/raid1/www/Hosts/bankrupt/TCRLA_Public/230120.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Friday, January 20, 2023, Vol. 24, No. 16
Headlines
A R G E N T I N A
ARGENTINA: IDB Approves $30MM-Loan to Lessen Toll of Cyberattacks
BLOCKFI INC: To Disclose Finances Breakdown Amid Bankruptcy
B R A Z I L
AMERICANAS SA: Face Up to $8BB Early Debt Charges After Scandal
BRAZIL: Jair Bolsonaro Supporters Storm Congress, High Court
BRAZIL: Market Has Restrained Reaction to Attacks in Brasilia
C A Y M A N I S L A N D S
TRANSOCEAN INC: S&P Rates New $1.175BB Senior Secured Notes 'B-'
E L S A L V A D O R
EL SALVADOR: IDB Approves $100 Million Loan to Help MSMEs
M E X I C O
MEXARREND SAPI: S&P Lowers LongTerm ICR to 'CC', On Watch Negative
SERVICIOS CORPORATIVOS JAVER: Fitch Affirms LongTerm 'BB-' IDRs
- - - - -
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A R G E N T I N A
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ARGENTINA: IDB Approves $30MM-Loan to Lessen Toll of Cyberattacks
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The Inter-American Development Bank (IDB) has approved a $30
million loan to help Argentina implement the Cybersecurity Program
for Critical Information Infrastructures (CII), an initiative aimed
at reducing the cost of cyberattacks in the country through early
detection.
By stepping up protection for Argentina's public institutions and
their technological infrastructure, the program will increase
Argentina's cybersecurity, which will benefit citizens, the private
sector, and the government. To achieve this, the program will
strengthen the institutional and technological capabilities of the
Argentinian Secretariat of Public Innovation, invest in training
cybersecurity professionals, and bolster protections for the
country's Electronic Document Management ecosystem.
Cyberattacks have been on the rise as digital technology use has
surged in the wake of the COVID-19 pandemic. According to the World
Economic Forum, they are now one of the top economic threats faced
by countries today. At the same time, digital transformation plays
a key role in the post-pandemic recovery of economies around the
globe, making it essential for countries in the region to shore up
their cybersecurity measures.
The Cybersecurity Program for CII strategy seeks to improve
Argentina's ability to detect cyber incidents early, with the goal
of minimizing the cost of responding to and recovering from such
attacks. It will also work to address the cybersecurity industry's
labor shortage and the stark gender gap in the cybersecurity
workforce, which are challenges present in both Latin America and
the Caribbean and globally. Indeed, the 2022 Cybersecurity
Workforce Study finds that approximately 3.4 million additional
cybersecurity professionals are needed worldwide, and research from
Microsoft found that women represented only 25% of the global
cybersecurity workforce in 2021.
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.
BLOCKFI INC: To Disclose Finances Breakdown Amid Bankruptcy
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Crypto Slate reports that BlockFi said publicly that it will file a
financial breakdown soon following progress in its January 9, 2023
bankruptcy hearing.
In a blog post on its website, BlockFi said that it plans to file
reports regarding its assets and liabilities and broader financial
status by Jan. 11, 2023. Specifically, those filings will include
the company's Schedules of Assets and Liabilities and its Statement
of Financial Affairs. The latter statement will lay out
transactions that BlockFi made to various parties including
insiders prior to its bankruptcy.
Apart from BlockFi's public statement, the company's latest
bankruptcy hearing revealed various other pieces of information
related to its finances.
On January 10, 2023, Coindesk quoted a statement from Joshua
Sussberg, the lawyer for the firm. Sussberg said during the
hearing that BlockFi executives have not withdrawn any of their own
crypto holdings since the company's bankruptcy filing in November
2022.
Sussberg differentiated the behavior of BlockFi's executives from
that of Celsius' leadership. In the latter case, numerous
individuals including Celsius CEO Alex Mashinsky withdrew assets
shortly before the company halted its services.
Elsewhere, Reuters reported that BlockFi repaid an unidentified
investor $15 million to preempt a threatened lawsuit last 2022.
According to Sussberg, the investor's complaints concerned the
declining value of BlockFi's equity. Though BlockFi believed that
those claims were "specious," it reached a financial settlement
nonetheless.
It has now been nearly two months since BlockFi suspended
operations. The company halted user withdrawals on Nov. 11, 2022
and filed for bankruptcy on Nov. 28, 2022. BlockFi cited the
collapse of FTX and the resulting "lack of clarity" as the reason
for its failure.
The crypto lending company is believed to owe between $1 billion
and $10 billion to over 100,000 creditors, according to court
statements in December 2022.
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.
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B R A Z I L
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AMERICANAS SA: Face Up to $8BB Early Debt Charges After Scandal
---------------------------------------------------------------
Rodrigo Viga Gaier and Tatiana Bautzer at Reuters report that a
Brazilian court said Americanas SA (AMER3.SA) could be liable to
repay up to 40 billion reais (US$7.9 billion) in debt earlier than
planned, if the retailer is found in breach of covenant after
reporting "accounting inconsistencies."
A group representing minority shareholders filed a complaint with
Brazil's securities regulator earlier claiming a "multi-billion
fraud," after Americanas said it had uncovered inconsistencies in
the order of 20 billion reais, according to Reuters.
"Calling it 'inconsistencies' is nothing more than an attempt to
use a euphemism for a multi-billion fraud that not only destroyed
the assets of shareholders but also undermined the credibility of
Brazil's capital markets," Abradin said in a document seen by
Reuters.
The group, the Abradin association, also called for an
investigation of PwC, the firm's auditor. PwC declined to comment.
The court granted an injunction protecting Americanas from
creditors looking to claim back debt faster or seize company
assets, as well as contracts necessary for the firm's operations -
on the condition it file for bankruptcy protection or reach a deal
with creditors, the report notes.
If Americanas does not file within 30 days, the court document
said, the injunction will lose effect, the report discloses.
Changes to the firm's balance sheet resulting from the purported
inconsistencies, the court said, could affect its debt and minimum
working-capital levels, resulting in a breach of covenant requiring
the early repayment of up to $8 billion in debt, the report
relays.
The company had said it and its creditors were together seeking a
"viable alternative" in light of its looming debts, the report
relates.
Americanas shares rebounded 15% after plummeting over 75% a day
earlier, wiping out 8.4 billion reais in market value when Chief
Executive Sergio Rial, nine days into his job, resigned over the
discovery of the irregularities, the report notes.
The regulator, CVM, has announced three probes into the retailer,
while the company has formed an independent committee to
investigate, the report relays.
In revealing the irregularities on Wednesday, Americanas said it
believed the cash impact was not material though more inquiries
were needed, the report says.
'Not Easy To Hide'
"I think this is the biggest scandal I've ever seen on the
Brazilian stock exchange," James Gulbrandsen, NCH Capital's chief
investment officer in Latin America, told Reuters.
Fabio Alperowitch, a manager at FAMA Investimentos, said he had
sold his position in Americanas in 2019 due to the "opacity" of its
financial statements. "All the evidence of misconduct was there,"
he tweeted, the report relays.
Americanas directors sold around 215 million reais (4$42 million)
in shares between July and September, according to regulatory
filings, the report discloses. The company did not report sales by
controlling shareholders or members of the board, the report says.
"What draws a lot of attention is the size of the problem. It's not
easy to hide 20 billion reais," said Eric Barreto, a professor at
Sao Paulo's Insper. "If the operations were on the balance sheet,
it was a matter of presentation. But I don't know if they were
fully on the sheet," the report relays.
Rial, in a meeting with investors, attributed the inconsistencies
to differences in accounting for the financial cost of bank loans
and debt with suppliers, the report discloses. Accountants,
however, are still trying to figure out details, the report says.
Rial was named in August to succeed former CEO Miguel Gutierrez
after almost 30 years at the firm, the report relays.
Americanas, long controlled by three Brazilian billionaires who
founded 3G Capital, has a network of stores ubiquitous in the
country's shopping malls, the report relays. The company's
e-commerce unit is one of the country's top online retailers, the
report notes.
"The market (including us) still does not fully comprehend what the
full implications are for Americanas," analysts at JPMorgan said in
a research note, citing a lack of consistent communication from the
company, the report discloses.
Ratings agency Fitch downgraded the firm's long-term foreign and
local currency issuer default ratings to "CC" from "BB". S&P Global
downgraded Americanas' credit rating to "BB," and added it to its
CreditWatch list with negative implications.
BRAZIL: Jair Bolsonaro Supporters Storm Congress, High Court
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globalinsolvency.com, citing the Wall Street Journal, reports that
thousands of protesters supporting Brazil's former President Jair
Bolsonaro stormed the presidential palace, Congress and the Supreme
Court in the capital Brasilia, many calling for military
intervention to remove Luiz Inacio Lula da Silva, the leftist
leader who took office.
Protesters dressed in Brazil's national green and yellow colors
charged into the country's most important government buildings,
smashing windows and furniture and ripping up documents before riot
police forced them back into the streets by nightfall. Some 300
people were arrested, police said, according to
globalinsolvency.com.
Mr. da Silva, who was some 500 miles away from the capital visiting
flood victims in the state of Sao Paulo, called the protesters
"fanatic fascists," and decreed a state of federal intervention in
Brasília, an emergency measure by which the federal government
temporarily replaces state authorities in charge of public
security, the report relays.
The 77-year-old leader, a standard-bearer of the Latin American
left, accused Brasília's military police of not acting to contain
the protesters, many of whom had marched for more than an hour to
get to the presidential palace, the report notes.
"They did absolutely nothing," said Mr. da Silva of the military
police, which counts many supporters of Mr. Bolsonaro among its
ranks. Mr. Bolsonaro condemned any attacks on government buildings,
the report relays.
"Peaceful demonstrations, within the law, are part of democracy,"
he wrote on Twitter. "However, vandalism and the invasion of
public buildings like today's acts, and like those practiced by the
left in 2013 and 2017, are an exception," he wrote, referring to
previous waves of protests in the country, 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: Market Has Restrained Reaction to Attacks in Brasilia
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Rio Times Online reports that it looked like it would be a bad day
for local markets after the attacks by radical Bolsonaristas in
Brasilia.
However, the perception that the risk of an institutional crisis
has been controlled and should not gain greater proportions led
local assets to outline a slight reaction during the trading
session, according to Rio Times Online.
The stock market and interest rates even abandoned the worst
moments of the beginning of the day and ended the session in a more
positive tone, 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).
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C A Y M A N I S L A N D S
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TRANSOCEAN INC: S&P Rates New $1.175BB Senior Secured Notes 'B-'
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S&P Global Ratings assigned its 'B-' issue-level rating and '1'
recovery rating to Transocean Inc.'s (Cayman Islands-based
subsidiary of offshore drilling contractor Transocean Ltd.)
proposed $1.175 billion senior secured notes due 2030. The '1'
recovery rating indicates its expectation for very high (90%-100%;
rounded estimate: 95%) recovery to creditors in the event of a
payment default.
The proposed note offering begins to simplify the capital structure
by refinancing and consolidating four existing senior secured
issues, while alleviating near term pressure on liquidity by
extending the debt maturity profile. The proposed notes will be
secured by the same five rigs as the existing notes (Deepwater
Thalassa, Deepwater Proteus, Deepwater Pontus, Transocean
Encourager, and Transocean Enabler). In addition, they will be
guaranteed by Transocean Ltd. and benefit from limited guarantees
from each collateral rig-owning subsidiary up to the redeemed
amounts of each issue. S&P expects Transocean will use the proceeds
from these notes primarily to fully redeem the following issues:
-- 7.75% senior secured notes due 2024 ($247 million);
-- 6.25% senior secured notes due 2024 ($256 million);
-- 5.875% senior secured notes due 2024 ($352 million); and
-- 6.125% senior secured notes due 2025 ($320 million).
S&P said, "At the same time, we affirmed our 'B-' issue-level
rating on Transocean's existing secured debt (including its secured
credit facility), our 'CCC+' issue-level rating on its
super-priority unsecured senior notes with subsidiary guarantees,
our 'CCC+' issue-level rating on its priority unsecured senior
notes with subsidiary guarantees, and our 'CCC' issue-level rating
on its unsecured debt without guarantees and the unsecured debt
issued by Global Marine Inc."
ISSUE RATINGS--RECOVERY ANALYSIS
Key analytical factors
-- S&P estimates that for the company to default it would require
sustained minimal demand for offshore contract drilling services.
This would likely occur due to sustained low oil prices or a
permanent shift away from offshore resources and toward onshore
resources.
-- S&P values Transocean on a discrete asset value basis based on
its net book value and its estimated appraisal values for the
company's fleet.
-- S&P applies a 5% annual dilution rate and between 25-75%
realization factor to the estimated $17 billion in gross asset
value. S&P also applies about 50% shrinkage to the company's
accounts receivable, materials, and supplies, and 100% shrinkage to
cash.
S&P said, "We base our recovery analysis on a net enterprise value
(net of 7% administrative expenses) of about $7.1 billion. In our
hypothetical default scenario, if the offshore drilling market does
not recover sufficiently and the company needs to pursue other
alternatives, we believe Transocean's creditors would realize
greater value through reorganization rather than liquidation of its
assets.
"Our analysis assumes Transocean's secured credit facility has a
first-priority security interest in the Deepwater Asgard, Deepwater
Invictus, Deepwater Skyros, Dhirubhai Deepwater KG2, Discoverer
Inspiration, Deepwater Orion, Deepwater Mykonos, Deepwater
Corcovado, and Development Driller III drillships, and
harsh-environment rigs Transocean Barents and Transocean
Spitsbergen. We also assume its secured notes have a
first-priority security interest in the Deepwater Proteus,
Deepwater Thalassa, Deepwater Pontus, Deepwater Poseidon, and
Deepwater Titan drillships, and the Transocean Encourage,
Transocean Enabler, Transocean Endurance, and Transocean Equinox
harsh-environment rigs. Parents Transocean Inc. and Transocean Ltd.
guarantee each secured note.
"We also assume the company's 11.5% notes with subsidiary
guarantees, 2.5% exchangeable notes due in 2027 and 4.0% notes due
2025 have structural priority over all existing unsecured notes
(with and without subsidiary guarantees)."
Simulated default assumptions
-- Simulated year of default: 2024
-- Jurisdiction (Rank A): Although Transocean Ltd. is
headquartered in Switzerland, S&P believes it would most likely
file for bankruptcy protection in the U.S. or restructure under the
U.S. bankruptcy code given its nexus in the country.
S&P assumes Transocean's current $774 million revolving credit
facility is 60% utilized with total outstanding borrowings at the
time of its hypothetical default of about $475 million.
Simplified waterfall
Secured debt recovery:
-- Net enterprise value: $7.1 billion
-- Revolver and secured note debt outstanding: $3.2 billion
--Recovery expectations: 90%-100% (rounded estimate: 95%)
Super priority unsecured senior notes with subsidiary guarantees:
-- Net recovery value: $3.9 billion
-- Priority unsecured senior debt outstanding at hypothetical
default: $1.3 billion
--Recovery expectations: Capped at 70%-90% (rounded estimate:
85%)
-- Priority unsecured senior notes with subsidiary guarantees:
-- Net recovery value: $2.6 billion
-- Unsecured senior debt outstanding at hypothetical default: $1.9
billion
--Recovery expectations: Capped at 70%-90% (rounded estimate:
85%)
-- Residual value available: $0.7 billion
-- Unsecured non-guaranteed debt outstanding at default: $1.6
billion
--Recovery expectations: 30%-50% (rounded estimate: 40%)
Global Marine senior notes:
-- Net recovery value from Global Marine: $26.1 million
-- Recovery from Transocean Inc. guarantee: $101 million
-- Global Marine unsecured debt outstanding: $261 million
--Recovery expectations: 50%-70% (rounded estimate: 45%)
Note: Assumes six months of accrued and unpaid interest on funded
debt and any scheduled amortization is paid to the default year.
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E L S A L V A D O R
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EL SALVADOR: IDB Approves $100 Million Loan to Help MSMEs
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The Inter-American Development Bank (IDB) has approved a $100
million loan to help micro, small, and medium-sized enterprises
(MSMEs) in El Salvador thrive by expanding their access to medium-
and long-term business loans.
Specifically, the IDB funds will finance lines of credit from the
Banco de Desarrollo de la República de El Salvador (BANDESAL) that
are designed for intermediary financial institutions, which in turn
can offer loans to the enterprises themselves.
The loan is the third individual operation under the Conditional
Credit Line for Investment Projects (CCLIP) for increasing access
to business and housing loans in El Salvador. This $400 million
CCLIP was approved in July 2020 to promote business activity and
social welfare in the Central American country.
The loan is expected to improve beneficiary MSMEs' sales revenue
and allow them to create more jobs. It should also positively
affect Salvadoran women entrepreneurs, given that 30% of the funds
will target MSMEs led or owned by women.
According to data from the Salvadoran Banking Association, 99% of
the country's microenterprises-particularly those involved in
commerce-regularly take out informal loans considered usurious.
Likewise, the 2019 National Survey on Access to Finance for MSMEs
revealed that only 29% of MSMEs in the country have successfully
secured formal lines of credit or loans.
This third loan operation for $100 million will have a 25-year
repayment schedule, a 5.5-year grace period, and a SOFR-based
interest rate.
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M E X I C O
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MEXARREND SAPI: S&P Lowers LongTerm ICR to 'CC', On Watch Negative
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S&P Global Ratings lowered its long-term global scale issuer credit
rating on Mexico-based nonbank financial institution (NBFI),
Mexarrend S.A.P.I. de C.V. to 'CC' from 'CCC-'. At the same time,
S&P lowered its long-term national scale rating to 'mxCC' from
'mxCCC-'. S&P also cuts its issue-level rating on the lender's
senior unsecured notes to 'CC' from 'CCC-'. S&P affirmed its
short-term national scale issuer credit rating at 'mxC'. Finally,
S&P is maintaining all ratings on CreditWatch negative.
Mexarrend won't pay principal and interest on its short-term debt
due Jan. 19 and won't make the interest payment on Jan. 24 on its
senior unsecured notes that mature in 2024. Based on the company's
announcement, S&P doesn't expect these interest payments to occur
within the applicable grace periods. The company will initiate
conversation with the short-term debtholders and senior bondholders
to address liquidity constraints.
As a result of a review of the company's loan portfolio and other
assets conducted in coordination with its advisors, Mexarrend
expects to write off approximately MXN655 million in financial
assets, given errors in its recording of assets. The company also
mentioned that during the fourth quarter of 2022, it increased
reserves for nonperforming loans by approximately MXN100 million
and wrote off approximately MXN300 million of assets.
Environmental, social, and governance (ESG) credit factors for this
change in credit rating/outlook and/or CreditWatch status:
-- Risk management, culture, and oversight
-- Transparency and reporting
S&P considers that the recent announcement about accounting errors
reflects governance deficiencies.
SERVICIOS CORPORATIVOS JAVER: Fitch Affirms LongTerm 'BB-' IDRs
---------------------------------------------------------------
Fitch Ratings has affirmed Servicios Corporativos Javer, S.A.B. de
C.V.'s (Javer) Long-Term Local- and Foreign Currency Issuer Default
Ratings (IDRs) at 'BB-'. In addition, Fitch upgraded the Long-Term
National Rating to 'A(mex)' from 'A-(mex)'. The Rating Outlook for
all ratings is Stable.
Javer's ratings are supported by its strong business position as
one of the largest homebuilding companies in Mexico, the ability to
adjust its sales mix to market dynamics, improved operating margins
and comfortable liquidity position.
The upgrade of the National Scale Rating reflects Fitch's
expectation that the company's profitability will remain strong,
with an estimated EBITDA margin around 14%, positive FCF
generation, gross leverage around 2.0x, and a strong liquidity
profile.
KEY RATING DRIVERS
Strengthened Leverage Metrics: For the LTM as of September 2022,
Javer's net leverage ratio (net debt/EBITDA pre IFRS16) was 0.9x,
the lowest in a decade, down from 1.7x in December 2021 and 2.5x in
December 2020. The improvement in the company's net leverage
reflects higher margins and positive FCF as result of the strategy
to focus in the middle income and residential segments.
In 2022, Javer used excess cash generation to reduce its debt
balance and Fitch expects the company will close 2022 with total
debt of MXN2.450 billion. Deleveraging is expected to continue in
the following years due to a stable cash flow generation and the
scheduled amortization of debt.
Revenue Growth Despite Volume Decline: Javer's business model has
shown flexibility to adapt the sales mix to market conditions and
benefit from it. The change in sales mix toward middle-income and
residential segments mitigates the decline in sales volume. LTM
September 2022 average sale price for Javer was around MXN653
thousand, up 12.5% from MXN580 thousand during 2021, driven
primarily by the change in sales mix. In terms of units, the
company sold 12,066 in the LTM as of 3Q22, down from 13,991 in
3Q21.
Solid EBITDA Margin Supports Deleverage: EBITDA margin has been
strong in the last couple of years; for the LTM as of September
2022 it was 13.7%, similar to 13.9% in December 2021 and 13.2% in
December 2020. Javer has continued to diversify its portfolio of
projects and locations, driving the sales mix toward higher-margin
and higher average price products. Increased revenue generation has
allowed Javer to strengthen its credit metrics and liquidity. Fitch
expects margins to continue at similar levels over the next 24
months.
Positive FCF Generation: Efficiencies in working capital have
benefited FCF generation. In addition, land investment has been low
since 2020 due to delays in the acquisitions pipeline process, from
the seller side. Javer's working capital management will continue
to be key for business and financial strengthening in the coming
years. Fitch projects that land investment will resume in 2023 to
levels between MXN850 million to MXN1 billion annually; moreover,
Fitch expects that Javer will generate positive FCF in the rating
horizon, allowing it to cover scheduled debt amortizations.
Industry Still Linked to INFONAVIT: Javer continues to maintain its
market share as the leading national provider of new homes sold
through the INFONAVIT mortgage system. The share of units sold
through INFONAVIT and COFINAVIT loans has historically been high.
At the end of September 2022, it was around 86%, down from 87% in
2021 and 92% in 2020.
In August 2021, a set of new rules and policies to qualify for an
INFONAVIT individual home loan were approved, which will apply to
all housing intended to be acquired and granted as collateral
through an INFONAVIT loan. Housing developments must adhere to the
new criteria regarding location, mobility, and environment that
could make more difficult finding reserves that meet the conditions
of the new regulation or that the cost of these reserves does not
correspond to the company's strategy.
DERIVATION SUMMARY
Javer's rating is supported by its market leadership and product
diversification in Mexico. The company continues to be a leader of
new homes sold through the Infonavit system in Mexico. Javer's
operations are concentrated in seven states where the company holds
one of the largest market shares.
Homebuilding companies in the U.S., such as M/I Homes, Inc.
(BB/Stable), Meritage Homes Corporation (BB+/Stable) and Lennar
Corporation (BBB/Stable), are larger in scale in terms of revenues
and market diversification. Compared with Javer, U.S. peers have
stronger EBITDA margins (Meritage and Lennar), net leverage and
interest coverage metrics. Also, U.S. peers have access to a
broader range of sources of financing.
Compared with Mexican peers as Inmobiliaria Ruba, S.A. de C.V.
(Ruba [AA-(mex)/Stable]) and Consorcio Ara, S.A.B. de C.V. (Ara
[A+(mex)/Stable]) Javer has lower average price per unit, higher
net leverage and lower interest coverage metrics; in terms of
volume, in the first nine months of 2022 Javer sold 9,135 units,
Ruba 7,170 and Ara 4,658. Javer is present in seven Mexican
states,
Ruba in 12 and Ara in 16 (although it concentrates operations in
Estado de Mexico and Quintana Roo).
KEY ASSUMPTIONS
Fitch's key assumptions within the rating case for Javer include:
- Reduction of 5.3% in units sold in 2022; average increase of 4%
in 2023-2025;
- Average prices rise 12% in 2022 due to better sales mix;
increase
stabilizes in 2023-2025 at 3.7% per year on average, in line with
expected inflation;
- Revenues increase 6% in 2022; in 2023-2025 revenues grow by an
average of 8%;
- Average EBITDA margin of around 14%;
- Land investment equivalent to 10% of revenues in forecasted
period;
- Debt amortizes according to schedule. Includes refinancing of
MXN2.450 billion in 4Q22.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Maintain sustained gross leverage below 2.0x;
- Strong operational results reflected in EBITDA margin above 14%
over the rating horizon;
- Continued positive FCF generation across the cycle and a
strengthened financial flexibility;
- Strong liquidity position.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Sustained EBITDA margin reductions below 12%;
- Land investment levels substantially above current expectations
of investing to replace land reserves used;
- Negative FCF for consecutive years driven by increasing working
capital needs;
- Weakening of cash position;
- Gross leverage above 3.0x.
LIQUIDITY AND DEBT STRUCTURE
Very Strong Liquidity: As of Sept. 30, 2022, the company's
liquidity is strong with an available cash balance of MXN1.391
billion. The change in product mix to higher average-priced
housing, coupled with lower land inventory investments, freed up
working capital resources. Fitch expects a normalization in the
working capital cycle as well as investments in land inventories to
support the operation in the next 2-3 years.
The company refinanced its syndicated loan in 4Q22 with lower cost
and a comfortable amortizing schedule starting in 2024.
ISSUER PROFILE
Javer is one of the largest homebuilding companies in Mexico. The
company's growth is based on its participation in the homebuilding
market in Mexican states that have above average economic
development and population growth.
Entity/Debt Rating Prior
----------- ------ -----
Servicios
Corporativos
Javer, S.A.B.
de C.V. LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Natl LT A(mex)Upgrade A-(mex)
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