/raid1/www/Hosts/bankrupt/TCRLA_Public/230627.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
Tuesday, June 27, 2023, Vol. 24, No. 128
Headlines
A R G E N T I N A
ARGENTINA: Faces Crunch IMF Talks to Defuse Looming Debt Bomb
B A H A M A S
[*] BAHAMAS: Ran Third Consecutive Monthly Fiscal Surplus in March
B R A Z I L
BRAZIL: Central Bank Keeps Interest Rate Unchanged at a 6-Year High
BRAZIL: Falls to 60th in 2023 Global Competitiveness Rankings
SAO PAULO: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
XP INC: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
C O L O M B I A
BANCO DE BOGOTA: S&P Affirms 'BB+/B' ICRs, Outlook Stable
J A M A I C A
JAMAICA: Bank Boss Warns Interest Rate Rise Hard for Many
JAMAICA: Needs Policy Action to Boost Productivity, Hyde Says
P A R A G U A Y
RUTAS 2 AND 7: Fitch Affirms 'BB+sf' Rating on 2019-1 Secured Notes
P U E R T O R I C O
AES PUERTO RICO: Fitch Lowers Rating on $161MM Series A Bonds to D
PUERTO RICO: PREPA Bondholders Want Higher Claims in Bankruptcy
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A R G E N T I N A
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ARGENTINA: Faces Crunch IMF Talks to Defuse Looming Debt Bomb
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globalinsolvency.com, citing Reuters, reports that Argentina and
the International Monetary Fund (IMF) have a $44 billion dilemma,
with the two sides set to meet for crunch talks to revamp the
country's huge, wobbling debt deal, key to avoiding default on
billions in looming debt payments.
The South American country, a serial defaulter that has struggled
for years with inflation and currency crises, struck a $57 billion
loan deal with the IMF in 2018, which failed and was replaced last
year with a new $44 billion program, according to
globalinsolvency.com.
But with net foreign currency reserves estimated to be in negative
territory, hit by a major drought that sunk the key soy and corn
harvests, Argentina is at risk again of missing debt repayments,
with $2.7 billion due to the fund this month alone, the report
notes.
Economy Minister Sergio Massa is expected in Washington as early as
this week to try to unlock talks to accelerate IMF disbursements
and ease economic targets attached to the deal, with investors and
traders watching closely, the report relays.
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 A H A M A S
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[*] BAHAMAS: Ran Third Consecutive Monthly Fiscal Surplus in March
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RJR News reports that the Bahamas Government ran its third
consecutive monthly fiscal surplus in March.
The calendar year's traditionally revenue-rich first quarter saw
revenues exceed spending by more than $60 million, according to RJR
News.
Total spending year-over-year increased by just $800,000 compared
to March 2022, the report notes.
A 17.4 pe rcent or $49.9 million, jump in revenue drove the Phillip
Davis administration to a $40.4 million fiscal surplus for the
month, the report adds.
Revenues totalled $336.1 million compared to total spending of
$295.7 million, and this outturn helped to decrease the
Government's direct debt, while still high at over $11 billion, by
some $36.8 million during March.
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B R A Z I L
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BRAZIL: Central Bank Keeps Interest Rate Unchanged at a 6-Year High
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globalinsolvency.com, citing Bloomberg News, reports that Brazil's
central bank kept its key interest rate unchanged at a six-year
high and stopped short of endorsing imminent reductions,
frustrating a growing campaign for looser monetary policy from
President Luiz Inacio Lula da Silva, business leaders and top
politicians.
Policymakers kept the benchmark Selic at 13.75% for a seventh
straight meeting as widely anticipated, according to
globalinsolvency.com.
In an accompanying statement, the central bank removed language
pledging to resume rate hikes in case inflation doesn't behave as
expected, but repeated that "patience and serenity" are needed for
future policy decisions, the report notes.
The board "judges that the strategy of maintaining the Selic rate
for a long period has been adequate to ensure the convergence of
inflation," they wrote, the report discloses.
Policymakers added that the next steps in monetary policy will
depend on "inflationary dynamics" such as the long-term outlook for
consumer prices as well as measures of economic slack, 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).
BRAZIL: Falls to 60th in 2023 Global Competitiveness Rankings
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Richard Mann at Rio Times Online reports that in 2023, Brazil
ranked 60th out of 64 countries in the IMD Global Competitiveness
Ranking, falling one position from the previous year.
Although this decline is attributed to the inclusion of a new
entrant, Kuwait, experts argue that Brazil's static performance
played a part, according to Rio Times Online.
The ranking, conducted by the International Institute for
Management Development (IMD) in partnership with the Dom Cabral
Foundation's Center for Innovation and Entrepreneurship, assesses
countries' economic competitiveness, the report notes.
Brazil only surpassed South Africa, Mongolia, Argentina, and
Venezuela, 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).
SAO PAULO: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
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Fitch Ratings affirmed the Brazilian State of Sao Paulo's Long-Term
Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB-'.
The Rating Outlook is Stable. Fitch has also affirmed Sao Paulo's
Short-Term Foreign and Local Currency IDRs at 'B', National
Long-Term Rating at 'AA(bra)'/Stable and National Short-Term Rating
at 'F1+(bra)'. Sao Paulo's Standalone Credit Profile (SCP) is
assessed at 'bb-' and no other factors affect the entity's
ratings.
Sao Paulo reported a significant increase in operating expenditures
in 2022, which is expected to continue in 2023 as public sector
wages are adjusted to past inflation, after a period of
pandemic-related wage freezes in 2020-2021. The state is also
expected to report a real decrease in tax collection in 2023 as a
result of the ICMS tariff ceiling over fuels and electricity,
pressuring operating margins in the initial years of the scenario
horizon.
Nonetheless, the recent adoption of an ad rem ICMS tariff for fuels
and the partial reversion of tax losses in the electricity sector,
are already resulting in higher ICMS collection in May-June 2023,
indicating a recovery for the second half of 2023 and 2024. In the
event the recovery is slower than expected, Fitch could revise Sao
Paulo's SCP. However, the state's IDRs would benefit from
intergovernmental finance support as the federal government is its
most important creditor, and explains the Stable Outlook.
Currently, Sao Paulo's IDR is not notched upward to reflect
intergovernmental finance support as its SCP is already at the same
level as the sovereign and, per Fitch criteria, the uplift could
not lead beyond the lending government's rating.
KEY RATING DRIVERS
Risk Profile: 'Low Midrange'
The assessment reflects Fitch's view that there is a moderately
high risk of the issuer's ability to cover debt service with the
operating balance weakening unexpectedly over the scenario horizon
(2023-2027) due to lower revenue, higher expenditure, or an
unexpected rise in liabilities or debt service requirement.
Revenue Robustness: 'Midrange'
The Brazilian tax collection framework transfers a large share of
the responsibility to collect taxes to states and municipalities.
Constitutional transfers exist as a mechanism to compensate poorer
entities. For that reason, Fitch considers a high dependency
towards transfers a weak feature for Brazilian LRGs.
The primary metric for Revenue Robustness is the transfers ratio
(transfers to operating revenues). LRGs that report a transfer
ratio above or equal to 40% are classified as Weaker, while others
with a ratio below 40% are classified as 'Midrange'. The State of
Sao Paulo reports a high fiscal autonomy, with a low transfer
ratio, which drives the 'Midrange' factor. Transfers represented
only 7.2% of operating revenues on average in the 2018-2022
period.
Historically, revenue growth has performed in line with GDP growth.
In the 2018-2022 period, Fitch observed a CAGR of 10.2% in nominal
terms for operating revenues, compared to an average annual nominal
GDP growth of 9%.
Revenue Adjustability: 'Weaker'
Fitch believes Brazilian states and municipalities have a low
capacity for revenue increases in response to a downturn. There is
low affordability of additional taxation given that tax tariffs are
close to the constitutional national ceiling and a small number of
taxpayers represent a large share of tax collection, which drives
the 'Weaker' factor.
The most relevant tax, the ICMS, has a concentrated taxpayer base,
like other Brazilian states. The 10 largest tax payers corresponded
to around 30% of total ICMS tax collection in Sao Paulo in 2022.
This creates a challenging environment for LRGs to expand own
revenues collection during a downturn, leading to 'Weaker' factor.
Moreover, in July 2022, the National Congress recently set a limit
for ICMS tax tariffs for electricity, telecommunications and fuels.
Such goods should be treated as essential goods and tariffs are
limited to the tariff applied to essential goods, creating further
challenges for revenue adjustability.
Expenditure Sustainability: 'Midrange'
Responsibilities for states are moderately countercyclical since
they are engaged in healthcare, education and law enforcement.
Municipalities are mostly engaged in providing basic healthcare and
elementary education services.
Expenditure tends to grow with revenues as a result of earmarked
revenues. States and municipalities are required to allocate a
share of revenues in health and education. This results in a
procyclical behavior in good times, as periods of high revenue
growth result in a similar behavior for expenditures. However, due
to the big weight of personal expenditures and salary rigidity,
downturns that result in lower revenues are not followed by similar
drops in expenditures. LRGs with a better management of its human
resources and pension systems tend to be more efficient.
Sao Paulo has moderate control over expenditure growth, with sound
margins. Operating margins averaged 11.6% in the 2018-2022 period.
The state is current on its payroll bill and has no significant
delays for the payment of suppliers. Operating expenditure
increased 8.5% annually on average between 2018 and 2022, below
operating revenues growth of 10.2%.
Expenditure Adjustability: 'Weaker'
Fitch assesses the state's ability to reduce spending in response
of shrinking revenue as weak. As per the Brazilian Constitution,
there is low affordability of expenditure reduction especially in
payroll. As a result, whenever there is an unpredictable reduction
in revenues, operating expenditure does not follow automatically.
In addition, there is high share of inflexible costs since there is
close to 90% share of mandatory and committed expenditures.
Consequently, capex represented, on average, 5.2 % of state's total
expenditures for the 2018-2022 period, also corroborating to weaker
assessment.
Liabilities & Liquidity Robustness: 'Midrange'
The Brazilian credit market for subnational government is rather
limited and highly controlled by the federal government. Often,
LRGs will opt for new loans with federal guarantees, which are only
granted to subnationals rated 'A' or 'B' under the National
Treasury CAPAG, a criteria that assesses three indicators
(indebtedness, current savings and liquidity. Within this limited
market, Fitch understands that the State of Sao Paulo has relative
easier access to new loans given the strength of its economy.
There is a moderate national framework for debt and liquidity
management since there are prudential borrowing limits and
restrictions on loan types. Sao Paulo does not present maturity
concentration. As of December 2022, external debt corresponded to
9.3% of Direct Debt with no relevant maturity concentration. Debt
directly owed to the Federal Government represented 84.4% of total
debt in December 2021, or 256.4 billion.
In the second half of 2022 and early 2023, Sao Paulo benefited from
a debt service discount towards the federal government as
compensation for the ICMS tax loss related to Complementary Law
194. The state will have to return part of the discounted debt
service since the agreement with other Brazilian states let to a
lower compensation than previously anticipated. The return of such
amounts to the federal government is estimated at around BRL 3 to 4
billion, which will be added to the total stock of Sao Paulo´s
intergovernmental debt. Municipalities within the state will also
have to return part of the ICMS tax compensation to the state, as
well as the FUNDEB, a national fund for education.
Under the Fiscal Responsibility Law (LRF) of 2000, Brazilian LRGs
have to comply with indebtedness limits. Consolidated net debt for
states cannot exceed 2x (200%) of net current revenue. The State of
São Paulo reported a debt ratio of 114.7% as of December 2022,
according to national treasury calculation. The LRF also sets
limits for guarantees (for states, 32% of net current revenues).
Sao Paulo reported guarantees to state owned companies in the
amount of 2.2% of net current revenues in 2022.
There is moderate off-balance sheet risk stemming from the pension
system, which is a burden for most Brazilian LRGs, especially for
states given their mandate over education and public security.
Another relevant contingent liability refers to the payment of
judicial claims, the so-called "precatorios". The national congress
has determined that subnational governments must fully amortize
such liabilities until 2029.
Liabilities & Liquidity Flexibility: 'Midrange'
A framework exists for providing emergency liquidity support from
the federal government via the granting of extended maturity over
the prevalent federal debt portion. Fitch assesses the entity's
available liquidity to differentiate between 'Weaker' and
'Midrange' for Liabilities and Liquidity Flexibility.
One of the metrics analyzed by the Brazilian National Treasury to
LRGs borrows with Federal Government with guarantees (Capacidade de
Pagamento or CAPAG) is the liquidity rate, measured by the LRGs'
short-term financial obligation to net cash.
The threshold for the Federal Government to rate this ratio as 'A'
is 100%. Fitch has set a threshold of 100% for the average of the
last three years (2020-2022 year-end) and for the last year-end
results available (December 2022) below 100%, which would result in
a 'Midrange' assessment for this factor.
The State of Sao Paulo reported a three-year average liquidity
ratio of 84% and 96% in December 2022 (source: Relatorio de Gestão
Fiscal - RGF). Thus, corroborating with the 'Midrange' assessment.
Debt Sustainability: 'a category'
Debt Sustainability is assessed at 'a'. Fitch rating case forward
looking scenario indicates that the payback ratio (net direct risk
to operating balance) - the primary metric of the debt
sustainability assessment - will reach an average of 9.3x for the
2025-2027 period, which is aligned with an 'a' assessment. The
actual debt service coverage ratio - the secondary metric - is
projected at 1.1x for the average of 2025-2027, aligned with a 'bb'
assessment. Fiscal debt burden is projected at 75% for the same
period.
Fitch does not apply an override to the overall debt sustainability
assessment of Sao Paulo despite the two-level difference between
the primary and secondary metric. Tax policy volatility will result
in relatively weaker debt metrics in 2023, which Fitch expects to
be reversed in the following years of the scenario horizon. Sao
Paulo also reports strong liquidity, as per its Liquidity Coverage
Ratio of 4.3x in 2022 and 2.1x average for the projected rating
case (2025-2027). Fitch could revise its approach if Sao Paulo
actual debt service coverage ratio falls below 1x throughout the
scenario horizon.
DERIVATION SUMMARY
The State of Sao Paulo's ratings reflect the combination of a 'Low
Midrange' risk profile and an 'a' debt sustainability assessment
under Fitch's rating case scenario. The SCP, at 'bb-', also
reflects the comparison with national and international peers. The
state's IDRs are not affected by any other rating factors and are
assessed at 'BB-'/Stable Outlook. Sao Paulo's national scale rating
is mapped at 'AA(bra)' following a national peer comparison.
KEY ASSUMPTIONS
Risk Profile: 'Low Midrange'
Revenue Robustness: 'Midrange'
Revenue Adjustability: 'Weaker'
Expenditure Sustainability: 'Midrange'
Expenditure Adjustability: 'Weaker'
Liabilities and Liquidity Robustness: 'Midrange'
Liabilities and Liquidity Flexibility: 'Midrange'
Debt sustainability: 'a'
Support (Budget Loans): 'N/A'
Support (Ad Hoc): 'N/A'
Asymmetric Risk: 'N/A'
Sovereign Cap (LT IDR): '-'
Sovereign Cap (LT LC IDR) '-'
Sovereign Floor: 'N/A'
Quantitative assumptions - Issuer Specific
Fitch's rating case is a "through-the-cycle" scenario, which
incorporates a combination of revenue, cost and financial risk
stresses. It is based on 2018-2022 figures and 2023-2027 projected
ratios. The key assumptions for the scenario include:
- YoY 3.5% increase in operating revenue on average in 2023-2027;
- YoY 4.6% increase in tax revenue on average in 2023-2027;
- YoY 5.0% increase in operating spending on average in 2023-2027;
- Net capital balance of BRL 13,067 million on average in
2023-2027;
- Cost of debt: 4.9% on average in 2023-2027.
Quantitative assumptions - Sovereign Related
Figures as per Fitch's sovereign actual for [2022] and forecast for
[2023], respectively (no weights and changes since the last review
are included as none of these assumptions was material to the
rating action):
Liquidity and Debt Structure
As of December 2022, net adjusted debt totaled BRL 263 billion and
considers unrestricted cash availabilities of BRL 49 billion.
Foreign currency debt corresponds to 9.3% of adjusted debt, while
84.4% consist of intergovernmental debt related to the legacy of
the debt restructuring program of the 90s. Foreign debt is owed to
multilateral organizations like the World Bank, CAF and the
Interamerican Development Bank, characterized by long amortization
profiles and guaranteed by the federal government.
Intergovernmental debt pays the lowest between the policy rate
(Selic) and CPI + 4% spread. Fitch also includes BRL 9.8 billion
PPP related liabilities to Sao Paulo Net Adjusted Debt.
Issuer Profile
The State of Sao Paulo is classified by Fitch as a Type B LRG,
which is required to cover debt service from cash flow on an annual
basis. Sao Paulo is the most populous Brazilian state with
approximately 45 million people. Its revenue sources are mostly
based on taxation with a low dependence on federal transfers and ad
hoc sources. Sao Paulo has the right to borrow on the domestic
market and externally, subject to national government approval.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- A downgrade of Brazil's IDRs would negatively affect the State of
Sao Paulo's IDRs.
- Fitch could lower Sao Paulo's SCP if the actual debt service
coverage ratio falls below 1.0x throughout the scenario horizon and
its payback ratio remains between 9x and 13x.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Sao Paulo's IDR's are at the sovereign level and could only be
upgraded if the sovereign is upgraded in combination with an
improvement of the state's SCP.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Sao Paulo, State of LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
Natl LT AA(bra) Affirmed AA(bra)
Natl ST F1+(bra) Affirmed F1+(bra)
XP INC: Fitch Affirms 'BB-' LongTerm IDRs, Outlook Stable
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Fitch Ratings has affirmed XP Inc.'s Long-Term Local and Foreign
Currency Issuer Default Ratings (IDRs) at 'BB-' with a Stable
Rating Outlook. At the same time, Fitch has affirmed Banco XP SA's
(Banco XP) National Long- and Short-Term Ratings at
'AA(bra)'/Stable and 'F1+(bra)', respectively.
KEY RATING DRIVERS
Operating Environment Outlook Revision: Under the newly updated
Non-Bank Financial Institutions Criteria (NBFI), to assign a Sector
Risk Operating Environment (SROE) score, Fitch determines the
Sector Risk Assessment (SRA) range and the Operating Environment
Score (OES). The final SROE score is equal to the lower of the two.
For securities firms the SRA upper boundary category is set at 'a'
while the OES assigned for Brazilian NBFIs is 'bb-', in line with
the implied assessment based on Brazil's GDP per capita and Fitch's
Operational Risk Index. Fitch revised the outlook on its OE score
to 'stable' from 'negative' given the improving trends in both of
these indicators, also mirroring Brazil´s sovereign rating.
Strong Franchise, Increasing Diversification: XP Inc is Brazil´s
largest independent securities firm. The entity has a strong
business profile and leading retail brokerage franchise. XP Inc.'s
solid business model has evolved into a full financial solution
supported by a robust technological platform and strong brand that
are key competitive advantages over domestic peers. XP Inc has been
able to generate strong revenues despite the observed headwinds
related with higher interest rates, lower investor confidence and
limited capital markets activity. The entity reported a total
operating income (TOI) of USD1.92 billion in the last four-year
average, which is commensurate with the mid-range of Fitch´s 'bb'
category for business profile benchmark for securities firms.
Therefore, Fitch has upgraded XP Inc´s business profile score to
'bb', from 'bb-'with a Stable Outlook.
Strong Management and Execution: XP Inc.'s ratings also consider
top management experience and credibility, as evidenced by the
successful execution of its rapid client base growth coupled with
an increasing share of wallet of existing clients, which has
translated into grater revenue diversification. The company also
managed to diversify its geographical footprint through offices in
New York, Miami and Europe, supporting its distribution
capabilities.
Adequate Risk Profile: XP Inc´s risk profile incorporates the
likelihood of operational, cyber and reputational risk, although
this has to date been well-managed by highly sophisticated risk
management framework. XP group growth has been above peers, but in
line with the company's strategic planning and market
opportunities. Fitch also takes into account XP Inc´s high volume
of private securities, although the entity is constantly revolving
those holdings, which reduces relevant credit risks.
Strong Asset Quality Metrics: Fitch views the credit risk in XP
Inc.'s loan portfolio as modest but increasing due to the
portfolio's expansion since Banco XP was created back in 2019,
which offers credit cards and collateralized credit for both retail
and corporate clients. Although delinquency remains immaterial,
stage 3 loans accounting for less than 0.1% as of March 2023, XP
Inc's relatively high non-loan exposures pose an additional credit
risk for the company, which limits any widening differential
between its Asset Quality (AQ) and SROE scores. As a result, Fitch
has affirmed XP Inc's AQ score at 'bb-'/Outlook Stable.
Resilient Profitability: Although market conditions led to a drop
in institutional revenues (-39.4% yoy) and brokerage fees, an
increasing scale of new business verticals partially offset this
effect. XP Inc´s profitability, measured by operating profit to
average equity declined to 18.7% at 1Q23, from 21.4% in 2022. Even
though challenges are likely to remain throughout 2023, Fitch
forecasts that XP Inc will be able to sustain strong profitability
metrics, due to its by increasing diversification and better
efficiency. Fitch has affirmed XP Inc´s Earnings and Profitability
score at 'bb+'.
Increasing Leverage: As a result of strong asset growth, XP Inc's
net adjusted leverage ratio, defined by Fitch as tangible assets
excluding securities borrowed and reverse repurchase agreements,
divided by tangible equity has rapidly increased. This ratio
increased to 7.2x at March 2023, from 6.7x at the end of 2022.
Nevertheless, XP Inc's net adjusted leverage ratio remains within
the 'bb' benchmark range of 5x to 12x for balance sheet-intensive
securities firms. Fitch expects XP Inc to sustain adequate leverage
ratios, though this is trending negative given the expected growth
of its loan portfolio. As a result, Fitch has affirmed XP Inc's
capitalization & leverage score at 'bb'/Stable.
Robust Funding & Liquidity: Fitch views XP Inc's liquidity and
funding diversity as solid when compared with other NBFIs. Since it
began its bank operations, XP Inc has reduced its dependency on
wholesale funding lines. The deposit base (considering letras) grew
by 62% yoy, reaching BRL 27.4 billion or 57% of XP Inc´s total
funding in March 2023. As a result, XP Inc's total funding grew
66.6% supported by the growth of structured notes linked with its
clients - 64.9% higher when compared with a year before. Liquid
assets cover a large part of the company's short-term liabilities,
with a liquid assets/short-term funding ratio of 102% in March
2023, compared with 108% at the end of2022. This ratio remains
aligned with the assigned 'bb-' score for funding and liquidity.
Banco XP
The National Ratings assigned to Banco XP are based on Fitch's view
that the entity's operation is fully integrated with its parent in
terms of management, systems and strategy, which in Fitch's view
creates a highly correlated credit profile between them. Banco XP
is one of the most relevant subsidiaries in terms of assets,
accounting for more than 40% of the consolidated numbers as of
December 2022. According to Fitch's methodology, in such cases, the
agency will assign Group Ratings, to both parent and subsidiary.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
XP Inc. - IDRs, Banco XP - National Ratings
- Rating downside would be primarily contingent on a downgrade of
the Brazilian sovereign rating;
- Ratings could be downgraded under a scenario where XP Inc reports
operational problems that could result in severe damage to the
company's image, leading to a substantial outflow of client's
assets;
- XP Inc's ratings could also suffer if the entity reports relevant
losses related with its own securities portfolio (including loans)
and/or strong volatility in its profitability metrics;
- Further increase in the company´s leverage, tangible leverage
ratio above 10x and/or a significant decrease in the group´s local
regulatory metrics, and CET 1 ratio below 12%.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
XP Inc. - IDRs, Banco XP - NATIONAL RATINGS
- Rating upside would be contingent on an upgrade of the SROE
score, currently with a limited upside potential.
DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS
XP Inc.'s unsecured senior notes rating is equalized with the
Long-Term IDR, as the probability of default is the same as that of
the entity. The notes will also rank pari passu with other senior
unsecured obligations.
DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- XP Inc.'s senior unsecured debt ratings are sensitive to a change
in its IDR.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- XP Inc.'s senior unsecured debt ratings are sensitive to a change
in its IDR.
ADJUSTMENTS
Fitch has assigned an Asset Quality score of 'bb-' that is below
the 'bbb' category implied score due to the following adjustment
reason: Non-loan exposures (negative).
Fitch has assigned an Earning and Profitability score of 'bb+' that
is below the 'bbb' category implied score due to the following
adjustment reason: Revenue Diversification (negative).
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch has made an adjustment to XP Inc´s net adjusted leverage
ratio. In addition to the adjustments mentioned under the NBFI
Criteria, retirement plan funds accounted in XP Inc´s own balance
sheet and uninvested cash from clients have been fully deducted
from the calculation.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
Entity/Debt Rating Prior
----------- ------ -----
Banco XP S.A Natl LT AA(bra) Affirmed AA(bra)
Natl ST F1+(bra) Affirmed F1+(bra)
XP Inc. LT IDR BB- Affirmed BB-
ST IDR B Affirmed B
LC LT IDR BB- Affirmed BB-
LC ST IDR B Affirmed B
senior unsecured LT BB- Affirmed BB-
===============
C O L O M B I A
===============
BANCO DE BOGOTA: S&P Affirms 'BB+/B' ICRs, Outlook Stable
---------------------------------------------------------
S&P Global Ratings affirmed its 'BB+/B' ICR on Banco de Bogota S.A.
y Subsidiarias (BBogota) and its 'BB+' issue-level rating on the
senior unsecured debt.
Between the end of 2022 and first-quarter 2023, BBogota sold its
remaining equity in BIB following the 75% spin-off in early 2022.
In our view, this has reduced the bank's geographical
diversification. Nonetheless, the bank still holds about 23% of its
total assets in Panama through Multibank, and remains a key player
in the Colombian banking industry with a market share of nearly 11%
in terms of loans as of March 2023. Additionally, BIB's spin-off
will decrease the bank's foreign-exchange fluctuations steadying
interest income generation. In this sense, the bank will continue
to maintain its sound business stability and increase its operating
revenue by about 17% for 2023.
BBogota's capital base has remained relatively stable during the
past five years, mainly owing to its internal capital generation,
which has been sufficient to fund its credit growth, even during
periods of profitability stress. In this sense, we expect that
BBogota's loan portfolio will increase 9% and that profitability
will continue improving, keeping the bank's RAC ratio close to 4.7%
for the next 24 months. In addition, we forecast that the bank's
expanding digital offerings, coupled with controlled expenses, will
improve the efficiency ratio and profitability. As a result, S&P
expects core earnings to average assets to continue improving,
closer to 1.35% in 2023, but remain slightly below pre-pandemic
levels.
BBogota's asset quality metrics will slip this year mainly because
of the deterioration of its Colombian consumer loan portfolio. This
is because high inflation and interest rates have taken a toll on
the disposable income of Colombian households, raising the bank's
nonperforming assets (NPAs). S&P said, "We forecast the latter to
edge up to about 3.8%, fully covered by reserves, and net
charge-offs (NCOs) to rise to 2.0% from 3.6% and 1.2%,
respectively, in 2022. Despite BBogota's slightly
weaker-than-expected metrics than the banking system average, we
consider them manageable and in line with the bank's risk appetite.
For 2024, we expect asset quality to gradually improve and trend
towards the average of the Colombian banking system and main
peers."
On the other hand, the bank continues benefitting from a
well-diversified loan portfolio, which consist of consumer services
(about 37%), commercial (23%), construction (10%), food and
beverage (6%), transport and communications (4%) loans, among
others. Additionally, BBogota doesn't have client concentrations,
as its top 20 clients represent about 8.6% of its gross loan
portfolio and approximately 0.8x of its total adjusted capital. For
the next two years, we don't expect a significant shift in the
bank's lending sector or client mix, as BBogota will maintain its
origination standards and focus on existing sectors.
Historically, BBogota's stable deposit base has been its main
funding source for business growth. In this sense, its deposit base
represented 76% of its total funding base as of March 2023, while
the rest consists of banking lines (14.4%), market debt (9.4%), and
the rest in repos. Additionally, the bank's deposit base comprises
nearly 10.8% of the system's total deposits, highlighting the
bank's importance in the Colombian financial system. S&P said, "On
the other hand, 79% of its deposits come from wholesale
clients--which we consider to be more volatile than retail
ones--but this metric is in line with the banking system average.
However, we expect retail deposits to increase, thanks to BBogota's
expanding digital operations, but not enough to change its deposit
mix."
The bank maintains its very conservative liquidity management.
BBogota's broad liquid assets were nearly 2x its short-term
wholesale funding needs as of March 2023. Additionally, the bank
doesn't have sizable market debt maturities in the next 12 months
that could pose a refinancing risk for the bank. S&P expects that
liquidity will slightly rise as BBogota will continue to fund the
bulk of its operations with deposits.
ESG credit indicators: E-2, S-2, G-2
=============
J A M A I C A
=============
JAMAICA: Bank Boss Warns Interest Rate Rise Hard for Many
---------------------------------------------------------
RJR News reports that interest ratesvin Jamaic have risen more than
expected in a shock move as the Bank of England battles to slow
soaring prices.
The Bank raised rates to 5 per cent from 4.5 per cent, the highest
level in 15 years, according to RJR News.
Most analysts had expected a smaller rise, the report notes.
Bank of England governor Andrew Bailey said if the Bank did not
raise rates now, it could be worse later, the report relays.
The move will lead to higher repayments for people with loans and
many mortgage holders, but it should benefit savers if the rise is
passed on, 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: Needs Policy Action to Boost Productivity, Hyde Says
-------------------------------------------------------------
RJR News reports that Outgoing Chairman of the Jamaica Productivity
Centre Anthony Hyde says the country needs a sustainable
development policy to boost productivity.
As he addressed the JPC's World Productivity Day forum, Mr. Hyde
said policy action has to drive the critical outcomes needed for
growth, according to RJR News.
"In the 1950s and 60s, Jamaica saw an annual average increase in
productivity of 3.9%. But in the 70s, we saw a dramatic decline.
What caused the change? Policy. Jamaica needs to have a
sustainable development policy to move up the value chain as well
as to broaden our economic base," he said, the report notes.
Mr. Hyde suggested that if Jamaica were to put the policies in
place that support economic development across administrations,
such as the Economic Program Oversight Committee (EPOC), "we could
see economic growth in Jamaica that would probably result in
balance of payment surplus of US$10-15 billion annually," the
report relays.
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
===============
RUTAS 2 AND 7: Fitch Affirms 'BB+sf' Rating on 2019-1 Secured Notes
-------------------------------------------------------------------
Fitch Ratings has affirmed the 'BB+sf' rating on the Series 2019-1
senior secured notes issued by Rutas 2 and 7 Finance Limited (the
issuer), a special purpose vehicle (SPV) incorporated in the Cayman
Islands. The Rating Outlook is Stable.
Entity/Debt Rating Prior
----------- ------ -----
Rutas 2 and 7
Finance Limited
Series 2019-1
78319MAA1 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
The notes are fully backed by deferred investment payment
obligations (PDIs) trust securities after the completion of all
bond construction milestones. PDIs are deferred investment
recognition payment rights vested upon completion of construction
milestones (tramos) of Rutas 2 and 7 projects from the Republic of
Paraguay (RoP). PDIs are public debt of the sovereign and their
budgeting process follows the same procedure as a sovereign bond's
debt service.
Fitch's ratings address the likelihood of timely payment of
interest and principal on the notes.
KEY RATING DRIVERS
Rating Linked to Sovereign: Fitch has determined that the primary
risk contributor for the transaction is the RoP, and therefore the
transaction's rating is linked to the country's Long-Term Foreign
Currency Issuer Default Rating (LT FC IDR) of 'BB+'/Stable. The
rating reflects Fitch's view of the credit quality of deferred
investment payment obligations (PDIs).
Government Payment Obligation: After the availability period, Fitch
assumes that payment on the notes will rely on the RoP's
unconditional and irrevocable payment obligation regarding vested
PDIs. Under Paraguayan law 1535, PDIs are considered external
public debt of the RoP denominated in USD. Additionally, pursuant
to the PPP Trust Agreement, PDI payment right holders will have
direct recourse against the country for failure to make timely
payments.
No Construction/Performance Risk: PDIs are Paraguayan-law governed,
freely transferable payment rights. Once issued, they are not
related to the PPP Contract and therefore do not depend on the
status of the construction or operation of the project. This
eliminates construction and operating risk. Vested PDIs survive the
termination or nullity of the PPP Contract for any reason.
Construction Progress in 2023: As of February 2023, the project was
slightly behind the expected construction schedule, but all project
tranches (tramos) related to the PDIs backing the 2019-1 notes have
been completed. PDIss related to these tramos have been sold to the
issuer and are 100% vested.
No Negative Carry Risk: All PDIs related to the 2019-1 notes have
been sold to the issuer and are 100% vested. The transaction is no
longer exposed to negative carry.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The ratings on the transactions are linked to the LT FC IDR of
RoP; hence, a downgrade of the country's FC IDR would trigger a
downgrade of the rated notes in the same proportion.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- The ratings on the transactions are linked to the LT FC IDR of
RoP; hence, an upgrade of the country's FC IDR would trigger an
upgrade of the rated notes in the same proportion.
=====================
P U E R T O R I C O
=====================
AES PUERTO RICO: Fitch Lowers Rating on $161MM Series A Bonds to D
------------------------------------------------------------------
Fitch Ratings has downgraded AES Puerto Rico L.P.'s (AES PR) $161.9
million ($144.57 million outstanding) cogeneration facility revenue
bonds Series A (tax-exempt bonds) issued through the Puerto Rico
Industrial, Tourist, Educational, Medical & Environmental Control
Facilities Financing Authority to 'D' from 'C'.
RATING RATIONALE
The rating downgrade of AES PR's Series A Bonds to 'D' follows the
failure to pay principal and interest due on June 1, 2023. The
rating on the bonds has reached the lowest level on Fitch's rating
scale.
AES PR's rating is linked to, but not constrained by, the credit
quality of the Puerto Rico Electric Power Authority (PREPA),
currently rated 'D'. PREPA is the revenue counterparty under AES
PR's PPA and has been honoring its PPA payment obligations,
demonstrating the importance of AES PR as a supplier of power for
PREPA.
KEY RATING DRIVERS
Operation Risk - Weaker
Escalating Cost Profile: The operating cost profile has
significantly exceeded Fitch's original estimates, primarily due to
a change in the law requiring AES PR to dispose coal ash outside of
Puerto Rico. The low likelihood of a short-term resolution to the
escalated operating cost profile impedes sustainable operation of
the plant in the near term. AES PR has historically been
susceptible to forced outages, which have reduced capacity
payments. The operating performance has somewhat stabilized in
recent years with consistently high availability factors.
Supply Risk - Midrange
Manageable Supply Risk: Fuel supply risk is mitigated by a
two-year, fixed-price fuel supply agreement sufficient to meet the
project's expected fuel requirements through 2023. The agreement's
short-term risk is mitigated by the historical precedence for
renewal and the liquid market for coal. Fuel price risk is
mitigated by the tolling-style PPA, subject to heat rates. Due to
pressure on operating costs and heightened cashflow uncertainty,
AES PR intends to reduce coal inventories, which may elevate the
near-term supply risk.
Revenue Risk - Midrange
Contracted Revenue Profile: The 25-year tolling-style PPA
effectively mitigates some exposure to capacity price, energy
margin and dispatch risks throughout the debt term, subject to
project availability and heat rates. Project cash flows are
materially independent from dispatch levels, and revenues are
subject to achievable minimum performance thresholds of 90%
effective availability factor (EAF) under the project's PPA.
However, the off-taker's ability to make future contractual
payments is unclear given its financial and operational
difficulties, which were exasperated by recent natural disasters.
Debt Structure - 1 - Midrange
Lack of Available Liquidity: The project's bonds are fixed-rate and
mature within the PPA term, but have back-loaded amortization
profiles. AES PR does not have O&M or major maintenance reserves,
which increases the importance of operational stability and
heightens the project's reliance on other sources of liquidity.
While the equity distribution, leverage and debt service reserve
provisions are consistent with standard project finance structures,
AES PR had liquidated its debt service reserve to service its debt
obligation in December 2022.
ESG - Waste and Hazardous Materials Management: The cost of waste
disposal related to coal ash is a key credit driver that has a
significant impact on the rating on an individual basis. The impact
from these escalating costs has resulted in weak cash flow
generation and depletion of liquidity, and has significantly
contributed toward payment default.
Financial Profile
Persistent and significant escalation in operating costs has
depleted the project's liquidity and contributed to the current
failure to meet debt service obligations.
PEER GROUP
Choctaw Generation Limited Partnership, LLLP (Choctaw; rated D on
Series 1 and C on Series 1 debt) is a comparable coal project that
has recently experienced a payment default. Similar to AES PR,
Choctaw experienced operational issues and significant cost
increases that led to depletion of liquidity and eventual payment
default on one of its outstanding debt tranches.
In public ratings outside the U.S., a higher-rated coal project in
Indonesia, Minejesa Capital BV (BBB-/Stable), maintains an
investment-grade rating supported by the absence of merchant
exposure under the PPA, favorable pass-through of fuel costs,
stable operating history and a stronger average rating case
coverage of 1.45x.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- The rated debt instrument is currently at the lowest possible
rating and cannot be downgraded
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- An upgrade is unlikely for the rated debt instrument, which
defaulted on its most recent scheduled payment of debt service
CREDIT UPDATE
AES PR failed to meet its debt service obligation due on June 1,
2023. It has experienced significant cost escalation leading to
insufficient cash flow generation and depletion of available
liquidity. AES PR liquidated its debt service reserve to meet its
debt payment obligation in December of 2022, and does not currently
have any additional liquidity.
AES PR is under discussion with the offtaker to amend the Power
Purchase and Operating Agreement (PPA) with terms that will allow
sustainable operations of the project. AES PR has entered into a
standstill and forbearance agreement with the bond holders while
working toward a meaningful resolution with the offtaker.
SECURITY
All project revenues, controlled bank accounts, and security
interest in the contract rights of AES PR secure the bonds.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Puerto Rico Electric Power Authority (PREPA) is the single
counterparty to the project and is publicly rated by Fitch.
ESG CONSIDERATIONS
AES Puerto Rico LP (PR) has an ESG Relevance Score of '5' for Waste
and Hazardous Materials Management. The cost of waste disposal
related to coal ash is a key credit driver that has a significant
impact on the rating on an individual basis. The impact from these
escalating costs has resulted in weak cash flow generation and
depletion of liquidity, and has significantly contributed toward
payment default.
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
----------- ------ -----
AES Puerto Rico LP (PR)
AES Puerto Rico
LP (PR) /Power
Supply Revenues/1 LT LT D Downgrade C
PUERTO RICO: PREPA Bondholders Want Higher Claims in Bankruptcy
---------------------------------------------------------------
Robert Slavin of The Bond Buyer reports that a lawyer for the
Puerto Rico Electric Power Authority bondholders argued that if a
receiver had been in place early on in the PREPA bankruptcy
process, they would have controlled him or her and therefore raised
rates to repay bonds in full.
Assured Guaranty Attorney Mark Ellenberg argued that to be the case
in the third and final day of the bond claim estimation hearing. It
was in response to U.S. District Court Judge Laura Taylor Swain's
March ruling against a bondholder lien in which she also ordered
the parties to explore what would have happened in July 2017 if the
bondholders had sought a receiver for PREPA. Specifically, Swain
directed the parties to argue how much money the bondholders would
have received and to use this as a basis to determine the
bondholders' "claim."
The Oversight Board in July 2017 put PREPA into the Title III
bankruptcy process included in the Puerto Rico Oversight,
Management, and Economic Stability Act. In her March ruling, Swain
asked the lawyers to assume history had unfolded differently.
About Puerto Rico
Puerto Rico is a self-governing commonwealth in association with
the United States. The chief of state is the President of the
United States of America. The head of government is an elected
Governor. There are two legislative chambers: the House of
Representatives, 51 seats, and the Senate, 27 seats. The
governor-elect is Ricardo Antonio "Ricky" Rossello Nevares, the son
of former governor Pedro Rossello.
In 2016, the U.S. Congress passed PROMESA, which, among other
things, created the Financial Oversight and Management Board and
imposed an automatic stay on creditor lawsuits against the
government, which expired May 1, 2017.
The members of the oversight board are: (i) Andrew G. Biggs, (ii)
Jose B. Carrion III, (iii) Carlos M. Garcia, (iv) Arthur J.
Gonzalez, (v) Jose R. Gonzalez, (vi) Ana. J. Matosantos, and (vii)
David A. Skeel Jr.
On May 3, 2017, the Commonwealth of Puerto Rico filed a petition
for relief under Title III of the Puerto Rico Oversight,
Management, and Economic Stability Act ("PROMESA"). The case is
pending in the United States District Court for the District of
Puerto Rico under case number 17-cv-01578. A copy of Puerto Rico's
PROMESA petition is available at
http://bankrupt.com/misc/17-01578-00001.pdf
On May 5, 2017, the Puerto Rico Sales Tax Financing Corporation
(COFINA) commenced a case under Title III of PROMESA (D.P.R. Case
No. 17-01599). Joint administration has been sought for the Title
III cases.
On May 21, 2017, two more agencies -- Employees Retirement System
of the Government of the Commonwealth of Puerto Rico and Puerto
Rico Highways and Transportation Authority (Case Nos. 17-01685 and
17-01686) -- commenced Title III cases.
U.S. Chief Justice John Roberts named U.S. District Judge Laura
Taylor Swain to preside over the Title III cases.
The Oversight Board has hired as advisors, Proskauer Rose LLP and
O'Neill & Borges LLC as legal counsel, McKinsey & Co. as strategic
consultant, Citigroup Global Markets as municipal investment
banker, and Ernst & Young, as financial advisor.
Martin J. Bienenstock, Esq., Scott K. Rutsky, Esq., and Philip M.
Abelson, Esq., of Proskauer Rose LLP; and Hermann D. Bauer, Esq.,
at O'Neill & Borges LLC are onboard as attorneys.
Prime Clerk LLC is the claims and noticing agent. Prime Clerk
maintains the case web site
https://cases.primeclerk.com/puertorico
Jones Day is serving as counsel to certain ERS bondholders.
Paul Weiss is counsel to the Ad Hoc Group of Puerto Rico General
Obligation Bondholders.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
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Information contained herein is obtained from sources believed to
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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.
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* * * End of Transmission * * *