/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230609.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 Friday, June 9, 2023, Vol. 24, No. 116 Headlines B R A Z I L BRAZIL: ID OKs $50MM Loan for St. Catarina to Improve Fiscal Mgmt. BRAZIL: Industrial Production Drops 0.6% in April, Says IBGE BRAZIL: Public Accounts Surplus Falls 47% in First Quarter C A Y M A N I S L A N D S GFH SUKUK: Fitch Affirms B Rating on USD500MM Sukuk Due 2025 C H I L E CHILE: Central Bank Says Local Inflation Woes Remain Unresolved C O L O M B I A PA AUTOPISTA RIO: Fitch Affirms BB+ Rating on 2036 Notes J A M A I C A DIGICEL GROUP: Completes Consent Solicitation on 2023 Notes JAMAICA: Expected to Realise 1-3% Growth for 2023-2024 N I C A R A G U A NICARAGUA: Fitch Alters Outlook on B- Foreign Curr. IDR to Positive P U E R T O R I C O 3RD MILLENNIUM: Case Summary & Two Unsecured Creditors CEDIPROF INC: Gets OK to Hire Bielli & Klauder as Special Counsel - - - - - =========== B R A Z I L =========== BRAZIL: ID OKs $50MM Loan for St. Catarina to Improve Fiscal Mgmt. ------------------------------------------------------------------ A $50 million loan from the Inter-American Development Bank (IDB) will help the State of Santa Catarina in Brazil modernize its fiscal management and enhance how it administers taxes and manages public spending, the bank noted in a press release. The loan is part of Brazil Fiscal Management Modernization Program, Profisco II, which supports all 26 Brazilian states and the Federal District. Santa Catarina is the eighteenth Brazilian state to receive financing from this program. The resources for modernizing Santa Catarina's fiscal management will fund a program with three components. The first is designed to improve management instruments, modernize technological infrastructure, and increase fiscal transparency. The second will simplify tax compliance for taxpayers, streamline tax collection, and expand government revenue to fund programs that serve the population's needs. Finally, the third component focuses on tightening fiscal discipline and on more effective and efficient government spending. This program in Santa Catarina will boost the sustainability of public finances so that the government and private sectors and citizens in general can benefit from better services and infrastructure, easier and less costly tax compliance, more readily available information for public management, and greater transparency. The Profisco II Program, which includes this financing for the state of Santa Catarina, operates through a $900 million conditional credit line for investment projects (CCLIP) approved in 2017. This line of credit finances projects by individual state governments, with support from the federal government, which provides sovereign guarantees for the program's loans on behalf of the states. The loan to Santa Catarina has a 25-year repayment term, a six-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). 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). BRAZIL: Industrial Production Drops 0.6% in April, Says IBGE ------------------------------------------------------------ Richard Mann at Rio Times Online reports that industrial production in Brazil fell 0.6% in April compared to March on a seasonally adjusted basis after growing 1.1% last month and ending two consecutive declines. Compared to the same period last year, the industry fell 2.7%. From January to April, industrial production fell by 1%. The result was released by IBGE (Brazilian Institute of Geography and Statistics) on Friday (June 2, 2023). Here is the full report (1 MB), according to Rio Times Online. The main negative influences came from food products (-3.2%), machinery and equipment (-9.9%), and automotive vehicles, trailers, and car bodies (-4.6%), 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). BRAZIL: Public Accounts Surplus Falls 47% in First Quarter ---------------------------------------------------------- Richard Mann at Rio Times Online reports that the Brazilian public sector accounts (central government, states and municipalities, and state-owned companies) recorded a primary surplus of US$78.7 billion (US$15.515 billion) in the first four months of the year, 47 percent less than in the first four months of last year, the Central Bank informed. According to the issuing entity, the consolidated public sector result between January and April equals 2.31 percent of the country's Gross Domestic Product (GDP), the report notes. The primary surplus occurs when tax revenues exceed expenditures without considering interest on public debt, 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). =========================== C A Y M A N I S L A N D S =========================== GFH SUKUK: Fitch Affirms B Rating on USD500MM Sukuk Due 2025 ------------------------------------------------------------ Fitch Ratings has affirmed Bahrain-based GFH Financial Group BSC's (GFH) Long- and Short-Term Issuer Default Ratings (IDR) at 'B'. The Outlook on the Long-Term IDR is Stable. Fitch has also affirmed the senior unsecured long-term rating of the USD500 million sukuk due 2025 issued through GFH Sukuk Company Limited (GFH SCL) at 'B' with a Recovery Rating of 'RR4'. GFH SCL is a special-purpose vehicle, incorporated in the Cayman Islands. GFH SCL was established solely to issue certificates (sukuk). KEY RATING DRIVERS Concentrated Risk Profile: GFH's IDR reflects ongoing significant albeit reduced exposure to illiquid unlisted investments, primarily related to real estate investments and exposure to low-rated operating environments. The IDR also takes into account GFH's niche franchise in Bahrain as an Islamic wholesale investment bank and majority owner of Khaleeji Commercial Bank (KHCB, unrated), and its efforts to develop more stable fee-based revenue streams. Low-Rated Operating Environment: GFH is incorporated and regulated in Bahrain (B+/Stable), with further activities across the MENA region. KHCB's business is entirely domestic. Bahrain's sovereign rating does not directly cap GFH's Long-Term IDR, but at its current level it limits upgrade potential. Evolving Business Model: Management has been following a strategy to de-risk GFH's business model in recent years, seeking to grow treasury activities, increase fee-generative business from investment management and reduce legacy illiquid real estate investments. In 2022, GFH carved out the bulk of these into a separate legal entity, Infracorp B.S.C., which is no longer consolidated. However, in Fitch's view, GFH's exposure to Infracorp remains considerable (through a 40% equity stake and a sizeable investment in Infracorp's USD900 million perpetual green sukuk issued in March 2022). Management has plans to reduce GFH's Infracorp exposure in the near to medium term and achieved some sales of the sukuk to third-party investors in 2022. Growing Treasury Activities: GFH's treasury activities (26% of revenue in 2022) are a growing area and a significant profit contributor, having commenced only a few years ago. Fitch believes these activities add some stability to GFH's earnings, providing their risk profile does not increase, as investments are expected to be largely focused on government and quasi-government debt with a smaller allocation to structured notes. The treasury portfolio registered significant fair value declines over 2022 as interest rates were increased. Investment Management a Strategic Priority: Investment banking activities (around 27% of revenue in 2022) have been a significant recent contributor to GFH's net profit, but earnings are potentially volatile as they depend on individually significant deal placements and investment exits. Management fees from private equity and income-yielding real-estate investments are a more stable and recurring source of revenues. GFH currently has around USD7.8 billion (2021: USD5.7 billion) of fee-earning assets under management across the group. Fitch views positively management's aim to significantly increase this level over the medium term, largely through inorganic growth targeted at the US and UK markets. Recent acquisitions include Roebuck Asset Management in the UK and Student Quarters Asset Management and Big Sky Asset Management in the US. KHCB Provides Some Earnings Stability: KHCB is a significant contributor to GFH's revenue (around 18% in 2022) and net profit and provides a source of more stable income. Following a balance sheet clean-up exercise in recent years, KHCB's asset quality has been improving and the bank is adjusting to a higher rate environment. Modest Overall Profitability: Group profitability is modest compared with peers, with a return on average assets of 1.1% for 2022 (2021: 1.3%). GFH's large asset base depresses profitability where assets are not regularly monetised, for example, in the real estate investment portfolio. Management is seeking to exit these more illiquid investments and is also focusing on developing the higher margin investment banking business where GFH benefits from good client relationships in the GCC region, with the potential to earn significant deal fees. Capitalisation Lags Peers: GFH's wholesale banking licence means the company is regulated for capital and liquidity by the Central Bank of Bahrain. Capitalisation is adequate with a common equity Tier 1 (CET1) ratio of 13.99% at end-2022 (for KHCB the CET1 ratio was 12.88% at end-2022). This ratio has increased following the spin-off and de-consolidation of certain capital-intensive real estate developments investments. However, the ratio is still weaker than banking peers, albeit above the regulatory requirement of 9%. Adequate Liquidity: GFH's liquidity coverage ratio and net stable funding ratio are above regulatory requirements at 134% and 111%, respectively. In Fitch's view, GFH remains exposed to longer-term liquidity risk, given the high proportion of less liquid assets it continues to hold alongside its treasury investments, and the lack of fungibility of both capital and liquidity between the parent entity and KHCB as a separately regulated subsidiary. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade -- Material reduction in GFH's regulatory capital headroom, for example, via significant impairment of its unlisted investments. -- Reduced investor appetite for GFH as a deposit-taker or asset manager, negatively impacting its liquidity or fee income and increasing the reliance of its cash generation on illiquid assets. -- Deterioration in the Bahrain operating environment, giving rise to significant asset-quality problems within KHCB, losses in GFH's own treasury activities or to lower demand for GFH's other investment banking services. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade -- Reduction in GFH's risk profile, by raising asset quality and growing a business model that enhances revenue stability through generating a greater proportion of recurring income. This would be likely to require further development of GFH's asset management business and reduced exposure to legacy real estate investments via Infracorp. -- Improvements in the macroeconomic condition of GFH's key operating environments, supporting investment banking demand and investment exit multiples. DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS GFH SCL SUKUK The US dollar senior unsecured sukuk ratings are driven solely by GFH's 'B' Long-Term IDR. This reflects Fitch's view that default of these senior unsecured obligations would reflect the default of GFH in accordance with Fitch's rating definitions. The 'RR4' Recovery Rating reflects Fitch's expectation of average recoveries in the event of a default. DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES GFH SCL's sukuk rating is principally sensitive to changes in GFH's IDR. The ratings could also be sensitive to changes to the roles and obligations of GFH under the sukuk's structure and documents. 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 ----------- ------ -------- ----- GFH Financial Group BSC LT IDR B Affirmed B ST IDR B Affirmed B GFH Sukuk Company Limited senior unsecured LT B Affirmed RR4 B ========= C H I L E ========= CHILE: Central Bank Says Local Inflation Woes Remain Unresolved --------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Chile's central bank said there's no evidence that the domestic inflation slowdown had been consolidated, even as headline consumer price and consumption readings head in the right direction. The only plausible monetary policy option was to keep rates unchanged at an over two-decade high of 11.25%, central bankers wrote in the minutes to their May 12 decision, according to globalinsolvency.com. The risks associated with scenarios of higher inflationary pressures were "particularly complex and costly," they wrote, the report notes. "The Board agreed that the fact that total inflation fell and activity and consumption continued to adjust did not indicate that the inflationary problem had been resolved," they wrote in the document published, the report relays. "Information still had to be accumulated to assess whether the convergence of inflation to the 3% target had been consolidated," the report relays. Policymakers are sticking to their cautious stance on rates as both headline inflation and closely-watched core gauges continue to run well above the 3% target, the report notes. Still, investors expect easing to start in coming months on bets that activity and price pressures are cooling, the report relays. The monetary authority's decision to raise capital requirements also fanned speculation borrowing cost cuts are near, the report adds. =============== C O L O M B I A =============== PA AUTOPISTA RIO: Fitch Affirms BB+ Rating on 2036 Notes -------------------------------------------------------- Fitch Ratings has affirmed and removed from Rating Watch Negative (RWN) the following ratings of P.A. Autopista Rio Magdalena (ARM): - Unidad de Valor Real (UVR) notes for COP915,500 million due in June 2036 at 'BB+'/'AA+(col)'; - UVR loan for COP278,000 million due in June 2036 at 'BB+'/'AA+(col)'. The Rating Outlook is Stable. The rated notes coexist on a pari-passu basis with two Colombian peso-denominated and U.S. dollar-denominated loans, for an amount of USD200 million and COP825,000 million that mature in 2031 and 2035, respectively. The removal of the RWN reflects the execution of financial strategies by Construcciones El Condor, S.A. (CEC) that have allowed them to improve its liquidity position and meet its obligations. CEC signed an engineering, procurement and construction (EPC) contract with ARM for the execution of the toll road's functional units (UF) UF1 and UF2. RATING RATIONALE The ratings reflect the project's exposure to completion risk and a concession agreement that limits revenue risk due to the existence of traffic top-ups and grant payments. The transaction includes a satisfactory tariff adjustment mechanism that allows for increasing toll rates by inflation every year, although Fitch's cases assume tariffs will be frozen in 2023 and 2024 given the recent announcement made by grantor Agencia Nacional de Infraestructura (ANI). The ratings also consider a strong debt structure that includes cash sweep and pre-payment mechanisms that largely protect the transaction from traffic performance being materially different than expected. Under Fitch's rating case, the project's minimum loan life coverage ratio (LLCR) of 1.3x is strong for the rating according to applicable criteria and the revenue profile, where toll revenues represent only about 20% of total revenues. The ratings are constrained by the credit quality of CEC, as per Fitch's 'Stronger' completion risk assessment, in conjunction with the project's qualitative attribute assessments and available security. KEY RATING DRIVERS Completion Risk Limited by Weak Contractor [Completion Risk: Stronger]: Construction works are performed under two fixed-price date-certain EPC contracts; the obligations under the EPC contract for UF3 were assumed on a joint and several basis. According to the Independent Engineer, works are of low complexity and are executed by experienced contractors, and the completion schedule is adequate. The security package provides adequate liquidity should the EPC contractor need to be replaced, by means of combination of performance bonds, letters of credit and EPC contract retention clauses between 5.0% and 7.5%. Low Exposure to Volume Risk [Revenue Risk - Volume: High Midrange]: The assessment reflects only the road's traffic characteristics as per applicable criteria; however, exposure to traffic risk is rather limited due to the concession framework. The road connects the country's largest cities, Medellin and Bogota, along with the Caribbean coast and the main ports of the country. There is only one operational toll plaza with low traffic volatility, but two new plazas are expected to start operations in 2024. There is a moderate exposure to heavy vehicles traffic. Additionally, the road is expected to face some competition upon completion of all UFs and operate with moderate tolls. The project's main revenue sources are ANI's contributions, toll revenues and traffic top-up payments to be made periodically by ANI to compensate the concessionaire if toll collections are below the amounts established in the concession contract. Inflation Adjusted Toll Rates [Revenue Risk - Price: Midrange]: Toll rates are annually adjusted by inflation rate at the beginning of the year; however, in January 2023 the Colombian government announced that toll rates for 2023 will be frozen as part of the government's anti-inflationary policies. Toll rates are moderate, and should the net present value of toll collections received by the 9th, 14th, 19th, and last year of the concession be below guaranteed values, ANI has the obligation to cover any shortfalls, after deductions. Adequate Maintenance Plan [Infrastructure Development and Renewal: Midrange]: The project depends on a moderately developed capital and maintenance plan to be implemented by the concessionaire. The plan will be largely funded from the project's cash flows. The structure includes a dynamic 12-month forward-looking operating and maintenance (O&M) reserve that accounts for expected O&M as well as periodic major maintenance expenditures. The O&M plan, organizational structure and budget appear reasonable and in line with similar projects in Colombia. Robust Structural Features [Debt Structure: Stronger]: Debt is denominated in U.S. Dollars (USD), Unidad de Valor Real (UVR) and Colombian Pesos (COP). USD-denominated debt is matched with USD-linked currency revenues settled in COP (24% of future budget allocations [Vigencias Futuras] are USD-linked), and will be partially exposed to variable rate. COP-denominated debt is indexed to inflation. Structural features also include 12-month principal and interest prefunded onshore and offshore debt service reserve accounts (DSRA), and cash sweep mechanisms for traffic over and underperformance, according to preestablished debt service coverage ratio (DSCR) levels. Financial Profile The most relevant financial metric for the project is LLCR, given the transaction's debt structure. Although, under Fitch's rating case, DSCRs below 1.0x are projected, the existence of cash sweep mechanisms and reserve accounts support liquidity in case top-up payments are not timely received. Fitch's base and rating case LLCRs is 1.3x, which is strong for the rating according to applicable criteria and compared with other similarly rated transactions, particularly in light of the project's low exposure to volume risk. PEER GROUP ARM is comparable with Patrimonio Autonomo Union del Sur (Rumichaca), rated 'BB+'/Stable and 'AA+(col)'/Positive. The projects are part of the 4G toll road program in Colombia and share the same assessments for all risk attributes. Rumichaca has a higher contribution of toll revenues to total revenues (around 30%) compared to ARM (20%), which results in a higher exposure to volume risk. Rumichaca also has a higher rating case's minimum LLCR at 1.4x, but its international rating is constrained by the counterparty risk of the ANI. The Positive Outlook on Rumichaca's national ratings reflects satisfactory progress on construction works, along with Fitch's expectation that once construction obligations are met, the national ratings may be upgraded. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Completion difficulties leading to delays and cost overruns beyond those already contemplated in Fitch's scenarios; - Deterioration in Fitch's view regarding the credit quality of ANI's grantor obligations; - Deterioration in the credit quality of the EPC contractors that result in Fitch's completion risk rating below that of the debt rating. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Improvement in Fitch's view of the credit quality of ANI's grantor obligations, provided that project fundamentals support that view. - For the national scale ratings, successful compliance of construction obligations per the concession agreement subject to adequate financial performance. CREDIT UPDATE As of February 2023, the overall construction progress is 37.87% complete versus the programmed progress of 53.47%. For UF1 and UF2, the concessionaire requested for ANI a Liability Exculpatory Event (LEE) to compensate for heavy rains in late 2022, in order to extend the completion date of UF1 for 179 days and 199 days for UF. However, the LEE has not been granted yet. The concessionaire is working on a new construction schedule and expects works of UF1 will be finished in October 2024 and UF2 in April 2024. UF3 was completed and delivered on Dec. 26, 2022 to the ANI and the certificate of completion was executed on April 28, 2023. The concessionaire expects to receive trapped revenues for this UF in June 2023. In 2022, average annual daily traffic (AADT) in Puerto Berrio toll booth reached 2,370 vehicles, which was 6.6% below Fitch's base case expectations of 2,537 vehicles, but above the concessionaire's projection. According to the concessionaire, in 2022, traffic benefited the commencement of operations of UF4 in January 2022 and the execution of construction works in UF3. Toll revenues were COP10.7 billion, slightly below COP11.0 billion projected by Fitch due to traffic performance. The project was only entitled to receive 12.9% of the toll collection corresponding to UF4. In addition, in March 2023 the project collected COP36 billion associated to Future Budget Allocations (FBA) of the same UF. On Jan. 15, 2023, the Colombian government announced, through Decree 050, that toll rates for 2023 will be frozen as part of the government's anti-inflationary policies. The decree also states that the government will design and apply a mechanism to re-establish the tariff scheme by Dec. 31, 2024. The concessionaire expects partial tariffs increases will be applied during 2023 and 2024 as to reestablish tariffs by the stipulated date in the decree. In 2022, operational, maintenance and administrative expenditures were COP14.8 billion, associated with the operational phase of UF4, and were in line with Fitch's base case expectations of COP14.5 billion. The issuer properly complied with debt service payment in 2022, which included interest payments only, for COP82 billion. FINANCIAL ANALYSIS Fitch's base case (BC) assumes a ramp-up phase for all toll plazas in the project until 2025, driven by its construction phase and the completion of future infrastructure projects expected to induce traffic to the project. The compounded annual growth rate (CAGR) traffic is 19.7% in 2022-2026 and 3.2% onward. Fitch's rating case (RC) assumes a one-year delay in the ramp-up phase for all toll booths compared with the base case, driven by the potential delay in completing future infrastructure projects. The compounded annual growth rate (CAGR) traffic is 18.1% in 2022-2026 and 2.4% onwards. Other assumptions for Fitch's cases used to calculate credit metrics: - Colombia CPI growth: 2023: 6.0%; 2024: 3.0%; 2025 onward: 2.5% every year. - U.S. CPI growth: 2023: 3.7%; 2024: 2.7%; 2025 onward: 2% every year. - Opex stress: 5.0% (BC); 7.5% (RC). - Capex stress: 3.0% (BC); 5.0% (RC). - Construction delay: None for the BC and up to concession deadline for all UFs under RC. - ANI contribution's payment delay: Three months after the end of previous year. - Top-up payment delay: 18 months (maximum delay before termination event). - Performance ratio: 99% (BC); 98% (RC). - LIBOR rate: 2023: 3.5% (BC) and 5.5% (RC); 2024+: 4% (BC) and 6% (RC). - COP/USD exchange rate: 2023 and 2024: 4,500; 2025+: depreciation at 1.5%. Credit Metrics - Minimum LLCR: 1.3x (BC and RC). SECURITY The security package includes a pledge of the project company's shares, a first priority security interest in all of its assets, a pledge of all onshore and offshore accounts, EPC contract security package, proceeds from credit enhancements and insurance/reinsurance, and a pledge of the right to receive the termination payment under the concession agreement. In December 2014, ANI granted the concession to build, rehabilitate, improve, operate and maintain the Rio Magdalena 2 toll road, to ARM, a company fully-owned by Aleatica S.A.U. The project has a length of 144km and will include 87km of construction works, 47km of rehabilitation and 10km of improvement, the latter connecting to Ruta del Sol highway. It aims to improve the connection between the southwest, central Colombia, including Bogota and Medellin, and the Caribbean coast to the main ports of Colombia, Cartagena and Barranquilla. ESG CONSIDERATIONS Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Entity/Debt Rating Prior ----------- ------ ----- P.A. Autopista Rio Magdalena P.A. Autopista Rio Magdalena/ Senior Secured Notes/1 LT LT BB+ Affirmed BB+ P.A. Autopista Rio Magdalena/ Senior Secured Notes/1 Natl LT Natl LT AA+(col) Affirmed AA+(col) ============= J A M A I C A ============= DIGICEL GROUP: Completes Consent Solicitation on 2023 Notes ----------------------------------------------------------- Jamaica Observer reports that Digicel Limited received the requisite consents from its noteholders to amend the terms of its 2023 senior notes at the holding company level, as the telecommunications firm seeks to restructure its US$4.55-billion debt pile. The consent solicitation expired on May 26, with at least 80 per cent of noteholders in aggregate principal having their consents validly delivered as per Epiq Corporate Restructuring, LLC. The green light by noteholders gave way for an additional 15-day extension to the 90-day grace period on the 6.75 per cent notes which were originally due on March 1, according to Jamaica Observer. While this one transaction paves the way for a planned US$1.8-billion reduction in its total debt, it would still see Digicel founder Dennis O'Brien's ownership cut to 10 per cent from the current 99.9 per cent stake, as the current debt holders would receive equity, the report notes. However, his stake could increase again to 20 per cent if certain warrants attached to the restructuring are exercised, the report relays. Digicel is continuing negotiations with secured debt holders of bonds held by Digicel International Finance Limited (DIFL) and ad hoc crossover holders related to the other portion of the company's debt, the report notes. The debt restructuring situation has also pushed Digicel's credit rating from C to RD (restricted default) by credit rating agency Fitch Ratings, in its latest update on May 22, the report says. DIFL commenced a consent solicitation on April 26 related to its 2024, 2025 and 2026 notes in which it was noted that Digicel Group Holdings, DIFL and DL would attempt to enter a restructuring support agreement (RSA), the report discloses. DIFL was supposed to seek a new bridge loan facility of US$100 million to complete the RSA, which was to be secured under the collateral covenant of the note indenture, the report says. The Irish Times noted, "It is envisaged that the restructuring will be completed through a so-called scheme of arrangement carried out in Bermuda and rubber-stamped through a US reorganisation under Chapter 15 bankruptcy protection. This is similar to how Digicel carried out another debt restructuring in early 2020, when debt investors agreed to write off $1.6 billion of Digicel's then $7-billion debt mountain," the report relays. "While no definitive agreement concerning the material terms of such a transaction has been finalized, and no assurances can be provided that it will be finalized, based on negotiations to date and agreement in principle on key terms, the company believes a consensual and comprehensive restructuring is achievable in the near term. The company expects to announce further updates in the near term," Digicel stated in a press release obtained by the news agency. About Digicel Group Digicel Group is a mobile phone network provider operating in 33 markets across the Caribbean, Central America, and Oceania regions. The company is owned by the Irish billionaire Denis O'Brien, is incorporated in Bermuda, and based in Jamaica. As reported in the Troubled Company Reporter-Latin America in April 2020, Moody's Investors Service downgraded Digicel Group Limited's probability of default rating to Caa3-PD from Caa2-PD. At the same time, Moody's downgraded the senior secured rating of Digicel International Finance Limited to Caa1 from B3. All other ratings within the group remain unchanged. The outlook is negative. Also in April 2020, the TCR-LA reported that Fitch Ratings has downgraded Digicel Limited to 'C' from 'CCC', and its outstanding debt instruments, including the 2021 and 2023 notes to 'C'/'RR4' from 'CCC'/'RR4'. Fitch has also downgraded Digicel International Finance Limited to 'CCC+' from 'B-'/Negative, and its outstanding debt instruments, including the 2024 notes and the 2025 credit facility, to 'CCC+'/'RR4' from 'B-'/'RR4'. Fitch has removed the Negative Rating Outlook from DIFL. JAMAICA: Expected to Realise 1-3% Growth for 2023-2024 ------------------------------------------------------ RJR News reports that Jamaica is expected to realize growth of one to three per cent for the 2023/2024 fiscal year. Dr. Wayne Henry, Director General of the Planning Institute of Jamaica (PIOJ), said despite the slower out-turn, all industries are set to see GDP growth, according to RJR News. He said some pandemic induced strategies influenced the projection for the period which ends March next year, the report notes. "In some instances, the economy has entered into this new growth phase stronger, more efficient and competitive due to the pivoting that firms were forced to undertake to combat the fallout from the COVID-19 pandemic. These benefits arose from the continued utilisation of the work from home modality within the private sector and reports of the realization of increased productivity from workers," Dr. Henry noted, the report relays. It was also influenced by new opportunities which resulted in firms adding new products and services, particularly in the areas of information technology and service delivery modalities, the report says. Additionally, Dr. Henry said the retooling and addition of new capacities by major industry players, such as the addition of new hotel rooms, has better equipped some firms to meet the expanding demand, the report notes. The PIOJ director general said growth for the fiscal year will be led by the mining and quarrying industry as the Jamalco refinery continues to ramp up to full capacity by the end of 2023, the report discloses. "Relatively strong growth is also expected from the hotels and restaurants, other services and transport, storage and communication industry," he said, 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. ================= N I C A R A G U A ================= NICARAGUA: Fitch Alters Outlook on B- Foreign Curr. IDR to Positive ------------------------------------------------------------------- Fitch Ratings has affirmed Nicaragua's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B-' and revised the Rating Outlook to Positive from Stable. KEY RATING DRIVERS Outlook Revision: The revision of Nicaragua's Outlook to Positive from Stable reflects a prudent policy mix that has strengthened fiscal and external buffers, rendering the authorities better positioned to manage macroeconomic challenges related to international/geopolitical tensions. The economy has so far proven broadly resilient to these political tensions and resulting economic sanctions, although they continue to pose downside risks for growth prospects and constrain the sovereign's external financing options, making it increasingly reliant on one regional multilateral lender. The ratings are also supported by favorable government debt metrics and external liquidity, and constrained by low per-capita GDP, narrow local currency financing flexibility, and weak governance indicators. Political Tensions Ongoing: Domestic and external political tensions remain high under the Daniel Ortega administration, which has recently involved the suppression of civil society via the closure of numerous charity and civic organizations. The U.S. government enacted the RENACER Act in 2021, tightening sanctions on targeted individuals and institutions, and in 2022 expanded its toolkit and took measures affecting specific sectors (sugar, mining). Further tightening of sanctions remains a downside risk. These developments are likely to be one factor behind lower investment levels relative to the past, and they have narrowed external financing options, rendering the sovereign increasingly reliant on the Central American Bank for Economic Integration (CABEI). Nevertheless, prudent macro policies have helped the sovereign navigate these political developments. A surge in outward migration, though a negative trend likely driven by these social and political issues, has also meant a sharp increase in remittance inflows that are fueling growth and the buildup of external buffers. Remittances Improve External Position: The current account deficit improved to 1.4% of GDP in 2022 from 3.1% in 2021 despite an adverse terms-of-trade shock, bucking the trend in Central America due to a dramatic surge in remittances. Outward migration and a strong U.S. labor market drove a sharp 50% increase in remittances in 2022 to USD3.2 billion (or 21% of GDP, up from 10% in 2017). Remittances continue to grow (up 60% yoy in Q1) and, combined with lower oil prices, are projected to lower the current account deficit to 0.6% of GDP in 2023. Inflows of FDI reached record levels in 2022, though with a much larger share of retained earnings as opposed to new equity than in the past. Large "errors and omissions" (6% of GDP in 2022) mean the strength of the external position may be overstated. Strengthening External Liquidity: Fitch expects the strong current account + FDI balance and sovereign external borrowing to drive further improvement in external liquidity and solvency metrics. The central bank (BCN) has doubled its international reserve holdings to USD4.9 billion as of April 2023 since their dip during the 2018-2019 crisis. Reserves now cover 74% of broad money, a high level among peers with managed FX regimes, and around 4.6 months of current external payments, in line with the peer median. Net external debt fell to 36% of GDP in 2022 from a peak of 55% in 2018. Fiscal Balance Shifts to Surplus: The general government balance (consolidating the central government, social security institute, and other smaller entities) shifted to a 1.0%-of-GDP surplus in 2022 from a 1.2% deficit in 2021, driven by outperformance in tax collections, withdrawal of pandemic-related outlays that offset the cost of fuel subsidies (0.8% of GDP), and lower capex. Fitch expects conservative policy settings will preserve a fiscal surplus of around 0.5% of GDP in 2023-2024, much better than the 'B' median forecast of a 3% deficit. Reduced Financing Options: Continued net external borrowing in the context of a fiscal surplus resulted in further accumulation in deposits and some paydown in domestic debt in 2022. However, the sovereign has become increasingly reliant on loans from CABEI as sanctions have curtailed access to financing from other multilaterals. Fitch does not presently expect a recent vote to change the leadership at CABEI will greatly restrict its lending to Nicaragua, although it sees some risk given that the bank's financing of the country was reportedly an impetus for this change. While these external financing restrictions appear likely to persist in the coming years, the sovereign is better placed to navigate them in light of the strong fiscal position. Improving Debt Metrics: Government debt fell to 49% of GDP in 2022 from 51% in 2021 and a peak of 53% in 2020. Fitch expects debt will continue to fall further in the coming years below its pre-crisis 2017 level of 40%, and below the 'B' median of 55%. Net debt/GDP at around 37% of GDP in 2022 has had an even more favorable trend in light of the substantial accumulation of government deposits. The interest/revenues ratio of just 4.5% is one of the best in the 'B' category. Virtually all domestic debt (excluding securities issued to capitalize the BCN) are denominated or linked to the U.S. dollar, highlighting negligible local currency financing flexibility. Nicaragua does not have any outstanding external bond. Remittances, Credit Fuel Growth: Growth eased to 3.8% in 2022 following a sharp 10.3% rebound in 2021, and Fitch forecasts it will slow somewhat to 3.2% in 2023 amid a less favorable external backdrop. Private consumption continues to fuel growth, supported by surging remittances, as well as credit growth that remains buoyant (up 21% yoy as of March 2023) as banks continue to deploy their ample liquidity to rebuild their loan portfolios after the shocks of past years. Private investment has been slower to recover, and remains well below its pre-crisis 2017 levels. Inflation Easing from High Levels: Inflation moderated to 9.5% in April 2023 from 11.6% in December 2022. Nicaragua has experienced Central America's greatest inflation shock, despite the freezing of domestic fuel prices, in part due to rising food prices and their particularly large weight in the CPI. The BCN reduced the pace of depreciation of the crawling peg - its main policy instrument in the absence of an inflation-targeting regime - to 1% in 2023 from 2% in the prior two years, which should help contain imported price pressures. It has raised its policy rate by 350bp to 7%, but transmission of this into financial activity and domestic demand is likely to be muted given ample liquidity among banks and high financial dollarization. ESG - Governance: Nicaragua has an ESG Relevance Score (RS) of '5' for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. These scores reflect the high weight that the Worldwide Governance Indicators have in its proprietary Sovereign Rating Model. Nicaragua has a low WBGI percentile ranking of 17, reflecting episodes of political violence, weak political participation rights and uneven application of the law. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - Structural: Political developments that severely impair trade and investment flows, external financing, and growth prospects; for example, due to a tightening of international sanctions. - Macro: Policy slippage that results in depletion of financial buffers and heightens macroeconomic vulnerabilities. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - Macro/Public Finances: Confidence that Nicaragua's policy mix will remain prudent and deliver continued economic growth, entrench macroeconomic stability, and lower inflation, as well as a further build-up of fiscal buffers and debt/GDP reduction. - External finances: Further improvement in external liquidity and solvency metrics, and/or diversification of external financing sources. - Structural: Improvement in the business climate and easing of downside political risks; for example, owing to reduction in international tensions and rollback of sanctions. SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO) Fitch's proprietary SRM assigns Nicaragua a score equivalent to a rating of 'B-' on the Long-Term Foreign Currency (LT FC) IDR scale. Fitch's sovereign rating committee did not adjust the output from the SRM to arrive at the final LT FC IDR. Fitch's SRM is the agency's proprietary multiple regression rating model that employs 18 variables based on three-year centered averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch's QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within its criteria that are not fully quantifiable and/or not fully reflected in the SRM. ESG CONSIDERATIONS Nicaragua has an ESG Relevance Score of '5' for Political Stability and Rights as Worldwide Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Nicaragua has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile. Nicaragua has an ESG Relevance Score of '5' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as Worldwide Governance Indicators have the highest weight in Fitch's SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Nicaragua has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile. Nicaragua has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the Worldwide Governance Indicators is relevant to the rating and a rating driver. As Nicaragua has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile. Nicaragua has an ESG Relevance Score of '4' for Creditor Rights as willingness to service and repay debt is relevant to the rating and is a rating driver for Nicaragua, as for all sovereigns. As Nicaragua has a fairly recent restructuring of public debt in 2008, this has a negative impact on the credit profile. 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 ----------- ------ ----- Nicaragua LT IDR B- Affirmed B- ST IDR B Affirmed B LC LT IDR B- Affirmed B- LC ST IDR B Affirmed B Country Ceiling B- Affirmed B- ===================== P U E R T O R I C O ===================== 3RD MILLENNIUM: Case Summary & Two Unsecured Creditors ------------------------------------------------------ Debtor: 3rd Millennium Surgery Center, LLC 2 Vela St. Esquire Bldg. PH-2 San Juan, PR 00918 Business Description: The Debtor is a Single Asset Real Estate (as defined in 11 U.S.C. Section 101(51B)). The Debtor owns leasehold interest in parcels E1 & E2 of the P.R. Convention Center valued at $30 million. Chapter 11 Petition Date: June 6, 2023 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 23-01737 Debtor's Counsel: Rafael A. Gonzalez Valiente, Esq. GODREAU & GONZALEZ LAW Calle McCleary 1806 Suite 1-B San Juan, PR 00902 Tel: (787) 726-0077 Email: rgv@g-glawpr.com Total Assets: $30,000,000 Total Liabilities: $1,600,001 The petition was signed by Hector Lopez Quinones as authorized representative of the Debtor. A full-text copy of the petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/SW6U7JQ/3rd_Millennium_Surgery_Center__prbke-23-01737__0001.0.pdf?mcid=tGE4TAMA List of Debtor's Two Unsecured Creditors: Entity Nature of Claim Claim Amount 1. Hector Lopez Pumarejo Money Loaned $1,600,000 P.O. Box 13923 San Juan, PR 00908 2. P.R. Convention $1 Center District Authorit P.R. Convention Center Third Floor San Juan, PR 00907 CEDIPROF INC: Gets OK to Hire Bielli & Klauder as Special Counsel ----------------------------------------------------------------- Cediprof, Inc. received approval from the U.S. Bankruptcy Court for the District of Puerto Rico to hire Bielli & Klauder, LLC as its special counsel. The firm will represent Cediprof in the Chapter 11 case filed by Lannett Company, Inc. before the U.S. Bankruptcy Court for the District of Delaware (Case No. 23-10559). Cediprof is a creditor of Lannett Company and holds an unsecured claim of $11.7 million. David Klauder, Esq., is the firm's attorney who will represent the Debtor in Lannett Company's bankruptcy case. He will be compensated at $400 per hour for his services. Mr. Klauder declared that he is a disinterested person according to Section 101(14) of the Bankruptcy Code. Bielli & Klauder can be reached at: David M. Klauder, Esq. Bielli & Klauder, LLC 1204 N. King Street Wilmington, DE 19801 Phone: (302) 803-4600 Fax: (302) 397-2557 Email: dklauder@bk-legal.com About Cediprof Inc. Cediprof, Inc. is a company in Caguas, P.R., which develops, manufactures, supplies and distributes finished dosage forms of pharmaceutical products. Cediprof filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 22-03198) on Nov. 4, 2022, with $10 million to $50 million in both assets and liabilities. The Debtor tapped Carmen D. Conde Torres, Esq., at the Law Offices of C. Conde & Assoc. as bankruptcy counsel; Bielli & Klauder, LLC as special counsel; and RSM Puerto Rico as accountant. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *