/raid1/www/Hosts/bankrupt/TCRLA_Public/230125.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
Wednesday, January 25, 2023, Vol. 24, No. 19
Headlines
A R G E N T I N A
ARGENTINA: Bonds Jump with US$1-Billion Buyback
GAUCHO GROUP: Releases Growth Objective for 2023 and Beyond
B E R M U D A
FRYDAY'S: Rising Costs Force Closure of Restaurant
B R A Z I L
ALUPAR INVESTIMENTO: Fitch Affirms IDRs at BB/BBB-, Outlook Stable
AMERICANAS SA: Minority Shareholders Denounce Firm for 'Fraud'
BRAZIL: Unemployment Reaches Lowest Level Since April 2015
C O S T A R I C A
AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Duke-Farley Spat Affects Investment in Country
X X X X X X X X
LATAM: ECLAC Proposes New Policies to Promote Growth in Region
- - - - -
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A R G E N T I N A
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ARGENTINA: Bonds Jump with US$1-Billion Buyback
-----------------------------------------------
Buenos Aires Times reports that Argentina's international bonds
leaped to their highest in more than a year after the government
said it planned to repurchase about US$1 billion of the debt,
surprising investors in the cash-strapped country.
The nation's US$16.1 billion in overseas bonds due 2030 rose 2.5
cents to 35.5 cents on the dollar to the highest since October
2021, paring gains from earlier in the day, according to Buenos
Aires Times. It is those bonds, plus ones maturing in 2029, that
the government plans to buy back, Economy Minister Sergio Massa
said, without giving details. The Central Bank will lead the
process, the report notes.
For investors, the key question is where the money comes from,
Portfolio Personal Inversiones analysts led by Joaquin Bagues wrote
in a note. "Net reserves are hovering around US$6.08 billion, so
this first phase of the program would consume 16.4 percent of this
scarce stock," the report relays.
Argentina's Economy Ministry is using dollars held by the Treasury
to fund the buyback, including money it expects to save from energy
imports it presumes it won't need in 2023, according to people with
direct knowledge of the matter, who declined to be named, the
report discloses. The buyback is seen affecting Argentina's gross
reserves, but not its net reserves, the people said, the report
notes.
The move would mark the first major action by the government on the
country's global bonds since US$65 billion of notes were
restructured in 2020, the report relays. Its bonds have been
trading in distressed levels since then, but prices have almost
doubled in recent weeks from an October low of 19 cents on the
dollar, the report notes.
"The decision would be justifiable if Argentina had excess reserves
- but that's not the case. International reserves currently stand
at US$42.9 billion and have long been running below the the IMF's
recommended level. Voluntarily disposing of US$1 billion is a
risky bet on sustainable improvement in commodity prices and
international liquidity," said Adriana Dupita, Latin America
economist for Bloomberg.
Argentina is trying to comply with the government's US$44-billion
agreement with the International Monetary Fund, build international
reserves and battle annual inflation near 100 percent ahead of this
year's presidential elections, the report notes.
"It's hard to believe that the IMF has signed off on this, or maybe
they haven't and Argentina is going forward with it anyways," said
Edwin Gutierrez, head of emerging-market sovereign debt at Abrdn in
London, the report says. "There's no way Argentina will overshoot
their reserve accumulation target in the short term," he added.
Drought Risks
Massa added that an ongoing drought is impacting the government's
economic forecasts included in its 2023 budget. Without providing
specifics, he said Argentina would need to import less energy than
projected in the budget, the report notes.
The country's key export crop, soy, is facing the prospect of its
worst harvest in 14 years as drought-stricken farmlands anticipate
poor yields. That outcome would risk shaving 1.8 percentage points
from gross domestic product, according to estimates from the Buenos
Aires Grain Exchange, the report discloses.
Before the announcement, economists surveyed by Argentina's Central
Bank last month had projected economic growth would slow to less
than one percent this year from over five percent in 2022 amid the
drought and election uncertainty, the report notes.
Local Woes
At the same time, that Argentina is seeking to buy back some of its
foreign currency bonds, trouble is brewing in the local debt
market, the report discloses.
Local investors have been unwilling to roll over their holdings of
peso denominated debt amid fears soaring inflation is making the
country's CPI-indexed peso debt unsustainable, raising speculation
that the government will be forced to default later this year, the
report relays.
A peso debt auction will serve as a litmus test for local
investors' willingness to fund the government in 2023, indicating
just how close a possible default may be, the report notes. The
results should be known before the end of the day, the report
says.
The Treasury is seeking to refinance around 365 billion pesos (US$2
billion) in local notes and bonds, with about 86 percent of the
total maturities held by the private sector, according to Portfolio
Personal Inversiones, the report notes.
If Argentina doesn't roll over the full amount, it will need to
cover any shortfall through money printing, further fuelling
inflation and increasing pressure on the government to devalue its
official exchange rate, according to Javier Casabal, a fixed income
strategist at Adcap Asset Management in Buenos Aires, the report
discloses. That in turn adds to pressure for a reprofiling of the
debt later this year, the report says.
"If Argentina doesn't manage to refinance its local debt, the
market will start to get nervous, and we could see more pronounced
redemptions from mutual funds," Casabal said. "There are already
redemptions, but for now, everything is still manageable," 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. 20, 2023, affirmed its 'CCC+/C' foreign
currency and 'CCC-/C' local currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings remains negative.
S&P's 'CCC+' transfer and convertibility assessment is unchanged.
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.
Fitch Ratings, on the other hand, downgraded in October 2022
Argentina's Long-Term Foreign-Currency (FC) and Local-Currency (LC)
Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC'. The downgrade
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 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.
GAUCHO GROUP: Releases Growth Objective for 2023 and Beyond
-----------------------------------------------------------
Gaucho Group Holdings, Inc. announced its objectives for 2023 and
beyond, as the Company continues to lay the foundation for growth
and scale with the goal to create long term value for its
investors.
Scott Mathis, CEO & Chairman of Gaucho Holdings commented; "We have
accomplished so much since we embarked on this journey, building
from the ground up a portfolio of diverse experiential luxury
brands and real estate assets. Looking ahead, we seek to continue
development and the build out of our existing assets, to strengthen
our businesses by setting up our revenue potential for exponential
and transformational growth for 2023.
"Upcoming initiatives for our luxury vineyards estate lot sales
program can potentially generate USD 5 Million or more in sales in
2023 alone, while our continued build out of the project's
infrastructure (a planned 60-room hotel and spa, that is also
slated to include 30-50 residences, and for which we seek to
co-brand with a luxury hotel brand) could generate an additional
$25 million per year of revenue once complete. With our
Masterplan's addition of 200 more lots, ranging in size from 2.47
acres to 6 acres, we anticipate the potential to generate more than
$100 million in revenue.
"In the hospitality sector, we have a strategy in place to increase
the occupancy and ADR for our hotels in Buenos Aires and Mendoza.
"Similarly, our e-commerce wine sales in 2022 saw increased sales
volume, retuning customer rates and online sessions, as well as
increased distribution channels in both Argentina and the U.S. Our
plans for 2023 and beyond include further increasing our
distribution channels, our e-commerce sales and our international
markets, such as Argentina's neighbor Brazil, which is the world's
3rd largest market for online wine sales.
"Last summer, our leather goods and accessories brand celebrated
the incredible milestone of opening our flagship at one of the
world's most renowned luxury shopping malls, the Miami Design
District, among the likes of widely recognized luxury retail brands
such as Off White, Bottega Veneta, Gucci, and Chanel, and many
others. In addition to presenting at the renowned New York Fashion
Week, we also launched our line of luxury home goods, among other
notable milestones. We look forward to continuing to scale our
e-commerce revenue growth with an aggressive marketing campaign, as
well the launch of our Resort Collection this summer and a luggage
+ travel accessories collection."
2022 Accomplishments Highlights
* Received official approval from the Municipality of San Rafael
of the Masterplan for Algodon Wine Estates, a 4,138-acre wine,
wellness, culinary and sport resort and luxury residential
development, in San Rafael, Mendoza, Argentina. This includes an
additional 200 lots for sale.
* Completion of Algodon's winery multi-year expansion and
infrastructure improvement initiative, that has resulted in a
larger and better equipped facility to produce premium quality,
small batch wines.
* San Rafael's vineyard estate restaurant expansion project
nearly complete.
* Unveiled map of newly expanded and revised Masterplan of the
entire 4,138 acres including a new Hotel & Spa project.
* Received approval for Masterplan electrical grid by EDEMSA to
develop further sectors of estate.
* Deed approval of 27 new lots in Sector A, allowing the sale
of
lots to be simplified for foreign buyers.
* 2nd and 3rd water wells approved. 3rd well is awaiting
drilling commencement.
* Gaucho's Buenos Aires NYFW Runway Show.
* Gaucho.com domain acquired, driving more brand awareness and
traffic to online e-commerce platform.
* Launched Gaucho CASA the Home Collection.
* Engaged Tara Ink PR agency
* Opened U.S. Flagship retail location in one of the most
luxurious retail centers in Florida's the Miami Design District.
* Algodon Fine Wines added to Southern Glazer's Wine & Spirits
portfolio, penetrating the Miami hospitality market (currently in
20 restaurants and looking to be in 50 by the end of the year).
* Algodon Fine Wines targets Brazil e-commerce wine market.
* Record sales in Argentine wine e-commerce platform.
* VIVINO Partnership (Top 2% of Pageviews on VIVINO App out of
180k Wineries).
* Algodon Mansion refurbishment of furniture lighting and
interiors.
* Rooftop at Algodon Mansion has been completed.
About Gaucho Group
Headquartered in New York, NY, Gaucho Group Holdings, Inc. --
http://www.algodongroup.com-- was incorporated on April 5, 1999.
Effective Oct. 1, 2018, the Company changed its name from Algodon
Wines & Luxury Development, Inc. to Algodon Group, Inc., and
effective March 11, 2019, the Company changed its name from Algodon
Group, Inc. to Gaucho Group Holdings, Inc. Through its wholly-owned
subsidiaries, GGH invests in, develops and operates real estate
projects in Argentina. GGH operates a hotel, golf and tennis
resort, vineyard and producing winery in addition to developing
residential lots located near the resort. In 2016, GGH formed a new
subsidiary and in 2018, established an e-commerce platform for the
manufacture and sale of high-end fashion and accessories. The
activities in Argentina are conducted through its operating
entities: InvestProperty Group, LLC, Algodon Global Properties,
LLC, The Algodon - Recoleta S.R.L, Algodon Properties
II S.R.L., and Algodon Wine Estates S.R.L. Algodon distributes its
wines in Europe through its United Kingdom entity, Algodon Europe,
LTD.
Gaucho Group reported a net loss of $2.39 million for the year
ended Dec. 31, 2021, a net loss of $5.78 million for the year ended
Dec. 31, 2020, and a net loss of $6.96 million for the year ended
Dec. 31, 2019. As of Sept. 30, 2022, the Company had $25.39 million
in total assets, $6.86 million in total liabilities, and $18.53
million in total stockholders' equity.
=============
B E R M U D A
=============
FRYDAY'S: Rising Costs Force Closure of Restaurant
--------------------------------------------------
Duncan Hall at The Royal Gazette reports that a fast-food
restaurant in Hamilton has been sold owing to the rising costs of
doing business.
FryDay's, on the second floor of the Bermudiana Arcade on Queen
Street, shut its doors for good after a six-year run.
Mstira Weeks, the co-owner of FryDay's, said: "The decision to
divest ourselves from the restaurant business was primarily the
substantial increase in food cost, electricity and gas, according
to The Royal Gazette.
"We do not see the cost decreasing anytime soon. Therefore, we
decided that rather than significantly increase the cost to our
customers, we would sell and concentrate on our entertainment and
retail sections of our business enterprise, the report notes.
"It wasn't a hard decision. In our view, it is a good business
decision. With the facts in front of us that food cost is on the
rise globally, it is only so much we can charge customers before we
price ourselves out of Bermudians being able and willing to pay the
price without complaints," the report relays.
Ms Weeks added: "The restaurant division was sold to another group
who will use their own menu. We wish them success," the report
discloses.
She said that no jobs have been lost, the report relays.
"The new owners took some staff and we kept a staff member as we
endeavour to enhance our services in the customisation business,"
she added.
Ms. Weeks said the restaurant's customer base was "very upset"
about the closing, the report notes.
"We received so many calls and messages with people disappointed
that we were closing. We had an overwhelming last week of business
where our valued customers showed their support and stated they
will miss FryDay's, the report notes.
"FryDay's would like to say thank you to our customers, friends and
business providers for their support."
FryDay's Market, which opened in October 2021 to replace the
dine-in side of the restaurant, will continue in the same location,
the report relays.
Ms Weeks said it will be "enhanced", adding: "We will create an
experience where we will customise crocs, sneakers and clothes and
have our customers come in and do it themselves, the report notes.
"We will also be offering customisation parties, sip 'n paints,
team-building events and fun entertainment," she added.
===========
B R A Z I L
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ALUPAR INVESTIMENTO: Fitch Affirms IDRs at BB/BBB-, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Alupar Investimento S.A.'s Foreign
Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs)
at 'BB' and 'BBB-', respectively. Fitch has also affirmed Alupar's
and its subsidiary Foz do Rio Claro Energia S.A.'s National Scale
Ratings and outstanding local debentures at 'AAA(bra)'. In
addition, Fitch has affirmed Alupar's subsidiary Amazônia Empresa
Transmissora de Energia S.A.'s (AETE) and its outstanding local
debenture's National Scale Rating at 'AA+(bra)'. The Rating Outlook
for the corporate ratings is Stable.
Alupar's ratings reflect its low business risk relative to its
diversified portfolio of power transmission assets in Brazil, with
predictable revenues and high operating margins. The company also
benefits from its generation activity, which adds to dilution of
operational and regulatory risks. The group should continue to
reduce leverage and present positive FCF in 2023. The company's FC
IDR is constrained by Brazil's country ceiling of 'BB', while
Brazil's operating environment limits the LC IDR.
Foz do Rio Claro's rating mainly reflects the high legal incentives
of Alupar to support this company, while these incentives are
considered low to medium factors in the case of AETE.
KEY RATING DRIVERS
Low Business Risk: Alupar's credit profile benefits from the
combination of its activities in energy transmission and
generation, mainly in Brazil, through a sizable and diversified
asset base that dilutes potential operational and regulatory risks.
The group's concessions will not begin to expire until 2030 in
transmission, and 2038 in generation, and will occur on a staggered
basis over the following years.
In transmission, concession revenue (Annual Permitted Revenues
[PAR]) is generated through the availability of its assets, without
demand risk and annually adjusted for inflation. This segment will
remain the company's main business. In the generation segment,
long-term contracts for the sale of a large part of the asset's
assured energy and the partial protection for hydrological risk
also create an expectation of strong and predictable performance.
This segment should represent 20%-25% of the consolidated EBITDA
from 2023 on, considering the conclusion of the wind complex
Agreste Potiguar - Phase 1 and solar complex Pitombeira in 2023.
Leverage to Be Reduced: Fitch expects Alupar's consolidated
leverage to be consistent with the current LC IDR in the rating
horizon, considering its current portfolio of projects. The base
case scenario contemplates an adjusted net debt-to-EBITDA ratio
between 3.0x-3.5x in 2023 and 2024, continuing to gradually decline
from the peak of 4.7x in 2020 as capex reduces and new projects
come into operation and contribute to cash generation. On Sept. 30,
2022, this ratio was 3.5x, according to Fitch's criteria. The
group's financial covenants should limit the group's appetite for
new sizable projects.
Fitch considers the development of the transmission line Transnorte
Energia S.A. (TNE), which should require BRL635 million in capital
injection from 2023 to 2025 and BRL865 million in off balance debt
guarantee, already included in the leverage ratios, corresponding
to Aupar's 51% stake in the project.
Capex Reduction Strengthens FCF: Alupar should present positive FCF
of BRL373 million in 2023 and an annual average of BRL1.3 billion
during 2024-2025 due to capex reduction and based on dividend
distribution corresponding to 50% of net income. The base case
scenario takes into account BRL914 million in capex in 2023 and an
annual average of BRL158 million in the following two years,
significantly below the annual average of BRL1.8 billion during the
2019-2021 period.
Consolidated EBITDA, calculated through regulatory accounting,
should reach BRL2.8 billion in 2023 and BRL3.0 billion in 2024,
benefitting from an 8.1% average PAR increase of the 2022/2023
cycle, as defined in July 2022. EBITDA margins are high at 80%-85%,
characteristic of transmission companies in Brazil. In the LTM
ended on Sept. 30, 2022, Alupar's consolidated EBITDA was BRL2.4
billion, with an 86% margin.
Manageable Construction Risk: Alupar's positive track record of
developing and obtaining long-term financing for its new
transmission and generation projects mitigates the risks associated
with the construction phase. The pending long-term project finance
debt structure of three transmission lines and of the generation
projects is not a major concern. The group needs to raise BRL473
million to refinance bridge loans due in 2023 and BRL388 million
for loans due in 2024. Alupar has two transmission projects and
three energy generation plants to be concluded by the end of 2023.
Transmission lines will add 275 km and require BRL661 million in
capex, while the conclusion of construction of the generation
plants will add an installed capacity of 125 MW and require capex
of BRL200 million. Lot 6, a project won in the regulatory auction
in December 2022, will also require capex of BRL420 million during
2023-2026.
Parent Strengthens Subsidiaries' Ratings: Taking into account the
Parent and Subsidiary Linkage criteria, Fitch equalizes the
National Scale Ratings of Foz do Rio Claro and Alupar due to the
high legal incentives of the parent to support the subsidiary.
Alupar holds 100% of Foz do Rio Claro's shares and is the guarantor
of the company's single debt, whose financial covenants are based
on Alupar's consolidated figures. Foz do Rio Claro also operates in
Alupar's core business.
In the case of AETE, there are no legal or strategic incentives of
support from the parent, but the operational incentive is
considered as medium and benefits the rating. Alupar does not
guarantee AETE's debt and there is no cross-default between them.
Alupar owns 32,06% of AETE, which is part of its main business.
AETE is not relevant in terms of consolidated revenues (around 1%
of PAR), but presents synergies with four other assets of the
group. On a standalone basis, AETE's should presents a low net
leverage, with 2.5x at the end of 2023.
DERIVATION SUMMARY
Alupar's financial profile is stronger than Latin American peers
Interconexion Electrica S.A. E.S.P. (FC IDR BBB/Stable) and
Consorcio Transmantaro S.A. (FC IDR BBB/Stable), in Colombia, and
Transelec S.A. (FC IDR BBB/Stable), in Chile. All these peers have
low business risk profiles and predictable cash flow generation,
characteristic of transmission electricity companies in a regulated
industry. The main difference in the IDRs of Alupar and those
companies is the country where they generate their main revenues
and the location of assets.
While its peers are located in countries with higher IDRs, Alupar's
ratings are negatively affected by Brazil's country ceiling of
'BB'. In the case of Transmissora Alianca de Energia Eletrica
S.A.'s (FC IDR BB/Stable), also located in Brazil, both have
similar credit profile, with a diversified portfolio of
transmission companies and a robust financial profile, with some
expected decrease in leverage metrics due to reduction in
investments.
KEY ASSUMPTIONS
Fitch's Main Assumptions in its Base Scenario for the Issuer
Include:
- PARs adjusted annually by inflation, with a 50% reduction for
transmission assets signed until 2007, whose concession agreement
contemplates this movement after the 15th year of operation;
- Generation scaling factor of 0.85 in 2023 and 0.93 in 2024;
- Operating expenses adjusted by inflation;
- Distribution of dividends equivalent to 50% of net income (net
income based on regulatory accounting standards);
- Total investments of BRL2.3 billion during 2022-2026 period and
absence of acquisitions and/or new investments out of the current
portfolio.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Positive rating action for the company's FC IDR depends on an
upgrade on Brazil's sovereign rating;
- Positive rating action for the company's LC IDR depends on
improvements on Brazil's operating environment;
- An upgrade is not applicable to the National Scale rating as it
is at the highest level;
- Higher incentive of Alupar to support AETE may lead to an upgrade
on its rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative rating action for the LC IDR would be associated to a
deterioration in Alupar's consolidated financial profile, with net
adjusted leverage above 3.5x and funds from operations net leverage
above 4.0x, both on a sustainable basis;
- A weaker Brazilian operating environment may result in a
downgrade of the LC IDR;
- A downgrade on Brazil's sovereign rating would result in a
similar rating action on Alupar's FC IDR;
- A two-notch downgrade on Alupar's LC IDR would lead to a
downgrade on the National Scale rating;
--Lower incentive of Alupar to support Foz do Rio Claro and AETE
may lead to a downgrade on their ratings;
- Net debt/EBITDA ratio above 5.0x at AETE level could result in a
negative rating action on its ratings.
LIQUIDITY AND DEBT STRUCTURE
Sound Liquidity Profile: Alupar group should continue to benefit
from a high liquidity position and broad access to the banking and
capital markets. On a consolidated basis, the group's cash position
of BRL2.4 billion at the end of September 2022 covered its
short-term debt of BRL619 million by 3.9x. Fitch also expects that
the operating cash generation of new assets will be adequate to
service their debt. On Sept. 30, 2022, total consolidated adjusted
debt of BRL11.0 billion mainly consisted of debentures issuances
(BRL8.5 billion or 78%) and Banco Nacional de Desenvolvimento
Economico e Social (BNDES; BRL620 million, or 6% of the total).
The holding company should use its significant cash reserves to
supply the needs of its projects, maintaining a debt maturity
schedule compatible with its cash flow expectations. As of Sept.
30, 2022, its cash position of BRL662 million (27% of the
consolidated amount) was slightly smaller than the total debt of
BRL690 million. The dividends inflow is its main source of funds,
with BRL660 million received in the LTM ended on Sept. 30, 2022. In
the same period, the total debt-to-received dividends ratio was
1.0x. Alupar should be able to maintain the net debt-to-received
dividends ratio below 1.0x over the following years.
ISSUER PROFILE
Alupar is a non-operational holding company active in the energy
transmission and generation segments mainly in Brazil, with small
operations in other Latin America countries. The company's shares
are traded at B3 in Brazil.
SUMMARY OF FINANCIAL ADJUSTMENTS
Net revenues and EBITDA net of construction revenues and cost.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
AETE - Amazonia
Empresa Transmissora
de Energia S.A. Natl LT AA+(bra) Affirmed AA+(bra)
senior unsecured Natl LT AA+(bra) Affirmed AA+(bra)
Foz do Rio Claro
Energia S.A. Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
Alupar Investimento
S.A. LT IDR BB Affirmed BB
LC LT IDR BBB- Affirmed BBB-
Natl LT AAA(bra) Affirmed AAA(bra)
senior unsecured Natl LT AAA(bra) Affirmed AAA(bra)
AMERICANAS SA: Minority Shareholders Denounce Firm for 'Fraud'
--------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that a group
representing minority shareholders filed a complaint with Brazil's
securities regulator against Americanas SA after the retailer
uncovered "accounting inconsistencies" totaling 20 billion reais
(US$3.89 billion).
The Abradin association said it was denouncing Americanas for what
it called a "multi-billion fraud," while also asking regulator CVM
to investigate the retailer's auditor, PwC, according to
globalinsolvency.com.
Shares in Americanas plummeted more than 75%, wiping out 8.4
billion reais in market value after the company's chief executive
Sergio Rial resigned, citing the discovery of inconsistencies, the
report relays.
"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 report notes.
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: Unemployment Reaches Lowest Level Since April 2015
----------------------------------------------------------
Richard Mann at Rio Times Online, citing the state-run Brazilian
Institute of Geography and Statistics (IBGE), reports that
unemployment in Brazil fell in the quarter that ended in November
to 8.1 percent, the lowest level since April 2015 and equivalent to
about 8.7 million people out of work.
Compared to the quarter ending in August, unemployment in the
country fell by 0.9 percentage points; compared to November 2022,
the reduction was 3.5 percentage points, according to Rio Times
Online.
In numbers, unemployment fell by 953,000 people compared to the
previous quarter and by 3.7 million compared to November last year,
the report notes.
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). Â 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).
===================
C O S T A R I C A
===================
AUTOPISTAS DEL SOL: Fitch Affirms 'B' Rating on International Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed Autopistas del Sol, S.A.'s (AdS)
international notes at 'B' and national scale rating on its local
notes at 'AA-(cri)'. The Rating Outlook remains stable. The
international and local notes are supported by the cash flow
generation from Costa Rica's Ruta 27 toll road.
RATING RATIONALE
AdS's ratings reflect the asset's traffic and revenue profile,
supported by an adequate toll adjustment mechanism. Mostly used by
commuters, the project may face significant competition in the
medium term once the main competing road is improved, and
especially if its tariffs are significantly lower than those of
Ruta 27.
Toll rates are adjusted quarterly to the exchange rate and annually
to reflect changes in the U.S. Consumer Price Index (CPI). The
ratings also reflect a fully amortizing senior debt structure with
a fixed interest rate and a net present value (NPV) cash trap
mechanism that prevents an early termination of the concession
before debt is fully repaid.
Fitch's rating case minimum and average debt service coverage
ratios (DSCR) are 0.8x and 1.2x, respectively, which remain in line
with Fitch's criteria guidance for the assigned rating. The
eventual shortfalls in debt coverage will likely be covered by the
reserve accounts available within the structure. Under this
scenario, Fitch expects the project will receive MRG payments from
2028 onward, which totals 9% of annual revenues on average.
KEY RATING DRIVERS
Mostly Commuter with Growing Heavy Traffic [Revenue Risk - Volume:
Midrange]:
The asset is a toll-road that serves a strong reference market,
playing an important role in the broader transportation system. The
road serves as a link between San Jose (Costa Rica's capital city)
and its surrounding metropolitan area with the Pacific Coast, and
is used by commuters on workdays and by San Jose residents
traveling to beaches on the weekends. The road could face
significant competition once major improvements to the existing and
congested San Jose-San Ramon Route are made. The concession
agreement provides an MRG that compensates the issuer if revenue is
below certain thresholds, somewhat alleviating this risk.
Adequate Rate Adjustment Mechanism [Revenue Risk - Price:
Midrange]
Toll rates are adjusted quarterly to reflect changes in the Costa
Rican Colon (CRC) to USD exchange rate, and annually to reflect
changes in the U.S. CPI. Tolls may be adjusted prior to the next
adjustment date if the U.S. CPI or the CRC/USD exchange rate varies
by more than 5%. Historically, tariffs have been updated
appropriately.
Suitable Capital Improvement Program [Infrastructure Development &
Renewal: Midrange]
The asset is operated by an experienced global company with a
higher-than-average expense profile due to its geographical
attributes. The majority of the investments required by the
concession have been made. The concession requires lane expansions
when congestion exceeds 70% of the ideal saturation flow, which
triggers the need for further investments. However, the project
would only require the grantor to perform these investments to the
extent they do not represent a breach in the DSCRs assumed by the
issuer in the financing documents.
Structural Protections Against Shortened Concession [Debt
Structure: Midrange]
Debt is senior secured, pari passu, fixed-rate, and fully
amortizing. The debt is denominated in USD, but no significant
exchange rate risk exists due to the tariff adjustment provisions
set forth in the concession and because CRC-denominated toll
revenues will be converted to USD daily. The structure includes an
NPV cash trap mechanism to prepay debt if revenue outperforms the
base case revenue indicated in the issuer's financial model, which
largely mitigates the risk of the concession maturing before the
debt is fully repaid. Typical project finance features include a
six-month debt service reserve account (DSRA), a six-month backward
and forward-looking 1.20x distribution trigger and limitations on
investments and additional debt.
Financial Profile
Under Fitch's base case the project yields a minimum and average
DSCR of 0.8x (in 2023) and 1.3x, respectively. While under Fitch's
rating case, minimum and average DSCR are 0.8x (in 2023) and 1.2x,
respectively. The eventual shortfalls in debt coverage will likely
be covered by the reserve accounts available within the structure.
The concession is expected to expire in July 2033, which matches
its maturity. It assumes payments under the MRG starting in 2028,
which amounts in average to 9% of annual revenues. The metrics are
in line with Fitch's applicable criteria for the assigned rating.
PEER GROUP
Comparable projects in the region include TransJamaican Highway
(TJH; BB-/Stable) in Jamaica. AdS and TJH are similar projects
since they are both strong commuting assets within their respective
country's capital cities. Although they share similar attributes,
the difference in ratings comes from AdS's lower metrics (average
DSCR of 1.2x versus 2.2x of TJH under Fitch's rating case) and
because TJH has no dependency on traffic growth in order to repay
the rated debt. TJH is rated above the Jamaican sovereign
(B+/Stable) and is constrained by Jamaica's 'BB-' Country Ceiling.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Negative rating action on Costa Rica's sovereign ratings could
trigger a corresponding negative action on the rated notes.
- Traffic (WAADT) performance significantly below the Fitch's
rating case expectation of 41,868 vehicles in 2023, and/or a
substantially greater than expected traffic loss occurs due to the
advancement of works in the competing route.
- A deterioration of the liquidity available for debt service,
beyond the expected use of reserves.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action is unlikely in the near future given the
tight financial profile that is expected for the coming year with
DSCR below 1x in 2023.
TRANSACTION SUMMARY
The asset serves as a connection between the city of San Jose and
its metropolitan area with Puerto Caldera, along the Pacific Coast.
The asset is operated by Globalvia, one of the world leaders in
infrastructure concession management, which manages 28 concessions
in seven countries. The company was established in 2007 by FCC
Group and Bankia Group. In March 2016, Globalvia was acquired by
pension funds OPSEU Pension Plant Trust Fund (40%), PGGM N.V. (40%)
and Universities Superannuation Scheme Ltd (20%).
CREDIT UPDATE
Up to November 2022, traffic reached 93% of 2019 volume, below
Fitch's Base Case expectation of 95% and in line with Fitch's
Rating Case expectation of 93%. Traffic growth diminished in the
second half of the year and, according to the concessionaire, this
derived from steep tariff increases due to the higher inflation and
the increase in fuel costs in Costa Rica, which resulted in an
underperformance, especially considering that the effect of the
competing road has been negligible so far given the constant delays
in the improvement works.
The traffic mix has shifted slightly since the pandemic, with a
proportional increase of heavy vehicles (now 7.6% from 6.3% in
2019) as it decreased less than other categories, and a decline in
bus traffic generally due to pandemic-related effects on public
transportation. This is consistent with what Fitch has observed
with other toll roads, given the significant effects of
pandemic-related measures on commuting and touristic traffic.
Revenues through November 2022 at USD75.5 million surpassed 2019
revenues for the same period by 7%. Even though traffic has not
reached levels commensurate to 2019, higher tariffs and a traffic
mix leaning to heavy vehicles have resulted in a faster recovery in
revenues. Actual revenues in this period were generally in line
with Fitch's cases. Tariffs in 2022 increased in line with U.S.
inflation, maintaining their real value in USD terms.
Operational expenses have been generally in line with Fitch's
expectations. However, total expenditures were materially lower,
given that investments for slope stabilization, explained below,
were considerably lower than projected at USD2.2 million vs. the
expected USD7.5 million, due to permitting issues that have been
resolved. The postponed investments are expected to be performed
during 2023.
Part of the road is built on a sloping embankment, which has
presented constant settlement issues. As this situation worsened,
it was concluded that to avoid the risk of landslide it was
necessary to construct a viaduct without any support on the
potentially sliding surface. Total investment is estimated at
USD13.5 million. Work began in 2021; however, it was delayed
because of permits and other negotiations with the government. Work
has now started and will be finished in 2023, with an expected
investment of USD 10 million.
DSCR for November 2022 was 1.0x, higher than the expected 0.95x in
Fitch's base case and 0.92x in Fitch's rating case, given the lower
CAPEX investments. The debt service reserve account is currently
funded only with 84% of its target balance.
The first of five phases of undelayable work to the competing route
San Jose-San Ramon (Ruta Uno) has been completed; however, the next
four phases have been severely delayed, which has resulted in an
expected completion date of 2025. The road expansion is expected to
be completed a few years later. Ruta Uno announced that they will
increase the road's toll tariffs to maintain financial equilibrium;
however, the total tolls are expected to be less than those of Ruta
27.
FINANCIAL ANALYSIS
Fitch's base case assumes traffic recoveries in 2023, 2024 and 2025
of 96%, 98% and 100%, relative to 2019 levels. From 2026 until
2033, Fitch expects a compounded annual growth rate of 4%. From
this baseline, Fitch deducts the expected effect of the expansion
and improvement of the competing road with traffic drops of 7.5% in
2025 and 11.75% in 2027.
O&M and major maintenance expenses were projected following the
issuer's budget, adding a 7.5% stress plus annual U.S. inflation,
which is forecast at 7% for 2022, 3.6% for 2023, 2.7% for 2024 and
2.0% afterward. This scenario resulted in a minimum and average
DSCR of 0.8x (in 2023) and 1.3x, respectively.
Fitch's rating case assumes traffic recoveries in 2023, 2024, 2025
and 2026 of 94%, 96%, 98% and 100% relative to 2019 levels. From
2027 until 2033, Fitch expects a compounded annual growth rate of
4%. From this baseline, Fitch deducts the expected effect of the
expansion and improvement of the competing road with traffic drops
of 15% in 2025 and 23.5% in 2027. O&M, major maintenance and
inflation assumptions are the same as in the base case.
This scenario resulted in a minimum and average DSCR of 0.8x (in
2023) and 1.2x, respectively. Under this scenario, MRG will be
received from 2028 onward.
The debt coverage shortfall in 2023 in Fitch base and rating cases,
is expected to be covered by contributions from the sponsor to
finance the slope stabilization for up to USD 12 million. Fitch
does not consider this contribution in its projections, given it's
not a formal commitment or an enforceable obligation. Even if these
contributions do not materialize, available liquidity is sufficient
to withstand transitory shortfalls when CFADs cannot fully cover
debt service.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Autopistas del
Sol, S.A.
Autopistas del
Sol, S.A./Debt/1 LT LT
Serie 2017-B-CR
30-Dec-2030 - 144A
05330RAA8 LT B Affirmed B
Serie 2017-B-CR
30-Dec-2030 - Reg S
USP05875AB84 LT B Affirmed B
Autopistas del
Sol, S.A./Debt/2
Natl LT Natl LT
Series 2017-A-CR
Local Notes 10-yr Natl LT AA-(cri)Affirmed AA-(cri)
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Duke-Farley Spat Affects Investment in Country
-----------------------------------------------------------------
Trinidad Express reports that businessman and former chairman of
the Tobago arm of the Trinidad and Tobago Chamber of Industry and
Commerce, Demi John-Cruickshank, has said the public spat between
Progressive Democratic Patriots leader (PDP) leader Watson Duke and
Chief Secretary Farley Augustine has been affecting investment in
Tobago.
Cruickshank said as a result of the uncertain political climate, a
number of investors have turned their backs on Tobago and are
investing elsewhere, the report notes.
Cruickshank said several potential investors are concerned about
the public outburst between Duke and his members, the report
relays.
"If you look at it, you are in your father's house and your father
is saying to yourself and your siblings leave, leave, leave and one
day you pick up and leave your father's house and you're living
pretty. But then your father comes back and says to you 'I want you
back in my house,' will you go back?"
He said the political squabble is affecting investment because
people are not sure if Tobago is stable. This is affecting
investors and banks, he said, the report relays.
In addition, he said several international calls of concern have
been received, the report adds.
===============
X X X X X X X X
===============
LATAM: ECLAC Proposes New Policies to Promote Growth in Region
--------------------------------------------------------------
RJR News reports that ECLAC proposes new policies to promote growth
in Latin America and the Caribbean.
The Executive Secretary of the Economic Commission for Latin
America and the Caribbean (ELAC), Jose Manuel Salazar-Xirinachs,
has outlined a new set of policies to help Latin American and
Caribbean countries emerge from a prolonged development crisis,
according to RJR News.
The Council official is proposing cluster-based policies as a
powerful instrument to promote growth and product diversification
to help pull the region out of the crisis that has impeded high,
sustained, and sustainable growth in the last decades, the report
relays.
He was addressing the 2023 World Economic Forum Annual Meeting, the
report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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* * * End of Transmission * * *