/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230216.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Thursday, February 16, 2023, Vol. 24, No. 35 Headlines A R G E N T I N A ARGENTINA: Four Economic Alarm Bells Sound B E R M U D A FTX GROUP: Gets Court Approval to Subpoena Founder, Other Insiders NABORS INDUSTRIES: S&P Affirms 'B-' ICR & Alters Outlook to Pos. B R A Z I L AMERICANAS SA: Billionaires' Personal Assets Targeted by Creditors AZUL SA: S&P Lowers ICR to 'CCC-' on Increased Liquidity Risks GOL LINHAS: Moody's Cuts CFR to 'Caa2', Outlook Negative C A Y M A N I S L A N D S TOURADJI MASTER FUND: Appoints FPP as Joint Official Liquidator TOURADJI ONSHORE FUND: Appoints FPP as Joint Official Liquidator C H I L E EMPRESA NACIONAL DEL PETROLEO: S&P Alters Ratings Outlook to Pos. P E R U RUTAS DE LIMA: S&P Lowers Debt Rating to 'B-', On Watch Negative P U E R T O R I C O UNLIMITED DEVELOPMENT: Hits Chapter 11 Bankruptcy Protection X X X X X X X X LATAM: CEOs Think Companies Will Not Stay Economically Viable - - - - - ================= A R G E N T I N A ================= ARGENTINA: Four Economic Alarm Bells Sound ------------------------------------------ Buenos Aires Times reports that Argentina's economy received a wave of bad news, worsening an already dire economic outlook ahead of presidential elections this year. Four key indicators - construction, manufacturing, soy production and city inflation - flashed warning signs, according to Buenos Aires Times. And on February 3, economists surveyed by the Central Bank forecast a brief recession this year, defined by two consecutive quarterly contractions of gross domestic product, the report notes. The report discloses that here are more details: Construction Construction activity declined on a monthly basis in December for the fifth straight month, according to government data published the INDEC national statistics bureau. On an annual basis, activity also dropped 10.6 percent, the sharpest one-month decline since 2020. On the other hand, construction employment, a lagging indicator, continued to show gains. Soy outlook Argentine farmers will collect just 34.5 million metric tons of soybeans during the second-quarter harvest, the lowest level since 2009, the Rosario Board of Trade said in a monthly report. That's down seven percent from January and the lowest estimate yet among traditional forecasters. Manufacturing Argentina's industrial production index declined for the fourth time in six months in December, according to data published. About 10 percent of factory employers intend to reduce headcount in the next three months, up from six percent last June, while those intending to hire more fell to 10 percent from 15 percent over the same period. Most plan to make no changes. City Inflation Prices increased 7.3 percent in Buenos Aires City, all but ensuring inflation at the national level accelerated too. The city figures, published, showed prices rose in the capital by 99.4 percent from a year ago. National inflation data is published February 14. 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. ============= B E R M U D A ============= FTX GROUP: Gets Court Approval to Subpoena Founder, Other Insiders ------------------------------------------------------------------ Dietrich Knauth at Reuters reports that failed crypto firm FTX court approval to issue subpoenas to its founder Sam Bankman-Fried and members of his family as part of the company's investigation into "misappropriated and stolen" funds. FTX, a once-prominent crypto exchange, filed for bankruptcy protection in November amid allegations that Bankman-Fried used FTX customers' money to prop up the balance sheet of the FTX-affiliated hedge fund Alameda Research, according to Reuters. FTX said that it needs more information from former insiders, including its indicted founder, to identify misspending that could be clawed back to repay FTX's customers, the report notes. U.S. Bankruptcy Judge John Dorsey, who is overseeing FTX's Chapter 11 proceedings, approved FTX's request to issue subpoenas to Bankman-Fried, his parents Barbara Fried and Joseph Bankman, his brother Gabriel Bankman-Fried, former FTX Chief Technology Officer Gary Wang, former Alameda Research CEO Caroline Ellison, and former FTX chief operating officer Constance Wang, the report notes. Ellison and Gary Wang have pleaded guilty to fraud charges for their role in the collapse of FTX and Alameda. Bankman-Fried has pleaded not guilty, and is scheduled to face trial in federal court in Manhattan in October, the report notes. The subpoenas focus on questionable spending by FTX insiders. That includes $16.7 million spent on Bahamian real estate by Bankman-Fried's parents and a Washington, D.C., headquarters building purchased by Guarding Against Pandemics, an advocacy organization founded by the Bankman-Fried brothers, the report relays. FTX is also seeking information about political donations. In addition to donations by Sam Bankman-Fried, his mother founded a political action committee called Mind the Gap, which makes recommendations to a network of political donors, the report notes. Bankman-Fried declined to comment, and members of his family could not immediately be reached for comment. Mind the Gap has previously said that Sam Bankman-Fried did not make any direct contributions to the organization but did donate to some of its recommended programs, the report adds. About FTX Group FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10 showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent, maintaining the page https://cases.ra.kroll.com/FTX/Home-Index The Official Committee of Unsecured Creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the Committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. About Voyager Digital Holdings Based in Toronto, Canada, Voyager Digital Holdings Inc. -- https://www.investvoyager.com/ -- runs a cryptocurrency platform. Voyager claims to offer a secure way to trade over 100 different crypto assets using its easy-to-use mobile application. Through its subsidiary Coinify ApS, Voyager provides crypto payment solutions for both consumers and merchants around the globe. Voyager Digital Holdings Inc. and two affiliates sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 22-10943) on July 5, 2022. In the petition filed by Stephen Ehrlich, chief executive officer, the Debtors estimated assets and liabilities between $1 billion and $10 billion. Michael E. Wiles oversees the cases. The Debtors tapped Kirkland & Ellis, LLP as general bankruptcy counsel; Berkeley Research Group, LLC as financial advisor; Moelis & Company as investment banker; Consello Group as strategic financial advisor; Deloitte Tax, LLP as tax services provider; and Deloitte & Touche, LLP as accounting advisor. Stretto, Inc. is the claims agent. On July 19, 2022, the U.S. Trustee for Region 2 appointed an official committee of unsecured creditors in these Chapter 11 cases. The committee tapped McDermott Will & Emery, LLP as bankruptcy counsel; FTI Consulting, Inc. as financial advisor; Cassels Brock & Blackwell, LLP as Canadian counsel; and Epiq Corporate Restructuring, LLC as noticing and information agent. The committee also tapped the services of Harney Westwood & Riegels, LP in connection with Three Arrows Capital Ltd.'s liquidation proceedings in British Virgin Islands. On July 6, 2022, the Debtors filed a joint Chapter 11 plan of reorganization. NABORS INDUSTRIES: S&P Affirms 'B-' ICR & Alters Outlook to Pos. ---------------------------------------------------------------- S&P Global Ratings revised its outlook on Bermuda-based drilling contractor Nabors Industries Ltd. to positive from stable and affirmed its 'B-' issuer credit rating. S&P said, "At the same time, we placed our 'B' issue-level rating on Nabors' 7% SPGN due 2027 on CreditWatch with positive implications, which indicates that we expect to revise our recovery rating on the 7% notes to '1' from '2' following the redemption of the 9% SPGN due 2025. Our 'CCC' issue-level rating and '6' recovery rating on the company's priority guaranteed notes and unsecured notes remain unchanged. The positive outlook reflects the company's improved near-term maturity profile, improving credit measures, supportive industry fundamentals, and our expectation it will use its free cash flow for debt reduction. The outlook revision reflects the expected improvement in Nabors' maturity profile and improving credit measures. The issuance of the $225 million unsecured exchangeable notes, which the company plans to use the proceeds from to redeem its approximately $210 million 9% SPGN due 2025, improves the company's maturity profile. Nabors near-term maturity profile is manageable and we expect it will repay its notes maturing in 2023 and 2024 with cash on hand and free cash flow. Nabors' next sizeable maturity is its approximately $474 million of 5.75% notes due in 2025, followed by additional maturities in 2026 and 2027, which constrain the rating. However, this recent transaction, combined with the company's access to an undrawn credit facility and numerous other financing options, improves its financial flexibility. Additionally, S&P expects its credit measures will improve in 2023, including funds from operations (FFO) to debt averaging about 30%. S&P expects the conditions in the oilfield services industry, which have improved, to remain supportive this year. Nabors generated $154 million of free cash flow in 2022 and expects to generate more than $400 million of free cash flow in 2023. S&P expects the company will use the free cash flow to further improve its balance sheet. Nabors expects to increase its active fleet in the contiguous U.S. by 1 rig in the first quarter of 2023 and improve its margins as it renews contracts at higher prices. The company noted that the decrease in natural gas prices led to some rig churn, notably among private drillers in gas basins. However, Nabors' rig count remained steady in January as it successfully contracted the released rigs in oilier basins. The company expects to increase its rigs working under longer-term contracts. S&P said, "Nabors Drilling Solutions (NDS) continues to gain traction, and we expect this segment will continue to expand in 2023 and account for a larger proportion of its total EBITDA. Internationally, Nabors expects to increase its rig count by 1-2 rigs in the first quarter while maintaining flat margins. The company's joint venture (JV) with Saudi Aramco, SANAD, has two of the initial five awarded rigs working and expect the remaining three to start operation by the third quarter. SANAD was also awarded five new builds, bringing the total awards to 10. We expect the company will start work on the new awards late in the third quarter at the earliest. Nabors expects continued growth in the Middle East and North Africa, as well as the potential for additional awards in Latin America in 2023." The positive outlook reflects the company's improved near-term maturity profile, improving financial measures, supportive industry fundamentals (despite volatile commodity prices), and S&P's expectation it will continue to use its free cash flow for debt reduction. S&P said, "We could revise the outlook to stable if free cash flow is lower than expected, resulting in less-than-anticipated debt reduction. Such a scenario is possible if capital expenditure (capex) exceeds our current expectations or commodity prices decrease such that demand for Nabors' services underperforms our expectations. "An upgrade is possible if Nabors maintains FFO to debt above 20% while making progress in addressing its 2023-2026 debt maturities. This could occur if Nabors generates our projected level of free cash flow in 2023 and uses it to repay debt." ESG credit indicators: E-4, S-2, G-2 Environmental factors are a negative consideration in S&P's credit rating analysis of Nabors Industries Ltd. due to its expectation that the energy transition will result in lower demand for services and equipment as accelerating adoption of renewable energy sources reduces demand for fossil fuels. Additionally, the industry faces an increasingly challenging regulatory environment, both domestically and internationally, that has included limits on fracking activity in certain jurisdictions, as well as the pace of new and existing well permits. To help offset these concerns, Nabors is operating relatively environmentally friendly rigs (17 duel-fuel, 2 biodiesel, 3 with advanced energy management systems, 3 grid powered, and 54 dual-fuel-capable rigs in the contiguous U.S.), has developed technology to improve the accuracy and transparency of greenhouse gas reporting on the rig site, and is evaluating carbon capture, emissions minimization, power storage, and power management technologies. In addition, the company has invested in seven clean energy startups concentrating on geothermal, energy storage, and emissions monitoring. Nabors was recently awarded the Energy Transition Award-Upstream and the Annual Platts Global Energy Awards. =========== B R A Z I L =========== AMERICANAS SA: Billionaires' Personal Assets Targeted by Creditors ------------------------------------------------------------------ globalinsolvency.com, citing Bloomberg News, reports that top Brazilian banks that are creditors of distressed retailer Americanas SA plan to go after personal assets of billionaires who are the firm's biggest shareholders -- Jorge Paulo Lemann, Marcel Telles and Carlos Sicupira. The firms will make the move if the billionaires don't rescue the company with combined capital injections of at least 15 billion reais (US$3 billion), according to globalinsolvency.com. The billionaires have offered no more than 6 billion reais. Creditors are trying to prove who was responsible for the $4 billion of "accounting inconsistencies" announced by Americanas, which doubled the retailer's liabilities and made it collapse in one week, the report relays. They say that the firm's managers and main shareholders benefited from what they call fraud, ther eport notes. In a Jan. 22 filing, the three billionaires said they didn't know about the accounting issues, the report discloses. "We never had any knowledge and would never have tolerated any maneuvers or accounting tricks in the company," Lemann, Telles and Sicupira said, the report notes. "Our action over decades has always been one of ethical and legal rigor. Bradesco SA, the biggest Americanas creditor and Brazil's second-largest bank by market value, has said in a filing obtained by Bloomberg that it aims to go after the personal assets of shareholders, the report relays. Other large banks have a similar view, but the people familiar with the matter asked not to identify them because it would reveal their legal strategy, the report adds. About Americanas SA Americanas was 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 billionaire Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles. The retailer nosedived in January 2023 after becoming mired in an accounting scandal. The firm filed for bankruptcy at a court in Rio de Janeiro on Jan. 19, 2023. Americanas sought protection under Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25, 2023. White & Case LLP, led by John K. Cunningham, is the U.S. counsel. AZUL SA: S&P Lowers ICR to 'CCC-' on Increased Liquidity Risks -------------------------------------------------------------- S&P Global Ratings, on Feb. 10, 2023, lowered its global scale issuer credit ratings on Azul S.A. to 'CCC-' from 'CCC+'. At the same time, S&P lowered its national scale issuer credit rating to 'brCCC-' from 'brBB'. S&P said, "We also lowered our issue-level rating on the senior unsecured notes to 'CCC-' from 'CCC+'. The recovery rating remains '4', indicating our expectation of average (30%-50%; rounded estimate: 45%) recovery in the event of a payment default. "The negative outlook reflects that although we expect operating performance to maintain momentum, Azul faces increased risk of a liquidity crisis that could push the company to pursue some type of debt and liabilities renegotiation within the next six months." Amid persistently strong yields, recovery in international and (to a lesser extent) corporate travel, and somewhat lower fuel prices, we forecast Azul's EBITDA to almost double in 2023, resulting in a sharp drop in leverage. However, Azul's margins should remain below pre-pandemic levels. This, coupled with considerable cash needs due to the payment of accumulated liabilities in the past three years (including leases renegotiated during the pandemic) and maintenance, fleet transformation, and other capital expenditures, will likely result in a large cash flow deficit during 2023. Azul has about Brazilian real (R$) 950 million in principal maturities, mostly banking debt, during 2023. While the size of amortizations isn't that large, Azul also has large lease payments of about $3.0 billion this year, which adds to working capital and capital expenditure (capex) needs. As a result, S&P forecasts a cash flow deficit of about R$3.0 billion that Azul will need to finance. Capital markets aren't showing much appetite for speculative-grade corporates in emerging markets, and the Brazilian domestic market has sharply deteriorated since the beginning of the year, which heightens liquidity risks despite the business recovery. Additionally, Azul's immediately accessible cash position fell to R$1.1 billion as of September 2022 from R$3 billion in December 2021. S&P said, "We expect domestic capacity to expand 1%-5% this year, but we think international capacity will grow about 55% because international travel remained very weak in 2022. We expect some pressure on yields starting in the second quarter as Brazilian airlines continue adding capacity and macroeconomic conditions remain weak (very low GDP growth and high inflation and interest rates). However, we believe airlines will focus on protecting profitability and operating cash flow, and so we expect a rational market and average yields in 2023 to remain strong. "In addition, we forecast Azul to benefit from a drop of about 10% in jet fuel prices as crude oil prices are likely to fall, and we don't expect a material depreciation of the Brazilian real. In any case, fuel prices will remain higher than normal during an expected global recession this year. As a result, our base case assumes Azul's EBITDA will jump to about R$5.0 billion this year from an estimated R$2.5 billion in 2022. In line with this, we forecast adjusted debt to EBITDA of about 5.5x (considering operating leases as reported) and funds from operations to debt of 8%-10% by year-end 2023." ESG credit indicators: E-3, S-5, G-2 GOL LINHAS: Moody's Cuts CFR to 'Caa2', Outlook Negative -------------------------------------------------------- Moody's Investors Service has downgraded to Caa2 from B3 Gol Linhas Aereas Inteligentes S.A. (Gol)'s corporate family rating and assigned a Caa2 rating to the new subordinated secured notes due 2025 and senior secured notes due 2026 issued by Gol Finance (LuxCo) in December 2022 and unconditionally guaranteed by Gol and Gol Linhas Aereas S.A. At the same time, Moody's has downgraded to Caa2 from B2 the rating of the senior secured notes issued by Gol Finance (LuxCo), and downgraded to Caa3 from Caa1 the rating of the senior unsecured notes issued by Gol Finance and Gol Equity Finance. The outlook for all ratings is negative. Assignments: Issuer: Gol Finance (LuxCo) Backed Senior Secured Regular Bond/Debenture, Assigned Caa2 Backed Subordinated Secured Regular Bond/Debenture, Assigned Caa2 Downgrades: Issuer: Gol Linhas Aereas Inteligentes S.A. Corporate Family Rating, Downgraded to Caa2 from B3 Issuer: GOL Equity Finance Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Caa3 from Caa1 Issuer: Gol Finance Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Caa3 from Caa1 Issuer: Gol Finance (LuxCo) Backed Senior Secured Regular Bond/Debenture, Downgraded to Caa2 from B2 Outlook Actions: Issuer: GOL Equity Finance Outlook, Changed To Negative From Stable Issuer: Gol Finance Outlook, Changed To Negative From Stable Issuer: Gol Finance (LuxCo) Outlook, Changed To Negative From Stable Issuer: Gol Linhas Aereas Inteligentes S.A. Outlook, Changed To Negative From Stable RATINGS RATIONALE The downgrade of Gol's CFR to Caa2 reflects the company's liquidity risk and sizeable upcoming refinancing needs. Gol's cash generation has not fully recovered from the impact of the pandemic and higher oil prices in the last years, and the company has been pursuing liquidity alternatives to refinance debt obligations and match its cash outflows to its internal cash generation. On February 7, 2023, Gol announced that Abra Group, the holding company that will hold stakes of Gol and Avianca Group International Limited (Avianca, B3 stable), will raise $418 million in cash and issue $987 million in senior secured notes due 2028. Proceeds will be used to subscribe Gol's new senior secured 2028 notes, which will increase Gol's cash position by approximately $400 million, and finance a voluntary tender offer of $680 million for Gol's notes due 2024, 2025, 2026, and perpetual. The group of ad hoc creditors of Gol agreed to tender $680 million in face value of the notes due 2024, 2025 and 2026 bonds at $0.60, $0.60, and $0.73 on the dollar, respectively. Abra will also buy Gol's perpetual bonds at $0.50 on the dollar. For bondholders outside the ad hoc group, Abra will offer $0.49 per dollar for the 2024 and 2025 notes and could pay a premium of $0.05 per dollar for bondholders that enter the voluntary tender up to 10 days after the deal is announced. For the 2026 notes, the proposal is $0.55 per dollar plus a premium of $0.05 per dollar if the bond is sold within 10 days after the deal's announcement and if the bondholders contribute new money representing 30% of their holdings. For the perpetual notes, the proposal is $0.35 on the dollar plus the $0.05 premium if the bond is sold within 10 days of the deal's announcement. In addition, if the perpetual bond holders contribute new money representing more than 30% of their holdings, there will be an additional $0.04 premium. Gol expects to close this deal on March 03rd 2023. Moody's views the deal as a distressed exchange given the losses creditors will incur, and the fact that the deal will be avoiding a potential default in light of Gol's current weak liquidity and untenable capital structure. The deal will improve Gol's liquidity position with the additional $400 million cash and lengthened debt amortization schedule. However, in such scenario, despite the potential refinancing and debt exchange, financial leverage would remain very high considering the still weak operating performance, making even the newly implemented capital structure of Gol untenable if the company cannot improve its weak margins and generate positive free cash flow. Gol's Caa2 CFR reflects the company's leadership position in the Brazilian market, supported by its strong brand name and low cost structure based on a modern and efficient operating fleet of Boeing 737 aircraft, along with an experienced management team. The rating also takes into consideration the faster-than-expected post-pandemic recovery in passenger traffic in Government of Brazil (Ba2 stable); and more rational competition and capacity in the Brazilian market, which has enabled carriers to charge higher airfares, mitigating the effect of higher jet fuel prices and other inflationary cost pressures. Gol's ability to reduce costs by reaching agreements with employees and lessors that resulted in a better-than-expected reduction in cash burn is also incorporated in the Caa2 rating. Gol has strong potential to substantially improve its key credit metrics toward the 2019 levels through 2024. The Caa2 rating is constrained by Gol's weak liquidity, exposure to foreign currency and fuel price volatility, still-weak credit metrics, the continued fragile situation in the airline industry in the context of the pandemic and rising macroeconomic risks. The company's ability to increase liquidity and control cash burn or cash needs will still be key aspects in its rating assessment, as Gol will continue to depend on debt roll overs to remain solvent. The downgrade of Gol's senior secured notes ratings to Caa2 follows the increased proportion of secured debt within Gol's capital structure, which eliminates the privileged position of such creditors relative to Gol's CFR. Furthermore, upon the conclusion of the debt exchange, certain senior priority and LTV tests under the secured notes program would be eliminated. Gol's senior notes currently have a pool of collateral that comprises a first-priority security interest in Gol's intellectual property, including patents, trademarks, brand names, trade dress, know how, copyright secrets, domain names and social media accounts. The collateral package also includes Gol's aircraft spare parts located in Brazil, including rotable, repairable and expendable parts. Gol's secured debt instruments account for around 73% of the company's debt. Gol's secured notes program currently has a maximum loan-to-value (LTV) ratio limit of 65% and a minimum coverage of 1.5x. The program includes other eligible collateral that can be added to the existing security package if needed, such as spare engines, flight simulators, first- or second-lien on incremental aircraft purchases, non-credit card backed receivables and a first lien on Smiles's revenue, intellectual property and brand. The new subordinated secured notes due 2025 and senior secured notes 2026 are rated Caa2, in line with Gol's CFR and other senior secured ratings, primarily reflecting the instruments' current pool of collaterals, including the Itaú Smiles receivables and the secured account, even though the subordinated tranche of the new notes is junior to the senior tranche of the notes in the instruments' payment waterfall. Moody's understands that both tranches of the new notes rank at least on a pari passu basis with Gol's other secured indebtedness. The notes proceeds were used to refinance lease obligations that Gol deferred during the pandemic, thus not impacting leverage ratios. Gol's senior unsecured notes were downgraded to Caa3, one notch below Gol's CFR, reflecting the effective subordination of unsecured creditors, which rank below the company's existing and future secured claims. Unsecured creditors account for about 27% of Gol's total debt. RATING OUTLOOK The negative outlook on Gol's ratings reflects the company's untenable capital structure and weak liquidity that results in high risk of debt restructure. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Gol's ratings could be further downgraded if the transaction is not concluded as announced, and Gol pursues other debt exchange alternatives that entail higher losses to creditors than those associated with the Caa2 rating category. An upgrade of Gol's ratings is unlikely in the near term unless there are sustainable improvements in the company's capital structure and liquidity. ESG CONSIDERATIONS Governance considerations were a factor in this rating action as the untenable capital structure of Gol and the potential debt restructuring have negative implications for creditors as it relates to financial strategy and risk management and management credibility and track record. Accordingly, Moody's changed Gol's Financial Strategy and Risk Management score to 5 from 3 and Management Credibility and Track Record score to 4 from 2, and Gol's Credit Impact Score to CIS-5 from CIS-3, driven by the change in the Governance Issuer Profile Score to G-5 from G-3. COMPANY PROFILE Based in Sao Paulo and founded in 2001, Gol is the largest low-cost carrier in Latin America, offering more than 550 daily passenger flights that connect Brazil's major cities and various destinations in South America, North America and the Caribbean, along with cargo and charter flight services. Additionally, Gol owns 100% of Smiles, a loyalty program company with more than 20 million participants that allows members to accumulate miles and redeem tickets in more than 900 destinations around the world and offer non-ticket reward products and services. In the 12 months that ended September 2022, Gol reported consolidated net revenue of BRL13.4 billion ($2.6 billion). Gol Finance (LuxCo), Gol Finance and Gol Equity Finance are wholly owned subsidiaries of Gol. The principal methodology used in these ratings was Passenger Airlines published in August 2021. =========================== C A Y M A N I S L A N D S =========================== TOURADJI MASTER FUND: Appoints FPP as Joint Official Liquidator --------------------------------------------------------------- Touradji Private Equity Master Fund Limited, which is in liquidation, tapped Nicola Cowan and Michael Pearson of FFP Limited as joint official liquidator. The joint liquidators can be reached at: Nicola Cowan Michael Pearson FFP Limited 2nd Floor Harbour Center, 159 Mary Street George Town Grand Cayman KY1-9006, Cayman Islands TOURADJI ONSHORE FUND: Appoints FPP as Joint Official Liquidator ---------------------------------------------------------------- Touradji Private Equity Onshore Fund Limited, which is in liquidation, tapped Nicola Cowan and Michael Pearson of FFP Limited as joint official liquidator. The joint liquidators can be reached at: Nicola Cowan Michael Pearson FFP Limited 2nd Floor Harbour Center, 159 Mary Street George Town Grand Cayman KY1-9006, Cayman Islands ========= C H I L E ========= EMPRESA NACIONAL DEL PETROLEO: S&P Alters Ratings Outlook to Pos. ----------------------------------------------------------------- S&P Global Ratings, on Feb. 9, 2023, revised the outlook to positive from stable and affirmed the 'BB+' ratings on Empresa Nacional del Petroleo (ENAP). S&P's assessment of the very high likelihood of support from the Chilean government, the company's sole shareholder, remains unchanged. S&P believes this assessment properly captures its expectation of support in a stress scenario, and it's in line with those of other government-related entities (GREs) rated in the country and region. The positive outlook reflects S&P's expectation that ENAP's main credit metrics will remain strong in the next 12 months primarily thanks to robust oil prices, which should result in debt to EBITDA consistently below 5x. ENAP has steadily improved its financial performance in the last couple of years, which we mainly attribute to the following factors: -- Its mandate to become as self-sustainable as possible; -- The financial discipline and cost-containment policy, including the reduction of workforce by about 12%; -- A more disciplined and effective management following the 2017 charter approval; -- An oil procurement approach that incorporates a broader spectrum of potential oil-supplying countries; and -- High oil and refining prices, particularly in 2021 and 2022. As a result, in 2022, the company posted its highest EBITDA of the past 10 years ($1.3 billion), resulting in net debt to EBITDA below 3.5x, the lowest in the last 10 years. S&P said, "However, we also note that this stemmed from high oil prices that typically help bolster refining margins, along with increasing the contribution from the upstream division. In addition, the industry and the company--and its two divisions--are capital-intensive and remain heavily dependent on oil prices with the consequent working-capital swings. Therefore, we're keeping our assessment of ENAP's financial risk profile unchanged. "We believe ENAP will maintain its leverage metrics in the next 12-24 months, with net debt to EBITDA ratio below 5x, compared with more than 7.5x on average since 2016, given the upward revision of our Brent price assumptions for 2023 and more notably 2024 to $90/bbl and $80/bbl from $85/bbl and $55/bbl, respectively. "The ratings on ENAP continue to reflect our opinion that there's a very high likelihood that its owner, Chile (foreign currency: A/Stable/A-1; local currency: A+/Stable/A-1), would provide timely and sufficient extraordinary support to the company in the event of financial distress. We base this on our view of ENAP's very important role as Chile's sole oil refiner, and its ability to supply about 60% of the domestic market's needs (the remainder coming from imports). The company also has a very strong link to the government, particularly regarding debt authorization, business plans, budget approvals, governance, and tax payments. In addition, following the new governance charter in 2017, ENAP received a capital infusion in 2018 from the government and it has capitalized earnings in the last few years. We believe that this underscores our view that ENAP has a very strong link to, and a very important role for, the government. "We believe this assessment is in line with those of other rated GREs in the region engaged in the same activity, such as Petroleos del Peru Petroperu S.A. (BB/Stable/--) and Administracion Nacional de Combustibles Alcohol y Portland (BB+/Stable/--). We also believe this assessment properly captures the differences between ENAP and the country's other GREs such as Corporacion Nacional del Cobre de Chile (A/Stable/--) and Banco del Estado de Chile (A/Stable/A-1)." ESG credit indicators E-4, S-2, G-2 ======= P E R U ======= RUTAS DE LIMA: S&P Lowers Debt Rating to 'B-', On Watch Negative ---------------------------------------------------------------- S&P Global Ratings, on Feb. 10, 2023, lowered its issue-level rating on Rutas de Lima S.A.C.'s (RdL or the project) debt to 'B-' from 'BB-' and placed the rating on CreditWatch with negative implications. The CreditWatch negative reflects a 50% chance of a further downgrade in the next 90 days if S&P perceives higher risk of acceleration of notes repayment, or if the project faces further adverse operating conditions that could hamper its cash flow, leading to a DSCR below 1.0x in 2023 and onward. On Jan. 30, 2023, The Metropolitan Municipality of Lima (MML) formally notified RdL of its decision to terminate the concession agreement. The MML stated the following reasons: -- Acts of corruption and the illegality of the concession agreement. -- The impediment to the MML of maintaining contractual links with corrupt companies, under its integrity and anti-corruption policy. -- RdL's high tariffs due to illegal amendments to the concession agreement. -- The Peruvian Office of the Comptroller General detected severe irregularities in the concession agreement. -- The economic impact of the Chillon tolls on low-income families, who use between 9% and 15% of their monthly income to pay for these tolls. -- Additional contractual deficiencies, such as MML's obligation to compensate RdL if an alternative road were to be constructed. -- The concession contract reduces toll users' quality of life, as seen in PN's transit time falling to 17 km/hour in 2023 from an average of 20 km/hour in 2013. -- RdL's deficient service, based on the 14,759 reported observations between 2020 and 2022. -- The addendum and the private acts used to modify the concession agreement didn't obtain the opinions of the Peruvian Ministry of Economy and Finance and Office of the Comptroller General. As a result, RdL will be exposed to a nonautomatic event of default once the concession is terminated. The termination will result in the following: -- RdL will be obligated to return to the MML the land related to the concession areas and the revertible concession assets; -- RdL's right to exploit the project will be terminated; -- The MML or a new company will take over the concession; -- The MML will be required to compensate RdL for the investments it made during the concession's term; and -- The MML will be obligated to continue paying debt service to bondholders as originally stipulated in the offering memorandum. Overall, the MML will be obligated--under the terms of the concession--to generate, update, adjust, channel, and administer the tariffs and tolls, and to preserve the concession assets in order to ensure the payment of the bonds. Furthermore, under the existing concession agreement, the MML won't be allowed to reduce tariffs or suspend toll collections. On Feb. 1, 2023, RdL initiated legal actions against the MML in order to start a process of dispute resolution, as stipulated in the concession. Consequently, if the parties don't reach an agreement within 90 days after RdL notifies the MML of the legal dispute, the claim will be resolved through an international arbitration procedure subject to the rules of the International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C. S&P said, "We note that all legal disputes RdL had had with the MML in the past (regarding the suspension of toll collections and the opposition to tariff increases) have resulted in final judgements in favor of the project, which sets a favorable precedent for further legal disputes. However, based on that track record of international arbitration processes between the two parties, we expect that the final judgement on this case will take longer than 90 days and be issued after the concession agreement is terminated on July 29, 2023." At this stage, the MML hasn't indicated if and how they will operate the assets once reverted to them. S&P will continue monitoring this situation to understand the MML's operational and financial strategy after the takeover. S&P said, "We have revised our projections and excluded tariff increases from our base case. In addition, amid the ongoing social and political protests occurring in Peru, including in Lima, we also lowered our traffic volume assumptions for this year to zero growth versus our previous expectation of 4.5%. We now expect the minimum DSCR to be near 0.90x, down from the previous 1.15x and indicating weaker debt repayment capacity. "The abovementioned changes in our assumptions also affect our downside-case scenario, which now has a much higher shortfall than the project's total reserve accounts. As a result, we now assess the project's resiliency as low." ===================== P U E R T O R I C O ===================== UNLIMITED DEVELOPMENT: Hits Chapter 11 Bankruptcy Protection ------------------------------------------------------------ Unlimited Development Corp. filed for chapter 11 protection in the District of Puerto Rico. The Debtor's sole asset is a residential apartment located at Capitolio Plaza, located on the 11th Floor, with 3 bedrooms, in San Juan, Puerto Rico, valued at $375,000. Secured creditor Cielo Vivienda LLC is owed $1,200,000. A telephonic meeting of creditors under 11 U.S.C. Section 341(a) is slated for March 6, 2023 at 9:150 a.m. Proofs of claim are due by June 5, 2023. About Unlimited Development Corp. Unlimited Development Corp. owns a residential apartment located at Capitolio Plaza, San Juan, Puerto Rico, valued at $375,000. Unlimited Development Corp. filed a petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 23-00253) on Jan. 31, 2023. In the petition filed by Ismael Crespo, as president, the Debtor estimated assets between $100,000 and $500,000 and liabilities between $1 million and $10 million. The Debtor listed Cielo Vivienda LLC as its only unsecured creditor holding a claim of $825,000. The case is overseen by Honorable Bankruptcy Judge Maria De Los Angeles Gonzalez. The Debtor is represented by: Wanda I. Luna Martinez, Esq. LUNA LAW OFFICES PO Box 19400 San Juan, PR 00919-4000 Tel: (787) 998-2356 Fax: (787) 200-8837 Email: quiebra@gmail.com =============== X X X X X X X X =============== LATAM: CEOs Think Companies Will Not Stay Economically Viable ------------------------------------------------------------- RJR News reports that thirty per cent of Caribbean CEOs think their organisations will not be economically viable in a decade. The latest Annual Global CEO survey conducted by auditing firm PwC, shows that more than a third of CEOs polled in the region, think their organisations will not be economically sound if they continue on their current path, according to RJR News. PWC says the findings are consistent with the view by global CEOs on economic viability, with 39 per cent saying the current pace of viability is unsustainable, the report notes. ********* 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 * * *