/raid1/www/Hosts/bankrupt/TCRLA_Public/230105.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
Thursday, January 5, 2023, Vol. 24, No. 5
Headlines
A R G E N T I N A
AGUA Y SANEAMIENTOS: Fitch Ups IDRs to CCC Post Exchange Completion
BLOCKFI INC: Asks Court OK to Return Frozen Cryptocurrency to Users
GAUCHO GROUP: Board OKs Issuance of Additional RSUs Under Plan
B R A Z I L
OURO VERDE: Fitch Affirms LongTerm IDRs at 'BB-', Outlook Stable
C O S T A R I C A
LIBERTY SERVICIOS: Moody's Gives First Time B2 CFR, Outlook Stable
LIBERTY SERVICIOS: S&P Gives 'B+' ICR & New Sr. Secured Bond Rating
D O M I N I C A N R E P U B L I C
[*] Punta Catalina Power Plants Have Lower Prod. Cost Than Others
J A M A I C A
PALACE AMUSEMENT: Board Agrees to Stock Split
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Cunupia Farmers Losing Hope in Agri Sector
X X X X X X X X
LATAM: M&A Expected to Recover in 2023, IPOs May Take Longer
- - - - -
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A R G E N T I N A
=================
AGUA Y SANEAMIENTOS: Fitch Ups IDRs to CCC Post Exchange Completion
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Fitch Ratings has downgraded Agua y Saneamientos Argentinos S.A.'s
(AySA) Long-Term Foreign and Local Currency Issuer Default Ratings
(IDRs) to 'RD' from 'C' on the completion of its exchange offer.
Fitch considers the debt exchange completed on Dec. 19, 2022, which
was necessary to comply with central bank restrictions on dollar
debt refinancings, to have been a distressed debt exchange (DDE)
under its DDE methodology.
Subsequently, Fitch has reassessed and upgraded AySA's IDRs to
'CCC-' post completion of the exchange. In addition, Fitch has
affirmed AySA's senior unsecured notes due 2023 at 'C' and has
revised the recovery rating to 'RR6' from 'RR4', and assigned a
'CCC-/RR4' rating to the company's USD310 million senior unsecured
amortizing notes due 2026.
The SCP has been assessed at 'ccc-' due to AySA's improved
financial flexibility, post-exchange. Per Fitch's Parent and
Subsidiary Linkage Rating Criteria, AySA is rated on a stand-alone
basis as its SCP is aligned with that of the sovereign and its GRE
assessment score is 22.5, resulting in the GRE rating being
assessed on a stand-alone basis. The GRE assessment score reflects
a Support Track Record score of 'moderate', with Financial
Implications of a Default and Socio-Political Implications of a
Default scores at 'moderate'.
KEY RATING DRIVERS
Exchange Offering Completed: Fitch believes the completion of
AySA's exchange offering has improved the company's credit profile
and financial flexibility; however, AySA remains highly reliant on
support from the government in order to service its debt, which the
rating reflects. The company has restructured its USD500 million
6.625% senior notes due 2023 with a USD167.3 million cash payment
and a new USD309.8 million 7.9% senior unsecured amortizing note
due 2026.
The exchange offer will materially improve the company's debt
maturity profile, spreading maturities through 2026, which helps
mitigate AySA's refinancing risk, exacerbated by Argentina's
capital controls rules, which have been extended through 2023 and
are expected to remain in place for the foreseeable future, given
Argentina's deteriorating macroeconomic conditions.
Elevated Leverage Profile: AySA's Leverage profile remains
elevated, post-exchange, as the company is estimated to continue
reporting negative EBITDA at ARS65 billion at FYE 2022; thus,
leverage is also expected to remain negative. On a pro forma basis,
the company faces a USD15.5 million maturity in November 2023,
followed by four payments of USD62 million to be made on May 1,
2024, Nov. 1, 2024, May 1, 2025 and Nov. 1, 2025, with the final
principal amount of USD46.5 million due May 1, 2026.
The upcoming amortization payments will be repaid through
government subsidies or refinanced. AySA's FCF is also expected to
remain negative, projected at ARS 215 billion at FYE 2022 due to
increasing negative operating cash flow generation and higher
capex. The base case scenario assumes tariff growth of 32% in 2023,
and in line with inflation rates thereafter.
Government Related Entity: AySA's ratings now reflect its
likelihood of default, but the company's GRE assessment score is
22.5 as a result of having a Support Track Record of 'moderate',
Financial Implications of a Default as 'moderate', and
Socio-Political Implications of Default as 'moderate'. Improvement
in the overall GRE scoring can occur if the Support Track Record
reflects more predictable and stable financial support from the
government either through an equity injection or adjustment in
tariffs and/or subsidies to improve the company's credit profile.
Weak Regulatory Environment: The regulatory environment for AySA is
weak given a demonstrated track record of reduced enforceability,
with annual tariff increase ultimately a political decision from
the federal government, which poses uncertainty about future
regulatory mechanisms to adjust tariffs.
Agua y Saneamientos Argentinos S.A. has an ESG Relevance score of
'4' for Governance Structure, due to its nature as a majority
government-owned entity and the inherent governance risk that
arises with a dominant state shareholder, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
DERIVATION SUMMARY
AySA's SCP is weak as compared with its main peers in other Latin
American countries owing to its fragile operating performance, weak
regulatory environment and strong dependence on shareholders to
support its negative operating cash flow generation and debt
payments.
This condition compares unfavorably with Companhia de Saneamento
Basico do Estado de Sao Paulo (Sabesp; Local Currency IDR
BB+/Stable), a state-owned company based in Brazil with sound cash
flow generation and strong credit metrics, and Aegea Saneamento e
Participacoes S.A. (Local Currency IDR BB/Rating Watch Negative), a
privately owned company in Brazil with strong EBITDA margins and
diversified portfolio of concessions.
KEY ASSUMPTIONS
- Continued support from government through capital injections;
- Tariff segmentation and removal of subsidies as of Nov. 1, 2022;
- A tariff increase in 2022 of 32% in 2022 and increase in line
with inflation estimates thereafter;
- Additional revenue growth in 2022 and thereafter in line with the
four-year historical annual average growth in connections;
- Average annual capex of around ARS437 billion over the 2022-2025
period;
- Operating losses, capex, and financial obligations backed by
government transfers.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Upgrade of Argentine sovereign IDR, coupled with improvement in
AySA's credit metrics and financial flexibility.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Downgrade of Argentine sovereign IDR;
- A default or default-like process has begun, which would be
represented by a 'CC' or 'C' rating.
LIQUIDITY AND DEBT STRUCTURE
Weak Liquidity: AySA's liquidity fully relies on cash injections
from the shareholder given its inability to generate internal cash
and its restricted access to debt and capital markets on a
standalone basis.
ISSUER PROFILE
AySA is the water/wastewater concessionaire of Buenos Aires and 26
municipalities of the metropolitan region. The company is a service
provider to an estimated 15 million people through a 20-year,
extendable concession agreement.
ESG CONSIDERATIONS
Agua y Saneamientos Argentinos S.A. has an ESG Relevance score of
'4' for Governance Structure, due to its nature as a majority
government-owned entity and the inherent governance risk that
arises with a dominant state shareholder, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Agua y
Saneamientos
Argentinos S.A. LT IDR RD Downgrade C
LT IDR CCC- Upgrade RD
LC LT IDR RD Downgrade C
LC LT IDR CCC- Upgrade RD
senior
unsecured LT CCC- New Rating RR4
senior
unsecured LT C Affirmed RR6 C
BLOCKFI INC: Asks Court OK to Return Frozen Cryptocurrency to Users
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Stephen Katte of CoinTelegraph reports that bankrupt crypto lending
platform BlockFi has filed a motion requesting authority from a
United States bankruptcy court to allow its users to withdraw
digital assets currently locked up in BlockFi wallets.
In a motion filed on Dec. 19, 2022 with the U.S. Bankruptcy Court
in the District of New Jersey, the lender asked the court for
authority to honor client withdrawals from wallet accounts that
have been frozen on the platform since Nov. 10, 2022.
The court documents also request permission to update the user
interface to properly reflect transactions as of the platform's
pause.
In a widely shared email sent to affected users, BlockFi called the
motion an "important step toward our goal of returning assets to
clients through our chapter 11 cases," adding:
"It is our belief that clients unambiguously own the digital assets
in their BlockFi Wallet Accounts."
According to BlockFi, this motion will not impact withdrawals or
transfers from BlockFi Interest Accounts, which remain paused at
this time.
The lending platform has also signaled intentions to seek "similar
relief from the Supreme Court of Bermuda with respect to BlockFi
Wallet Accounts held at BlockFi International Ltd."
BlockFi International is a subsidiary of the company based in
Bermuda, which runs its non-U.S. operations.
Crypto blogger Tiffany Fong shared the communication sent to her by
BlockFi on Dec. 19, 2022 commenting that the embattled firm appears
to be moving much faster than Celsius, which filed for bankruptcy
over five months ago, compared to BlockFi's bankruptcy filing in
November.
According to the court documents, a hearing to decide if the motion
will be granted is scheduled for Jan. 9, 2022.
A separate hearing regarding wallet accounts held at BlockFi
International Ltd is scheduled to go before the Supreme Court of
Bermuda on Jan. 13, 2023.
BlockFi halted client withdrawals and requested clients not to
deposit to BlockFi wallets or Interest Accounts on Nov. 11, citing
a lack of clarity around FTX.
By Nov. 28, 2022, BlockFi filed for Chapter 11 bankruptcy, for the
company and its eight subsidiaries. BlockFi International filed for
bankruptcy with the Supreme Court of Bermuda on that same day.
About BlockFi
BlockFi is building a bridge between digital assets and traditional
financial and wealth management products to advance the overall
digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital,
among others. BlockFi made waves in 2019 when it began
providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received
a $400 million credit line from FTX US in an agreement that also
gave FTX the option to acquire BlockFi
through a bailout orchestrated by Bankman-Fried over the summer.
BlockFi also had collateralized loans to Alameda Research, the
trading firm co-founded by Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius
Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius
and Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C. as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC as strategic and
communications advisor. Kroll Restructuring Administration, LLC
is the notice and claims agent.
GAUCHO GROUP: Board OKs Issuance of Additional RSUs Under Plan
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As reported on Gaucho Group Holdings, Inc.'s Current Report on Form
8-K filed with the Securities and Exchange Commission on June 30,
2022, the Company issued a total of 26,278 of restricted stock
units subject to vesting. A total of 13,139 vested on Sept. 18,
2022, and on Dec. 18, 2022, the remaining RSUs vested and the
Company issued 13,020 shares of common stock pursuant to the
vesting provisions of the RSUs, of which, a total of 11,407 shares
of common stock were issued to certain officers and directors of
the Company.
On Dec. 24, 2022, the Board of Directors of the Company approved
the issuance of additional RSUs pursuant to the 2017 Equity
Incentive Plan effective Dec. 31, 2022 subject to vesting,
representing 767,280 shares of common stock of the Company to
certain employees, contractors, consultants and advisors in
exchange for services to the Company in the fiscal year
2022. The
RSUs will have a price per share equal to the closing price of the
shares of common stock on the Nasdaq as of Dec. 30, 2022. A
third
of the RSUs will vest on the date of grant, which is Dec. 31,
2022.
Thereafter, one-third of the RSUs will vest on the first
anniversary of the date of grant, and the remaining one-third to
vest on the second anniversary of the date of grant.
About Gaucho
Group
Headquartered in New York, NY, Gaucho Group Holdings, Inc. --
http://www.algodongroup.com --was incorporated on April 5, 1999.
Effective Oct. 1, 2018, the Company changed its name from Algodon
Wines & Luxury Development, Inc. to Algodon Group, Inc., and
effective March 11, 2019, the Company changed its name from Algodon
Group, Inc. to Gaucho Group Holdings, Inc. Through its
wholly-owned subsidiaries, GGH invests in, develops and operates
real estate projects in Argentina. GGH operates a hotel, golf
and
tennis resort, vineyard and producing winery in addition to
developing residential lots located near the resort. In 2016,
GGH
formed a new subsidiary and in 2018, established an e-commerce
platform for the manufacture and sale of high-end fashion and
accessories. The activities in Argentina are conducted through
its operating entities: InvestProperty Group, LLC, Algodon Global
Properties, LLC, The Algodon - Recoleta S.R.L, Algodon Properties
II S.R.L., and Algodon Wine Estates S.R.L. Algodon distributes its
wines in Europe through its United Kingdom entity, Algodon Europe,
LTD.
Gaucho Group reported a net loss of $2.39 million for the year
ended Dec. 31, 2021, a net loss of $5.78 million for the year ended
Dec. 31, 2020, and a net loss of $6.96 million for the year ended
Dec. 31, 2019. As of Sept. 30, 2022, the Company had $25.39
million in total assets, $6.86 million in total liabilities, and
$18.53 million in total stockholders' equity.
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B R A Z I L
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OURO VERDE: Fitch Affirms LongTerm IDRs at 'BB-', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Ouro Verde Locacao e Servico S.A.
Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs)
at 'BB-' and upgraded its Long-Term National Scale Rating, together
with its local senior unsecured issuances, to 'AA-(bra)' from
'A+(bra)'. The Rating Outlook for the corporate ratings is Stable.
Ouro Verde's IDRs reflect its moderate scale in the competitive
light vehicle fleet and heavy machinery and equipment rental sector
in Brazil. The company benefits from high revenue predictability
and should be able to continue delivering its growth strategy with
an adequate capital structure and robust operating margins. The
analysis also incorporates the positive tracking record of support
from its controlling shareholder. The National Scale Rating upgrade
reflects the strengthening of the company's credit profile within
the 'BB-' IDR as Ouro Verde improves its business position and
scale, as well as demonstrates greater access to adequate funding
to deal with refinancing needs
KEY RATING DRIVERS
Business Predictability; Medium-Size Player: Ouro Verde's moderate
scale in a very competitive industry limits its IDRs. Positively,
the company's strong and highly predictable operating cash
generation, based on long-term contracts for fleet rental of light
vehicles and heavy machinery and equipment, adds to its business
profile. The diversification between these two segments is
important to the company's credit profile. Fitch expects Ouro Verde
to rightly price the sale of its light vehicles at the end of the
contracts, as this is crucial for this segment performance.
Improving Business Profile: Ouro Verde's business profile should
continue to improve over the rating horizon as the company delivers
solid growth and higher margins. Fitch projects that the compound
annual grow rate for total fleet and net revenue will be around 8%
during the 2022-2025 period. For 2022, Fitch forecasts total
revenue at BRL1.3 billion and a total fleet of 42,220 vehicles at
year-end (74% light vehicles (LV)), reaching BRL2 billion and
44,024 vehicles (73% LV) in 2023. The company should also benefit
from a more diversified client base.
Potential Synergies with Unidas' Assets: Ouro Verde's controlling
shareholder acquisition of certain Rent a Car assets segregated
from old Unidas S.A.'s operations should benefit Ouro Verde's
business profile due to potential operating synergies. The impact
on the ratings will, most likely, rely on future consolidation of
operations and the financial profile of the combined entities.
CEDAR Fundo de Investimento em Participações, an investment fund
managed by Brookfield Asset Management Investimentos, is Ouro
Verde's main shareholder, and the ratings incorporate its positive
track record in supporting the company in terms of capital
injections and funding access.
Growing EBITDA; Pressured FCF: Rating case scenario presents
strengthening EBITDA based on organic growth and improving margins.
A still underpenetrated and very fragmented market for light
vehicles fleet and heavy machinery and equipment rental should
continue to experience further growth and allowing rental rates
increase - based on higher asset prices and cost of capital,
favoring renting over ownership - as companies' capital allocation
becomes more selective. Rental rate increases have been crucial to
face cost inflation, higher asset purchase prices and increasing
cost of capital.
Fitch forecasts EBITDA of BRL697 million (54% margin) and BRL989
million (47% margin) in 2022 and 2023, respectively. In the LTM
ended on September 2022, EBITDA reached BRL653 million (52%
margin). The rating scenario considers that cash flow from
operations (CFFO), which in this case does not consider maintenance
capex, should increase along with the EBITDA, being BRL525 million
in 2022 and BRL1 billion in 2023. Nevertheless, free cash flow
(FCF) should remain negative due to higher average annual gross
capex of BRL1.9 billion in the 2022-2024 period.
Moderate Leverage: Margin expansion resulting in higher return on
invested capital (ROIC) and a ROIC spread over the cost of debt at
levels in line with industry historical numbers should enable Ouro
Verde to cope with high interest rates and asset inflation,
allowing the company to conciliate its growth and fleet renew with
a moderate financial leverage. Fleet growth should be primarily
debt funded in the rating scenario. The base case scenario
forecasts Ouro Verde's consolidated net leverage, measured by net
debt/EBITDA, around 4.0x from 2022 to 2024, in line with the
average of 3.9x in the last four years. In the LTM ended on
September 2022, net leverage was at 4.0x.
DERIVATION SUMMARY
Compared to Simpar S.A. (Simpar; Local Currency and Foreign
Currency IDR BB / Long-term National Scale Rating AAA(bra) /
Outlook Stable), Ouro Verde has a much smaller scale, less
diversified service portfolio, and an overall weaker business
profile. While Ouro Verde has higher profitability (operating
margins), both companies have similar leverage levels and strong
liquidity position, while Simpar has stronger access to credit
markets, both locally and abroad.
Compared to Ouro Verde, Localiza Rent a Car S.A. (Localiza; Local
Currency IDR BB+; Foreign Currency IDR BB / Long-term National
Scale Rating AAA(bra) / Stable) has greater scale, stronger
negotiating power with suppliers, and an overall stronger business
profile. Localiza also has a stronger financial profile, based on
lower leverage, lower cost of capital and stronger access to credit
markets.
KEY ASSUMPTIONS
- Average annual capex of BRL2 billion in the 2022-2024 period;
- Total Fleet of 42.2 thousand vehicles at year-end 2022, and 44.0
thousand vehicles at year-end 2023;
- Average ticket for asset acquisition of BRL148 thousand in 2022
and BRL135 thousand in 2022;
- Average ticket for light vehicles fleet rental higher 16% in 2022
and 10% 2023;
- Average ticket for heavy machinery and equipment rental higher
16% in 2022 and 20% 2023;
- No dividends payout.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade in the short term is unlikely but would be related to
an improvement in Ouro Verde's scale, business position and client
base, combined with a net debt-to-EBITDA ratio below 3.5x on a
sustainable basis;
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to preserve liquidity and inability to access adequate
debt funding;
- Increase in net leverage to more than 4.5x on a regular basis;
- Deterioration of the company's business position;
- Declining EBITDA and profitability levels;
- A perception of lower support from Brookfield.
LIQUIDITY AND DEBT STRUCTURE
Strong Financial Flexibility: Ouro Verde has strengthened its
funding access to deal with forecasted negative FCF and debt
refinancing needs, while gradually reinforces its liquidity
position towards BRL800 million. As of Sept. 30, 2022, Ouro Verde
had BRL389 million of cash and equivalents and total debt of BRL2.9
billion, being BRL215 million maturing on the short-term and a
significant amount of BRL672 million in the 4Q23-2024 period.
Expected funding needs for 2023 should be addressed at the
beginning of the year. The debt mainly comprises local debentures
(58%) and Resolucao 4131 loans (33%). Around 1% of the company's
debt is secured. Ouro Verde's ability to postpone growth capex to
adjust to the economic cycle, the presence of Brookfield as a
controlling shareholder and the group's unencumbered fleet, with
its book value over net debt close to 1.3x, reinforce its financial
flexibility
ISSUER PROFILE
Ouro Verde is a leading player in the still incipient and
fragmented Brazilian market of heavy machinery and equipment
rentals. The company also operates as a medium-size participant in
the fleet rental of light vehicles.
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
----------- ------ -----
Ouro Verde
Locacao e Servico
S.A. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Natl LT AA-(bra) Upgrade A+(bra)
senior
unsecured Natl LT AA-(bra) Upgrade A+(bra)
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C O S T A R I C A
===================
LIBERTY SERVICIOS: Moody's Gives First Time B2 CFR, Outlook Stable
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Moody's Investors Service assigned a B2 corporate family rating to
Liberty Servicios Fijos LY, S.A. ("Liberty Costa Rica") and a B2
rating to Liberty Costa Rica Senior Secured Finance proposed $400
million sustainability-linked senior secured notes due 2031. The
rating outlook is stable.
This is the first time Moody's assigns ratings to Liberty Costa
Rica.
The issuer of the proposed notes, Liberty Costa Rica Senior Secured
Finance, will use the proceeds to purchase a 100% participation in
the $400 million Term Loan B provided by Inter-American Investment
Corporation ("IDB Invest" Aa1, stable) to Liberty Costa Rica. This
Term Loan B tranche along with a $50 million Term Loan A tranche
directly from IDB Invest, will be used to refinance Liberty Costa
Rica's $411 million debt maturing in 2024 and other general
corporate purposes.
While IDB Invest will be the lender of record for both the Term
Loan A and B, Liberty Costa Rica will be the ultimate source of
repayment through the bond participation agreement and pursuant the
loan agreement with IDB Invest.
The Term Loans A and B will be guaranteed by Liberty
Telecomunicaciones de Costa Rica LY, S.A. and Liberty Gestion de
Infraestructura LY, S.A., and secured by first ranking pledges over
the shares of Liberty Costa Rica and the guarantors and certain
subordinated shareholder loans. The new Term Loans A and B will
represent the bulk of Liberty Costa Rica's capital structure and
will rank pari passu with the existing and future senior secured
debt of Liberty Costa Rica.
The notes will be sustainability-linked, and coupon will be linked
to sustainability performance targets; more specifically, absolute
greenhouse gas emissions (Scope 1 and 2) and greenhouse gas
emissions intensity (Scope 3).
The rating of the proposed notes assumes that the issuance will be
successfully completed and that the final transaction documents
will not be materially different from draft legal documentation
reviewed by Moody's to date. It also assumes that these agreements
are legally valid, binding and enforceable.
Assignments:
Issuer: Liberty Servicios Fijos LY, S.A.
Corporate Family Rating, Assigned B2
Issuer: Liberty Costa Rica Senior Secured Finance
Senior Secured Regular Bond/Debenture, Assigned B2
Outlook Actions:
Issuer: Liberty Servicios Fijos LY, S.A.
Outlook, Assigned Stable
Issuer: Liberty Costa Rica Senior Secured Finance
Outlook, Assigned Stable
RATINGS RATIONALE
Liberty Costa Rica's B2 CFR reflects the company's strong
competitive position in Costa Rica following the acquisition of
Telefonica S.A. (Telefonica, Baa3 stable)'s mobile assets in August
2021, creating an integrated telecommunications service provider,
with leading market shares in the country. Liberty Costa Rica's B2
ratings also consider its good liquidity with no major maturities
before 2031. Additionally, the B2 ratings consider Liberty Latin
America Ltd ("LLA")'s ownership, implicit support and proven
expertise in acquiring assets, supporting the integration of its
business, operations and growth.
Liberty Costa Rica's ratings also consider its modest revenue size
compared with that of its global peers, the lack of track record
operating in its current format and geographic concentration in one
market, Government of Costa Rica, rated B2.
As of September 2022, Liberty Costa Rica served 522.5 thousand
fixed RGU's customers, mostly through its hybrid fiber-cable
network (86% of the network, 14% FTTH) with 691.7 thousand homes
passed. Following the acquisition of Telefonica's assets in Costa
Rica, Liberty Costa Rica is the mobile market leader with 2.92
million clients, mostly in the prepaid segment (72.3%). While the
market in Costa Rica is highly competitive, the new business model
has upside potential due to cross and up selling strategies and
synergies that the company expects during the next two years.
Moody's expects Liberty Costa Rica to generate EBITDA margin above
37%, reducing Moody's adjusted leverage towards 4x by 2023, from
7.2x in December 2021, which included the full amount of debt and
only 4 months of the combined business.
LLA has experience in integrating assets and the acquisition in
Costa Rica entails relatively lower execution risk since Liberty
Costa Rica will not need to migrate customers to a different mobile
core, minimizing disruption. In addition, Liberty Costa Rica has in
place transitional service agreements (TSAs) with Telefonica for up
to 24 months, covering services related to technology, network and
supply chain, among others.
As of December 2021, Liberty Costa Rica holds around 42% mobile
market share, 28% in pay TV, 23% in broadband and 6% in voice
according to the country's regulator. The company competes with the
incumbent Instituto Costarricense de Electricidad (ICE) ("ICE", B1
stable), America Movil, S.A.B. de C.V. (Baa1 stable) and Millicom
International Cellular S.A. (Ba1 stable).
Liberty Costa Rica is 80% owned by LLA with the balance owned by
Sidera Visus, S.A., as such LLA controls and consolidates Liberty
Costa Rica, together with its other two credit pools; Liberty
Communications PR Holding LP (B1 stable) and Cable & Wireless
Communications Limited (Ba3 stable); LLA also owns 50% of the
recently created joint venture between VTR Finance N.V. (B2
negative) and America Movil's, Claro Chile. LLA is a listed company
and its largest shareholder has 23% of voting stock with the
balance spread among funds and other individuals (all of them with
holdings below 7.5%). The company has 10 directors, out of which, 8
are independent according to Nasdaq and SEC rules. LLA has three
committees, including the Nominating and Corporate Governance
committee, the Audit committee, and the Compensation committee. In
addition to this, Liberty Costa Rica has a local board which main
role is the local governance managing validations and approvals
according to the delegation of authority as well as compliance
matters, among others. While the company has financial policies
that include high tolerance to leverage and distributions to its
parent company, LLA's liquidity management is very conservative.
As telecommunications service providers, Liberty Costa Rica has
overall a low direct business exposure to environmental and
moderately negative exposure to social risks.
Liberty Costa Rica will have good liquidity, generating neutral to
positive free cash flow after paying dividends to LLA. While the
company does not have a dividend policy, Moody's assumes that
excess cash flow after repaying operational expenses, interest and
capex at around 16% of revenues, will be distributed to LLA.
Further supporting the company's liquidity, Liberty Costa Rica will
have access to a new $60 million senior secured revolving credit
facility which will mature in 2028 and will share the same
guarantors and collateral with the term loans. There will be no
material debt maturities before 2031.
The stable outlook reflects Moody's expectation that, despite some
integration risks, Liberty Costa Rica will successfully execute the
integration of the mobile business as planned while maintaining
adequate liquidity. The stable outlook also incorporates the
expectation that leverage measured by total adjusted debt/EBITDA
will decline towards 4x by 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Moody's could upgrade Liberty Costa Rica's ratings if its leverage
declines below 4x and its ratio of (EBITDA-capex)/interest expense
(including Moody's adjustments) increases above 1.75x on a
sustained basis. Positive pressure could arise should the company
increases its size or geographic diversification while maintaining
a Moody's adjusted EBITDA margin above 35% and an adequate
liquidity profile. Upward pressure would also require an upgrade of
Costa Rica's sovereign rating, currently at B2.
Moody's could downgrade Liberty Costa Rica's ratings if its
leverage is maintained at a level higher than 5x and
(EBITDA-capex)/interest expense remains below 1.25x for a prolonged
period. A downgrade would also occur if liquidity weakens or if the
company's revenue base declines, or if liquidity deteriorates due
to a higher-than-expected shareholder remuneration. A negative
rating action of the Government of Costa Rica's ratings would also
put negative pressure on the ratings of Liberty Costa Rica.
The principal methodology used in these ratings was
Telecommunications Service Providers published in September 2022.
Liberty Costa Rica is a leading integrated operator in Costa Rica,
offering broadband, mobile, Pay TV and fixed telephony services,
with about 691.7 thousand homes passed and 522.5 thousand RGUs as
of September 2022, and revenue of CRC 281.7 billion (around $445
million) for the last twelve months ended September 2022. LLA
acquired an 80% stake in Liberty Costa Rica (formerly Cabletica) in
October 2018 for an enterprise value of CRC146 billion (about $250
million; valuation for 100% of the business).
Moody's The consolidated entity will generate around 41% of its
revenue from the mobile segment, 18% from pay-TV, 14% from fixed
broadband, 8% from B2B and 19% from voice and other services.
Moody's estimates that the consolidated entity will generate around
41% of its revenue from the mobile segment, 18% from pay-TV, 14%
from fixed broadband, 8% from B2B and 19% from voice and other
services.
LIBERTY SERVICIOS: S&P Gives 'B+' ICR & New Sr. Secured Bond Rating
-------------------------------------------------------------------
On Jan. 3, 2023, S&P Global Ratings assigned its 'B+' issuer credit
rating to Costa Rica-based telecom company, Liberty Servicios Fijos
LY S.A. (Liberty Costa Rica). S&P also assigned a 'B+' issue-level
rating on Liberty Costa Rica Senior Secured Finance's proposed $400
million senior secured bond.
The stable outlook reflects S&P's view that Liberty Costa Rica will
continue deleveraging as a result of its strong revenue growth due
to its recent integration of Telefonica's operations.
Liberty Costa Rica is a leading fixed services and mobile
communications provider in Costa Rica with about 522,500 and 2.9
million fixed and mobile subscribers, respectively.
During the third quarter of 2021, the company completed the
acquisition of Telefonica Costa Rica. Liberty Costa Rica financed
the purchase through a combination of debt and about $235 million
of capital contribution from the direct parent, LBT CT
Communications S.A. S&P said, "The acquisition will enable Liberty
Costa Rica to provide new services, mobile and B2B, which we expect
to contribute about 60% to the company's revenue. Additionally, we
expect that the combination of both businesses (fixed and mobile)
will drive significant synergies and efficiencies. We also believe
that the company will continue gaining market shares, which are
currently about 40% in mobile services and 30% in the cable TV
business. As a result, we expect top-line growth to surge 75% (not
considering any pro forma adjustments from the merger), with EBITDA
margins in the range of 33%-35%."
S&P said, "As the company continues to integrate Telefonica Costa
Rica's business into its portfolio, we expect Liberty Costa Rica's
adjusted debt to EBITDA ratio to fall to about 4.4x by the end of
2022 from 7.5x at the end of 2021, considering increased EBITDA
generation for the last four months of the year due to the timing
of the transaction. We forecast the ratio to drop to 4.0x in 2023
and 3.7x in 2024, stemming from an expected subscriber growth in
the fixed and mobile segments. We also expect higher EBITDA and
free operating cash flows (FOCF) given the projected gains from
operating synergies and relatively stable capital investments
during the next couple of years."
Under the new issuance, Liberty Costa Rica has established
sustainability objectives to reduce greenhouse gas (GHG) emissions.
The company's goal is to reduce absolute Scope 1 and 2 GHG
emissions by the greater of 30% or SBTi-validated target by 2027
from 2021 baseline at 36,283 gross GHG emissions, and to reduce
Scope 3 GHG emissions per operating profit unit by the greater of
35% or SBTi-validated target by 2027 from 2021's baseline. The bond
has a mechanism for the interest rate to rise 0.125% annually if by
July 2028 the company fails to meet each target on GHG emissions.
ESG credit indicators: E-2, S-2, G-2
===================================
D O M I N I C A N R E P U B L I C
===================================
[*] Punta Catalina Power Plants Have Lower Prod. Cost Than Others
-----------------------------------------------------------------
Dominican Today reports that despite the complicated international
context that maintains the price of coal above 300% compared to
usual, the units of the Punta Catalina Thermoelectric Power Plant
(CTPC) occupy the first two places in the order of merit for the
dispatch of thermal units of the System Interconnected Electricity
(SENI). According to the statement, this places it in a more
efficient position compared to the rest, the report notes.
The disclosure was made by the company's administrator, Celso
Marranzini, who stated that this achievement for Punta Catalina is
due to the efficient management for the purchase of coal, the
commendable effort of the technical and administrative team, and
the trust of President Luis Abinader, according to Dominican Today.
He defined this fact as emblematic of the high prices experienced
by fuels as a result of the current geopolitical complexities,
which also affect the supply chain, the report relays. He
explained that, with this, CTPC guarantees the continuity of the
supply of around 30% of the national energy demand with economic
generation driven by high operational efficiency, the report
discloses.
The order of merit is determined based on the production cost of
the plants, so those with a lower cost - as is the case of CTPC-
may be dispatched with priority over those with a higher cost, the
report relays.
"This simply means that we are facing the most efficient plants
that serve energy to the Dominicans," stressed Marranzini, noting
that this has been achieved "with the tenacious work of the
technicians and administrative staff," as well as the good
purchases of coal," the report relays.
The Punta Catalina senior executive said that the team under his
direction has concentrated on resolving the historical problems of
the thermoelectric plant that are associated with its construction,
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.
The TCR-LA reported in April 2019 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.
The TCR-LA reported on December 12, 2022, that Fitch Ratings has
affirmed Dominican Republic's Long-Term Foreign Currency Issuer
Default Rating (IDR) at 'BB-' with a Stable Rating Outlook. Fitch
said 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.
Standard & Poor's, 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.
=============
J A M A I C A
=============
PALACE AMUSEMENT: Board Agrees to Stock Split
---------------------------------------------
RJR News reports that the board of movie theater operators Palace
Amusement has agreed to a stock split.
The decision will now be put to the company's shareholders at its
annual general meeting on January 24, 2023, according to RJR News.
Investors will be asked to vote on increasing the company's
authorized share capital from 1.5 million to an unlimited number of
shares, the report notes.
These ordinary shares will be equal to the current shares in
circulation, the report relays.
Palace's shareholders are also being asked to agree to a stock
split, which would see each issued ordinary share in the company,
sub-divided into 600 additional shares, the report discloses.
This would take effect from the close of business on February 28,
2023, the report notes.
It will bring the total number of issued shares from 1.44 million
ordinary shares to 862.22 million ordinary shares with no-par
value, the report says.
At the close of trading, Palace Amusement shares were being sold
for $1,425.94 per unit, the report adds.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Cunupia Farmers Losing Hope in Agri Sector
-------------------------------------------------------------
Vishanna Phagoo at Trinidad and Tobago Newsday reports that after
taking a look back at 2022, president of the Jerningham Junction
Farmers Association Marlon Mathura said it's "very poor." He went
even further to say that he feels like there's no hope for
farmers.
"I losing hope, I am losing farmers and I am losing members in my
association. Nobody is doing anything," he said, notes the report.
Mathura said many farmers were plagued with infrastructural issues
that they alone couldn't have handled and the high prices of
chemicals needed, according to Trinidad and Tobago Newsday. He
also estimated the loss to the entire association which is made up
over 200 farmers to be over $1 million, the report notes.
He said the prices chemicals farmers use regularly have increased
by between 200 and 300 per cent and is still going up while many
drains in Jerningham Junction, Cunupia need desilting, the report
relays. "Our drains haven't been desilted in going on eight years
now, infrastructure wise, praedial larceny is a big problem as
well," he said.
Mathura has already planned for the future if he stops farming and
said, "Well, the easiest thing I can think of is to drive taxi or
cut back and just mind my family. That's the only thing I'm seeing
right now," the report discloses.
He said farmers are "bawling" even with the allocation of
$795,240,000 to the Ministry of Agriculture, Land and Fisheries
which was announced in the 2022-2023 budget in September, the
report notes. Many farmers won't be able to reap the benefits, the
report relays.
Mathura said land tenure is the biggest problem within the farming
industry; 60 per cent of farmers do not have land tenure to be
registered, the report relays. He explained that farmers must have
proof of owning land before they can apply for a loan from the
Agricultural Development Bank making it difficult for them to
prosper, the report discloses.
Some of the projects listed in the summary of the ministry's
expenditure, divisions and projects are the expansion of sanitary,
phytosanitary (the control of plant diseases) and food safety
capabilities, the development of Mon Jaloux Forage Development
Centre and La Gloria Forage Farms, the establishment of a central
farmers wholesale market and provision of infrastructure for the
Praedial Larceny Squad, the report relays. Many others were also
listed and can be found on the Parliament website, the report
notes.
Farmers were also allocated $500 million in 2021 to somewhat ease
the strain of the covid19 pandemic, when Clarence Rambharat was the
minister, the report says. Rambharat also embarked upon creating
food packages using only produce from local farmers to feed 125,000
families, the report relays.
On this Mathura said, "I wish the government can be more
farmer-friendly. Make all these programs farmer-friendly and review
these incentive programs," the report relays.
He added that he is expecting the number of farmers in his
association to decrease as the problems are seemingly never-ending
and it's too difficult for them to receive help, the report says.
Supermarket Association of TT (SATT) president Rajiv Diptee looked
at the impact of climate change on food security.
He said the year, "has also been extraordinarily hallmarked by the
vicissitudes of climate change. Changing weather patterns are
affecting productive capacities on crops in various external
regions. From record measured rainfalls to prolong periods of
drought, it has implications for the surety of supply worldwide
where markets are affected. This has affected the global supply
especially for our region and will be a feature of how we continue
to plan for 2023," the report notes.
He said this can help farmers look at their commodities from a "new
farming method" perspective which will supply local and possibly
regional demand, the report relays.
Diptee added, "The internal and regional architecture of food
security came vividly into focus in 2022. As we place covid19 on
the back-burner, it is important to note the pandemic still
meaningfully lingers in tangible means that affect the continuity
of daily operations. Our ability to reduce our exposure to
externalities through avenues such as agriculture, agro-processing
industries, ease of doing business cannot be understated," the
report notes.
Diptee said SATT is looking forward to a sustained economic
recovery and to welcome initiatives that ensures no one is left
behind in 2023, the report relays.
"My sincerest wish is the 'upliftment' of every single citizen into
productive avenues which gives them the chance to provide for
themselves and loved ones," he said, the report notes.
TT and Guyana both hosted agri-investment forums and expos this
year in hopes of reducing the Caribbean billion-dollar food import
bill by 25 per cent by 2025, the report discloses. The theme for
forum and expo hosted in TT was "transforming agriculture through
innovation and investment" and it was held at the Queen's Park
Savannah on August 19 for three days, the report says.
Shortly after from September to early November, TT experienced
constant rain and bad weather that left many flooded out of their
homes and now a shortage in crops, the report notes. The most
recent instance of this is the sorrel shortage that was reported in
Business Day, the report relays. Due to heavy rains, there was no
chance for the floodwater to drain from the land leaving acres of
crops destroyed and inedible, or farmers had to reap a limited
supply than normal, the report discloses.
Seeing this situation, the prices of commodities would drastically
increase because of scarcity and would only decrease once
production can keep up with the demands, the report relays.
Farmers have predicted that these high prices can drop soon as TT
will be entering the dry season - January to May, the report adds.
===============
X X X X X X X X
===============
LATAM: M&A Expected to Recover in 2023, IPOs May Take Longer
------------------------------------------------------------
Reuters reports that after a sharp drop in Latin American deals in
2022, bankers expect a slow recovery this year, led by M&A.
IPOs may take longer to resume, due to high global interest rates,
according to Reuters. The volume of M&A deals in Latin America
fell 35% in 2022, to $86 billion, according to Refinitiv data, the
report notes.
Roderick Greenlees, global investment banking head at Itau Unibanco
Holding SA (ITUB4.SA), said the total value of M&A, although lower
than the record year of 2021, was within historical range in the
years before, the report relays.
"The volatility related to elections in the region tends to be
short lived and won't affect this trend," he said, citing the
example of market improvement in Chile a year after the election of
leftist Gabriel Boric, the report discloses.
Investors are also awaiting economic policy proposals from Brazil's
President-elect Luiz Inacio Lula da Silva, the latest leftist
elected in the region after Colombia's Gustavo Petro, Roca said,
the report adds
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
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 2023. 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.
.
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