/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/230621.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Wednesday, June 21, 2023, Vol. 24, No. 124 Headlines A R G E N T I N A ARGENTINA: Inflation Hits 114% as Government Faces Dollar Shortage B R A Z I L AZUL SA: Fitch Lowers LongTerm IDRs to 'C' Amid Exchange Offer AZUL SA: S&P Downgrades ICR to 'CC' on Distressed Debt Exchange BRAZIL: General Price Index Falls by 2.20% in June BRAZIL: Retail Sales Up 0.1% in April Driven by Easter MINERVA SA: Fitch Affirms LongTerm IDRs at 'BB', Outlook Stable NITEROI: S&P Affirms 'BB-/B' ICRs & Alters Outlook to Positive [*] S&P Alters Outlook on 16 Brazilian Finc'l. Entities to Positive [*] S&P Alters Outlook on Various Brazilian Entities to Positive D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Investments Needed in Electricity Sector DOMINICAN REPUBLIC: Minister Highlights Mining Impact on Economy [*] DOMINICAN REPUBLIC: Heads Towards Responsible Construction J A M A I C A JAMAICA: Minister Sees Interest in Caribbean Catastrophe Bond P U E R T O R I C O CERTENEJAS: Taps CPA Luis R. Carrasquillo as Financial Advisor - - - - - ================= A R G E N T I N A ================= ARGENTINA: Inflation Hits 114% as Government Faces Dollar Shortage ------------------------------------------------------------------ Patrick Gillespie at Bloomberg News reports that monthly inflation in Argentina unexpectedly cooled for the first time in six months, breaking a streak even as price pressures remained very high. Consumer prices rose 7.8 percent in May, less than analysts' expectations of 8.7 percent, according to Bloomberg News. From a year ago, inflation accelerated to 114.2 percent, the highest annual rate since 1991 when Argentina's economy was exiting a sharp bout of hyperinflation, Bloomberg News notes. Utilities, tourism and healthcare led monthly price increases in May, according to government data published, Bloomberg News discloses. Argentina's Central Bank board is expected to hold its key benchmark rate at its weekly meeting because of the lower inflation print, Bloomberg News relays. The monetary authority has tightened policy aggressively this year in a bid to cool prices, raising the key rate from 75 percent to 97 percent, Bloomberg News notes. Annual inflation has surged into triple-digit territory as money printing, a record drought and persistent fears of an abrupt currency devaluation fuel more price hikes ahead of a wide open presidential election in October, Bloomberg News says. The drought exacerbated Argentina's chronic shortage of dollars, translating to an estimated US$20 billion drop in agriculture exports, Bloomberg News discloses. Through April, agriculture exports are down 42 percent so far this year compared to the same period in 2022, Bloomberg News says. Economists surveyed by Argentina's Central Bank see prices rising 149 percent annually by the end of this year, Bloomberg News adds. About Argentina Argentina is a country located mostly in the southern half of South America. Its capital is Buenos Aires. Alberto Angel Fernandez is the current president of Argentina after winning the October 2019 general election. He succeeded Mauricio Macri in the position. Argentina has the third largest economy in Latin America. The country's economy is an upper middle-income economy for fiscal year 2019, according to the World Bank. Historically, however, its economic performance has been very uneven, with high economic growth alternating with severe recessions, income maldistribution and in the recent decades, increasing poverty. Last March 25, 2022, Argentina finalized agreement with the IMF for a new USD44 billion Extended Funding Facility (EFF) intended to fund USD40 billion in looming repayments of the defunct Stand-By Arrangement (SBA), with an extra USD4 billion in up-front net financing. This has averted the risk of a default to the IMF and is facilitating a parallel rescheduling of Paris Club debt. S&P Global Ratings, on March 29, 2023, lowered its long-term foreign currency sovereign credit rating on Argentina to 'CCC-' from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency sovereign credit rating and its 'CCC-/C' local currency ratings on Argentina. The outlook on the long-term ratings is negative. S&P also lowered the transfer and convertibility assessment to 'CCC-' from 'CCC+'. The negative outlook on the long-term ratings reflects risks surrounding pronounced economic imbalances and policy uncertainties before and after the 2023 national elections. Divisions across the political spectrum constrain the sovereign's ability to implement timely changes in economic policy. Global capital markets are closed to Argentina. In the local market, swaps are being deployed to manage large maturities before placing debt through traditional auctions. The central bank continues to play a key role as a backstop for local debt management in the secondary market. The ongoing severe drought has exacerbated pressures in the already disrupted foreign exchange (FX) market. Fitch Ratings, on the other hand, downgraded Argentina's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'C' from 'CCC-', and has affirmed the Long-Term Local Currency IDR at 'CCC-' on March 24, 2023. Fitch's downgrade of Argentina's rating to 'C' from 'CCC-' follows an executive decree that forces domestic public-sector entities into operations involving their holdings of sovereign debt securities, which would involve unilateral exchanges and forced currency conversion that constitute default events under Fitch's criteria. The 'C' rating reflects Fitch's view that default is thus imminent. Fitch said the rating would be downgraded to 'Restricted Default' (RD) upon execution of the exchanges. Moody's Investors Service, in September 2022, affirmed Argentina's Ca foreign-currency and local-currency long-term issuer and senior unsecured ratings. The outlook remains stable. The decision to affirm the Ca ratings balances Argentina's limited market access, weak governance, and history of recurrent debt restructurings with recent efforts to marshal fiscal and monetary measures to start addressing underlying macroeconomic imbalances in the context of the IMF program that was approved in 2022, according to Moody's. DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer Rating at CCC and downgraded its Long-Term Local Currency Issuer Rating to CCC from CCC (high) on March 3, 2023. =========== B R A Z I L =========== AZUL SA: Fitch Lowers LongTerm IDRs to 'C' Amid Exchange Offer -------------------------------------------------------------- Fitch Ratings has downgraded Azul S.A.'s (Azul) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'C' from 'CCC-', and its National Scale Rating to 'C(bra)' from 'CCC(bra)'. In addition, Fitch has downgraded Azul Investments LLP's unsecured notes to 'C'/'RR4' from 'CCC-'/'RR4'. The downgrades follow Azul's announcement of an exchange offers of existing senior notes (USD1 billion) for new senior secured second out notes, which Fitch views as distressed debt exchange (DDE) as per its criteria. The transaction will not result in an immediate debt haircut but will require a maturity extension, and structural subordination is likely for bondholders that do not accept the deal due to the larger secured debt profile. The deal is part of a more comprehensive debt restructuring plan that includes renegotiations with lessors and original equipment manufacturers (OEMs) pending completion of the exchange offer. These transactions are intended to enhance liquidity and capital structure and to ultimately avoid future default payments. KEY RATING DRIVERS Transaction Qualifies as DDE: The transaction will constitute a DDE under Fitch's criteria if approved, due to the involvement of a substantial portion of Azul's classes of obligors. The obligors are also related to the deal (lessors and OEMs pending refinancing agreements), leading to a broader restructuring plan to avoid a payment default. The extension of the maturity date and material reduction in terms of bondholders that do not accept the deal due to the elimination of some restrictive covenants as well as structural subordination are also incorporated. Exchange Offer Overview: Azul has entered into a transaction support agreement with an ad hoc group of note holders, representing 65.5% of the existing 2024 USD400 million notes and 65.8% of the existing 2026 USD600 million notes. The exchange offers consist of: (i) the 5.875% senior notes due 2024 for the 11.500% senior secured second out notes due 2029; and (ii) the 7.250% senior notes due 2026 for the 10.875% senior secured second out notes due 2030. The new notes will be secured by a shared collateral package, including certain receivables from TudoAzul, Azul Viagens, Azul Cargo and certain brands and intellectual property of Azul's group. Restricted Default and Re-Rate: Azul's IDR will likely be downgraded to Restricted Default (RD) if the proposed transaction is successfully completed. Subsequently, Fitch will re-rate the company's IDRs to a level consistent with its forecasted sustainable capital structure, liquidity, and debt risk profile as well as with the risks associated with the high cyclicality of the airline industry. Upon completion, any remaining existing unsecured bonds will likely be upgraded to levels below the new IDR due to their lower degree of credit protection and priority in the capital structure. Operations to Improve in 2023: Fitch expects Azul's operating cash flow to improve during 2023 due to the solid rebound in domestic travel, benefits related to the elimination of PIS/Cofins taxes, relatively better Fx rates and fuel prices levels as well as improvements in the cost structure. Fitch forecasts Azul`s EBITDA to reach around BRL5.3 billion in 2023, an increase from BRL3.2 billion in 2022. The performance during 2022 largely reflects the spike in fuel prices, which was partially offset by the substantial increase in yields. DERIVATION SUMMARY Azul's 'C' rating reflects the company's announcement of an exchange offer, which Fitch considers to be a DDE. The announcement occurs in the context of high refinancing risks and recovery from pandemic-related challenges. The company has a solid market position in the Brazilian airlines domestic market, and is the sole airline on 80% of its routes. During 2022, Azul's market-share in the local domestic market in Brazil was 29% in terms of Revenue Passenger Kilometers (RPK). RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Completion of the proposed exchange offer will lead to a downgrade of the Long-Term IDRs to 'RD' and then subsequently to an upgrade to a rating level that reflects the post-DDE credit profile. Factors that could, individually or collectively, lead to a negative rating action/downgrade: - An uncured payment default on any material financial obligation would lead to a downgrade of the IDRs to 'RD'. LIQUIDITY AND DEBT STRUCTURE Current Limited Financial Flexibility: Azul's readily available cash, per Fitch's criteria, declined to BRL466 million as of March 31 2023 from BRL668 million as of Dec. 31, 2022 and from BRL3.1 billion at end of December 2021. As of March 31 2023, short-term maturities totaled BRL6 billion (BRL1.4 billion of financial debt and BRL4.6 billion of leasing obligations) and total long-term debt was BRL17.1 billion. The total debt of BRL23.1 billion was composed of BRL14.5 billion of leasing obligations, BRL5.1 billion of cross-border senior notes (BRL2.1 billion in 2024 and BRL3.1 billion in 2026), BRL1.5 billion of convertibles debentures, BRL496 million of local debentures and BRL1.5 billion of working capital, aircraft and engines and others credit lines. ISSUER PROFILE Azul is one of the largest local airlines in Brazil, with significant presence in the regional market and the sole position on 80% of its routes. During 2022, 91% of its revenues derived from passengers and 9% from cargo and others. 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 ----------- ------ -------- ----- AZUL Investments LLP senior unsecured LT C Downgrade RR4 CCC- Azul S.A. LT IDR C Downgrade CCC- LC LT IDR C Downgrade CCC- Natl LT C(bra)Downgrade CCC(bra) AZUL SA: S&P Downgrades ICR to 'CC' on Distressed Debt Exchange --------------------------------------------------------------- S&P Global Ratings lowered its global scale issuer credit rating on Brazil-based airline company Azul S.A. to 'CC' from 'CCC-'. At the same time, S&P lowered its global scale issue-level rating to 'CC' from 'CCC-' on the company's senior unsecured notes and kept unchanged the '4' recovery rating, reflecting expectation of average (30%-50%; rounded estimate 40%) recovery prospects in the event of a payment default. S&P also lowered its national scale issuer credit rating to 'brCC' from 'brCCC-'. The negative outlook reflects that S&P will lower its global scale issuer credit rating on Azul to 'SD' (selective default) and its rating on the company's unsecured notes to 'D' if the transaction closes under the currently analyzed terms. On June 13, Azul announced it had launched a par-for-par exchange offer on its 2024 and 2026 senior unsecured notes for 11.5% notes due 2029 and 10.875% notes due 2030, respectively. The new notes will be secured on a second lien basis, the collateral package will include receivables from TudoAzul--the company's frequent flyer program--the company's travel business (Azul Viagens), and Azul's brand and intellectual property. At the time of the announcement, Azul already had support from an ad-hoc group of creditors that represents slightly over 65% of the outstanding amount of both existing notes. The announced transaction is part of a larger capital restructuring plan the company has been undertaking in the past few months. In this sense, Azul also announced in March and May that it's negotiating obligations with lessors and original equipment manufacturers, which should lower lease payments in the future, convert into equity part of the lease obligations, consequently reducing operating lease liabilities. Once completed, all these transactions, coupled with stronger expected operating performance in 2023, should improve the capital structure and cash-flow generation, and lower leverage. Amid persistently strong passenger yields, recovery in international and (to a lesser extent) corporate travel, and slightly lower fuel prices, we forecast Azul's revenue to grow about 15% and EBITDA to almost double in 2023 to about R$5 billion. S&P views this transaction as distressed rather than opportunistic since, absent this exchange, there's a realistic possibility of a conventional default on the 2024 notes or other short-term debt, due to the company's shrinking liquidity and challenging financial market conditions. Azul's cash flow has remained strained in the past several quarters, resulting in a considerable reduction of cash balances amid high lease expenses, repayment of various liabilities, and limited availability of refinancing. S&P said, "The company's lease renegotiations should reduce cash needs for the next few years, but we still expect cash deficits to cover debt amortizations, capital expenditures, and working capital needs in the next 12 months. We believe that an improved capital structure will enable the company to raise additional liquidity." Additionally, S&P believes bondholders will receive less than originally promised, as maturities are getting extended and holdouts on the 2024 and 2026 notes will be structurally subordinated to the newly issued secured notes, and it's likely the latter will be subordinated if Azul issues additional secured on a first lien debt to strengthen its liquidity position. Bondholders will receive some compensation in the form of higher coupons and a potential prepayment on the new 2029 notes if Azul is able to raise additional liquidity. Environmental, Social, And Governance ESG credit indicators: E-3, S-5, G-2 BRAZIL: General Price Index Falls by 2.20% in June -------------------------------------------------- Richard Mann at Rio Times Online reports that Brazil's General Price Index - 10 (IGP-10) experienced a decline of 2.20% in June, according to the Brazilian Institute of Economics at Fundacao Getulio Vargas (FGV Ibre). This comes after a 1.53% fall in May, according to Rio Times Online. So far this year, the IGP-10 shows a 4.14% decrease, with a 6.31% drop in the last 12 months, the report notes. For comparison, in June 2022, the IGP-10 rose by 0.74% for the month and accumulated a 10.40% increase over 12 months, the report relays. 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: Retail Sales Up 0.1% in April Driven by Easter ------------------------------------------------------ globalinsolvency.com, citing Reuters, reports that retail sales in Brazil rose for the second consecutive month in April driven by Easter sales, data from government statistics agency IBGE showed, but that was still not enough for them to meet market expectations. Sales increased 0.1% in the month compared with March, IBGE said in a report, boosted by supermarket shopping but slightly below consensus of 0.3% from economists polled by Reuters, as growth lost steam from the previous month, according to globalinsolvency.com. "Retail sales remain resilient, but tight financial conditions are preventing a stronger recovery," Pantheon Macroeconomics' chief economist for Latin America, Andres Abadia, said in a note to clients. Business leaders in the sector have been joining calls from President Luiz Inacio Lula da Silva for the central bank to lower interest rates from their current cycle-high of 13.75% after inflation reached its lowest in more than two years, 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). MINERVA SA: Fitch Affirms LongTerm IDRs at 'BB', Outlook Stable --------------------------------------------------------------- Fitch Ratings has affirmed Minerva S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB'. Fitch has also affirmed Minerva's National Scale rating at 'AA+(bra)' due to the good operational performance, strong liquidity and stable net leverage. The Rating Outlook is Stable. KEY RATING DRIVERS Steady Leverage: Fitch expects Minerva's net leverage to remain steady at close to 2.5x by YE 2023 due to increased EBITDA at about BRL3 billion in 2023, up from BRL2.8 billion in 2022. The increase in EBITDA stems from organic growth, the announced acquisition of a new Uruguay unit (BPU Meat), the ramp-up and the remaining disbursement related to the acquisition of the Australian lamb Company (ALC), and low cattle costs. Gross leverage is projected to decrease toward 4x by 2024 (5x in 2022) and FCF after dividends to be positive in 2023. LTM net revenues increased by 6.1% yoy to BRL30.1 billion and LTM EBITDA increased by 5.8% yoy to BRL2.7 billion as of 1Q23. Resilient Profitability Margins: Minerva's diversified footprint in LatAm and its export platform support its margin and lowers earnings volatility caused by changes in input costs and protein prices due to the supply and demand dynamics of commodity meat. EBITDA margins are projected to be maintained at about 9%-10% over the next two years (9% of LTM 1Q23). The company has shown resilience in profitability over the last four years with an average EBITDA margin close to 9.5%-10%. Minerva is among the largest exporters of beef in the region, accounting for 20% of total beef exports in South America. Increased Geographical Diversification: Minerva's geographical diversification lowers its business risk as the beef sector is exposed to sanitary, environmental, deforestation and temporary import or export restriction bans. The company has a large presence in different countries in South America including Paraguay, Uruguay, Argentina, Colombia but it is also ramping up its operations in Australia which are expected to represent about 6% of revenues in 2023. Positive Export Demand: The beef market in Latin America continues to benefit from low production costs due to good cattle availability, positive exports demand, and global limited supply - a trend that is expected to become even more accentuated given the strong restrictions for the North American production in the coming years. The USDA forecasts Brazil's exports to increase by about 3.9% yoy in 2023, but expects beef consumption to remain steady in Brazil due to a weak consumer environment. The export market accounted of 64.5% of Minerva's gross revenue as of 1Q23. DERIVATION SUMMARY Minerva's ratings reflect its solid business profile as a pure-player in the beef industry, with a large presence in South America and small presence in Australia. The ratings consider Minerva's lack of significant diversification across other proteins making the company less diversified from a product standpoint than JBS S.A. (BBB-/Stable) or Tyson Foods (BBB/Stable). Minerva has developed a more export-oriented business model, whereas Marfrig Global Foods S.A. (BB+/Stable) has a strong presence in the U.S. domestic market through its subsidiary National Beef. Minerva is smaller than its peers, such as Marfrig, JBS or Tyson. From a financial standpoint, the ratings are supported by Minerva's strong liquidity position, with cash sufficient to amortize its debt through 2026 and good profitability for the sector due to exports. KEY ASSUMPTIONS - Revenue growth driven by volume growth and the ramp-up of the acquired assets; - EBITDA to reach BRL3 billion in 2023; - Net debt/EBITDA steady at about 2.5x by YE23. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Gross leverage to below 3.5x and interest coverage above 3.5x, respectively, on a sustained basis; - Sustainable positive FCF generation. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Gross leverage above 4.5x and net leverage above 3.0x on a sustainable basis; - Sharp contraction of Minerva's performance. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Cash and cash equivalents was BRL6.4 billion and short-term debt totaled about BRL2.3 billion as of 1Q23. Total debt was BRL14.1 billion, of which 16% was short-term debt. Minerva's cash and cash equivalents are sufficient to amortize its debt through 2026. 59% of gross debt was denominated in foreign currency (mainly U.S. dollars) as of 1Q23. The company hedges at least 30% of the long-term foreign exchange exposure. ISSUER PROFILE Minerva Foods is the South American leader in beef exports, operating in the processing segment and selling its products to over 100 countries. Currently, the company has a daily slaughtering capacity of 29,350 head of cattle. Present in Brazil, Paraguay, Argentina, Uruguay, Colombia and Australia, Minerva operates 29 slaughter and deboning plants and three processing plants. ESG CONSIDERATIONS Minerva S.A. has an ESG Relevance Score of '4' for Governance Structure due to ownership concentration, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors. Minerva S.A. has an ESG Relevance Score of '4' for Waste & Hazardous Materials Management; ecological impacts due to land use & supply chain management as Minerva is exposed to cattle sourcing and need to monitor direct and indirect suppliers in South America which could expose Minerva as well the beef sector in general to export bans which has a negative impact on the credit profile, and is relevant to the rating[s] 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 ----------- ------ ----- Minerva Luxembourg S.A. senior unsecured LT BB Affirmed BB Minerva S.A. LT IDR BB Affirmed BB LC LT IDR BB Affirmed BB Natl LT AA+(bra) Affirmed AA+(bra) NITEROI: S&P Affirms 'BB-/B' ICRs & Alters Outlook to Positive -------------------------------------------------------------- S&P Global Ratings, on June 15, 2023, revised the outlook on the city of Niteroi's global scale ratings to positive from stable. At the same time, S&P affirmed its 'BB-' global scale and 'brAAA/Stable' national scale ratings on the city. Outlook S&P said, "The positive outlook incorporates our view that signs of greater policy certainty from the national government could translate into better-than-expected growth and support Niteroi's finances, which already benefit from sizable oil royalties, high cash reserves, and low debt. The outlook also reflects our view that the city will continue posting strong fiscal surpluses in the next two years, even when funding capital expenditures with its own financial resources." Upside scenario While Niteroi's intrinsic creditworthiness is stronger than the 'BB-' rating, S&P caps its ratings on the city to those on Brazil (BB-/Positive/B). As a result, S&P would only raise the ratings on the city if it was to raise the ratings on Brazil. Downside scenario S&P said, "Given that we cap our ratings on Niteroi at the sovereign level, we would revise our outlook back to stable within the next two years if we were to take a similar action on Brazil. We could also revise the outlook to stable if Niteroi's finances deteriorate significantly due to structurally weaker revenue performance from higher-than-expected volatility in the oil sector, coupled with aggressive expansion of expenditures. Such scenario would likely translate into falling liquidity and/or higher debt." Rationale The positive outlook on Brazil reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. Such developments would reinforce S&P's view of the resilience of Brazil's institutional framework, with stable policymaking based on extensive checks and balances across the executive, legislative, and judicial branches of government. S&P believes better-than-expected growth at the national level would also spill over to Niteroi's economy and financial performance. Niteroi's SACP of 'bb+' reflects the city's very prudent policies that result in strong fiscal performance, along with its higher GDP per capita than the national average, and economic growth that outpaces the national average. Sizable oil royalties have bolstered the city's liquidity position and alleviated its debt burden. The accumulated financial resources and cash flow allow Niteroi to maintain its stabilization fund and finance its substantial capital expenditures. The SACP also incorporates the city's vulnerability to the oil sector's heightened volatility, given Niteroi's heavy dependence on the industry through royalties. S&P said, "Despite the higher SACP than the ratings, according to our criteria, our ratings on Niteroi are capped by those on the sovereign. We assess the institutional framework of Brazilian local and regional governments (LRGs) as volatile and unbalanced. "Structural rigidities in Brazil's intergovernmental system have prevented LRGs from reaching balanced fiscal accounts over time. Nonetheless, we believe the system has some degree of predictability and transparency, with enhanced oversight over LRGs' finances and adherence to fiscal discipline." In accordance with S&P's relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable. At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action. Ratings List RATINGS AFFIRMED NITEROI (CITY OF) Issuer Credit Rating Brazil National Scale brAAA/Stable/-- RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION TO FROM NITEROI (CITY OF) Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- [*] S&P Alters Outlook on 16 Brazilian Finc'l. Entities to Positive ------------------------------------------------------------------- S&P Global Ratings revised the outlook to positive from stable on the global scale ratings on 16 Brazilian financial services companies following the same outlook revision on the sovereign. S&P also affirmed the long- and short-term ratings on these entities. Here's the list of entities on which took the rating action: -- Banco ABC Brasil S.A. (ABC Brasil); -- Banco Bradesco S.A. (Bradesco); -- Banco BTG Pactual S.A. (BTG Pactual); -- Banco Citibank S.A.; -- Banco Cooperativo Sicredi S.A. (Sicredi); -- Banco do Brasil S.A. (BdB); -- Banco do Nordeste do Brasil S.A. (BNB); -- Banco Nacional de Desenvolvimento Economico e Social (BNDES); -- Banco Pan S.A.; -- Banco Safra S.A.; -- Banco Santander (Brasil) S.A.; -- Banco Votorantim S.A. (Banco BV); -- Caixa Economica Federal (CEF); -- China Construction Bank (Brasil) Banco Multiplo S.A. (CCB); -- Haitong Banco de Investimento do Brasil S.A. (Haitong Brasil); and -- Stone Instituicao de Pagamento S.A. (Stone). The outlook revision to positive from stable on the sovereign reflects signs of greater certainty about stable fiscal and monetary policy that could benefit Brazil's still-low GDP growth prospects. Continued GDP growth plus the emerging framework for fiscal policy could result in a smaller government debt burden than expected, which could support monetary flexibility and sustain the country's net external position. Such developments would reinforce S&P's view of the resilience of Brazil's institutional framework, with stable policymaking based on extensive checks and balances across the executive, legislative, and judicial branches of government. The ratings on the sovereign cap the credit quality of the 16 entities, given their high exposure to sovereign risk and because S&P rarely rates financial services companies above the sovereign long-term ratings. This is because during sovereign stress, the sovereign's regulatory and supervisory powers may restrict an individual bank's or financial system's flexibility. Moreover, many of the same economic factors that cause sovereign stress often also affect financial institutions. ABC Brasil S&P said, "The positive outlook on our rating on ABC Brasil reflects prospects for an upgrade of Brazil (BB-/Positive/B) in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on ABC Brasil to move in tandem with the sovereign ratings. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher stand-alone credit profile (SACP) than the rating on the sovereign. "We would likely change our outlook on our rating on ABC Brasil to stable following a similar action on the sovereign ratings." Bradesco S&P said, "The positive outlook on our rating on Bradesco reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Bradesco to move in tandem with the sovereign ratings. "We would likely raise the ratings on Bradesco following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Bradesco to stable following a similar action on the sovereign ratings." BTG Pactual The positive outlook on S&P's rating on BTG Pactual reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, S&P expects the ratings on BTG Pactual to move in tandem with the sovereign ratings. S&P would likely raise the ratings on BTG Pactual following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. S&P would likely change its outlook on its rating on the bank to stable following a similar action on the sovereign ratings. Banco Citibank S&P said, "The positive outlook on our rating on Banco Citibank reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Banco Citibank to move in tandem with the sovereign ratings. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Banco Citibank to stable following a similar action on the sovereign ratings." Sicredi S&P said, "The positive outlook on our rating on Sicredi reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Sicredi to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Sicredi to stable following a similar action on the sovereign ratings." BdB S&P said, "The positive outlook on our rating on BdB reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on BdB to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on BdB to stable following a similar action on the sovereign ratings." BNB S&P said, "The positive outlook on our rating on BNB reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on BNB to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on BNB to stable following a similar action on the sovereign ratings." BNDES S&P said, "The positive outlook on our rating on BNDES reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on BNDES to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. Moreover, the ratings on the bank reflect our view that BNDES is a key government-related entity (GRE) for the sovereign, as a result we equalize its ratings and default risk with those on the sovereign. "We would likely change our outlook on our rating on BNDES to stable following a similar action on the sovereign ratings." Banco Pan S&P said, "The positive outlook on our rating on Banco Pan reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Banco Pan to move in tandem with the sovereign. "We would likely raise the ratings on Banco Pan following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given our view of its subsidiary status as core to its parent, BTG Pactual. "We would likely change our outlook on our rating on Banco Pan to stable following a similar action on the sovereign ratings." Banco Safra S&P said, "The positive outlook on our rating on Banco Safra reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Banco Safra to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Banco Safra to stable following a similar action on the sovereign ratings." Banco Santander (Brasil) S&P said, "The positive outlook on our rating on Banco Santander (Brasil) reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Banco Santander (Brasil) to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Banco Santander (Brasil) to stable following a similar action on the sovereign ratings." Banco BV S&P said, "The positive outlook on our rating on Banco BV reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Banco BV to move in tandem with the sovereign ratings. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given our view of its subsidiary status as moderately strategic to Votorantim S.A., which owns 50% of the bank. "We would likely change our outlook on our rating on BV to stable following a similar action on the sovereign ratings." CEF S&P said, "The positive outlook on our rating on CEF reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on CEF to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. Moreover, the ratings on the bank reflect our view that CEF is a key GRE for the sovereign, as a result we equalize its ratings and default risk with those on the sovereign. "We would likely change our outlook on our rating on CEF to stable following a similar action on the sovereign ratings." CCB S&P said, "The positive outlook on our rating on CCB reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on CCB to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given our view of its subsidiary as highly strategic to its parent, China Construction Bank Corp. "We would likely change our outlook on our rating on CCB to stable following a similar action on the sovereign ratings." Haitong Brasil S&P said, "The positive outlook on our rating on Haitong Brasil reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Haitong Brasil to move in tandem with the sovereign. "We would likely raise the ratings on the bank following a similar action on the sovereign ratings. Absent sovereign constraints, the bank could have a higher rating given our view of its subsidiary as core to its parent, Haitong Bank S.A. "We would likely change our outlook on our rating on Haitong Brasil to stable following a similar action on the sovereign ratings." Stone S&P said, "The positive outlook on our rating on Stone reflects prospects for an upgrade of Brazil in the next two years. The ratings on the latter constrain those on financial institutions, given their exposure to sovereign risk. Therefore, we expect the ratings on Stone to move in tandem with the sovereign. "We would likely raise the ratings on Stone following a similar action on the sovereign ratings. Absent sovereign constraints, the entity could have a higher rating given its stronger credit fundamentals reflected in its higher SACP than the rating on the sovereign. "We would likely change our outlook on our rating on Stone to stable following a similar action on the sovereign ratings." Environmental, Social, And Governance S&P Global Ratings has disclosed its ESG credit indicators for Latin America's commercial banks, insurance companies, and a clearinghouse, for which S&P assesses their stand-alone credit profiles. In this sense, its ESG factors have remained unchanged on our credit rating analysis of the following entities: ESG credit indicators ABC Brasil: E-2, S-2, G-2; Banco Bradesco: E-2, S-2, G-2; BTG Pactual: E-2, S-2, G-2; Banco Citibank: E-2, S-2, G-2; Sicredi: E-2, S-1, G-2; BdB: E-2, S-1, G-2; BNB: E-2, S-1, G-3; Banco Pan: E-2, S-2, G-2; Banco Safra: E-2, S-2, G-2; Banco Santander (Brasil): E-2, S-2, G-2; Banco BV: E-2, S-2, G-2; CCB: E-2, S-2, G-2; Haitong Brasil: E-2, S-2, G-2. Ratings List RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION TO FROM BANCO ABC BRASIL S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO BTG PACTUAL S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO PAN S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO BRADESCO S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO COOPERATIVO SICREDI S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- BANCO NACIONAL DE DESENVOLVIMENTO ECONOMICO E SOCIAL Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- BANCO SAFRA S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO SANTANDER (BRASIL) S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO DO BRASIL S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO DO NORDESTE DO BRASIL S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B CAIXA ECONOMICA FEDERAL Issuer Credit Rating BB-/Positive/B BB-/Stable/B CHINA CONSTRUCTION BANK (BRASIL) BANCO MULTIPLO S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B BANCO CITIBANK S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B HAITONG BANCO DE INVESTIMENTO DO BRASIL S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B STONE INSTITUICAO DE PAGAMENTO S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- BANCO VOTORANTIM S.A. Issuer Credit Rating BB-/Positive/B BB-/Stable/B [*] S&P Alters Outlook on Various Brazilian Entities to Positive ---------------------------------------------------------------- S&P related that it revised the global scale rating outlook on its long-term sovereign rating on Brazil to positive, signaling the potential of a one-notch rating uplift in the next two years if Brazilian governing institutions are able to implement pragmatic economic policy that contains vulnerabilities in the country's public finances and sets the stage for better GDP growth. Key to this would be passage of additional reforms -- among them a tax reform currently under debate. The global scale 'BB-' rating on Brazil limits a large number of corporate and infrastructure ratings due to its belief that in an event of sovereign default, many of these entities would experience credit stresses as well. Issuers Capped At The 'BB-' Sovereign Level The sovereign rating limits rated domestic entities in several ways. The entities whose ratings are capped have intrinsic credit qualities (or stand-alone credit profiles [SACPs]) stronger than 'bb-', but their final ratings are, by virtue of the sovereign limit, 'BB-'. Therefore, the ratings upside for these companies is the same as that for the sovereign. This group includes some regulated utilities and transportation companies, given their inherent exposure to the country's regulatory framework, and one government-related entity. Also in this group are companies that we believe are more likely to experience a liquidity crunch in a hypothetical sovereign distress scenario. Here's a list of such entities, on which S&P revised the global scale rating outlook: -- BRF S.A.; -- CESP-Companhia Energetica de Sao Paulo; -- Companhia de Eletricidade do Estado da Bahia; -- Companhia de Saneamento Basico do Estado de Sao Paulo; -- Companhia Energetica de Pernambuco (CELPE); -- Companhia Energetica do Rio Grande do Norte; -- EDP Espirito Santo Distribuicao de Energia S.A.; -- Energisa Paraiba-Distribuidora de Energia S.A.; -- Energisa S.A.; -- Energisa Sergipe-Distribuidora de Energia S.A.; -- MRS Logistica S.A.; -- Neoenergia S.A.; and -- Petroleo Brasileiro S.A. - Petrobras S&P said, "We would lift by one notch our ratings on BRF in case we were to upgrade Brazil to 'BB', while BRF controlling group, Marfrig Global Foods S.A. (BB+/Stable/--) remains at least at 'BB+' and we continue considering BRF as a moderately strategic subsidiary of Marfrig. "We also revised the outlook to positive on the government-owned entity Petrobras, as its SACP is 'bb+' but its ratings are limited at those on the sovereign. We would raise the ratings on Petrobras following a similar action on the sovereign, while its SACP remains at least at 'bb'." Issuers With Ratings Limited To One-To-Four Notches Above The Sovereign S&P said, "These entities have a number of credit strengths that, in our opinion, would contribute to some insulation from a potential sovereign stress. In this group, we have a wide array of entities, from companies with assets and clients mostly in Brazil but with very low leverage (generally the weaker SACPs in this group), to companies with a global footprint or that are export-oriented and demand for their products doesn't correlate to Brazil's economy (the strongest SACPs in this group). "Some ratings in this group are limited to one notch above our assessment of Brazil's transfer and convertibility (T&C; currently at 'BB+'), which is our assessment of the likelihood of the country imposing currency controls." In the case of a sovereign upgrade, S&P will also upgrade these companies: -- Ache Laboratorios Farmaceuticos S.A. -- Ambev S.A.; -- Localiza Rent a Car S.A.; -- MV24 Capital B.V.; -- Nexa Resources S.A.; -- Raiz en S.A.; -- Ultrapar Participacoes S.A.; -- Votorantim S.A.; and -- Votorantim Cimentos S.A. S&P said, "The outlook change on Votorantim triggers the same action on Votorantim Cimentos and Nexa Resources because of our view of a strong likelihood of group support in a stress scenario. "Finally, we revised the outlook on our rating on MV24's notes to positive from stable, remaining one notch above the rating on the weakest of the revenue counterparties, Petrobras, because we believe that there are economic incentives for the owners of the oilfield to continue oil production, even during financial distress. This reflects our view of the essential service the project provides to the oil production, which generates cash flows to the owners of the field, combined with the asset's unique characteristics that were designed to operate in the Tupi field; that is, it's a difficult asset to replace." Ratings List RATINGS AFFIRMED; CREDITWATCH/OUTLOOK ACTION TO FROM ACHE LABORATORIOS FARMACEUTICOS S.A. Issuer Credit Rating BB+/Positive/-- BB+/Stable/-- AMBEV S.A. Issuer Credit Rating BBB/Positive/-- BBB/Stable/-- BRF S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- CESP-COMPANHIA ENERGETICA DE SAO PAULO Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- COMPANHIA DE SANEAMENTO BASICO DO ESTADO DE SAO PAULO Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- EDP ESPIRITO SANTO DISTRIBUICAO DE ENERGIA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- ENERGISA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- ENERGISA PARAIBA-DISTRIBUIDORA DE ENERGIA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- ENERGISA SERGIPE-DISTRIBUIDORA DE ENERGIA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- LOCALIZA RENT A CAR S.A. Issuer Credit Rating BB+/Positive/-- BB+/Stable/-- MRS LOGISTICA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- MV24 CAPITAL B.V. Senior Secured BB/Positive/-- BB/Stable/-- NEOENERGIA S.A. Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- COMPANHIA ENERGETICA DE PERNAMBUCO (CELPE) Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- COMPANHIA DE ELETRICIDADE DO ESTADO DA BAHIA Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- COMPANHIA ENERGETICA DO RIO GRANDE DO NORTE Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- PETROLEO BRASILEIRO S.A. - PETROBRAS Issuer Credit Rating BB-/Positive/-- BB-/Stable/-- RAIZEN S.A. Issuer Credit Rating BBB-/Positive/-- BBB-/Stable/-- ULTRAPAR PARTICIPACOES S.A. Issuer Credit Rating BB+/Positive/-- BB+/Stable/-- VOTORANTIM S.A. Issuer Credit Rating BBB-/Positive/-- BBB-/Stable/-- NEXA RESOURCES S.A. Issuer Credit Rating BB+/Positive/B BB+/Stable/B VOTORANTIM CIMENTOS S.A. Issuer Credit Rating BBB-/Positive/-- BBB-/Stable/-- =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Investments Needed in Electricity Sector ------------------------------------------------------------ Dominican Today reports that the Dominican Republic requires substantial investments in the electricity sector to support the development of renewable energies and adopt technologies that promote energy efficiency. The Minister of Energy and Mines, Antonio Almonte, made the statement during the "CEO and Leadership" conference organized by the Caribbean Electric Utilities Services Corporation (CARILEC) and held in this eastern Dominican Republic beach resort, according to Dominican Today. The official stressed the need for electric utilities, government, regulators, and customers to find common ground in the energy transition process to ensure its success, the report notes. He also highlighted the challenges posed by distributed generation through self-produced solar panels and the importance of its consequences for a well-structured and environmentally sustainable energy transition, the report relays. He noted that more holistic planning is needed at the leadership level to ensure that all relevant parties involved in the energy transition have the necessary resources to achieve the goals, the report notes. The event was attended by crucial energy sector leaders from across the Caribbean, North America, and South America, with the special participation of executives from the Consortium Energético Punta Cana Macao (CEPM), and sponsorship from Wartsila, Aggreko, Caterpillar Inc, MSHS and media sponsor Electric Energy Online, the report discloses. The Caribbean Electric Utility Services Corporation (CARILEC) is an association of energy solutions providers and other players operating in the electricity industry in the Caribbean, the report says. CARILEC was established in 1989 with nine members as part of a USAID-funded electric utility modernization project implemented by NRECA under a five-year "Cooperative Agreement," the report relays. Currently, CARILEC has over one hundred members, which include thirty-three Full Members who are electric utilities and over eighty Independent Power Producers (IPPs), Associate, and Affiliate Members who are companies involved in some aspect of utility service, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'.The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative.S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said.A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. DOMINICAN REPUBLIC: Minister Highlights Mining Impact on Economy ---------------------------------------------------------------- Dominican Today reports that the Minister of Energy and Mines, Antonio Almonte, has highlighted the Dominican Republic's significant mining potential and its positive impact on the national economy through foreign currency earnings from resource exports. Almonte emphasized that the country has regulations and institutions in place to ensure that mining operations are safe and environmentally compatible, according to Dominican Today. In addition to the revenue generated for the Dominican treasury, mining production creates thousands of jobs and stimulates local business activity, as mining companies often purchase services and products from small and medium-sized industries, the report notes. Almonte referred to this as the productive chain, where economic growth is stimulated through job creation and business expansion, the report relays. Almonte acknowledged that mining plays a fundamental role in scientific advancements and is essential for social, economic, and technological development, the report discloses. He emphasized that the Dominican Republic supports responsible mining practices, aiming to harness the country's resources without negatively impacting the environment or local communities quality of life, the report says. To obtain authorization for mining operations, companies are required to conduct environmental impact studies based on international standards, the report discloses. These studies, involving specialists from various environmental perspectives, typically take one to two years and entail significant costs, the report relays. The evaluations are carried out by experts in different mining aspects, and upon approval, the companies are granted exploitation licenses, the report notes. The Ministry of the Environment and the Mining Department conducts regular inspections to ensure that mining operations are conducted sustainably, the report says. Almonte's statements highlight the government's commitment to responsible and sustainable mining practices, recognizing the potential benefits for the national economy while prioritizing environmental protection and community well-being, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'.The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative.S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said.A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. [*] DOMINICAN REPUBLIC: Heads Towards Responsible Construction -------------------------------------------------------------- Dominican Today reports that CEMEX Dominicana, a construction materials company, is committed to sustainability and environmental protection in the Dominican Republic. Through improvements in production, operations, and product innovation, CEMEX aims to support and enhance the construction sector while reducing its environmental impact, according to Dominican Today. During a panel discussion at the Construction Summit 2023, Jose Cabrera, Director of CEMEX for the Dominican Republic and Puerto Rico, emphasized the company's dedication to developing a sustainable construction sector that cares for the environment and meets market demands, the report notes. Rapid urbanization in the country and globally necessitates intelligent construction practices supported by innovation and digitization, which can contribute to mitigating climate change and resource scarcity while improving societal well-being, the report relays. Cabrera highlighted CEMEX's focus on offering products with reduced environmental impact, aligning with sectors such as tourism and the economy, the report discloses. The company aims to build a better future by providing durable and environmentally friendly construction materials, the report says. CEMEX is a global leader in providing comprehensive solutions for sustainable and resilient cities, the report relates. Through its "Future in Action" strategy, the company is actively developing products, solutions, and processes with low carbon emissions, the report notes. Their goal is to achieve zero CO2 emissions, the report discloses. Among the sustainable products and solutions developed by CEMEX, Cabrera mentioned Vertua General Use Titan Cement, which reduces emissions by 25% to 40%, and Vertua Concrete, which reduces carbon dioxide (CO2) emissions by 30% to 50% compared to standard concrete, the report relays. These innovations not only enable the construction sector to utilize high-quality and efficient materials but also position the Dominican Republic as a model for sustainable solutions in the industry, the report adds. About Dominican Republic The Dominican Republic is a Caribbean nation that shares the island of Hispaniola with Haiti to the west. Capital city Santo Domingo has Spanish landmarks like the Gothic Catedral Primada de America dating back 5 centuries in its Zona Colonial district. Luis Rodolfo Abinader Corona is the current president of the nation. TCRLA reported in April 2019 that the Dominican To related that Juan Del Rosario of the UASD Economic Faculty cited a current economic slowdown for the Dominican Republic and cautioned that if the trend continues, growth would reach only 4% by 2023. Mr. Del Rosario said that if that happens, "we'll face difficulties in meeting international commitments." An ongoing concern in the Dominican Republic is the inability of participants in the electricity sector to establish financial viability for the system. Fitch Ratings, in December 2021, revised the Outlook on Dominican Republic's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDRs at 'BB-'.The revision of the Outlook to Stable reflects the narrowing of Dominican Republic's government deficit and financing needs since Fitch's last review resulting in the stabilization of the government debt/GDP ratio, as well as the investment-driven economic momentum, reflected in the faster-than-expected economic recovery in 2021 that Fitch expects to carry into above-potential GDP growth during 2022 and 2023. Standard & Poor's, also in December 2021, revised its outlook on the Dominican Republic to stable from negative.S&P also affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings and its 'B' short-term sovereign credit ratings. The stable outlook reflects S&P's expectation of continued favorable GDP growth and policy continuity over the next 12 to 18 months that will likely stabilize the government's debt burden, despite lack of progress with broader tax reforms, S&P said.A rapid economic recovery from the downturn because of the pandemic should mitigate external and fiscal risks. Moody's affirmed the Dominican Republic's long-term issuer and senior unsecured ratings at Ba3 and maintained the stable outlook in March 2021. ============= J A M A I C A ============= JAMAICA: Minister Sees Interest in Caribbean Catastrophe Bond ------------------------------------------------------------- RJR News reports that Finance Minister Dr Nigel Clarke says he is seeing definite interest from other Caribbean countries to join in issuing a regional catastrophe bond that would protect their budgets from hurricanes and spread investor risk across more countries. In an interview with Reuters, Dr Clarke said he plans to reissue Jamaica's current bond when it matures at the end of this year's hurricane season in December, according to RJR News. The bond provides up to $185 million in disaster insurance payouts to Jamaica if named storms and hurricanes meet certain thresholds, the report notes. Dr Clarke indicated that he is trying to sell the regional bond idea to Barbados, the Bahamas, and other countries that are seeing increased hurricane activity and intensity due to climate change, the report adds. As reported in the Troubled Company Reporter-Latin America in March 2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is Stable. ===================== P U E R T O R I C O ===================== CERTENEJAS: Taps CPA Luis R. Carrasquillo as Financial Advisor -------------------------------------------------------------- Certenejas Incorporado seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ CPA Luis R. Carrasquillo & Co., P.S.C. as its financial advisor. The Debtor needs a financial advisor to assist in the financial restructuring of its affairs by providing advice in strategic planning; assist in the preparation of a plan of reorganization, disclosure statement and business plan; participate in negotiations with creditors; and assist the Debtor's legal counsel in investigating financial transactions and disbursements. The firm will be paid at these rates: Partners $185 per hour Seniors $90 to $125 per hour Juniors $45 to $60 per hour Administrative Support $35 per hour The retainer fee for the firm's services is $10,000. As disclosed in court filings, the firm and its members are disinterested persons pursuant to Section 101(14) of the Bankruptcy Code. The firm can be reached through: Luis R. Carrasquillo, CPA CPA Luis R. Carrasquillo & Co., P.S.C. 28Th Street, # TI-26 Turabo Gardens Ave. Caguas, P.R. 00725 Tel: (787) 746-4555/(787) 746-4556 Fax: (787) 746-4564 Email: luis@cpacarrasquillo.com About Certenejas Incorporado dba Hotel Flor Del Valle Certenejas Incorporado, doing business as Hotel Flor Del Valle, is the fee simple owner of a land with commercial building known as "Motel Flor Del Valle." The property is located in Cidra, P.R., and is valued at $3.15 million. Certenejas Incorporado filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 23-01438) on May 12, 2023, with $4,412,900 in assets and $10,114,333 in liabilities. Luis J. Meaux Vazquez, president, signed the petition. Judge Enrique S. Lamoutte Inclan oversees the case. Charles A. Cuprill, Esq., at Charles A. Cuprill, PSC Law Offices and CPA Luis R. Carrasquillo & Co., P.S.C. serve as the Debtor's legal counsel and financial advisor, respectively. ********* 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 * * *