/raid1/www/Hosts/bankrupt/TCRLA_Public/230119.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 19, 2023, Vol. 24, No. 15
Headlines
A R G E N T I N A
ARGENTINA: Formalize Currency Swap Deal With China
ARGENTINA: Records 94.8% Inflation, Highest Figure in 32Yrs
B R A Z I L
BR PROPERTIES: S&P Lowers ICR to 'B+', Outlook Stable
BRAZIL: 2022 Inflation Slows Sharply, Misses Government Target
BRAZIL: Haddad Discloses US$47.5BB Package for Surplus in 2023
RIO OIL: Fitch Affirms 'BB-' Ratings on Several Series of Notes
E L S A L V A D O R
TITULARIZADORA DE DPR: Fitch Affirms 'B-' Rating on 2019-1 Loan
P E R U
PERU: IDB OKs $60MM to Enhance Water and Sanitation Services
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Business Owners Glad on No Covid Restrictions
V E N E Z U E L A
VENEZUELA: Nicolas Maduro Says Economy Grew 15% in 2022
- - - - -
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A R G E N T I N A
=================
ARGENTINA: Formalize Currency Swap Deal With China
--------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Argentina and
China have formalized the expansion of a currency swap deal,
allowing the South American country to increase its depleted
foreign currency reserves, the Argentine central bank said.
Argentina's government needs to rebuild reserves to cover trade
costs and future debt repayments, and more reserves are a key
objective of a major debt deal with the International Monetary Fund
(IMF), according to globalinsolvency.com.
President Alberto Fernandez announced the deal in November last
year and said at the time it was worth $5 billion, the report
notes.
The heads of the Argentine and Chinese central banks "confirmed
that the deal for the swap of currencies between both institutions
has been activated and committed to deepening the use of (Chinese
yuan) in the Argentine market," the central bank said in a
statement. China is Argentina's second biggest trade partner, after
Brazil, and the second most important destination for Argentine
exports, 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.
S&P Global Ratings, on Jan. 9, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC+/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is
negative. The
negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition, and infighting among the opposition,
constrains the sovereign's ability to implement timely changes in
economic policy, according to S&P.
Fitch, on the other hand, downgraded Argentina's Long-Term
Foreign-Currency (FC) and Local-Currency (LC) Issuer Default
Ratings (IDRs) to 'CCC-' from 'CCC' in October 2022. Fitch
typically does not assign Outlooks to sovereigns with a rating of
'CCC+' or below. Fitch has removed the
Long-Term IDRs from Under Criteria Observation (UCO). The
downgrade of Argentina's FC IDR to 'CCC-' reflects deep
macroeconomic imbalances and a highly constrained external
liquidity position, which Fitch expects to increasingly undermine
repayment capacity as foreign-currency debt service ramps up in the
coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision
to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS has also confirmed Argentina's Long-Term Foreign Currency
Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at
CCC (high) on July 21, 2022.
ARGENTINA: Records 94.8% Inflation, Highest Figure in 32Yrs
-----------------------------------------------------------
Rio Times Online reports that Argentina's inflation during 2022 was
94.8 percent year-on-year, the highest figure in 32 years, the
National Institute of Statistics and Censuses (INDEC) reported.
The country closed December last year with 5.1 percent inflation,
reversing the downward trend shown in November, according to Rio
Times Online.
The sharp price increase, measured in year-on-year terms, mainly
affected the clothing item with a 120.8 percent rise, followed by
hotels and restaurants with 108.8 percent, and goods and services
with 97.8 percent, the report notes.
On the other hand, food increased by 95 percent, health by 90.9
percent, education by 86.3 percent, and transportation by 86.2
percent, according to INDEC, the report relays.
Similarly, services associated with housing and fuel reported a
rise of 80.4 percent and communication of 67.8 percent, the
official entity added, the report discloses.
According to the head of Strategy of the financial consulting firm
Inviu, Diego Martínez Burzaco, the high inflation in Argentina is
explained by a macroeconomic instability that persists and could
extend throughout 2023 if corrective measures are not accelerated,
the report says.
"The whole scenario of the unstable macro economy during the past
year was consolidated in higher inflation close to three digits,"
Burzaco pointed out in dialogue with Xinhua, the report relays.
Among the main factors, in addition to the global context of rising
prices, he mentioned a monetary reason caused by turbulences in the
financial market, which have led to solid interventions by the
country's central bank, 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.
S&P Global Ratings, on Jan. 9, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC+/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is
negative. The
negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Global capital
markets are closed to Argentina. Moreover, disagreement within the
government coalition, and infighting among the opposition,
constrains the sovereign's ability to implement timely changes in
economic policy, according to S&P.
Fitch, on the other hand, downgraded Argentina's Long-Term
Foreign-Currency (FC) and Local-Currency (LC) Issuer Default
Ratings (IDRs) to 'CCC-' from 'CCC' in October 2022. Fitch
typically does not assign Outlooks to sovereigns with a rating of
'CCC+' or below. Fitch has removed the Long-Term IDRs from Under
Criteria Observation (UCO). The downgrade of Argentina's FC IDR
to 'CCC-' reflects deep macroeconomic imbalances and a highly
constrained external liquidity position, which Fitch expects to
increasingly undermine repayment capacity as foreign-currency debt
service ramps up in the coming years.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision
to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS has also confirmed Argentina's Long-Term Foreign Currency
Issuer Rating at CCC and Long-Term Local Currency Issuer Rating at
CCC (high) on July 21, 2022.
===========
B R A Z I L
===========
BR PROPERTIES: S&P Lowers ICR to 'B+', Outlook Stable
-----------------------------------------------------
S&P Global Ratings lowered its global scale rating on Brazilian
real estate operator BR Properties S.A. (BR Properties) to 'B+'
from 'BB-' and its Brazilian national scale rating to 'brAA' from
'brAA+'.
S&P said, "The stable outlook reflects our view of the company's
lack of debt and comfortable cash position, without significant
cash outflows expected for next few years after the capital
reduction; as well as our expectation that it will continue
operating at reduced scale, with forecast EBITDA of R$40
million-R$50 million in 2023 and 2024."
On Jan. 3, 2023, Brazilian real estate operator BR Properties
announced its proposal for a new R$2.5 billion capital reduction.
This follows the previous R$1.1 billion reduction completed in
2022. The proposal includes the transfer of some of its properties,
representing about 26% of its current gross leasable area (GLA), to
a real estate fund, in exchange for shares.
The asset transfer and consequent capital reduction will occur in
two steps. BR Properties will pay R$1.2 billion in cash in the
first quarter of 2023, with the remaining proceeds of R$1.8 million
from last year's portfolio sale yet to be received. The company
will then transfer R$1.2 billion in assets to a real estate fund it
will structure, and transfer the fund's shares to its shareholders.
BR Properties plans to transfer to the fund its two remaining
office properties, corresponding to 91,791 square meters (sqm) of
GLA, or about 26% of its current GLA. The transaction must be
approved at a shareholders' meeting this month. S&P expects it will
pass without major changes, as, in its view, it represents a good
return on invested capital for shareholders in a still challenging
macroeconomic environment.
After the transaction is completed, BR Properties' smaller
portfolio will include five warehouses in the state of Sao Paulo,
down from 17 properties in June 2022, before last year's portfolio
sale. S&P said, "We expect vacancy will be relatively high in 2023,
at about 18%-20%, considering the higher impact of the recently
delivered Cajamar unit that is still not fully leased. The
warehouse would represent about 57% of the company's GLA after the
proposed changes. We forecast vacancy will decline to single digits
in 2024, as we expect BR Properties will be able to rent the new
area by taking advantage of the current positive prospects for the
segment in Brazil with increasing demand for good-quality assets
such as those offered by the company."
S&P said, "Although we now forecast lower revenues for the next few
years, at R$80 million-R$90 million in 2023 compared with our
previous estimate of R$140 million-R$150 million, we do not expect
expenses will decline in the same proportion, because management
intends to maintain the company's structure as it targets future
growth. This, coupled with still high vacancy expected this year,
should result in more pressured profitability than we previously
expected, with an EBITDA margin of about 47%-50% in 2023, although
improving in 2024 to about 58%-61%, given the increasing occupancy.
This is lower than what we expect for other companies in the
industry, such as Log Commercial Properties e Participações S.A.
(brAA+/Stable/--), with expected EBITDA margins of 77.5%-77.0% and
76.0%-77.5%, respectively, in the same years.
"Although the company did not disclose any current expansion plans,
we believe that BR Properties could resume growth in the future,
considering its position as one of the most experienced players
with solid expertise in the Brazilian real estate market. We
believe that the company's cash position, which we forecast at
about R$550 million-R$600 million at the end of 2023, and zero-debt
balance sheet provide financial flexibility to engage in new
projects or acquisitions without returning leverage to historical
levels of net debt to EBITDA above 6.0x. However, further mergers
and acquisitions (M&As) could affect the company's business and
financial risk profiles."
GP Investments (GP; not rated) announced on Jan. 13, 2023, its
intention to launch a tender offer to acquire up to 100% of BR
Properties' shares, through its subsidiary, GPIC LLC. The private
equity firm already manages the investment fund through which ADIA,
the sovereign fund of Abu Dhabi, holds a 61% stake in BR
Properties. The tender offer includes conditions, such as the
approval of the capital reduction proposal and whether BR
Properties would then exit Novo Mercado, a listing segment in the
Brazilian Stock Exchange--this condition would affect the maximum
limit at which the shares could be acquired in the tender offer.
S&P said, "With the capital reduction occurring as expected and the
tender offer then taking place, we would reassess BR Properties'
final ownership structure, including expected financial policies,
and its impact on our ratings. We currently assess the company's
financial risk profile as significant, due to a financial sponsor's
control, despite its current low leverage."
ESG Credit Indicators: E-2, S-2, G-3
BRAZIL: 2022 Inflation Slows Sharply, Misses Government Target
--------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazil's
inflation ended 2022 with a sharp slowdown from double-digit peaks
seen throughout the year on the back of fiscal measures and an
aggressive monetary policy tightening, but once again missed the
government's official target.
The benchmark IPCA consumer price index rose 5.79% last year,
statistics agency IBGE said according to globalinsolvency.com.
The result missed both the central bank's annual target of 3.5% and
the top 5% of its tolerance band, marking the second straight year
that it had done so, the report notes.
Central bank chief Roberto Campos Neto is legally required to
publish a letter justifying the inflation target miss, the report
relays.
It will be released soon, according to the central bank, the report
discloses.
In 2022, the central bank continued its aggressive monetary
tightening to battle inflation, lifting its key interest rate to
13.75% from a record low of 2% in March 2021, the report notes.
Since September, policymakers have left rates unchanged at their
cycle-high, stressing they remain vigilant about inflationary
pressures, 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 was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that jeopardize
broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook reflects
S&P's base-case assumption that Brazil will maintain its fiscal
anchors over the next two years despite an increasing interest
burden, preventing significant fiscal slippage and limiting the
rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook.  Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
BRAZIL: Haddad Discloses US$47.5BB Package for Surplus in 2023
--------------------------------------------------------------
Richard Mann at Rio Times Online reports that Brazil Minister of
Finance, Fernando Haddad, has announced a R$242.7 (US$47.5) billion
package of tax measures to make the government record a primary
surplus in 2023.
The measures involve reversing tax breaks, changes in the
Administrative Council of Tax Appeals (Carf), and a new special
renegotiation of debts called the Zero Litigation Program,
according to Rio Times Online.
According to the minister, the changes may make the Central
Government (National Treasury, Social Security, and Central Bank)
register a primary surplus of R$ 11.13 (US$2.1) billion in 2023,
against a deficit forecast of R$ 231.55 billion, the report
relays.
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 was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that jeopardize
broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022).  The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
RIO OIL: Fitch Affirms 'BB-' Ratings on Several Series of Notes
---------------------------------------------------------------
Fitch Ratings has affirmed the long-term series 2014-1, 2014-3 and
2018-1 notes issued by Rio Oil Finance Trust at 'BB-'. The Rating
Outlook is Stable.
The ratings are not directly linked to the originator's credit
quality. The ratings are based on potential production and
generation risk and are ultimately linked to Petrobras' Issuer
Default Rating (IDR), as it is the main source of cash flow
generation. The ratings are capped at Petrobras' rating level
(BB-/Stable), as the largest obligor of royalties and special
participations payments. Additionally, the ratings are also capped
at Banco do Brazil's rating level (BB-/Stable), given it cannot be
replaced as collection account bank.
The assigned ratings address timely payment of interest and timely
payment of principal on a quarterly basis.
Entity/Debt Rating Prior
----------- ------ -----
Rio Oil Finance
Trust
2014-1
76716XAA0 LT BB- Affirmed BB-
2014-1 REGS
USU76673AA72 LT BB- Affirmed BB-
2014-3
76716XAB8 LT BB- Affirmed BB-
2014-3 regs
USU76673AB55 LT BB- Affirmed BB-
2018-1
76716XAC6 LT BB- Affirmed BB-
TRANSACTION SUMMARY
The notes issued by Rio Oil Finance Trust, a Delaware-based special
purpose vehicle (SPV) constituted for the sole purpose of this
transaction are backed by the royalty flows owed by oil
concessions, predominantly operated by Petrobras, to the government
of the state of Rio de Janeiro (RJS), which has assigned 100% of
the flows to RioPrevidencia (RP). For the purpose of this
transaction, RP sold its rights to Rio Oil Finance Trust.
KEY RATING DRIVERS
Ratings Not Directly Linked to Originator's: RP is an autonomous
government agency that is part of the Secretary of State for
Planning and Management of RJS (BB-/Stable). Performance of the
originator will not affect the collateral as the generation of the
cash flow needed to meet timely debt service is not dependent on
either RP or RJS.
Largest Obligor Rating Cap: Petrobras' rating is the ultimate cap
for the proposed transaction, as it is the main source of cash flow
generation. Petrobras carries Local and Foreign Currency (LC/FC)
IDRs of 'BB-'/Outlook Stable and 'AA(bra)'/Outlook Stable. The
company is majority controlled by the federal government of Brazil
and has the rights to E&P of the vast majority of Brazil's oil
fields.
Future Production Risk: The transaction benefits from growth in
production levels as it increases the total royalty flows.
Depressed oil prices have led Petrobras to reduce production
targets on multiple occasions. Nevertheless, Petrobras recently
increased their 2023-2027 capital expenditure projection from
2022-2026 projections, and increasing production levels would
benefit the transaction in the near to medium term.
Cash Flows Support Rating: The expected levels of annualized
average debt service coverage ratios (AADSCRs) over 2.0x partially
mitigate the transaction's exposure to fluctuations in oil prices
and production levels at the current rating level. Fitch expects
AADSCRs to be over 2.0x for the life of the transaction, assuming
Law 12,734 is implemented after 2020.
Oil Revenues Dedicated Account Modification Mitigates Redirection
Risk: Pursuant to the Oil Revenues Dedicated Account Modification
Legislation, the RioPrevi Oil Revenues initially deposited to the
RJS Oil Revenues Dedicated Account are no longer required by
legislation to be deposited into a state-owned account. Oil
revenues assigned to this transaction are instead deposited into an
account under the name of the issuer. This change in the account
mitigates potential redirection of flows to RJS. As Banco do Brasil
(BdB) cannot be replaced as a collection bank, the transaction is
directly linked to the credit quality of BdB (BB-/Stable).
Ample Liquidity for Timely Payment: The transaction benefits from
liquidity, in the form of a Debt Service Reserve Account (DSRA) and
a Liquidity Reserve Account. Funds in deposit in these two accounts
shall at all times be sufficient cover three principal and interest
(P&I) payments, which is considered sufficient to keep debt service
current on the notes under different stress scenarios.
Potential Exposure Political Risk Partially Mitigated: The state's
liquidity constraints, evidenced by various delays in commercial
and other payments, have heightened the transactions political risk
exposure. However, provisions included in the sixth rescission
waiver and amendment, such as the rescission of the trapping of
excess cash and of the early amortization period, will increase the
cash flows returned to the state, and, in turn, decrease the
transaction's exposure to potential political risk.
Legal Changes May Affect Collateral Stability: Although, to date,
no amendments affecting the distribution of royalties for the
existing concession Regime have been implemented, provisions
regarding the change in allocation percentages incorporated in Law
12,734 are currently under review. The transaction was analyzed
assuming the law will change and DSCRs remain sufficiently robust
and commensurate with the expected ratings.
True Sale Valid under Brazilian Law: Collateral backing this
transaction was transferred to RP by RJS through a state decree,
making RP the legal owner of the royalties. This transfer gives RP
the right to sell the collateral into the trust.
Transfer and Convertibility Risk: Series 2014-1, 2014-3 and 2018-1
notes are exposed to transfer and convertibility risk as royalty
flows are paid in an account in Brazilian reais. This exposure caps
the rating of the transaction at the country ceiling of Brazil,
which is currently 'BB'. To partially mitigate operational risk
that may arise from transferring and converting flows on a daily
basis to an off-shore account, the transaction contemplates reserve
funds that covers three P&I payment.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The transaction is exposed to oil price and production volume
risks. Sustained low prices or declines in prices or production
levels significantly below expectations may trigger downgrades;
- The ratings are capped by the credit quality of Petrobras, the
main obligor generating cash flows to support the transaction, and
to the sovereign rating and country ceiling assigned to Brazil. A
downgrade of Petrobras or the sovereign would trigger a downgrade
on the notes;
- The ratings are sensitive to the rating of BdB given the
excessive counterparty exposure to the transaction; therefore, a
downgrade of BdB would trigger a downgrade on the notes.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The main constraints to the program rating are the ratings of
Petrobras and BdB. An upgrade of both Petrobras and BdB, together
with sustained high oil prices, which in turn supports growth in
production levels, could trigger a positive rating action;
- In December 2022, Fitch revised its "Global Economic Outlook"
forecasts as a result of central banks being forced to toughen up
in their fight against inflation and China's property market
outlook deterioration. Downside risks have increased and Fitch has
published an assessment of the potential rating and asset
performance impact of a plausible, but worse than expected, adverse
stagflation scenario on Fitch's major structured finance (SF) and
covered bond (CVB) subsectors ("What a Stagflation Scenario Would
Mean for Global Structured Finance"). Fitch expects LatAm's Global
Cross-Sector's future flow transactions in the assumed adverse
scenario to experience a "Virtually No Impact," indicating a low
risk for rating changes.
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.
=====================
E L S A L V A D O R
=====================
TITULARIZADORA DE DPR: Fitch Affirms 'B-' Rating on 2019-1 Loan
---------------------------------------------------------------
Fitch Ratings has affirmed Titularizadora de DPRs Limited's series
2019-1 loans at 'B-'. The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Titularizadora
de DPRs Limited
Series 2019-1
Variable
Funding Loan LT B- Affirmed B-
TRANSACTION SUMMARY
The transaction is backed by U.S. dollar-denominated existing and
future diversified payment rights (DPRs) originated by Banco
Cuscatlán de El Salvador, S.A. (BC). DPRs are processed by
designated depository banks (DDBs) that have executed
acknowledgement agreements (AAs), irrevocably obligating them to
make payments to an account controlled by the transaction trustee.
Fitch's rating addresses timely payment of interest and principal
on a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
transaction's rating is tied to the credit quality of the
originator, BC. Fitch's view of BC's credit quality is based on its
intrinsic credit strength and is highly influenced by the local
operating environment (El Salvador; rated CC). Fitch downgraded El
Salvador's IDR by two notches on Sept. 15, 2022 to 'CC' from
'CCC'.
Strong Going Concern Assessment (GCA): Fitch uses a GCA score to
gauge the likelihood that the originator of a future flow
transaction will stay in operation throughout the transaction's
life. Cuscatlán GCA's score of '2' reflects that the bank is
considered large and systemically important in El Salvador, which
is a highly concentrated market.
Fitch does not consider direct support or potential sovereign
support in the transaction's rating; however, the bank could
benefit from government assistance to receive extraordinary
shareholder support if required. The score allows for a maximum of
four notches above the Local Currency IDR of the originator.
Notching Uplift from IDR: The 'GC2' allows for a maximum four
notch-rating uplift from the bank's Long-Term IDR pursuant to
Fitch's future flow methodology. Considering the credit quality of
the originator, which is driven by its operating environment, the
assigned rating is at the maximum notching differential of four
notches allowed by Fitch's future flow methodology for an
originator with a GCA score of 'GC2'. Fitch reserves the maximum
notching uplift for originator's rated on the lower end of the
rating scale.
Low Future Flow Debt Relative to Balance Sheet: The future flow
transaction represents approximately 1.3% of BC's total funding and
9.8% of non-deposit funding when considering the current
outstanding balance on the program ($42.75 million) as of November
2022 and utilizing September 2022 financials. Fitch considers the
ratio of future flow debt relative to the bank's balance sheet
small enough to allow the financial future flow ratings up to the
maximum uplift indicated by the GCA score.
Strong Coverage Levels Remain Supportive of Assigned Rating:
Considering average rolling quarterly DDB flows over the last five
years (December 2017-November 2022) and the maximum periodic debt
service over the life of the program, including Fitch's interest
rate stress, the projected quarterly debt service coverage ratio
(DSCR) is 229.3x. Fitch considers this coverage level strong.
Moreover, the transaction can withstand a decrease in flows of over
99% and still cover the maximum quarterly debt service obligation.
Nevertheless, Fitch will continue to monitor the performance of the
flows as potential economic pressures could negatively impact the
assigned rating.
Sovereign/Diversion Risks Reduced: The structure mitigates certain
sovereign risks by collecting cash flows offshore until periodic
debt service requirements are met. In Fitch's view, diversion risk
is partially mitigated by the acknowledgments signed by the three
DDBs. The largest DDB, Citibank N.A., continues to process more
than 75% of DPRs (76% YTD Nov 2022). While this trend is
decreasing, Fitch believes Citibank's still relatively heavy DDB
concentration exposes the transaction to a higher degree of
diversion risk relative to other Fitch-rated DPR programs in the
region. Nevertheless, DDB concentration does not currently pose a
constraint on the assigned rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The transaction ratings are sensitive to changes in the credit
quality of the originating bank. Currently the program is receiving
the maximum notching uplift from the originator's IDR. Therefore, a
deterioration of the credit quality of BC by one notch would pose a
further constraint to the rating of the transaction from its
current level.
- The transaction ratings are sensitive to the ability of the DPR
business line to continue operating, as reflected by the GCA score,
and a change in Fitch's view on the bank's GCA score can lead to a
change in the transaction's rating. The quarterly DSCRs are
expected to be more than sufficient to cover debt service
obligations and should therefore be able to withstand a significant
decline in cash flows in the absence of other issues. However,
significant declines in flows could lead to a negative rating
action. Any changes in these variables will be analyzed in a rating
committee to assess the possible impact on the transaction
ratings.
- No company is immune to the economic and political conditions of
its home country. Political risks and the potential for sovereign
interference may increase as a sovereign's rating is downgraded.
However, the underlying structure and transaction enhancements
mitigate these risks to a level consistent with the assigned
rating.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- The main constraint to the program rating is the originator's
rating and bank's operating environment. If upgraded, Fitch will
consider whether the same uplift could be maintained or if it
should be further tempered in accordance with criteria.
- In December 2022, Fitch revised its "Global Economic Outlook"
forecasts as a result of central banks being forced to toughen up
in their fight against inflation and China's property market
outlook deterioration. Downside risks have increased and Fitch has
published an assessment of the potential rating and asset
performance impact of a plausible, but worse than expected, adverse
stagflation scenario on Fitch's major structured finance (SF) and
covered bond (CVB) subsectors ("What a Stagflation Scenario Would
Mean for Global Structured Finance"). Fitch expects LatAm's Global
Cross-Sector's future flow transactions in the assumed adverse
scenario to experience a "Virtually No Impact," indicating a low
risk for rating changes.
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.
=======
P E R U
=======
PERU: IDB OKs $60MM to Enhance Water and Sanitation Services
------------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $60 million
loan to boost the quality and coverage of drinking water and
sanitation services for the inhabitants of the Zarumilla and Aguas
Verdes districts in northern Peru.
The project will directly improve the quality of life of nearly
50,000 people. These beneficiaries include 7,050 homes that will be
connected to the drinking water system for the first time, as well
as approximately 11,900 families set to receive wastewater
collection and treatment services.
The loan will help expand and rehabilitate the drinking water
supply and sewer systems by financing new wells, collector lines,
impulse lines, reservoirs, distribution networks, pumping stations,
and household connections. Additionally, the plan includes building
and rehabilitating treatment plants and creating a sewer connection
program.
The strategy will also help the executing agency, Agua Tumbes,
refine how it manages its operations in order to guarantee its
sustainability, operational resilience, and service quality. Part
of the loan will be invested to reduce water losses, improve
processes to collect technical and commercial information, optimize
energy use, create a well protection and monitoring program, and
strengthen human resources.
The loan will significantly improve the population's quality of
life. Currently, the people of the districts of Zarumilla and Aguas
Verdes—on the border with Ecuador—experience constant
interruptions and outages in their drinking water service. In both
districts, their uninterrupted water supply averages a mere 4 to 9
hours per day.
The source of the districts' water is groundwater, which is
extracted through five tube wells. The quality of this water is
fair, and it has a high risk of cross-contamination that can cause
intestinal infections and other health problems, especially for
children.
A local contribution from the Ministry of Housing, Construction,
and Sanitation brings loan total to nearly $78 million. The loan
will be disbursed over a period of 6 years, with a 15-year
repayment term, a 7-year grace period, and an interest rate based
on the Secured Overnight Financing Rate (SOFR).
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Business Owners Glad on No Covid Restrictions
-----------------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that there was a
collective sigh of relief from business owners as the Prime
Minister said he would not be implementing any restrictions or
strict measures to curb the number of rising Covid-19 cases in
Trinidad and Tobago.
Ryan Chin, director at Dachin Group of Companies, which includes
Texas de Brazil, Rizzoni's Ristorante Italiano and Jaxx
International Grill, told the Express that he was pleased stricter
measures were not implemented.
Chin said his restaurants never stopped providing hand sanitisers
for guests, so that pattern will continue, according to Trinidad
Express.
"A lot of the measures that we implemented during the pandemic have
remained and a lot of our staff still wear the mask at their own
will. Keeping most of the protocols is just good practice for the
restaurants," Chin explained, the report notes.
Passage to Asia restaurant owner Dipchand Persad said he was quite
sure the prime minister was not going to lock down once again, with
the "Mother of All Carnivals" around the corner, the report
discloses.
"What has to happen is the population needs to take care of their
selves and ensure the said protocols put in place to curb the
spread continues. We still have the sink outside our restaurants
at Ariapita and Chaguanas. We are glad no restrictions on
businesses were given like the last time, so everyone must do their
part," Persad noted, the report relays.
Still Recovering
MovieTowne owner Derek Chin said the cinema industry certainly
could not take another lockdown and applauded the prime minister
for not going in that direction, the report notes.
"Most businesses are still recovering from the lockdowns and while
movie-goers are coming out, it is not like it was before, as some
persons are still scared to interact, and also the crime situation.
The Government should also embark on a PR campaign calling on
citizens to be more responsible," Chin said, the report says.
Chaguanas Chamber of Industry and Commerce (CCIC) head Richie
Sookhai said as a nation, everyone needs to collaboratively work
together to fight this ongoing battle, the report relays.
"Measures must be put in place to protect citizens of this country.
For the past two years, we have seen our economy endure adversity
from loss of lives to increasing unemployment, trade disruptions,
decimation of the tourism industry, and even business closure.
With a spike in cases once again we do not want to find ourselves
in the same situation," Sookhai noted, the report discloses.
Furthermore, he said the efficacy of proper community mask-wearing
substantially reduces the transmission of Covid-19 by up to 70 per
cent, the report notes.
"With such empirical evidence, we can safely say that mask-wearing
should be enforced more together with a rigorous push in our
vaccination drive, as well as encouraging proper sanitary measures
at home and in both the work and business places, especially with
Carnival right at the horizon, all to curb the spread of the
virus," Sookhai added, the report relays.
And, the Confederation of Regional Business Chambers (CRBC) was
also pleased with the prime minister's approach to dealing with the
rise in Covid-19 cases, the report says.
However, the CRBC urged citizens to get vaccinated, get their
booster shots, and ensure their protection, the report notes.
Maintaining the wearing of masks and social distancing are also
important steps for individuals to take, it said, the report
relays.
"This is the individual's responsibility. The medical team
indicated that the number of infections is increasing, and people
must be more responsible. But critically important is the
monitoring of visitors who are flying in our nation for Carnival
and caution must be consistently applied to ensure that infection
spread must be kept to a minimum," the CRBC added, the report
adds.
=================
V E N E Z U E L A
=================
VENEZUELA: Nicolas Maduro Says Economy Grew 15% in 2022
-------------------------------------------------------
Buenos Aires Times reports that Venezuela's economy closed out 2022
with a 15 percent growth rate, according to a government projection
presented by President Nicolas Maduro.
The Bolivarian leader also used a presentation to ask banks to
grant 30 percent of their loan portfolio in dollars, the prevailing
currency in the country, according to Buenos Aires Times.
"Venezuela has had a growth in the year 2022 above 15 percent of
gross domestic product, the highest growth in Latin America and the
Caribbean, with the impact of diversification of the economy that
we have not had in years," Maduro said during the presentation of
his annual report and account to Congress, the report notes.
Venezuela's economic activity began to fall in 2014, amid a slump
in the country's main source of income, oil, and a pressing crisis
that worsened after the imposition of a battery of international
sanctions in 2019 as part of a US-led crusade to bring down the
Chavista leader after disavowing his re-election in 2018, the
report relays.
As a result of these punitive measures, which included an oil
embargo, Venezuela lost 99 percent of its income, according to
Maduro, the report says.
With informal dollarisation and the easing of controls, the
Venezuelan economy took a breather and, after years of recession
and hyperinflation that destroyed purchasing power, recorded five
quarters of growth between 2021 and 2022, the report says.
"We are going step-by-step, it is the real economy, it is the real
economy, which is going up and should get better and better," the
president celebrated, although experts have warned that it is
possible that this "recovery" could reach a ceiling in the absence
of deeper measures, such as credit expansion, the report notes.
Maduro called on public and private banks to "expand foreign
currency financing -- Increase it to 30 percent of foreign currency
financing for the economic growth of all sectors that produce
goods, wealth and employment for the country," the report
discloses.
The president, who did not offer data on poverty, highlighted a
reduction in the unemployment rate from 8.9 percent in 2021 to 7.8
percent in 2022, the report relays.
He acknowledged some "disturbances" at the end of the year that
destabilised inflation, although he did not detail figures, the
report discloses. The latest official inflation figure published
by the Central Bank is from October, with a year-on-year rate of
155.8 percent, the report says.
According to private estimates, which warn of the possibility of a
return to the hyperinflationary cycle that Venezuela abandoned in
2021, the consumer price index exceeded 300 percent in 2022, the
report adds.
As recently reported in the Troubled Company Reporter-Latin
America, Moody's Investors Service has withdrawn Venezuela's C
local currency and foreign currency ceilings.
*********
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.
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