/raid1/www/Hosts/bankrupt/TCRLA_Public/230419.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
Wednesday, April 19, 2023, Vol. 24, No. 79
Headlines
A R G E N T I N A
SCC POWER PLC: Fitch Assigns 'CC' Rating to $17.861M Sr. Sec Notes
B R A Z I L
BR PROPERTIES: S&P Affirms 'B+' ICR on Ownership Structure Changes
BRAZIL: Beef Exports and Turnover Fall in First Quarter 2023
LIGHT SA: Fitch Lowers Local & Foreign Curr. LongTerm IDRs to 'C'
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Banreservas Allots RD$10,000M for Rice Harvest
DOMINICAN REPUBLIC: Urges Businessmen to Invest in Logistics
P U E R T O R I C O
ECSEM CORP: Unsecureds to Recover 5% in Plan
IGLESIAS DIOS: May 24 Plan Confirmation Hearing Set
T R I N I D A D A N D T O B A G O
HERITAGE PETROLEUM: Fitch Affirms BB LongTerm IDRs, Outlook Stable
[*] CARIBBEAN AIRLINES: Moves to Expand Fleet
- - - - -
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A R G E N T I N A
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SCC POWER PLC: Fitch Assigns 'CC' Rating to $17.861M Sr. Sec Notes
------------------------------------------------------------------
Fitch Ratings has assigned a 'CC' rating to SCC Power Plc's (SCC
Power) $17.861 million first lien senior secured notes due in 2028,
$310 million second lien senior secured notes and $200 million
senior secured notes due in 2032.
RATING RATIONALE
The rating reflects SCC Power's operational stage, moderate
operating risks with an experienced operator, and SCC's dependence
on the country's off-taker and electricity market coordinator,
Compania Administradora del Mercado Mayorista Electrico (CAMMESA).
Fitch views this exposure as systemic but strongly reliant on
federal government transfers.
The rating also reflects permissions under the debt structure to
allow for the issuance of new debt that could be preferred in the
waterfall ranking and is heavily exposed to refinance risk after
the maturity of the power purchase agreements (PPAs). After the
expiry of the current PPAs, the debt will also bare unhedged
financial risk, as revenues will be ARS denominated and exposed to
foreign currency devaluation. The debt also benefits from a six
months debt service reserve account.
The rating is constrained by the weak financial profile when the
debt matures. The level of revenues are significantly lower after
the expiration of current PPAs, which poses challenges to
refinancing the notes at maturity. However, the sponsor plans to
optimize SCC's future cash generation, and Fitch believes that the
sponsor's experience with thermal power operation and Argentina's
market framework might support the refinancing in 2028 and 2032.
KEY RATING DRIVERS
Experienced Operator and Defined Overhaul Costs [Operation Risk:
Midrange]
All four plants benefit from O&M agreements and Long-Term Services
Agreements (LTSA) with Siemens S.A. The contracts count with
defined overhaul routine with fixed prices and have some exposure
to foreign exchange (FX) risk. Fitch believes that the sponsor's
experience in operating similar technology plants are positive to
the project.
Fuel Supply Fully Mitigated by the Revenue Framework [Supply Risk:
Midrange]
Both oil and gas are fully supplied by CAMMESA, projects' sole
off-taker. As per the PPA and spot framework, in case of any supply
failure the project is not obligated to dispatch and still receives
its fixed capacity payment. This represents a stronger attribute
that isolated the fuel supply risk to the project. Even after PPA's
expire, as per the current regulations, CAMMESA would still be
responsible for the fuel supply.
Weak Counterparty and Relevant Exposure to Merchant Prices [Revenue
Risk: Weaker]
The thermal plants' sole off-taker is CAMMESA, a private company
which is the wholesale power market administrator and operator in
Argentina. CAMMESA's payment risk is viewed as systemic, however,
strongly dependent on transfers from the national government. Due
to Argentina's power sector characteristics, the systemic risk is
viewed to have a credit quality one notch below Argentina's Local
Currency (LC) Issuer Default Rating (IDR). Until 2027, most of the
project's revenues will come from USD denominated fixed capacity
payments that cover fixed costs and debt service. From 2028 to
2032, after most of the PPA's expiry, the projects will rely on
spot price revenues, which are indexed in Argentinian pesos and
adjusted by the government.
Non-Amortizing Debt With Cash Sweep Mechanism [Debt Structure:
Weaker]
The debt structure of each of the three notes is non-amortizing,
with a bullet payment at the maturity dates. Nonetheless, the notes
count with a cash sweep mechanism that is triggered quarterly
whenever unrestricted cash amounts are higher than USD15 million.
Additional debt can be issued for the expansion of the already
existent power plants, for the remediation of one of them as well
as refinancing of the current notes without rating confirmation.
The debt also relies on a six months debt service reserve account
(DSRA). There is no waterfall structure for the onshore accounts
and the intercompany loans among subsidiaries are allowed.
Financial Summary
Under Fitch's base case, the first lien notes are expected to be
paid through the cash sweep mechanism before maturity. Nonetheless,
as the debt structure allows for new indebtedness that would be
prioritized it might not occur. The second and third lien notes are
exposed to foreign currency risk and must be refinanced at
maturity. The refinancing depends on the ability of management to
reduce costs and still maintain the availability levels of the
plants, and also to re-establish Matheu's operation as a way to
secure positive cash flows.
Despite the expected weak financial profile at notes' maturity as
the revenues are expected to be much lower, the rating is supported
by Fitch's view that SCC's should be able to refinance, given its
sponsor's sound access to local markets, demonstrated experience
with thermal plant operations and the perpetual tenor of the
asset's permits.
VARIATION FROM CRITERIA
A variation was proposed to the treatment of systemic risk defined
in the Infrastructure and Project Finance Rating Criteria, which
would in principle detach payment risk from any individual
counterparty's credit quality. CAMMESA's payment risk is viewed as
systemic due to the role it plays in the country's power system.
However, it is strongly dependent on transfers from the national
government, which have been significantly delayed over the years.
Therefore, systemic risk in the Argentinian power sector is viewed
to have a credit quality one notch below Argentina's Local Currency
IDR.
PEER GROUP
SCC Power's closest peer is MSU Energy S.A. (MSU Energy; Long-Term
Foreign Currency and Local Currency IDRs CCC-), an Argentine
electric power company that controls thermal power plants. Despite
having the same ultimate parent as SCC, both are evaluated
separately, given their different corporate and debt structures.
MSU Energy's ratings reflect its dependence on CAMMESA. However, it
has a fully amortizing debt that will mature when PPAs are still in
place. Therefore, differently from SCC Power, MSU Energy's rated
notes are not exposed to refinancing risk nor spot capacity
revenues. Fitch expects MSU Energy's leverage to continually reduce
to 2.3x by 2025, which, combined with the later factors, justifies
its higher rating.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A substantial worsening of near-term operating performance
relative to Fitch's expectations;
- Significant payment delays from CAMMESA;
- Inability of SCC Power's to optimize future cash generation.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Unlikely in the short term, but qualitative improvement in
refinance risk following management's efforts to optimize SCC
Power's future cash generation and;
- Further regulatory developments leading to a market less reliant
on support from the Argentine government or a sovereign upgrade
that could positively affect the company's collections/cash flow.
TRANSACTION SUMMARY
SCC POWER Plc. is a public limited company organized under the laws
of England and Whales.
The issuer acquired the business enterprise of Stoneway Capital
Corporation (Stoneway), consisting of four thermal power generation
facilities located in the Province of Buenos Aires, Argentina with
an aggregate capacity of 791 MW, consisting of 686.6 MW simple
cycle brown-field projects and 105 MW to close the cycle of one of
the plants.
The acquisition and restructuring transactions were carried out
pursuant to the Chapter 11 of Stoneway and its affiliated
debtors-in-possession, which went effective on May 17, 2022, and
took place after Stoneway defaulted on its notes in 2020.
The four operational simple cycle plants, Las Palmas, Lujan, Matheu
and San Pedro have been awarded 10-year PPAs in the thermal
Generation Auction of 2016 (Resolution S.E.E. No. 21/2016).
Additionally, in October 2017, a new auction was held where the
expansion of one of the plants, San Pedro, was awarded with a
15-year PPA for its combined cycle operation.
FINANCIAL ANALYSIS
Given the level of the rating, Fitch did not develop base and
rating case scenarios. Fitch performed a qualitative assessment of
the level of default risk and the extent of any remaining margin of
safety indicated by the issuer's overall operating and financial
risk profile.
SECURITY
Secured first lien notes: US$17,861,000; Interest Rate: 6% ;
Maturity: 2028
Secured second lien notes: US$310,000,000; Interest Rate: 8%;
Maturity: 2028
Secured third lien notes: US$200,000,000; Interest Rate: 4% ;
Maturity: 2032
Amortization of all the notes is bullet at the maturity date and
the debt structure is secured in first priority lien by a pledge of
substantially all assets of the issuer and its subsidiaries,
including receivables and equipment, and counts with a cash sweep
mechanism.
Criteria Variation
A variation was proposed to the treatment of systemic risk defined
in the Infrastructure and Project Finance Rating Criteria, which
would in principle detach payment risk from any individual
counterparty's credit quality. CAMMESA's payment risk is viewed as
systemic due to the role it plays in the country's power system.
However, it is strongly dependent on transfers from the national
government, which have been significantly delayed over the years.
Therefore, systemic risk in the Argentinian power sector is viewed
to have a credit quality one notch below Argentina's LC IDR.
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
----------- ------
SCC Power Plc
SCC Power
Plc/Debentures/1 LT CC New Rating
SCC Power
Plc/Debentures/2 LT CC New Rating
SCC Power
Plc/Debentures/3 LT CC New Rating
===========
B R A Z I L
===========
BR PROPERTIES: S&P Affirms 'B+' ICR on Ownership Structure Changes
------------------------------------------------------------------
S&P Global Ratings affirmed its 'B+' global scale and 'brAA'
Brazilian national scale ratings on Brazilian real estate operator
BR Properties S.A. (BR Properties).
The stable outlook reflects the absence of debt on the company's
balance sheet and comfortable cash position, without significant
cash outflows expected for the next few years after the capital
reduction. The outlook is also based on its expectation that BR
Properties will continue operating at a smaller scale.
After the conclusion of the tender offer, BR Properties will now be
controlled by GP through Slabs with a 89.7% stake. This percentage
could increase if the remaining shareholders decide to sell their
shares as well. S&P continues to assess the company as having a
financial-sponsor ownership structure, which still constrains its
assessment of its financial risk profile.
S&P said, "Despite a new controller, no substantial deviation for
BR Properties, in terms of strategy or approach to leverage
according to our latest base-case published on Jan. 16, 2023 (BR
Properties S.A. Ratings Lowered To 'B+' And 'brAA' On Smaller
Scale, Reduced Profitability; Outlook Stable). This is because GP
was already part of BR Properties' board prior to the tender offer,
acting as the manager of the fund that ADIA held its stake in the
company. At the end of 2022, BR Properties had no debt after
redeeming all of its debt with proceeds from the portfolio sale to
Brookfield. Our base-case scenario assumes no additional debt in
the next few years, given that the company should continue to
operate at a smaller scale in the short to medium term."
Environmental, Social, And Governance
ESG credit indicators: E-2; S-2; G-3
S&P said, "Environmental and social factors has no material
influence on our credit rating analysis of BR Properties.
Governance factors are a moderately negative consideration in our
credit rating analysis of BR Properties. Our assessment of the
company's financial risk profile as aggressive reflects corporate
decision-making that could prioritize the interests of the
controlling owners, in line with our view of the majority of rated
entities owned by private-equity sponsors. This also reflects their
generally finite holding periods and a focus on maximizing
shareholder returns. The private equity firm, GP, currently owns a
89.7% stake in BR Properties."
BRAZIL: Beef Exports and Turnover Fall in First Quarter 2023
------------------------------------------------------------
Richard Mann at Rio Times Online reports that Brazilian beef
exports and turnover fell by 8 and 22 percent, respectively, in the
first quarter compared to the first three months of last year, the
Brazilian Association of Slaughterhouses (Abrafrigo) reported.
According to the entity, Brazil, the world's second-largest beef
producer and largest global exporter, shipped 498,888 tons of beef
between January and March, compared to 542,410 tons in the same
period in 2022, while turnover this year through March was $2.255
billion, down from $2.895 billion a year earlier, the report
notes.
China was the main destination for Brazilian beef in the first
quarter, according to Rio Times Online.
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).
LIGHT SA: Fitch Lowers Local & Foreign Curr. LongTerm IDRs to 'C'
-----------------------------------------------------------------
Fitch Ratings has downgraded the Local Currency and Foreign
Currency Long-Term Issuer Default Ratings (IDRs) of Light S.A.
(Light) and its wholly owned subsidiaries Light Servicos de
Eletricidade S.A. (Light Sesa) and Light Energia S.A. (Light
Energia) to 'C' from 'CC'. Fitch has also downgraded the Long-Term
National Scale Ratings of these entities to 'C(bra)' from
'CC(bra)'. Fitch has downgraded the foreign currency and local
currency debt instruments to 'C'/'RR4' from 'CC'/'RR4' and to
'C(bra)' from 'CC(bra)', respectively.
The downgrade to 'C' follows Light's announcement that it has
obtained an "Injunction Relief" from Rio de Janeiro's court,
establishing the suspension of enforceability of all obligations
related to financial instruments and the effects of any
declarations of early maturity and/or accelerated amortization. The
injunction also approves the commencement of collective mediation
proceedings. If Light formally announces a restructuring plan,
Fitch will downgrade the ratings to 'RD' to reflect a Restricted
Default.
KEY RATING DRIVERS
Standstill Obtained: The "Injunction Relief" allows Light to not
comply with any of its financial obligations for 30 days, beginning
April 11. During this term, which is extendable for 30 days, the
court will judge the company's claim for a longer standstill. The
objective is to preserve cash and ensure the continuity of the
business until company, creditors and shareholders reach an
agreement related to a potential debt restructuring. Fitch
considers this event as a standstill.
Probable Debt Restructuring: Fitch expects Light to launch a debt
restructuring process in the coming months that would fall within
Fitch's definition of a default-like process. Light Sesa, Light's
main subsidiary, has sizeable cash outflows of BRL 2.8 billion in
2023, comprised of BRL1.0 billion in debt amortization,
approximately BRL800 million of capex, and BRL1.0 billion in
deferred tax expenses. The company's cash position at its power
distribution segment was BRL633 million at the end of 4Q22 and was
reduced to BRL457 million on a pro forma basis, after the
anticipated payment of the third and the ninth debenture issuances
on March 29, 2023. This cash balance is not enough to support those
disbursements.
High Refinancing Needs: Fitch believes it is highly unlikely that
Light group has the ability to access financing to secure its
funding needs in the short term. The agency estimates that the
group will need up to BRL1.8 billion of financing in 2023 and at
least BRL1.5 billion in 2024. In case of non-renewal of the Light
Sesa concession, the company should receive an indemnity for
unamortized assets equal to its asset base, currently valued at
BRL10.1 billion. This compares unfavorably with on-balance-sheet
consolidated debt of BRL11.1 billion (BRL8.7 billion of which is at
Light Sesa's level). The group had a cash position of BRL2.1
billion in December 2022. The indemnification would partially
support the recovery prospect of debt holders, if needed.
High Leverage: Light's consolidated adjusted leverage should remain
high. The rating case estimates a consolidated net adjusted
debt/EBITDA above 5.0x in 2023 and 2024, including guarantees
provided to Norte Energia S.A. as off-balance sheet debt (BRL730
million in December 2022). As of December 2022, group's
consolidated adjusted net leverage reached 5.6x, with 9.2x at Light
Sesa's level. EBITDA to interest expense for the company is
estimated to be 1.3x in 2023, which leaves small room for capex and
debt amortization.
Recovery Analysis: Fitch applies a bespoke approach to recovery for
issuers rated 'B+' and below, using the higher of going-concern and
liquidation estimates to enterprise valuation. In the case of
Light, Fitch estimates recovery rates to be 'RR1' for its secured
debts and 'RR3' for unsecured debts, which could potentially lead
to uplift on the bonds' rating from Light's FC IDR. However,
Fitch's "Country-Specific Treatment of Recovery Ratings Criteria"
caps at 'RR4' the recovery for debt instruments in Brazil,
resulting in an instrument rating equal to Light's FC IDR. These
caps reflect Fitch's concerns over the enforceability of creditor
rights in certain jurisdictions, where average recoveries tend to
be lower.
DERIVATION SUMMARY
The current IDRs incorporate that Light is currently in a
standstill situation and will likely enter a debt restructuring
with creditors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A positive rating action is unlikely and depends upon the
company's ability to raise capital and maintain credit lines.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- The formal announcement of a distressed debt exchange;
- Miss payment of any financial obligations after "Injunction
Relief" period.
LIQUIDITY AND DEBT STRUCTURE
Heightened Refinancing Risk: Light's ability to secure funding in
the short term is limited. During the 4Q22, Light's cash position
reduced by BRL1.9 billion (or 48%), and the cash and equivalent
position as of December 2022, BRL2.1 billion, should not cover the
expected debt amortizations (BRL1.0 billion) and expected negative
FCF through 2023. Adjusted consolidated debt was BRL11.8 billion
and comprises debentures (BRL6.9 billion) and Eurobonds (BRL3.5
billion), with off-balance sheet debt of BRL730 million related to
guarantees provided to Norte Energia S.A. There is no debt at the
holding level.
ISSUER PROFILE
Light Sesa is the fourth largest power concession in Brazil,
serving more than 70% of Rio de Janeiro's consumption and accounts
for about 60% of the group's EBITDA. Light Energia has 511 MW of
assured energy, from concessions expiring in 2028.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch excluded revenues and costs related to construction from
income statements.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Light Servicos de
Eletricidade S.A. LT IDR C Downgrade CC
LC LT IDR C Downgrade CC
Natl LT C(bra)Downgrade CC(bra)
senior
unsecured LT C Downgrade RR4 CC
senior
unsecured Natl LT C(bra)Downgrade CC(bra)
Light Energia S.A. LT IDR C Downgrade CC
LC LT IDR C Downgrade CC
Natl LT C(bra)Downgrade CC(bra)
senior
unsecured LT C Downgrade RR4 CC
senior
unsecured Natl LT C(bra)Downgrade CC(bra)
Light S.A. LT IDR C Downgrade CC
LC LT IDR C Downgrade CC
Natl LT C(bra)Downgrade CC(bra)
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Banreservas Allots RD$10,000M for Rice Harvest
------------------------------------------------------------------
Dominican Today reports that the Reserve Bank has announced that it
will provide RD$10,000 million pesos to fund the Rice Pledge
Program for the 2023-2024 season, maintaining the same 6% interest
rate as last year. The program received a total of RD$66,000
million pesos from Banreservas between 2012 and 2022, with
RD$54,000 million already disbursed, representing a 63.37%
contribution to the financing of rice production in the Dominican
Republic's financial system, according to Dominican Today.
Banreservas aims to increase the impact of their support, with a
disbursement of RD$10 billion pesos this year, up from last year's
RD$8 billion, the report relays. Samuel Pereyra, the general
administrator of Banreservas, stressed the importance of the
program to support rice producers and millers in the 21 provinces
where the crop is grown, the report notes. Pereyra also noted the
significance of rice production to the national economy, generating
jobs in rural areas, reducing poverty and inequality, and expanding
the middle class, the report says.
During the launch of the program at Cetro Mountain Club in La Vega,
Fernando Duran, the administrator of Banco Agricola, Marcelo Reyes
Jorge, the president of the National Federation of Rice Producers
(FENARROZ), and Fausto Armando Pimentel, the president of the
Dominican Association of Rice Factories (ADOFA), emphasized the
importance of the Pledge Program in ensuring price stability and
the availability of rice for the Dominican diet, the report
discloses.
The launch was attended by several officials, including the
governor of La Vega, Luisa Jimenez, the municipal mayor, Kelvin
Cruz, and the director of the Dominican Agrarian Institute,
Francisco Garcia, along with business executives from Banreservas
and members of the financial institution's board of directors, the
report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
DOMINICAN REPUBLIC: Urges Businessmen to Invest in Logistics
------------------------------------------------------------
Dominican Today reports that to enhance the country's potential as
a nearshoring destination, the logistics sector necessitates
increased investment from private companies. The government aims
to create more jobs and expand the economy by implementing this
strategy.
Eduardo Sanz Lovaton, the head of the General Directorate of
Customs (DGA), urged private sector investors to explore the
advantages of the logistics sector during his participation in the
Latin American Cities Conference Series was held in Santo Domingo
for the first time, according to Dominican Today. Experts
discussed the progress and structure of innovation, trade, energy,
and technology, critical sectors for addressing the complicated
international economic landscape, the report notes.
Sanz Lovaton stated during his participation in the panel
"Diversifying industries, creating opportunities for development,
and promoting a climate for innovation" that it is time for the
private sector to invest in the country's logistics capabilities,
the report relays. He emphasized that the government has more air
connectivity than Brazil and an abundance of labor, the report
notes. According to a study conducted by Customs in collaboration
with the American Chamber of Commerce of the Dominican Republic
(Amchamdr), half-island has more connectivity with Europe than
Brazil, the report discloses. The country's physical
infrastructure is strengthened by the extensive options for
maritime transport, and 60% of cargo transport abroad is mobilized
in the belly of planes, the report relays.
Sanz Lovaton was accompanied by Jose Fernandez, regional sales
director of Salesforce, who underscored the importance of
prioritizing technology education in the country. He also stated
that the technology sector requires better and more education,
which can be accomplished through a combination of private and
public sectors.
During his speech, Sanz Lovaton emphasized that the country has a
strong legal framework and political stability, facilitating
communication between both sectors to develop investments, the
report discloses. President Luis Abinader, in his closing remarks,
highlighted the role that industries play in the country's and the
region's economy, the report says. The Dominican Republic has
established itself as one of the pioneering countries worldwide in
the successful implementation of the free zone model in recent
years, benefiting significantly from the near shoring phenomenon in
the entire Las Vegas region, the report notes.
Private, national, and foreign investment has an important place in
this space, which has been increasing in recent years, with the
country registering approximately 4 billion dollars in foreign
investment at the end of 2022, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
Fitch Ratings, in December 2021, revised the Outlook on Dominican
Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR)
to Stable from Negative and affirmed the IDRs at 'BB-'.The
revision of the Outlook to Stable reflects the narrowing of
Dominican Republic's government deficit and financing needs since
Fitch's last review resulting in the stabilization of the
government debt/GDP ratio, as well as the investment-driven
economic momentum, reflected in the faster-than-expected economic
recovery in 2021 that Fitch expects to carry into above-potential
GDP growth during 2022 and 2023.
Standard & Poor's, also in December 2021, revised its outlook on
the Dominican Republic to stable from negative.S&P also
affirmed its 'BB-' long-term foreign and local currency sovereign
credit ratings and its 'B' short-term sovereign credit ratings. The
stable outlook reflects S&P's expectation of continued favorable
GDP growth and policy continuity over the next 12 to 18 months that
will likely stabilize the government's debt burden, despite lack of
progress with broader tax reforms, S&P said.A rapid economic
recovery from the downturn because of the pandemic should mitigate
external and fiscal risks.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=====================
P U E R T O R I C O
=====================
ECSEM CORP: Unsecureds to Recover 5% in Plan
--------------------------------------------
ECSEM Corporation filed a Small Business Plan and a corresponding
Disclosure Statement on April 14, 2023.
The Debtor filed a second bankruptcy case to propose a viable plan
to its creditors and obtain a fresh start.
Under the Plan, stockholders Eridebel Mercado Cosme and Dr. Carlos
Santiago Sanchez will retain control of the Debtor.
General unsecured creditors are classified in Class 6 (unsecured
claims of $5,500 or more) and Class 7 (unsecured claims of $5,499
or less). Classes 6 and 7 will receive a distribution of 5% of
their allowed claims over a period of 5 years.
ECSEM Corporation earlier sought and obtained an order extending
until April 14, 2023, its deadline to file Plan and a Disclosure
Statement.
Attorney for the Debtor:
Mary Ann Gandia-Fabian
GANDIA-FABIAN LAW OFFICE
P.O. Box 270251
San Juan, PR 00927
Tel: (787) 390-7111
Fax: (787) 729-2203
E-mail: gandialaw@qmail.com
About Ecsem Corporation
Ecsem Corporation is a "for profit" corporation organized under the
laws of the Commonwealth of Puerto Rico, and is dedicated to the
rental of commercial properties. It owns two real properties
located in TOa Baja and Cidra, Puerto Rico. The property located
at Toa Baja has 5 commercial spaces and the property in Cidra is a
vacant lot composed of 5.28 "cuerdas".
Ecsem Corporation filed a Chapter 11 bankruptcy petition (Bankr.
D.P.R. Case No. 22-03006) on Oct. 19, 2022, with up to $500,000 in
both assets and liabilities. Judge Mildred Caban Flores oversees
the case.
The Debtor tapped Mary Ann Gandia-Fabian, Esq., at Gandia-Fabian
Law Office as legal counsel and Jimenez Vazquez & Associates, PSC
as accountant.
IGLESIAS DIOS: May 24 Plan Confirmation Hearing Set
---------------------------------------------------
On Feb. 3, 2023, Iglesias Dios Es Amor, Inc., filed with the U.S.
Bankruptcy Court for the District of Puerto Rico a Disclosure
Statement for Chapter 11 Plan.
On April 13, 2023, Judge Edward A. Godoy approved the Disclosure
Statement and ordered that:
* May 24, 2023 at 1:30 PM is the hearing for the
consideration
of confirmation of the Plan and of such objections as may be made
to the confirmation of the Plan.
* That acceptances or rejections of the Plan may be filed in
writing by the holders of all claims on/or before 14 days prior to
the date of the hearing on confirmation of the Plan.
* That any objection to confirmation of the plan shall be
filed on/or before 14 days prior to the date of the hearing on
confirmation of the Plan.
* That the debtor shall file with the Court a statement
setting forth compliance with each requirement in section 1129,
the
list of acceptances and rejections and the computation of the
same,
within 7 working days before the hearing on confirmation.
A copy of the order dated April 13, 2023 is available at
https://bit.ly/3GNIV7M from PacerMonitor.com at no charge.
The Debtor's counsel:
Gerardo Santiago Puig
Doral Bank Plaza, Ste 801, 33 Resolucion Street
San Juan, PR 00920
Tel: (787) 777-8000
E-mail: gsantiagopuig@gmail.com
About Iglesias Dios Es Amor
Iglesias Dios Es Amor, Inc., is a corporation that administer a
Church in the municipality of Trujillo Alto. It has been in this
business since June 29, 1977.  Mr. Elias Reyes Ortiz is
the
president of the corporation.
Since Hurricane Maria, the members of the assembly has been
significantly reduced, causing the debtor to default on a mortgage
loan with Cooperativa de Ahorro (COOPACA). Coopaca filed a
mortgage foreclosure case against the debtor corporation and a
judgment was entered.
Due to the advanced stage of the foreclosure, Iglesias Dios Es
Amor, Inc., filed its voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code (Bankr. D.P.R. Case No. 21-03508) on
Nov. 29, 2021, with as much as $1 million in both assets and
liabilities. Elias Reyes Ortiz, president, signed the petition.
Judge Edward A. Godoy oversees the case.
The Debtor tapped Gerardo L. Santiago Puig, Esq., at Santiago Puig
Law Offices as legal counsel and Juan C. Pomales Torres as
accountant.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
HERITAGE PETROLEUM: Fitch Affirms BB LongTerm IDRs, Outlook Stable
------------------------------------------------------------------
Fitch Ratings has affirmed Heritage Petroleum Company Limited's
(Heritage) Long-Term Foreign and Local Currency Issuer Default
Ratings at 'BB'. The Rating Outlook is Stable. Fitch has also
affirmed the 'BB' rating of the senior secured notes of $500
million due 2029.
Heritage's rating reflects its strategic importance to Trinidad and
Tobago. Heritage and its guarantors, TPHL and Paria, play a key
role in the government's oil and gas development plan, and are a
material source of government revenue and economic development in
the country.
KEY RATING DRIVERS
Strategic Importance for Trinidad and Tobago: Heritage's rating
reflects the company's strategic importance for oil production in
Trinidad and Tobago, representing over half of crude production in
the country in 2022. Over the rated horizon, total production is
expected to grow from 43,600boed in 2022, to 56,500boed in 2026.
Further, the government take (royalties, supplemental petroleum
taxes, and cash taxes) is estimated to average USD12.36 per barrel
over the rated horizon. The government has acted to support
Heritage in the past by waiving its supplemental petroleum tax for
a period of two years beginning in June 2019.
Stable Production Profile: Heritage's production is expected to
average 52,700 boed through the rating horizon, which places the
company firmly in the 'b' category. 2022 was estimated to average
43,600 boed, reflecting production figures are a rating
constriction. 1P reserve life of 10.6 years is strong and
consistent with a higher rating category. Heritage has demonstrated
ability to replace reserves at a rate of 130% on average in the
last three years, and Fitch assumes the company will be able to
continue to replace reserves at a rate of 104% through the rating
horizon.
High Government Take: Royalties plus taxes are estimated to average
25% through the rating horizon. This includes royalties,
supplemental production and corporate taxes. Fitch estimated
Heritage's half-cycle cost of production at $40.67/boe in 2022 and
full-cycle cost of production were $42.2/boe. Government take was
estimated to be $25/boe in 2022 resulting in a post-tax full-cycle
cost of production of $67.6/boe. The estimated netback in 2022 was
$27.4/boe based on a realized crude price of $95/bbl .
Manageable Leverage Profile: Fitch estimated Heritage's gross
leverage, defined as total debt to EBITDA, to be 2.2x in 2022, the
estimated average for between 2023 through 2026. Net debt is
estimated to be negative at YE 2022 and to be around 1.1x over the
rated horizon. Total debt to 1P is estimated to be $5.60/boe and
total debt to PDP at $6.50/boe in 2022. On average, EBITDA will
cover debt service (amortizing debt and interest expense) 3.1x
between 2022 and 2026.
DERIVATION SUMMARY
Heritage Petroleum Company Limited compares best to other rated
government-related entities (GREs) in the region including
Ecopetrol (BB+/Stable), Pemex (BB-/Stable), Petrobras (BB-/Stable),
and YPF (CCC-).
Heritage's production is concentrated in oil. Its total production
in 2022 represented 59% of total oil production in the country.
This compares to Pemex whose oil production is 70% of the total
countries output, Ecopetrol at 85%, Petrobras at 95% and YPF at
25%. Heritage and its GRE peers are all deemed to be strategically
important for the energy security of their respective countries.
Heritage half-cycle and full-cycle cost of production compares
favorably to peers. For 2022, Fitch estimates its half-cycle cost
was $40.67boe and full cycle cost was $42.20/bbl. This compares
closest to Pemex whose 2022 half-cycle cost was $60/boe and
full-cycle was $77/boe. Ecopetrol's was estimated to be $18.2boe
and $30.6boe, Petrobras at $14.1boe and $22.89 boe, and YPF at
$31.41 boe and $47.00boe in 2022. Heritage has a high government
take estimated to be $25.43boe in 2022.
Heritage has a stable reserve profile with a 1P reserve life of
10.6 years reported in 2022, which is higher than YPF's 6.1 years,
and Ecopetrol's 8.9 years, and in line with Petrobras' 10 years and
Pemex's 10.15 years. Heritage's pro forma gross leverage, defined
as total debt to EBITDA was estimated to be 2.2x in 2022, and its
total debt to 1P was estimated at $7.39boe in 2022. This compares
favorably to Pemex at 2.8x in 2022 and $14.49boe per 1P.
Ecopetrol's leverage was 1.2x and $10.84boe, Petrobras at 0.8x and
$3.61boe and YPF at 1.2x and $5.86boe, all lower than that of
Heritage.
KEY ASSUMPTIONS
Fitch made the following Key Assumptions within the Rating Case of
the issuer:
- Fitch's price deck for Brent of $100bbl in 2022, $85bbl in 2023
and $53bbl long term;
- Realized Brent price $4.0bbl discount to Fitch's price deck;
- Average oil production of 51,300bbld between 2023 through 2026;
- Production cost of $19.5bbl between 2023 through 2026;
- Royalties of 12.5% per bbl over the rated horizon;
- Supplemental petroleum tax (SPT) of 13% per bbl over the rated
horizon;
- Production tax of $1.20bbl over the rated horizon;
- SG&A of $1.5bbl over the rated horizon;
- Effective cash tax rate of 30%;
- Capex budget of $500 million over the rated horizon, an average
of $125 million per annum;
- Reserve replacement ratio of 105%.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Material improvement in the country's overall economic
condition.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A deterioration of Heritage's financial flexibility, coupled with
government inaction to support liquidity, potentially resulting
from continued negative FCF or a material reduction of the
company's cash on hand, credit facilities and restricted capital
markets access;
- A debt service coverage ratio below 1.5x on a sustained basis.
LIQUIDITY AND DEBT STRUCTURE
Adequate liquidity: Heritage reported USD303 million in cash as of
YE 2022. Over the rated horizon, the company is expected to be FCF
neutral, but the rating case estimates the company will have
adequate liquidity.
ISSUER PROFILE
Heritage is the largest crude oil producer in Trinidad and Tobago,
producing 59% of total crude in the country. It is a state-owned
enterprise that is controlled by the government, through Trinidad
Petroleum Holding Limited (TPHL).
ESG CONSIDERATIONS
Heritage Petroleum Company Limited has an ESG Relevance Score of
'4' for Governance Structure due to its nature as a majority
government-owned entity and the inherent governance risk that
arises with a dominant state shareholder, which has a negative
impact on the credit profile, and is relevant to the ratings in
conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Heritage Petroleum
Company Limited LT IDR BB Affirmed BB
LC LT IDR BB Affirmed BB
senior secured LT BB Affirmed BB
[*] CARIBBEAN AIRLINES: Moves to Expand Fleet
---------------------------------------------
Curtis Williams at Trinidad Express reports that Caribbean Airlines
Limited is expected to present a strategic plan to the Cabinet
before the end of this month in which the company will tell
government about its plans to expand its operations, to increase
connectivity to Trinidad and Tobago and throughout the region.
Express Business has learnt that as part of its presentation CAL
will say to the Keith Rowley administration that it will acquire at
least three additional Boeing 737 Max 8 aircraft to service the
North American and North Western Caribbean routes and more ATRs for
the Eastern Caribbean and between Trinidad and Tobago, according to
Trinidad Express.
It is also to raise the possibility of leasing Brazilian built
Embraer aircraft to compete against Copa Airlines on the South
American route with either flights to Rio De Janeiro or an
agreement with the Brazilian carrier, GOL, to fly passengers
between the region and South America, the report notes.
Caribbean Airlines confirmed to Express Business that it has
already sent out a Request For Proposal (RFP) for the three 737 Max
8 aircraft, the report relays.
Asked when it expects to go out with its RFP for three additional
737 Max 8, CAL responded by simply saying, "This is completed," the
report relays.
The company was also asked, if the acquisition lead to more routes
or greater reliability on existing routes, the report discloses.
It told the Express Business that while the additional Max 8 will
lead to more routes, it was not prepared to say at this time where
the aircraft will be deployed.
The Airline wrote in an email response to Express Business:
"Caribbean Airlines currently operates an extensive and reliable
schedule to over 20 destinations. As part of its mandate to
enhance connectivity in the region, the airline intends to expand
its route network. At the appropriate time more details will be
provided," the report relays.
The Cabinet presentation comes less than two months after Carnival
2023 saw smaller numbers than 2020 and the lack of connectivity was
blamed for the smaller number of revellers, the report notes.
It will also be welcomed news to tourism stakeholders who have been
concerned with both the price of tickets to fly to T&T and the
frequency and availability flights, the report relays.
It is now much more difficult to get to Trinidad and Tobago by
plane than it was pre Covid-19 due to the loss of all Liat's
flights, all flights out of Canada, except Caribbean Airlines and a
significant reduction in service out of Florida, the report says.
Figures provided to the Express Business by the Airport's Authority
for the month of February, leading up to this year's Carnival, show
the number of flights coming to Trinidad and Tobago from all
destinations decreased by a massive 46 per cent, the report notes.
There were 408 flights this year as compared to 760 in 2020, the
report says. It must be noted that on both years Carnival fell
almost on the same date and therefore the peak demand period was
the same, the report relays.
Liat no longer has service in 2023 as compared to 2020 when all its
flights were functional and provided much connectivity to the rest
of the region, the report discloses.
American Airlines operates one turnaround flight per day versus
2020 when it operated one turnaround and one overnight flight, the
report discloses. JetBlue has pulled its Ft Lauderdale route and
now operates only one flight compared to 2020 when there were two
flights per day, the report relays. West Jet and Air Canada no
longer fly to Trinidad compared to in 2020 when they operated
pre-Covid, the report discloses.
The statistics also show that Caribbean Airlines simply cannot pick
up the slack with its limited number of planes and routes, the
report relays.
In a telephone interview with Express Business, General Manager of
the Airports Authority of Trinidad and Tobago, Hayden Newton argued
that all the major airlines have had challenges in terms of pilots
and staffing, the report notes.
"There were challenges with South West and American Airlines with
their pilots." He noted.
Newton said there was zeal to come to Trinidad for Carnival 2023,
but there were not enough flights coming in, the report relaus.
For example, from Canada, the only carrier was Caribbean Airlines,
the report notes. Then there is the challenge of the labour laws
in Canada with regard to flying to a particular jurisdiction, the
report notes.
"Flights coming out of Toronto (major hub) and other parts of
Canada were down . . . .If you look at American, they would have
had about three flights per day in 2020. CAL has JFK, Miami and Ft
Lauderdale. JFK and Miami operate every day. Ft Lauderdale did not
operate daily, the report discloses. It's either three times per
week at Fr Lauderdale and Orlando operated twice per week," Newton
told Express Business, the report says.
"CAL has other flights that go twice weekly to the United States.
American had much less flights into Trinidad. JetBlue operated
only the normal JFK flight. They did not have the Ft Lauderdale
which they had in 2020. Before JetBlue had two flights daily - one
from JFK International Airport and one from Ft Lauderdale. United
might have been the only one that operated in the same manner like
2020," added Newton.
CAL also confirmed that it is expecting to take possession of other
ATRs to service the regional routes, the report notes.
Asked if it was looking at acquiring some Brazilian made aircraft
to also fly some routes and what was the state of discussions with
GOL to partner and compete with COPA on the South American route,
the national carrier said, "Caribbean Airlines is always reviewing
its options to enhance its operations and service delivery," 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
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