/raid1/www/Hosts/bankrupt/TCRLA_Public/230123.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Monday, January 23, 2023, Vol. 24, No. 17
Headlines
A R G E N T I N A
ARGENTINA: Losses From Severe Drought Could Exceed US$10 Billion
B R A Z I L
AMERICANAS SA: Brazil Court Grants Bankruptcy Protection
AMERICANAS SA: Fitch Cuts LongTerm IDRs to C Amid Injunction Relief
ATLAS LITHIUM: Closes $4.05MM Underwritten Public Offering
MUNICIPALITY OF NITEROI: Fitch Gives 'BB-' LT IDRs, Outlook Stable
E C U A D O R
ECUADOR DPR: Fitch Assigns 'BB-' Rating on $200MM 2023-1 Loan
J A M A I C A
JAMAICA: Businesses Urged to Help Workers to Invest
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: 45.9% Up in Food From 2015-2022, Says Economist
TRINIDAD & TOBAGO: Investors Relocate if Rates Increases
X X X X X X X X
[*] BOND PRICING: For the Week Jan. 16 to Jan. 20, 2023
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A R G E N T I N A
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ARGENTINA: Losses From Severe Drought Could Exceed US$10 Billion
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Buenos Aires Times reports that government officials in Argentina
are fearing the impact of drought on the nation's agricultural
production, with experts estimating the potential losses could top
US$10 billion.
Economy Minister Sergio Massa and leaders from Argentina's
agricultural sector huddled to discuss the financial impact of a
severe drought that has damaged and destroyed crops across the
country, according to Buenos Aires Times.
Fears of losses are gripping President Alberto Fernandez's
government, with grain exchanges warning that the deterioration
could shave as much as two points of gross domestic product this
year, the report notes. That would do significant damage to
Argentina's state coffers and its chances of meeting the fiscal
targets outlined in its multi-billion-dollar debt deal with the
International Monetary Fund, the report relays.
Authorities are closely monitoring crop forecasts, as agricultural
exports are crucial to the country's economy, the report discloses.
Massa, accompanied by Agriculture, Fisheries & Livestock Secretary
Juan Jose Bahillo met with representatives of the Mesa de Enlace
industry group to establish the state of play, the report relays.
The economy minister said that the government would work with the
grouping to establish a 90-day monitoring system "sector-by-sector
and economy-by-economy, looking at satellite maps of rainfall,
looking at satellite maps of soil moisture, and comparing the drop
in profitability 2022 against 2023," the report discloses.
Experts are warning that losses from the drought could be huge and
that rains heralding the end of the devastating La Nina drought
will likely come too late to prevent crops from withering and
ending up as the smallest in 14 years, the report notes.
The La Nina weather phenomenon is easing into a more neutral
weather pattern, but it is doing so at a slower pace than
previously thought, the report says. Rains that were forecast for
late January are now expected weeks from now, too late for relief
for Argentina's soybean and maize crops that require more water in
February, the heart of summer in the southern hemisphere. The
soybean harvest occurs in the second quarter, the report notes.
"While rains are expected to return in the coming months,
alleviating the soil situation in the 2023/24 season, they will not
improve the current production cycle," the Buenos Aires Grain
Exchange said in a report. The Rosario Stock Exchange said it
expects rains to normalize closer to April, the report discloses.
Argentina is the world's largest exporter of soybean meal and oil
and the world's third-largest supplier of corn. It is also a major
supplier of maize, wheat and sunflower oils, the report notes.
The US Department of Agriculture has sharply lowered its
projections for Argentina's soybean and corn production, warning of
the possibility of further reductions, the report says.
Estimates
According to estimates by the Rosario Stock Exchange, the impact of
the drought would erase 2.2 points of GDP by 2023, the report
discloses.
A report filed by the Exchange trimmed estimates for the wheat,
soybean and maize harvest by 28.5 million tonnes, 23 percent of the
initial expected production, Buenod Aires notes.
The cost of the 2022/23 drought already amounts to US$10.425
billion for soybean, wheat and corn producers and would erase 2.2
points of this year's GDP estimate, it warned, adding that the
situation "could get worse if the rainfall deficit continues," the
report discloses.
"When we talk about the producer sector's net income loss, we are
referring to the difference between the producer's net margin
estimated at the time of sowing, with an average yield under normal
weather conditions, and that which is expected to date, as a result
of the drought," explained the Rosario-based commercial entity, the
report notes.
"This analysis takes into account both the loss of yields, as well
as the hectares that were sown and cannot be harvested, and those
that could not even be sown due to lack of moisture," they added.
Lower income from exports also has a knock-on effect for freight,
financial and intermediary services, as well as less demand for the
construction sector, etc. This is what is called the multiplier
effect of agriculture on consumption in Argentina, the report
relays.
The Rosario exchange said that Argentina has lost half of the
soybean crop in its main growing area, the fertile pampa humeda,
due to drought, the report notes.
"Although it was known that it would be a very difficult season
because of the drought, what can be seen has surpassed the worst
nightmares of producers," said the exchange, the report relays.
Warning that "economic losses will be very large," the grain
exchange said "there is a drop in the sown area due to the extreme
lack of water" and the expectation is that "there may be producers
who do not harvest anything this year," 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.
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B R A Z I L
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AMERICANAS SA: Brazil Court Grants Bankruptcy Protection
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globalinsolvency.com, citing Reuters, reports that a Rio de Janeiro
court accepted Brazilian retailer Americanas SA's bankruptcy
protection request, the firm said, days after the company uncovered
nearly $4 billion in accounting inconsistencies and amid a legal
feud with creditors.
Americanas, backed by the billionaire trio that founded 3G Capital,
said in a securities filing that it will restructure debts of about
43 billion reais (US$8.23 billion), according to
globalinsolvency.com.
The move came "despite the efforts and measures that the management
has been taking in the past few days alongside its financial and
legal advisers to protect the company from the effects" of the
accounting scandal, the company said, the report notes.
Investors had expected the decision, with some deeming it
unavoidable, especially after lender BTG Pactual obtained a court
decision overturning part of the firm's protection from creditors,
the report relays.
In a document filed with the court, law firms Basilio Advogados and
Salomao Kaiuca Abrahao attributed the urgency to file for
bankruptcy to the creditors' decision to seize the companies'
assets, the report notes.
The retailer also mentioned a debt downgrade by ratings agencies,
which prevented any new loans from being extended. S&P, Moody's and
Fitch all downgraded Americanas' credit ratings following the
accounting scandal, the report relays.
Americanas had said earlier that it was considering filing for
bankruptcy on an emergency basis, noting its current cash position
stood at only 800 million reais, down from a previously reported
7.8 billion, the report adds.
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.
AMERICANAS SA: Fitch Cuts LongTerm IDRs to C Amid Injunction Relief
-------------------------------------------------------------------
Fitch Ratings has downgraded Americanas S.A.'s (Americana)
Long-Term Foreign Currency (FC) and Local Currency (LC) Issuer
Default Ratings (IDRs) to 'C' from 'CC', and its Long-Term National
Scale Rating to 'C(bra)' from 'CC(bra)'. Fitch has also downgraded
the rating of the senior unsecured global notes issued by its
wholly owned subsidiaries JSM Global S.a.r.l. and B2W Digital Lux
S.a.r.l. to 'C'/'RR4' from 'CC'/'RR4', and the rating of
Americanas' unsecured debentures to 'C(bra)' from 'CC(bra)'.
The downgrade to 'C' follows Americanas' announcement that it has
obtained an "Injunction Relief" from Rio de Janeiro's court
establishing, among other protection measures, the suspension of
enforceability of all obligations related to financial instruments,
such as debt principal and interest. In case Americanas formally
announces a restructuring plan, the ratings will be downgraded to
'RD' to reflect a Restricted Default or 'D' if the company files a
bankruptcy protection.
KEY RATING DRIVERS
Standstill Obtained: The "Injunction Relief" allows Americanas not
to comply with any of its financial obligations for the next 30
days, beginning Jan. 13. The objective was to preserve cash, avoid
acceleration of its debt, arrest of assets and ensure the
continuity of the business until company, creditors and
shareholders reach an agreement related to a potential debt
restructuring and/or capital increase. Fitch considers this event
as a standstill as Americanas' payment capacity is irrevocably
impaired.
Unsustainable Capital Structure: Americanas' capital structure is
deemed to be unsustainable with an addition of an estimated BRL20
billion of new liabilities, as announced by the company a few days
ago. This figure compares with BRL3.2 billion of LTM EBITDAR and
BRL15.4 billion of shareholder equity at the end of September 2022.
The additional liabilities announced nearly double Fitch's
calculation of the company's lease adjusted net debt to BRL46
billion, from BRL26 billion.
Limited Financial Flexibility: Americanas' unsustainable capital
structure and damaged reputation severely impairs its financial
flexibility and ability to cope with operational and financial
obligations. Support from creditors will be critical to improving
its flexibility. This could come in some combination of waivers of
potential covenants breaches, the non-acceleration of financial
obligations, and the rolling over of financial facilities.
Operationally, the company may struggle to maintain some of its
existing suppliers. A material capital injection in a timely manner
to avoid default is highly critical, although uncertain. The
ability of Americanas to raise cash through asset sale and
divestitures will be tested and could potentially minimize
creditors' losses.
ESG Affected: Weak Corporate Governance negatively affects
Americanas' ratings. The accounting inconsistencies announcement
highlights several years of material weakness in the quality of the
company's financial statements, as well as the lack of transparency
in its financial reporting, as reverse factoring information has
not been adequately disclosed in its financial statement notes. The
event raises questions about the financial controls of the company,
and pressures the company's ability to raise additional debt with
banks, capital market and other third parties, including
suppliers.
ESG - Corporate Governance: Americanas S.A. for several years has
not properly disclosed its supplier financing mechanisms in its
financial statements, which is highly relevant to the rating and a
key rating driver with a high weight.
DERIVATION SUMMARY
The current IDRs incorporate the fact that Americanas is currently
in a standstill situation and will likely enter a debt
restructuring with creditors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action is unlikely and depends upon the
company's ability to raise a substantial amount of equity and the
company's ability to maintain credit lines.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The formal announcement of a distressed debt exchange or
bankruptcy protection process;
- Miss payment of any financial obligations after "Injunction
Relief" period.
LIQUIDITY AND DEBT STRUCTURE
Challenges to Protect Liquidity: The ability of Americanas'
shareholders to inject a material amount of capital into the
company is crucial to support working capital needs and to avoid
defaulting on financial obligations, but remains highly uncertain.
Cash and equivalents were BRL8.8 billion as of Sept. 30, 2022. This
figure compares with total adjusted debt of BRL26.4 billion, not
considering the potential impact from reverse factoring, but
including approximately BRL5.4 billion in rental obligations, as
per Fitch's methodology. The company has financial obligations of
BRL2.2 billion in the short-term, which includes BRL1.3 billion in
debentures and BRL900 million in loans.
ISSUER PROFILE
Americanas is one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by Jorge Paulo Lemann,
Carlos Alberto Sicupira and Marcel Telles.
SUMMARY OF FINANCIAL ADJUSTMENTS
- Fitch uses a multiple of 5x to capitalize Brazilian companies
leasing adjusted debt;
- Fitch includes the factoring of account receivables on debt.
Fitch adjusts short-term and long-term marketable securities back
to cash and equivalents. Fitch considers the financing to the
marketplace sellers as finance activity. Applying methodology, the
finance service activity has a debt/equity leverage ratio of 2.0x.
The asset of the financial service activity corresponds to the
receivables related to the marketplace business, so, half of this
asset is financed by debt, which is deconsolidated from total
debt.
ESG CONSIDERATIONS
Americanas S.A. has an ESG Relevance Score of '5' for Corporate
Governance and Financial Transparency due to the inconsistencies of
reporting reverse factoring in its financial statements., which has
a negative impact on the credit profile, and is highly relevant to
the rating.
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
----------- ------ -------- -----
B2W Digital Lux
S.a.r.l.
senior
unsecured LT C Downgrade RR4 CC
Americanas S.A. LT IDR C Downgrade CC
LC LT IDR C Downgrade CC
Natl LT C(bra)Downgrade CC(bra)
senior
unsecured Natl LT C(bra)Downgrade CC(bra)
JSM Global
S.a r.l.
senior
unsecured LT C Downgrade RR4 CC
ATLAS LITHIUM: Closes $4.05MM Underwritten Public Offering
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Atlas Lithium Corporation announced the closing of its underwritten
public offering of 675,000 shares of common stock and Nasdaq
uplisting. In addition, the underwriters exercised their
over-allotment option to purchase an additional 101,250 shares of
common stock. The shares began trading on the Nasdaq Capital
Market under the ticker symbol "ATLX" on Jan. 10, 2023.
The Company had priced the underwritten public offering of 675,000
shares of common stock at a public offering price of $6.00 per
share, for aggregate gross proceeds of approximately $4.05 million,
prior to deducting underwriting discounts, commissions, and other
offering expenses.
EF Hutton, division of Benchmark Investments, LLC, acted as sole
book-running manager for the offering.
The Company's registration statement on Form S-1 (File No.
333-262399) relating to the offering was declared effective by the
U.S. Securities and Exchange Commission on Jan. 9, 2023. A final
prospectus relating to the offering was filed with the SEC on
January 10, 2023 and is available on the SEC's website at
www.sec.gov. Electronic copies of the final prospectus relating to
this offering, when available, may be obtained from EF Hutton,
division of Benchmark Investments, LLC, 590 Madison Avenue, 39th
Floor, New York, NY 10022, Attention: Syndicate Department, or via
email at syndicate@efhuttongroup.com or telephone at (212)
404-7002.
About Atlas Lithium
Atlas Lithium Corporation is focused on advancing and developing
its 100%-owned hard-rock lithium project which consists of 52
mineral rights spread over 56,078 acres (227 km2) and is located
primarily in the Lithium Valley of the state of Minas Gerais in
Brazil. Atlas Lithium also has a separate second lithium project
located in Brazil's Northeast region. In total, Atlas Lithium has
100% ownership of mineral rights for almost all battery metals
including lithium (293 km2), nickel (222 km2), rare earths (122
km2), titanium (89 km2), and graphite (56 km2), in addition to
mining concessions for gold, diamonds, and sand. The Company also
owns approximately 45% of Apollo Resources Corp. (private company;
iron) and approximately 28% of Jupiter Gold Corp. (OTCQB: JUPGF;
gold and quartzite).
Brazil Minerals reported a net loss of $4.03 million for the year
ended Dec. 31, 2021, a net loss of $1.55 million for the year ended
Dec. 31, 2020, a net loss of $2.08 million for the year ended Dec.
31, 2019, and a net loss of $1.85 million for the year ended Dec.
31, 2018. As of Sept. 30, 2022, the Company had $5.56 million in
total assets, $2.96 million in total liabilities, and $2.59 million
in total stockholders' equity.
Lakewood, CO-based BF Borgers CPA PC, the Company's auditor since
2015, issued a "going concern" qualification in its report dated
March 25, 2022, citing that the Company's significant operating
losses raise substantial doubt about its ability to continue as a
going concern.
MUNICIPALITY OF NITEROI: Fitch Gives 'BB-' LT IDRs, Outlook Stable
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Fitch Ratings has assigned the Municipality of Niteroi Long-Term
Foreign Currency and Local Currency Issuer Default Ratings (IDRs)
of 'BB-'. The Rating Outlook is Stable. Fitch has also assigned
Niteroi Short-Term Foreign and Local Currency IDRs of 'B'. The
National Long-Term rating was assigned at 'AA(bra)' with a Stable
Outlook, and the National Short-Term Rating was assigned at
'F1+(bra)'. The Municipality of Niteroi's Standalone Credit Profile
(SCP) is assessed at 'bbb'.
Niteroi´s IDRs are capped by the sovereign's IDR (BB-/Stable).
Fitch has assessed Niteroi SCP at 'bbb'.
KEY RATING DRIVERS
Risk Profile -- Weaker
The assessment reflects Fitch´s view that there is high risk in
the issuer´s ability to cover debt with operating balance
weakening unexpectedly over the scenario horizon (2022-2026) due to
lower revenue, higher expenditure, or an unexpected rise in
liabilities or debt service requirement.
Revenue Robustness -- Weaker
The Brazilian tax collection framework transfers a large share of
the responsibility to collect taxes to states and municipalities.
Constitutional transfers exist as a mechanism to compensate poorer
entities. For that reason, a high dependency on transfers is
considered a weakness for a Brazilian LRG.
The primary metric for Revenue Robustness is the transfer ratio
(transfers to operating revenues). LRGs that report a transfer
ratio above or equal to 40% are classified as weaker, while others
with a ratio below 40% are classified as Midrange. The Municipality
of Niteroi reports a high dependency on transfers, which drives
this factor to 'Weaker'. Transfers represented 60.7% of operating
revenues on average for 2017-2021.
In particular, transfers to Niteroi are also heavily affected by
royalties from the oil sector. Dependency on volatile revenue
sources, such as commodity sales, is considered weakness for
revenue robustness. For Niteroi, oil royalties represented 38.3% of
operating revenues and approximately 60% of transfers in 2021.
Nonetheless, Niteroi has a Revenue Equalization Fund, which will
help the municipality cope with the volatility of oil prices.
The most important tax collected at the municipal level is the
IPTU, a tax on the property of real estate, which is not highly
related to the economic cycle, reporting stability across the
years. The IPTU represented 41% of tax collection in 2021.
Municipalities also collect the ISS, a tax on services, which
represented 32% of tax collection in 2021. The ISS is highly
correlated to the economic activity.
Revenue Adjustability -- Midrange
The midrange assessment for Revenue Adjustability is mainly due to
the Municipality of Niteroi Revenue Equalization Fund (FEI). The
FEI was instituted in 2019 through a municipal law and regulated by
Decree no 13.215/2019 and Law no 3633 of Sept. 15, 2021. Resources
are allocated as fixed income through Brazilian sovereign bonds and
fixed income investment funds.
The municipal treasury is responsible for the financial management
of FEI. Revenues constitute of 10% of the special participation
over oil royalties, which made up of approximately 5% of oil
royalties received by the municipality in 2021. The fund will also
keep interest revenues of its investments. The municipality might
also perform additional allocations to FEI when it deems adequate.
Access to funds will be allowed during a period of revenue
frustration related to oil royalties. Niteroi may withdraw up to
50% of the revenue loss (expected royalties' revenues as estimated
by the National Oil Agency [ANP] versus the actual royalties'
revenues), as long as the amount is equal to or smaller than 20% of
the available funds under FEI.
Expenditure Sustainability -- Midrange
Municipalities are mostly engaged in providing healthcare and
elementary education services. They are also responsible for urban
infrastructure and social housing, but such mandates consume a
lesser portion of the municipal budget when compared with health
and education.
Expenditure tends to grow with revenues as a result of earmarked
revenues. States and municipalities are required to allocate a
share of revenues in health and education. This results in
procyclical behavior in good times, as periods of high revenue
growth result in a similar behavior for expenditures. However, due
to the weight of personal expenditures and salary rigidity,
downturns that result in lower revenues are not followed by similar
drops in expenditures.
The municipality of Niteroi kept expenditure growth below revenue
growth in the period of 2017-2021. Operating margins averaged 25.9%
in the same period, which is a high figure for Brazilian LRGs.
During the pandemic, margins dropped to 13.2%, which is still a
robust considering the challenging scenario. The adequate control
over expenditure growth across the years translates to a 'Midrange'
assessment for Expenditure Sustainability.
Expenditure Adjustability -- Weaker
Brazilian local governments suffer from a fairly rigid cost
structure, driving this factor to 'Weaker'. As per the Brazilian
Constitution, there is low affordability of expenditure reduction
especially in salaries. As a result, whenever there is an
unpredictable reduction in revenues, operating expenditure does not
follow automatically.
For the municipality of Niteroi, personal expenditures corresponded
to 47.9% of total expenditure in 2021. This item has very limited
flexibility for adjustments given salary rigidity and limited
ability to manage human resources. Other operating expenditures
amounted to close to 36.8% of total expenditures in 2021 and has
some flexibility for adjustments, but still limited by
constitutional mandates. Lastly, Capex represented 14.3% of total
expenditures in 2021 and 12%, on average, between 2017 and 2021.
Historically, Brazilian LRGs have often relied on investments cuts
when facing a more challenging economic scenario.
Liabilities and Liquidity Robustness
Weaker
Access to new loans is restricted as Brazilian LRGs are not allowed
to access the market through bond issuances. Lenders consist mainly
of public commercial and development banks and multilateral
organizations. Often, loans are guaranteed by the federal
government, especially for foreign currency loans. For that reason,
the federal government has strict control over new lending to
LRGs.
There is a moderate national framework for debt and liquidity
management since there are prudential borrowing limits and
restrictions on loan types. Under the Fiscal Responsibility Law
(LRF) of 2000, Brazilian LRGs have to comply with indebtedness
limits. Consolidated net debt for states cannot exceed 1.2x (120%)
of net current revenue for municipalities. Niteroi reported a debt
ratio of -27.33% as of December 2021 due to sizable cash position.
The LRF also sets limits for guarantees (22% of net current
revenues). Niteroi had no guarantees as of December 2021.
External debt amounted to BRL436 million as of December 2021, which
represents 58% of direct debt. It consists of two contracts with
multilateral organizations and counts with federal guarantee.
Overall, Niteroi reports a low debt burden and smooth amortization
profile.
There is moderate off-balance sheet risk stemming from the pension
system, which is a burden for most Brazilian LRGs. Another relevant
contingent liability refers to the payment of judicial claims, the
so-called "precatorios." The National Congress has determined that
subnational governments have to fully amortize such liabilities
until 2029. Niteroi expects to fully amortize the stock of
precatorios until 2024.
Liabilities and Liquidity Flexibility -- Midrange
One of the metrics analyzed by the Brazilian National Treasury of
LRGs borrows with Federal Government guarantees (CAPAG - Capacidade
de Pagamento) is the liquidity rate, measured by LRGs' short-term
financial obligation to net cash.
The trigger of Federal Government to rate this ratio 'A' is 100%.
Fitch is setting a trigger of 100% on the average of last three
years (2019-2021 year-end) together with the last year-end
available (December 2021) below 100% to assess this factor as
'midrange'. The Municipality of Niteroi reported a three-year
average liquidity ratio of 13%, and 8.5% in December 2021 (source:
Relatorio de Gestão Fiscal - RGF), thus, corroborating with
midrange assessment.
Debt Sustainability: 'aaa' category
Debt Sustainability is assessed at 'aaa'. Fitch's rating case
forward looking scenario indicates that the payback ratio (net
direct risk to operating balance) - the primary metric of the debt
sustainability assessment - will reach an average of -0.3x for the
2024-2026 period, which is aligned with a 'aaa' assessment. The
negative payback reflects strong unrestricted cash and low levels
of debt. The actual debt service coverage ratio - the secondary
metric - is projected at 6.5x for the average of 2024-2026, aligned
with an 'aaa' assessment. Fiscal debt burden is projected at -4.3%
for the same period.
For its rating case, Fitch takes into consideration the
municipality's historical performance and projections for main
macro variables, such as GDP growth and inflation. By its nature,
the rating case is a stressed scenario. Low levels of debt reflect
government plans for new loans and the constrained credit market
for Brazilian subnationals.
Summary of Other Factors
The ratings of the Municipality of Niteroi are capped the sovereign
rating.
DERIVATION SUMMARY
Fitch assesses the Municipality of Niteroi SCP at 'bbb'. This
reflects the combination of a 'Weaker' risk profile, debt
sustainability metrics at 'aaa' category and the national and
international peer comparison. The municipality's IDRs of
'BB-'/Stable are capped by the sovereign.
Short-Term Ratings
Niteroi's short-term FC and LC IDRs are positioned at 'B' following
the Rating Correspondence Table.
For the national scale, the correspondence table indicates a
'F1+(bra)' short-term rating.
National Ratings
Municipality of Niteroi's national scale rating is positioned at
'AA(bra)', the sovereign-equivalent at the national scale.
KEY ASSUMPTIONS
Risk Profile
Weaker
Revenue Robustness
Weaker
Revenue Adjustability
Midrange
Expenditure Sustainability
Midrange
Expenditure Adjustability
Weaker
Liabilities and Liquidity Robustness
Weaker
Liabilities and Liquidity Flexibility
Midrange
Debt Sustainability
aaa
Budget Loans (Notches)
N/A
Ad-Hoc Support (Notches)
N/A
Asymmetric Risks (Notches)
N/A
Floor
N/A
Cap (FC IDR/IDCO)
BB-
Cap (LC IDR/IDCO)
BB-
Quantitative Assumptions -- Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2017-2021 figures and 2022-2026 projected
ratios. The key assumptions for the scenario include:
- Yoy 1.5% increase in operating revenue on average in 2022-2026;
- Yoy 5.8% increase in tax revenue on average in 2022-2026;
- Yoy 1.4% increase in current transfers on average in 2022-2026.
The lower growth of current transfers is explained by the expected
drop in royalties as per Fitch's stressed assumptions for oil
prices (2022: USD105; 2023: USD85; 2024: USD74.8; 2025: USD74.8;
2026: USD72.3).
- Yoy 7.4% increase in operating spending on average in 2022-2026;
- Net capital balance of -BRL1,160 million on average in
2022-2026;
- Cost of debt 4.8% on average in 2022-2026.
Quantitative assumptions - Sovereign Related
Figures as per Fitch's sovereign actual for 2021 and forecast for
2023, respectively (no weights of changes since the last review are
included as none of these assumptions were material to the rating
action).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action on Brazil´s IDRs would lead to a
positive rating action on the Municipality of Niteroi IDRs given
that the ratings of the municipality are currently capped by the
sovereign.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A sovereign downgrade would lead to a downgrade of the
Municipality of Niteroi´s IDRs;
- Municipality of Niteroi´s IDRs could be downgraded if its
payback ratio is projected above 5x and its actual debt service
coverage ratio is projected below 1.5x.
LIQUIDITY AND DEBT STRUCTURE
Net adjusted debt considers BRL751 million of direct debt and
unrestricted cash of BRL1.6 billion as of December 2021. Fitch
estimates that close to 58% of debt is guaranteed by the federal
government and consists of foreign debt contracts with multilateral
organizations.
Niteroi has a history of strong liquidity, with an A score under
the National Treasury CAPAG for the last three years.
ISSUER PROFILE
Niteroi is a Brazilian municipality in the Metropolitan Region of
Rio de Janeiro, in the state of Rio de Janeiro. With an estimated
population of 513,000 inhabitants and an area of 133.757 km², it
holds the highest Municipal Human Development Index (HDI) of Rio de
Janeiro. Niteroi´s economy and public finances are highly reliant
on the oil sector. Nonetheless, given high per capita income and
its strategic position, it has seen robust growth within the
service sector, especially in medical services.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The ratings of the Municipality of Niiteroi are capped by the
Brazilian sovereign rating.
ESG CONSIDERATIONS
Municipality of Niteroi has an ESG Relevance Score of '4' for
Biodiversity and Natural Resource Management due to Niteroi´s
economic and financial dependency on the hydrocarbon sector, 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
----------- ------
Municipality of
Niteroi LT IDR BB- New Rating
ST IDR B New Rating
LC LT IDR BB- New Rating
LC ST IDR B New Rating
Natl LT AA(bra) New Rating
Natl ST F1+(bra) New Rating
=============
E C U A D O R
=============
ECUADOR DPR: Fitch Assigns 'BB-' Rating on $200MM 2023-1 Loan
-------------------------------------------------------------
Fitch Ratings has assigned a 'BB-' issue-specific rating to the
$200 million series 2023-1 loan originated by Ecuador DPR Funding
and affirmed the rating on the existing series 2020-1 loan and
series 2022-1 notes at 'BB-'. The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Ecuador DPR Funding
2020-1 LT BB- Affirmed BB-
2022-1 27928YAA5 LT BB- Affirmed BB-
2023-1 LT BB- New Rating BB-(EXP)
TRANSACTION SUMMARY
The future flow program is backed by existing and future U.S.
dollar-denominated diversified payment rights (DPRs) originated by
Banco Pichincha C.A. (BP) in Ecuador. The majority of DPRs are
processed by designated depository banks (DDBs) that have signed
acknowledgement agreements (AAs), irrevocably obligating them to
make payments to an account controlled by the transaction trustee.
Upon issuance of the series 2023-1 loan, the total program size
will be approximately $612.5 million.
Fitch's ratings address timely payment of interest and principal on
a quarterly basis.
KEY RATING DRIVERS
Future Flow Rating Driven by Originator's Credit Quality: The
rating of this future flow transaction is tied to the credit
quality of the originator, BP. On Nov. 21, 2022, Fitch affirmed
BP's Long-Term Issuer Default Rating (IDR) at 'B-' with a Stable
Outlook. The bank's Viability Rating (VR) or standalone
creditworthiness drive the IDR of BP. Fitch believes Ecuador's
Sovereign Rating (B-/Stable) and broader operating environment
considerations highly influence the VR of BP as it affects the
sustainability of its financial profile.
Going Concern Assessment Supports Notching Differential: Fitch uses
a Going Concern Assessment (GCA) score to gauge the likelihood that
the originator of a future flow transaction will stay in operation
through the transaction's life. Fitch assigns a GCA score of 'GC1'
to BP based on the bank's systemic importance and standing as the
largest bank in the Ecuadorian banking system in terms of assets
and deposits. The score allows for a maximum of six notches above
the Local Currency (LC) IDR of the originator; however, additional
factors limit the maximum uplift.
Factors Limit Notching Uplift from IDR: The 'GC1' score allows for
a maximum six-notch rating uplift from the bank's IDR, pursuant to
Fitch's future flow methodology. However, uplift is tempered to
three notches from BP's IDR given certain factors including no
lender of last resort in Ecuador and high future flow debt relative
to BP's non-deposit funding.
High Future Flow Debt Relative to BP's Balance Sheet Limits
Notching Differential: Fitch estimates future flow debt will
represent 4.8% of BP's total funding and 43.03% of non-deposit
funding based on September 2022 non-consolidated financials and
adjusting to include the new issuance of $200 million, three
executed and funded debt facilities, and the current outstanding
balance on the program today ($412.5 million).
Fitch does not allow the maximum uplift for originators that have
future flow debt greater than 30% of the overall non-deposit
funding; nevertheless, given the benefits of the structure and
quality of flows, the agency allows for some differentiation (three
notches) from BP's LT LC IDR. Fitch is comfortable with this level
at the assigned rating and expects these levels to continue to be
high given the program remains a main source of funding for the
bank.
Coverage Levels Commensurate with Rating: The series 2023-1 loan
has an interest-only period of two years with the first principal
payment not expected to be due until March 2025. Considering
average rolling quarterly DDB flows over the past five years
(November 2017-October 2022) and the maximum periodic debt service
over the life of the program, including the new issuance amount of
$200 million and Fitch's 'BB-' interest rate stress for the series
2023-1 floating-rate loan, Fitch's projected quarterly debt service
coverage ratio (DSCR) is 46.7x. The program can withstand a
reduction in flows of approximately 97.9% and still cover the
maximum quarterly debt service obligation. Nevertheless, Fitch will
continue to monitor the impact of macroeconomic pressures on the
performance of the flows as this could potentially affect the
assigned rating.
No Lender of Last Resort: Ecuador is a dollarized economy without a
true lender of last resort. While certain mechanisms are in place
to help fend off a banking system crisis, this limits the notching
differential of the transaction.
Reduced Redirection/Diversion Risk: The structure mitigates certain
sovereign risks by collecting cash flows offshore until collection
of the periodic debt service amount, allowing the transaction to be
rated over the sovereign country ceiling. Fitch believes payment
diversion risk is partially mitigated by the AAs signed by the five
correspondent banks processing the vast majority of U.S. dollar DPR
flows originating in the U.S.
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 BP, which in turn is sensitive to changes in the credit
quality of Ecuador and its operating environment. A deterioration
of the credit quality of BP by one notch is likely to pose a
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. Additionally, the transaction
rating is sensitive to the performance of the securitized business
line. The expected quarterly DSCR is approximately 46.7x, and
should therefore be able to withstand a significant decline in cash
flows in the absence of other issues. However, significant further
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 BP'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 financial 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.
=============
J A M A I C A
=============
JAMAICA: Businesses Urged to Help Workers to Invest
---------------------------------------------------
RJR News reports that business leaders in Jamaica are being urged
to assist their employees with investment opportunities.
Metry Seaga, President of the Private Sector Organization of
Jamaica (PSOJ), says the move would boost economic growth and
encourage economic independence, according to RJR News.
"I think it's incumbent on us as business people to start to get
our employees investing and there are some creative ways of so
doing, and maybe the employers, when they are giving bonuses can
give some in cash and some in investment. We need to start people
down the road of investment for the future," he proposed, the
report notes.
Mr. Seaga was speaking at the latest Business & Consumer Confidence
Indices Webinar, the report adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: 45.9% Up in Food From 2015-2022, Says Economist
------------------------------------------------------------------
Trinidad Express reports that food prices have increased by a
whopping 45.9 per cent from the period 2015 to 2022, according to
according to economist Prof Roger Hosein.
It's the sharpest increase on record and is a cause for concern, he
said in an interview with the Express at the St Augustine campus of
The University of the West Indies, according to Trinidad Express.
Hosein explained that the Index of Retail Prices (IRP) points to
changes in inflation. The change in the IRP is the inflation rate,
and therefore it gives an indication of how the cost of living in a
country is changing, he said, the report notes.
The Central Statistical Office released the IRP as of November
2022, showing food, health and transportation registered the
highest increases, with food prices at the top of the list, and
affecting fixed and low-income households the most, the report
notes.
"When you are on a low income, the first thing you do with your
money is you buy food. So if prices increase by 50 per cent, that
means the amount of money you will have remaining for health care,
education, and other things would have fallen considerably. That
to me is something policymakers must keep a close eye on because it
could push some households below the poverty line and make things
difficult for others," he added.
As such, Hosein is calling on people to try as far as possible to
grow their own food, the report notes.
He said, "If you grow some of your own food, patchoi, lettuce,
chive, celery, bandania (chadon beni) in your yard, things you use
on a weekly basis, then you can help cut household expenditure and
give yourself a reasonable chance of surviving," he said, the
report relays.
Hosein was reminded that people don't just want to survive, and a
backyard kitchen garden can only reach so far, the report relays.
While accepting the argument he said the ultimate solution to
improve the standard of living is to grow the economy and this is
where it is critical government looks at the ratio of transfers and
subsidies to capital injection, the report notes.
"When $26 billion of the budget goes toward transfers and subsidies
and $4 billion goes to capital injection, that just does not allow
enough space to widen the productive capacity of the country,"
Hosein argued, the report discloses.
He called on corporate T&T to look for novel ways to cope,
suggesting instead of treating employees to pizza, firms consider
as part of their corporate social responsibility stabilizing
households by gifting a variety of seedlings, the report adds.
TRINIDAD & TOBAGO: Investors Relocate if Rates Increases
--------------------------------------------------------
Andrea Perez-Sobers at Trinidad Express reports that an economist
from the St Augustine campus of The University of the West Indies
believes higher electricity prices in Trinidad & Tobago can cause
both local and foreign investors to relocate to other countries
such as Suriname and Guyana.
Weighing in on the debate over electricity rates, Dr Vaalmikki
Arjoon said these electricity price increases will yet again
compound overall price increases locally for almost all commodities
and services, according to Trinidad Express, according to Trinidad
Express.
"So far, a myriad of factors has exacerbated prices including
higher fuel prices and transport costs, increased prices from
international suppliers, and concomitant higher taxes paid on these
imports due to higher prices, Customs overtime, and inefficiencies
especially at the Port of Port of Spain causing higher rent and
demurrage charges for businesses, among a host of other obstacles
in the business environment," Arjoon detailed, the report notes.
He said all these drive-up business costs which are then passed
onto the consumer as higher prices, and higher electricity charges
will also undoubtedly be passed on, the report relays. "Some
operations such as manufacturing activities may sometimes run 24/7,
the report relays. For instance, if a manufacturer operates
several plants using a total of two million kWh and 10,000 kVA
demand charge, their monthly electricity expense will increase by
over $686,000, causing them to push up the prices of the
commodities they produce, the report discloses. Consumers are
therefore faced with these increased prices plus their own higher
residential electricity charges, thereby compounding the cost of
living for all households," Arjoon explained, the report
discloses.
In the short term, he indicated that inflation will increase, as
higher electricity costs such as this will also lower some of their
profitability, compounding their financial stress from the
pandemic, the report relays.
Moreover, Arjoon hinted that this increase could cause T&T to lose
some investors, both local and foreign—with the deepening of the
energy sector in Guyana and Suriname, the report notes.
"Higher electricity prices locally together with the other
problematic factors in doing business could encourage some
businesses, especially those in the industrial sector to relocate
to these countries, in the very likely event they lower their
electricity prices," he stressed, the report discloses.
Arjoon opined that the rising prices will also encourage more
workers to clamour for higher wages, as over 220,000 employees in
the registered labour force earn less than $6,000 per month and
these higher electricity prices will lower their purchasing power
further and contribute to exacerbated poverty levels, the report
relays.
Proper Supply Needed
As a result of these rate increases, he said it could suggest that
the consumer is paying the price for the inefficiencies of T&TEC,
the report says.
"Going forward, it is integral that T&TEC mitigate their
inefficient practices and lower their cost structure, as this has
exacerbated their operating costs and restricted their
profitability for years, leaving the State with little choice but
to spend hundreds of millions each year to subsidise them," said
Arjoon, the report notes.
He added: "Lower costs could have meant reduced subsidies to be
paid and less need for these higher rates. It also necessities
that they are more reliable with their power supply to the country
and avoid periodic cuts in their service which seems to be
happening regularly in several parts of the country," the report
relays.
Further, he said it was useful to compare T&T's prices to other
economies with a similar Gross Domestic Product (GDP) per capita to
this country—Bulgaria's, Uruguay's and Chile's prices per kWh are
approximately US$0.13, US$0.17, and US$0.16—again, all
substantially higher than the public pays, the report says.
However, Arjoon indicated that this country's economy centres
around natural gas and this forms the basis for electricity
generation as 2021 data shows that some other natural gas-producing
economies charge cheaper or almost equivalent residential prices to
T&T, including Angola (US$0.02), Algeria (US$0.04), Argentina
(US$0.05) and Oman (US$0.05) to name a few, the report adds.
===============
X X X X X X X X
===============
[*] BOND PRICING: For the Week Jan. 16 to Jan. 20, 2023
-------------------------------------------------------
Issuer Name Cpn Price Maturity Country Curr
----------- --- ----- -------- ------- ---
Cia Latinoamericana de 9.5 73.9 7/20/2023 AR USD
Provincia de Buenos Ai 7.9 75.3 6/15/2027 AR USD
AES Tiete Energia SA 6.8 1.2 4/15/2024 BR BRL
Fospar S/A 6.5 1.2 5/15/2026 BR BRL
Metrogas SA/Chile 6.0 41.6 8/1/2024 CL CLP
Argentine Republic Gov 4.3 70.0 12/31/2033 AR JPY
Provincia de Cordoba 7.1 72.7 8/1/2027 AR USD
Argentina Bonar Bonds 5.8 75.2 4/18/2025 AR USD
Noble Holding Internat 6.1 62.0 3/1/2041 KY USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Esval SA 3.5 49.9 2/15/2026 CL CLP
Sylph Ltd 2.4 65.1 9/25/2036 KY USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentina Bonar Bonds 7.6 74.4 4/18/2037 AR USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Provincia de Rio Negro 7.8 70.4 12/7/2025 AR USD
Noble Holding Internat 6.2 62.2 8/1/2040 KY USD
Provincia del Chaco Ar 4.0 0.0 12/4/2026 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
Avadel Finance Cayman 4.5 55.0 2/1/2023 US USD
Noble Holding Internat 5.3 60.5 3/15/2042 KY USD
Argentine Republic Gov 0.5 27.6 12/31/2038 AR JPY
Argentine Republic Gov 6.9 75.2 1/11/2048 AR USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
City of Cordoba Argent 7.9 73.1 9/29/2024 AR USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 7.1 75.7 6/28/2117 AR USD
Provincia de Cordoba 7.1 74.7 8/1/2027 AR USD
Province of Santa Fe 6.9 74.7 11/1/2027 AR USD
Cia Latinoamericana de 9.5 74.3 7/20/2023 AR USD
Argentine Republic Gov 8.3 74.5 12/31/2033 AR USD
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Odebrecht Finance Ltd 6.0 16.4 4/5/2023 KY USD
Argentine Republic Gov 8.3 72.9 12/31/2033 AR USD
Argentine Republic Gov 6.3 74.1 11/9/2047 AR EUR
Province of Santa Fe 6.9 75.2 11/1/2027 AR USD
Provincia del Chaco Ar 9.4 74.8 8/18/2024 AR USD
Provincia de Rio Negro 7.8 70.3 12/7/2025 AR USD
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 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.
.
* * * End of Transmission * * *