/raid1/www/Hosts/bankrupt/TCRLA_Public/230418.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 18, 2023, Vol. 24, No. 78
Headlines
A R G E N T I N A
ARGENTINA: Lula Says IMF Choking Economy With Debt
B R A Z I L
BANCO DAYCOVAL: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
BANCO FIBRA: Fitch Affirms LongTerm IDRs at 'B+', Outlook Stable
BRAZIL: Central Bank Has a Window of Opportunity to Lower Rates
C H I L E
GUACOLDA ENERGIA: S&P Raises ICR to 'CCC+', Outlook Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Tourism Facing Challenge of "More Open" Offers
J A M A I C A
JAMAICA: Finance Minister Pushing for Regional Catastrophe Bond
[*] JAMAICA: Holds Dialogue on Trade & Investment w/ Dom. Republic
P U E R T O R I C O
AES PUERTO RICO: Fitch Affirms 'C' Rating on $161.9M Revenue Bonds
COMUNICADORES GRAFICOS: Case Summary & 20 Top Unsecured Creditors
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Inflation Rate Dips Slightly, CSO Says
- - - - -
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A R G E N T I N A
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ARGENTINA: Lula Says IMF Choking Economy With Debt
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Simone Iglesias & Leda Alvim at Bloomberg News reports that
Brazil's President Luiz Inacio Lula da Silva said the International
Monetary Fund is asphyxiating Argentina's economy as it faces one
of the world's highest inflation rates and struggles to comply with
its US$44-billion program.
Lula's comments were made during the swearing-in ceremony of Dilma
Rousseff as president of the BRICS's New Development Bank in
Shanghai, according to Bloomberg News. The leftist leader, who's
in China for a state visit, said banks have to be tolerant and not
asphyxiate indebted countries, Bloomberg News notes.
"A bank shouldn't choke national economies, like the International
Monetary Fund is doing in Argentina," said Lula, who emphasised
he'll push for changes at the IMF and the United Nations, Bloomberg
News relays. "No ruler can work with a knife on his throat because
he is in debt," he added.
An IMF spokesperson didn't immediately respond to a request for
comment.
South America's second-largest economy is facing annual inflation
over 100 percent, exacerbating pressure on an economy that's
expected to fall into recession ahead of presidential elections in
October, Bloomberg News notes. Last month, the IMF's executive
board approved a US$5.4-billion disbursement to Argentina,
representing a key step forward in the program that's facing
heightened risks amid the worsening economic outlook, Bloomberg
News says.
The deal is Argentina's 22nd IMF program in its crisis-prone
history. Amid a currency crisis in 2018, Argentina's former
government secured a record IMF bailout, but it failed to stabilise
the economy, Bloomberg News notes. President Alberto Fernández
negotiated a new deal in 2022 after two years of talks, but IMF
officials recently said that "policy setbacks" are hindering the
program, Bloomberg News 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 March 29, 2023, lowered its long-term
foreign currency sovereign credit rating on Argentina to 'CCC-'
from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency
sovereign credit rating and its 'CCC-/C' local currency ratings on
Argentina. The outlook on the long-term ratings is negative. S&P
also lowered the transfer and convertibility assessment to 'CCC-'
from 'CCC+'.
The negative outlook on the long-term ratings reflects risks
surrounding pronounced economic imbalances and policy uncertainties
before and after the 2023 national elections. Divisions across the
political spectrum constrain the sovereign's ability to implement
timely changes in economic policy. Global capital markets are
closed to Argentina. In the local market, swaps are being deployed
to manage large maturities before placing debt through traditional
auctions. The central bank continues to play a key role as a
backstop for local debt management in the secondary market. The
ongoing severe drought has exacerbated pressures in the already
disrupted foreign exchange (FX) market.
Fitch Ratings, on the other hand, downgraded Argentina's Long-Term
Foreign Currency
Issuer Default Rating (IDR) to 'C' from 'CCC-', and has affirmed
the Long-Term Local Currency IDR at 'CCC-' on March 24, 2023.
Fitch's downgrade of Argentina's rating to 'C' from 'CCC-' follows
an executive decree that forces domestic public-sector entities
into operations involving their holdings of
sovereign debt securities, which would involve unilateral exchanges
and forced currency conversion that constitute default events under
Fitch's criteria. The 'C' rating reflects Fitch's view that
default
is thus imminent. Fitch said the rating would be downgraded to
'Restricted Default' (RD) upon execution of the exchanges.
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, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
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B R A Z I L
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BANCO DAYCOVAL: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
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Fitch Ratings has affirmed Banco Daycoval S.A.'s Long-Term Foreign
and Local Currency Issuer Default Ratings (IDRs) at 'BB-'. The
Rating Outlook on the IDRs is Stable. Fitch has also affirmed the
bank's National Long-Term Rating at 'AA(bra)'/Outlook Stable.
KEY RATING DRIVERS
IDRs, VR and NATIONAL RATING
Daycoval's IDRs and National Ratings are driven by its intrinsic
strength, as reflected in its 'bb-' Viability Rating (VR), which is
in line with the bank's implied VR. The VR reflects the bank's
well-established niche franchise, in particular in the SME segment,
sound earnings generation capacity through economic cycles and
adequate capitalization and funding structure.
Operating Environment Outlook Revised to Stable: The operating
environment (OE) score for Brazilian Banks is 'bb-' and is in line
with the implied assessment based on Brazil's GDP per capita of
USD8.94 and Fitch's ORI (Operational Rating Index) index of 41
(percentile ranking). Fitch revised the Outlook on its OE score to
Stable from Negative given the improving trends in both of these
indicators. Fitch projects Brazilian GDP growth of 3.0% in 2022,
reflecting surprisingly strong momentum in the year supported by
the final stages of post-pandemic economic reopening, stimulus
measures, and a strong labor market.
However, growth is cooling following the lagged effect of
substantial monetary tightening, and the expected global
deceleration will be an additional drag. High policy rates should
be supportive for banks' interest revenue but will also continue to
moderately pressure asset quality and credit volumes, as
households' resilience and business prospects weaken.
Strong Niche Franchise: Daycoval is Brazil's largest midsized bank.
Its overall banking franchise is small in national terms (less than
1% of domestic banking assets at end-2022); however, the bank's
sound niche franchise confers some pricing power, and has supported
adequate business volumes over multiple periods.
Well-Managed Risk Profile: Daycoval's lending book is sensitive to
the performance of domestic SMEs (75% of loans), which Fitch views
as more vulnerable borrowers relative to large corporates or other
types of secured loans. However, the risk controls are sound,
underpinned by Daycoval's well demonstrated risk pricing expertise
in the SME segment and a material share of well-collateralized
payroll and auto loans (about 25% of loans).
Controlled Asset Quality: Daycoval's impaired loan ratio increased
to 4.5% at end-2022 from 3.7% at end-2021 as expected given the
current OE combined with the end of emergency aid made by the
government during the years 2020 and 2021. Fitch expects
delinquency ratios to normalize over 2023 as relief loans continue
to expire, while deterioration will be more limited than initially
expected. The rise in impaired loans in 2022, mainly due to a
specific case of a company that was among the bank's largest credit
exposures, contributed to the decrease of the loan loss
allowance/impaired loans ratio to 80% at end-2022 from 104% at
end-2021.
Resilient Profitability: The bank has resilient profitability
underpinned by its good-yielding SME lending assets and robust cost
efficiency, providing adequate loss absorption capacity given the
bank's strategic focus on SMEs. The short duration of its assets
allows the bank to reprice loans relatively quickly, maintaining
controlled interest rate sensitivity. Daycoval's operating
profit/risk-weighted assets (RWAs) ratio reached 3.1% in 2022 and
averaged 4.7% in the last four years. The volatility presented in
2022 is linked with the increase of LIC, mainly explained by a
higher provision for a specific case of the corporate portfolio.
Adequate Capitalization: Capitalization levels are adequate
considering Daycoval's chosen business model and credit risk
profile. The bank's common equity Tier 1 ratio was stable at 10.9%
at YE 2022 and 10.8% at YE 2021 and dropped from 13.1% at YE 2020,
despite good earnings retention in the period, as risk-weighted
asset growth outpaced internal capital generation.
Stable Funding and Liquidity: Daycoval largely funds its
SME-oriented loan book through a combination of deposits and
financial bills (Letras Financeiras), which accounted for around
80% of total funding (loans-to-deposits ratio of 248% at YE 2022;
loan-to-deposits + letras of 125%). Liquidity management is
supported by the short-term profile of assets and the possibility
to sell payroll lending assets, that enjoy adequate investor
appetite in the domestic market.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
IDRS, VR and NATIONAL RATING
Daycoval's VR and Long-Term IDRs could be downgraded if the bank's
operating profit to RWA assets ratio is sustained below 2% of RWA
and its CET1 ratio is sustained below 10% without credible
prospects to restore these ratios over the short-term. This could
stem from a structural deterioration in Daycoval's revenues (i.e.
prolonged lower business activity) or higher-than-expected credit
risks.
The international ratings are sensitive to a negative rating action
on the sovereign or any deterioration of Fitch's assessment on the
OE score.
National Ratings are sensitive to a weakening creditworthiness
relative to other Brazilian issuers.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
IDRS, VR and NATIONAL RATING
There is limited rating upside, unless the bank's business profile
and financial metrics improve materially.
National Ratings are sensitive to strengthening creditworthiness
relative to other Brazilian issuers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SENIOR DEBT
Daycoval's senior unsecured debt is rated in line with its IDRs as
the likelihood of default on these obligations reflects the
likelihood of default of the entity.
GOVERNMENT SUPPORT RATING
The GSR of 'No Support' (NS) reflects Daycoval's small franchise
within the Brazilian financial system (less than 1% of customer
deposits at YE 2022). In Fitch's view, there is no reasonable
assumption of support being forthcoming.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
SENIOR DEBT
Daycoval's senior unsecured debt rating is sensitive to a change in
its IDR. Therefore, a downgrade of the bank's IDR would
automatically trigger a downgrade on the debt ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
SENIOR DEBT
Daycoval's senior unsecured debt ratings is sensitive to a change
in its IDR. Therefore, an upgrade of the bank's IDR would
automatically trigger a upon the debt ratings.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
GOVERNMENT SUPPORT RATING
Daycoval's GSR of 'NS' is sensitive to changes in Fitch's
assessment about the ability and / or propensity of the sovereign
to provide timely support to the bank and would only be likely to
occur with a significant increase in the bank's systemic
importance.
VR ADJUSTMENTS
The VR has been assigned in line with the implied VR.
The Asset Quality 'b+' has been assigned below the implied 'bb'
Asset Quality Score due to the following adjustment reason:
Historical and Future Metrics (negative).
The Funding & Liquidity of 'bb-' has been assigned above the
implied 'b' Funding & Liquidity Score due to the following
adjustment reason: Non-Deposit Funding (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
----------- ------ -----
Banco Daycoval
S.A. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA(bra) Affirmed AA(bra)
Natl ST F1+(bra)Affirmed F1+(bra)
Viability bb- Affirmed bb-
Government Support ns Affirmed Ns
senior
unsecured LT BB- Affirmed BB-
BANCO FIBRA: Fitch Affirms LongTerm IDRs at 'B+', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed Banco Fibra S.A.'s (Fibra) Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'.
The Rating Outlook on the IDRs is Stable. In addition, Fitch has
affirmed the bank's National Long-Term Rating at
'BBB+(bra)'/Stable.
KEY RATING DRIVERS
Viability Rating: Fibra's IDRs and National Ratings are driven by
its intrinsic strength, as reflected in its 'b+' Viability Rating
(VR). The VR reflects Fibra's improved risk profile since its
retail portfolio run-off. This has supported continuous progress on
the execution of its restructuring plan and led to notable
improvements in asset quality over the past four years. However,
the ratings also reflect Fibra's weak operating profitability and
capitalization metrics that are at the low end for its rating
category.
Niche Franchise: Fibra's business model assessment reflects the
bank's relatively small size, evolving profitability and limited
product offerings relative to its higher rated peers. The bank
focuses on structured loans to domestic corporates with over BRL300
million in annual revenues and benefits from synergies with the
group by providing loan operations to the suppliers of Companhia
Siderurgica Nacional (CSN).
Good Asset Quality: Fibra has conservative underwriting standards
and is mainly focused on offering credit products with collateral.
This approach has proven beneficial, resulting in a steady
enhancement in asset quality. The bank's NPL ratio as of December
2022 improved to 0.4%, from 0.6% in December 2021 and 1.6% in
December 2020. To date, the bank has not experienced any material
deterioration in asset quality ratios despite the country's weak
macroeconomic environment. The Loan Loss Reserves/Impaired loans
ratio was at a comfortable 183% at December 2022, and Fitch
believes the bank is in an adequate position to absorb credit
deterioration.
Earnings and Profitability Volatility: Fitch has revised the 'b'
midpoint of Fibra's earnings and profitability assessment to 'b-'
as the bank's operating profit/risk weighted assets ratio is weak
relative to peers both in Brazil and in similar operating
environments. A stronger net interest margin and growing business
volumes boosted operating income in 2022, though loan impairment
charges resulted in slightly negative operating profits.
Profitability has been volatile in recent years due to less
diversified revenue sources and comparatively weaker cost
efficiency.
Fitch expects the bank to continue to face difficulties in
increasing and monetizing its loans over the near term. That,
combined with higher funding costs reflecting high interest rates
and a larger funding base, will continue to pressure profitability
over the rating horizon.
Modest Capital Ratios: In terms of capitalization, Fibra's CET1
ratio was 9.3% at 2022 (9.0% in Dec2021). Although adequate and
above minimum regulatory requirements, its capital ratios are
modest compared to domestic peers and international peers in
similarly scored operating environments. The bank has not paid
dividends and plans to continue to limit dividend distribution.
Fitch believes Fibra's capitalization is pressured, which limits
credit growth and the bank's capacity to boost internal capital
generation via earnings retention.
Funding and Liquidity Remains Stable: Fibra largely funds its loan
book through wholesale deposits and financial bills (Letras
Financeiras), distributed through a series of partner brokerages.
The result was a funding expansion of 5% compared to 2022
(excluding Repos), and a loan-to-customer deposits ratio of 70% in
December 2022 and 91% in the four-year-average, slightly below its
peer average. The bank's liquidity remained adequate when compared
with its short-term needs, with liquid assets totaling BRL2.1
billion and covering 64% of short-term deposits and funding in
December 2022.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
VR/IDR
- A sustained reduction in the bank's CET 1 ratio below 9%, either
due to rapid credit growth or weak internal capital generation
could be negative for creditworthiness;
- A substantial deterioration of the bank's asset quality and
earnings that results in a sustained increase of the impaired loans
ratio above 4%, and the maintenance of operating losses over the
medium-term could also pressure ratings.
NATIONAL RATINGS
- National Ratings are sensitive to a weakening creditworthiness
relative to other Brazilian issuers.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A potential upgrade of Fibra's VR and IDRs is unlikely for the
foreseeable future, as this would only arise from a material
improvement in the banks' business model, which could be reflected,
for instance, through a larger and diversified revenue base;
- Over the medium term, a sustained improvement in the bank's
Operating Profit/RWA ratio above 1.5% and CET1 ratio above 12%
combined with the maintenance of current asset quality metrics
could be positive for creditworthiness.
NATIONAL RATINGS
- National Ratings are sensitive to strengthening creditworthiness
relative to other Brazilian issuers.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
The GSR of 'No Support' (ns) reflects Fibra's small franchise
within the Brazilian financial system (less than 1% of customer
deposits at YE 2022). Fitch believes there is no reasonable
assumption of support forthcoming.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Fibra's GSR of 'ns' is sensitive to changes in Fitch's assessment
about the ability and/or propensity of the sovereign to provide
timely support to the bank and would only be likely to occur with a
significant increase in the bank's systemic importance.
VR ADJUSTMENTS
The VR has been assigned in line with the implied VR.
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
----------- ------ -----
Banco Fibra
S.A. LT IDR B+ Affirmed B+
ST IDR B Affirmed B
LC LT IDR B+ Affirmed B+
LC ST IDR B Affirmed B
Natl LT BBB+(bra)Affirmed BBB+(bra)
Natl ST F2(bra) Affirmed F2(bra)
Viability b+ Affirmed b+
Government Support ns Affirmed ns
BRAZIL: Central Bank Has a Window of Opportunity to Lower Rates
---------------------------------------------------------------
Reuters reports that Brazil's Finance Minister Fernando Haddad said
that the central bank has an opportunity to lower interest rates to
help boost economic growth as fiscal and monetary policies are
converging.
"I want to believe that the central bank has a window of
opportunity that I hope will be taken advantage of so that Brazil
can think about economic and sustainable growth," Haddad told
journalists in China, where he is accompanying President Luiz
Inacio Lula da Silva on a high-profile visit, according to Reuters.
Haddad's remarks come a day after central bank governor Roberto
Campos Neto said that while inflation has decreased, persistent
pressures remain, stressing that the demand-driven component of
inflation in the country remains "relatively strong," the report
notes.
Despite frequent criticism from leftist Lula and his political
allies, policymakers have kept the interest rate unchanged at a
six-year high of 13.75% since September, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
=========
C H I L E
=========
GUACOLDA ENERGIA: S&P Raises ICR to 'CCC+', Outlook Negative
------------------------------------------------------------
S&P Global Ratings raised its issuer credit and issue-level ratings
on Chilean coal-fired power generator Guacolda Energia S.A. to
'CCC+'.
The negative outlook reflects the likelihood of a downgrade in the
next 12 months if company launches a new tender offer below par
values. In addition, even if this doesn't occur, S&P might lower
the ratings by mid-2024 to reflect the shorter time to the bond's
maturity amid insufficient cash flows to pay it and absent the
implementation of a refinancing strategy.
S&P said, "Our 'CCC+' ratings indicate that the company is
currently vulnerable and dependent upon favorable financial and
economic conditions to meet its financial commitments. Although we
don't expect that Guacolda will face a near-term credit or
liquidity crunch as we believe it will be able to service its
interest payments in the next 12-18 months, its capital structure
is unsustainable in the long term and the company will be unable to
repay its debt if it doesn't implement a successful refinancing
strategy."
The 'CCC+' ratings also reflect the shareholder's aggressive
character, considering the recent cash tender offer well below par
values and uncertainty regarding the financial policies that it
might apply in the future.
On April 13, 2023, Guacolda completed the tender offer for its 2025
notes with $132.5 million of notes validly tendered, for which the
company paid approximately $60 million in cash. Given that the
notes are the company's only financial debt, Guacolda's outstanding
debt declined to $275 million from $407 million. Although the cash
deficit at maturity is now lower than before ($150 million in
comparison with $250 million), the company still faces a cash
shortfall, according to S&P's base-case scenario.
S&P said, "We also expect thermal coal prices to decline since our
last revision to $170/metric ton (mt) from $180/mt for 2023, but to
increase to $120/mt from $90/mt in 2024. The currently volatile
fuel prices and the company's increasing exposure to the spot
market to sell its energy add uncertainty over the company's cash
flows through 2025. On the other hand, Guacolda's power purchase
agreements (PPAs) have a pass-through mechanism to adjust for fuel
prices, but it has a lag of three to six months, which could
require the company to increase its working capital needs. Although
our expectations for EBITDA remain in line with our previous
assessment of nearly $70 million for 2023 and 2024, we now forecast
leverage to be about 5x for the same period, down from about 6x in
our previous forecast. We will continue monitoring our coal-price
projections or any potential decision of the financial sponsor,
such as dividends or capital reductions, which are not limited by
the debt covenants, that could put additional pressure on
Guacolda's cash position, and consequently, erode its capacity to
repay debt in the medium term."
ESG credit indicators: E-5, S-2, G-3
ESG credit factors:
-- Climate transition risks; and
-- Risk management, culture, and oversight
===================================
D O M I N I C A N R E P U B L I C
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DOMINICAN REPUBLIC: Tourism Facing Challenge of "More Open" Offers
------------------------------------------------------------------
Dominican Today reports that the COVID-19 pandemic has had
long-lasting effects on the economy and people's lifestyles, even
three years after its start. One significant area that has been
impacted is tourism in the Dominican Republic, where travelers are
now seeking personalized, exclusive experiences that cater to their
satisfaction, such as cultural immersion and unique activities like
fishing with locals, according to Dominican Today. However,
challenges in road safety, signage, and security still need to be
addressed, the report notes.
A recent American Express survey found that 76% of people wanted to
spend more on travel experiences that promote mental and physical
health, the report relays. As a result, hotels are increasing
their wellness offerings, responding to the new trend in tourism
called "well hospitality," the report discloses. The spa sector is
projected to grow by 17% per year through 2025, the report says.
Luxury hotels are one of the main destinations for tourists seeking
total disconnection while still enjoying the benefits of full
comfort, the report notes. The founder of Grupo Puntacana, Frank
Rainieri, and the Vice President of Marketing, Public Relations,
and Communications of Grupo Puntacana, Paola Rainieri, agree that
wellness tourism is becoming more important than just sun and sand,
the report relays.
To respond to these new demands, hotels are designing complete
experiences to achieve a feeling of active rest to fully enjoy
their stay, the report discloses. Grupo Pinero has invested over
US$40 million in constructing the Cayo Levantado Resort, which
promises to revitalize the Samana area as a tourist hub and cater
to the demands of good hospitality, the report says. One example
is the Yubarta experience, offering workshops, meditation spaces,
and training to promote unity with the natural environment, 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
=============
JAMAICA: Finance Minister Pushing for Regional Catastrophe Bond
---------------------------------------------------------------
RJR News reports that Finance Minister Dr. Nigel Clarke says the
region needs to strengthen partnerships for risk financing.
Dr. Clarke says if more countries sign on to a catastrophe bond or
other vehicle, it could bring down the cost per country, according
to RJR News.
A Catastrophe Bond is a facility that provides a payout to
signatories, insuring them against damage based on certain
criteria, the report notes.
Jamaica agreed to a Catastrophe Bond in 2021 through the World
Bank, to the tune of US$185 million, the report says.
The finance minister says Jamaica has come a far way in improving
investor confidence, especially with the country's history of debt
and concerns about the country being prone to certain
vulnerabilities, the report relays.
He was addressing a forum on overcoming debt during the IMF-World
Bank Spring Meetings, 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.
[*] JAMAICA: Holds Dialogue on Trade & Investment w/ Dom. Republic
------------------------------------------------------------------
RJR News reports that an important intersectoral meeting called
"High-Level Dialogue on Trade and Investment Dominican
Republic-Jamaica" was recently organized by the Ministry of Foreign
Affairs of the Dominican Republic and the Embassy of the Dominican
Republic in Jamaica. The meeting aimed to strengthen and increase
trade and investment between the two nations and was attended by
prominent government representatives and the private sector of both
countries, according to RJR News.
Leading the meeting was the Vice Minister of Economic Affairs and
International Cooperation, Ambassador Hugo Rivera, representing
Foreign Minister Roberto Alvarez. Other important attendees
included the Minister of Industry, Investment, and Trade of
Jamaica, Aubyn Hill, the Dominican ambassador in Kingston, Angie
Martínez, the executive director of ProDominicana, Biviana
Riveiro, and several other prominent figures from both countries,
the report relays.
During the meeting, the Vice Minister of Economic Affairs
emphasized the importance of closer trade relations between the two
countries and expressed his commitment to work together with
Senator Hill to promote greater growth and economic development in
both nations, the report notes. Both leaders expressed their
confidence that the discussions will lead to important progress in
the near future, the report discloses.
The Dominican ambassador to Jamaica, Angie Martinez, valued the
initiative as a key opportunity to strengthen bilateral relations
and increase economic cooperation between the two nations that
share historical and cultural ties, the report relays. She
expressed her commitment to establishing a new commercial era
between the Dominican Republic and Jamaica and taking advantage of
all available opportunities: commercial, political, cultural, and
academic, the report says.
The event had the participation of important Dominican authorities
who spoke on issues of trade, investment, economy, and logistics,
among others, the report discloses. Opportunities for development
cooperation between the two countries were also discussed, and
several presentations were made on the facilities for trade and
investment in the Dominican Republic, 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.
=====================
P U E R T O R I C O
=====================
AES PUERTO RICO: Fitch Affirms 'C' Rating on $161.9M Revenue Bonds
------------------------------------------------------------------
Fitch Ratings has affirmed AES Puerto Rico L.P.'s (AES PR) $161.9
million ($144.7 million outstanding) cogeneration facility revenue
bonds Series A (tax-exempt bonds) issued through the Puerto Rico
Industrial, Tourist, Educational, Medical & Environmental Control
Facilities Financing Authority at 'C'.
RATING RATIONALE
AES PR's 'C' rating reflects the significant cost escalation the
project has experienced, leading to insufficient cash flow
generation and depletion of available liquidity that is likely to
lead to a payment default on the next scheduled debt service date
of June 1, 2023. AES PR liquidated its debt service reserve to meet
its debt payment obligation in December 2022 and projects that it
will not have sufficient operating cash to meet the upcoming debt
service. While AES PR has requested the offtaker under the Power
Purchase and Operating Agreement (PPA) to implement certain
modification for sustainable operation, a short-term resolution
that would lead to sufficiently improved cash generation and
liquidity position is highly unlikely.
AES PR's rating is linked to, but not constrained by, the credit
quality of the Puerto Rico Electric Power Authority (PREPA),
currently rated 'D'. PREPA is the revenue counterparty under AES
PR's PPA. A payment default and negative rating action would result
if PREPA failed to make payments under the PPA, which could become
a possibility should PREPA try to renegotiate the PPA under
bankruptcy proceedings. The remaining downside risks that may
materialize in PREPA's insolvency process are reflected in the
rating. However, PREPA is currently honoring its PPA payment
obligations, demonstrating the importance of AES PR as a supplier
of power for PREPA.
KEY RATING DRIVERS
Operation Risk - Weaker
Escalating Cost Profile: The operating cost profile has
significantly exceeded Fitch's original estimates, primarily due to
change in law requiring AES PR to dispose coal ash outside Puerto
Rico. Low likelihood of short-term resolution to the escalated
operating cost profile impedes sustainable operation of the plant
in the near term. AES PR has historically been susceptible to
forced outages, which have reduced capacity payments. The operating
performance has somewhat stabilized in recent years with
consistently high availability factors. AES PR has historically
been susceptible to forced outages, which have reduced capacity
payments.
Supply Risk - Midrange
Manageable Supply Risk: Fuel supply risk is mitigated by a
two-year, fixed-price fuel supply agreement sufficient to meet the
project's expected fuel requirements through 2023. The agreement's
short term is mitigated by the historical precedence for renewal
and liquid market for coal. Fuel price risk is mitigated by the
tolling-style PPA, subject to heat rates. Due to pressure on
operating costs and heightened cashflow uncertainty, AES PR intends
to reduce coal inventories, which may elevate the near-term supply
risk.
Revenue Risk - Midrange
Contracted Revenue Profile: The 25-year tolling-style PPA
effectively mitigates some exposure to capacity price, energy
margin and dispatch risks throughout the debt term, subject to
project availability and heat rates. Project cash flows are
materially independent from dispatch levels, and revenues are
subject to achievable minimum performance thresholds of 90%
effective availability factor (EAF) under the project's PPA.
However, the off-taker's ability to make future contractual
payments is unclear given its financial and operational
difficulties, which were exasperated by recent natural disasters.
Debt Structure - Senior - Midrange
Lack of Available Liquidity: The project's bonds are fixed-rate and
mature within the PPA term, but have back-loaded amortization
profiles. AES PR does not have O&M or major maintenance reserves,
which increases the importance of operational stability and
heightens the project's reliance on other sources of liquidity.
While the equity distribution, leverage and debt service reserve
provisions are consistent with standard project finance structures,
AES PR had liquidated its debt service reserve to service its debt
obligation in December 2022.
AES PR's ESG Relevance Score for Waste and Hazardous Materials
Management has been revised to '5' from '4'. The cost of waste
disposal related to coal ash is a key credit driver that has a
significant impact on the rating on an individual basis. The impact
from these escalating costs has resulted in weak cash flow
generation and depletion of liquidity, and may result in payment
default.
Financial Profile
The project's 'C' rating is guided by Fitch's ratings definitions,
and also the assessments assigned for all the qualitative key
rating drivers. Persistent and significant escalation in operating
costs have depleted the project's liquidity. In absence of any
near-term resolution under the PPA to alleviate the cost pressure,
AES PR is likely to default on its debt service payment obligation
on June 1, 2023.
PEER GROUP
Choctaw Generation Limited Partnership, LLLP (Choctaw; rated D on
Series 1 and C on Series 1 debt) is a comparable coal project that
has recently experienced a payment default. Similar to AES PR,
Choctaw experienced operational issues and significant cost
increases that led to depletion of liquidity and eventual payment
default on one of its outstanding debt tranches.
In public ratings outside the U.S., a higher-rated coal project in
Indonesia, Minejesa Capital BV (BBB-/Stable), maintains an
investment-grade rating supported by the absence of merchant
exposure under the PPA, favorable pass-through of fuel costs,
stable operating history and a stronger average rating case
coverage of 1.45x.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to modify the PPA and achieve sufficient compensation to
cover all operating costs and meet future debt service
obligations.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An improvement in PREPA's long-term credit quality, and PPA
modifications allowing sufficient compensation to cover all
operating costs and meet future debt service obligations.
CREDIT UPDATE
Due to significant cost increases in recent years, which are not
passed to PREPA under the existing PPA, AES PR's debt service
coverage ratios (DSCRs) had fallen below 1.0x. AES PR had
liquidated the debt service reserve account to service its debt
service obligations due in December of 2022. AES PR has
communicated that it anticipates that it will not have sufficient
funds for principal and interest payments toward the Series A Bonds
that are due on June 1, 2023.
The project's financial difficulties are caused by a combination of
rising costs and falling revenues. Due to incremental legal
restriction on disposal of coal combustion residuals (CCR) in
Puerto Rico, the project has incurred close to $28 million of
additional costs per year for the 2019-2022 period, estimated to
continue at $22 million per year for the 2023-2027 period. The
project has additionally incurred costs related to atypical unit
outages due to loss in transmission lines, which are estimated to
be $11 million for 2022.
For 2022, the revenue had reduced by 5.8% to $285.3 million from
$302.8 million in 2021. The DSCR for 2022 was 0.70x. AES PR
currently projects DSCR of 0.80x for 2023. The project is
projecting less than 1x DSCR for many quarters.
As of Feb. 28, 2023, AES PR had a cash balance of $10.9 million.
AES PR has a monthly expense run rate of approximately $24 million.
PREPA has agreed to reduce the billing period under the PPA to 25
days, and paid $38.2 million toward its January and February
invoices, helping with the project's immediate liquidity issues.
Reduction in the billing period will provide the project with
working capital relief to continue its operation through June 2023.
However, this is unlikely to be sufficient to meet upcoming debt
service obligations.
The project has requested that PREPA agree to some additional PPA
modifications that will provide immediate relief and will put the
project's operations on a sustainable long-term path. These
includes reverting demand charge paid to the project under the PPA
at 2022 levels, reducing the requirement for on-site fuel
inventory, modification in heat rate requirement, and release of
$12 million escrow account held with PREPA as security. PREPA has
indicated that it is not in a position to agree to these amendments
unilaterally. All of these changes to the PPA will require an
approval of various other stakeholders, which will take significant
time to negotiate.
For the period of January 2022 to November 2022, the plant had
achieved availability of 88.88%, capacity factor of 78.72% and
capacity payment of 99.45%. During the same period in the previous
year, the availability was 90.59%, capacity factor was 82.79% and
capacity payment was 95.05%
The project remains dependent on PREPA's continued payments under
the revenue contract to service debt and finance operations. PREPA
remains in default, and its long-term financial position and
restructuring plans will continue to have an outsized effect on the
project. Management has indicated that PREPA has been paying its
bills regularly, in compliance with the timeframes allowed under
the PPA. PREPA's recent payment track record and high levels of
dispatch corroborate the project's view that it is an important
part of Puerto Rico's generation system as a reliable and a
low-cost producer.
SECURITY
All project revenues, controlled bank accounts, and security
interest in the contract rights of AES PR
ESG CONSIDERATIONS
AES Puerto Rico LP (PR) has an ESG Relevance Score of '5' for Waste
& Hazardous Materials Management; Ecological Impacts due to the
cost of waste disposal related to coal ash, which has a negative
impact on the credit profile, and is highly relevant to the rating,
resulting in a weak cash flow generation and depletion of
liquidity, and may result in payment default.
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
----------- ------ -----
AES Puerto
Rico LP (PR)
AES Puerto
Rico LP (PR)
/Power Supply
Revenues/1 LT LT C Affirmed C
COMUNICADORES GRAFICOS: Case Summary & 20 Top Unsecured Creditors
-----------------------------------------------------------------
Debtor: Comunicadores Graficos Inc.
CG Printing Group, Inc.
URB. Industrial San Isidro Lote 16
Carr. 188 Km 0.5
Canovanas, PR 00729
Business Description: The Debtor is engaged in printing and
related support activities.
Chapter 11 Petition Date: April 13, 2023
Court: United States Bankruptcy Court
District of Puerto Rico
Case No.: 23-01064
Debtor's Counsel: Jesus Enrique Batista Sanchez, Esq.
THE BATISTA LAW GROUP, PSC
239 Ave Arterial Hostos Ste 206
San Juan PR 00918-1475
Tel: (787) 620-2856
Email: jeb@batistasanchez.com
Estimated Assets: $1 million to $10 million
Estimated Liabilities: $1 million to $10 million
The petition was signed by Juan Rafael Pierantoni Gonzalez as
president.
A full-text copy of the petition containing, among other items, a
list of the Debtor's 20 largest unsecured creditors is available
for free at PacerMonitor.com at:
https://www.pacermonitor.com/view/Y3JS4UA/COMUNICADORES_GRAFICOS_INC__prbke-23-01064__0001.0.pdf?mcid=tGE4TAMA
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Inflation Rate Dips Slightly, CSO Says
---------------------------------------------------------
Trinidad Express reports that the inflation rate in the country has
dipped slightly.
The rate for February 2023 -- measured as the percentage change in
the average All Items Index for the period January to February
2022/January to February 2023 -- was 8.0 per cent, the Central
Statistical Office (CSO) announced in the release of the Index of
Retail Prices for the month of February 2023, according to Trinidad
Express.
The report discloses that this represents a decrease from 8.3 per
cent which was recorded in the previous period (January
2023/January 2022).
The inflation rate for the comparative period (January to February
2022/January to February 2021) was 4.0 per cent, the report notes.
The All Items Index of Retail Prices calculated from the prices
collected for the month of February 2023 was 123.1, representing a
decrease of 0.5 points or 0.4 per cent below the Index (All Items)
for January 2023, the report relays.
The Index for Food and Non-Alcoholic Beverages decreased from 150.3
in January 2023 to 147.8 in February 2023, reflecting a decrease of
1.7 per cent, the report says.
"Contributing significantly to this decrease was the general
downward movement in the prices of tomatoes, pumpkin, celery,
chives, whole fresh chickens, mixed fresh seasoning, carrots,
cucumbers, sweet peppers and cabbage," the CSO said, the report
discloses. "However, the full impact of these price decreases was
offset by the general increases in the prices of chilled or frozen
beef, fresh beef, chilled or frozen pork, sweet potatoes, ochroes,
fresh carite, oranges, evaporated milk, fresh king fish and melon,"
the report says.
A further review of the data for February 2023 compared to January
2023 reflected an increase in the sub-index for Alcoholic Beverages
and Tobacco of 0.3 per cent and Health of 0.3 per cent, the report
relays.
There was also a decrease in the sub-index for Clothing and
Footwear of 0.2 per cent, the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
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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.
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