/raid1/www/Hosts/bankrupt/TCRLA_Public/230221.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
Tuesday, February 21, 2023, Vol. 24, No. 38
Headlines
A R G E N T I N A
ARGENTINA: Inflation Hits 6% in January
B R A Z I L
ANDRADE GUTIERREZ: Fitch Hikes LongTerm IDRs to 'CCC-'
AZUL SA: Fitch Lowers Rating on LongTerm IDRs to 'CCC-'
BRAZIL: Credit Crunch Brewing as Fallout Grows
BRAZIL: Economic Activity Rose 2.9% in 2022
GOL LINHAS: Fitch Lowers LongTerm Issuer Default Ratings to 'C'
C H I L E
CHILE: IDB Approves $200,000 Loan for Forest Fire Emergency
INVERSIONES LATIN: Fitch Cuts Rating on USD403MM Sec Notes to 'B-'
C O L O M B I A
COLOMBIA: Growth Data Shows Economy's Worse Than Initially Thought
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: 100,000+ Workers Had 2 Jobs to Survive 2022
P A N A M A
MULTIBANK INC: Fitch Assigns 'BB+' Rating on USD300MM Unsec. Notes
P E R U
PERU: GDP Growth Misses Forecasts in December as Unrest Simmers
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A R G E N T I N A
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ARGENTINA: Inflation Hits 6% in January
---------------------------------------
Buenos Aires Times reports that consumer prices in Argentina rose
six percent in January, the INDEC national statistics bureau said,
accelerating from the previous month despite the renewal of a
sweeping price control program enforced by the government.
The news, another blow to President Alberto Fernandez's
administration, means inflation has totalled 98.8 percent over the
past 12 months – the highest officially recorded rate since 1991,
according to Buenos Aires Times.
Argentina's consumer price index is now heating up after slowing
slightly in November (to 4.9 percent), recording similarly high
rates to those recorded in September (6.2 percent) and October (6.3
percent), the report notes.
In its 2023 Budget bill, the government forecast that consumer
prices would increase 60 percent this year, though analysts
consulted by the Central Bank's monthly market expectations survey
expect the figure to surpass 97 percent, the report relays.
Argentina has recorded annual inflation rates of double digits for
more than a decade, but price rises have accelerated sharply since
2018, when they increased 47.6 percent in the calendar year, the
report discloses. In 2019, increases totaled 53.8 percent, while
in 2020, in the midst of the Covid-19 pandemic, a rate of 36.1
percent was registered, the report discloses.
Over the last two years, inflation has shot up again, reaching 50.9
percent in 2021 and 94.8 percent last year, the report says.
January's six-percent rise was a result of a 7.9 percent rise in
the prices of seasonal products, 5.4 percent in core inflation and
7.1 percent in regulated services, the report notes.
Increases in January were led by a rise of nine percent for prices
in the recreation and culture sector, mainly due to rises in
tourism costs as a result of the holiday season and cable
television services, the report relays. That was followed by
utilities (housing, water, electricity and other fuels) and
communications, which rose eight percent, the report says.
Fair prices ?
Another notable rise was the 6.8 percent recorded for food and
non-alcoholic beverages, a major component of Economy Minister
Sergio Massa's ‘Precios Justos' scheme, the report discloses.
Within the division, seasonal price increases for fruits,
vegetables, legumes and pulses stood out, the report says.
Back in February, the official renewed his opt-in price control
scheme for more than 2,000 key products, limiting increases to 3.2
percent a month, the report relays.
Despite the agreement, the increase in food and non-alcoholic
beverages exceeded the January guideline (6.8 percent vs. the four
percent guideline), the report notes.
The government briefed reporters that the agreement with firms and
supermarkets is being honored and that it will continue to check
that companies are complying, the report relays. However, there
are many smaller stores such as grocers and neighborhood stores
that are not signed up to the program, the report relays.
The Economy Ministry announced that at least seven cuts of meat
would be added to the scheme, with existing prices maintained until
March 31 and allowed to rise 3.2 percent monthly thereafter, the
report discloses.
Private analysts are sceptical that the government will be able to
considerably lower prices to meet Massa's stated target of a
monthly inflation of four percent in April, the report says.
The two sectors with the lowest price variations in January were
clothing and footwear (up 2.3 percent) and education (up 1.1
percent), the report notes.
The Greater Buenos Aires region was in line with the general price
index with an exact rise of six percent, while the Cuyo region had
the highest monthly inflation rate in the country at 6.4 percent,
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.
===========
B R A Z I L
===========
ANDRADE GUTIERREZ: Fitch Hikes LongTerm IDRs to 'CCC-'
------------------------------------------------------
Fitch Ratings has upgraded Andrade Gutierrez Engenharia S.A.'s
(AGE) Long-Term Foreign and Local Currency Issuer Default Ratings
to 'CCC-' from 'RD' and its National Scale Rating to 'CCC(bra)'
from 'RD(bra)'. Fitch has also assigned a 'CCC-'/'RR4' rating to
Andrade Gutierrez International S.A.'s (AGI) senior secured PIK
Toggle notes of USD391 million due in 2029 and a 'C'/'RR6' for the
senior secured PIK Toggle notes of USD63 million due 2040. The
notes are fully and irrevocably guaranteed by AGE. Fitch has also
withdrawn the ratings on AGI's previous senior secured notes due in
2021 and 2024, following the debt exchange.
The upgrade of AGE's ratings follows the conclusion of AGI's debt
exchange offer of its USD480 million senior secured bond due in
2024 and its USD43 million senior secured bond due in 2021 by the
USD391 million senior secured PIK toggle notes due in 2029 and the
USD63 million senior secured bonds due in 2040. AGE used part of
the proceeds from the sale of 14.8% stake in CCR S.A. (CCR;
'AA+[bra]'/Negative) owned by Andrade Gutierrez Participacoes
S.A.'s (AGPar), its sister-company, for the pre-payment of USD202
million of AGI's 2024 bond and delayed coupons, and also to
reinforce its cash position. AGPar paid down approximately BRL2.2
billion of its guaranteed debt.
The ratings consider the high credit risk due to the several
challenges AGE still faces in attempting to turnaround its
operations, recover backlog and improve operational cash flow
generation. Despite the group's recent DDE conclusion, AGE's
financial flexibility remains limited to support operations, and
service debt and fines of plea bargain agreements. The analysis
also reflects AGE's weak capital structure and negative FCF over
the rating horizon.
Fitch has withdrawn the ratings on AGI's previous senior secured
notes of USD43 million due 2021 and USD480 million due 2024,
following the debt exchange.
KEY RATING DRIVERS
Relevant Turnaround Challenges Remain: AGE still faces relevant
challenges to turnaround its operations and recover backlog in
order to improve the overall credit quality. AGE ended September
2022 with a backlog of BRL11.2 billion, of which BRL2.9 billion
will be executed by sister company Inzag GMBH. The DDE conclusion
benefits the company's competitiveness in new projects bids, which
is crucial for backlog increase. A continued backlog recovery also
depends on the Brazilian macroeconomic scenario and growing
investments in infrastructure.
Operating Cash Flow to Remain Negative: Fitch projects a gradual
recovery of EBITDA margins in the next three years, to between 7%
and 8%, however, operating cash flow should remain negative,
pressured by still high debt burden. AGE is expected to generate
EBITDA of BRL159 million and negative cash flow from operations
(CFFO) of BRL163 million in 2022, and BRL201 million and negative
BRL17 million, respectively, in 2023, as per Fitch's criteria.
AGE will PIK coupons of BRL115 million and face payment of BRL46
million in fines in 2023. This compares to negative EBITDA of
BRL325 million and positive CFFO of BRL201 million in 2021,
benefited by strong working capital inflow. AGE's FCF is forecasted
to be negative between BRL100 million and BRL270 million in
2022-2024, after an annual average capex BRL90 million and no
dividends.
Weak Capital Structure: AGE is likely to maintain a weak capital
structure over the next three years, with net leverage around 17.1x
in 2022 and 13.7x in 2023. Fitch forecasts net debt of BRL3.1
billion in December 2022. Following the sale of CCR's shares, the
company was able to pay down approximately BRL1 billion in bonds
and reinforce its cash by about BRL200 million. AGPar paid down
approximately BRL2.2 billion of debt and the remaining debenture of
BRL305 million, due in 2031, is scheduled to be serviced by AGE.
High Foreign Exchange Exposure: AGE is exposed to foreign exchange
risks, as about 71% of total debt, including AGI's bonds, are
denominated in foreign currency, while foreign currency revenues
averaged 30% in the first nine months of 2022. Foreign activities
are expected to increase to 40%-50% of revenues over the next years
as the pace of execution of projects abroad increases. AGI's bonds
are not hedged.
DERIVATION SUMMARY
AGE's credit profile is commensurate with local peer OEC S.A.
('CCC-'/Stable), which managed to restructure its bonds in March
2021. Both companies have relevant challenges to recover backlog,
improve EBITDA generation and reduce leverage to more sustainable
levels.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
- Backlog of BRL8.2 billion in 2022 and BRL9.2 billion in 2023,
excluding BRL2.9 billion from Inzag;
- Average conversion ratios of three years in 2022 and 2023,
leading to net revenues of BRL2.6 billion and BRL3.0 billion,
respectively;
- Capex of BRL104 million in 2022 and BRL89 million in 2023;
- No dividend distribution in the foreseeable future.
Key Recovery Rating Assumptions
The recovery analysis assumes that AGE would be reorganized as a
going concern in bankruptcy rather than liquidated. Fitch has
assumed a 10% administrative claim.
Going Concern Approach
- AGE's going concern EBITDA is BRL200 million, reflecting the
2023 revenue forecast of approximately BRL3 billion and a
6.8% margin, plus dividends received from nonconsolidated
investments of BRL34 million. The EBITDA forecast still
reflects the limited growth on the backlog and the lack of
cost dilution;
- Fitch has also considered no gains from the potential
collection of past due receivables and legal claims, as
they would distort recurring EBITDA;
- A 5x enterprise value multiple is used to calculate a
post-reorganization valuation, in line with the
industry's historical multiples;
- The approach considers the 2040 notes subordinated to
the 2029.
Liquidation Value Approach
Although the liquidation value approach may indicate a slightly
better recovery, Fitch excluded this method because Brazilian
bankruptcy law tends to favor the maintenance of a business to
preserve direct and indirect jobs. Moreover, in extreme cases in
which liquidation was necessary, asset recovery has been very
difficult for creditors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Sustainable cash flow generation improvement, above Fitch's
expectations.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Fail to monetize its backlog and generate positive operating
cash flow;
- Beginning of a default or default-like process, such as
entering
in a cure-period or in standstill;
- The announcement of debt restructuring.
LIQUIDITY AND DEBT STRUCTURE
Weak Financial Flexibility: AGE's liquidity is expected to remain
weak despite the debt pre-payment and the conclusion of the DDE in
late 2022. Access to new long-term credit lines is restricted and
will depend on company's ability to turnaround operations. AGE is
expected to continue financing the execution of contracts with
short-term working capital lines. Pro forma cash position for
September 2022 was BRL406 million and covered 1.1x the short-term
debt of BRL367 million.
AGE's pro-forma debt of BRL3.6 billion mainly consists of AGI's
2029 and 2040 bonds (67% of total debt), debentures (20%), working
capital lines (11%) and permanent asset loans (2%). AGPar's total
debt mainly consists of BRL305 million debentures due in 2031.
ISSUER PROFILE
Brazilian-based Andrade Gutierrez Engenharia S.A. (AGE) is the
engineering & construction unit of the ultimate parent Andrade
Gutierrez S.A. (AGSA), one of the largest infrastructure groups in
Brazil. AGE operates in Latin America and Africa and had a backlog
of BRL11.2 billion in September 2022, considering Inzag's
projects.
The group uses Andrade Gutierrez International S.A. (AGI) as an
investment vehicle for bond issuances that are fully and
irrevocably guaranteed by AGE. AGSA also counts with an investment
branch, spearheaded by Andrade Gutierrez Participações S.A.
(AGPar), which owns stakes in infrastructure concessions, such as
toll roads and electric utilities in Brazil.
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 Recovery Prior
----------- ------ -------- -----
Andrade
Gutierrez
Engenharia
S.A. LT IDR CCC- Upgrade RD
LC LT IDR CCC- Upgrade RD
Natl LT CCC(bra)Upgrade RD(bra)
Andrade
Gutierrez
International
S.A.
senior secured LT CCC- New Rating RR4
senior secured LT C New Rating RR6
senior secured LT WD Withdrawn C
senior secured LT WD Withdrawn C
AZUL SA: Fitch Lowers Rating on LongTerm IDRs to 'CCC-'
-------------------------------------------------------
Fitch Ratings issued a correction of a release on Azul S.A. dated
Feb. 9, 2022. It corrects the National Scale Rating for Azul S.A.
The amended ratings is as follows:
Fitch Ratings has downgraded Azul S.A.'s Long-Term Foreign and
Local Currency Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC+',
and its National Scale Rating to 'CCC(bra)' from 'B(bra)'. Fitch
has also downgraded Azul Investments LLP's unsecured notes to
'CCC-'/'RR4' from 'CCC+'/'RR4'.
The downgrades reflect Azul's high refinancing risks, operating
cash flow pressure due to current and deferred leases payments,
liquidity deterioration per Fitch's criteria, and the more
restrictive local credit market due to Americanas' default. Fitch's
view of a less friendly renegotiation backdrop with lessors and
other main suppliers, despite their proven support during the
pandemic, is also considered in this rating action.
KEY RATING DRIVERS
High Refinancing Risks: Negative headwinds faced by Azul relate to
credit tightening in the local market and uncertainties regarding
the recovery of credit conditions, as the company seeks to
refinance its leasing obligations and aircraft financing debt while
investing to renew its fleet. These challenges coincide with
capital market debt due in 2024 and 2026.
Azul's short-term maturities totaled BRL5.1 billion (BRL1.3 billion
of financial debt and BRL3.8 billion of leasing obligations) as of
Sept. 30, 2022. Azul's readily available cash, per Fitch's
criteria, declined to BRL1.4 billion from BRL3.4 billion at end of
December 2021. Total long-term debt was BRL18.8 billion. Total debt
primarily consists of BRL14 4 billion of leasing obligations,
BRL2.2 billion of cross-border senior notes due 2024 and BRL3.2
billion of senior notes due 2026).
Negative FCF: The increase in lease payments following their
reduction/postponements during the COVID-19 pandemic crisis, in
addition to elevated interest rates and still high fuel prices has
led Fitch to project Azul`s FCF will be negative by BRL2 billion in
2023, which is similar to its expectation for last year. Fitch
estimates total leasing payments, including interest expense, of
around BRL3.8 billion in 2022 and BRL3.3 billion in 2023, a
significant increase from BRL1.4 billion in 2020 and BRL2.1billion
in 2021.
Improved EBITDA: The benefits related to the elimination of
PIS/Confins taxes, a reduction in fuel prices from extremely
elevated levels and some improvement in the cost structured will
improve the company's operating cash flow. Fitch expects Azul`s
EBITDA to reach around BRL5.3 billion in 2023 and BRL5.8 billion in
2024, an increase from a projected level of BRL3 billion in 2022.
The performance during 2022 largely reflects the spike in fuel
prices, which was partially offset by the substantial increase in
yields.
During 1Q22, 2Q22 and 3Q22, Azul's average fuel price rose 57%, 81%
and 85%, while yields increased 34%, 53% and 39%. The yield
management strategy has been supported by pent-up demand following
the pandemic and a strong rebound in corporate traffic demand.
Brazilian domestic market demand has rebounded strongly, with the
passenger traffic during 2022 only 7% lower than pre-pandemic
(2019). The more rational behavior of the three largest players in
the domestic market is likely to support healthy yields for a
while.
Strong Domestic Market Position: Azul's credit profile benefits
from its unique regional airline market position in Brazil, with a
strong presence in underserved markets and limited route overlap
with competitors, GOL Linhas Aereas Inteligentes S.A. and LATAM
Airlines Group S.A. Azul is the sole provider of services on 77% of
its routes and is one of the two largest airline companies in
Brazil, with a market share of around 29%, as measured by
revenues/passenger/kilometer (RPK) in 2022. As Brazil is the
company's key market, Azul's operating results are highly
correlated to the Brazilian economy.
DERIVATION SUMMARY
Azul's ratings rating reflects the continuation of ongoing
refinancing risks. Azul's liquidity has deteriorated over the past
quarters, and it used to be bright spot compare to most immediate
peers. GOL's ratings also reflect high financial distress related
to elevated refinancing risk.
Azul has a weaker position relative to global peers given its
limited geographic diversification and relatively high operating
leverage. Its strong position in the Brazilian regional market,
high operating margins and track record of strong liquidity ratios
have nevertheless been key rating drivers. These positive factors
are tempered by the company's ongoing business growth and
operational volatility related to its key market, Brazil.
Foreign exchange risk exposure is a negative credit factor for Azul
considering its limited geographic diversification; the company
implemented a currency hedge position that partially mitigates this
risk.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
- Fitch's base case during 2022 and 2023 includes an increase in
RPK by 6% and 18%;
- Load factors around 80% during 2022 and 2023;
- Capex of BRL8 billion in 2022 and BRL2.4 billion in 2023.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Material improvement in the company's debt-amortization
profile, reducing refinancing risks, associated with the
maintenance of sound liquidity position;
- Maintenance of the solid rebound in the domestic air traffic
in Brazil.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Continuous difficulties to access credit lines and/or to
refinance its 2024 bonds by 3Q23.
LIQUIDITY AND DEBT STRUCTURE
Deterioration of Available Cash: The company's readily available
cash, per Fitch's criteria, declined to BRL1.4 billion as of Sept.
30, 2022, from BRL3.4 billion at end of December 2021. At the same
period, short-term maturities totaled BRL5.1 billion (BRL1.3
billion of financial debt and BRL3.8 billion of leasing
obligations) and total long-term debt was BRL18.8 billion. Total
debt was mainly composed by BRL14.4 billion of leasing obligations
and around BRL5.5 billion cross-border senior notes (BRL2.2 billion
in 2024 and BRL3.2 billion in 2026).
The company considers it has other sources of liquidity such as
accounts receivables (including subleases), security and
maintenance deposits and the ability to use Tudo Azul (Azul's
mileage program) as collateral for a secured debt issuance.
ISSUER PROFILE
Azul is one of the largest local airlines in Brazil. The company
has an important presence in the regional market and is the sole
airline on 77% of its routes.
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 Recovery Prior
----------- ------ -------- -----
AZUL Investments LLP
senior
unsecured LT CCC- Downgrade RR4 CCC+
Azul S.A. LT IDR CCC- Downgrade CCC+
LC LT IDR CCC- Downgrade CCC+
Natl LT CCC(bra)Downgrade B(bra)
BRAZIL: Credit Crunch Brewing as Fallout Grows
----------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
investors are losing faith in Brazil's corporate borrowers in the
aftermath of Americanas SA's implosion, defying reassurances that
the century-old retailer's collapse was a one-off with no broader
implications.
Instead, in just the few weeks since the default, power company
Light SA, clothing retailer Marisa Lojas SA and travel-agency CVC
Brasil have all hired advisers to restructure their debt, according
to globalinsolvency.com.
Telecom operator Oi SA won a court case to temporarily suspend its
obligations, while S&P Global Ratings warned airline Gol could
approve a restructuring that's equivalent to a default, the report
notes.
"There will be a credit squeeze" following the recent events,
according to Andre Jakurski, who helped found JGP Asset Management,
one of Brazil's first hedge fund firms, the report relays.
Companies will likely go bust "in torrents," he warned at an event,
the report notes. Vista Capital, the operator of Brazil's
best-performing hedge fund in the past three years, is also urging
caution, saying that the seeds of a "credit crunch" were germinated
in Brazil in recent years, the report discloses.
Now, with tepid economic growth, stubborn inflation, steep interest
rates and diminished corporate confidence following the revelations
of alleged fraud at Americanas, those seeds might be on their way
to sprouting, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that jeopardize
broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term foreign
and local currency sovereign credit ratings on Brazil, and the
outlook remains stable (June 2022). The stable outlook reflects
S&P's base-case assumption that Brazil will maintain its fiscal
anchors over the next two years despite an increasing interest
burden, preventing significant fiscal slippage and limiting the
rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and senior
unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
BRAZIL: Economic Activity Rose 2.9% in 2022
-------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazil's
economic activity increased by 2.9% in 2022, according to a central
bank index released, boosted by the services sector and defying
earlier predictions of mild growth, but with recent months'
performance showing loss of momentum.
After starting the previous year with a forecast of a 0.3%
expansion for the Brazilian economy in 2022, private economists
surveyed weekly by the central bank now project 3% growth, on the
back of resilient services activity and a stronger labor market,
according to globalinsolvency.com.
The IBC-BR economic activity index, a leading indicator of gross
domestic product, rose 0.29% in December from November on a
seasonally adjusted basis, surpassing the 0.1% growth forecast by
analysts in a Reuters poll, the report notes.
Compared to the same month in 2021, the increase was 1.42%, the
report relays.
The annual growth of Latin America's largest economy was also aided
by increased government spending by former President Jair
Bolsonaro, who boosted social expenses ahead of a presidential
election, the report discloses.
However, the last few months have shown a clear slowdown, weighed
by high borrowing costs aimed at combating inflation, the report
relays.
The IBC-BR index fell by 1.46% in the fourth quarter compared to
the previous quarter, highlighting the challenges ahead for the
leftist administration of President Luiz Inacio Lula da Silva, who
has been calling for a reduction in the benchmark interest rate to
unlock economic growth, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
GOL LINHAS: Fitch Lowers LongTerm Issuer Default Ratings to 'C'
---------------------------------------------------------------
Fitch Ratings has downgraded GOL Linhas Aereas Inteligentes S.A.'s
(GOL) Long-Term Foreign and Local Currency Issuer Default Ratings
(IDRs) to 'C' from 'B-'/Negative Outlook. In addition, Fitch has
downgraded GOL Finance Inc.'s unsecured bonds to 'C' from
'B-'/'RR4', as well as GOL's Long-Term National Scale rating to
'C(bra)' from 'BB+(bra)'/Negative Outlook.
The downgrades follow GOL's announcement of a new financing
commitment from Abra Group Limited, a new holding company
established to control the operations of GOL and Avianca Group.
Fitch considers the new financing to be a distressed debt exchange
(DDE) as per its criteria. The proposed refinancing would result in
a material reduction in terms of structural subordination and
through the elimination of some restrictive covenants for
bondholders that do not accept the deal.
The transaction includes different levels of haircuts for the
company's outstanding bonds, more in line with current market price
trends, and is contingent upon minimum participation thresholds and
exit consents to eliminate covenants.
KEY RATING DRIVERS
Transaction Qualifies as DDE: The financing commitment will
constitute a DDE under Fitch's criteria if approved, as bondholders
that do not accept the deal would face a material reduction in the
terms of their existing notes due to the elimination of some
restrictive covenants as well as structural subordination. Bonds
from the Ad-Hoc Group will be offered the following prices: 60
cents for the notes due in 2024 and 2025; 73 cents for the 2026
notes (capped at USD326 million face value); and 50 cents for its
perpetual notes.
The proposed prices for creditors outside of the Ad-Hoc Group are
as follows: 49 cents plus 5 for 2024 bondholders joining the
agreement within 10 days; 49 cents plus 5 for 2025 bondholders
joining the agreement within 10 days; 55 cents plus 5 for 2026
bondholders joining the agreement within 10 days; and 35 cents plus
5 cents for perpetual bond holders who join the Support Agreement
within 10 days of this announcement. GOL's total outstanding debt
per issuances are USD425 million senior exchangeable notes due
2024, USD650 million for the unsecured notes due 2025, USD650
million for the 2026 notes and USD154 million for the perpetual
notes.
Transaction Overview: GOL informed the market on February 7, 2023
that the Abra Group had obtained commitments that contemplate, upon
closing, an investment into GOL through senior secured notes and an
exchangeable senior secured notes private placement. This issuance
will be secured by the intellectual property and brand of Smiles,
which is GOL's loyalty program, and a pari passu lien on the
intellectual property, brand and spare parts of GOL. Third party
appraisers have valued this collateral at USD3.7 billion and USD1.5
billion, respectively. A portion of the commitment comes from
members of an Ad-Hoc Group of secured and unsecured GOL
bondholders, who entered into the support agreement.
New Issuance: Fitch expects GOL to issue senior secured notes (SSN)
due in 2028 of not less than USD1 billion to Abra. The holding
company has committed to invest from time to time up to
approximately USD400 million of cash in GOL that shall be used for
general corporate purposes, fleet modernization and additional
liability management. Additionally, the transaction incorporates
the cancelation of at least USD680 million of GOL bonds that would
be delivered under the transactions. Following closing, Abra will
be GOL's largest secured creditor while the GOL SSNs due 2028 are
outstanding.
Closing Conditions: The closing of the transactions is conditioned
upon, among other things, the implementation of the corporate
reorganization related to Abra and the Ad-Hoc Group and other GOL
bondholders collectively providing a minimum of USD325 million in
cash, and delivering no less than 50.1% of the total outstanding
GOL SENs due 2024 plus the outstanding GOL SUNs due 2025 (USD539
million face value combined) and delivering no less than a simple
majority of the outstanding GOL SSNs.
GOL's IDR will be downgraded to Restricted Default (RD) if the
proposed transaction is successfully completed. Subsequently, Fitch
will re-rate GOL's IDRs to a level that is consistent with the
company's new capital structure and risk profile. Upon completion,
any remaining existing unsecured bonds will likely be upgraded to
levels below the new IDR due to lower levels of credit protection
and priority.
Operations to Improve in 2023: The benefits related to the
elimination of PIS/Confins taxes, a reduction in fuel prices from
extremely elevated levels and some improvement in the cost
structured are expected to drive improvements in GOL's operating
cash flow during 2023. Fitch expects GOL's EBITDA to reach BRL4.4
billion in 2023, which is substantially higher than its projected
EBITDA during 2022 of around BRL2.3 billion. The company's
performance during 2022 largely reflects the spike in fuel prices,
only partially offset by a substantial increase in yields. These
figures compare with negative EBITDA during 2020 and 2021.
DERIVATION SUMMARY
GOL's 'C' rating reflects the company's announcement of a new
financing agreement, which Fitch considers to be a distressed debt
exchange. The announcement occurs in the context of high
refinancing risks and recovery from pandemic-related challenges.
The company has a solid market position in the Brazilian airlines
domestic market.
KEY ASSUMPTIONS
Pending final terms of the transaction.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The completion of the proposed exchange offer will lead to a
downgrade of the Long-Term IDRs to 'RD'. The IDRs would be
subsequently upgraded to a rating level reflecting the post-DDE
credit profile.
Factors that could, individually or collectively, lead to a
negative rating action/downgrade:
- An uncured payment default on any material financial
obligation would lead to a downgrade of the IDRs to
'RD'.
LIQUIDITY AND DEBT STRUCTURE
Limited Financial Flexibility and Weak Cash Position: GOL's
short-term maturities totaled BRL3.1 billion as of Sep. 30, 2022,
consisting of BRL869 million of financial debt and BRL2.3 billion
of leasing obligations. Readily available cash, per Fitch's
criteria, was only BRL494 million, and represents a deterioration
from June 30 2022 (BRL761 million) and December 2021 (BRL1.1
billion). GOL considers its accounts receivable (BRL951 million)
and a secured issuance program as sources of liquidity.
Total debt was BRL23.4 billion composed by BRL12 billion of leasing
obligations, BRL9.7 billion cross-border senior notes (BRL1,8
billion in 2024, BRL3.5 billion in 2025 and BRL3.5 billion in
2026), BRL1.1 billion in local debentures with final maturity in
2024 and BRL0.6 billion of aircraft financing.
ISSUER PROFILE
GOL is a leading Brazilian airline, with around 32% market share in
the domestic market, per revenue per RPK in 2021. As of YE 2022,
GOL's fleet included 144 Boeing 737 aircraft, with 110 NGs and 34
MAXs.
ESG CONSIDERATIONS
Gol Linhas Aereas Inteligentes S.A has an ESG Relevance Score of
'4' for Management Strategy due to announcement of a corruption
case and charges implemented by The Securities and Exchange
Commission (SEC) and Department of Justice (DOJ), in a total amount
of USD31.9 million, after waivers of USD41.5 million. This has a
negative impact on the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
GOL Linhas Aereas
Inteligentes S.A. LT IDR C Downgrade B-
LC LT IDR C Downgrade B-
Natl LT C(bra)Downgrade BB+(bra)
Gol Finance Inc.
senior
unsecured LT C Downgrade B-
GOL Linhas Aereas
S.A. LT IDR C Downgrade B-
LC LT IDR C Downgrade B-
Natl LT C(bra)Downgrade BB+(bra)
=========
C H I L E
=========
CHILE: IDB Approves $200,000 Loan for Forest Fire Emergency
-----------------------------------------------------------
The Inter-American Development Bank (IDB) has approved a $200,000
technical cooperation to support humanitarian assistance for
Chileans as the country battles massive forest fires.
The aid will help meet the essential needs of those affected by the
blazes, deliver relief supplies, and facilitate transportation to
disaster areas. The assistance is channeled through a Bank
mechanism for providing immediate humanitarian assistance in
response to natural disasters.
The infernos in Chile have already consumed over one million acres
this year in the Nuble, Biobio, and Araucania regions. They have
killed 24 people and destroyed 1,500 homes, leaving approximately
6,000 people homeless.
The IDB is committed to Chile and Chileans and stands in solidarity
with the victims' families and all those directly and indirectly
affected by this disaster.
INVERSIONES LATIN: Fitch Cuts Rating on USD403MM Sec Notes to 'B-'
------------------------------------------------------------------
Fitch Ratings has downgraded Inversiones Latin America Power
Limitada's (ILAP) USD403.9 million senior secured notes to 'B-'
from 'BB-'. In addition, Fitch has maintained the Negative Watch
on the ratings. The notes are supported by cash flows from two
windfarms in Chile, San Juan, S.A. (San Juan) and Norvind, S.A.
(Totoral).
RATING RATIONALE
The downgrade follows the deterioration of ILAP's available
liquidity, greatly reducing its ability to face the challenging
market conditions in the Chilean power sector, which Fitch
anticipates could extend until at least 2024. The O&M reserve is
now exhausted and the Debt Service Reserve Account (DSRA) was 80%
used to meet the January 2023 debt service payment, leaving the
issuer with only USD3.5 million of reserves, significantly
hindering its capacity to adequately manage throughout the
unfavorable environment.
The tariff stabilization mechanism implemented in Chile (PEC II)
has stressed ILAP's working capital, and although there is a
program to alleviate this pressure its timing is uncertain. ILAP's
highly contracted position compared to its generation profile
remain detrimental to its financial margins.
The Negative Watch reflects the project's reliance on the
monetization of the PEC II receivables in the next few months.
Failure to receive this liquidity and the continued pressure to the
issuer's working capital endanger ILAP's capacity to meet its debt
service payments in 2023, and may lead to further downgrades. The
rating could be stabilized if such receivables are collected in the
short term and market fundamentals improve.
The rating for ILAP's portfolio of two windfarms in Chile, San Juan
(81% of total generation capacity) and Totoral (19%), reflects its
mostly contracted position, averaging 73% of its revenues
contracted with distribution companies (DisCos) through regulated,
fixed-priced, long-term power purchase agreements (PPAs) and
short-term bilateral PPAs through 2033. The transaction is exposed
to profitability erosion risk due to varying prices between the
energy injection node and the DisCo withdrawal node, which is
expected to be mitigated over the medium term due to transmission
network expansions.
The rating is not limited by counterparty risk, as the projects'
most relevant counterparties are either investment grade or DisCos
under regulated PPAs, which benefit from protective regulatory
step-in provisions. The transaction will also have a mostly
merchant tail once the regulated PPAs expire in 2033, although this
is somewhat mitigated by the long remaining useful life of the
larger plant, San Juan, which Fitch assumes will end in 2042 (25
years total).
Together, both farms have a P90/P50 differential of 13%, indicating
moderate wind resource variability, and have performed at around
P50 in most years. The windfarms have some curtailment risk, which
is expected to persist going forward.
Both farms have presented an adequate operating track record and
benefit from long-term, fixed-price service and availability
agreements with Vestas Chile, guaranteed by Vestas Wind Systems
A/S, which is considered an experienced O&M contractor. The overall
debt structure is solid, with a mandatory amortization schedule
complemented by a partial cash sweep up to a target debt balance.
Refinancing risk exists due to a balloon payment expected to be
equal to roughly 15% of the original value of the notes under
Fitch's cases.
Under Fitch's rating case, debt service coverage ratios (DSCRs)
average 1.2x with a minimum of 1x (in 2023). These ratios assume
the collection of PEC II receivables. Fitch notes that if this cash
inflow does not happen in the first half of 2023, DSCR would be
0.4x in the period, which would deplete the DSRA and the debt
service payment would not be fully met.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Collection of PEC II receivables not taking place before the
end of March 2023.
- Net spot losses exceeding USD19 million during 2023 driven by
adverse operating performance or market dynamics.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action is unlikely, given the rating is on
Negative Watch. The Negative Watch could be removed if the
decoupling costs remain below or equivalent to USD15 per MWh,
yielding an average forecast DSCR above 1.2x and if project
liquidity improves, accompanied by the collection of the PEC II
receivables, leading to operational cash generation above debt
service.
CREDIT UPDATE
Operating results improved with a USD13.5 million EBITDA for 2H2022
(USD9.1 million coming in 4Q); however, an increase in working
capital of USD16.5 million, mainly from the accumulation of PEC II
receivables, drove the company to draw its reserves, noting that
ILAP used USD13 million of its USD16.5 million DSRA in January 2023
to meet its scheduled debt service
Fitch expected an EBITDA of USD11 million on its base case and of
USD9 million on its rating case with a use of reserves around of
USD8 million. However, the agency underestimated the impact on
cash-flows of the PEC II program and the working capital investment
needs to recover from the losses incurred in 2Q22.
Operating results improved in 4Q22 as the hydro reserve, together
with better hydrology than in the last hydrological period, have
allowed the accumulation of a greater quantity of water in the
dams, adding stability to the system.
The generation profile for the farms has been favorable, with more
generation on night hours with higher prices. This has allowed the
company to capture positive decoupling during this quarter, as
opposed to the very unfavorable decoupling in previous periods.
Generation remains below expectations, persistently below P50, and
also below contractual obligations; therefore, ILAP had to purchase
energy in the spot market in order to supply the shortage on PPA
contracts.
PEC II has not allowed ILAP to capture the full price of its DisCo
PPAs, as they only collect the regulated price and receive an
account receivable for the remainder. This has been a burden to its
cash-flow, as in 2H 2022 they accumulated six million in PEC
receivables on a 13 million EBITDA.
PEC receivables are expected to be monetized through a factoring
line with the IDB. This would provide an important boost to project
liquidity and also reduce the monthly burden in working capital. As
long as this does not happen, the reduced collection on PPA
revenues caused by the PEC II will limit the company's ability to
generate enough cash-flow to meet debt service.
FINANCIAL ANALYSIS
Fitch's adjusted spot price curve for central Chile nodes (the main
withdrawal nodes) was shifted upwards for 2023 and 2024, with
average prices of USD85/MWh and USD75/MWh, respectively, which is
consistent with Fitch's expectation of high commodity prices. All
other assumptions remained in line with Fitch's previous review.
Under Fitch's base case, average DSCRs are 1.3x with a minimum of
1.1x in 2023 with a PLCR at refinancing date of 2.4x. Under the
rating case, these metrics erode to an average of 1.2x with a
minimum of 1x in 2023 and a PLCR at refinancing date of 1.6x.
There is a high dependence on collecting the PEC II receivables and
the continuous use of the IDB facility to reduce the working
capital stress. If the facility is not available during H1 2023,
the ability to make the July debt service payment is questionable,
resulting in DSCRs for the period of 0.6x in our base case and 0.4x
in our rating case which would deplete the remaining reserve.
The issuer is working on finding additional sources of liquidity
which include the monetization of the PEC I receivables which
according to management amount to USD18 million.
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
----------- ------ -----
Inversiones Latin
America Power Ltda.
Inversiones
Latin America
Power Ltda./
Senior Secured
Notes/1 LT LT
USD 403.9 mln
5.125% bond/note
15-Jun-2033
46137NAC2 LT B- Downgrade BB-
===============
C O L O M B I A
===============
COLOMBIA: Growth Data Shows Economy's Worse Than Initially Thought
------------------------------------------------------------------
Oscar Medina at Bloomberg News reports that Colombia's steep growth
slowdown late last year combined with large data revisions showed
its economy is weaker than initially thought, posing a challenge
for policymakers who are still grappling with the fastest inflation
in over two decades.
Gross domestic product expanded 2.9% in the fourth quarter from the
previous year and 0.7% from the prior quarter, the statistics
agency said, according to Bloomberg News. Economists surveyed by
Bloomberg expected year-on-year growth of 3.8%. The results were
affected by significant revisions to first and third-quarter data,
following the adoption of a new methodology.
The revisions show that "the economic slowdown didn't start in the
fourth quarter but before, which wasn't clear to us," Scotiabank
Colpatria economist Sergio Olarte said by phone, Bloomberg News
otes. "It is a problem for the central bank because the story
changed for the worse, with a steeper slowdown but still high
inflation, Bloomberg News relays. Can the central bank continue
increasing rates?"
Colombia's economy is slowing after the central bank raised
borrowing costs by 11 percentage points since 2021 to combat
inflation that's running above 13% a year, Bloomberg News
discloses. Finance Minister Jose Antonio Ocampo, who has a seat on
the monetary policy committee and has expressed concerns about the
growth outlook, may argue that interest rates can't go higher
because they're already hurting the economy without further
lowering inflation, Olarte added.
Before GDP data was published, economists surveyed by the central
bank expected two more hikes in March and April, leading the key
interest rate to end the tightening cycle at 13.25%, Bloomberg News
notes.
Confidence Blow
January consumer confidence, an indicator that correlates with
future consumption, fell to -28.6, much worse than the -19.8
analyst forecast, and is now at the lowest level since May 2021,
Bloomberg News relays.
The central bank estimates gross domestic product will expand by
just 0.2% this year as higher interest rates and rising prices hurt
domestic demand and private investment eases, Bloomberg News
notes. Urban unemployment lost momentum in December and
unexpectedly jumped to 10.8%, Bloomberg News says.
A slower economy and high consumer prices may be weighing on
President Gustavo Petro's popularity levels, which have fallen
below 50% just as he begins a push for major reforms to labor laws
and Colombia's health and pension systems, Bloomberg News
discloses.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: 100,000+ Workers Had 2 Jobs to Survive 2022
---------------------------------------------------------------
Dominican Today reports that for hundreds of workers, a single
source of economic income is insufficient to support their standard
of living, prompting them to start or work in two businesses at the
same time. According to the most recent report on the Dominican
Republic's sectoral panorama, approximately 102,942 people who
contribute to the Dominican Social Security System (SDSS) had two
or more jobs at the end of 2022, the report notes.
The Ministry of Economy, Planning, and Development (MEPyD) released
its most recent economic analysis by sector, highlighting that
105,000 new workers were hired in the formal sector during 2022,
representing a 4.8% increase over 2021, according to Dominican
Today. However, 4.5% of all contributing employees (2,271,360)
work more than one job, the report notes.
The entities calculate the number of workers who contribute to
Social Security and the total contributions that employers register
for each of their employees to determine the level of multiple
employment, the report discloses. This variation represents the
number of employees who contribute to the Social Security Treasury
for two salaries (TSS), the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
===========
P A N A M A
===========
MULTIBANK INC: Fitch Assigns 'BB+' Rating on USD300MM Unsec. Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings of 'BB+' to Multibank,
Inc. (Multibank) USD300 million senior unsecured notes due on Feb.
3, 2028 at a fixed rate of 7.75%. The proceeds will be used to
prepay other institutional debt.
The final rating follows a review of the final terms and conditions
conforming to information already received when Fitch assigned an
expected rating on Jan. 23, 2023.
KEY RATING DRIVERS
Senior Unsecured Debt: Multibank's senior unsecured obligations
rating is at the same level of the banks' Issuer Default Rating
(IDR) as the likelihood of default of the new debt is the same as
the other senior unsecured obligations of Multibank.
The notes will be direct, unconditional and unsecured general
obligations of Multibank and ranks pari passu in right of payment
with all other existing and future general unsecured and
unsubordinated obligations.
In Fitch's view, Multibank supports its group's franchise and
market position in Panama and contributes to the group's business
model and regional strategy, providing key products and services in
a market considered core. Growing integration with Bogota improves
Multibank's franchise, provides a relative business model stability
and benefits the subsidiary's business generation.
Fitch also weighs with high importance the reputational risk that
an event of default by Multibank would constitute to its
shareholder, severely damaging the franchise.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Multibank's senior unsecured debt would mirror any potential
downgrade on its IDRs.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Multibank's senior unsecured debt would mirror any potential
upgrade on its IDRs.
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
----------- ------ -----
Multibank, lnc.
senior unsecured LT BB+ New Rating BB+(EXP)
=======
P E R U
=======
PERU: GDP Growth Misses Forecasts in December as Unrest Simmers
---------------------------------------------------------------
Marco Aquino at Reuters reports that Peru's economy slowed down for
the second month in a row, missing forecasts for the last month of
2022, figures from the national statistics institute showed, as the
country faces a wave of social unrest that began early December.
The Andean nation's gross domestic product (GDP) rose 0.86%
year-on-year in the month, while economists expected a 1.25%
expansion, according to the median forecast in a Reuters poll.
Protests have rocked the world's No. 2 copper producing country,
since the December 7 removal and arrest of former President Pedro
Castillo, according to Reuters. The clashes between protesters and
security forces have blocked roads and left dozens dead, the report
notes.
The central bank's economic studies unit said the unrest had likely
impacted the country's economy and inflation, as it hit both the
country's infrastructure and transport networks, the report
relays.
With the latest figure, Peru's 2022 economic growth lands at 2.68%,
a sharp decline from the 13.61% jump the country - historically one
Latin America's fastest-growing economies - recorded in 2021, the
report discloses.
The 2021 figure, Peru's highest on record, was driven by a rapid
recovery from the coronavirus pandemic-driven downturn, 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
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 * * *