/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230404.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, April 4, 2023, Vol. 24, No. 68 Headlines A R G E N T I N A YPF SA: Argentina Found Liable in Suit Over Oil Takeover B R A Z I L AMERICANAS SA: Ex CEO Was in Charge for 9 Days Prior to Collapse G U A T E M A L A CENTRAL AMERICA BOTTLING: Fitch Affirms BB+ LT IDR, Outlook Stable J A M A I C A JAMAICA: BOJ Rate Pause Continues M E X I C O EMPEREON MARKETING: Call Center Starts Subchapter V Case GRUPO KUO: Fitch Affirms 'BB' LongTerm IDRs, Outlook Now Stable P A N A M A BAC INTERNATIONAL: Fitch Hikes LongTerm IDR to BB+, Outlook Stable P E R U BANCO INTERAMERICANO: Fitch Affirms BB+ LongTerm IDRs, Outlook Neg. T R I N I D A D A N D T O B A G O CL FIN'L: CLF Heads to Privy Council VOYAGER DIGITAL: Sale to Binance Halted by District Court - - - - - ================= A R G E N T I N A ================= YPF SA: Argentina Found Liable in Suit Over Oil Takeover -------------------------------------------------------- Bob Van Voris at Bloomberg News reports that a US judge ruled against Argentina and in favor of entities funded by Burford Capital on claims the South American nation failed to pay fair value to shareholders when it nationalised the gas and oil company YPF SA in 2012. US District Judge Loretta Preska ruled in favour of the Spanish companies Petersen Energia Inversora SAU and Petersen Energia SAU, which sued YPF and Argentina in 2015, according to Bloomberg News. While she granted a request by YPF to dismiss the claims, she determined that the Argentine government itself was liable, with damages to be resolved at trial, Bloomberg News notes. The ruling increases the likelihood of a settlement over a case that has its roots in former president Cristina Fernandez de Kirchner's decision to nationalise YPF, the country's largest and most emblematic energy company, Bloomberg News relays. At that time, Petersen, controlled by the Eskenazi family, owned 25 percent of YPF. Fernandez de Kirchner is currently back in government as vice-president and remains a key political figure in the country, Bloomberg News notes. While the judge didn't set a figure for the compensation, Argentina would have to pay US$7 billion to US$19.8 billion, newspaper La Nacion said, citing estimates provided by the funds, Bloomberg News discloses. The country has been trying to rein in expenses to reduce its fiscal deficit under a US$44-billion deal with the International Monetary Fund, Bloomberg News says. Burford's New York-listed shares soared as much as 59 percent, an intra-day record, after the news, Bloomberg News notes. The London-listed shares were up 30 percent prior to being suspended, Bloomberg News relays. YPF's US-listed shares dropped 1.8 percent. "This look like a very substantial victory for Burford," said Julian Roberts, an analyst at Jefferies, in a note. A settlement is possible, and the judge appears to mostly agree with Burford's view on how to calculate damages, said Roberts, who advises buying the fund's shares, Bloomberg News notes. A lawyer representing Argentina in the case didn't immediately respond to a request for comment. An Argentina government spokesman in Buenos Aires also didn't respond to a request for comment. The case is Petersen Energia Inversora, S.A.U. v. Argentine Republic, S.D.N.Y., 1:15-cv-02739, 3/31/23 About YPF SA As reported in the Troubled Company Reporter-Latin America on April 3, 2023, S&P Global Ratings lowered its local and foreign currency ratings on YPF SA to 'CCC-' from 'CCC+'. The outlook on these ratings is now negative. The downgrade follows a similar action on S&P's long-term foreign currency ratings and T&C on Argentina, following announced plans that, if implemented, would oblige some nonfinancial public-sector entities to exchange or sell their holdings of global- and local-law dollar-denominated bonds issued during the 2020 restructuring for other locally issued peso debt, likely dollar- and/or inflation-linked bonds. In S&P's view, the lack of clarity and the apparent motivation for the potential transaction underscore heightened credit vulnerabilities, in particular given the increasing pressures from the severe drought that Argentina is facing, which further constrains the already disrupted FX market. This expected greater pressure on the FX markets also explains S&P's downward revision of the T&C assessment to 'CCC-'. =========== B R A Z I L =========== AMERICANAS SA: Ex CEO Was in Charge for 9 Days Prior to Collapse ---------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that in his first public comments since blowing the whistle on a 20 billion real ($3.8 billion) accounting hole on Jan. 11 that led to the collapse of one of Brazil's most well-known retailing chains, Sergio Rial told senators that he was kept in the dark before taking over and then immediately realized the firm was insolvent. During a hearing in Brasilia to discuss the downfall of Americanas SA, Rial, who was chief executive officer from Jan. 2 to 11, said the previous management team led by Miguel Gutierrez centralized a lot of information and didn't include him in year-end financial meetings during the transition, according to globalinsolvency.com. It wasn't until he took over that several directors took him aside to point out huge bank debts that weren't properly booked on the balance sheet, the report notes. About Americanas SA Americanas was one of the largest diversified retail chains in Brazil, with a wide platform of physical stores, robust e-commerce, fintech, and has just entered into the niche food retail. It is listed on B3, being indirectly controlled by billionaire Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles. The retailer nosedived in January 2023 after becoming mired in an accounting scandal. The firm filed for bankruptcy at a court in Rio de Janeiro on Jan. 19, 2023. Americanas sought protection under Chapter 15 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25, 2023. White & Case LLP, led by John K. Cunningham, is the U.S. counsel. ================= G U A T E M A L A ================= CENTRAL AMERICA BOTTLING: Fitch Affirms BB+ LT IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed The Central America Bottling Corporation's (CBC) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and senior unsecured notes at 'BB+'. The Rating Outlook is Stable. The affirmation reflects CBC's business position as an anchor bottler of the PepsiCo system with operations in Central America, the Caribbean, Ecuador, Peru and Argentina. The company has a diversified product portfolio of PepsiCo and proprietary brands across its franchised territories, combined with a good distribution network in key markets. CBC's ratings are constrained by the sovereign ratings where it operates, the competitive environment of the beverage industry and the volatility of prices in its main raw materials. KEY RATING DRIVERS Solid Position in Core Markets: CBC's ratings reflect its stable market share positions across its operations that results in predictable cash flow generation. In the carbonated soft drink (CSD) category, which represents around 53% of its total sales volume, the company maintained a leading market share position in Jamaica, and maintained significant positions in other core markets, such as Guatemala, Ecuador and Puerto Rico. CBC has a strong presence in non-CSD categories such as water, juices and nectars, isotonics and energy drinks, where it holds important positions in most of its markets. Non-CSD products represent around 42% of its total sales volume. The company's brand portfolio, distribution capabilities and management strategies to design and execute commercial initiatives will support its business position in the long term. Positive Revenue Growth: Fitch expects CBC's revenues to grow annually around 6% in 2023 and 2024 amid a weaker economic environment in the region and inflationary pressures. A balanced combination of volume growth and average price increases should support revenue trends. Non-CSD categories such as water, isotonics and energy drinks are projected to reach higher growth rates than the CSD category. For the first nine months as of Sept. 30, 2022, CBC's revenues grew around 13%, as a result of higher sales across all the beverages categories. Peru, Guatemala, Puerto Rico and Jamaica were the main markets that also drove the revenue growth. Profitability Face Challenges: Fitch expects that CBC's EBITDA margin (pre IFRS 16) will continue facing an environment of higher commodities costs and expenses in 2023. During 2022, the company's gross margin was impacted by higher commodities and freights costs, while higher selling and administrative expenses were associated to investments in their digital capabilities to improve execution at the point of sales and competitive advantages in the long term. Fitch anticipates that CBC will be mitigating some of these pressures with price increases, internal efficiencies and cost expenses control as the company is executing a transformational program focused on improving manufacturing, logistics and procurement areas. Fitch anticipates that CBC's EBITDA margin will be around 13% in 2023-2024. Leverage Manageable: CBC's gross and net leverage were within Fitch previous projections and are expected to reach 4.4x and 2.8x at YE 2023, respectively. These ratios incorporate that the company could have some bolt on acquisitions that will not impact materially its credit quality. For 2024-2025, CBC's gross and net leverage should stabilize below 4.0x and 2.5x mainly as a result of higher EBITDA from organic operations and potential investments. As of Sept. 30, 2022, CBC's total debt was USD1.2 billion, excluding USD176 million of a lender of record loan structure that the company implemented to channel funds from bond issuances to its operations. FCF Neutral to Positive: CBC's ratings reflect its capacity to maintain a neutral to positive FCF capacity across the rating horizon. Fitch forecasts CBC's FCF to be negative in 2023 mainly due higher networking capital requirements related to inventory and capex. Capex investments are mainly oriented to strength production capabilities and distribution network, including returnable bottles and coolers at the point of sale. Fitch expects cash flow from operations (CFO) for 2023 to be around USD160 million, with a capex of approximately USD118 million, and dividends of USD56 million. From 2024 and going forward, FCF is expected to be positive as EBITDA, calculated by Fitch (pre-IFRS 16), will approach USD300 million. DERIVATION SUMMARY CBC's 'BB+' ratings are below those of other beverage peers in the region, such as Arca Continental, S.A.B. de C.V. (A/Stable), Coca-Cola FEMSA, S.A.B. de C.V. (A/Negative) and Embotelladora Andina S.A. (BBB+/Stable), given its lower size and scale and weaker brand recognition of PepsiCo and proprietary beverage brands when compared to the stronger brand equity of Coca-Cola products. Also, the company's ratings reflect its lower profitability margins and higher exposure to lower-rated countries. CBC's ratings are above those of other beverage companies, such as Grupo Atic (BB-/Positive), given its better operating performance, adequate leverage metrics and ample liquidity. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Revenue growth of 6% on average during 2023-2024; - EBITDA margins of around 13% on average during 2023-2024; - Annual capex around USD116 million in 2023-2024; - Dividend distributions of around USD56 million per year; - Negative to neutral FCF on 2023-2024. - Potential acquisition of USD200 million in 2023. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Fitch does not foresee positive rating actions for CBC in the medium term unless the economic environments of Guatemala, Honduras, Nicaragua, El Salvador and Ecuador improve; - Higher cash flow generation from investment-grade markets such as Peru and Puerto Rico; - EBITDA margin above 16% on a sustained basis; - Positive FCF margin across the rating horizon; - Gross debt/EBITDA and net debt/EBITDA rations below 3.0x and 2.0x, respectively, on a sustained basis. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A multiple downgrade in Guatemala's Country Ceiling or sovereign ratings; - Declines in volume and revenue on sustained basis; --An EBITDA margin below 12% on sustained basis; - Consistent negative FCF that deteriorates the company's liquidity position and financial profile; - Use of excess cash in unprofitable investments or shareholders distributions; - Gross debt to EBITDA and net debt to EBITDA higher than 4.0x and 3.0x, respectively, on a sustained basis. LIQUIDITY AND DEBT STRUCTURE Ample Liquidity: As of Sept. 30, 2021, CBC's liquidity is ample, given its current cash position of USD608 million and USD77 million of short-term debt. Approximately 70% of its total cash is maintained in U.S. dollars, which is invested in different investment grade U.S. banks. After refinancing its total debt in January 2022 with USD1.1 billion sustainability-linked notes issuance due in 2029, the company's debt amortizations are manageable in the following two years. Fitch believes CBC has financial flexibility given its CFO generation capacity and liquidity position. ISSUER PROFILE CBC produces and distributes carbonated soft drinks (CSD) and beverages in Central America, the Caribbean, Ecuador, Peru and Argentina, and has a long-standing relationship with PepsiCo and partnership with AmBev to distribute beer in Central America and some countries in the Caribbean. 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 ----------- ------ ----- The Central America Bottling Corporation LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ senior unsecured LT BB+ Affirmed BB+ ============= J A M A I C A ============= JAMAICA: BOJ Rate Pause Continues --------------------------------- Dashan Hendrick at RJR News reports that the Bank of Jamaica (BOJ) held the key policy rate at 7 per cent for its third-straight meeting, chided the slow pace of increases in lending and deposit rates but assures the financial system remains safe in light of recent upheavals in the US and Europe which were partly blamed on higher interest rates. Analysts had expected the central bank to hold rates especially with the Federal Reserve raising its benchmark by only 0.25 per cent and with inflation in Jamaica continuing its downward trend, with prices rising by an average of 7.8 per cent in February, the lowest year-over-year increase since December 2021, according to RJR News. Still, chairman of the rate setting monetary policy committee (MPC) Richard Byles and policymakers entered the second policymaking meeting of the year watching keenly what had happened in early March in the United States financial system with several banks collapsing and so sought to assure the local market that Jamaica's financial system remains stable, the report notes. "The MPC noted that the banking system remains sound with adequate capital and liquidity," it said in notes accompanying its monetary policy decision, the report discloses. The BOJ did not expound on the level of capital adequacy and liquidity in the financial system, the report says. However, it told the Jamaica Observer that more data on the financial system will be available from March 31, 2023 with the publication of the Financial Stability Report 2022, the report adds. Yet, it indicated that it remains concerned that deposit-taking institutions (DTIs) - commercial banks, merchant banks and building societies - are not raising lending and deposit rates fast enough, the report notes. "The MPC also noted that interest rates in the domestic money and capital markets and the term rates offered by deposit-taking institutions have generally increased in line with the policy rate. However, the DTI sector has so far made only marginal adjustments to saving deposits and lending rates," it said, the report relays. Between October 2021 and January 2023, the weighted average deposit rate offered by commercial banks to the public increased by 67 basis points (bps), the report notes. However, the overall weighted average lending rate to the private sector on local currency loans was 11.6 per cent at January 2023, 12 bps below the rate at September 2021, the report relays. The BOJ, however, pointed to preliminary survey data which indicate that these rates will be adjusted upward by marginal amounts in the near future, the report says. In the last few weeks, a number of banks have sent notices to their customers indicating lending rates will be going, the report relays. The expectation is that higher lending rates will discourage people from borrowing to make purchases, especially for things like houses, cars, furniture or vacations, which will slow the economy and help to bring price increases back in line with the target of keeping annual price increases within the 4 per cent to 6 per cent band, the report notes. Higher deposit rates should have a similar effect, the report relays. If banks are giving consumers more on their deposits, then consumers should be encouraged to save more and spend less, again, slowing the economy and sapping the strength out of price increases, the report discloses. Even with positive developments such as fertilizer costs falling 12.3 per cent from January to February 2023, liquefied natural gas prices declining by 34.8 per cent from January to February, oil rising by 0.1 per cent - below the central bank's projection - and grains prices (wheat, corn, soybean) also increased at a slower pace than expected for the two-month period, the BOJ expressed concern that their effect could be stymied by wage increases, the report notes. "In a context where the domestic economy continues to grow, labour market shortages carry the potential for future wage adjustments that can put upward pressure on inflation," it said while noting that higher inflation could also result from a worsening in supply chain conditions and higher commodity prices if there are further geo-political disruptions, the report adds. As reported in the Troubled Company Reporter-Latin America in March 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. =========== M E X I C O =========== EMPEREON MARKETING: Call Center Starts Subchapter V Case -------------------------------------------------------- Empereon Marketing LLC filed for chapter 11 protection in the District of Arizona. The Debtor elected on its voluntary petition to proceed under Subchapter V of chapter 11 of the Bankruptcy Code. The Debtor owns and operates call centers throughout Arizona and Mexico. The Debtor's revenues dropped on account of the Covid-19 pandemic. The Debtor's liabilities increased at the same time from unused leased space in Houston and Waco, Texas, and Phoenix, Arizona. Empereon seeks to restructure under Subchapter V due to unanticipated leasehold liabilities caused by the Covid-19 pandemic along with concurrent revenue reduction related to same effects on the economy. According to court filings, Empereon Marketing has $1,777,954 in debt owed to 1 to 49 creditors. The petition states that funds will be available to unsecured creditors. A telephonic meeting of creditors under 11 U.S.C. Section 341(a) is slated for April 18, 2023 at 9:00 a.m. About Empereon Marketing Empereon Marketing LLC -- https://www.empereon/ -- is a business process outsourcing company providing end-to-end customer engagement and customer management solutions through two distinct, but affiliated, privately held entities. Empereon Marketing LLC filed a petition for relief under Subchapter V of Chapter 11 of the Bankruptcy Code (Bankr. D. Ariz. Case No. 23-01592) on March 15, 2023. In the petition filed by Travis Bowley, as C.E.O., the Debtor reported total assets as of Dec. 31, 2022 amounting to $6,385,218 and total liabilities as of Dec. 31, 2022 of $1,777,954. The case is overseen by Honorable Bankruptcy Judge Madeleine C Wanslee. The Debtor is represented by: Gerald L. Shelley, Esq. FENNEMORE CRAIG, P.C. 10400 N. 25th Avenue Suite 100 Phoenix, AZ 85021 Tel: 602-916-5000 Email: gshelley@fclaw.com GRUPO KUO: Fitch Affirms 'BB' LongTerm IDRs, Outlook Now Stable --------------------------------------------------------------- Fitch Ratings has affirmed Grupo KUO, S.A.B. de C.V.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and unsecured senior notes at 'BB'. In addition, Fitch has affirmed KUO's National Scale Long-Term rating at 'A(mex)'. The Rating Outlook has been revised to Stable from Positive. The Outlook revision incorporates Fitch's view that KUO's operations will continue to be pressured by high raw material prices in a high inflationary environment, while demand and reference prices in the chemical sector tends to normalize. The ratings reflect KUO's diversified business portfolio, leading market positions across the industries where it participates, and its joint ventures (JVs) with recognized companies. The ratings are limited by the company's exposure to volatility in product demand and input costs across its business units. For analytical purposes, Fitch incorporates financial information for KUO under the proportional consolidation of its JVs (pro forma). In addition, Fitch considers reported consolidated figures, which account for the JVs under the equity method (consolidated). KEY RATING DRIVERS Environment Weakens Performance: KUO's results were affected by a challenging environment with high volatility in raw materials, which had a negative impact, particularly in the pork business. The price of corn and soybean paste were affected by the Ukraine-Russian War, as well as the climatic effects related to droughts. Despite adverse market conditions and price increases volumes were resilient in KUO's different industries. On a pro forma basis, KUO's annual revenues grew 11.6% in 2022, while by industry the growth was 13.1% for consumer, 12.3% in chemicals and 7.9% in automotive. Fitch expects a challenging environment for KUO in 2023 as cost inflationary pressures continue in the food segment and the chemical industry moves towards normalization of price references and margins. Fitch estimates on a pro forma basis, revenue growth of around 5% and a Fitch calculated EBITDA margin of around 9%. On a consolidated basis, Fitch expects revenue growth to be close to 6% and an EBITDA margin of around 7%. Diversification Helps to Offset Volatility: KUO's diversified business portfolio in the consumer, automotive and chemical industries, allows the company to mitigate the volatility from economic and industry cycles. In 2022, operating results were supported by a favorable environment in the chemicals business and good aftermarket dynamics, which offset to some extent the decline in margins in the pork and synthetic rubber businesses. The Consumers industry, KUO's most significant business with pork meat and the Herdez Del Fuerte JV (JV with Grupo Herdez, S.A.B. de C.V.), is generally oriented to the more stable consumer segment, while the Chemical and Automotive businesses are normally more volatile, with higher exposure to demand cycles. The chemical businesses (synthetic rubber JV with Repsol Quimica S.A. and polystyrene) and the automotive businesses (transmission and aftermarket) contributed around 42% and 26%, respectively, of KUO's EBITDA in 2022. Fitch estimates that the contribution of the consumer division to recover above levels of 40% of EBITDA in the next two years. Lower EBITDA Pressures Leverage: Fitch expects KUO's proforma net debt to EBITDA (pre IFRS-16) including non-recourse factoring and debt from its JVs, to be at 2.2x at the end of 2023 and to trend toward levels close to 2.0x by 2024. On a consolidated basis, Fitch expects this to be around 3.0x for the next two years. KUO's strong EBITDA generation in all industries led to an improvement of the net leverage ratio in 2021. However, without a significant reduction in gross debt and facing volatility in raw materials, leverage was pressured at YE 2022 and is expected to maintain in the same levels for 2023. Negative FCF Expectation: In 2022, KUO's FCF on a pro forma and on a consolidated basis was negative, as calculated by Fitch. For 2023, KUO's forecasted cash flow from operations (before capex and dividends) on a pro forma basis will be around USD100 million, which combined with a capex of approximately USD140 million and dividends of around USD23 million, will result in a negative FCF. On a consolidated basis, Fitch projects KUO's FCF to be negative in 2023 and 2024. Solid Business Positions: KUO's ratings benefits by the important market positions of its business units. The company's Pork Meat business is the largest producer in Mexico with vertically integrated operations that serves the domestic market and exports products to Japan, Korea and U.S. Under its Herdez Del Fuerte JV, KUO has highly recognized brands with leading market shares in Mexico with different products such as guacamole, tomato paste and mole, among others. This JV also has relevant operations in the U.S. as a producer and distributor of Hispanic brands. Its transmissions business is a leading producer of rear wheel transmissions in North America for the high-performance segment. In the Aftermarket business, KUO is a leader in engine components with recognized proprietary brands and third-party products in Mexico. In addition, the company is the largest producer of synthetic rubber in Mexico through its JV with Dynasol, as well as the main producer of polystyrene in the country. For 2022, exports represented 54% of total sales. DERIVATION SUMMARY KUO's ratings are supported by its diversified business portfolio, solid business position of its main brands and products in different industries, geographic diversification, and stable financial position. Its credit profile is comparable with other diversified groups as Alfa, S.A.B. de C.V. (BBB-/Stable) and Votorantim, S.A. (BBB-/Stable). Alfa's and Votorantim business position are considered stronger than KUO, given its larger size and scale, geographic diversification and stronger position of its businesses, as well as stronger financial market access. In terms of financial profile, KUO (EBITDA margin around 9% and net leverage around 2.0x) compares weaker to Alfa's consolidate profitability (EBITDA margin around 10%) and with Votorantim, which project's an EBITDA margin of around 20% and net leverage below 2.0x. KUO's current leverage is considered strong for its 'BB' rating, but its negative FCF across the business cycle limits the ratings. Other comparable companies in the 'BB' category are Cydsa, S.A.B. de C.V. (BB+/Stable) and Fortaleza Materiales, S.A.B. de C.V.'s (BB/Stable). KEY ASSUMPTIONS Fitch's Key Assumptions on a Pro Forma Basis, Including Proportional Consolidation of JVs: - Revenue growth of 5% in 2023 and -1% in 2024; - EBITDA margin of around 9% in 2023-2024; - Capex around 4% of revenues in 2023-2024; - Dividends around MXN450 million for the next two years; - Total debt/EBITDA and net debt/EBITDA close to 2.7x and to 2.2x, respectively, by YE 2023. Fitch's Key Assumptions on a Consolidated Basis, Excluding Proportional Consolidation of JVs: - Revenue growth of 6% in 2023 and 2% in 2024; - EBITDA margin of around 7% in 2023-2024; - Capex around 3.4% of revenues in 2023-2024; - Dividends around MXN450 million for the next two years. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Lower volatility in the consumer portfolio, mainly in the Pork business; - Neutral to positive FCF through the economic cycle; - Maintaining a strong liquidity position; - Sustaining lower leverage ratios for pro forma total debt to EBITDA and net debt to EBITDA of around 2.5x and 2.0x, respectively. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Higher than expected negative FCF over the next two years; - A weak liquidity position; - Sustained deterioration in operating performance across the company's businesses, leading to pro forma total debt to EBITDA and net debt to EBITDA consistently above 3.0x and 2.5x, respectively. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: KUO's readily available cash of MXN3.8 billion on a pro forma basis at YE 2022, is sufficient to cover its debt amortization in the short term of MXN2.0 billion, which includes MXN0.7 billion of nonrecourse factoring and MXN0.8 billion of debt in its JVs. The company's liquidity is also supported by available committed credit lines of USD300 million. On a consolidated basis, KUO's cash balance was MXN2.3 billion and a short-term debt including factoring of MXN1.2 billion. KUO's total debt, including nonrecourse factoring, at YE 2022 was MXN15.3 billion on a pro forma basis, and MXN14.4 consolidated. Fitch considers KUO's has good access to capital markets and bank loans, and it´s debt maturity is manageable, with the most significant maturity until 2027 for MXN12 billion. ISSUER PROFILE KUO is a Mexican conglomerate with a diversified portfolio of six strategic business units that participates in the consumer, automotive and chemical industries, with a strong presence in international markets through operations located outside Mexico. 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 ----------- ------ ----- Grupo KUO, S.A.B. de C.V. LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB Natl LT A(mex) Affirmed A(mex) senior unsecured LT BB Affirmed BB =========== P A N A M A =========== BAC INTERNATIONAL: Fitch Hikes LongTerm IDR to BB+, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has upgraded BAC International Bank, Inc.'s (BIB) Long-Term (LT) Issuer Default Rating (IDR) to 'BB+' from 'BB' and LT National Rating to 'AA(pan)' from 'AA-(pan)'. The Rating Outlook for the LT IDR and the LT National Rating is Stable. Fitch affirmed BIB's Short-Term (ST) IDR and ST National Rating at 'B' and 'F1+(pan)', respectively. Fitch has also upgraded BIB's Viability Rating (VR) to 'bb+' from 'bb' and has withdrawn the Shareholder Support Rating (SSR) of 'bb-' and has assigned the Government Support Rating (GSR) of 'ns'. These ratings actions follow the recent upward revision of Fitch's assessment of the Operating Environment (OE) scores of Costa Rica and Guatemala. Both OE revisions lead to an upgrade of BIB's OE score under the agency's blended approach to 'bb' from 'bb-' with a stable trend. The actions also consider Fitch's improved assessment of capitalization and asset quality, as described below. SSR: The withdrawal of the SSR is driven by Banco de Bogota (BdeB; 'BB+' rated by Fitch) no longer owning any shares of BIB's ultimate parent company, BAC Holding International Corp. (BHIC), as of today (June 2022: 25% ownership). Consequently, the SSR is no longer relevant by Fitch for BIB. KEY RATING DRIVERS Ratings Driven by VR: BIB's IDRs and National Ratings are driven by its VR, based on the OE of the countries in which it has presence as well as the consolidated credit profile, which is derived mainly from the performance of six banking operations in Central America. International Environment Enhancement: Fitch's blended OE assessment for BIB is a key component of its intrinsic creditworthiness. Fitch assessed BIB's OE by weighing the gross earning assets and the OE scores of the jurisdictions where those assets are allocated as well as taking into consideration the benefits from geographic diversification. Recently, the key markets of Guatemala and Costa Rica improved their OEs to 'bb-', benefiting the BIB's blended OE factor which, ultimately, will strengthen BIB's business and financial profiles over the rating horizon. In Fitch's opinion, when considering the benefits of the diversification of operations, any adverse event in the jurisdictions where BIB has presence would be manageable by the entity. Strong and Consistent Business Profile: Fitch upgraded BIB's Business Profile factor to 'bbb-' from 'bb+' as BIB has an important and stable income generation, as well as a recognized franchise and integrated operations across the markets where it operates. BIB has a four-year average total operating income of USD2.2 billion. Compared to other regional financial groups with a business focus in Central America, BIB is the largest one in terms of assets, USD31.05 billion as of December 2022. Moreover, its banking subsidiaries have important franchises in their respective local markets, standing in the third or fourth place in terms of loans and deposits, by serving the retail and corporate segments under an ample array of products offering and a well-developed electronic payments business. Favorable Asset Quality: Fitch upgraded BIB's Asset Quality factor to 'bb+' from 'bb' as it reflects its effective risk framework and control. Its core metric, stage 3 loans to gross loans, decreased to 3.1% as of December 2022 (December 2021: 4.0%); while the 90+ days past-due loans accounted for 1.2% of gross loans. Fitch expects this asset quality will continue to perform favorably, reinforced by the recent improvement in the two OEs and the stable outlook of almost all the rest of the markets. Increasing Profitability: BIB's profitability has continued its recovery since the pandemic impact, and Fitch expects this trend will continue as the markets where it operates perform favorable amid the challenging international context. Its core metric, operating profit to risk weighted assets (RWA), increased to 2.7% as of December 2022 (December 2021: 2.5%). This was also benefited by a higher net interest margin (NIM), relatively lower loan impairment charges, and an operational efficiency under control. Capitalization Favored by Non-Core Capital Cushions: Fitch upgraded BIB's Capitalization and Leverage factor to 'bb' from 'bb-' with a stable trend because BIB's capital position is strengthened by its subordinated perpetual bond program, which is classified as AT1 in the regulatory capital adequacy ratio (CAR), improving BIB's loss absorption ability as well as by a conservative RWA calculation. BIB's capitalization compares similar to close peers in Latin America. As of December 2022, its core metric, common equity Tier 1 ratio (CET1), reversed its decreasing trend, and stood at 10.4% (December 2021: 10.2%). While the CAR continued its slight decreasing trend, and stood at 12.45% as of YE 2022 (YE 2021: 12.47%). Solid Funding Profile: BIB's funding sources benefit from an ample and an increasing deposit base due to its recognized franchise in the region. All banking subsidiaries have an important market share of deposits in their respective countries favored by the its business focus on means of payments as wells as the cross-border operations of its regional clients. As of YE 2022, BIB's loan to deposit ratio increase to 89.3% (December 2021: 85.2%). BIB's liquidity is also supported by its wide access to alternative funding, such as issuances in local capital markets and wholesale credit lines, whether on a consolidated or unconsolidated basis. Debt Ratings: Fitch has affirmed BIB's CP program's ST National rating at 'F1+(pan)', which is at the same level as BIB's ST National Rating. Mirroring the same action on BIB's LT National rating, Fitch also upgraded BIB's senior unsecured debt's LT national rating to 'AA(pan)' from 'AA-(pan)', which is at the same level as BIB's LT National Rating, and junior subordinated perpetual debt's LT National Rating to 'A-(pan)' from 'BBB+(pan)'. Fitch views the senior unsecured debt programs' likelihood of default the same as BIB's because they do not have specific guarantees. The subordinated bonds' national rating is four notches below its anchor rating, BIB's LT National Rating, two-notches downgrade for loss severity due to its deep subordination, and two additional notches for incremental non-performance risk given the bonds' non-cumulative coupon omission capability. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - A deterioration in Fitch's assessment of BIB's OE derived from a worsening of the OE in the Central America largest markets would put pressure on BIB's IDR, VR and national ratings; - BIB's IDR, VR and national ratings would also be pressured in case of sustained reductions of its business volume that lead to significant deterioration of its loan book along with continuous reductions on its profitability and capitalization levels, particularly in case of sustained operating profits to RWA and CET1 metrics consistently below 1.5% and 9%, respectively; - BIB's senior unsecured bonds, CP and subordinated perpetual bonds' national ratings would be downgraded in the case of negative actions on BIB's national ratings, as the senior unsecured bonds' and CP's ratings will remain in line with BIB's national ratings, while the subordinated perpetual bonds' rating will maintain its four-notch difference with the BIB's LT national rating; - There is no downside potential for GSR because this is the lowest level in the respective scale. Factors that could, individually or collectively, lead to positive rating action/upgrade: - BIB's potential ratings upside is limited by its OE and how this cascades down to the its business and financial performance; - Positive rating action in BIB's IDR, VR and national ratings would reflect a relevant improvement in Fitch's assessment on BIB's OE, while maintaining a resilient financial profile; however, this OE improvement is a medium- or long-term scenario given BIB's exposure to relatively risky OEs; - Under the current BIB's OE, upside potential in BIB's IDR, VR and national ratings would come from maintaining its well-positioned business profile and sound loan portfolio, while exhibiting sustained and material improvements in profitability and capitalization levels; - BIB's senior unsecured bonds, CP and perpetual subordinated bonds' national ratings would be upgraded in case of positive actions on BIB's national ratings as the senior unsecured bonds' and CP's ratings will remain in line with BIB's national rating while the subordinated perpetual bonds' rating will maintain its four-notch difference with the BIB's LT national rating; - As Panama is a dollarized country with no lender of last resort, an upgrade in GSR is unlikely GSR: The GSR of 'ns' (No Support) reflects that, however possible, external support cannot be relied upon, given banking system's large size relative to the local economy and weak support stance due to Panama's lack of a lender of last resort. VR ADJUSTMENTS The Operating Environment Score has been assigned below the implied score due to the following adjustment reason: International Operations (negative). The Business Profile Score has been assigned above the implied score due to the following adjustment reason: Business Model (positive). The Capitalization & Leverage Score has been assigned above the implied score due to the following adjustment reason: Regulatory Capitalization (positive) and Leverage and Risk-Weight Calculation (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 ----------- ------ ----- BAC International Bank, Inc. LT IDR BB+ Upgrade BB ST IDR B Affirmed B Natl LT AA(pan) Upgrade AA-(pan) Natl ST F1+(pan)Affirmed F1+(pan) Viability bb+ Upgrade bb Government Support ns New Rating Shareholder Support WD Withdrawn bb- senior unsecured Natl LT AA(pan) Upgrade AA-(pan) junior subordinated Natl LT A-(pan) Upgrade BBB+(pan) senior unsecured Natl ST F1+(pan)Affirmed F1+(pan) ======= P E R U ======= BANCO INTERAMERICANO: Fitch Affirms BB+ LongTerm IDRs, Outlook Neg. ------------------------------------------------------------------- Fitch Ratings has affirmed Banco Interamericano de Finanzas S.A.'s (BanBif) Long-Term (LT) Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB+', and its Viability Rating (VR) at 'bb+'. The Rating Outlook for the Long-Term IDRs is Negative. Fitch has also affirmed Banbif's LC and FC Short-Term IDRs at 'B' and Government Support Rating (GSR) at 'bb-'. KEY RATING DRIVERS BanBif's IDRs are driven by its 'bb+' VR, which considers its relatively limited business profile underpinned by weak profitability and capital metrics, good asset quality and adequate funding and liquidity profile. The Outlook on the LT IDRs mirrors Fitch's assessment of a negative outlook on the operating environment (OE). The bank's business profile is characterized by its mid-size franchise and focus on corporate loans. While the business model has been consistent over time, revenue generation is limited by a competitive market on the segments it attends, although this also drives its good asset quality. BanBif's tight capital metrics remain the bank's main credit weakness. As of December 2022, its FCC to Risk-Weighted Assets (RWA) ratio stood at a low 9.03%, which compares unfavorably with similarly rated international peers in 'bbb' OEs. Narrow capital metrics are partially offset by ample reserve coverage. The bank's regulatory capital ratio is comfortably over the minimum requirement given the consideration of subordinated debt. Given the bank's modest growth plans and still limited internal capital generation, Fitch expects the bank to maintain a FCC ratio at around 9%. BanBif's profitability ratios improved in 2022 driven by the release of reserves that reduced loan impairment charges. The operating profit to RWA ratio improved to 1.40% from 0.99% a year earlier, while the four-year average stood at 1.16%, which still compares unfavorably to its closest peers. Fitch expects this ratio to be sustained around current levels, although high funding costs and further asset deterioration could still limit a sustained improvement. The bank's asset quality has been consistently good over time. As of YE22, BanBif's NPL (+90 days past due loans) ratio receded to 2.98% from 2.42% at YE21, while the four-year average was 2.73%, which is commensurate to 'bbb' assessed banks. Fitch believes that the bank will maintain a ratio of around 3% supported by its sound credit risk management and a recent enhancement of the collections process. The bank's funding relies on customer deposits, although mainly from institutional clients that demand higher interest rates and are more sensitive to market conditions. As of YE22, BanBif's loans to deposit ratio stood at 110.4%. Other sources of funding include bilateral loans, subordinated debt and local debt issuances. The bank possesses a good proportion of highly liquid assets that supports its liquidity management. RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - BanBif's IDRs are sensitive to a material deterioration in the local operating environment or a negative sovereign rating action; - The ratings could be downgraded if the FCC to RWA ratio falls consistently below 8%, especially considering the tighter internal capital generation of the bank. Factors that could, individually or collectively, lead to positive rating action/upgrade: - IDRs currently have a Negative Outlook, which makes an upgrade highly unlikely over the rating horizon; - The VR could be upgraded if the bank manages to improve and sustain its operating profit to RWA ratio over 1.5% and FCC to RWA ratio over 10%. OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS GOVERNMENT SUPPORT RATING (GSR) The bank's 'bb-' GSR reflects its mid-size franchise and lower systemic importance in the context of the investment-grade Peruvian operating environment. As the sixth-largest Peruvian bank, Fitch believes the probability of support from the government would be moderate if required. OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES Factors that could, individually or collectively, lead to negative rating action/downgrade: - GSR would be affected if Fitch negatively changes its assessment of the government's ability and/or willingness to support the bank; - The GSR could also be downgraded if BanBif loses material market share in terms of loans and customer deposits. Factors that could, individually or collectively, lead to positive rating action/upgrade: - Upside potential for the GSR is limited and can only occur over time with material growth of the bank's systemic importance. VR ADJUSTMENTS The OE score has been assigned above the implied score due to the following adjustment reasons: Sovereign Rating (positive) and Macroeconomic Stability (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, due to either their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- Banco Interamericano de Finanzas S.A. LT IDR BB+ Affirmed BB+ ST IDR B Affirmed B LC LT IDR BB+ Affirmed BB+ LC ST IDR B Affirmed B Viability bb+ Affirmed bb+ Government Support bb- Affirmed bb- ===================================== T R I N I D A D A N D T O B A G O ===================================== CL FIN'L: CLF Heads to Privy Council ------------------------------------ Rickie Ramdass at Trinidad Express reports that the all-clear has been given by the Appeal Court to CL Financial (CLF) to challenge, at the Privy Council, a previous decision it made relating to the amount of monies owed to its joint liquidators for works carried out in 2019. Government put the conglomerate into liquidation in 2017 to clear its debt after 2009's multi-billion-dollar bailout, according to Trinidad Express. International accounting firm Grant Thornton was selected to be the liquidator. During an appeal, the court granted conditional leave to the company to petition the British law lords to determine whether it was right in remitting the matter before Justice Kevin Ramcharan in the High Court for reconsideration on the fees to be paid, the report notes. The appeal revolves around the decision of Justice Ramcharan to approve a Remuneration and Expenses Application brought by Grant Thornton's liquidators Hugh Dickson and David Holukoff, the report relays. In the application, the duo claimed US$3,175,492.39 for the services they provided between January and December 2019, the report recalls. They also claimed $43,641.95 for payroll and tax services as well as US$312,738.33 for fees and services of Grant Thornton Corporate Directors between October 2018 and December 2020, the report notes. The quoted fees included discounts applied by Grant Thornton. Based on the amount being claimed, it was challenged by the Office of the Attorney General but Justice Ramcharan subsequently approved the amount being sought, the report relays. That was in July 2021. But the judge's decision was later appealed. The AG's Office claimed that the judge had mishandled the application as the duo's claim lacked pertinent details about the services performed during the period, the report discloses. It pointed out that while the duo claimed approximately $21 million in fees between September 2017 and December 2018, the fees claimed for 2019 were higher for a shorter period, the report relays. Essentially, it was seeking to have the Appeal Court overturn the ruling of Justice Ramcharan and have the court make an order of its own, the report relays. But this was not done. Instead, Justices Prakash Moosai and Charmaine Pemberton in December, last year remitted the matter to Justice Ramcharan for reconsideration, the report discloses. It is based on this remission of the matter to the High Court that the Privy Council will now be getting involved, the report notes. Justice Pemberton, who had delivered the previous decision, said while the court was of the view that Justice Ramcharan's findings and reasoning were deficient given a lack of reasons to support the findings, the matter was being remitted to him for reconsideration anyway, the report notes. "In this case, we are of the opinion that the liquidation judge's findings and reasoning such as they are, were deficient. There was no analysis of the evidence or cogent reasons to support the findings and conclusions," the report says. In the application for leave to pursue the appeal, CLF's legal team led by Fyard Hosein, SC, claimed that the Court of Appeal mishandled the appeal, the report relays. They claimed that the decision to remit the case to Justice Ramcharan was based on the fundamentally flawed premise that no full written reasons had been issued by the High Court judge, the report notes. About CL Financial/CLICO CL Financial was one of the largest privately held conglomerate in Trinidad and Tobago. It was originally founded as an insurance company and has since expanded to be the holding company for a diverse group of companies and subsidiaries. CL Financial is the parent company of Colonial Life Insurance Company (Trinidad) Limited (Clico). CLICO is now the Company's insurance division. CL Financial however experienced a liquidity crisis in 2009 that resulted in a "bail out" agreement by which the government of Trinidad and Tobago loaned the company funds ($7.3 billion as of December 2010) to maintain its ability to operate, and obtained a majority of seats on the company's board of directors. The companies to be bailed out were: CL Financial Ltd (CLF); Colonial Life Insurance Company Ltd (CLICO); Caribbean Money Market Brokers Ltd (CMMB); Clico Investment Bank (CIB) and British American Insurance Company (Trinidad) Ltd (BAICO). As reported in the Troubled Company Reporter-Latin America in July 2017, CL Financial Limited shareholders vowed to pay back a TT$15 billion (US$2.2 billion) debt to the Trinidad Government. VOYAGER DIGITAL: Sale to Binance Halted by District Court --------------------------------------------------------- Jeremy Hill of Bloomberg News reports that a federal judge granted the US government's request to temporarily halt Voyager Digital Ltd.'s bankruptcy plan, putting the crypto lender's proposed sale to Binance.US on hold. US District Judge Jennifer Rearden on March 27, 2023, granted the US government's request for a stay pending appeal of Voyager's recently approved bankruptcy plan, court papers show. An opinion explaining the decision is forthcoming. The deal is a blow to Voyager, which has been trying to exit bankruptcy and repay its customers since filing for Chapter 11 protection last 2022. About Voyager Digital Holdings Based in Toronto, Canada, Voyager Digital Holdings Inc. -- https://www.investvoyager.com/ -- runs a cryptocurrency platform. Voyager claims to offer a secure way to trade over 100 different crypto assets using its easy-to-use mobile application. Through its subsidiary Coinify ApS, Voyager provides crypto payment solutions for both consumers and merchants around the globe. Voyager Digital Holdings Inc. and two affiliates sought protection under Chapter 11 of the U.S. Bankruptcy Code (Bankr. S.D.N.Y. Lead Case No. 22-10943) on July 5, 2022. In the petition filed by Stephen Ehrlich, chief executive officer, the Debtors estimated assets and liabilities between $1 billion and $10 billion. Judge Michael E. Wiles oversees the cases. The Debtors tapped Kirkland & Ellis, LLP as general bankruptcy counsel; Berkeley Research Group, LLC as financial advisor; Moelis & Company as investment banker; Consello Group as strategic financial advisor; Deloitte Tax, LLP as tax services provider; and Deloitte & Touche, LLP as accounting advisor. Stretto, Inc., is the claims agent. On July 19, 2022, the U.S. Trustee for Region 2 appointed an official committee of unsecured creditors in these Chapter 11 cases. The committee tapped McDermott Will & Emery, LLP as bankruptcy counsel; FTI Consulting, Inc. as financial advisor; Cassels Brock & Blackwell, LLP as Canadian counsel; and Epiq Corporate Restructuring, LLC as noticing and information agent. The committee also tapped the services of Harney Westwood & Riegels, LP, in connection with Three Arrows Capital Ltd.'s liquidation proceedings in British Virgin Islands. On July 6, 2022, the Debtors filed a joint Chapter 11 plan of reorganization. * * * Following an auction process, the Debtors in September 2022 selected the bid submitted by FTX US' West Realm Shires Inc. as the winning bid for the assets. But after a series of events, FTX collapsed in November 2022, before the sale could be completed. After reopening bidding, Voyager Digital selected the offer from U.S. exchange BAM Trading Services Inc. (doing business as "Binance.US") as the highest and best bid for its assets. Binance's bid is valued at $1.022 billion. ********* 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 * * *