024 to a USD375 million
due in 2031, while significantly reducing debt service. By
lengthening its bond maturity, Tupy also decreased liquidity and
refinancing risks.
ISSUER PROFILE
Tupy is a Tier-1 and Tier-2 global automotive supplier that was
founded in 1938 in Joinville, Santa Catarina in Southern Brazil. It
is one of the world's largest independent manufacturers of
high-value-added cast iron structural components, such as engine
blocks and cylinder heads.
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
----------- ------ -----
Tupy Overseas
S.A.
senior
unsecured LT BB+ Upgrade BB
Tupy S.A. LT IDR BB+ Upgrade BB
LC LT IDR BB+ Upgrade BB
Natl LT AAA(bra)Upgrade AAA(bra)
===============
C O L O M B I A
===============
COLOMBIA: Employment Will be on the Ropes After Wage Increase
-------------------------------------------------------------
Rio Times Online reports that there was an agreement between the
Colombian Government, labor unions and businessmen on the increase
in the minimum wage for next year, and although a priori it does
not seem to have a negative effect on price formation, there are
many doubts about what will happen to employment.
With the increase in the minimum wage and the increase in the
transportation subsidy, employees in Colombia will receive $1.3
million, according to Rio Times Online.
===========
M E X I C O
===========
FAST RADIUS: Bankruptcy Court Approves Assets Sale to SyBridge
--------------------------------------------------------------
Fast Radius, Inc. on Dec. 13, 2022, disclosed that the United
States Bankruptcy Court of the District of Delaware has approved
the sale of a majority of the Company's assets to SyBridge
Technologies.
SyBridge Technologies' bid maximizes value and minimizes the
remaining duration of the Company's restructuring by providing a
clear path forward for the Debtors to consummate a chapter 11 plan
and return value to their customers and other creditors.
The transaction is expected to close later this week.
Court filings and other information related to the proceedings are
available on a separate website administered by the Company's
noticing agent, Stretto, at https://cases.stretto.com/fastradius or
by calling Stretto representatives toll-free at 1-877-361-4291 or
1-714-384-7055 for calls originating outside of the U.S.
DLA Piper LLP (US) is serving as legal advisor to the Company,
Lincoln International is serving as its investment banker, and
Alvarez & Marsal is serving as its financial advisor.
About SyBridge Technologies
SyBridge Technologies -- http://www.sybridgetech.com --was
established in 2019 by Crestview Partners to create a global
technology leader that provides value-added design and
manufacturing solutions across multiple industries. SyBridge is
the
combination of 13 acquisitions made to combine different products,
services and technologies into a singular technology enabled
solution. SyBridge is based in Southfield, Michigan and has
operations in the United States, Canada, Mexico and Ireland.
About Fast Radius
Fast Radius, Inc. (OTCMKTS: FSRDQ) is a cloud manufacturing and
digital supply chain company in Chicago, Ill.
Fast Radius, Inc. and affiliates, Fast Radius Operations, Inc. and
Fast Radius PTE Ltd., sought protection under Chapter 11 of the
U.S. Bankruptcy Code (Bankr. D. Del. Lead Case No. 22-11051) on
Nov. 7, 2022. In the petition signed by Patrick McCusker,
authorized signatory, Fast Radius, Inc. disclosed $69.329 million
in assets and $55.212 in liabilities.
The Debtors tapped DLA Piper LLP (US) and Bayard, P.A. as legal
counsels; Lincoln Partners Advisors, LLC as investment banker;
Alvarez & Marsal North, America, LLC as financial advisor; and
Stretto, Inc. as claims and noticing agent and administrative
advisor.
The U.S. Trustee for Region 3 appointed an official committee of
unsecured creditors in the Debtors' Chapter 11 cases on Nov. 18,
2022. The committee is represented by Potter Anderson Corroon,
LLP.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
CARIBBEAN AIRLINES: Airbridge Fares to Go up From January 1
-----------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that the increase
in ticket prices for the Caribbean Airlines Ltd (CAL) flight to and
from Tobago will come into effect on January 1.
Finance Minister Colm Imbert announced the decision in the 2023
budget presentation on September 26, following years of losses
recorded by CAL in operating the domestic airbridge.
In a news release on CAL's website, the airline said adults will
pay $200 for every one-way flight, according to Trinidad Express.
That is up from $150, which represents a 33.3 per cent increase,
the report notes.
The CAL news release also noted that a date-change fee of $50 on
domestic tickets still applies and it must be noted that tickets
purchased on or before December 31, 2002 for travel in 2023, will
be subject to both the date change fee and the difference in fare
PER Sector, should the passenger choose to change their original
ticketed travel dates to different date of travel in 2023, the
report relays.
CAL also outlined that any ticket purchased up to and inclusive of
December 31, 2002 will be at a cost of $150 (adult one way) $300
(adult return) $100 (child one way) $200 (child return), the report
discloses. However, the airline said the date change fee and the
difference in fare will apply should the travel date in 2023 be
changed from the original ticket travel date, the report relays.
CAL also added that the new fare applies to all passengers
traveling on the air bridge. Children's fares are applicable to
persons aged 2 to 11 years old and elderly passengers pay the
applicable adult fare, the report notes.
In August, the airline highlighted some factors which could result
in losses in its domestic operations, the report relays. They
include high operating costs (US$17,306) per flight hour), low
prices which do not reflect actual market value and one-way peak
demand periods outside of the July-August school holiday period,
the report notes.
The airline's total operational cost for the airbridge as of June
was US$18,777,648. The cost per flight hour during that period was
US$ 17,306, the report relays.
CAL said, "The high costs are driven by the frequency of flights
and the short distance (52 miles) leading to an undesirable low
block hour utilisation of aircraft and crews and maintenance cost
-- US$17,306 per flight hour," notes the report.
Despite this, the airline continued, the domestic schedule
(inclusive of peak travel periods) considers "the essential nature
of the service, events and activities in Tobago, the total number
of passengers over a 12-month period and other information relevant
to its operation," the report says.
Between July 17, 2021 and July 31, 2022, CAL operated 6,527 flights
between Trinidad and Tobago, the report discloses. A total of
416,780 passengers were transported on those flights, the report
adds.
About Caribbean Airlines
Caribbean Airlines Limited -
http://www.caribbean-airlines.com/ - providespassenger airline
services in the Caribbean, South America, and North America. The
company also offers freighter services for perishables, fish and
seafood, live animals, human remains, and dangerous goods. In
addition, it operates a duty free store in Trinidad. Caribbean
Airlines Limited was founded in 2006 and is based in Piarco,
Trinidad and Tobago.
Caribbean Airlines is among many airlines whose business has been
greatly affected in 2020 by the slowdown of international travel
caused by the COVID-19 pandemic. The government of Trinidad &
Tobago guaranteed a US$65 million loan for the airline, and that
funding has helped with the airlines' cash flow shortfall since
May 2020. In September 2020, the airline related it will be
taking cost-cutting measures to help keep it afloat. The
measures, which was to affect some 1,700 employees, included salary
deductions, no-pay leaves and lay-offs.
SAN JUAN BUSINESS: President, Board Resign
------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that mass
resignation at the San Juan Business Association (SJBA), due to
alleged corporate governance issues and matters surrounding
democracy within the organisation, have triggered fresh elections
that was to take place Dec. 15.
An e-mail to members that started circulating on WhatsApp said that
a number of directors have resigned their positions, according to
Trinidad Express.
They include: president Jason Roach; vice president Kishal Basdeo;
treasurer Joash Kissoon; director—networking and events Neela
Rambharose; director, membership, Michelle Baptiste, and director,
digital strategy, Dale De Mille, the report discloses.
The Express understands the resignation started with Rambharose in
September, Baptiste in October, Roach, De Mille, and Kissoon in
November and Basdeo resigned Dec. 12, the report relays.
The e-mail went on to state that these resignations were all based
on personal principles and, as a result, the remaining board of
directors have voted to dissolve the board and seek a new mandate
from members, the report relays.
It added that founder Abrahim Ali will be conducting an election to
appoint a new board, the report discloses. Therefore, the election
will be held at the Real Street Mosque Hall, the report notes.
When contacted on the matter, Roach said he did not want to be in a
public spat with the founder Ali, however he resigned on the
principle of corporate governance and wished with the founder and
incoming board of directors all the best, the report says.
The former president and the board was elected six months ago and
had four more months to make the one-year term, the report
discloses.
Ali told the Express when contacted that the association does not
know how the information was leaked, but admitted that some things
were accurate, the report notes. However, he said what was
inaccurate to say was that the former president and the board of
directors resigned all at once, the report discloses.
When asked as to why the sudden resignations, the founder indicated
that some situations came up, which he preferred not to bring in
the public domain, as it dealt with accountability, the report
discloses.
"I do not want to point fingers at anybody, because I am not about
targeting or interfering with anyone's character. All the paid
members have been informed about the new elections and it will be
held tomorrow. I am in the process of calling people to come out
and vote. We want to also address the constitution," Ali
highlighted, the report relays.
He noted that the public will know of the SJBA's new president and
board of directors, the report notes.
Ali added that he was concerned that the former president and board
did not make its full term in office, the report discloses.
"Once you belong to any organisation there are protocols,
procedures and constitution that must be observed," he added, adds
the report.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Dec. 12 to Dec. 16, 2022
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
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
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
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
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
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
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
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The TCR Latin America subscription rate is US$775 per half-year,
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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 * * *