/raid1/www/Hosts/bankrupt/TCRLA_Public/230927.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
L A T I N A M E R I C A
Wednesday, September 27, 2023, Vol. 24, No. 194
Headlines
A R G E N T I N A
ARGENTINA: Unemployment Rate Drops to 6.2%, but Pensions Alarm On
BUENOS AIRES: S&P Affirms 'CCC-' LongTerm ICR, Outlook Negative
B R A Z I L
BANCO DE DESENVOLVIMENTO: Moody's Affirms 'B2' Issuer Ratings
BRAZIL: Develops Strong Trade Relationship with China
BRAZIL: Grapples with Third Tax Revenue Drop
C H I L E
LATAM AIRLINES: Moody's Hikes CFR & Senior Secured Term Loan to B1
C O L O M B I A
UNE EPM: Moody's Downgrades CFR to B1, Outlook Negative
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Economists Express Concerns on Border Closure
E L S A L V A D O R
EL SALVADOR: IDB OKs $100MM to Support Vulnerable Population
M E X I C O
MEXICO: Egan-Jones Retains 'B+' Senior Unsecured Ratings
P U E R T O R I C O
GRUPO HIMA: Seeks to Hire IEC Consulting as Investment Consultant
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: Inflation Rate at 6.2% for August, CSO Says
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A R G E N T I N A
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ARGENTINA: Unemployment Rate Drops to 6.2%, but Pensions Alarm On
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Buenos Aires Times reports that unemployment in Argentina dropped
to 6.2 percent of the working population in the second quarter of
the year, below the 6.9 percent of this rate in the January-March
period, according to the INDEC national statistics bureau.
INDEC's sample is partial, since they only surveyed areas inhabited
by 29.4 million people, when the total population is around 46
million. In their sample, there are 900,000 unemployed people,
according to Buenos Aires Times.
Out of the total population employed, 9.7 million are wage-earners,
36.8 percent of whom work in the underground economy, i.e., they do
not have pension contributions or health insurance, according to
official data, the report notes.
The non-working population, including children, is 15.4 million
people (52.4 percent), while the working population is 14 million
(47.6 percent), the report relays.
In the second quarter of 2023, the workforce, which measures the
working population out of the total population, reached 47.6
percent; the employment rate, gauging the proportion of people in
work with respect to the total population, was 44.6%; and the
unemployment rate, people out of work, available to work and
actively seeking employment, as a proportion of the working
population, was 6.2 percent, the report discloses.
The underemployment rate was 10.6 percent, whereas those in work
seeking other employment and those not accounted for a total 11
percent of the working population, the report says.
As for specific populations, within the age bracket of 14 and over,
divided by gender, the employment rate was 69.8 percent for men,
while it was 51.5 percent for women, the report notes.
Geographically speaking, the regions with the largest workforces
were the Pampas (49.2 percent), Greater Buenos Aires (47.6 percent)
and the Cuyo West (47 percent), the report relays. The region with
the lowest workforce was the Northwest (44.4 percent), the report
notes.
When it comes to the size of conurbations, in those with half a
million inhabitants or more, the workforce (48 percent) was higher
than in those under 500,000 (45.7 percent), the report discloses.
Within the working population (47.6 percent), it was noted that
74.2 percent of those in work are wage-earners, and 36.8 percent of
them do not pay pension contributions, the report says.
On the other hand, 22.3 percent are freelancers, 3.2 percent are
employers and 0.3 percent are unpaid family workers, the report
relays.
Among employed wage-earners, 4.5 percent used their own
machinery/equipment, the report notes.
Moreover, out of the total at work, 9.1 percent worked from home,
the report says.
When analysing the population in work by educational level, over
half (60.8 percent) have completed secondary school, while 39.2
percent have higher and university studies (complete and
incomplete), the report discloses.
As for the qualifications of the main job, 55 percent have an
operational job, 17.2 percent have technical qualifications, 18.3
percent are non-skilled workers, and 9.1 percent are professionals,
the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Alberto Angel Fernandez is
the current president of Argentina after winning the October 2019
general election. He succeeded Mauricio Macri in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal
year 2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on June 13, 2023, raised its local currency
sovereign credit ratings on Argentina to 'CCC-/C' from 'SD/SD' and
its national scale rating to 'raCCC+' from 'SD'. S&P also affirmed
its 'CCC-/C' foreign currency sovereign credit ratings on
Argentina. The outlook on the long-term ratings is negative. S&P's
'CCC-' transfer and convertibility assessment is unchanged. None of
its rated bond issues are affected.
S&P said the negative outlook on the long-term ratings is based on
the risks surrounding pronounced economic imbalances and policy
uncertainties before and after the 2023 national elections.
Divisions within the government coalition, and infighting among the
opposition, constrain the sovereign's ability to implement timely
changes in economic policy.
Fitch Ratings also upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from 'C'
and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'. Fitch
typically does not assign Outlooks to sovereigns with a rating of
'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years,
regardless of the outcome of upcoming elections. The affirmation of
the LC IDR at 'CCC-' follows the peso debt swap in June that Fitch
did not deem to be a "distressed debt exchange" (DDE).
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.
BUENOS AIRES: S&P Affirms 'CCC-' LongTerm ICR, Outlook Negative
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S&P Global Ratings, on Sept. 25, 2023, affirmed its 'CCC-' foreign
and local currency long-term issuer credit ratings on the city of
Buenos Aires. The outlook remains negative.
Outlook
The negative outlook indicates the potential for further
deterioration of credit conditions in Argentina in the coming
months. Argentina faces challenging economic dynamics, including
worsened external liquidity, which has raised pressure in the
foreign exchange market. While the city's fiscal position is
healthy, it depends on the availability of foreign currency to
service its debt, amid very low international reserves and risks of
more restrictive access. This situation poses questions about the
city's capacity to meet its debt obligations, especially as its
single international bond starts maturing in 2025.
Downside scenario
S&P could lower the long-term ratings on the city of Buenos Aires
in the next 12 months if the central government further tightens
access to foreign exchange, which could impair the city's ability
to service foreign currency debt.
Upside scenario
S&P could raise the ratings in the next 12 months if it sees
improvement in conditions for non-sovereigns' access to foreign
currency to service debt. A track record of the sovereign's
successful execution under the IMF's Extended Fund Facility,
coupled with clarity on how policy will ease financing challenges
and provide a road map to address Argentina's major structural
macroeconomic imbalances, would be positive for Argentine LRGs.
Rationale
The city's stand-alone credit profile (SACP) of 'bb-' indicates its
stronger intrinsic creditworthiness than the rest of the local and
regional governments (LRGs) in Argentina. In S&P's view, the city's
socioeconomic conditions are better than those of peers. It also
has adequate financial management, which has led to strong fiscal
results, as well as declining debt and debt service levels,
notwithstanding very difficult macroeconomic conditions.
In 2023-2024, the city's debt service will be low and mostly
denominated in local currency, which Buenos Aires will finance
through its adequate cash flow generation. Domestic markets remain
available for the city in case of liquidity shortfalls.
S&P said, "Finally, in our view, Argentina's volatile and
underfunded institutional framework, T&C assessment of 'CCC-', and
'CCC-' sovereign ratings cap our ratings on the city at 'CCC-'. Our
T&C assessment reflects persistent pressures on the foreign
currency markets, as evidenced by the low levels of international
reserves and the persistent restrictions of non-sovereigns to
access them.
"We expect the city to maintain financial resiliency in the next
two years.
"We expect the city's fiscal revenues to continue to benefit from a
strong pass-through effect from inflation. We also expect financial
gains from LELIQs (a Central Bank of Argentina debt instrument) to
continue being taxed--an extraordinary measure to compensate for a
reduction of "coparticipation" transfers from the national
government.
"At the same time, we assume that despite pressures to compensate
for real losses on salaries and service contracts, the city will
continue to implement effective controls to ensure that expenditure
growth does not significantly exceed inflation in 2023-2025." As a
result, the operating balance would normalize toward 11% of
operating revenues, on average, over 2023-2025, from very high
levels in 2022.
With still-strong operating cash flow, the city has strengthened
its capex execution, reaching 15% of total expenditure in 2022,
from a low of 11% in 2020. As the current government finalizes its
capex program, S&P expects capex levels at 15% of total expenditure
this year. But it expects they'll decline marginally as a new
administration takes office in December 2023 and redefines policy
priorities. Deficits after capital expenditures are expected at
around 2% of total revenues over 2023-2025.
Moderately low financing needs, plus an official exchange rate that
continues to depreciate below inflation rates, would lead to a
decline in the city's debt toward 18% of operating revenues by 2025
from 28% in 2022. S&P expects the interest burden to average less
than 5% of operating revenues during 2023-2025. In addition, it
expects Buenos Aires' exposure to foreign currency to be over 80%
of total debt. So in case of a steep depreciation of the peso, debt
could increase significantly in nominal terms and as a share of
operating revenues.
S&P expects the city's liquidity to be more than enough to meet the
low levels of debt service expected for the next 12 months. That
said, restrictions imposed by the central bank limit saving in
foreign currency, and the city has few available options to sustain
the real value of liquidity denominated in local currency.
As the city's debt service increases significantly in 2025, when
its single international bond starts to mature, S&P expects marked
volatility in liquidity coverage. On the other hand, as investors
look to diversify from the central government risk, S&P observes
enough peso liquidity in the domestic market, which should be
accessible for the city in case of liquidity shortfalls.
A more favorable economic profile and lower infrastructure needs
underpin resilience.
The city of Buenos Aires has the highest income among Argentina's
LRGs. Its estimated GDP per capita of $31,379 for 2023 is well
above the estimated national average of $12,750 (both measured at
official foreign exchange). The city's wealthier economy--plus
resilient consumption and, consequently, tax revenue--translated
into greater fiscal resilience than that of domestic peers during
the economic downturn. This helped mitigate the effects of lower
intergovernmental transfers. In addition, high capex in the past
reduced the city's infrastructure needs, giving the administration
flexibility to withstand the economic downturn.
Regardless of more favorable socioeconomic conditions, the city's
economic growth will continue to be linked to Argentina's. For
Argentina, we don't expect growth, on average, for 2023-2025.
Unlike most of Argentina's LRGs, Buenos Aires' efforts to finance
itself with domestic currency issuances and MLIs helped the city
avoid a distressed debt restructuring in 2020-2021. And if not for
concerns about the city's capacity to access foreign currency, debt
service would be manageable over 2023-2025. The city has been able
to balance its budget in the recent past, despite a significant
reduction in transfers from the national government, owing to its
capacity to impose extraordinary taxes.
Liquidity policy is driven by a goal to build cushions for the
international bond partial maturities. With a new administration
taking over in December 2023, we assume that efforts to
institutionalize financial practices will result in adequate
financial management over the forecast. As in the rest of the
Argentine LRGs, financial planning is limited to the current year
given stress macroeconomic conditions.
S&P assesses the institutional framework for Argentina's LRGs as
very volatile and underfunded, reflecting its perception of the
sovereign's very weak institutional predictability and volatile
intergovernmental system that has been subject to various
modifications to fiscal regulations and lack of consistency over
the years. This constrains the LRGs' financial planning and
consequently, their credit quality. In S&P's opinion, this weakness
currently prevents us from rating the city higher.
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B R A Z I L
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BANCO DE DESENVOLVIMENTO: Moody's Affirms 'B2' Issuer Ratings
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Moody's Investors Service has affirmed Banco de Desenvolvimento de
Minas Gerais S.A.'s (BDMG) local-currency issuer ratings at B2 and
Not Prime, long- and short-term respectively, as well as its local-
and foreign-currency counterparty risk ratings at B1 and Not Prime,
long- and short-term. Moody's also affirmed BDMG's baseline credit
assessment (BCA) and adjusted BCA at b2, as well as its
counterparty risk assessments at B1(cr) and NP(cr), long- and
short-term respectively. The outlook on BDMG's long-term issuer
rating was changed to positive from stable.
RATINGS RATIONALE
The affirmation of BDMG's b2 BCA reflects the bank's consistent
performance in the past four years, particularly by reporting high
capital metrics and increased diversification in funding sources.
The b2 BCA is also underpinned by the bank's intrinsic business
constrain because of its exclusive role as financial development
agent for the State of Minas Gerais (B2, ratings under review for
upgrade). Consequently, the bank cannot operate beyond state
boundaries and is highly dependent and exposed to the local economy
in Minas Gerais. The bank's institutional linkage with the state
government also results in governance risks in the form of
potential changes to its management team every four years because
of gubernatorial elections. In addition, BDMG's BCA is constrained
by a loan portfolio that has material sector and borrower
concentration.
By affirming BDMG's BCA at b2, Moody's also acknowledges the
potential of volatility in the bank's asset-quality metrics
stemming from the high borrower concentration in its loan book. As
of June 2023, the bank's 20 largest borrowers represented 28% of
loan loans. The segment of large corporate clients accounted for
37% of the loan book. Despite that, BDMG has strived to diversify
its credit portfolio by growing in the segments of micro, small and
midsize companies (SMEs) and by lending more to municipalities in
the past 5 years. As of June 2023, SMEs accounted for 25% of total
loans, while municipalities reached 9%. The bank's volume of
problem loans remained controlled at 2.1% of gross loans at the
same date, from 1.8% one year prior, and below the banking industry
average of 3.1%. Despite that, BDMG's asset quality continued to
benefit from a high volume of renegotiated loans, at 21.1% of total
loans in June 2023, which could indicate potential weakening in
asset quality in the future. In order to mitigate this risk, BDMG
maintains high levels of collateral, while loan loss reserves
covered 4.9x problem loans in June 2023.
In June 2023, the bank's capitalization, measured by Moody's ratio
of tangible common equity to risk-weighted assets (TCE/RWA), was
22.4% and remained a credit strength for BDMG. At this level,
capital provides a robust buffer against loan losses and potential
volatility in profitability. On a regulatory basis, the bank's
Common Equity Tier 1 capital ratio was 26.3%, which offers adequate
conditions for management to achieve a target of BRL10 billion ($2
billion) in total loans in the next 3 to 4 years. In addition, the
bank's adequate position of liquid banking assets, at 26.7% of
tangible banking assets (June 2023), will likely also support
management's growth strategy. About 77% of BDMG's liquid assets
were invested in Brazilian government bonds.
The BCA of b2 also incorporates BDMG's modest profitability metrics
that derive from the geographic concentration of its operations,
which adds volatility to earnings generation through different
economic cycles, and its role as a development bank, with a social
mandate that includes providing long-term financing to companies in
Minas Gerais. As of June 2023, BDMG's ratio of net income to
tangible assets was 1.7%. The bank's profitability has been
affected positively by a decline in provision expenses, since the
stock of loan loss reserves has remained high since the first year
of the COVID pandemic and problem loan formation has been under
control. In addition, the bank's bottom-line results have benefited
from a 14.0% annual growth in net interest income as of June 2023,
due to the still high level of the benchmark policy rate in the
country.
The change in outlook to positive reflects an increase in
diversification of BDMG's funding structure, as well a potential
improvement of business environment in Minas Gerais that could
emerge from its adhesion to the new federal fiscal recovery regime.
Since 2016, the bank has increased access to local and
international funds, reducing its historically dependence on Banco
Nacional de Desenvolvimento Economico e Social (BNDES, Ba2 stable,
ba2). As of June 2023, BNDES onlendings represented 24.6% of BDMG's
total funding, down from 75% in December 2017. Local debt issuances
and long-term deposits reached 6.5% and 25.4%, respectively, of
total funding in June 2023, while resources from multilateral
agencies were 28.3%. Despite the importance of BNDES' funds for the
past growth of BDMG's lending, access to alternative funding
sources will likely support future credit origination.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of the BDMG's ratings and assessments could be
considered if the bank reports consistent growth in loan volumes
origination while maintaining low problem loan ratios and
preserving funding diversification, at the same time recording
adequate profitability. In addition, The bank's ratings could face
upward pressure if the ratings of the State of Minas Gerais were
upgraded. Conversely, a downgrade of the ratings of the State of
Minas Gerais could pressure BDMG's ratings downward. The bank's
standalone BCA could face negative pressure from rapid loan growth
that lead to an increase in credit losses and a requires the bank
to build reserves, which could negatively affect profitability and
its capital.
The principal methodology used in these ratings was Banks
Methodology published in July 2021.
BRAZIL: Develops Strong Trade Relationship with China
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Rio Times Online reports that Brazil and China have a strong trade
relationship, valued at over $100 billion annually. Around 30% of
Brazil's exports and 20% of its imports are linked to China.
Notably, China buys around 70% of Brazil's soybean exports and
about 63% of its iron ore, according to Rio Times Online.
In addition, China's direct investment in Brazil spans multiple
sectors such as energy, agriculture, and infrastructure, the report
notes.
About Brazil
Brazil is the fifth largest country in the world and third largest
in the Americas. Luiz Inacio Lula da Silva won the 2022 Brazilian
general election. He was sworn in on January 1, 2023, as the 39th
president of Brazil, succeeding Jair Bolsonaro.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
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 Inc., on August 15, 2023, upgraded Brazil's Long-Term Foreign
and Local Currency - Issuer Ratings to BB from BB (low). At the
same time, DBRS Morningstar confirmed Brazil's Short-term Foreign
and Local Currency - Issuer Ratings at R-4. The trend on all
ratings is Stable (March 2018).
BRAZIL: Grapples with Third Tax Revenue Drop
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Richard Mann at Rio Times Online reports that Brazil witnessed a
third monthly drop in its federal tax revenue in August 2023.
The tax service reported a 4.14% fall compared to last August,
totaling 172.785 billion reais or $35 billion, according to Rio
Times Online.
Previously, revenue fell 4.20% in July and 3.37% in June, the
report notes.
One factor is a 23.30% decline in corporate tax, the report relays.
Tax authorities said this sector had unusual gains in the previous
year, 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.
Fitch Ratings upgraded on July 26, 2023, Brazil's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'BB', from 'BB-',
with a Stable Outlook. The upgrade reflects better-than-expected
macroeconomic and fiscal performance amid successive shocks in
recent years, proactive policies and reforms that have supported
this, and Fitch's expectation that the new government will work
toward further improvements.
In mid-June 2023, S&P Global Ratings, revised the outlook on its
long-term global scale ratings on Brazil to positive from stable.
S&P affirmed its 'BB-/B' long- and short-term foreign and local
currency sovereign credit ratings on Brazil. S&P also affirmed its
'brAAA' national scale rating, and the outlook remains stable. The
transfer and convertibility assessment remains 'BB+'. The positive
outlook reflects signs of greater certainty about stable fiscal and
monetary policy that could benefit Brazil's still-low GDP growth
prospects. Continued GDP growth plus the emerging framework for
fiscal policy could result in a smaller government debt burden than
expected, which could support monetary flexibility and sustain the
country's net external position.
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 Inc., on August 15, 2023, upgraded Brazil's Long-Term Foreign
and Local Currency - Issuer Ratings to BB from BB (low). At the
same time, DBRS Morningstar confirmed Brazil's Short-term Foreign
and Local Currency - Issuer Ratings at R-4. The trend on all
ratings is Stable (March 2018).
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C H I L E
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LATAM AIRLINES: Moody's Hikes CFR & Senior Secured Term Loan to B1
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Moody's Investors Service has upgraded to B1 from B2 LATAM Airlines
Group S.A's corporate family rating, the rating of the $1.1 billion
senior secured term loan B due in 2027, and the ratings of the
$1.15 billion senior secured notes due in 2027 and 2029, co-issued
by LATAM and Professional Airline Services, Inc., a Florida
corporation and a wholly owned subsidiary of LATAM. The outlook
remains stable.
RATINGS RATIONALE
The upgrade of LATAM's ratings to B1 from B2 reflects the better
than anticipated operating and financial performance of the company
during 2023, which allowed the company to strengthen its credit
metrics and liquidity. LATAM's Moody's-adjusted leverage improved
to 3.2x in the twelve months ended in June 2023 from 6.1x at the
end of 2022, while it generated $352 million of free cash flow in
the first half of the year. Moody's expects LATAM's leverage to
remain within 2.5-3.0x and its cash position to amount to 15%-20%
of revenues in the next 2 years, which provides cushion to the
company's credit quality even under stress scenarios. The strong
operating performance and strengthened credit metrics reflect
sustained improvements in LATAM's cost and capital structures,
which provides LATAM with flexibility to withstand volatility in
market conditions.
LATAM's B1 rating reflects the company's scale and superior network
connectivity that translates into leading positions in 4 out of the
5 domestic markets in which it operates and in intraregional
flights in Latin America as of June 2023, along with its
well-diversified business portfolio of air transportation services
and strategic alliances. The rating is also supported by LATAM's
improved post-bankruptcy capital and cost structures and adequate
liquidity, which will allow the company to weather the volatile
recovery of the industry.
The rating is constrained by LATAM's exposure to the airline
industry and rising macroeconomic risks and increasing costs. LATAM
will have to contend with higher costs derived from labor
(denominated in local currencies), fuel, and other US dollar
denominated inputs, which can hamper profitability despite firm
demand and capacity discipline in its key markets.
LATAM's operating performance was stronger than anticipated in the
first half of 2023, with Moody's-adjusted EBIT margin increasing to
10.0% compared to 7.5% in 2019. The strong performance was driven
by LATAM's sustained improvements in its cost base, combined with a
disciplined approach towards capacity and airfares by all Latin
American airlines following industry consolidation and tight
balance sheets and liquidity. LATAM's CASK ex-fuel stood at around
$4.7 cents in the first half of 2023, stable relative to 2019
levels, evidencing LATAM's cost-driven management despite the
inflationary pressures faced by the region in the last two years.
The company restructured its cost base, simplified its fleet,
increased the share of variable costs, outsourced non-core
activities and renegotiated over 1,000 contracts, most of which do
not contain step-up or termination clauses, making the improvements
sustainable.
So far, air travel demand has remained robust in the region even
amid stagnant economic growth and declining disposable income.
LATAM's total RPK recovered to 96% of 2019 level in August 2023,
with Brazil and Spanish speaking countries RPKs at 110% and 92% of
pre-pandemic levels, respectively, and international RPKs still
lagging behind at 88%.
LIQUIDITY
LATAM has a good liquidity profile with $1.7 billion in cash and
$1.5 billion in debt maturing until the end of 2024. The company's
cash balance covers short term financial debt maturities of $534
million by 3.2x. The company's debt amortization schedule is
comfortable, with most of the upcoming maturities represented by
the exit financing, namely the term loans and notes, due beyond
2026. The company also has two secured, undrawn revolving credit
facilities amounting to $1.1 billion and generated $352 million of
free cash flow in the first half of the year. The company's cash
generation benefits from a reduction of about 40% in annual fleet
cash costs from 2019 levels following the renegotiation of the
fleet contracts done during Chapter 11, and the company continues
to have flexibility in terms of fleet capex. Moody's expects that
LATAM will generate about $1.7 billion in cash flow from operations
annually, which is sufficient to cover annual capex needs by about
1.0-1.5x, including fleet renewal and expansion. Moody's also
expects a neutral to positive free cash flow from 2023 onwards,
reflecting flexibility in maintenance capex and costs. The company
also has other potential liquidity sources, including unencumbered
assets that could be used in potential secured financing
transactions.
RATING OUTLOOK
The stable outlook reflects Moody's expectations that LATAM's
credit metrics and liquidity will remain stable in the next 12-18
months, and that the company will maintain its conservative
approach towards liquidity, costs and capacity management.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of LATAM's rating would require longer term visibility
over the company's post Chapter 11 recovery or strengthened credit
metrics that provide cushion to credit quality under various stress
scenarios. Quantitatively an upgrade would require adjusted
leverage (measured by total debt / EBITDA) below 4.5x and interest
coverage (measured by (FFO + interest expense) / interest expense)
above 4x, all on a sustained basis. The maintenance of an adequate
liquidity profile would also be required for an upgrade.
The rating could be downgraded if credit metrics' recovery falls
behind Moody's expectations, with adjusted leverage remaining above
5.5x and interest coverage below 1x on a sustained basis. A
deterioration in the company's liquidity profile or additional
shocks to demand or profitability that lead to cash burn could also
result in a downgrade of the rating.
LATAM Airlines Group S.A (LATAM) is a Chile-based airline holding
company formed by the business combination of LAN Airlines S.A. of
Chile and TAM S.A. (TAM) of Brazil in June 2012. LATAM is the
largest airline group in South America, with a local presence for
domestic passenger services in five countries (Brazil, Chile, Peru,
Ecuador and Colombia). The company also provides intraregional and
international passenger services, has a cargo operation that is
carried out using belly space on passenger flights and a dedicated
freighter service and has LATAM Pass, the largest frequent flyer
program in the region and 7th largest in the world in terms of
members. In the last twelve months ended June 2023, LATAM generated
$10.7 billion in net revenue. LATAM serves passengers in around 143
destinations in 25 different countries; provides cargo services to
156 destinations in 24 countries; and as of June 30, 2023, had a
fleet of 311 aircraft and a set of bilateral alliances.
The principal methodology used in these ratings was Passenger
Airlines published in August 2021.
===============
C O L O M B I A
===============
UNE EPM: Moody's Downgrades CFR to B1, Outlook Negative
-------------------------------------------------------
Moody's Investors Service downgraded UNE EPM Telecomunicaciones,
S.A.'s (Tigo Une) Corporate Family Rating to B1 from Ba1 with a
negative outlook. Previously, the rating was on review for
downgrade.
RATINGS RATIONALE
The downgrade to B1 reflects the substantial increase in liquidity
risk, a consequence of uncertainties regarding the shareholders'
potential support for the company and provision of a required
equity capital requested by management. The rating also considers
elevated governance risks arising from the complexity added to the
ownership structure by the partial indirect government ownership by
Empresas Publicas de Medellin (EPM). This structure makes the
company vulnerable to political interference and shareholder
disputes, both of which can substantially influence its operations,
liability, and liquidity management. The ongoing disagreement among
shareholders has hindered the company's access to capital markets
and the implementation of liability management strategies aimed at
refinancing upcoming maturities and spectrum renewal. The difficult
interaction between shareholders, Millicom and EPM, has prompted
the Ministry of Telecommunications to act and mediate the
discussion to find a solution for Tigo UNE's immediate liquidity
needs. In the last mediated meeting, the ministry gave the parties
a deadline of October 9 to find a viable solution, either through
the requested capital injection or a sale of EPM's stake.
Tigo UNE´s liquidity is weak when considering upcoming debt
maturities, costs associated with spectrum renewal and capex
deployment needs. As of September 2023, the company had
approximately $30 million (COP126 billion) in cash on hand.
Upcoming maturities amount to approximately $56 million (COP235
billion) due in October 2023 and $91 million (COP396 billion) due
in the second quarter of 2024. In the absence of shareholder
support or a change in the timing of these obligations, the
company's ability to sustain operations will be hindered.
This action concludes the review for downgrade initiated in July
2023 to assess Tigo UNE's ability to reinforce its liquidity
position, implement liability management plans as well as its
shareholders' ability and willingness to support the company's
strategic plan and liability management efforts. The negative
outlook considers Tigo UNE's challenges to restore liquidity and
meet its upcoming debt and spectrum obligations, as well as improve
operating performance considering the intense market competition
and adverse macroeconomic scenario.
Tigo Une is owned by Millicom International Cellular S.A. (Ba1
stable) and Empresas Publicas de Medellin E.S.P (Baa3 stable) a
wholly owned subsidiary of the City of Medellin (Baa2 stable). Tigo
UNE is controlled by Millicom, which holds the majority of voting
shares. Despite the size and importance of its shareholders, Tigo
UNE's rating does not consider any formal support or rating uplift
from its ownership structure.
Tigo UNE operates in a competitive operating environment, which
weighs on profitability and organic growth. Moody's believes that
the company's operating performance over the rating horizon will
continue to be pressured by intense competition as well as the
country´s challenging economic environment. However, since early
2022 operating performance has shown positive momentum, with mobile
costumer base reaching 12 million and service revenue growing 6.6%
year-over-year in 2022 and 2.5% in the first half of 2023. Over the
next two years, although Moody's expects this positive subscriber
growth trend to continue, Moody´s Adjusted EBITDA margin should
remain below 30%, as subscriber growth will not be enough to fully
recover the competitive impact on ARPU. Nevertheless, the company
maintains a strong position in the Colombian market, holding about
26% of the mobile market share and about 29% of the fixed broadband
market, as well as its small scale when compared to global peers.
Tigo UNE has posted negative free cash flow as adjusted by Moody's
since 2021, a trend that should continue over the next two years.
Moody´s expects that high capex investments required to expand and
enhance the network and defend market share will consume all
internal cash generation during this period. In addition, ongoing
renewal of the company's share of the 1900 MHz spectrum as well as
the possibility of a 5G spectrum auction over the next 12 months
should further pressure liquidity. The 20% down payment of the
total spectrum renewal price of approximately $250 million is due
in November 2023.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
An upgrade is unlikely at this point given the negative outlook.
However, Moody´s could stabilize the rating outlook if the company
demonstrates adequate liquidity and the ability to secure financing
to timely meet upcoming debt amortization and capex needs.
The ratings could be further downgraded if the company is not able
to secure financing to meet upcoming debt maturities, operating
performance deteriorates, or leverage is expected to remain at a
level higher than 2.5x without a clear path for deleveraging.
The principal methodology used in this rating was
Telecommunications Service Providers published in September 2022.
Tigo UNE is a leading, integrated telecommunications provider in
Colombia offering mobile, fixed, pay TV and B2B services. The
company is Colombia's third largest mobile operator with over 12
million subscribers. Tigo UNE is Millicom's second largest market
in terms of revenues, accounting for about 23% of consolidated
revenue and about 16% of consolidated EBITDA in the twelve months
ended in June 2023. Tigo UNE reported $1.19 billion in revenues and
Moody's adjusted EBITDA of $371 million in the twelve months ended
in June 2023.
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Economists Express Concerns on Border Closure
-----------------------------------------------------------------
Dominican Today reports that five days have passed since the
closure of the Dominican-Haitian border, and economists are
expressing concerns about the potential economic and humanitarian
impact on both countries. Many believe that this measure could
have severe consequences not only for the Dominican Republic but
also for Haiti, possibly leading to an influx of Haitian citizens
into the Dominican Republic, according to Dominican Today.
Economist Andy Dauhajre believes that the Dominican Government's
decision to implement a "close or let the sea in" policy could
potentially lead to the collapse of Haiti. This, in turn, might
force Haitians to attempt to enter the Dominican Republic in larger
numbers, the report notes. Dauhajre explained, "There are many
interests, and at the end of the day, where do we want the Haitians
to be, on this side or that side? You can't cause a sudden
collapse; they already have a low standard of living, the report
relays. If my money becomes worthless because I have nothing to
buy with it, what am I going to do? What has happened in all parts
of the world is that if you don't vote with your money, then you
vote with your feet . . . . what is voting with your feet? Well, I
cross."
Furthermore, Dauhajre pointed out that the border closure has led
to an increase in prices for Haitians seeking to cross into the
Dominican Republic, suggesting that someone is profiting from this
situation, the report notes.
Antonio Ciriaco, the dean of the Faculty of Economics at the
Autonomous University of Santo Domingo (UASD), described the border
closure as a "Lose-Lose" policy for both nations, the report
discloses. He noted that although the Dominican Republic has
greater economic stability, Haiti relies heavily on imports from
its neighbor, the report notes. Consequently, the closure could
exacerbate poverty, food insecurity, and informality in Haiti,
increasing pressure on the border, the report says.
Ciriaco also highlighted the economic impact, stating that the
Dominican Republic is losing between 85 and 86 million dollars in
exports to Haiti, the report relays. Additionally, he mentioned
the need for the government to subsidize livestock and poultry
producers in the border provinces, which could cost three billion
pesos if the closure continues for the next three months, 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.
On August 14, 2023, the TCR-LA reported that Moody's Investors
Service changed the outlook on the Government of Dominican
Republic's ratings to positive from stable and affirmed the local
and foreign-currency long-term issuer and senior unsecured ratings
at Ba3. Moody's said the key drivers for the outlook change to
positive are: (i) sustained high growth rates have enhanced the
scale and wealthclevels of the economy; and (ii) a material decline
in the government debt burden coupled with improved fiscal policy
effectiveness will support medium-term debt sustainability. The
affirmation of the Ba3 ratings balances the Dominican Republic's
strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
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
cover 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.
In September 2023, S&P Global Ratings assigned its 'BB' issue
rating to the Dominican Republic's 11.25% Dominican peso (DOP)
linked bond for DOP71 billion (equivalent to US$1.25 billion)
maturing in 2035. The rating on the bond is the same as the
long-term local currency sovereign credit rating on the Dominican
Republic (BB/Stable/B). The country used about 57% of the
DOP-linked bond to roll over a peso-denominated bond maturing in
2026, and will use the rest of the proceeds for general budgetary
purposes.
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.
=====================
E L S A L V A D O R
=====================
EL SALVADOR: IDB OKs $100MM to Support Vulnerable Population
------------------------------------------------------------
The Inter-American Development Bank (IDB) approved a $100 million
program to support the vulnerable population in El Salvador who
face adverse impacts.
El Salvador is the third country with the highest risk of disasters
in Central America, and 71.9% of people in poverty live in areas
exposed to natural disasters. The program seeks to increase the
resilience of households affected by adverse events, including
those caused by climate change. To this end, it will create an
integrated social protection system that responds to transitory
shocks of different natures, such as natural disasters and health
emergencies.
Monetary transfers are one of the most effective responses to
protect and support the income and consumption of households
affected by adverse events. This operation, which was approved by
the IDB Executive Board, will finance a new monetary transfer
project to serve families in poverty in urban and rural areas,
prioritizing households led by women, households with children
under eight years of age, households with people with disabilities,
and households with people over 70 years.
The project will also increase the coverage and quality of child
development services. It will finance the equipment of 47 Child
Welfare Centers (CBI), the development of pedagogical guides for
the national early childhood curriculum, and the training of direct
care personnel of the 187 CBI, among other initiatives. In turn,
the initiative will increase the coverage of comprehensive early
childhood care services by designing, implementing, and evaluating
a home visit modality. In total, the operation will benefit 170,000
homes affected by adverse events.
The IDB loan of $100 million has a disbursement period of 5 years,
a grace period of 5.5 years, and an interest rate based on SOFR.
===========
M E X I C O
===========
MEXICO: Egan-Jones Retains 'B+' Senior Unsecured Ratings
--------------------------------------------------------
Egan-Jones Ratings Company on September 12, 2023, maintained its
'B+' foreign currency and local currency senior unsecured ratings
on debt issued by United Mexican States. EJR also withdraws rating
on commercial paper issued by the country.
=====================
P U E R T O R I C O
=====================
GRUPO HIMA: Seeks to Hire IEC Consulting as Investment Consultant
-----------------------------------------------------------------
Grupo Hima San Pablo, Inc. and its affiliates seek approval from
the U.S. Bankruptcy Court for the District of Puerto Rico to employ
IEC Consulting, LLC as their investment consultant.
The consultant will render these services:
a. seek to identify and contact prospective
investors/purchasers and solicit and assist in evaluating
indications of interest & proposals among prospective
investors/purchasers related to the Sale Transactions;
b. assist in structuring and negotiating the Sale
Transactions
and the terms of the securities/consideration;
c. assist in developing/presenting financial and operational
data to facilitate the Sale Transactions;
d. participate in hearings before the bankruptcy court
concerning matters upon which IEC has provided advice, if
necessary, including coordinating with the Debtor's counsel
concerning the testimony in connection therewith;
e. advise and assist the Debtor in executing such Sale
Transactions should the Debtor seek to proceed with the Sale
Transactions,
f. assist in matters associated with closing the Sale
Transactions; and
g. provide such other advisory services reasonably necessary
to accomplish the foregoing and consummate the Sale Transactions
as
requested by the Debtor and agreed to by IEC occasionally.
IEC will receive fees for work done based on the hourly rate of
$250 per hour.
The Debtor shall additionally pay a Sale Transaction Fee of 0.50
percent of gross proceeds up to $50 million dollars and 1 percent
of any amount exceeding $50 million dollars based on the aggregate
amount of assets sold and paid at the time proceeds are received by
the Debtor.
The firm received a retainer in the amount of $10,000.
IEC Consulting does not hold or represent any interest adverse to
the Debtor or its estate, according to court filings.
The firm can be reached through:
Ivan E. Colon, MHSA, FACHE
IEC Consulting, LLC
1201 S. Hope St. #4002
Los Angeles, CA 90015
About Grupo Hima San Pablo, Inc.
Grupo HIMA San Pablo, Inc. serves as a diversified healthcare
services holding company pursuant to a corporate reorganization of
several businesses related by common ownership. Through its
subsidiaries and affiliates, the Company primarily owns and
operates hospital facilities and other healthcare related
businesses. As of August 2023, the HIMA GROUP operates four
hospitals, with over 1,200 licensed beds, including an Oncological
Hospital, a multi-specialty physician practice management company,
Home Care Service (including infusion therapies and wound care), a
free-standing Ambulatory Center and a 16-Ambulance Service
Company.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. P.R. Case No. 23-02510-EAG11) on August
15, 2023. In the petition signed by Armando J. Rodriguez-Benitez,
chief executive officer, the Debtor disclosed up to $1 billion in
assets and up to $500,000 in liabilities.
Judge Enrique S. Lamoutte Inclan oversees the case.
Wigberto Lugo Mender, Esq., at Lugo Mender Group, LLC, represents
the Debtor as legal counsel. Pietrantoni Mendez & Alvarez LLC as
special counsel.
=====================================
T R I N I D A D A N D T O B A G O
=====================================
TRINIDAD & TOBAGO: Inflation Rate at 6.2% for August, CSO Says
--------------------------------------------------------------
Trinidad and Tobago Newsday reports that the Central Statistical
Office (CSO) has reported a 0.2 per cent decrease in inflation in
Trinidad & Tobago for the month of August, according to a release
of its retail price index.
The inflation rate – measured as a percentage change in the
average all items index – for January to August 2023/2022 was 6.2
per cent, compared to 6.4 per cent for January-July 2023/2022,
according to Trinidad and Tobago Newsday.
The inflation rate for the previous comparative period
(January-August 2022/2021) was 4.9 per cent, the report notes.
CSO said the all items index of retail prices was 123.4,
representing a decrease of 0.1 points or 0.1 per cent above the
index for July, the report relays.
The index for food and non-alcoholic beverages decreased from 147.5
in July to 147.0 in August, reflecting a decrease of 0.3 per cent,
the report discloses.
Contributing significantly to this decrease was the general
downward movement in the prices of tomatoes, white flour, parboiled
rice, melongene, ochroes, soya bean oil, chilled or frozen chicken,
celery, cheddar cheese and eddoes, the release said, the report
says.
However, the full impact of these price decreases was offset by the
general increases in the prices of chilled or frozen beef or pork,
fresh beef, whole chicken (fresh or frozen), Irish potatoes,
plantains, green pigeon peas, steak (fresh) and garlic, the report
notes.
"A further review of the data for August compared with July
reflected an increase in the sub-index for health of 0.2 per cent.
Also, this period showed a decrease in the sub-index for alcoholic
beverages and tobacco of 0.2 per cent and clothing and footwear of
0.1 per cent. All other sections remained unchanged," the release
said, the report adds.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C.,
USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T.
Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
This material is copyrighted and any commercial use, resale or
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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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The TCR Latin America subscription rate is US$775 per half-year,
delivered via e-mail. Additional e-mail subscriptions for members
of the same firm for the term of the initial subscription or
balance thereof are US$25 each. For subscription information,
contact Peter A. Chapman at 215-945-7000.
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* * * End of Transmission * * *