/raid1/www/Hosts/bankrupt/TCRLA_Public/230811.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, August 11, 2023, Vol. 24, No. 161
Headlines
A R G E N T I N A
BLOCKFI INC: Committee Settles With Insiders Over Collapse
BLOCKFI INC: Sept. 26 Hearing on Disclosures and Plan
C H I L E
NOVA AUSTRAL: Plan Set to Pit Bondholders Against DNB
C O L O M B I A
COLOMBIA: Gov't Bets Pension Fund Would Revive Capital Market Flows
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Sees Alarming Up in Scams & Usurious Loans
J A M A I C A
JAMAICA: Spent US$311M on Industrial Supplies, STATIN Says
M E X I C O
PLAYA HOTELS: S&P Ups ICR to 'B+' on Deleveraging, Outlook Stable
P U E R T O R I C O
PUERTO RICO: PREPA's Debt Deal Extended by a Week
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=================
A R G E N T I N A
=================
BLOCKFI INC: Committee Settles With Insiders Over Collapse
----------------------------------------------------------
BlockFi Inc. has settled a dispute with a committee representing
its customers that will resolve potential legal claims against the
company's senior management related to the bankrupt crypto lender's
failure last year, according to July 31, 2023 court filings.
BlockFi's official committee of unsecured creditors, which is
composed of individual clients, said it agreed to back the
management settlement after analyzing what assets were available to
pay potential claims against the lender's directors and officers.
The committee considered "the mounting administrative costs of
these bankruptcy cases and the savings that could be achieved by
pursuing a prompt exit from Chapter 11."
On July 21, 2023, the Debtors and the Creditors Committee announced
a settlement with insiders Zac Prince, Flori Marquez, Amit Cheela,
Jonathan Mayers, Rob Loban, Tony Lauro, Yuri Mushkin, Andrew Tam,
David Spack, and all other Pprsons who served as officers or
directors of the Debtors during the Chapter 11 Cases, including
Alan Carr, Jill Frizzley, Scott Vogel, Jennifer Hill, Harvey
Tepner, and Pamela Corrie.
In light of the comprehensive settlement, the Debtors amended the
Plan and the Disclosure Statement in a number of respects to
implement the terms of the Committee Settlement.
The terms of the Committee Settlement reflect the Debtors', the
Committee Settlement Parties', and the Committee's determinations
as to the proper course of action with regard to the various Claims
and Causes of Action.
The Committee Settlement Parties (which include all persons who
served as officers and/or directors of any of the Debtors during
the Chapter 11 Cases) will participate and assist the Wind-Down
Trustee with any ongoing litigation, including prosecuting claims
against and by 3AC, FTX, Alameda, Core Scientific, and any other
counterparties (including the United States), and assist in making
in-kind distributions to creditors, both of which will have a
material impact on clients.
The Committee Settlement Parties (and each of their Related
Parties) shall each be included as a "Released Party" for purposes
of the Plan in which all claims and causes of action by the Debtors
against the each of the Committee Settlement Parties shall be
released. The Court will have exclusive jurisdiction to consider
issues regarding the scope of the Debtor Release.
In full settlement of all estate causes of action, the Committee
Settlement Parties have agreed to provide cash consideration. The
insiders have also agreed to provide time to help prosecute and
defend against litigation, to assist with regulatory inquiries, and
to assist in making in-kind distributions to clients, after the
individuals are no longer employed with BlockFi and presumably have
other jobs:
Insider Consideration Cooperation
------- ------------- -----------
Zac Prince $1,500,000 200 hours
Flori Marquez $500,000 200 hours
Amit Cheela N/A 100 hours
Jonathan Mayers N/A 200 hours
Rob Loban N/A 100 hours
Tony Lauro $100,000 200 hours
Yuri Mushkin N/A 200 hours
Andrew Tam $100,000 100 hours
David Spack $50,000 Unlimited+150 hours
About BlockFi Inc.
BlockFi is building a bridge between digital assets and traditional
financial and wealth management products to advance the overall
digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital, among
others. BlockFi made waves in 2019 when it began providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a
$400 million credit line from FTX US in an agreement that also gave
FTX the option to acquire BlockFi through a bailout orchestrated by
Bankman-Fried over the summer. BlockFi also had collateralized
loans to Alameda Research, the trading firm co-founded by
Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius
and Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC as strategic and
communications advisor. Kroll Restructuring Administration, LLC is
the notice and claims agent.
BLOCKFI INC: Sept. 26 Hearing on Disclosures and Plan
-----------------------------------------------------
Judge Michael B. Kaplan has entered an order conditionally
approving the adequacy of the Disclosure Statement of Blockfi Inc.,
et al.
The Plan confirmation timeline is approved:
* Sept. 11, 2023, at 4:00 p.m., prevailing Eastern Time, as the
deadline by which objections to confirmation of the Plan must be
filed with the Court and served so as to be actually received by
the appropriate notice parties.
* Sept. 11, 2023, at 4:00 p.m., prevailing Eastern Time, as the
deadline by which all Ballots and opt out forms must be properly
executed, completed, and electronically submitted to
https://restructuring.ra.kroll.com/BlockFi/EBallot-Home so that
they are actually received by the Claims, Noticing, and
Solicitation Agent.
* Sept. 25, 2023, at 5:00 p.m., prevailing Eastern Time, as the
deadline by which the Debtors must file their brief in support of
confirmation of the Plan and deadline by which replies to
objections to confirmation of the Plan must be filed with the
Court.
* Sept. 25, 2023, at 5:00 p.m., prevailing Eastern Time, as the
date by which the Voting Report must be filed with the Court.
* Sept. 26, 2023, at 1:00 p.m. prevailing Eastern Time, or such
other date as may be scheduled by the Court, as the date of the
hearing at which the Court will consider confirmation of the Plan
and approval of the Disclosure Statement on a final basis.
Attorneys for the Debtors:
Michael D. Sirota, Esq.
Warren A. Usatine, Esq.
COLE SCHOTZ P.C.
Court Plaza North, 25 Main Street
Hackensack, NJ 07601
Tel: (201) 489-3000
E-mail: msirota@coleschotz.com
wusatine@coleschotz.com
- and -
Joshua A. Sussberg, Esq.
Christine A. Okike, Esq.
KIRKLAND & ELLIS LLP
KIRKLAND & ELLIS INTERNATIONAL LLP
601 Lexington Avenue
New York, NY 10022
Tel: (212) 446-4800
E-mail: jsussberg@kirkland.com
christine.okike@kirkland.com
- and -
Richard S. Kanowitz, Esq.
Kenric D. Kattner, Esq.
HAYNES AND BOONE, LLP
30 Rockefeller Plaza, 26th Floor
New York, NY 10112
Tel: (212) 659-7300
E-mail: richard.kanowitz@haynesboone.com
kenric.kattner@haynesboone.com
About BlockFi Inc.
BlockFi is building a bridge between digital assets and traditional
financial and wealth management products to advance the overall
digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital, among
others. BlockFi made waves in 2019 when it began providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a
$400 million credit line from FTX US in an agreement that also gave
FTX the option to acquire BlockFi through a bailout orchestrated by
Bankman-Fried over the summer. BlockFi also had collateralized
loans to Alameda Research, the trading firm co-founded by
Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius and
Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors taped Kirkland & Ellis and Haynes and Boone, LLP as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC as strategic and
communications advisor. Kroll Restructuring Administration, LLC is
the notice and claims agent.
=========
C H I L E
=========
NOVA AUSTRAL: Plan Set to Pit Bondholders Against DNB
-----------------------------------------------------
Bloomberg News reports that the owners of Chilean salmon farmer
Nova Austral SA have presented a debt restructuring plan that would
transfer ownership to creditors -- but it may pit bondholders
against a bank.
Nova Austral, owned by Norwegian private equity firm Altor Equity
Partners, presented the plan at a Chilean court, according to the
report.
It proposes a $487 million capital increase to turn part of its
debt into stock. Norway's DNB Bank ASA, one of its largest
creditors, will receive five shares for every dollar it's owed, the
report notes.
Other bondholders, represented by Nordic Trustee ASA, will receive
just one share per dollar, the report discloses.
DNB is receiving special treatment because it has made separate
loans to the company guaranteed by specific assets, according to
Diario Financiero, the report relays.
Nova owes bondholders $416 million and $69 million to DNB,
according to court papers. In 2022, its total revenue was $88
million, says the report.
Bondholders, including the Solari-Donaggio family and Moneda Asset
Management, will vote on the proposal this month, according to
Diario Financiero, the report relates.
Many are balking at the plans, the newspaper said, notes the
report.
Chilean environmental regulators have fined Nova Austral on several
occasions for a total of more than 7 billion pesos ($8.2 million)
for breaching production limits, the report discloses.
In July of 2022, the regulator went so far as to revoke licenses
for three of Nova's feeding facilities. The company announced on
June 20 that it had began judicial reorganization proceedings in a
Chilean court, the report adds.
===============
C O L O M B I A
===============
COLOMBIA: Gov't Bets Pension Fund Would Revive Capital Market Flows
-------------------------------------------------------------------
Bloomberg News reports that Colombia's government is betting that
its proposed public pension fund would reinvigorate investment
flows in the local bond and equity markets, according to a top
Finance Ministry official.
The fund could be used to stimulate local markets while also
facilitating access to long-term capital, Jose Roberto Acosta, the
Finance Ministry's Public Credit Director, said during an event at
Bloomberg's Bogota office, according to Bloomberg News.
"The Finance Ministry is concerned because the equity market is
nonexistent, and the corporate bond market has also been dry for a
long time," Acosta said, the report notes. "We are willing to make
the mistakes that are necessary, but we need to act."
President Gustavo Petro's overhaul envisions a government-run
system that would receive contributions from workers earning as
much as four minimum wages a month, with those earning more than
that saving the surplus in private pension firms, the report
relays.
The plan would also set aside money in a fund to help finance
future retirement payments. Some investors worry those plans would
hurt the $118 billion local bond market, given a quarter of its
investments come from private pension firms that would stand to see
weaker inflows, the report notes.
Other critics say the money could be used for current spending, the
report adds.
Finance Minister Ricardo Bonilla wants those savings to be managed
independently, Acosta said, notes the report. Detailed rules on how
the fund will operate should be included in the pension reform bill
to "shield those resources," he said.
The report relates that the pension bill was already approved by a
Senate committee, and it still needs to pass three more debates
before becoming law. The legislation will be discussed in congress
in the second half of this year.
Debt Balance
On government borrowing, notes Bloomberg News, the amount of debt
in foreign currency rose to about 40% of the total stock in the
aftermath of the pandemic, making the nation more vulnerable to
external shocks. To cushion against this, Petro's administration is
seeking to have 70% of its debt in pesos and the remaining in hard
currency, Acosta said.
"It is a difficult task, but we already have it on the map," Acosta
said, adding that the administration has seen "good appetite" from
investors, relates Bloomberg.
Colombian-peso denominated bonds have returned almost 22% this
year, local debt from Brazil has gained around 14% and notes from
Mexico have returned 4.8%, according to an index of local-currency
debt, adds the report.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Sees Alarming Up in Scams & Usurious Loans
--------------------------------------------------------------
Dominican Today reports that a group of five people living in Bonao
has reported being victims of fraud and usurious loans by the owner
of a business group.
The allegations range from loans with exorbitant interest rates to
the sale of defective products, according to Dominican Today. This
reflects an alarming trend in the last decade, with a significant
increase in fraud complaints affecting thousands of people in
society, the report notes.
In 2013, there were 907 scam reports, and the numbers continued to
rise over the years, peaking at 4,818 complaints in 2018, the
report recalls. Although there was a slight decrease in 2020, the
complaints surged again in 2021 and 2022, with 3,737 and 3,837
reports, respectively, the report says. The year 2023 started with
a worrisome note, registering 1,907 complaints in the first 6
months, the report notes.
One individual, Elizabeth Cava Acosta, shared her ordeal after
being deceived by a store called Subasta Motors, the report relays.
She was promised a dining room but faced various obstacles when
trying to obtain it, the report says. After signing a questionable
contract, she ended up paying an exorbitant interest rate of 160%,
the report notes. Despite reporting the issue to Pro Consumidor,
she encountered difficulties in resolving the matter, leading her
to expose her experience on social media, the report discloses.
Another citizen, Jose Dario Mella, also confronted a similar
situation and sought a refund from the same store, the report
relays.
The director of Pro Consumidor confirmed that the company led by
Jose Garcia faced two complaints from consumers, the report notes.
Although one case was reconciled, the other was pending resolution,
the report says. Elizabeth Cava recorded a conversation with the
manager of Pro Consumidor, highlighting her dissatisfaction and the
prevalence of such problems with the store, the report discloses.
Jose Garcia, the store's owner, claimed to have made efforts to
find an amicable solution but decided to pursue a defamation
lawsuit against Elizabeth Cava after her social media post, the
report relays. Other consumers have also shared similar
experiences with the store, indicating a pattern of misleading
advertising, questionable contracts, and inadequate warranties, the
report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCRLA reported in April 2019 that the Dominican To related that
Juan Del Rosario of the UASD Economic Faculty cited a current
economic slowdown for the Dominican Republic and cautioned that if
the trend continues, growth would reach only 4% by 2023. Mr. Del
Rosario said that if that happens, "we'll face difficulties in
meeting international commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18
months that will likely stabilize the government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
Fitch Ratings, in December 2022, affirmed the Dominican Republic's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-'
with a Stable Rating Outlook.
Moody's affirmed the Dominican Republic's long-term issuer and
senior unsecured ratings at Ba3 and maintained the stable outlook
in March 2021.
=============
J A M A I C A
=============
JAMAICA: Spent US$311M on Industrial Supplies, STATIN Says
----------------------------------------------------------
RJR News reports that STATIN says that of Jamaica's US$586 million
spent on the import of "Raw Materials/Intermediate Goods" for
January to March this year, the import of 'Industrial Supplies' was
up 6.5 per cent, valued at US$311 million.
Higher spending on imports of inorganic chemicals and non-metallic
mineral products supported the increase, the report discloses.
Spending on 'Construction Materials' increased by 14.8 per cent to
US$153.7 million, the report says
STATIN says this was due to higher imports of iron and steel, as
well as cement, the report discloses.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
Standard & Poor's credit rating for Jamaica stands at B+ with
negative outlook (April 2020). Moody's credit rating for Jamaica
was last set at B2 with stable outlook (December 2019). Fitch's
credit rating for Jamaica was last reported at B+ with stable
outlook (April 2020).
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
M E X I C O
===========
PLAYA HOTELS: S&P Ups ICR to 'B+' on Deleveraging, Outlook Stable
-----------------------------------------------------------------
S&P Global Ratings raised its issuer credit rating on Mexican and
Caribbean all-inclusive resort owner and operator Playa Hotels &
Resorts N.V. (Playa) to 'B+' from 'B'. S&P also raised the
issue-level rating on Playa's senior secured credit facility to
'B+' from 'B'.
S&P said, "The stable outlook reflects our expectation that demand
for Playa's Mexican and Caribbean all-inclusive resorts will remain
strong and its financial policy will support leverage remaining
about 4x through 2024. This provides a good cushion relative to our
5x downgrade threshold at the current rating.
"The upgrade reflects our belief that Playa's stated financial
policy net leverage maximum tolerance of 4x is plausible and
provides a good cushion relative to our 5x downgrade threshold.
"The company was able to recover from the pandemic through strong
operating performance and a supportive financial policy that
resulted in S&P Global Ratings'-adjusted leverage of 4.8x at the
end of 2022. Based on our current base-case assumptions, we expect
leverage to improve to about 4x by the end of 2023. Our measure of
leverage is roughly 1x higher than management's measure due to not
netting cash. We believe Playa's hotel portfolio has benefited from
significant capital investment and branding initiatives over the
years and the company's financial policy is likely sustainable. In
addition, even though Playa may occasionally use debt to fund
growth initiatives, including potential hotel acquisitions that
could temporarily increase its leverage, we expect it will maintain
leverage under 5x on average."
S&P expects Playa will sustain leverage below its 5.0x downgrade
threshold through 2024.
Playa continues to see good demand for its all-inclusive product
despite an uncertain macroeconomic environment later this year. The
company reported strong performance through the first half of 2023
with net package revenue per available room (RevPAR) up 19.2% year
over year driven by strong net package average daily rate (ADR).
The Jamaica segment led this strong performance—it reported an
increase in net package RevPAR of 41.5% through the first half of
2023. However, S&P expects net package RevPAR growth to moderate in
the second half of the year as Playa overlaps a tougher second half
comparison.
For the second half of 2023, Playa's disclosed forward booking data
suggests solid operating performance through the remainder of the
year pointing toward occupancy to be flat to slightly down and
package ADR up single digits. S&P said, "We expect this could
result in revenue increasing by low- to mid-double digits year over
year. These assumptions, supported by Playa's net leverage maximum
tolerance of 4x, drive our expectation that S&P Global
Ratings'-adjusted gross leverage could improve to about 4x in 2023,
which provides a good cushion compared with our 5x downgrade
threshold at the current rating."
In 2024, S&P assumes occupancy remains relatively flat as Playa,
like other hotel operators, favors holding ADR levels over gains in
occupancy, and it preliminarily assumes ADR levels remain
relatively flat year over year. Although it is not its current base
case, a substantial drop in package ADR in 2024 from currently high
levels could be the result of any one or a combination of the
following factors:
-- A recessionary macroeconomic environment in North America that
drives weaker-than-expected consumer discretionary spending.
-- Weakening demand for travel to Mexico and the Caribbean from
historical highs primarily if North American travelers shift plans
to Europe and Asia, as these alternative markets become fully
reopened.
-- Rate competition with other Mexican and Caribbean all-inclusive
resort operators or U.S.-based resorts.
-- Travelers are deterred from visiting the company's hotels
because of crime.
As a hotel owner, Playa's ability to liquidate properties enhances
its financial flexibility. Playa's liquidity in the form of cash
and revolver availability is currently adequate and more than
sufficient to finance our assumed level of maintenance and growth
capital expenditures.
S&P said, "In addition, we believe the company's hotel portfolio
remains a source of future flexibility should the company need it.
Historically, Playa successfully sold multiple properties and most
recently, on April 22, 2021, Playa announced the sale of its
Riviera Maya-based Capri hotel for $55 million in cash. Market
conditions are typically depressed when asset sales are needed and
this may reduce the number of potential buyers. However, the
company could sell additional noncore hotels in its portfolio if it
needs to generate additional liquidity. The company is currently in
the process of selling its two Jewel properties in the Dominican
Republic. Due to uncertainty in proceeds and timing of the
completion of the sale, we have not assumed any sales in our
current base-case forecast."
Playa's relationships with well-known global lodging brands provide
it with competitive advantages.
Playa operates five of its resorts under the Hilton brand,
including the Hilton Playa del Carmen and Hilton La Romana. Playa
also owns and operates 10 resorts under the Hyatt brand. The
company operates Sanctuary Cap Cana in the Dominican Republic,
which is Playa's first managed resort under a Marriott
International brand. The company's partnerships with these brands
provide a number of benefits, including access to their loyalty
programs, quality assurances, and increased exposure to new
customers. As global brands expand their all-inclusive offerings,
Playa could identify additional opportunities to partner with
lodging companies that are well recognized and have good
distribution systems.
Geographic concentration leaves Playa vulnerable to regional
risks.
Playa generates the majority of its EBITDA from its Mexican
properties, most of which are located in the Yucatan peninsula.
This concentration leaves Playa more exposed to regional risks than
its higher-rated peers in the lodging industry. Travel-related
event risk and weather-related emergencies, such as hurricanes,
floods, or other natural disasters can significantly impair
business conditions in the Mexican and Caribbean resort market. For
example, this was demonstrated during the health scare involving
reports of tainted alcohol that deterred travel to the Dominican
Republic in 2019.
Before the pandemic, competition in the all-inclusive space was
heating up and S&P believes competition could intensify over the
next several years.
Since entering the all-inclusive space in 2019, Marriot has added
32 franchised resorts to its portfolio, with plans to continue
expanding its all-inclusive presence. S&P believes traditional
lodging brands that have historically eschewed the all-inclusive
model are responding to consumer demand and the success of Hyatt's
Ziva and Zilara brand launches with Playa a few years ago.
Intensifying competition from branded all-inclusive resorts in the
company's markets could diminish the competitive advantages it
receives from partnering with Hilton and Hyatt.
S&P said, "The stable outlook reflects our expectation that demand
for Playa's Mexican and Caribbean all-inclusive resorts will remain
strong, with a supportive financial policy net leverage maximum
tolerance of 4x. This should enable Playa to sustain S&P Global
Ratings'-adjusted gross leverage at about 4x through 2024. This
provides a good cushion compared with our 5x downgrade threshold at
the current rating.
"We could lower our rating on Playa if we expect it will sustain
debt to adjusted EBITDA above 5x or EBITDA coverage of interest
expense under 3x. This could occur because of an unanticipated and
sustained material decline in occupancy and package ADR driven by
an economic slowdown in the U.S.. This could also occur due to a
major shift in travel plans to Europe and Asia that materially
reduces North American travel to Mexico and the Caribbean, a
significant leveraging transaction, or unexpected business
disruption from travel-related event risk.
"An upgrade is unlikely because of Playa's net leverage target of
4x and track record of periodically using leverage to fund
acquisitions, developments, and improvements that fuel growth.
However, we could consider a higher rating if Playa sustains S&P
Global Ratings'-adjusted gross leverage below 4x over the lodging
cycle.
"Social factors are a moderately negative consideration in our
credit rating analysis of Playa and are reflected in the
unprecedented impact on the company's systemwide RevPAR due to the
pandemic. Although this was a rare and extreme disruption unlikely
to recur at the same magnitude, safety and health scares are an
ongoing risk. Playa has mitigating factors that contributed to 2022
revenue exceeding 2019. Playa's recovery compared favorably with
other lodging peers due to its ownership of beachfront
all-inclusive resorts in Mexico and the Caribbean, which have
benefited from pent-up demand for leisure travel. In addition,
Playa is exposed to the risk of terror attacks, geopolitical
unrest, health scares, and other events that can have temporary but
significantly negative impacts on travel demand and financial
performance. The company's limited geographic diversity makes it
vulnerable to idiosyncratic regional events, which have included
health scares and crime concerns in recent years. Environmental
factors are a moderately negative consideration. This reflects the
company's potential exposure to severe hurricanes that impair
operations in Caribbean markets. Highly destructive storms can
diminish traveler demand and cripple local infrastructure,
potentially impairing travel volumes to Playa's key markets."
=====================
P U E R T O R I C O
=====================
PUERTO RICO: PREPA's Debt Deal Extended by a Week
-------------------------------------------------
Michelle Kaske of Bloomberg News reports that the judge overseeing
the bankruptcy of Puerto Rico's power utility granted it an
additional week -- for the second time in the past 10 days -- to
reach a deal with bondholders as talks are progressing.
The island's federally appointed financial oversight board, which
is managing the utility's bankruptcy, sought more time to negotiate
with bondholders as it anticipates reaching an agreement with at
least one creditor, a lawyer for the board said in a court document
filed Thursday, August 3, 2023.
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.
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