/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230321.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, March 21, 2023, Vol. 24, No. 58 Headlines A R G E N T I N A ARGENTINA: Admits 'Unexpected' Feb. Inflation Data is 'Very Bad' ARGENTINA: Considers First Rate Hike Since September BLOCKFI INC: Has $227M Unprotected Funds at Silicon Valley Bank B R A Z I L BRAZIL: Finance Ministry Cuts 2023 GDP Forecast to 1.61% OEC SA: Fitch Affirms LongTerm Foreign & Local Curr. IDRs at 'CCC-' C H I L E LATAM AIRLINES: Posts $2.54-Billion Profit After Chapter 11 Exit D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Almost RD$700MM Allocated for Low-Cost Houses DOMINICAN REPUBLIC: Calls to be Positive in Face of Drought DOMINICAN REPUBLIC: Cano Highlights Impact of Tobacco Production DOMINICAN REPUBLIC: Trade w/ Commonwealth Countries Total US$2,515 J A M A I C A NATIONAL COMMERCIAL: Fitch Affirms 'B+' LT IDRs, Outlook Now Pos. M E X I C O BRASKEM IDESA: Fitch Affirms 'BB-' LT IDRs, Alters Outlook to Neg. V I R G I N I S L A N D S LIMETREE BAY: $465M Bank Debt Trades at 19% Discount - - - - - ================= A R G E N T I N A ================= ARGENTINA: Admits 'Unexpected' Feb. Inflation Data is 'Very Bad' ---------------------------------------------------------------- Buenos Aires Times reports that Presidential spokeswoman Gabriela Cerruti acknowledged that the latest inflation data released by the INDEC national statistics bureau "is bad, very bad and was not what was expected." Nevertheless, the government official said that the country's macroeconomic variables are "under control," according to Buenos Aires Times. "The inflation figure is bad, very bad and also not what was expected," said Cerruti, who said the government would continue to enforce "its firm commitment to move forward in controlling prices, inflation, so that they go down," the report notes. INDEC reported that prices rose 6.6 percent this month, a worrying acceleration for the government, the report relays. Over the last 12 months, according to official data, inflation totals 102.5 percent, with the annualised rate now hitting three digits for the first time in three decades, the report notes. Speaking at her weekly press conference at the Casa Rosada, the official said that "explanations" could be "offered" regarding the price increases, "but they are not excuses for those who have to go to the grocery store every day," the report discloses. In this regard, she underlined the impact of a harsh drought on Argentina's agricultural producers and rises in meat and dairy prices. She also pointed the finger at telecommunications companies, the report says. "The telephone, cable and web service companies continue to indiscriminately increase prices for users," Cerruti said, the report notes. She went on to criticise further: "The government cannot intervene because the courts do not allow it to do so due to the presentations of the big media, the owners of the companies. This price that influences daily life could be regulated by the state if the courts intervened and the media companies did not have any influence," the report notes. She also stressed that President Alberto Fernández and Economy Minister Sergio Massa, "are working together, side by side and have the same commitment so that this situation is solved as soon as possible," 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. ARGENTINA: Considers First Rate Hike Since September ---------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Argentina's central bank is considering raising its benchmark rate for the first time since September after annual inflation surged above 100% last month. The monetary authority's board will consider an increase after leaving the key Leliq rate unchanged at 75% for several months, the people said, asking not to be named discussing internal decisions, according to globalinsolvency.com. The board hasn't decided on the size of the hike in case they opt for such move, they said, the report notes. Consumer prices rose 102.5% in February from a year earlier, one of the highest rates in the world and the fastest pace in Argentina since late 1991, when the economy was cooling down from 3,000% hyperinflation, the report discloses. Triple-digit inflation now is putting extra pressure on the economy, which is expected to fall into recession this year before presidential elections in October, the report relays. The potential policy move also comes in the wake of the government reaching a staff-level agreement on March 13 with the International Monetary Fund on the fourth review of its $44 billion program, 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. BLOCKFI INC: Has $227M Unprotected Funds at Silicon Valley Bank --------------------------------------------------------------- Becky Yerak of Law360 reports that bankrupt crypto lender BlockFi Inc. faces risks of having its funds locked up at Silicon Valley Bank, which collapsed March 10, 2023, after a run on deposits doomed the bank's plans to raise fresh capital. BlockFi, which filed for bankruptcy in November, had roughly $227 million in unprotected funds at the bank, the U.S. Trustee, a unit at the Justice Department overseeing bankruptcies, said in a court filing March 10, 2023. About BlockFi Inc. BlockFi is building a bridge between digital assets and traditional financial and wealth management products to advance the overall digital asset ecosystem for individual and institutional investors. BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in its early days had backing from influential Wall Street investors like Mike Novogratz and, later on, Valar Ventures, a Peter Thiel-backed venture fund as well as Winklevoss Capital, among others. BlockFi made waves in 2019 when it began providing interest-bearing accounts with returns paid in Bitcoin and Ether, with its program attracting millions of dollars in deposits right away. BlockFi grew during the pandemic years and had offices in New York, New Jersey, Singapore, Poland and Argentina. BlockFi worked with FTX US after it took an $80 million hit from the bad debt of crypto hedge fund Three Arrows Capital, which imploded after the TerraUSD stablecoin wipeout in May 2022. BlockFi had significant exposure to the companies founded by former FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a $400 million credit line from FTX US in an agreement that also gave FTX the option to acquire BlockFi through a bailout orchestrated by Bankman-Fried over the summer. BlockFi also had collateralized loans to Alameda Research, the trading firm co-founded by Bankman-Fried. BlockFi is the latest crypto firm to seek bankruptcy amid a prolonged slump in digital asset prices. Lenders Celsius Network LLC and Voyager Digital Holdings Inc. also filed for court protection this year. Kirkland & Ellis is also advising Celsius and Voyager in their separate Chapter 11 cases. BlockFi Inc. and eight affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on Nov. 28, 2022. In the petitions signed by their chief executive officer, Zachary Prince, the Debtors reported $1 billion to $10 billion in both assets and liabilities. Judge Michael B. Kaplan oversees the cases. The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as general bankruptcy counsels; Walkers (Bermuda) Limited as special Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley Research Group, LLC as financial advisor; Moelis & Company as investment banker; and Street Advisory Group, LLC as strategic and communications advisor. Kroll Restructuring Administration, LLC is the notice and claims agent. =========== B R A Z I L =========== BRAZIL: Finance Ministry Cuts 2023 GDP Forecast to 1.61% -------------------------------------------------------- Marcela Ayres at Reuters reports that Brazil's Finance Ministry reduced its estimates for economic growth this year citing the impact of higher basic interest rates on activity and credit, and it said it sees monetary easing prospects despite higher inflation projections. The Ministry's Secretariat of Economic Policy (SPE) now projects a gross domestic product expansion of 1.61%, down from 2.1% in November, according to Reuters. The projection for next year was also reduced to 2.34% from 2.5%, the report notes. In a statement, the secretariat said previous estimates, made under former President Jair Bolsonaro's government, "minimized the contractionary effects of monetary policy on the economic cycle and credit market," the report relays. Economic Policy Secretary Guilherme Mello said the recent bankruptcy of retailer Americanas (AMER3.SA) due to a multi-billion accounting scandal could partly be explained by the rapid change in monetary policy, the report notes. "It is a fact that Brazil today has the highest interest rate in the world, and this has impacted the credit market, both bank credit and non-bank credit," he told a news conference, adding that events, such as the Americanas scandal, "pushed spreads up and further undermined the possibility of raising funds for companies," the report relays. Mello emphasized that the cost of credit is extremely high, making it difficult for companies to carry out their activities and investments, the report discloses. The central bank, whose rate-setting committee meets, raised interest rates to 13.75% from a record low of 2% in March 2021 to combat inflation, the report relays. New leftist President Luiz Inacio Lula da Silva has consistently criticized the level of the bank's benchmark interest rate, which has been held steady at a six-year high since September, arguing that it harms activity growth and threatens a credit crunch, the report discloses. The secretariat also now sees higher inflation, at 5.31% in 2023 and 3.52% in 2024, up from 4.6% and 3%, respectively, the report notes. The official inflation target is 3.25% this year and 3% in 2024, with a plus or minus 1.5 percentage point margin, the report says. Despite the projections, Mello stated there is "no incompatibility" in reducing interest rates with inflation above the target, arguing that monetary policy has lagged effects, the report notes. "We certainly expect (monetary easing) this year. But the sooner, the better," he added. 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). OEC SA: Fitch Affirms LongTerm Foreign & Local Curr. IDRs at 'CCC-' ------------------------------------------------------------------- Fitch Ratings has affirmed OEC S.A.'s (OEC) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'CCC-' and National Long-Term Rating at 'CCC(bra)'. Fitch has also affirmed OEC Finance Ltd.'s (OEC Finance) USD1.8 billion senior unsecured payment-in-kind (PIK) toggle notes at 'CC'/'RR5', which are unconditionally and irrevocably guaranteed by OEC. The Stable Outlook for the corporate ratings was removed. OEC's ratings reflect the still-elevated operational challenges and uncertainties to obtain new projects, execute current infrastructure contracts, as well as to satisfactorily recover margins and cash flows. Financial flexibility remains too weak to support operations and service debt and fines of plea bargain agreements. The base case scenario considers OEC's aggressive capital structure and negative FCF over the rating horizon, and incorporates no support from its ultimate parent, Novonor S.A. The ratings also factor in the cyclicality and volatility of Latin America's engineering and construction (E&C) sector as well as fierce competition. KEY RATING DRIVERS Turnaround Remains Challenging: OEC is still challenged to pursue new contracts and recover profitability consistently to support operations and service coupons and fines of the plea bargain agreement that amounts USD2.9 billion to be paid until 2038. The base case projection assumes a backlog ranging from USD3.3 billion in 2023 to USD3.9 billion in 2025 with EBITDA margins rising to 5.1% in 2025 (EBITDA of BRL269 million), from 3.5% projected for 2023 (EBITDA of BRL179 million). OEC has prioritized activities in Angola, Peru, U.S., Brazil, and Panama, with the first two countries benefiting from the hike in commodity prices. The recovery of OEC operations will largely depend on the GDP growth of these countries and the company's capability to add profitable projects. Heavy Fines Pressures FCF: The base case scenario for the rating expects OEC to report an average negative FCF of around BRL180 million per year in the 2022-2024, mainly pressured by the fines of the plea bargain agreement and the winding down of the ability to PIK coupons (100%, 92.5%, and 65% in 2022-2024). The issuer should fund this cash burn through short-term credit lines. Fitch projects a near break-even EBITDA in 2022 and positive BRL179 million in 2023, with limited dilution of fixed costs and pressured margins. Fitch estimates cash flow from operations (CFFO) at negative BRL28 million and positive BRL120 million in 2022 and 2023, the last one aided by PIK coupons, and investments of BRL123 million and BRL156 million, respectively. Aggressive Capital Structure: Total debt is projected to have reached BRL10.8 billion in 2022 and increase to BRL11.7 billion in 2023, pushed by the accrual of the coupons and negative FCFs. Total debt consists of USD1.8 billion senior unsecured PIK toggle notes issued by OEC Finance and working capital lines related to ongoing projects. Fitch believes OEC will pay-in-kind OEC Finance coupons until 2025, which spares cash flow in the short term, though increases the outstanding debt in the medium term. There is an additional challenge to increase hard-currency revenues to partially mitigate the FX exposure. Operating Environment Stabilizing: The operating environment for E&C companies in Brazil is expected to stop deteriorating and gradually improve in 2023 and 2024 given development infrastructure projects within airports, ports, railroads, toll roads, water & sewage, and energy sectors. The hike in commodity prices is also favoring exporters of oil and metals, such as Angola and Peru, to unlock their infrastructure agendas. DERIVATION SUMMARY OEC's credit profile is commensurate with local peer Andrade Gutierrez Engenharia S.A. (CCC-), which managed to restructure its bonds in December 2022. Both companies have relevant challenges to recover backlog, improve EBITDA and cash flow generation and reduce leverage to more sustainable levels. KEY ASSUMPTIONS Fitch's Key Assumptions Within the Rating Case for the Issuer - Order book of BRL17.0 billion in 2022 and BRL17.4 billion 2023, and executed on average in four years; - Criteria-based EBITDA of BRL24 million in 2022 and BRL179 million in 2023; - Capitalization of the coupons of OEC Finance notes, as per indentures; - Payment of fines per consent solicitation; - Capex of BRL123 million in 2022 and BRL156 million in 2022; - No dividends. Key Recovery Rating Assumptions - The recovery analysis assumes that OEC would be liquidated in a bankruptcy rather than considered a going concern; - Fitch assumed a 10% administrative claim. Going Concern (GC) Approach Fitch excluded the going concern approach due to expectations of negligible EBITDA in the foreseeable future. In a scenario which OEC starts reporting substantial positive EBITDA, the GC will be the preferred approach as Brazilian bankruptcy protection legislation tends to favor the maintenance of the business to preserve direct and indirect jobs. Liquidation Approach Fitch considered 75% of the accounts receivables, 50% of the inventory and 50% of net PP&E reported in September 2022 to calculate the liquidation value (LV). The allocation of value in the liability waterfall corresponds to a 'RR5' recovery for the senior unsecured notes and other bank debts of BRL10.1 billion. The 'RR5' Recover Rating reflects below-average recovery prospects, and indicates a recovery ranging from 11%-30%. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade: - Capacity to consistently increase backlog above Fitch's expectations; - Substantial improvements in profitability; - Improved financial flexibility. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade: - Failure to recover backlog and operating margins; - Higher refinancing risks in the short term. LIQUIDITY AND DEBT STRUCTURE Weak Financial Flexibility: OEC's financial flexibility should remain weak despite the ability to PIK coupons from 2022 until 2025 (at rates of 100%, 92.5%, 65%, and 30%, respectively). The access to new long-term credit lines is limited and will depend on the company's ability to increase its backlog and turn around operations. In September 2022, OEC had a cash position of BRL755 million, which is 2.2x the short-term debt of BRL339 million. Upcoming bond amortizations of USD46 million in 2024 and USD83 million in 2026 may increase to USD55 million and USD99 million at their maturities, respectively, with the PIK coupons. At Sept. 30, 2022, OEC's total debt of BRL10.1 billion (USD1.9 billion) was 96% composed by the restructured bonds while the remaining 4% were working capital lines. ISSUER PROFILE Brazilian-based OEC is one of the largest Latin American contractors, operating in nine countries mostly in the Americas and Africa. The company belongs to the Novonor Group, which has a diversified portfolio of investments that includes petrochemical, oil & gas, sugar & ethanol, real estate, among others. OEC Finance Limited is the investment vehicle that issues the bonds. ESG CONSIDERATIONS OEC S.A. has an ESG Relevance Score of '4' for Management Strategy, as it relies mostly on winning sizable contracts in upcoming years, which has a high degree of uncertainty and depends on economic growth, funding availability, clients' financials and competition. This has a negative impact on the credit profile and is relevant to the ratings in conjunction with other factors. This RS could be lowered to '3' if the company manages to win and execute sizable contracts without sacrificing profitability. OEC S.A. has an ESG Relevance Score of '4' for Group Structure due to its complexity with participations within sister companies, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Fitch sees the provisions made by the company to simplify related-party transactions with other entities of the Novonor Group as constructive, and a lower relevance score would require a more tangible simplification of the group structure. OEC S.A. has an ESG Relevance Score of '4' for Governance Structure due to pending plea bargain agreements and qualified financial statements, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. The agency recognizes the company's progress made since car wash investigations began in 2014. Plea bargain agreements have been signed and most of the top management was replaced. Stringent compliance rules and internal controls were implemented to guide stakeholders' relationships and to avoid repeating misconduct practices. Lowering this ESG.RS to '3' would require more concrete steps such as signing the remaining plea bargain agreements and publishing unqualified financial statements. OEC S.A. has an ESG Relevance Score of '4' for Financial Transparency due to the periodic restatements of historical figures, consolidation of assets with minority economic stake, and several partnerships that retain cash before it reaches the parent, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- OEC Finance Limited senior unsecured LT CC Affirmed RR5 CC OEC S.A. LT IDR CCC- Affirmed CCC- LC LT IDR CCC- Affirmed CCC- Natl LT CCC(bra) Affirmed CCC(bra) ========= C H I L E ========= LATAM AIRLINES: Posts $2.54-Billion Profit After Chapter 11 Exit ---------------------------------------------------------------- Mariana Greif of Reuters reports that LATAM Airlines (LTM.SN) reported a fourth-quarter net profit of $2.538 billion, the company said March 9, 2023, and said the results reflected all financial renegotiations stemming from its bankruptcy proceedings. The quarterly profit of South America's leading airline compares to a loss of $2.755 billion during the same three-month period a year earlier. However the company will propose not to pay out dividends and instead use its 2022 profits to offset accumulated losses, it said in a securities filing later on March 9, 2023. "Profits for the year ended December 31, 2022 must be used primarily to absorb such losses," it said. The airline, created by the 2012 merger of Chile's LAN with Brazilian rival TAM, operates units in Chile, Brazil, Colombia and Peru. Revenue for Santiago-based LATAM during the quarter rose about 38% to $2.75 billion from the year-ago period. Last November 2022, LATAM announced the completion of a years-long restructuring process after it declared bankruptcy in 2020. Chief Financial Officer Ramiro Alfonsin told reporters at a news conference that "all renegotiations since we left Chapter 11" bankruptcy protection are now reflected in the quarter's income statement as profits. The company's operating result -- which excludes the restructuring process -- reached $139 million in the quarter, according to the airline. Meanwhile, LATAM'S total costs for the quarter stood at $2.6 billion, almost in line with pre-pandemic levels, despite a nearly two-thirds increase in fuel costs between 2019 and 2022. About LATAM Airlines Group LATAM Airlines Group S.A. -- http://www.latam.com/-- is a pan-Latin American airline holding company involved in the transportation of passengers and cargo and operates as one unified business enterprise. It is the largest passenger airline in South America. Before the onset of the COVID-19 pandemic, LATAM offered passenger transport services to 145 different destinations in 26 countries, including domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, and international services within Latin America as well as to Europe, the United States, the Caribbean, Oceania, Asia and Africa. LATAM and its 28 affiliates sought Chapter 11 protection (Bankr. S.D.N.Y. Lead Case No. 20-11254) on May 25, 2020. Affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the Chapter 11 filing. The Debtors disclosed $21,087,806,000 in total assets and $17,958,629,000 in total liabilities as of Dec. 31, 2019. The Hon. James L. Garrity, Jr., is the case judge. The Debtors tapped Cleary Gottlieb Steen & Hamilton LLP as bankruptcy counsel, FTI Consulting as restructuring advisor, Lee Brock Camargo Advogados as local Brazilian litigation counsel, and Togut, Segal & Segal LLP and Claro & Cia in Chile as special counsel. The Boston Consulting Group, Inc. and The Boston Consulting Group UK LLP serve as the Debtors' strategic advisors. Prime Clerk LLC is the claims agent. The official committee of unsecured creditors formed in the case tapped Dechert LLP as its bankruptcy counsel, Klestadt Winters Jureller Southard & Stevens, LLP as conflicts counsel, UBS Securities LLC as investment banker, and Conway MacKenzie, LLC as financial advisor. Ferro Castro Neves Daltro & Gomide Advogados is the committee's Brazilian counsel. The ad hoc group of LATAM bondholders tapped White & Case, LLP as counsel. Glenn Agre Bergman & Fuentes, LLP, led by managing partner Andrew Glenn and partner Shai Schmidt, has been retained as counsel to the ad hoc committee of shareholders. =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Almost RD$700MM Allocated for Low-Cost Houses ----------------------------------------------------------------- Dominican Today reports that the Central Bank reported that as of March 15, 2023, financial intermediation entities had placed financing for low-cost housing for a value of RD$689.7 million as part of the program to free up resources approved by the Monetary Board in January 2023. The total amount authorized is RD$21,424.0 million, with disbursements beginning in February of this year, says the entity in a press release, according to Dominican Today. Families Of the resources disbursed, RD$540.7 million have been earmarked for acquiring low-cost housing, benefiting 214 families, for an average spent value of RD$2.5 million per home, the report notes. The remaining RD$149.0 million corresponds to six interim loans for constructing low-cost housing, the report relays. Of the number of resources disbursed, totaling RD$689.7 million, a total of RD$347.1 million has been placed by savings and loan associations, RD$335.8 million by multiple banks, and the remaining RD$6.8 million by savings and loan banks, the report relays. Dynamism Low-cost housing is in great demand and, in turn, contributes to the dynamism of the private construction sector, the report discloses. Savings and Loans. Disbursements RD$347.1 million has been placed by savings and loan associations, RD$335.8 million by multiple banks, and RD$6.8 million by savings and loan banks, the report discloses. 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. DOMINICAN REPUBLIC: Calls to be Positive in Face of Drought ----------------------------------------------------------- Dominican Today reports that the Minister of Agriculture, Limber Cruz, called on all the sectors that are affected by the seasonal drought that is affecting the country, to be positive in the face of the situation, just before the institution he directs announced the selective irrigation of crops in the face of the phenomenon that strongly attacks agriculture. According to the head of the agricultural portfolio, it is true that the drought has affected producers, but he denied that this is happening to the extent that some have raised it, the report discloses. According to Cruz, at the moment, production has been affected between seven and ten percent, which depends on the area where the crops are located, the report relays. "There are always decreases in production when there are droughts, what we cannot say is, because I have heard it, is that production fell by 40 or 45 percent. That is not true. It is true that it has affected (the drought), but not in the dimension that they want to put it. We can speak at this time of seven or eight percent, or ten percent, no more than that, depending on the area. Remember that the country has much drier areas and that there are cases like the central cibao that resists more, not so much the deep south and part of the east," said the official when interviewed prior to his participation in the act which celebrated National Consumer Day, according to Dominican Today. Given the current reality, the Minister of Agriculture asked to wait for the rains that are expected for the next few days, but at the same time, he did not fail to highlight the actions that, as a Government, have been taken to mitigate the effects of the drought, the report relays. "We are going to be positive and the truth is that the Government is doing a lot to mitigate. Regarding cattle, we are attacking strongly on the northwest line, especially in Montecristi, Dajabon, and Santiago Rodriguez. We have been penetrating the south with bales, well drills, tanker trucks, diesel for the submersible pumps, and with all kinds of pumps to extract the water. We are doing what we can do as a government," he added. 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. DOMINICAN REPUBLIC: Cano Highlights Impact of Tobacco Production ---------------------------------------------------------------- Dominican Today reports that the candidate for deputy for the Modern Revolutionary Party (PRM), Miguel Cano, assured that with the relaunch of the country's tobacco industry launched by the Ministry of Industry and Commerce, the San Juan province is visualized as the largest center of production. "With the plan to relaunch the tobacco industry promoted by Minister Ito Bisono, it will mean a significant increase in exports, but it also places San Juan with the largest production center," he said, according to Dominican Today. Likewise, he raised the impact of tobacco products for the benefit of the economy, citing the previous years 2021 and 2022 as an example, the report notes. "Tobacco exports in the years 2021 and 2022 once again reflected the importance of this sector for the Dominican economy," said Cano, notes the report. In the same way, the young social activist from the Las Matas de Farfan municipality, San Juan province, cited the aspects on which the current government management has focused to promote the tobacco industry in the Dominican Republic, the report discloses. "President Abinader's government strategy through Industry and Commerce, the Banco Agrícola directed by Fernando Duran, and the Ministry of Agriculture with Limber Cruz, are focused on planting planning, the accompaniment of an incentive program such as the preparation free land, opening of wells and cleaning of irrigation canals, as well as zero-rate financing via Banco Agricola," Cano pointed out, 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. DOMINICAN REPUBLIC: Trade w/ Commonwealth Countries Total US$2,515 ------------------------------------------------------------------ Dominican Today reports that the commercial exchange between the Dominican Republic and the countries that make up the Commonwealth totaled 2,515 million dollars last year, reflecting an increase compared to 2021 of about 239 million, equivalent to an increase of 10 percent. This was stated by the president of the Round Table of the Commonwealth Countries in the Dominican Republic, Fernando Gonzalez Nicolas, in the act of celebrating the World Day of the Commonwealth, held at the headquarters of the Chamber of Commerce and Production of Santo Domingo, according to Dominican Today. The activity was attended by ambassadors, consuls, and presidents of chambers of commerce of the nations that belong to the Commonwealth, the report notes. Gonzalez Nicolas estimated that in 2023 the Commonwealth countries will continue to be, as a whole, the main foreign investors and the largest destinations for exports from the Dominican Republic, the report relays. He gave as an example the commercial exchange with India in 2023 was 807 million dollars, becoming the main commercial partner among all the countries of the Commonwealth, the report says. He stated that Great Britain follows, with an exchange of 467 million, reflecting an increase of 26 percent compared to the previous year; Canada with 466 million, for an increase of 37 percent; Trinidad & Tobago, with 194 million, for a 35 percent increase; and Jamaica with 102 million, for a 15 percent increase, the report notes. "The statistics confirm the strength of our country's trade with the 54 Commonwealth countries," said Gonzalez Nicolas, the report says. Mockbul Ali Obe, the British ambassador, who represents his majesty King Carlos III, who is the head of the Commonwealth, also took part in the act, in connection with celebrating, March 13, World Commonwealth Day. Also present at this meeting were Ramu Abbagani, Ambassador of India; Collin Holditch, Consul General of Canada, and Jose María Cabral, Secretary for the Board of the Commonwealth; Campos de Moya, treasurer and Marcos Pena, director, Amauris Vasquez, president of the British Chamber; Dharmendra Basita, Chairman of the Indian Chamber of Commerce, among others, the report discloses. What is the Commonwealth? It is a voluntary organization that groups 54 countries. After the Queen's death on September 8, 2022, King Charles III became Head of the Commonwealth, the report relays. These countries have the same idiosyncrasy and the same legal and political systems. The Commonwealth contains 2.4 billion people (one-third of the world’s population), on 6 continents, the report notes. It includes as members nations as large as the United Kingdom, Canada, Australia, India, South Africa, Malaysia, and territories as small as Antigua, Barbados, Malta, Mauritius, and Singapore, among others, the report says. What is the Table of the Commonwealth in the DR? The Round Table of the Commonwealth Countries in the Dominican Republic is an organization whose objective is to promote bilateral, economic, political, and social relations between the Commonwealth countries and the Dominican Republic, the report notes. The Table is made up of diplomats from the countries that are part of this bloc and who are attached to the Dominican Republic and the presidents of the British, Canadian, Indian, Trinidad, Jamaica, Guyana, and South African bi-national chambers of commerce, the report says. In addition, multinationals in Santo Domingo that have their headquarters in a Commonwealth country are corporate associates, 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. ============= J A M A I C A ============= NATIONAL COMMERCIAL: Fitch Affirms 'B+' LT IDRs, Outlook Now Pos. ----------------------------------------------------------------- Fitch Ratings has affirmed National Commercial Bank of Jamaica Limited's (NCBJ) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'. Fitch also affirmed NCBJ's Viability Rating (VR) at 'b+'. The Rating Outlooks on the Long-term IDRs have been revised to Positive from Stable following a similar action on Jamaica's Long-term IDRs. The rating actions also follow Fitch's revision of the outlook on the Jamaican banking system's 'b' operating environment (OE) score to positive. The outlook revision on Jamaica's OE score to positive reflects Fitch's assessment of the country's post-pandemic economic recovery. Even though Fitch expects real GDP growth to decelerate to 2.3% in 2023 and 2% in 2024, (converging towards its medium-term potential growth rate estimated around 1%-2%), the economy has recovered from the deep recession in 2020, while inflation is expected to improve and unemployment will remain below its 2020 peak. Fitch expects this recovery to benefit the bank's financial performance. KEY RATING DRIVERS VR Driven Ratings: NCBJ's Viability Rating (VR) drives its Long-Term Issuer Default Ratings (IDRs). The VR is in line with the implied VR. The bank's VR is influenced by Jamaica's sovereign rating and broader operating environment considerations. The bank's business profile also weighs on the VR due to its strong local competitive position as the largest bank in Jamaica with a consolidated market share by assets of 39% and deposits of 33% at December 2022. Improved Asset Quality: At the end of September 2022 (FYE 2022), the 90-day nonperforming loan (NPL) ratio improved to 3.3% (FYE 2021: 4.0%), mainly reflecting more conservative underwriting standards for consumer loans in a high inflation environment and the improvement in collection practices. Similarly, stage 3 loans reduced to 3.3% of total loans at FYE 2022 from 4.1% at FYE 2021. Loan loss allowances cover 61.7% of impaired loans, but if the non-distributable reserve held in the equity is included, the coverage increases to 105% of impaired loans at FYE 2022 vs. 78% the prior year. Fitch expects the NPL ratio to remain stable in 2023 due to lower inflation, recovering employment, and stricter risk management. Sound Profitability: The operating profit to average total assets ratio remained sound at 2.0% at FYE 2022 (2.3% at FYE 2021), mainly due to low loan impairment charges and sound net interest and non-interest income. NCBJ adopted a conservative provisioning approach in 2020 to address the risks stemming from the pandemic, which significantly reduced the need for provisions in 2021 and 2022. Fitch expects that profitability will be sustainable at FYE 2023, reflecting credit growth, low funding cost, and higher non-interest income generation. Lower Capitalization: Fitch does not use the core metrics to assess NCBJ's profitability and capitalization as no public Risk-Weighted Assets (RWA) are available for the consolidated banking group. NCBJ's capital ratio of tangible common equity to tangible assets declined to 9.8% at FYE 2022, down from 12.8% at FYE 2021, reflecting lower equity primarily due to unrealized losses arising from investments designated as fair value through other comprehensive income, as well as asset growth. Earnings generation and expectations for a sharp reduction of unrealized losses will underpin a recovery in capitalization over the rating horizon. Conservative Liquidity: NCBJ's liquidity position is conservative and has remained sound as core deposits grew by 6.8% at FYE 2022. Accordingly, the loan-to-deposit ratio is sound at 83.1% at FYE 2022. Moreover, NCBJ benefits from the largest market share in the country, a well-diversified and low-cost deposit base that covers more than one-half of the bank's funding needs (57.7% at FYE 2022) and its proven access to debt markets. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: IDRs and VR - Given NCBJ's government support assessment at the sovereign rating level, its IDRs are sensitive to changes in the sovereign rating actions; - The VR could be downgraded if the bank's tangible equity ratio is sustained below 10%, due to either accelerated growth, or a relevant deterioration in asset quality, the fair value of the bank's security portfolio or profitability. Factors that could, individually or collectively, lead to positive rating action/upgrade: IDRs and VR - Given NCBJ's government support assessment at the sovereign rating level, its IDRs are sensitive to sovereign rating actions; - An upgrade of NCBJ's VR would also be positive for the bank's IDR. NCBJ's VR could be upgraded if the bank is able to maintain its strong franchise and financial profile relative to its rating level in the context of an improvement of the operating environment. Fitch has assigned NCBJ a Government Support Rating (GSR) of 'b+', the same level of the sovereign rating, to reflect NCBJ's systemic importance. Despite the government's record of having provided extraordinary support to the banking system during prior crises, NCBJ's GSR of 'b+' reflects a limited probability of support being forthcoming because of significant uncertainties about the ability of the sovereign to do so, based on its 'B+' Long-term IDRs. - NCBJ's GSR could be upgraded if Jamaica's rating is upgraded. - NCBJ's GSR would be affected if Fitch negatively changes its assessment of the Jamaican government's propensity to provide timely support to the bank. This could also arise in the event of a sovereign negative rating action. VR ADJUSTMENTS - The Business Profile score has been assigned above the implied score due to the following adjustment reason(s): Market Position (positive). 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 ----------- ------ ----- National Commercial Bank Jamaica Limited LT IDR B+ Affirmed B+ ST IDR B Affirmed B LC LT IDR B+ Affirmed B+ LC ST IDR B Affirmed B Viability b+ Affirmed b+ Government Support b+ Affirmed b+ =========== M E X I C O =========== BRASKEM IDESA: Fitch Affirms 'BB-' LT IDRs, Alters Outlook to Neg. ------------------------------------------------------------------ Fitch Ratings has affirmed Braskem Idesa, S. A. P. I.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-' and senior secured notes at 'BB-'. Fitch previously assigned a Recovery Rating of 'RR4' to the notes but no longer maintains the Recovery Rating. The Rating Outlook is revised to Negative from Stable on the IDRs. The Negative Outlook reflects Braskem Idesa's vulnerability to deteriorating sector and economic conditions and sensitivity to polyethylene (PE) prices as the producer of a single commodity chemical. Fitch expects the company's net leverage to be high in 2023 and 2024. Braskem Idesa faces execution risk as it begins construction of an ethane import terminal and also needs to secure financing for the project. The company's ratings are supported by the long-term nature of its debt, strong market share in the Mexican PE market and the relatively low-cost and efficient operations with ethane as its primary feedstock. Fitch rates Braskem Idesa on a standalone basis due to low legal incentives for the parent to support the subsidiary. KEY RATING DRIVERS High Near-term Leverage: Following challenging market conditions in 2H22, Fitch expects polyethylene prices to remain at relatively low levels in 2023 and 2024. This will cause net leverage to be relatively high in those years at 6.7x and 4.3x, respectively, which is near Fitch's downgrade trigger. The deleveraging trend is driven largely by PE price and spread improvement and to a lesser extent by amortizations on the company's term loan due in 2026. Fitch forecasts the company's EBITDA for 2023 and 2024 to be approximately USD280 million and USD390 million. Braskem Idesa's higher leverage exposes it to negative industry trends, such as lower PE prices, higher raw material costs and general economic slowdowns. Spreads Remain Under Pressure: The end of the three-year pandemic-related lockdown in China will be partly offset by a combination of pent-up supply coming online, concerns over demand due to a fragile global economy and high interest rates. PE prices in 2022 were higher than average, particularly in 1H22 but lower prices in 2H22 combined with elevated raw material costs caused spreads to contract markedly. Fitch's base case reflects Braskem Idesa PE prices of USD1,385/ton in 2022, USD1,125/ton in 2023, USD1,215/ton in 2024 and USD1,385/ton in 2025 and spreads of USD930/ton in 2022, USD865/ton in 2023, USD960/ton in 2024 and USD1,015/ton in 2025. Ethane Terminal Partnership Formalized: In March 2023, the company formalized its partnership with Advario, a carve-out of German tank storage and logistics company Oiltanking GmbH. The project will have a capacity of 80kbpd and fulfill 100% of Braskem Idesa's ethane needs as well as reduce the company dependence of Petroleos Mexicanos (Pemex, BB-/Stable) for ethane. The project includes two cryogenic tanks and an approximately 9.8km pipeline from the terminal to the company's petrochemical complex. It will be majority financed with debt, which Fitch assumes will be non-recourse to Braskem Idesa and not consolidated in the company's financial statements. The terminal is expected to be completed by the beginning of 2025 and is currently approximately 33% complete. Business Risk: Braskem Idesa is vulnerable to PE price swings, spikes in raw material costs as well as dependence on a single product and single site operations. The company is exposed to operational risk from Pemex, which has an agreement to supply a minimum volume of 30,000 barrels per day (kbpd) of ethane until the earlier of February 2025 or the start-up of the ethane import terminal. The date can be extended if there are delays in obtaining terminal licenses and gives Braskem Idesa preemptive rights to acquire all Pemex's ethane not used for its own production. The recent expansion of the Fast Track increased capacity to 35kpbd, or 53% of capacity. The Fast Track expansion helps secure ethane supply until the terminal is built. Fitch assumes operating rates of 83% in 2023, 86% in 2024 and 95% in 2025. Standalone Rating Approach: Fitch considers Braskem Idesa's ratings and those of its majority shareholder Braskem S.A. (75% equity interest) to be independent due to Braskem S.A.'s lack of strong legal incentive to support Braskem Idesa as there are no parent guarantees or cross default provisions on Braskem Idesa's debt. In addition, Braskem Idesa's financial contribution in the form of dividends paid to the parent has been low and operational synergies between the companies are weak. As of Sept. 30, 2022, Braskem Idesa reported MXN51 billion of subordinated shareholder loans, approximately MXN38 billion with Braskem and MXN13 billion with Grupo IDESA. DERIVATION SUMMARY Braskem Idesa's 3Q22 LTM net leverage ratio was well that of its peers at 4.3x, compared with Braskem at 2.3x, Orbia at 1.8x, Cydsa at 3.3x and Unigel at 1.1x. Braskem Idesa's 2023 net leverage should be around 6.5x before declining to 4.3x in 2024. Dow's net leverage was 1.25x in 2021 and 1.56x in 2022. Historically, Braskem Idesa benefited from access to a competitive cost feedstock, with its EBITDA margin well positioned relative to other PE producers such as Braskem S.A. (BBB-/Stable) and more diversified players such as Dow Chemical Company (BBB+/Positive) in terms of operating margins. Braskem Idesa compares positively with its Latin American chemical peers such as Alpek S.A (BBB-/Positive) or Orbia Advance Corporation, S.A.B de C.V. (BBB/Stable). Nevertheless, Braskem Idesa has a higher exposure to supply/contract risks compared with its peers. The company also has a weaker position in terms of exposure to a single asset and product, as well as limited geographic diversification. KEY ASSUMPTIONS - Pemex provides 27kbpd in 2023 and 27kbpd in 2024 and 15kbpd thereafter; - Imported ethane of 26kpbd in 2023, 28kpbd in 2024 and 46kpbd thereafter; - Operating rates of 83% in 2023, 86% in 2024 and 95% in 2025; - Braskem Idesa polyethylene prices of USD1,125/ton in 2023, USD1,215/ton in 2024 and USD1,385/ton in 2025; - Average ethane purchase prices of USD260/ton in 2023, USD255/ton in 2024 and USD375/ton in 2025; - Braskem Idesa polyethylene-ethane spreads of USD865/ton in 2023, USD960/ton in 2024 and USD1,015/ton in 2025; - Braskem Idesa earns a 5% premium over the industry reference PE price; - The company builds an ethane import terminal at a net equity contribution cost of USD95 million paid in 2022 and USD5 million paid in 2023; - USD/MXN exchange rates of 20.17 in 2022, 20.54 in 2023 and 21 thereafter. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Fitch would view positively the full completion of the ethane import terminal coupled with sustained gross debt/EBITDA below 3.5x and net debt/EBITDA below 3.0x; - EBITDA interest coverage of 5.0x or greater on a sustained basis. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Gross debt/EBITDA above 5.5x or net debt/EBITDA above 4.5x on a sustained basis; - EBITDA interest coverage of 2.5x or less on a sustained basis; - Materially higher operating costs or sustained capacity utilization levels below 80%; - Failure to receive at least 20,000 barrels per day of ethane from Pemex; - Significant delays or cost overruns in the construction of the new ethane import terminal or failure to secure the required permits for the project; - Shareholder loans are refinanced with external financial debt. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: As of Sept. 30, 2022, Braskem Idesa reported total debt of USD2.2 billion and net debt of USD1.8 billion. The company's maturities are well spread with only term loan amortizations of USD23 million due in each 2024 and 2025 and USD83 million in 2026. The majority of the company's debt is a USD900 bond due 2029 and a USD1.2 billion bond due 2032. EBITDA interest coverage will be tight at 1.8x in 2023 reflecting a continued challenging operating environment. The average life of the debt is 7.8 years and cash was adequate at USD400 million as of 3Q22. ISSUER PROFILE Braskem Idesa, S.A.P.I. is a polyethylene producer with operations in the city of Coatzacoalcos, Mexico. Its annual production is 1.05 million tons of high- and low-density polyethylene. It began operations in early 2016. ESG CONSIDERATIONS Braskem Idesa SAPI has an ESG Relevance Score of '4' for Governance Structure due to shareholder concentration and track record of a corruption scandal of one of its parent companies, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Braskem Idesa SAPI has an ESG Relevance Score of '4' for Financial Transparency due to below average financial disclosure, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Braskem Idesa SAPI LT IDR BB- Affirmed BB- LC LT IDR BB- Affirmed BB- senior secured LT BB- Affirmed BB- =========================== V I R G I N I S L A N D S =========================== LIMETREE BAY: $465M Bank Debt Trades at 19% Discount ---------------------------------------------------- Participations in a syndicated loan under which Limetree Bay Terminals LLC is a borrower were trading in the secondary market around 80.6 cents-on-the-dollar during the week ended Friday, March 17, 2023, according to Bloomberg's Evaluated Pricing service data. The $465 million facility is a Term loan that is scheduled to mature on February 15, 2024. About $439.4 million of the loan is withdrawn and outstanding. Limetree Bay Terminals operates oil terminals. The Company's country of domicile is the Virgin Islands. ********* 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. 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