/raid1/www/Hosts/bankrupt/TCRLA_Public/230623.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 23, 2023, Vol. 24, No. 126
Headlines
A R G E N T I N A
ARGENTINA: Consumer Prices Rose 7.8% in May, Reveals INDEC
B R A Z I L
AMERICANAS SA: Accused Ex-Executive Fires Back on Fraud Claims
AMERICANAS SA: Accuses Ex-Executives, Banks & Auditors of Fraud
BRAZIL: Economists Cut LongTerm Inflation Expectations
ELETROBRAS: Fitch Alters Outlook on 'BB-' IDRs to Negative
J A M A I C A
JAMAICA: $11.5 Billion in New Notes Issued
JAMAICA: World Bank Looking to Strengthen Ties with Country
P A R A G U A Y
FRIGORIFICO CONCEPCION: Fitch Affirms B+ IDRs, Outlook Stable
- - - - -
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A R G E N T I N A
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ARGENTINA: Consumer Prices Rose 7.8% in May, Reveals INDEC
----------------------------------------------------------
Buenos Aires Times reports that consumer prices in Argentina rose
7.8 percent in May, the INDEC national statistics bureau revealed,
marking a slight deceleration from the preceding month.
According to official government data, inflation since the turn of
the year is 42.2 percent, with prices over the last 12 months now
up 114.2 percent, according to Buenos Aires Times.
Hikes in May were led by the housing, water, electricity and other
fuels category, which soared 11.9 percent as a result of
government-approved increases to rates, the report notes.
Close behind was restaurants and hotels, up 9.3 percent, and
healthcare, which rose nine percent, mostly due to a rise in
medicines and prepaid medical services, the report discloses.
The report says that other categories topping eight percent were
recreation and culture (8.4 percent) and alcoholic beverages and
tobacco (8.4 percent).
In contrast to recent months, food and non-alcoholic beverages were
for once at the lower end of the scale, rising 5.8 percent,
compared to 10.1 percent back in April, the report discloses.
Some items, however, recorded very steep rises last month, such as
sugar, which rose 23 percent in just a month, and tomatoes, which
jumped 38 percent. Rice (18 percent), peas (16.7 percent) and yerba
mate (14 percent) also rose significantly. Over the last 12 months,
the price of foodstuffs generally have risen 117.8 percent, said
INDEC, the report notes.
Education recorded the lowest hike in May of 4.9 percent. Core
inflation came in at 7.8 percent, with seasonal prices increasing
six percent, the report says. Regionally, the highest inflation
rate of eight percent was recorded in Greater Buenos Aires and the
Northeast, while at the other end of the scale, Patagonia recorded
7.3 percent, the report relays.
Consumer prices increased 8.4 percent in April and Central Bank
sources had forecast a slight slowing for last month, the report
discloses. The Central Bank's survey of market expectations had
forecast a monthly rate of nine percent and an annual rate of 148.9
percent for the calendar year, the report relays.
The deceleration of the consumer price index in May interrupted a
five-month upward trend, the report discloses.
Private consultancy firms said that increases in prepaid health
services, fuel, transport, education and utilities had all pushed
up the monthly rate, the report says.
Inflation is one of the biggest challenges facing Alberto
Fernandez's government, with incessant price hikes complicating the
government's position ahead of the presidential election in
October, the report notes. The president, who said that inflation
is "a very serious problem," has decided not to run for
re-election, the report relays.
"It is not possible to live with 100 percent inflation," he said in
an interview with high-school students, pointing to Russia's war in
Ukraine and the economic legacy of his predecessor in office,
Mauricio Macri, as cause for the problem, the report discloses.
"You can look at inflation, which is very high in Argentina, but
you also have to look at what happened in the world. Inflation is
largely due to the [Ukraine] war. In the country, inflation has
doubled, but Macri left 55 points of inflation" behind, he argued,
the report relays.
News of the rate came as little surprise to the government, of
course. Speaking prior to the release of INDEC's data, Economy
Minister Sergio Massa had forecast that the national rate would be
"in line with inflation in the City of Buenos Aires," which reached
7.5 percent in May, the report notes.
Speaking on Tuesday, economist Fausto Sportorno said in a radio
interview that he believes inflation is now stabilising at around
eight percent a month, the report says.
"Inflation has been accelerating every month since November. But
the positive data is that if in May it is around eight percent, we
could be seeing a sign of stabilisation," he emphasized, the report
notes.
The expert predicted that May's inflation rate would be between 7.5
and 8.5 percent with core inflation "remaining at around eight
percent," the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
Last March 25, 2022, Argentina finalized agreement with the IMF for
a new USD44 billion Extended Funding Facility (EFF) intended to
fund USD40 billion in looming repayments of the defunct Stand-By
Arrangement (SBA), with an extra USD4 billion in up-front net
financing. This has averted the risk of a default to the IMF
and is facilitating a parallel rescheduling of Paris Club debt.
S&P Global Ratings, on March 29, 2023, lowered its long-term
foreign currency sovereign credit rating on Argentina to 'CCC-'
from 'CCC+'. S&P also affirmed its 'C' short-term foreign currency
sovereign credit rating and its 'CCC-/C' local currency ratings on
Argentina. The outlook on the long-term ratings is negative. S&P
also lowered the transfer and convertibility assessment to 'CCC-'
from 'CCC+'. The negative outlook on the long-term ratings
reflects risks surrounding pronounced economic imbalances and
policy uncertainties before and after the 2023 national elections.
Divisions across the political spectrum constrain the sovereign's
ability to implement timely changes in economic policy. Global
capital markets are closed to Argentina. In the local market, swaps
are being deployed to manage large maturities before placing debt
through traditional auctions. The central bank continues to play a
key role as a backstop for local debt management in the secondary
market. The ongoing severe drought has exacerbated pressures in the
already disrupted foreign exchange (FX) market.
Fitch Ratings, on the other hand, downgraded Argentina's Long-Term
Foreign Currency Issuer Default Rating (IDR) to 'C' from 'CCC-',
and has affirmed the Long-Term Local Currency IDR at 'CCC-' on
March 24, 2023. Fitch's downgrade of Argentina's rating to 'C' from
'CCC-' follows an executive decree that forces domestic
public-sector entities into operations involving their holdings of
sovereign debt securities, which would involve unilateral exchanges
and forced currency conversion that constitute default events under
Fitch's criteria. The 'C' rating reflects Fitch's view that default
is thus imminent. Fitch said the rating would be downgraded to
'Restricted Default' (RD) upon execution of the exchanges.
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
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B R A Z I L
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AMERICANAS SA: Accused Ex-Executive Fires Back on Fraud Claims
--------------------------------------------------------------
Andre Romani at Reuters reports that fraud allegations by Brazil's
Americanas against former executives are based on falsehoods and an
incomplete report designed to disrupt ongoing investigations,
lawyers for one of the accused former executives said.
The retailer's management disclosed a report from outside legal
advisers that implicated several former executives, banks and audit
firms in "fraudulently altered" financial statements, according to
Reuters.
Americanas filed for bankruptcy protection in January after
uncovering a $4 billion accounting scandal, the report notes. The
report issued on Tuesday accused ex-CEO Miguel Gutierrez and half a
dozen other former executives and employees of committing fraud,
the report relays.
Gutierrez did not respond to a request for comment, nor did other
former executives named by Americanas or their lawyers, with the
exception of former chief operating officer Jose Timotheo de
Barros, the report relays.
His lawyers said in a statement that the outside report contains
"untruths" as well as unproven accusations, the report discloses.
The law firms that put together the report did not respond
immediately to a request for comment outside business hours.
The company report said that Barros was one of the former
executives who exchanged emails that showed the existence of a
false, parallel accounting statement that differed significantly
from the one it disclosed publicly in 2021, the report notes.
Current CEO Leonardo Coelho on Tuesday testified before lawmakers
in Brasilia, arguing that the report documented fraud committed by
the former executives, while insisting board members were not
involved, the report relays.
But Barros' defense team said the excerpts from the report were
shown to the congressional committee "in a frivolous manner" and
the document had been prepared in part to disrupt investigations,
the report relays. The lawyers said Coelho's testimony was "mere
opinions of suspicions," the report discloses.
In response, Americanas said the information provided to lawmakers
"speaks for itself" and that it would provide the report to all
competent authorities, the report discloses.
The company's board removed Barros and other executives in
February, the report adds.
About Americanas SA
Americanas was one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust
e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by billionaire Jorge
Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles.
The retailer nosedived in January 2023 after becoming mired in an
accounting scandal. The firm filed for bankruptcy at a court in Rio
de Janeiro on Jan. 19, 2023.
Americanas sought protection under Chapter 15 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25,
2023. White & Case LLP, led by John K. Cunningham, is the U.S.
counsel.
AMERICANAS SA: Accuses Ex-Executives, Banks & Auditors of Fraud
---------------------------------------------------------------
Carolina Pulice, Andre Romani and Gabriel Araujo at Reuters report
that top management at bankrupt Brazilian retailer Americanas
(AMER3.SA) slammed former executives, banks, and audit firms after
a report by the company's legal advisers alleged their involvement
in "fraudulently altered" financial statements.
Americanas' current top executive Leonardo Coelho assured lawmakers
that board members were not among at least 30 people within the
company he said were implicated in the financial scheme allegedly
designed to hide its deteriorating balance sheet, according to
Reuters.
Americanas filed for bankruptcy protection in January after
uncovering a $4 billion accounting scandal, the report notes. The
company accused ex-chief executive Miguel Gutierrez and half a
dozen other former executives and employees of taking part in
"fraud," the report relays.
Gutierrez did not immediately respond to a request for comment, nor
did other former executives named by Americanas or their lawyers.
The report was based on documents provided by an independent
committee, the company said. It identified irregularities in
cooperative advertising budget agreements, according to a
securities filing, Reuters discloses.
It also found that the firm entered into a series of financing
deals without proper corporate approvals, the report notes.
"The improper accounting of these financing operations in
Americanas' financial statements did not allow for the true
determination of the company's indebtedness level," the filing
said, the report relays.
Accounting adjustments will be reflected in future financial
statements as soon as auditing work is concluded, the company said,
adding that the effects were still being ascertained, Reuters
notes.
"The management expects the impact on the most recent results to be
significant," the company said, promising to evaluate ways it might
be reimbursed for the damages, Reuters says.
CEO Coelho testified to a congressional committee that the report
documents the fraud, and that purchase financing operations known
as forfeit debts were not seen by any board members, the report
discloses.
Coelho noted that firings of those involved started and were
continuing on, the report relays.
He added that audit firms KPMG and PwC in Brazil allowed the
amendment of letters on the request of the company's management, in
order to eliminate inconsistencies in financial statements, the
report relays.
KPMG and PwC said they were unable to comment on client issues
because of confidentiality clauses and professional secrecy rules,
the report notes.
Brazilian banks Itau Unibanco (ITUB4.SA) and Santander Brasil
(SANB3.SA) were also mentioned in the investigation, the report
discloses.
Coelho said that there was an "exchange of information" between
banks and people inside the company in order to alter the words in
documents exchanged between them regarding the financing processes,
Reuters says.
Itau said in a statement that it acted with transparency and that
financial statements were the responsibility solely of the company,
and that it was "frivolous" to attribute responsibility for the
fraud to third parties, the report relays.
Santander Brasil said in a statement that Americana's securities
filing proved "emphatically" the sole and exclusive responsibility
of Americanas for accounting inconsistencies, the report says.
The documents exchanged between the bank and people inside the
company were just "one among many sources of auditing" and
Santander Brazil always fully reported all of the balances of
Americanas' operations in the central bank system, the bank added.
About Americanas SA
Americanas was one of the largest diversified retail chains in
Brazil, with a wide platform of physical stores, robust
e-commerce,
fintech, and has just entered into the niche food retail. It is
listed on B3, being indirectly controlled by billionaire Jorge
Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles.
The retailer nosedived in January 2023 after becoming mired in an
accounting scandal. The firm filed for bankruptcy at a court in Rio
de Janeiro on Jan. 19, 2023.
Americanas sought protection under Chapter 15 of the U.S.
Bankruptcy Code (Bankr. S.D.N.Y. Case No. 23-10092) on Jan. 25,
2023. White & Case LLP, led by John K. Cunningham, is the U.S.
counsel.
BRAZIL: Economists Cut LongTerm Inflation Expectations
------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazilian
economists have reduced their long-term inflation expectations,
putting an end to months of unchanged projections that the central
bank had cited as a cause for concern.
According to the median forecast of a weekly central bank survey on
Monday, 2025 inflation projections now stand at 3.9%, down from the
previous estimate of 4.0% calculated since March 24, the report
notes.
The expectation for 2026 has also decreased to 3.88% from the
previous 4.0% forecast since March 17.
The central bank has consistently expressed concern about increased
inflation expectations for long-term horizons in its justifications
for the need to keep the benchmark interest rate at a 13.75%
cycle-high, which has remained steady since September despite
cooling inflation, according to globalinsolvency.com.
This policy stance has faced frequent criticism from President Luiz
Inacio Lula da Silva, who sees it as hindering economic growth, the
report relays.
Central bank chief Roberto Campos Neto had already emphasized last
week that long-term inflation expectations would start to decline,
pointing to a clearer economic environment, the report says.
The weekly survey also showed lower inflation forecasts for 2023
(5.42% from 5.69%) after consumer prices decelerated more than
expected in May, the report adds.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022
Brazilian general election. He was sworn in on January 1, 2023, as
the 39th president of Brazil, succeeding Jair Bolsonaro.
As recently reported in the Troubled Company Reporter-Latin
America, Fitch Ratings, in December 2022, affirmed Brazil's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Outlook. The ratings are constrained by high
government indebtedness, a rigid fiscal structure, weak economic
growth potential, and a record of governability challenges that
have hampered efforts to address these fiscal and economic issues
and clouded policy predictability. The Stable Outlook reflects
Fitch's expectation that growth will slow in the coming year and
that recent fiscal improvement will erode under a new government,
but within a margin consistent with the current rating, and from a
better starting point than previously expected. Uncertainty is
elevated regarding the plans of the incoming government and the
extent to which these could ease or aggravate fiscal and economic
challenges. However, Fitch does not expect policies that
jeopardize broad economic stability.
Standard & Poor's affirmed its 'BB-/B' long- and short-term
foreign and local currency sovereign credit ratings on Brazil, and
the outlook remains stable (June 2022). The stable outlook
reflects S&P's base-case assumption that Brazil will maintain its
fiscal anchors over the next two years despite an increasing
interest burden, preventing significant fiscal slippage and
limiting the rise in its already high debt burden.
Moody's credit rating for Brazil was last set at Ba2 in 2018 with
stable outlook. Moody's affirmed the Ba2 issuer ratings and
senior unsecured bond ratings in April 2022.
DBRS's credit rating for Brazil is BB (low) with stable outlook
(March 2018).
ELETROBRAS: Fitch Alters Outlook on 'BB-' IDRs to Negative
----------------------------------------------------------
Fitch Ratings has affirmed Centrais Eletricas Brasileiras S.A.'s
(Eletrobras) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) and outstanding senior unsecured bond ratings at
'BB-'. Eletrobras' National Scale rating, as well as its rated
subsidiaries and their outstanding local debentures ratings were
affirmed at 'AA(bra)'. Fitch has revised the Rating Outlook for the
corporate ratings to Negative from Stable.
The Outlook revision to Negative reflects the expectation of lower
cash generation coming from the sale of uncontracted energy, which
should prevent Eletrobras from deleveraging as expected. It also
takes into account the increase on the risk of the hydro power
plant (UHE) Belo Monte, where Eletrobras guarantees BRL14 billion
of debt, as well as uncertainties surrounding the new capex plan
and the need to address around BRL20.4 billion of debt maturing
until December 2024.
Eletrobras' ratings consider its relevant and diversified asset
base, moderate to high leverage and strong liquidity position, with
expected positive FCF from 2024 on. The subsidiaries' ratings are
equalized to Eletrobras' rating due to medium to high incentives of
support from the parent, if needed.
KEY RATING DRIVERS
Strong Business Profile: Eletrobras has a strong business position
in the electricity energy sector in Brazil, as the country's
largest player in the generation and transmission segments. Its 43
GW of installed capacity and 74,000 km of transmission lines
represent 22% and 38% in terms of national market share,
respectively. Around 70% of the group's revenues have contracts in
the regulated market annually readjusted for inflation - 38% from
transmission segment and 33% from generation. These revenues
provide moderate visibility in the short to medium term. Almost 10%
of regulated revenues come from energy generation sold under quota
regimethat will gradually migrate to the unregulated market until
2027, with expectation of higher prices for the new contracts.
Moderate to High Leverage: Eletrobras' net adjusted financial
leverage, including off-balance guarantees, should remain above
4.5x until at least 2026, with 5.6x in 2023 and 4.8x in 2024.
Eletrobras' off-balance debt of BRL28.7 billion at the end of March
2023 mainly incorporates guarantees provided to UHE Belo Monte
(BRL14.2 billion) and to the nuclear power plant Angra 3 (BRL6.1
billion). Eletrobras' guarantees to Angra 3 should grow as this
project still has an estimated BRL20 billion of capex during
2024-2028, with Eletrobras responsible for BRL7.2 billion, relative
to its 35.9% stake. The sizable guarantee to UHE Belo Monte's debt
currently has higher weight on the leverage metrics as this
entity's credit profile has deteriorated.
High Exposure to Price Risk: Eletrobras' high uncontracted energy
generation capacity and Fitch's expectation of energy prices in
Brazil around 25% lower than previously anticipated, should disrupt
the group's forecast cash generation. The group needs to recontract
1.5GW in 2023, 3.0GW in 2024, 6.1GW in 2025 and 8.3GW in 2026,
which represent an uncontracted position of 16%, 29%, 48% and 62%,
respectively. Fitch's base case scenario considers energy sales
prices of BRL128/MWh in 2023, BRL110/MWh in 2024 and an average of
BRL131/MWh during the 2025-2026 period, around 25% lower than
previous expectations. Currently, around 62% of Eletrobras' revenue
comes from regulated contracts in transmission (38%) and generation
(24%) segments, and the reduction of the energy sold to the
regulated market increases the company's exposure to unfavorable
trends for energy prices in Brazil.
Synergies from Privatization Process: Higher prices in the
generation segment compared with that of the quota regime and
potential efficiency synergies from privatization should moderately
improve Eletrobras' EBITDA in the coming years. The base case
scenario takes into account BRL9.9 billion in 2023 and BRL11.5
billion in 2024, assuming BRL1.9 billion of savings in personal
expenses as a result of dismissal plans promoted in 2022 and 2023,
with full impact in 2024. Fitch estimates the dismissal plan cost
of BRL2.0 billion during 2023-2025. This initiative and other
expected cash outflows will affect the company's cash flow from
operations (CFFO), which should reach BRL4.7 billion in 2023 and
BRL6.6 billion in 2024. FCF is expected to be negative in BRL300
million in 2023 and positive in BRL1.6 billion in 2024, after
annual investments close to BRL4.0 billion and dividend payout of
25%.
Subsidiaries' Ratings Equalized: Fitch equalizes the National Scale
ratings of Companhia Hidro Eletrica do Sao Francisco (Chesf) and
Companhia de Geracao e Transmissao de Energia Eletrica do Sul do
Brasil - Eletrobras CGT Eletrosul (CGT Eletrosul) with Eletrobras'
rating due to the medium to high set of legal, operational and
strategic incentives for the controlling shareholder to support
them, if needed.
Eletrobras holds a 100% stake of Chesf and CGT Eletrosul and these
two subsidiaries are included in cross default clauses of the
parent Eurobonds and local debentures. The operating and strategic
incentives are mainly based on the importance of Chesf and CGT
Eletrosul's assets for Eletrobras group and the centralized
operational and financial decisions.
DERIVATION SUMMARY
Eletrobras' 'BB-' rating is three notches below the Local Currency
(LC) IDR of the Brazilian generation company Engie Brasil Energia
S.A. (Engie Brasil; BBB-/Stable) and the Brazilian transmission
groups Alupar Investmento S.A. (Alupar; BBB-/Stable) and
Transmissora Alianca de Energia Eletrica S.A. (Taesa;
BBB-/Negative) due to its worst operating performance and weaker
financial profile, despite its larger size and asset
diversification.
Eletrobras will have higher gross and net leverage than these
peers, particularly after the consolidation of Santo Antonio
Energia S.A. and its incurring of privatization-related costs.
Eletrobras' 2022 gross and net adjusted leverage were 7.8x and
5.7x, respectively, which includes off balance sheet guarantees as
debt. These ratios were 2.7x and 2.4x for Engie Brasil, 4.7x and
3.6x for Alupar, and 4.3x and 3.7x for Taesa, respectively.
Eletrobras' leverage is expected to remain above that of its peers
over the next two years, with 2023 net leverage of 5.5x and 4.7x in
2024, while Engie Brasil's will be 2.7x and 3.3x. Alupar's leverage
will be in the 3.0x-3.5x range, and TAESA's will be in the
4.0x-4.5x range. Additionally, Alupar and TAESA have a lower
business risk profile due to their concentration in electricity
transmission, which has less variability than generation.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within the Rating Case for the Issuer:
- Energy sales average 10.3 GW in 2023 and 10.7 GW in 2024,
not including thermal and quotas capacity;
- Average sales price for the uncontracted capacity of
BRL128/MWh in 2023, BRL110/MWh in 2024 and BRL126/MWh in 2025;
- 20% per year of capacity under the quota regime is repriced
to reflect market prices;
- SG&A expenses adjusted by inflation;
- Dividends of 25% of net income;
- Capex of BRL12.6 billion from 2023 to 2025;
- No distributions associated with the outstanding guarantees
to non-consolidated subsidiaries;
- Conclusion of Nuclear Plant Angra 3 construction in 2028.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The Outlook may be revised to Stable if:
- Uncontracted energy position declines allowing greater cash
flow visibility;
- The risk of off-balance debt guarantees materializes into
cash reductions, mainly the one related to UHE Belo Monte;
- Improvement in the debt maturity schedule;
- Sustained total adjusted leverage below 6.0x and sustained
net adjusted leverage below 5.0x, coupled with FFO interest
coverage closer to 3.0x.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Continuity of high uncontracted energy position;
- Increasing risk relative to the off-balance guarantees;
- Deterioration on the debt and liquidity profiles;
- Total adjusted leverage above 6.0x or net adjusted leverage
above 5.0x on a sustainable basis;
- Higher pressure on the expected FCF.
LIQUIDITY AND DEBT STRUCTURE
Sound Liquidity Profile: Eletrobras' strong liquidity position is a
key consideration in its ratings as it mitigates the existing debt
maturity concentration. In March of 2023, the group's robust
consolidated cash and marketable securities of BRL20.0 billion
compared with its short-term debt of BRL6.7 billion and BRL20.4
billion maturing from April 2023 until December 2024. The cash
inflow of BRL950 million in April 2023, related to the transfer of
Itaipu Binacional to Empresa Brasileira de Participações em
Energia Nuclear e Binacional (ENBPar), reinforced the liquidity
position. Fitch views that Eletrobras has to solve its debt
concentration within the next few quarters, but its financial
flexibility is a positive consideration.
Eletrobras' adjusted consolidated debt of BRL86.0 billion as of
March 2023 was mainly concentrated in debentures (29%) and
Brazilian state-owned entities (27%). Brazilian owned Federal bank
BNDES holds 16% of the consolidated on-balance-sheet debt, with
Petrobras being responsible for 11%. Foreign currency debt is
manageable, representing around 12% of the group's debt. Off
balance sheet debt of BRL28.6 billion was mainly comprised by
corporate guarantees in loans of UHE Belo Monte (BRL14.2 billion)
and Angra 3 (BRL6.1 billion).
ISSUER PROFILE
Eletrobras is the largest electric energy group in Brazil. It
operates in the energy generation and energy transmission segments.
The group is responsible for 22% of the installed generation
capacity and 38% of the transmission lines in the country.
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
----------- ------ -------- -----
Companhia de Geracao e
Transmissao de Energia
Eletrica do Sul do Brasil
(CGT Electrosul)
Natl LT AA(bra) Affirmed AA(bra)
senior
unsecured Natl LT AA(bra) Affirmed AA(bra)
senior secured Natl LT AA(bra) Affirmed AA(bra)
Centrais Eletricas
Brasileiras S.A.
(Eletrobras)
LT IDR BB- Affirmed BB-
LC LT IDR BB- Affirmed BB-
Natl LT AA(bra) Affirmed AA(bra)
senior
unsecured LT BB- Affirmed BB-
Companhia Hidro
Eletrica do Sao
Francisco S.A. Natl LT AA(bra) Affirmed AA(bra)
senior secured Natl LT AA(bra) Affirmed AA(bra)
=============
J A M A I C A
=============
JAMAICA: $11.5 Billion in New Notes Issued
------------------------------------------
Dashan Hendricks at Jamaica Observer reports that that Bank of
Jamaica (BOJ) said it issued $11.5-billion worth of the new polymer
banknotes, the first day the new notes were distributed to the
public. The new notes that are being issued are set to, over time,
replace $228 billion in notes that were in circulation, according
to Jamaica Observer.
Natalie Haynes, deputy governor for banking and currency operations
and payment system and money services oversight divisions at the
central bank, told the Jamaica Observer that the a total of 11.8
million pieces of the new polymer notes were in circulation as at
June 15, 2023, the report discloses.
She told the Caribbean Business Report that the new polymer notes
comprised 56 per cent of the total value of notes issued, the
report says.
"We therefore expect this ratio to increase over the next six
months into next year, and the following years," Haynes said in
response to queries about the roll-out of the new notes, the report
relays.
She reiterated that the central bank will continue to issue old
notes based on what is ordered by the commercial banks, the report
notes.
"Banks may continue to order old notes until all ABMs [automated
banking machines] are ready for accepting and dispensing polymer
notes. Once all ABMs are ready, BOJ will cease issuing old notes,"
the report says.
She said how quickly the new notes are rolled out will be dependent
on the readiness of the banks in having all ABMs ready for
dispensing and accepting the polymer notes, adding that "each bank
will issue an advisory to its customers on this," the report
discloses.
As for how long the old notes will be in circulation, the BOJ
deputy governor said it is difficult to assess as persons hold
notes for posterity purposes in addition to transaction purposes,
the report notes.
"Notably, for banknotes that are no longer legal tender, there are
still notes in circulation," the report relays. The central bank
estimates that 14 per cent of old notes which are no longer
accepted as legal tender are still in the hands of individuals,
some who keep them to show grandchildren the types of currency
notes used in the past, the report discloses.
With the new notes, the central bank has issued a new $2,000 note,
as a measure to reduce the demand for the heavily used $1,000 note,
the report notes.
The BOJ notes that the upgrade of Jamaica's banknotes is aimed at
enhancing the security of the banknotes to combat counterfeiting,
and also to better satisfy the needs of the visually impaired, the
report says. Each of the current banknotes has one feature which
is dedicated to the visually impaired, that is either large
numbering or tactile printing, recognized through touching and
feeling, the report notes.
Haynes last year told the Caribbean Business Report that the
central bank spends about $1.4 billion to order bank notes each
year, but declined to say how much would be spent to order the new
polymer notes, the report adds.
As reported in the Troubled Company Reporter-Latin America in March
2022, Fitch Ratings has affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
JAMAICA: World Bank Looking to Strengthen Ties with Country
-----------------------------------------------------------
RJR News reports that newly appointed president of the World Bank,
Ajay Banga, says the entity is looking at opportunities to
strengthen its relationship with Jamaica.
Speaking with journalists at a site visit in Manchester, Mr. Banga
said preliminary discussions have started with Finance Minister Dr.
Nigel Clarke regarding possible areas of focus, according to RJR
News.
"The most important thing that came out to me was investing in
people - education. He spoke about education, I would say, not
once, not twice, but four, five times. What he means by education
obviously is primary education, early stages, but also at the right
time, the right kind of skilling for people that makes sense with
the job opportunities that should come up in Jamaica," he reasoned,
the report notes.
He said the parties also discussed the digitization of the
population as well as government, in addition to talks on how to
bring the cost of electricty down, the report relays.
"Electricity at an affordable price is the starting point of
development," he noted.
The new World Bank head said climate resilience was another key
area in the discussions, the report relays.
Mr. Banga is the first World Bank president to visit Jamaica in an
official capacity in the 60-year history of relations between
Jamaica and the multilateral agency, the report discloses.
His visit is part of his global impact tour, happening now through
to December, 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 A R A G U A Y
===============
FRIGORIFICO CONCEPCION: Fitch Affirms B+ IDRs, Outlook Stable
-------------------------------------------------------------
Fitch Ratings has affirmed Frigorifico Concepcion S.A.'s Long-term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B+'.
In addition, Fitch has affirmed the company's senior secured bonds
at 'B+'/'RR4'. The Rating Outlook is Stable.
The ratings reflect Frigorifico Concepcion's improved geographical
diversification, steady net leverage and the assumption that the
company will be able to ramp up its operations and generate
positive FCF in 2024 and beyond.
KEY RATING DRIVERS
High Working Capital Need: Fitch expects Frigorifico Concepcion's
FCF to remain negative in 2023 due to working capital requirement
for the ramp-up of its operations and for capex. Working capital
consumption is estimated at about USD130 million. The working
capital cycle is about 118 days, and the company plans to lower it
to about 110 days by extending payable days. Fitch projects capex
of about USD44 million, which includes the investment of USD30
million in INCKA, a Paraguayan unit dedicated to the slaughter and
processing of pigs that is currently under construction.
EBITDA to Ramp Up: Fitch forecasts EBITDA of about USD150 million
to USD160 million in 2023, up from USD115 million in 2022. The
increase is driven by the ramp-up of operations in Brazil and
increased volumes in Bolivia, and the overall EBITDA margin is
projected at close to 9%-10% in 2023 (10.1% in 2022). LTM EBITDA
reached USD128 million in 1Q23 (EBITDA margin of 10.2%). The group
benefits from low production costs and good cattle availability.
Steady Net leveraging: Net debt/ EBITDA is expected to remain
steady at about 3x (3.1x in 2022) thanks to the increase in EBITDA
in 2023. The company is publicly seeking USD50 million to
USD100million of new financing to fully finance its rapid growth
this year. The deleveraging will accelerate beyond 2023 as acquired
assets mature and the company starts generating positive FCF.
Increased Geographical and Protein Diversification: The increase in
diversification lowers business risks as it mitigates sourcing and
exports bans inherent to the volatile protein sector. Operations in
Bolivia and Brazil are estimated to represent about 60% of EBITDA
in 2023, while pork and pork products represented about 19% group
sales in 1Q23. Frigorifico Concepcion is exposed to sanitary,
environmental, deforestation and import or export restriction
risks, and quotas, which have resulted in its historically volatile
performance.
Export Business Model: Frigorifico Concepcion has developed an
export platform that benefits from good international protein
demand and low cost of production. 60% of revenues came from
exports, mainly to Asia and Latin America (Chile, Brazil) in 2022.
The company can export to China through its subsidiary in Bolivia,
as meatpackers in Paraguay are not allowed to export to China,
given Paraguay's recognition of Taiwan as a sovereign. In Brazil,
Fitch understands that the operations will move toward the export
market over time as volumes are initially sold in the domestic
markets during the ramp-up phase.
DERIVATION SUMMARY
Frigorifico Concepcion's ratings reflect its solid business profile
as a protein company with a leading presence in Paraguay and
Bolivia. The company is ramping up its operation in Brazil with BMG
Foods (beef and pork). Beef protein remains the main contributor to
the group's profitability. The company has developed an
export-oriented business model and 60% of Frigorifico Concepcion's
revenues were derived from exports in 2022.
The company has been able to maintain good operating margins over
the years despite facing several challenges such as export
restrictions or unfavorable weather conditions. FCF remains
negative, resulting principally from high working capital needs due
to the company's growth. Net leverage is expected to remain steady
in 2023.
KEY ASSUMPTIONS
- Revenues growth driven by the ramp up of the company's
operations in 2023 (notably Brazil);
- Working capital need of about USD130 million in 2023;
- Capex of about USD44millon to finance the INCKA projects;
- WK days between 110-118 days;
- Net debt/ EBITDA stable at 3x at YE23;
- New financing to finance the ramp up of its operations.
Recovery Analysis:
The recovery analysis assumes Frigorifico Concepcion would be
reorganized as a going-concern (GC) in bankruptcy rather than be
liquidated. Fitch has assumed a 10% administrative claim. The GC
EBITDA assumption of about USD92 million reflects the volatility of
the protein industry, potential sanitary risks or temporary
shutdown of any export markets.
An EV multiple of 5x EBITDA is applied to the GC EBITDA to
calculate a post-reorganization enterprise value. Fitch uses a
multiple of 5x that reflects the sector dynamics and the company's
business profile as a mid-sized company with strong growth
prospects and a good operating margin.
The above assumptions result in a recovery rate assumption of 'RR4'
for the secured notes due to the cap for Paraguayan Corporate.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Debt/ EBITDA below 3x on a sustained basis;
- Sustainable positive FCF.
- Increased financial flexibility.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Debt/ EBITDA above 4.5x or Net debt/ EBITDA above 3.5x on a
sustained basis;
- Deterioration of liquidity;
- Negative FCF beyond 2023.
LIQUIDITY AND DEBT STRUCTURE
Weak Liquidity: Fitch views Frigorifico Concepción's liquidity as
weak due to the need of financing working capital to fully ramp up
its operations. Cash and cash equivalents were USD75 million, and
short-term debt totaled about USD73 million as of 1Q23. Total debt
was USD419 million as of 1Q23, comprised of USD300 million secured
notes due in 2028, local notes and bank debt.
ISSUER PROFILE
Frigorifico Concepción S.A. was founded in 1997 and is based in
Concepción, Paraguay. The company operates as a meatpacker in
Paraguay, Bolivia and Brazil.
ESG CONSIDERATIONS
Frigorifico Concepcion S.A. has an ESG Relevance Score of '4' for
Waste & Hazardous Materials Management; Ecological Impacts due to
chain management. The company is exposed to cattle sourcing and
needs to monitor direct and indirect suppliers in South America.
This has a negative impact on the credit profile and is relevant to
the ratings in conjunction with other factors.
Frigorifico Concepcion 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
ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Recovery Prior
----------- ------ -------- -----
Frigorifico
Concepcion S.A. LT IDR B+ Affirmed B+
LC LT IDR B+ Affirmed B+
senior secured LT B+ Affirmed RR4 B+
*********
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
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contact Peter A. Chapman at 215-945-7000.
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