/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230525.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 Thursday, May 25, 2023, Vol. 24, No. 105 Headlines A R G E N T I N A ARGENTINA: To Hike Rates in Bid to Stem Inflation Crisis B A H A M A S FTX TRADING: BOJ Makes US$30 Million FX Intervention FTX TRADING: Seeks to Claw Back Over $240M From Embed Acquisition B R A Z I L BRAZIL: Inflation Within Target in May and June C A Y M A N I S L A N D S SEAGATE HDD: Moody's Affirms Ba2 CFR & Alters Outlook to Negative C O L O M B I A CANACOL ENERGY: Fitch Affirms LongTerm IDRs at 'BB', Outlook Stable D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Cuts Price of Gasoline E L S A L V A D O R LA HIPOTECARIA 15TH: Fitch Hikes Rating on Two Tranches to 'Bsf' J A M A I C A DIGICEL GROUP: Fitch Lowers LongTerm Issuer Default Rating to 'RD' JAMAICA: Digital Payments Access Challenge Local Businesses JAMALCO: Aiming to Return Facilities to Full Production Next Year M E X I C O GRUPO IDESA: S&P Raises LongTerm ICR to 'B-', Outlook Stable P E R U PERU: Gets Continued Access to FCL Resources, IMF Review Says P U E R T O R I C O CERTENEJAS INCORPORADO: Case Summary & 20 Top Unsecured Creditors PUERTO RICO: PREPA Bankruptcy at Risk of Dismissal - - - - - ================= A R G E N T I N A ================= ARGENTINA: To Hike Rates in Bid to Stem Inflation Crisis -------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Argentina will unveil a set of emergency measures in a bid to stem additional currency losses, including a large increase to its key interest rate, as inflation spirals out of control in the run up to presidential elections, according to officials at the Economy Ministry and the central bank. The monetary authority will raise its benchmark rate by 600 basis points to 97% while boosting intervention in the foreign exchange market, the officials said, asking not to be named before measures are formally announced by Economy Minister Sergio Massa, according to globalinsolvency.com. Policymakers are struggling to contain a selloff in the peso, which in parallel markets has lost 35% of its value against the dollar so far this year, the report notes. The government intends to obtain more international support for its dwindling foreign reserves by speeding up deals with the International Monetary Fund, China and Brazil through the BRICS group, which also include Russia, India, China, and South Africa, one of the officials said, the report adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. Last March 25, 2022, Argentina finalized agreement with the IMF for a new USD44 billion Extended Funding Facility (EFF) intended to fund USD40 billion in looming repayments of the defunct Stand-By Arrangement (SBA), with an extra USD4 billion in up-front net financing. This has averted the risk of a default to the IMF and is facilitating a parallel rescheduling of Paris Club debt. S&P Global Ratings, on 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. ============= B A H A M A S ============= FTX TRADING: BOJ Makes US$30 Million FX Intervention ---------------------------------------------------- RJR News reports that Jamaica's foreign exchange market increased earlier to US$30 million after an intervention by the Bank of Jamaica. This latest intervention through the BOJ's Flash Auction came after FX intervention was paused, according to RJR News. Proven Wealth, Sagicor, JN Bank, and Barita Investments were among the institutions that were successful at the BOJ's foreign exchange auction, the report notes. About FTX Trading FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10, 2022, showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent. The official committee of unsecured creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. Katherine Stadler, the court-appointed fee examiner, is represented by Godfrey & Kahn, SC. FTX TRADING: Seeks to Claw Back Over $240M From Embed Acquisition ----------------------------------------------------------------- Dietrich Knauth at Reuters reports that bankrupt crypto exchange FTX is seeking to claw back more than $240 million it paid for stock trading platform Embed, saying former FTX insiders did no investigation before buying the essentially worthless bug-ridden software platform. FTX filed three lawsuits in U.S. Bankruptcy Court in Delaware targeting former FTX insiders including indicted founder Sam Bankman-Fried, Embed executives including founder Michael Giles, and Embed shareholders, according to Reuters. FTX alleged that Bankman-Fried and other FTX insiders misappropriated company funds to acquire stakes in Embed as part of the transaction, the report notes. FTX closed on the Embed acquisition just six weeks before the crypto exchange collapsed into bankruptcy in November, the report relays. FTX lost billions in customer money while propping up its own risky investments, actions its current CEO John Ray called "old-fashioned embezzlement," the report notes. FTX's new management has been seeking to recover assets to repay customers since the bankruptcy filing. U.S. law allows debtors to claw back payments made under certain circumstances shortly before a bankruptcy filing and use those funds to repay other creditors, the report says. FTX recently tried to sell Embed, but the highest bidder was Giles, who offered only $1 million, the report notes. FTX's auction "leaves no doubt" that the $220 million it spent to acquire Embed was "wildly inflated relative to the company's fair value, which Giles well knew," FTX wrote in its lawsuit, the report discloses. FTX intended to use Embed's software to add stock trading to its crypto exchange platform, but Embed's software was "essentially worthless," the lawsuits said. FTX performed almost no investigation of Embed and "prioritized speed over all else," they added. Embed's own insiders were surprised that FTX paid so much for the company after little more than a meeting with Giles, describing FTX's approach to due diligence with a cowboy emoji in internal messages, the report relays. As part of the purchase, FTX also paid Embed employees $70 million in retention bonuses. Most of that went to Giles, who later worried how to explain his $55 million bonus to other Embed shareholders, according to the lawsuits, the report notes. FTX is seeking to recover $236.8 million from Giles and Embed insiders, and $6.9 million from Embed minority shareholders, the report adds. About FTX Trading FTX is the world's second-largest cryptocurrency firm. FTX is a cryptocurrency exchange built by traders, for traders. FTX offers innovative products including industry-first derivatives, options, volatility products and leveraged tokens. Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that FTX paused customer withdrawals after it was hit with roughly $5 billion worth of withdrawal requests. Faced with liquidity issues, FTX on Nov. 9 struck a deal to sell itself to its giant rival Binance, but Binance walked away from the deal amid reports on FTX regarding mishandled customer funds and alleged US agency investigations. At 4:30 a.m. on Nov. 11, Bankman-Fried ultimately agreed to step aside, and restructuring vet John J. Ray III was quickly named new CEO. FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc. (d/b/a FTX US), Alameda Research Ltd. and certain affiliated companies then commenced Chapter 11 proceedings (Bankr. D. Del. Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022. Additional entities sought Chapter 11 protection on Nov. 14, 2022. FTX Trading and its affiliates each listed $10 billion to $50 million in assets and liabilities, making FTX the biggest bankruptcy filer in the US this year. According to Reuters, SBF shared a document with investors on Nov. 10, 2022, showing FTX had $13.86 billion in liabilities and $14.6 billion in assets. However, only $900 million of those assets were liquid, leading to the cash crunch that ended with the company filing for bankruptcy. The Hon. John T. Dorsey is the case judge. The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel; Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal North America, LLC as financial advisor. Kroll is the claims agent. The official committee of unsecured creditors tapped Paul Hastings as counsel, FTI Consulting, Inc., as financial advisor, and Jefferies LLC as the investment banker. Young Conaway Stargatt & Taylor LLP is the committee's Delaware and conflicts counsel. Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory T. Donilon, Edward L. Schnitzer, and David M. Banker, is representing Sam Bankman-Fried in the Chapter 11 cases. White-collar crime specialist Mark S. Cohen has reportedly been hired to represent SBF in litigation. Lawyers at Paul Weiss previously represented SBF but later renounced representing the entrepreneur due to a conflict of interest. Katherine Stadler, the court-appointed fee examiner, is represented by Godfrey & Kahn, SC. =========== B R A Z I L =========== BRAZIL: Inflation Within Target in May and June ----------------------------------------------- Rio Times Online reports that inflation entered the inflation target range in March this year when the IPCA pointed to an annualized variation of 4.65% in prices. The IBGE (Brazilian Institute of Geography and Statistics) announced that the IPCA reached 4.18% in April in the accumulated over 12 months, according to Rio Times Online. According to XP, inflation will also be within the target range in May and June, the report discloses. The inflation target is defined by the CMN, which has two members from the government and one from the Central Bank, the report notes. 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 A Y M A N I S L A N D S =========================== SEAGATE HDD: Moody's Affirms Ba2 CFR & Alters Outlook to Negative ----------------------------------------------------------------- Moody's Investors Service affirmed Seagate HDD Cayman's (Seagate) Ba2 Corporate Family Rating and Ba2-PD Probability of Default rating, and downgraded the ratings for its senior unsecured notes to Ba3, from Ba2, and its Speculative Grade Liquidity rating to SGL-3, from SGL-2. The ratings outlook was changed to negative, from stable. The negative outlook reflects the steep cyclical downturn, and the likelihood of a delayed turnaround in demand for Hard Disk Drives (HDDs) and Seagate's weak profitability extending into late 2023. Seagate HDD Cayman is an indirect subsidiary of Seagate Technology Holdings plc. Affirmations: Issuer: Seagate HDD Cayman Corporate Family Rating, Affirmed Ba2 Probability of Default Rating, Affirmed Ba2-PD Downgrades: Issuer: Seagate HDD Cayman Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2 Backed Senior Unsecured Regular Bond/Debenture, Downgraded to Ba3 from Ba2 Outlook Actions: Issuer: Seagate HDD Cayman Outlook, Changed To Negative From Stable RATINGS RATIONALE Seagate is experiencing a steep cyclical downturn and it expects demand for nearline drives to recover around year-end 2023. The company faces still-elevated levels of HDD inventory primarily at its cloud customers, slowing growth in the hyperscale data center market, and a weaker -than-expected recovery in demand from customers in China, a key market for Seagate, since COVID-19 restrictions were lifted earlier this year. Based on the company's guidance for fiscal fourth quarter ending June 2023, adjusted operating income (non-GAAP) for fiscal year ending in June 2023 could decline by about 80% over prior year. The negative ratings outlook reflects Moody's expectation for negative free cash flow through the first half of FY '24 and total debt to EBITDA (Moody's adjusted and after excluding restructuring charges, purchase cancellation payments, and reserves associated with a legal settlement with the US Department of Commerce) to exceed 7x. Seagate faces additional downside risk of muted enterprise IT spending if macroeconomic conditions remain weak over the next few quarters. Seagate's shareholder-friendly financial policies have reduced the company's financial capacity to weather the cyclical downturn and constrain its credit profile. Moody's views the increase in Seagate's net debt levels over the last few years as a result of the company's large share repurchases until they were suspended in F2Q '23, the potential for sale/leaseback transactions to refinance senior notes maturing in June 2023, and management's plan to preserve common dividends despite a significant decline in profitability, collectively as credit negative to debtholders. The affirmation of the Ba2 CFR reflects Moody's current expectation that Seagate's profitability should progressively strengthen in 2024 as excess inventory in the channel is consumed and demand for nearline drives recovers from the steep cyclical trough by late 2023. Seagate's large cost reduction measures and increasing production volumes will accelerate a rebound in profitability as demand recovers. Although the growth in the hyperscale cloud segment has slowed, the segment is growing and customers of cloud services continue to increase commitments toward future cloud capacity. Moody's expects year-over-year growth rates in the hyperscale cloud segment to improve in the second half of 2023 after the efforts by customers of cloud services to optimize consumption that began around mid-2022 run through their course and demand for cloud capacity grows. The Ba2 CFR is additionally supported by Seagate's strong market position as one of the two principal suppliers of high-capacity HDDs that are the primary, cost-effective storage media for the hyperscale cloud segment and other applications requiring large data storage, such as the video and imaging applications. The affirmation of the CFR reflects Moody's expectation that Seagate's total debt to EBITDA will decline to below 4x (Moody's adjusted) and free cash flow will improve to least mid-single digit percentages of total adjusted debt in 2024. Moody's further expects share repurchases to remain suspended in 2024 until the cash position strengthens meaningfully. At the same time, Seagate has high business risks from its revenue concentration in the HDD product category. The company faces substitution risks from flash memory in its legacy end markets that could extend to enterprise storage solutions, and sustained pricing pressure that it needs to offset through innovation and growth in capacity shipments. Product cycles are short and execution risk in managing technology transitions with increasingly complex storage technologies is high. Moody's expects that strong long-term demand for HDDs from the hyperscale cloud providers will more than offset declining demand for HDDs in Seagate's legacy markets. However, growing revenue concentration in the hyperscale cloud end market and customers within that market will increase revenue variability. The downgrade of the Speculative Grade Liquidity rating to SGL-3 reflects Seagate $1.1 billion of current maturities as of F3Q '23. Moody's views Seagate's liquidity as adequate supported by the $766 million of cash balances and full access to $1.5 billion of revolving credit facility following the recently executed amendment to credit agreement. Seagate expects to enter into sale-leaseback transactions to refinance the $540 million of senior notes maturing in June 2023. The company also has $500 million of senior notes due in March 2024. Under the amended terms of the credit agreement, Seagate will be required to provide collateral to lenders in the credit agreement if the company does not prepay at least $450.0 million of outstanding term loans by December 29, 2023, or at least two of three rating agencies downgrade the company's corporate issuer ratings to below certain thresholds. The downgrade of Moody's ratings for the senior unsecured notes to Ba3, from Ba2, reflects lower expected recovery for senior unsecured debt in the event of default, a scenario in which the rating thresholds requiring the company to secure obligations under its credit agreement are likely to be triggered. If the springing collateral provision under the credit agreement were to be permanently eliminated, Moody's would equalize the ratings for Seagate's senior unsecured debt with that of its CFR as the capital structure would consist of a single class of debt. Moody's does not rate Seagate's credit facilities. Seagate's debt obligations are guaranteed by the intermediate holding company, Seagate Technology Unlimited Company (formerly known as Seagate Technology plc), but not by material operating subsidiaries of the borrower. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Seagate's ratings are unlikely to be upgraded over the next 12 to 18 months given its shareholder-friendly financial policies, elevated financial leverage, and high business risks. Over time, the ratings could be upgraded if the company commits to and establishes a track record of conservative financial policies such that Moody's expects Seagate will sustain average total debt to EBITDA (Moody's adjusted) below 3.5x through industry cycles, it generates sustained growth in profits with lower revenue volatility, and it meaningfully strengthens its cash position considering its investment requirements and industry cyclicality. The ratings could be downgraded if liquidity deteriorates, the anticipated inflection in demand is not expected to materialize by the end of 2023, or the recovery is weak such that Moody's expects total debt to EBITDA will be sustained above 4.5x or free cash flow will remain below the high single digit percentages of total debt over the following 12 months. The rating could also be pressured if Seagate's financial policies prioritize shareholder returns rather than strengthening liquidity when profitability rebounds. The principal methodology used in these ratings was Diversified Technology published in February 2022. =============== C O L O M B I A =============== CANACOL ENERGY: Fitch Affirms LongTerm IDRs at 'BB', Outlook Stable ------------------------------------------------------------------- Fitch Ratings has affirmed Canacol Energy Ltd.'s (CNE) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) and its senior unsecured notes at 'BB'. The Rating Outlook is Stable. The rating reflects CNE's expected production of nearly 300 million cubic feet per day (MMcfd) by 2025, its predictable and stable cash flow profile supported by long-term take-or-pay contracted sales at fixed prices. The ratings also reflect CNE's low production costs, adequate 1P reserve life of six years and expected EBITDA leverage at or below 3.0x over the rating horizon. The ratings incorporate CNE's regional importance for Colombia as the largest independent gas producer in the country and main supplier in the Caribbean coast. KEY RATING DRIVERS Predictable Cash Flows: CNE's long-term, take-or-pay contractual structure at fixed prices with strong credit quality off-takers significantly reduces its business risk, as this mitigates exposure to price and volume risk. This structure is unusual among its peers, as natural gas companies are normally exposed to market risks. Fitch projects CNE will sell approximately 80% of its production volume over the rating horizon under a fixed-price scheme, with an annual weighted average contracted life of seven years at an average price net of transportation costs of USD4.7 per one thousand cubic feet (Mcf). The company's contracted production volumes support robust and predictable cash flow, with an average EBITDA margin of approximately 63% and an average FFO margin of 36% over the rating horizon. Fitch estimates CNE's total cost of production (operating expenses plus royalties plus general and administrative and other expenses) will average USD2.4/Mcf over the rating horizon. Improving Operational Scale: Fitch projects production will grow at a CAGR of 17% over 2022-2025, reaching 300 MMcfd (approximately 53,000 boed) by 2025, up from 188 MMcfd in 2022. This growth is driven by El Tesorito (a 200MW thermo-power plant) and the Jobo-Medellin pipeline with a total capacity of 100 MMcfd. El Tesorito power plant operated by CELSIA S.A. E.S.P. started in 2H22, with Canacol owning 10% of the project and supplying 100% of its gas. The project is forecast to consume 30 MMcfd when running at 150MW equivalent to 75% utilization ratio. Shanghai Engineering and Technology Corp (SETCO), will build, own, operate and maintain the Jobo-Medellin pipeline, with gas delivery starting in 2H24, granting Canacol access to a market that constitutes nearly 60% of Colombia's natural gas demand. CNE will not own or pay for any part of the costs associated with the pipeline project, including its construction or operation. Upon assuming the pipeline project, expected at 3Q23, SETCO will reimburse Canacol for all of its back costs, including the amounts recorded in prepaid expenses (around USD20 million). Strategic for Energy Transition: Gas represents 70% of the regional energy matrix and will play an important role as a back-up power generation as Colombia moves away from other alternatives with higher greenhouse gas (GHG) emissions. As the key gas producer and supplier for the highly dependent Caribbean coast of Colombia, Canacol holds a strong competitive position, given the high start-up costs and limited conventional gas reserves. Fitch expects that Canacol will remain the largest supplier to Colombia's northern coast region. Strong Capital Structure: Fitch's base case calculates EBITDA net leverage will be at or below 3.0x for the period 2023-2026, with an average EBITDA/interest expense coverage of 8.0x. Canacol's debt to 1P reserves was USD8.3 per barrel of oil equivalent (boe) when applying 1P reserves of 60 million boe in 2022. Fitch expects Canacol to continue to benefit from manageable debt maturities, with its main maturity in 2028. DERIVATION SUMMARY Canacol's credit profile compares well with other independent gas producers in both Latin America and North America, including Hunt Oil Company of Peru L.L.C., Sucursal del Peru (BBB/Stable), CNX Resources Corporation (BB+/Stable), Ascent Resources Utica Holdings, LLC (B/Positive) and Comstock Resources, Inc. (B+/Stable). As a gas producer and supplier, Canacol compares favorably to peers, as it is the only entity that contracts an average of 80% of its production volume with solid off-takers. Hunt Oil is the closest peer in the region. Hunt owns an equity stake in the Camisea blocks 86 and 56 in Peru, which are strategically important for that country, providing 86% of its natural gas supply. Similarly, Canacol is regionally important to the Caribbean coast of Colombia, which is a large consumer of gas and is very comparable to Camisea. Canacol's capital structure, cash flow generation and liquidity profile are comparable to Hunt Oil. Fitch estimates that Canacol's 2023 total debt to EBITDA to be close to 3.0x, higher than Hunt's 0.7x, and above average among its U.S. peers (CNX, Ascent and Comstock) of 1.4x, as Canacol deploys its capex plan. Fitch projects Canacol's total debt to 1P to average USD9.40 boe over the next four years, which is highest among all peers. The latter is partially offset by its contracted cash flow profile and weighted life of contracts. KEY ASSUMPTIONS - Production volumes of 193,000 Mcf/d in 2023, 223,000 Mcf/d in 2024, 300,000 Mcf/d in 2025, and 310,000 Mcf/d in 2026; - Gross weighted average realized price of $5.15 per USD/Mcf in 2023 and $5.30 per USD/Mcf between 2024 through 2026; - Opex average of $.0.40 USD/Mcf between 2023 through 2026; - Royalties average of $0.80 USD/Mcf between 2023 through 2026; - Transportation cost average of $0.45 USD/Mcf between 2023 through 2026; - G&A cost average of $0.40 USD/Mcf between 2023 through 2026; - Total capex of $545MM between 2023 through 2026; - Dividends of $27MM per year; - Tax rate of 35% over the rated horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Net production rising to 55,000 boed on a sustained basis; - Maintenance of a 1P reserve size life at or higher than its weighted average contractual life; - Diversification of cash flows through growth in its electricity generation business segment; - Sustained conservative capital structure at or below 2.0x EBITDA gross leverage. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Production size declining below 35,000 boed; - A 1P reserve size life three years lowers than its weighted average contractual life; - Sustained EBITDA gross leverage at or above 3.0x; - Deterioration of the capital structure and liquidity due to a steeper than anticipated decline in production or a marked increase in debt; - Extraordinary dividends that weakens liquidity. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: As of March 2023, Canacol had cash on hand of USD72 million and USD125 million available under an RCF, for a total liquidity of USD197 million which covers more than four years of estimated interest expense. The company has a solid debt maturity profile, with its first major maturity expected to be the USD75 million drawn from the RCF in 2027, followed by the USD500 million bond maturity in 2028. ISSUER PROFILE Canacol Energy Ltd. (CNE) is a publicly listed exploration and production company focused on onshore natural gas in Colombia. The company's average production was 32,905 boe/d in 2022YE, 98% corresponded to natural gas. As of 2022, CNE had 114 mmboe of 2P natural gas reserves. ESG CONSIDERATIONS Canacol Energy Ltd. has an ESG Relevance Score of '4' for Exposure to Social Impacts due to the potential impact of social pressures and possible pushback from the communities in the region where it operates. This 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 ----------- ------ ----- Canacol Energy Ltd. LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB senior unsecured LT BB Affirmed BB =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Cuts Price of Gasoline ------------------------------------------ Dominican Today reports that the price of a barrel of oil has fallen in international markets, but so far it has not been reflected in the Dominican Republic. The Ministry of Industry and Commerce and MSMEs (MICM) ordered a reduction in local fuel prices, at a time when the price of a barrel of WTI crude (West Texas Intermediate) is falling in the New York market, according to Dominican Today. Gasoline dropped between one and two pesos and RD$3.00 per gallon was reduced only for LPG, the report notes. Fuel prices have remained high since world oil was trading at a high price and people expected further declines, as the government promised cuts as long as oil sold below $85, 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. ===================== E L S A L V A D O R ===================== LA HIPOTECARIA 15TH: Fitch Hikes Rating on Two Tranches to 'Bsf' ---------------------------------------------------------------- Fitch Ratings has upgraded to 'Bsf' from 'B-sf' the rating for the series A notes on La Hipotecaria Eleventh Mortgage-Backed Notes Trust, La Hipotecaria Thirteenth Mortgage-Backed Notes Trust, and series A and B notes on La Hipotecaria Fifteenth Mortgage-Backed Notes Trust. In addition, Fitch has affirmed the Series C notes issued by La Hipotecaria Fifteenth Mortgage-Backed Notes Trust at 'B-sf'. Fitch has also affirmed the ratings for La Hipotecaria El Salvadorian Mortgage Trust 2013-1 certificates and La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates at 'AAAsf'. The Rating Outlook is Stable for all ratings. The upgrades reflect the upgrade on El Salvador's country ceiling (CC) to 'B' from 'B-', which is based on the absence of any capital controls that would potentially constrain private sector debt repayment capacity, despite the recent period of sovereign stress. Entity/Debt Rating Prior ----------- ------ ----- La Hipotecaria Thirteenth Mortgage-Backed Notes Trust A PAL3008861A4 LT Bsf Upgrade B-sf La Hipotecaria El Salvadorian Mortgage Trust 2013-1 Series 2013-1 Certificates 501716AA2 LT AAAsf Affirmed AAAsf La Hipotecaria El Salvadorian Mortgage Trust 2016-1 2016-1 50346VAA7 LT AAAsf Affirmed AAAsf La Hipotecaria Eleventh Mortgage-Backed Notes Trust Series A Notes PAL3005461A6 LT Bsf Upgrade B-sf La Hipotecaria Fifteenth Mortgage-Backed Notes Trust A LT Bsf Upgrade B-sf B LT Bsf Upgrade B-sf C LT B-sf Affirmed B-sf KEY RATING DRIVERS RMBS Transactions La Hipotecaria Eleventh Mortgage-Backed Notes Trust (LHES 11th), La Hipotecaria Thirteenth Mortgage-Backed Notes Trust (LHES 13th), La Hipotecaria Fifteenth Mortgage-Backed Notes Trust (LHES 15th) Country Ceiling Upgrade Drives Rating Action Upgrades: El Salvador's country ceiling was upgraded to 'B' from 'B-', lifting the cap of the transactions to 'B' from 'B'. Fitch has tested the transactions under the new cap and the notes have been able to withstand stresses at this rating level. The ratings of Structured Finance notes cannot exceed the CC of the country where the assets reside unless the transfer and convertibility (T&C) risk is mitigated. While the rated notes of the three RMBS transactions may have sufficient credit enhancement to be rated above the country's IDR, the transfer risk is not mitigated, so the ratings remain constrained and ultimately capped by the country ceiling of El Salvador. Operational Risk Mitigated: Grupo ASSA, S.A. (BBB-/Stable; primary servicer) has hired La Hipotecaria S.A. de C.V. (LHES) (the sub-servicer) to be the servicer for the mortgages. Fitch has reviewed LHES systems and procedures and is satisfied with its servicing capabilities. Additionally, Banco General S.A. (BBB-/Stable) has been designated as backup servicer in order to mitigate the exposure to operational risk, and will replace the defaulting servicer within five days of a servicer disruption event. La Hipotecaria Eleventh Mortgage-Backed Notes Trust Transaction Performance Supports Upgrade On A Notes: CE has been increasing given the standard waterfall allocation and good asset performance. As of April 2023, CE has increased to approximately 58.9%, up from 52.0% observed in July 2022 for the Series A notes. The Series A notes also benefit from reserve accounts equivalent to 6x their next interest payment. Fitch has modelled the transaction and the notes are able to withstand stresses at the country ceiling level, at 'B'. Frequency of Foreclosure Remained Stable: Under Fitch's assumptions in a 'Bsf' scenario, the A notes would need to support a weighted average foreclosure frequency (WAFF) of 20.9% and a weighted average recovery rate (WARR) of 97.9%. These assumptions consider the main characteristics of the assets, where OLTV is 64.4%, the seasoning average 169 months and remaining term 180 months, WA current loan-to-value is 64.4% and the majority of performing borrowers (54.5%) pay through a payroll deduction mechanism. The assumptions also consider a Performance Adjustment Factor of 0.7x considering the historical performance of the portfolio. La Hipotecaria Thirteenth Mortgage-Backed Notes Trust Transaction Performance Supports Upgrade On A Notes: CE has been increasing given the standard waterfall allocation and good asset performance. As of April 2023, CE has increased to approximately 20.5%, up from 19.2% observed in July 2022 for the Series A notes. The Series A notes also benefit from reserve accounts equivalent to 1.0625% the outstanding balance of the series A notes, covering almost 3x their next interest payment and senior expenses. Fitch has modelled the transaction and the notes are able to withstand stresses at the country ceiling level, at 'B'. Frequency of Foreclosure Remained Stable: Under Fitch's assumptions in a 'Bsf' scenario, the A notes would need to support a WAFF of 15.3% and a WARR of 79.7%. These assumptions consider the main characteristics of the assets, where OLTV is 86.4%, the seasoning average 120 months and remaining term 226 months, WA current loan-to-value is 71.4% and the majority of performing borrowers (61.6%) pay through a payroll deduction mechanism. The assumptions also consider a Performance Adjustment Factor of 0.7x considering the historical performance of the portfolio. La Hipotecaria Fifteenth Mortgage-Backed Notes Trust Transaction Performance Supports Upgrade On A and B Notes: CE has been increasing given the standard waterfall allocation. As of April 2023, CE has increased approximately 18.0% up from 16.9% observed in July 2022 for the Series A notes, 6.8% up from 6.1% observed in July 2022 for the Series B notes, and 3.7% up from 3.3% observed in July 2022 for the Series C notes. However, performance deterioration is observed in last year, which pressures CE growth for the notes, especially for the most junior tranches. Delinquencies above 90 days increased from 0.4% (which was in line with the historical average) to 1.6% in LTM ending April 23. Fitch has modelled the transaction and results support the upgrade on class A and B notes, while the performance for class C notes converge to the affirmation of the current rating, 'B-'. Frequency of Foreclosure Remained Stable: Under Fitch's assumptions in a 'Bsf' scenario, the A, B and C notes would need to support a WAFF of 13.7% and a WARR of 66.9%, compared with WAFF of 13.1% and WARR of 66.0% from previous review, at the same rating level. These assumptions consider the main characteristics of the assets, where OLTV is 86.8%, the seasoning averages 94 months and the remaining term is 257 months, WA current loan-to-value is 75.7% and the majority of performing borrowers (65.9%) pay through a payroll deduction mechanism. The assumptions also consider a Performance Adjustment Factor of 0.7x considering the historical performance of the portfolio. CLN Transactions La Hipotecaria El Salvadorian Mortgage Trust 2013-1, La Hipotecaria El Salvadorian Mortgage Trust 2016-1 DFC's Credit Quality Supports Rating: The rating assigned to the La Hipotecaria El Salvadorian Mortgage Trust 2013-1 and La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates is commensurate with the credit quality of the guarantee provider. The credit quality of U.S. International Development Finance Corporation (DFC) is directly linked to the U.S. sovereign rating (AAA/F1+/Stable), as guarantees issued by, and obligations of, DFC are backed by the full faith and credit of the U.S. government, pursuant to the Foreign Assistance Act of 1969. Reliance on DFC Guaranty: Fitch assumes the payment on the La Hipotecaria El Salvadorian Mortgage Trust 2013-1 and La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates will rely on the DFC guaranty. Through this guaranty, DFC will unconditionally and irrevocably guarantee the receipt of proceeds from the underlying notes in an amount sufficient to cover timely scheduled monthly interest amounts and the ultimate principal amount on the certificates. Ample Liquidity: The La Hipotecaria El Salvadorian Mortgage Trust 2013-1 and La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates benefit from liquidity, in the form of a five-day buffer between payment dates on the underlying notes and payment dates on the certificates. Additionally, the certificates benefit from liquidity in the form of an interest reserve account or a letter of credit at the underlying note level. Fitch considers this sufficient to keep debt service current on the guaranteed certificates until funds under a claim of DFC are received. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade The ratings of La Hipotecaria Eleventh Mortgage-Backed Notes Trust Series A Notes, La Hipotecaria Thirteenth Mortgage-Backed Trust Series A Notes and La Hipotecaria Fifteenth Mortgage-Backed Notes Trust Series A, B and C Notes could be downgraded in case of severe increases in foreclosure frequency as well as reductions in recovery rates. Also, ratings could be downgraded if El Salvador's Country Ceiling (CC) level changes. In the case of La Hipotecaria El Salvadorian Mortgage Trust 2013-1 certificates and La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates, the rating assigned could be downgraded if the U.S. sovereign rating is downgraded. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The ratings of La Hipotecaria Eleventh Mortgage Backed Notes Trust Series A Notes, La Hipotecaria Thirteenth Mortgage-Backed Notes Trust Series A Notes and La Hipotecaria Fifteenth Mortgage Backed Notes Trust Series A and Series B Notes are currently capped at El Salvador's CC level. These ratings could only be upgraded if El Salvador's CC is upgraded. The ratings of La Hipotecaria Fifteenth Mortgage-Backed Notes Trust Series C Notes could be upgraded due to improvement of asset performance and consistent CE growth. In the case of La Hipotecaria El Salvadorian Mortgage Trust 2013-1 certificates, La Hipotecaria El Salvadorian Mortgage Trust 2016-1 certificates, the rating is at the maximum achievable level, thus no upgrades are possible. 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. ============= J A M A I C A ============= DIGICEL GROUP: Fitch Lowers LongTerm Issuer Default Rating to 'RD' ------------------------------------------------------------------ Fitch Ratings has downgraded the Long-Term Issuer Default Ratings (IDRs) of Digicel Group Holdings Limited (DGHL) and of Digicel Limited (DL) to 'RD' from 'C'. DGHL's senior unsecured notes and subordinated notes have been affirmed at 'C/RR5' and 'C/RR6', respectively. The downgrades follow recent revisions to Fitch's rating definitions. KEY RATING DRIVERS The downgrades of DL and DGHL reflect the expiration of the original grace periods to pay principal and interest on DL' s 2023 notes and on interest on DGHL's 2025 notes, . Fitch's revisions of its definition for restricted default (RD) removed ambiguity regarding multiple extensions of applicable grace periods. It also clarified that the relevant event in determining an 'RD' rating is the uncured expiry of any applicable original grace period. Recovery Prospects: The ratings of the DGHL subordinated notes reflect poor recovery prospects, consistent with an 'RR6' Recovery Rating due to their weaker position in the capital structure. The proposed restructuring of the 2025 DGHL unsecured notes indicate an expected recovery consistent with an 'RR5' rating. ESG - Governance Structure: Digicel's decision to restructure debt multiple times remains a constraint on the ratings, and Fitch views its corporate governance as weak. ESG - Group Structure: Digicel's incorporation status in dozens of countries and extensive use of contractual features of debt results in a complex group structure that weakens its corporate governance and the group's consolidated credit profile. DERIVATION SUMMARY DGHL and DL's IDRs reflect the expiry of the original grace period to pay principal and interest and interest, respectively. KEY ASSUMPTIONS The recovery analysis assumes that DGHL would be reorganized as a going concern in bankruptcy rather than liquidated. Fitch has assumed a 10% administrative claim. The going concern operating EBITDA reflects Fitch's estimates of mid-cycle EBITDA that is achievable in the medium term, given the company's position primarily in duopoly markets and its growth prospects under a scenario of only gradual currency depreciation. This going concern EBITDA of USD550 million is approximately equal to Fitch's projection for fiscal 2024. Fitch uses an enterprise value/EBITDA multiple of 5.0x, reflecting the company's long-term prospects and good market shares in mostly duopoly markets amid a scenario of financial distress. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Fitch will reassess the IDRs upon the completion of a debt restructuring process; the updated IDRs would reflect the new capital structure and credit profile of the issuer. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Filing for bankruptcy protection, liquidation, or any other formal winding-up procedure would lead to a downgrade of the corporate ratings to 'D'. LIQUIDITY AND DEBT STRUCTURE Insufficient Liquidity: DL entered into a grace period on USD925 million of note maturities due March 1, 2023, which the company has extended. DGHL experienced an uncured interest payment default on its unsecured debt, following the expiration of the 30-day grace period. ISSUER PROFILE Digicel is a diversified telecom operator that provides mobile and fixed-line services to consumers and businesses in the Caribbean. ESG CONSIDERATIONS Digicel Group Holdings Limited has an ESG Relevance Score of '5' for Group Structure due to its complex group structure and incorporation status in dozens of countries, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. Digicel Group Holdings Limited has an ESG RS of '5' for Governance Structure due to its willingness to restructure debt multiple times, which has a negative impact on the credit profile, and is highly relevant to the rating, resulting in an implicitly lower rating. Digicel Group Holdings Limited has an ESG RS of '4' for Exposure to Environmental Impacts due to its presence in a hurricane prone region, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Digicel Group Holdings Limited has an ESG RS of '4' for Financial Transparency due to the company's relatively opaque financial strategy, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Digicel Group Holdings Limited LT IDR RD Downgrade C Subordinated LT C Affirmed RR6 C senior unsecured LT C Affirmed RR5 C Digicel Limited LT IDR RD Downgrade C JAMAICA: Digital Payments Access Challenge Local Businesses ----------------------------------------------------------- RJR News reports that Jamaican businesses say telecommunications and electricity disruptions, along with access to digital payment frameworks, was a challenge for their operations. This is according to a report by the Inter-American Development Bank. The IDB says accessing digital payments, for example, using mobile wallets and digital services for financial transactions was flagged as a significant challenge for local businesses between 2014 and 2020, according to RJR News. As part of the Innovation, Firm Performance and Gender Survey, 2020, nine per cent of businesses surveyed said this was a major concern, the report notes. This is in the context of the rapidly growing prevalence of digital payment systems, and the closure of some local bank branches, the report relays. COVID-19 also pushed banks to offer more digital services. Vulnerabilities to service disruptions was another issue, with the private sector saying severe weather conditions tend to disrupt power and telecommunications systems such as the internet and mobile services, RJR News discloses. Approximately 46 per cent of Jamaican firms said access to electricity was a major challenge, the report says. That reflects a six per cent increase over the 2014 survey, the report notes. The number of firms highlighting interruptions in telecommunications services as a major challenge increased from about two per cent in 2014, to 26 per cent in 2020, the report relays. The findings were released by the IDB, as part of its Caribbean Economics Quarterly publication, 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. JAMALCO: Aiming to Return Facilities to Full Production Next Year ----------------------------------------------------------------- Dashan Hendricks at Jamaica Observer reports that JAMALCO is aiming to return its facilities to full production by early next year. The timeline comes nearly two years after a fire in the company's powerhouse left the alumina refinery paralysed, with estimates at the time showing it was losing up to US$500,000 per day when the facility was not producing. However, at a cocktail reception at the company's Great House in Halse Hall, Clarendon, for its new joint venture partner US-based Century Aluminum, Austin Mooney, managing director of Jamalco, said the plant is now running "at about 75 to 80 per cent" of its full capacity, with the hope that it will be at full capacity soon, according to Jamaica Observer. "We anticipate that sometime around the end of 2023 we should be back up to full production," Mooney told the audience in attendance. Later, in an interview with the Jamaica Observer, he placed the timeline as late as January due to uncertainties in the execution of certain projects under what he called Project Restore, which aims to get the alumina refinery up and running at full capacity, the report notes. "We've been slowly settling down and steadying the plant as we ramp up production month by month," Mooney said as he outlined that the plant has had to switch from its intention to use gas as its fuel source to diesel and heavy fuel oil (HFO) as prices for the fossil fuel surged in the aftermath of Russia's invasion of Ukraine, the report relays. "We started the plant all revolved around gas . . . so we rented a lot of boilers to operate and generate steam using gas, but with the war in the Ukraine gas became expensive. The week before the war, we were paying US$7 per MMBtu for gas, and it went up as high as US$16 per MMBtu," he told the Caribbean Business Report, Jamaica Observer discloses. Mooney said, ahead of the war which caused the hike in gas prices, Jamalco had rented assets that utilise gas as a fuel but have been slowly converting them from burning gas to burning diesel and said that process will be done by the end of May. "And then we have boiler five, which is one of our biggest and most efficient boilers. We expect that will be back on HFO by December into early January, which should then push us up to 100 per cent production," the report notes. It is not clear how much the refinery is saving with the switch from gas to diesel and HFO, the report relays. He, however, adds that: "Going forward we will have dual fuel and now we are talking to New Fortress [Energy] about looking to supply us with gas again," the report discloses. The company also said it is looking at renewable energy to help run its plant in the future, the report says. "That's one of the reasons why we are here, because we want to make our aluminium greener, more sustainable, and more environmentally friendly, and one part of that is to make sure that the refinery which makes the alumina for the smelters operate in an environmentally friendly manner," Gunnar Guolaugsson, executive vice-president of global operations for Century Aluminum told Caribbean Business Report on the sidelines of the cocktail reception, the report relays. He said that means "renewable green energy to supply the plant like solar and things like that. I think we can make refinery be environmentally friendly, but we have to do the right things to make that happen", he continued. Century became a partner in Jamalco after it acquired the 55 per cent stake previously owned by the Noble Group for US$1 in April, the report discloses. Clarendon Alumina Partners (CAP), a Government-owned entity, owns the other 45 per cent stake, the report says. "Here at Jamalco we are excited about this opportunity because Century is a good fit for Jamalco," Mooney said. Century Aluminum's main business is the smelting of aluminium, the report notes. The company has four smelters - three in the United States and one in Iceland, the report relays. "They were the customer to take the first shipment of alumina after the restart," Mooney said, though that came with a lot of challenges, with the date for the shipment of alumina changed more than once due to several challenges the company faced at the time, the report discloses. "Century are very, very aware of the challenges and they have also committed to helping us restore the powerhouse to its full operation capacity and also to invest in our Project Restore, which is to return the plant back up to its full operating capacity of 1.4 million [metric tonnes per year]," the report relays. As for Century, Guolaugsson said the acquisition was to secure the output of Jamalco for its smelters, the report relays. "Today we need around 1.4 million tonnes of alumina per year, and so when we have this plant back to capacity, it is basically all of the alumina we need," Guolaugsson told the Caribbean Business Report, the report says. He said the company is aware that it has to put new capital in the plant but declined to say how much that might be, the report discloses. "We are working out those plans right now as we speak, so I am not ready to give a number right now," Guolaugsson said in response to queries about how much will be spent overall to get the plant to full capacity. Efforts to ascertain how much has been spent so far proved futile. "We are working with Century and with CAP. We had a big session, where we went through a portfolio of projects, and we are looking to see the justification for each project, where it fits in the schedule, and then when we have all sort of signed off on the projects then we will be in a position to say how much we need to spend," Mooney added. One way the company is seeking to raise additional funds is through listing on the Jamaica Stock Exchange or raising money on the international capital markets, but Mooney explained that cannot be done now because Jamalco is not a legal entity, the report relays. Finance Minister Dr Nigel Clarke recently reiterated his commitment to incorporating the company, which Mooney said will be the first step before a decision can be made to list, the report notes. "It's progressing very fast. It's actually a priority for both partners," he added. Mooney, however, said he is not involved directly in the process so he does not know how long it will take, but added, "What I know [is] that since the acquisition with Century, both partners have been working on it full steam," the report says. He explained further: "We are an anomaly. We are a non-incorporated joint venture, so we are not really a legal entity. The legal entity is CAP and Century. In Jamaica we are well known and people understand the value, our proposition, our strengths, so within Jamaica we have a reputation, we can go out and secure credit. But if you want to go and secure credit outside of Jamaica, if you are not a legal entity, it's never going to happen." As reported in the Troubled Company Reporter-Latin America on May 3, 2023, RJR News relayed that the majority stake in the Jamalco alumina refinery will be acquired by Century Aluminium Company for US$1. The deal will be closed in the coming days. According to the Financial Gleaner, a breakdown of the deal price was not given, but the implication is that the transaction may have cleared Noble Group of liabilities for Jamalco going forward, the report notes. Jamalco will add to Century's assets which currently stand at US$1.47 billion, according to RJR News. TCRLA reported in November 2018, RJR News said that Singapore authorities have launched an investigation into suspected false and misleading financial statements at Noble Group, the part owner of the Jamalco alumina refinery. =========== M E X I C O =========== GRUPO IDESA: S&P Raises LongTerm ICR to 'B-', Outlook Stable ------------------------------------------------------------ S&P Global Ratings raised its long-term issuer credit rating on Mexico-based petrochemicals producer Grupo Idesa S.A. de C.V. (IDESA) to 'B-' from 'SD' (selective default) with a stable outlook. S&P also assigned an issue-level rating of 'B-' to IDESA's $187 million new senior secured notes due 2028. S&P also assigned a recovery rating of '3' to the new notes, indicating its expectation of meaningful recovery (50%-90%) prospects in the event of a payment default. S&P said, "At the same time, we withdrew our 'D' issue-level rating on about $23.4 million in senior secured notes due in 2026 (the remaining amount after the exchange offer) at the issuer's request. We also withdrew the '4' recovery rating on these notes. "The stable outlook reflects our expectation that IDESA should gradually enhance its credit metrics after its debt restructuring and Capital Inbursa S.A. de C.V.'s (Inbursa's) capitalization. Although the company's leverage is still high, we expect IDESA to increase its revenues and EBITDA through its regular operations, lowering its leverage in the next 12-18 months." IDESA completed its exchange offer by reaching an acceptance of 92.2% among its 2026 senior notes bondholders, who received the new 2028 senior secured notes and cash consideration. Coupled with the capitalization of $310 million from its main lender, Inbursa, IDESA has now enhanced its capital structure by slashing its debt by about 50% (before the exchange offer) and alleviated its financial burden. Under the current debt structure, IDESA's financial commitments should enable the company's long-term financial viability, as the new notes with a longer term (2028 versus 2026) bear a lower interest rate (6.50% versus 9.375%). Under the new debt structure, the 2028 notes account for about 50% of IDESA's debt and the company has improved its debt maturity profile (weighted average maturity of about five years) with its largest maturities (about 70% of total debt) extended to 2028, which should provide the company a financial cushion and a more flexible cash management in the short term as well. S&P said, "Although the company has alleviated its debt and capital structure, we estimate leverage for 2023 would still remain high at 8x-9x. While it is a significant improvement from the 15.7x level at the end of 2022, we still view the company's financial risk profile as highly leveraged. Although we don't expect dividend inflows from its joint ventures (JVs), mainly Braskem Idesa, during 2023, we believe that inflows from JVs should resume by 2024 and increase IDESA's adjusted EBITDA. Moreover, as we don't forecast debt to increase in the next 12-18 months, we expect that all of IDESA's business units (petrochemicals, distribution, and logistics) to post stable performance, resulting in moderate revenue and EBITDA growth, supporting the company's deleveraging. As a result, we estimate that leverage should drop to the 5x-6x range by 2024. "Despite macroeconomic headwinds for 2023, such as persistent inflation that could add volatility to some raw material prices and commodities, we believe that demand in the main end industries that IDESA serves should remain somewhat stable. IDESA's petrochemical and distribution divisions (about 35% and 65% of consolidated sales, respectively) are mainly oriented to markets of basic consumption nature (packaging of food and beverage and personal care products, pharmaceutical, among others), supporting IDESA's revenue and EBITDA growth. Therefore, we expect the company to display a resilient operating and financial performance." This should be supported by enhanced business strategies and stricter cost controls backed by a new shareholder, which should improve IDESA's cash flows in the long term. Nonetheless, the company's liquidity position will remain constrained for the next 12 months, and its improvement will depend upon better business conditions, raising an interest coverage ratio above 2.0x (or higher). Capital Inbursa S.A. de C.V. (not rated) is a capital investment fund whose main activity is to acquire interest, participation, or shares in various companies. S&P said, "According to our criteria, the financial sponsors include, but are not limited to, private-equity firms, hedge funds, and venture capital firms. Therefore, we consider IDESA's new shareholder, which has a 88.75% stake in the company, as a financial sponsor. Although financial sponsors typically have aggressive financial strategies to maximize shareholder returns in the short to intermediate time frame, we believe that Capital Inbursa should implement new strategies and initiatives to enhance IDESA's corporate, operating, and financial structures to increase its profitability, although there's no specific time (if any) for the entity to dilute its stake in IDESA." ESG credit indicators: E-3, S-2, G-3 (no changes) S&P said, "Environmental factors are a moderately negative consideration in our credit rating analysis of IDESA. Similar to the industry, the company is exposed to increasing environmental regulations on CO2 emissions, pollution, and waste. IDESA's petrochemical segment is active in the PET industry that produces plastics mainly used for packaging in the food and beverage, and personal care industries, among others. PET plastics can be recycled multiple times (unlike other plastics). Governance factors are also a moderately negative consideration in our credit rating analysis. In recent years, IDESA has displayed tolerance to high leverage and limits on risk management to ensure a more favorable financial performance. "Like most rated entities owned by private-equity sponsors, we believe the company's aggressive financial risk profile points to corporate decision-making that prioritizes the interests of the controlling owners. This also reflects the generally finite holding periods and a focus on maximizing shareholder returns." ======= P E R U ======= PERU: Gets Continued Access to FCL Resources, IMF Review Says ------------------------------------------------------------- The Executive Board of the International Monetary Fund (IMF) completed on May 17, 2023, the mid-term review of Peru's qualification under the Flexible Credit Line (FCL) arrangement. [1] The Executive Board reaffirmed that Peru's very strong macroeconomic policies and institutional policy frameworks, sound economic fundamentals, and proven track record of policy implementation warrant continued access to FCL resources. The two-year arrangement was approved on May 27, 2022 for an amount of SDR4.0035 billion (about US$5.3 billion or 300 percent of quota). The Peruvian authorities have reiterated their intention to continue to treat the arrangement as precautionary. The authorities intend to exit the arrangement conditional on the reduction of external risks, in line with their strategy that sees the use of the facility as temporary. Following the Executive Board's discussion on Peru, Mr. Kenji Okamura, Deputy Managing Director, made the following statement: "Over the past two decades, Peru's very strong economic fundamentals, institutional policy frameworks, and prudent policy settings have underpinned robust economic growth and stability, spanning multiple electoral cycles and governments. The solid inflation-targeting regime, credible fiscal framework, and robust financial sector supervision and regulation have allowed the country to deploy a robust policy response to mitigate the socio-economic impact of the pandemic, and subsequently remove the policy stimulus, while preserving macroeconomic stability and maintaining ample access to international capital markets. "Following a strong post-pandemic rebound, economic activity slowed down in 2022 and is expected to remain subdued in 2023, with inflation gradually declining to the target range by year-end. The economic outlook remains highly uncertain, and external risks remain elevated. Access to the Flexible Credit Line arrangement, along with sizable international reserves, low public debt, anchored inflation expectations, and a sound financial system have provided the authorities with valuable insurance in a period of high uncertainty and volatility. "Peru has a sustained track record of implementing very strong macroeconomic policies, and the authorities remain committed to maintaining very strong policies in the future. The Flexible Credit Line will continue to play an important role in supporting the authorities' macroeconomic strategy by sustaining market confidence and providing a valuable buffer against tail risks. The authorities intend to continue to treat the arrangement as precautionary, and to exit the facility conditional on the evolution of external risks." ===================== P U E R T O R I C O ===================== CERTENEJAS INCORPORADO: Case Summary & 20 Top Unsecured Creditors ----------------------------------------------------------------- Debtor: Certenejas Incorporado DBA Hotel Flor Del Valle Road #172, KM 7.5 Bayamon Ward Cidra, PR 00739 Business Description: The Debtor is the fee simple owner of a land with commercial building known as "Motel Flor Del Valle" located in Cidra, Puerto Rico valued at $3.15 million. Chapter 11 Petition Date: May 12, 2023 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 23-01438 Debtor's Counsel: Charles A. Cuprill, Esq. CHARLES A. CUPRILL, PSC LAW OFFICES 356 Fortaliza Street Second Floor San Juan, PR 00901 Tel: 787-977-0515 Email: ccuprill@cuprill.com Total Assets: $4,412,900 Total Liabilities: $10,114,333 The petition was signed by Luis J. Meaux Vazquez 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/4H5GHOA/CERTENEJAS_INCORPORADO__prbke-23-01438__0001.0.pdf?mcid=tGE4TAMA PUERTO RICO: PREPA Bankruptcy at Risk of Dismissal -------------------------------------------------- Michelle Kaske of Bloomberg News reports that Puerto Rico's bankrupt electric utility may not get another chance to craft a proposal to cut about $9 billion of debt, if the court overseeing its case fails to approve a restructuring plan that most bondholders have yet to accept. That's the warning that US District Court Judge Laura Taylor Swain gave May 8 to the financial oversight board that's managing the power utility's nearly six-year bankruptcy. The judge summoned the parties after they failed to participate in any court-monitored mediation sessions this year even though she ordered such action multiple times. About Puerto Rico Puerto Rico is a self-governing commonwealth in association with the United States. The chief of state is the President of the United States of America. The head of government is an elected Governor. There are two legislative chambers: the House of Representatives, 51 seats, and the Senate, 27 seats. The governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the son of former governor Pedro Rossello. In 2016, the U.S. Congress passed PROMESA, which, among other things, created the Financial Oversight and Management Board and imposed an automatic stay on creditor lawsuits against the government, which expired May 1, 2017. The members of the oversight board are: (i) Andrew G. Biggs, (ii) Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J. Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii) David A. Skeel Jr. On May 3, 2017, the Commonwealth of Puerto Rico filed a petition for relief under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"). The case is pending in the United States District Court for the District of Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's PROMESA petition is available at http://bankrupt.com/misc/17-01578-00001.pdf On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation (COFINA) commenced a case under Title III of PROMESA (D.P.R. Case No. 17-01599). Joint administration has been sought for the Title III cases. On May 21, 2017, two more agencies -- Employees Retirement System of the Government of the Commonwealth of Puerto Rico and Puerto Rico Highways and Transportation Authority (Case Nos. 17-01685 and 17-01686) -- commenced Title III cases. U.S. Chief Justice John Roberts named U.S. District Judge Laura Taylor Swain to preside over the Title III cases. The Oversight Board has hired as advisors, Proskauer Rose LLP and O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic consultant, Citigroup Global Markets as municipal investment banker, and Ernst & Young, as financial advisor. Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M. Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq., at O'Neill & Borges LLC are onboard as attorneys. Prime Clerk LLC is the claims and noticing agent. Prime Clerk maintains the case web site https://cases.primeclerk.com/puertorico Jones Day is serving as counsel to certain ERS bondholders. Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General Obligation Bondholders. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. 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