/raid1/www/Hosts/bankrupt/TCRLA_Public/231005.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
Thursday, October 5, 2023, Vol. 24, No. 200
Headlines
A R G E N T I N A
ARGENTINA: IMF Delivers Rare Public Rebuke to Massa Over Handouts
YPF SA: Argentina Asks for Extra Time as Litigators Seek Payment
B R A Z I L
BRAZIL: Sao Paulo Home Prices Fair But Steep for Locals
PILGRIM'S PRIDE: Moody's Rates New 10-Yr. Sr. Unsec Notes 'Ba2'
C A Y M A N I S L A N D S
OMANTEL SUKUK: Fitch Gives 'BB+(EXP)' Rating on Sr. Unsecured Notes
C H I L E
CHILE: Pres. Boric Plans 3.5% Spending Hike & Vows Economic Revival
H O N D U R A S
HONDURAS: Moody's Affirms 'B1' LongTerm Issuer Ratings
P U E R T O R I C O
GRUPO HIMA: U.S. Trustee Appoints Edna Diaz De Jesus as PCO
LUCENA DAIRY: Court OKs Cash Collateral Access Thru Oct 10
T R I N I D A D A N D T O B A G O
TRINIDAD & TOBAGO: To Continue Seeking Access to EU Markets
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A R G E N T I N A
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ARGENTINA: IMF Delivers Rare Public Rebuke to Massa Over Handouts
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Buenos Aires Times reports that the International Monetary Fund
(IMF) issued a rare public rebuke to Economy Minister Serigo Massa,
declaring that his new electioneering measures to bolster the
purchasing-power of suffering Argentines would only add to the
challenges facing the crisis-stricken nation.
With less than a month to go before the October 22 presidential
elections, the IMF is concerned that "the economic situation
remains very difficult and complex" in Argentina, said Julie
Kozack, the multilateral lender's communications chief during a
press conference in Washington, according to Buenos Aires Times.
"The recently adopted policy measures and announcements add to
Argentina's challenges," said Kozack. "The latest reviews were
aimed at restoring fiscal order and improving the economic
situation. We are working to thoroughly evaluate the new
provisions and take action to safeguard the programme's objectives,
the report notes.
In line with this, she assured that Argentina's US$44.5-billion
debt programme "is not broken" and that the IMF's objective
"continues to be to help Argentina during this difficult time" and
to work "in the search for consensus" in the midst of an electoral
process that has many tensions, the report relays.
"It is too early to speculate on when there will be a new programme
review with Argentina," Kozack said, the report discloses.
"Inflation is high, very high and rising. Reserve [monetary]
buffers are low and social conditions are fragile," warned the IMF
official, the report says.
With inflation running at more than 124 percent per annum and four
out of every 10 citizens now living below the poverty line, Massa
has unveiled a massive scheme of cash handouts to deal with falling
purchasing-power, the report notes.
The measures - dubbed 'plan platita' by critics - include subsidies
and tax exemptions for the poorest sectors and pensioners, the
report relays.
"We are working to better understand and assess the impact of
recent measures and the need for compensatory actions that could be
taken to reinforce stability and safeguard programme objectives
without adding to future vulnerabilities," said Kozack, the report
discloses.
The Fund also warns that one of Milei's flagship proposals,
dollarising the economy, "requires important preparatory steps and
is not a substitute for sound macroeconomic policies," the report
says.
While acknowledging that "determining an exchange rate is the
prerogative of a sovereign nation," the IMF official it was
important to ensure that "macroeconomic policies are consistent
with an orderly transition" and "long-term viability of the system"
that is chosen, 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.
YPF SA: Argentina Asks for Extra Time as Litigators Seek Payment
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Buenos Aires Times reports that Argentina has filed a motion in a
US court asking the judge overseeing the case regarding the 2012
nationalisation of oil company YPF to dismiss the petition by
claimants to enforce the judgement in 30 days.
Litigators are requesting the government pay the US$16.1 billion
awarded to minority shareholders in a major court decision last
month, according to Buenos Aires Times.
The prosecution had asked Judge Loretta Preska, from the US
District Court for the Southern District in Manhattan, to give
Argentina 30 days to begin paying the compensation and interest in
the sentence which favoured claimants Grupo Petersen and Eton Park,
the report notes. The two interested parties bought the rights to
the divested shares of firms following the nationalisation of the
YPF state oil firm, which in 2012 was controlled by Spanish company
Repsol, the report relays.
"It would be an extraordinary violation of international courtesy
to allow the enforcement of a US$16- billion judgement in the case
with an artificially limited term" and "it would generate
unnecessary and chaotic litigation," claimed lawyers representing
Argentina in a plea addressed to the judge on September 27, the
report discloses.
Attorney Robert Giuffra, who signed the petition, reminded the
court that Burford Capital, which bought the litigation from one of
the plaintiff companies, Grupo Petersen, has sold 38.75 percent of
its share in the case to third parties "whose identity has not even
been revealed," the report relays.
The payment the country needs to make accounts for nearly 20
percent of Argentina's Budget for 2023, the defence said, assuring
that the "payment of such a proportion of a country's budget would
not be possible for any government in the term proposed by the
claimants," the report discloses.
"There is no certainty that the payment of a judgement, once made,
may be recovered, an unsustainable outcome given that Argentina's
appeal claims difficult legal matters before the Court of Appeals",
they added.
The case dates back to 2012, when Argentina nationalised YPF, then
controlled by Repsol, the report relays. Two years later, the
Spanish company was compensated with US$5 billion to finalise the
litigation; this was not the case with other minority shareholders
such as Grupo Petersen or Eton Park Capital (25.4% of YPF's
capital), which in 2015 filed a lawsuit alleging that the country
had not presented an initial public offering as per company
statutes, the report adds.
About YPF SA
YPF S.A. is a vertically integrated, majority state-owned Argentine
energy company, engaged in oil and gas exploration and production,
and the transportation, refining, and marketing of gas and
petroleum products.
Founded in 1922, YPF was an oil company established as a state
enterprise. YPF was later privatized under president Carlos Menem
and was bought by the Spanish firm Repsol in 1999, and the
resulting merged company was call Repsol YPF.
In 2012, about 51% of the firm was renationalized and this was
initiated by President Cristina Fernandez se Kirchner. The
government of Argentina agreed to pay $5 billion compensation to
Repsol.
In April 2023, S&P Global Ratings lowered its local and foreign
currency ratings on YPF SA to 'CCC-' from 'CCC+'. The outlook on
these ratings is now negative. The downgrade follows a similar
action on S&P's long-term foreign currency ratings and T&C on
Argentina, following announced plans that, if implemented, would
oblige some nonfinancial public-sector entities to exchange or sell
their holdings of global-and local-law dollar-denominated bonds
issued during the 2020 restructuring for other locally issued peso
debt, likely dollar-and/or inflation-linked bonds. In S&P's view,
the lack of clarity and the apparent motivation for the potential
transaction underscore heightened credit vulnerabilities, in
particular given the increasing pressures from the severe drought
that Argentina is facing, which further constrains the already
disrupted FX market. This expected greater pressure on the FX
markets also explains S&P's downward revision of the T&C assessment
to 'CCC-'.
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B R A Z I L
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BRAZIL: Sao Paulo Home Prices Fair But Steep for Locals
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Lachlan Williams at Rio Times Online reports that the UBS Global
Real Estate Bubble Index of 2023 states that home prices in Sao
Paulo are fairly priced, reducing bubble risks.
However, residents find it costly due to Brazil's double-digit
interest rates, according to Rio Times Online.
Released this month, the report emphasizes that these elevated
prices often steer Sao Paulo's population toward renting, the
report notes.
Consequently, rental rates have seen a 10% increase in the past
four financial quarters, the report relays. Financial analysts
issue caution, pointing out changing market dynamics, the report
notes.
With inflation declining and Brazil's Central Bank reducing the
Selic rate, lending conditions are improving, 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).
PILGRIM'S PRIDE: Moody's Rates New 10-Yr. Sr. Unsec Notes 'Ba2'
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Moody's Investors Service assigned a Ba2 rating to Pilgrim's Pride
Corporation's proposed 10-year senior unsecured notes. Moody's also
affirmed Pilgrim's Ba2 Corporate Family Rating and Ba2-PD
Probability of Default Rating, and upgraded the rating on the
company's existing senior unsecured notes to Ba2 from Ba3. Moody's
took no action on the Ba1 rating on the existing senior secured
revolving credit facility because the expected replacement of the
facility will lead to a withdrawal of the rating. The company's
Speculative Grade Liquidity Rating remains SGL-1 and the outlook
remains stable.
Pilgrim's plans to utilize the proceeds from the proposed $500
million of new senior unsecured and unguaranteed notes along with
balance sheet cash to fund a cash tender offer for the company's
$850 million 5.875% senior notes due 2027. Upon repayment of the
2027 notes, Moody's plans to withdraw the rating on the notes.
The upgrade of the existing senior unsecured notes to Ba2 and the
assignment of the Ba2 rating to the proposed notes reflects the
anticipated replacement of Pilgrim's $800 million senior secured
revolving credit facility with a new senior unsecured revolving
credit facility. The senior unsecured notes were previously rated
one notch below the Ba2 Corporate Family Rating to reflect their
effective subordination to the secured revolving credit facility.
Following the replacement of the secured credit facility with an
unsecured and unguaranteed credit facility, the guarantees on the
existing notes will be released. Because the company's revolving
credit facility and the existing and new notes will be senior
unsecured and unguaranteed obligations, the note ratings are in
line with the Ba2 CFR since there is no longer a difference in
priority of claims. The credit facility will have financial
maintenance covenants and an ability to obtain subsidiary
guarantees and collateral in the future without providing
guarantees and collateral to the notes. Such indenture provisions
could lead to a transition in the capital structure that
subordinates the notes and weakens recovery in the event of a
default. The note limitation on liens provisions permit secured
debt on Principal Properties, as defined, up to the greater of $1.5
billion or 3.5x secured debt-to-EBITDA, and permit the grant of
security on assets aside from Principal Properties without having
to provide such collateral on the notes.
Moody's affirmed Pilgrim's Ba2 CFR because the company maintains
very good liquidity including cash, an undrawn $800 million
revolver, and committed unsecured revolvers in Mexico and Europe
($278 million of availability as of June 2023) to manage the
downturn in the poultry market if it is relatively short lived.
Moody's expects debt to EBITDA will increase to over 5.0x in the
third quarter and remain elevated for the rating at year end 2023.
The affirmation is nevertheless based on expectations that the
company will reduce debt to EBITDA to below 4.5x in fiscal 2023 and
below 3.0x in the next 12 to 18 months if a continued recovery in
the poultry market drives a recovery in the company's EBITDA.
RATINGS RATIONALE
Pilgrim's Ba2 CFR is supported by its position among the world's
largest chicken processors, a growing packaged foods business and
very good liquidity. The company's operating strategy is focused on
maximizing profitability and earnings stability by maintaining
operational excellence, improving diversified portfolio and key
customer focus. These focused efforts allow the company to at least
partially offset sector headwinds caused by external factors such
as grain prices, biological risks, trade restrictions and
government policies that are largely out of its control. These
strengths are balanced against the company's focus in the cyclical
chicken processing industry, which is characterized by volatile
earnings, modest profit margins, and high operating leverage. The
inherent earnings, financial leverage and free cash flow volatility
requires very good liquidity to manage through weak earnings and
cash flow periods. At the top of the cycle, Moody's expects
financial leverage to be very modest relative to comparably rated
companies. Conversely, at the bottom of the cycle, the company can
often have financial leverage that is well outside Moody's central
expectations for the rating for a limited period of time. The
financial policy of maintaining abundant access to cash and
external sources of liquidity helps the company manage through the
earnings volatility. Moody's evaluates Pilgrim's credit profile on
a stand-alone basis because the debt is not guaranteed by its
80%-shareholder JBS S.A. (JBS; Baa3 stable). Thus, the ratings are
not directly affected by the credit profile of JBS. However, the
strategic importance of Pilgrim's to JBS, as it provides protein
and geographic diversification, and potentially earnings stability,
is a positive credit factor because Pilgrim's does not pay a
dividend, at least a portion of earnings are being reinvested in
Pilgrim's growth and there is likely incentive for JBS to support
Pilgrim's through temporary cyclical slowdowns if necessary.
The SGL-1 speculative-grade liquidity rating reflects that the
company's cash balance, undrawn proposed $850 million revolver,
committed unsecured revolvers in Mexico and Europe ($278 million of
availability as of June 2023), and lack of maturities over the next
few years which provides good flexibility to manage the earnings
and cash flow volatility in the cyclical chicken processing
industry. Moody's estimates Pilgrim's will have cash of roughly
$380 million as of June 2023 pro forma for the proposed refinancing
and tender offer, and the company will have no maturities until the
new revolver expires in five years. Factoring in the proposed 2027
note redemption, the next senior note maturity will be in 2031.
Moody's projects a free cash flow deficit of $100-200 million in
2023 and slightly positive free cash flow in 2024. The proposed
revolving credit facility will maintain an EBITDA/interest coverage
ratio with the level tightened to 3.5x from the 3.0x required in
the existing revolver, and will eliminate the maximum 4.0x net
debt-to-EBITDA covenant that is in the existing revolver. Moody's
believes the cushion within the 3.5x interest coverage covenant
will be modest over the next six months but will improve as
earnings recover in 2024.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The stable outlook reflects a fairly wide range of potential
earnings performance that is typical in the cyclical U.S. chicken
processing industry balanced against Pilgrim's very good
liquidity.
Moody's anticipates that Pilgrim's Moody's adjusted debt to EBITDA
could increase to over 5.0x in fiscal 2023 before declining to
below 3.0x in the next 12 to 18 months.
The ratings could be upgraded if the company enhances earnings
stability through improvements in business and product mix, debt to
EBITDA is sustained below 2.0x, there is consistent improvement in
the EBITDA margin, the company generates consistent and comfortably
positive free cash flow, and liquidity sources (cash plus unused
revolver commitment availability) are maintained consistently above
$1 billion.
The ratings could be downgraded if debt/EBITDA is sustained above
3.0x. Other events that could contribute to a downgrade include a
major leveraged acquisition or share buyback, deteriorating
industry conditions that lead to prolonged negative free cash flow,
or deteriorating liquidity such as cash plus unused revolver
commitment below $750 million. The ratings could also be downgraded
if legal, governance or other challenges at related entities,
including JBS S.A., negatively affect the risk profile of
Pilgrim's.
The principal methodology used in these ratings was Protein and
Agriculture published in November 2021.
Headquartered in Greeley, Colorado, Pilgrim's Pride Corporation
(NASDAQ: PPC) is the second largest chicken processor in the world,
with operations in the United States, U.K., European Union, Mexico
and Puerto Rico. The company produces, processes, markets and
distributes fresh, frozen and value-added chicken products to
foodservice customers, distributors and retail operators
worldwide.
Pilgrim's also is a leading integrated prepared pork supplier in
Europe.
For the last 12-month period ended June 25, 2023, Pilgrim's
revenues totaled $17.1 billion. Pilgrim's Pride is controlled by
Sao Paulo, Brazil based JBS S.A. (Baa3 stable), the largest
processor of animal protein in the world. As of June 25, 2023, JBS
S.A. owns in excess of 80% of Pilgrim's outstanding common stock.
===========================
C A Y M A N I S L A N D S
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OMANTEL SUKUK: Fitch Gives 'BB+(EXP)' Rating on Sr. Unsecured Notes
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Fitch Ratings has assigned Oman Telecommunications Company
S.A.O.G.'s (Omantel, BB+/Stable) upcoming US dollar benchmark
senior unsecured trust certificate offering an expected rating of
'BB+(EXP)' with a Recovery Rating of 'RR4'.
The sukuk will be issued through the trustee, Otel Sukuk Limited
(OSL). Oztel Holdings SPC Limited (Oztel) will act as the guarantor
to all of Omantel's obligations under the transaction documents.
The expected rating is in line with Omantel's Long-Term Issuer
Default Rating (IDR) and senior unsecured rating of 'BB+'.
OSL is an exempted company with limited liability incorporated in
the Cayman Islands and has been incorporated solely for the purpose
of participating in the transactions contemplated by the
transaction documents to which it is a party and its shares are
held by Walkers Fiduciary Limited as share trustee. Omantel is the
obligor, seller, buyer and service agent. Fitch understands from
management that Omantel will use the proceeds for general corporate
purposes, including the redemption of the USD600 million secured
notes due 2023 issued by Oztel Holdings SPC Limited
The assignment of the final rating is contingent the receipt of
final offering documents materially conforming to information
already reviewed. If these conditions are not met, or if the
offering is not put in place, Fitch will review the rating.
KEY RATING DRIVERS
The trust certificate issuance's rating is aligned with that of the
ultimate parent and guarantor's IDR. This reflects Fitch's view
that default of these senior unsecured obligations would reflect
the default of Omantel in accordance with the agency's rating
definitions. Fitch has given no consideration to any underlying
assets or any collateral provided, as Fitch believes the trustee's
ability to satisfy payments due on the certificates ultimately
depends on Omantel satisfying its unsecured payments obligations to
the trustee under the transaction documents.
In addition to Omantel's propensity to ensure repayment of the
sukuk, in Fitch's view, Omantel is required to ensure full and
timely repayment of OSL's obligations, due to its various roles and
obligations under the sukuk structure and documentation, especially
but not limited to the below features:
- Pursuant to the service agency agreement, the sale of broadband
data services at the minimum sale price will be sufficient to fund
the periodic distribution amounts payable by the trustee in respect
of the relevant certificates. If it is not sufficient and there is
a sales shortfall during any distribution period, the agent will
transfer any available funds from a reserve account or if
unavailable, Omantel will pay the sales shortfall to the trustee by
way of indemnity after tax
- On any dissolution or default event, the exercise price, relevant
amount, and the required amount will become immediately due and
payable; and the trustee will have the right under the purchase
undertaking to require Omantel to purchase all of its rights,
titles, interests, benefits and entitlements, present and future,
into and under the relevant broadband data services. These are
intended to fund the dissolution amount payable by the trustee
under the trust certificates. The dissolution amount should equal
the sum of the outstanding face amount of such certificate; and any
due and unpaid periodic distribution amounts for such certificates
- The payment obligations of Omantel under the service agency
agreement and purchase undertaking, are direct, unconditional,
unsubordinated, and unsecured obligations, and at all the times
will rank at least pari passu with all other present and future
unsecured and unsubordinated obligations of Omantel. Furthermore,
Oztel guarantees Omantel's obligations under the offering on a
senior unsecured basis thus ranking them pari passu with Omantel's
existing debt obligations
- Additionally, Oztel has agreed to unconditionally and irrevocably
guarantee all Omantel's payment obligations under the transaction
documents to which the obligor is a party. To the extent that
Omantel does not pay any sum payable by it under the transaction
documents by the time and on the date specified for such payment,
the guarantor shall pay that sum as directed. The obligations of
the guarantor under the guarantee will be direct, unconditional,
unsubordinated and unsecured obligations, which at all times rank
at least equally with all other present and future unsecured and
unsubordinated obligations of the guarantor
- The sukuk includes a negative pledge provision, obligor event,
change-of-control clause and a cross-acceleration clause. The
transaction documents are governed by English law. Fitch does not
express an opinion on whether the relevant transaction documents
are enforceable under any applicable law. However, Fitch's rating
on the certificates reflects the agency's belief that Omantel would
stand behind its obligations. Fitch does not express an opinion on
the certificates' compliance with sharia principles when assigning
ratings to the certificates
DERIVATION SUMMARY
The offering's rating is derived from the guarantor's Long-Term
IDR.
RATING SENSITIVITIES
OSL
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- An upgrade of Omantel's IDR would lead to similar action on the
offering's rating
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- A downgrade of Omantel's IDR would lead to similar action on the
offering's rating. The offering's rating may also be sensitive to
adverse changes to the roles and obligations of Omantel and Oztel
under the sukuk's structure and documents
Omantel
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- The rating is capped by the Oman sovereign rating. Positive
rating action on Oman would be mirrored in Omantel, provided
Omantel's Standalone Credit Proile (SCP) is at the same level or
higher than the sovereign rating, and links between the government
and Omantel remain strong
- An upwards revision of the SCP would be possible if the company
can maintain its current market share and average revenue per user
(ARPU) in an increasingly competitive environment. It is also
contingent on Fitch-defined net debt/EBITDA on a deconsolidated
basis remaining below 3.6x on a sustained basis without any
deterioration in free cash flow (FCF)
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Negative sovereign rating action, provided links between the
sovereign and Omantel do not weaken
The below factors could lead to a weakening of the SCP but not
necessarily Omantel's IDR:
- Pressure on FCF driven by EBITDA margin erosion, consistently
higher capex and shareholder distributions, or significant
underperformance in the core domestic market and at other key
subsidiaries
- Fitch-defined net debt/EBITDA on a deconsolidated basis sustained
above 4.1x as a result of M&A, significant reduction in dividends
from Zain Group and weakness in domestic FCF without remedial
action from the company
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity, Upcoming Maturity: Omantel's cash balance at
end-1H23 was OMR53 million and largely unrestricted with access to
an undrawn OMR235 million revolving credit facility. Liquidity is
supported by a steady sufficient dividend flow from Zain Group to
meet interest expenses. Omantel's short-term liquidity has
significantly improved following the sale of towers in Oman and the
IPO of its headquarters.
Proceeds of asset sales have been used to prepay debt. During 2022,
the company made bond prepayments of around USD354 million. This
included a USD142.9 million prepayment of its 5.5-year USD600
million bonds. The outstanding USD457 million on these bonds will
mature in October 2023. Fitch assesses refinancing risks as
manageable given Omantel's low leverage, positive FCF and access to
capital markets. The other significant maturity is its 2028 bonds,
of which USD689 million is outstanding. In January 2023, Omantel
also fully prepaid its USD340 million term loans.
ISSUER PROFILE
Omantel is the incumbent telecom operator in the Sultanate of Oman.
The company owns national fixed and mobile telecoms infrastructure
as well as regional undersea cable infrastructure which it
wholesales to other international operators.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
Instrument ratings are linked with the ratings on Oman
Telecommunications Company S.A.O.G.'s (Omantel, BB+/Stable) due to
its role as seller under the purchase agreement, obligor, and
service agent.
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. Fitch's ESG Relevance Scores are not inputs
in the rating process; they are an observation of the materiality
and relevance of ESG factors in the rating decision.
Entity/Debt Rating Recovery
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Otel Sukuk Limited
senior
unsecured LT BB+(EXP) Expected Rating RR
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C H I L E
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CHILE: Pres. Boric Plans 3.5% Spending Hike & Vows Economic Revival
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Matthew Malinowski at Bloomberg News reports that Chile plans to
raise public spending 3.5 percent next year, President Gabriel
Boric said, as his administration struggles to move past political
tensions and deliver on its key policy proposals.
The 2024 budget will prioritise areas including public security,
health care, education and housing, Boric said in a televised
speech, according to Bloomberg News. Inflation will end this year
at about four percent after fiscal responsibility helped stabilise
the post-pandemic economy, he said, Bloomberg News notes.
"The year 2024 will be marked by the revival of the economy, and
this budget seeks to accompany that revival by putting the people
first," Boric said. The government is working so that the Chile's
inhabitants can enjoy "more public security, economic security and
social security," Bloomberg News relays.
In his speech, Boric also called on the fragmented Congress to push
ahead with talks on his marquee proposals, including an overhaul of
Chile's tax and pension systems, Bloomberg News discloses. But the
timing is challenging as the government must seek consensus
following both the revelation of corruption allegations against
some coalition members and political bickering surrounding this
month's anniversary of the 1973 military coup, Bloomberg News
says.
In the budget, expenditures will rise less than this year as the
administration tries to strike a balance between spending to
address rising crime and a healthcare crisis, and the need to
control above-target inflation, Bloomberg News relays. The 2024
budget will be the first to include income from a new mining
royalty, Finance Minister Mario Marcel told press earlier this
month, Bloomberg News notes.
Last year, Chile recorded a budget surplus for the first time in a
decade as it slashed spending and reined in much of the
pandemic-era cash transfers, Bloomberg News says.
In 2024, health care spending will rise by 8.1 percent, while
expenditure on housing jumps 12 percent as the administration
advances in its plan to build 260,000 new residencies during
Boric's term in office, Bloomberg News discloses. Public security
spending will rise 5.7 percent, while education outlays increase
4.2 percent, the president said, Bloomberg News notes.
The proposal comes as just 26 percent of voters back Boric while
55% disapprove of the president, according to a Data Influye poll
published, Bloomberg News relays. The survey identified crime and
the economy as top issues undermining his support, Bloomberg News
notes.
Chile's gross domestic product will contract 0.2 percent this year,
the worst performance in South America after Argentina, according
to analysts surveyed by Bloomberg. Economic growth is expected to
bounce back to 2% in 2024, Bloomberg News adds.
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H O N D U R A S
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HONDURAS: Moody's Affirms 'B1' LongTerm Issuer Ratings
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Moody's Investors Service has affirmed the Government of Honduras'
local and foreign-currency long-term issuer and senior unsecured
ratings at B1. The outlook remains stable.
The rating affirmation is driven by prospects of policy continuity
that will preserve Honduras' strong fiscal position compared to
similarly-rated peers and promote economic development. Moody's
view is that the country's medium-term fiscal framework, which has
led to moderate fiscal deficits and stable debt metrics, will
likely be preserved in the context of a recently approved
three-year Extended Fund Facility (EFF) and Extended Credit
Facility (ECF) arrangement with the International Monetary Fund
(IMF). The decision to affirm the rating also reflects Moody's
expectation that, while preserving the country's fiscal strength,
Honduran authorities will pursue policies that seek to promote
economic development and poverty reduction.
The stable outlook reflects Moody's expectation that the balance
between Honduras' rating constraints and underlying credit
strengths will persist. Low economic development, a weak
institutional framework and recurring domestic political risks are
long-standing credit constraints, which are compensated by a
comparatively strong fiscal position and steady economic growth.
Moody's view is that this balance is likely to remain unaltered
over the course of the outlook horizon.
The local-currency ceiling remains unchanged at Ba1, set three
notches above the sovereign rating. The Ba1 local currency ceiling
reflects an average government footprint in the economy, relatively
weak predictability and reliability of institutions, moderate
political risk and external imbalances, and average reliance on a
single common revenue source.
The foreign-currency ceiling remains unchanged at Ba3, two notches
below the local-currency ceiling to reflect the economy's moderate
level of external indebtedness, limited capital account openness
and lower overall policy effectiveness.
RATINGS RATIONALE
RATIONALE FOR THE RATING AFFIRMATION AT B1
POLICY CONTINUITY WILL HELP PRESERVE A STRONG FISCAL POSITION AND
PROMOTE ECONOMIC DEVELOPMENT SUPPORTED BY NEW IMF PROGRAM
Honduras' relatively strong fiscal position is supported by a
medium-term policy framework that prioritizes debt sustainability
and fiscal rules that set limits to government deficits. Moody's
assessment of Honduras' fiscal strength balances moderate debt
levels and a robust fiscal framework with a high share of foreign
currency-denominated debt which stands at around 55% of general
government debt. In 2018-19, with technical assistance from the
IMF, the government strengthened its fiscal policy framework and
undertook a fiscal consolidation effort that resulted in modest
fiscal surpluses and helped stabilize general government debt at
around 45% of GDP. The shock associated to the pandemic had a
sizable negative impact on the fiscal accounts, leading to a
widening deficit which reached 4.7% of GDP in 2020 and pushed
government debt to around 55% of GDP. The debt ratio subsequently
declined, stabilizing at around 50% of GDP (below the median of 54%
of GDP for B-rated sovereigns), supported by robust growth and
budget under-execution during the first year of the current
administration.
For 2023, Moody's projects a moderate fiscal deficit of 2.6% of GDP
and a debt burden of 51% of GDP, driven by greater capital
expenditure execution and weaker revenue growth. From 2024 onward,
Moody's expects deficits to gradually narrow and the debt burden to
stabilize, supported by the authorities continued prudent fiscal
policymaking and steady GDP growth of between 3% and 4% annually.
Moody's expects the government to advance reforms that, once
implemented, could generate additional fiscal space allowing for
increased social spending and infrastructure investment, in line
with the objectives set in the agreement signed with the IMF. In
September 2023, the IMF and Honduras agreed to a $822 million
EFF/ECF three-year program that according to the authorities will
advance policies needed to strengthen economic resilience and
address structural bottlenecks to boost inclusive growth. The
program will be anchored on: (a) a gradual fiscal adjustment path
supported by reforms that will create financial space for increased
capital and social spending, while preserving debt sustainability;
(b) monetary and exchange rate policies that support disinflation,
strengthen external resilience, and preserve macroeconomic
stability; and (c) structural reforms that will strengthen
governance, combat corruption and enhance the economy's resilience
to climate change.
The decision to affirm Honduras' rating implicitly incorporates
Moody's view that the authorities' will and ability to meet targets
to be set in the program will anchor the sovereign credit profile.
RATIONALE FOR THE STABLE OUTLOOK
CONTINUED BALANCE BETWEEN LONG-STANDING RATING CONSTRAINTS AND
UNDERLYING CREDIT STRENGTHS
The stable outlook reflects Moody's expectation that the current
balance between Honduras' rating constraints and credit strengths
will persist. Honduras' rating is constrained by long-standing
structural constraints, including relatively low economic
development and wealth levels, weak institutions and recurring
domestic political risks. These conditions are in turn balanced by
a comparatively strong fiscal position and relatively steady
economic growth.
The Honduran economy is small, with nominal GDP of $31.7 billion in
2022, and a low level of economic development. Honduras is one of
the world's most vulnerable countries to climate disasters,
including droughts and hurricanes. The economy is heavily reliant
on a stable inflow of remittances from overseas workers (around 25%
of GDP) that support domestic consumption, and on agricultural and
maquila (textile) exports. At $6,832 in 2022, GDP per capita in
purchasing power parity terms was the lowest in Latin America
coming well below the median of $10,899 for B-rated sovereigns,
with the poverty rate standing at around 50%. In the five years
before the pandemic average annual real GDP growth was 3.8%. After
a strong post-pandemic rebound the economy expanded by 4% in 2022,
Moody's expects growth to moderate to between 2.0% and 3.0% in
2023-24. Looking ahead, Moody's estimate that potential growth
could be close to 4% if structural reforms are implemented
successfully.
Honduras' weak institutional framework constrains the sovereign
rating and is evidenced by the country's low rankings in the
Worldwide Governance Indicator scores which reflect overall weak
government effectiveness, rule of law and control of corruption.
A history of political upheaval has recurrently affected the
country's overall economic performance. In January 2022, Xiomara
Castro of the left-of-center Libre Party assumed office as
president after more than a decade of rule by the conservative
National Party. Political polarization remains high with
contentious relations between the opposition and ruling parties,
restricting the government's ability to implement key pending
policy measures, which include proposals for a tax reform,
increased social spending and efforts to reduce corruption.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Honduras' ESG Credit Impact Score (CIS) is highly negative (CIS-4).
This indicates the rating is lower than it would have been if ESG
risk exposures did not exist. For Honduras this reflects a weak
governance profile, high social risks and environmental risks
driven mainly by exposure to physical climate risks related to
climate change.
Honduras' exposure to environmental risks is highly negative (E-4).
The country is exposed to environmental risks mainly driven by
physical climate change risks that include recurring droughts and
hurricanes. Extreme weather events can have a significant negative
impact on agricultural production and critical infrastructure,
including the energy sector. Access to water, the depletion of
natural capital, and waste and pollution are additional risks.
Exposure to social risks is highly negative (S-4). Honduras is
exposed to social risks as a result of the country's high levels of
poverty and inequality, low education outcomes and high levels of
domestic violence. Like many other emerging economies, Honduras
benefits from a comparatively benign demographic structure. The
country's very high level of remittances inflows from overseas
workers (around 25% of GDP) helps to mitigate some of social
risks.
Honduras' governance score is highly negative (G-4), reflecting
weak government effectiveness, rule of law, and control of
corruption. Political polarization remains high, which can affect
growth and reform implementation. Anti-government protests have
been common in recent years amid accusations of electoral fraud and
corruption.
SUMMARY OF MINUTES FROM RATING COMMITTEE
GDP per capita (PPP basis, US$): 6,832 (2022) (also known as Per
Capita Income)
Real GDP growth (% change): 4% (2022) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 9.8% (2022)
Gen. Gov. Financial Balance/GDP: 0.7% (2022) (also known as Fiscal
Balance)
Current Account Balance/GDP: -3.2% (2022) (also known as External
Balance)
External debt/GDP: 43.8% (2022)
Economic resiliency: b1
Default history: No default events (on bonds or loans) have been
recorded since 1983.
On September 28, 2023, a rating committee was called to discuss the
rating of the Honduras, Government of. The main points raised
during the discussion were: The issuer's economic fundamentals,
including its economic strength, have not materially changed. The
issuer's institutions and governance strength have not materially
changed. The issuer's fiscal or financial strength, including its
debt profile, has not materially changed. The issuer's
susceptibility to event risks has not materially changed.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Evidence that the rise in the debt burden has plateaued and that a
durable fiscal consolidation is underway, paired with successful
implementation of reforms incorporated in the IMF program, would
sustainably strengthen the country's credit profile creating upward
pressure on the sovereign rating.
Lack of political will or ability to comply with targets set in the
IMF program could undermine Honduras credit standing leading to a
negative rating action. Rising debt metrics resulting from relaxed
fiscal commitment on the part of the authorities, as well as
increased domestic political risk that materially affects investor
sentiment and growth prospects, could also adversely affect
Honduras credit profile.
The principal methodology used in these ratings was Sovereigns
published in November 2022.
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P U E R T O R I C O
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GRUPO HIMA: U.S. Trustee Appoints Edna Diaz De Jesus as PCO
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Mary Ida Townson, the U.S. Trustee for Region 21, appointed Edna
Diaz De Jesus as patient care ombudsman for Grupo HIMA San Pablo,
Inc.
The appointment was made pursuant to the order from the U.S.
Bankruptcy Court for the District of Puerto Rico on Aug. 17.
Section 333 of the Bankruptcy Code provides that the patient care
ombudsman shall:
* monitor the quality of patient care provided to patients of
the debtor, to the extent necessary under the circumstances,
including interviewing patients and physicians.
* not later than 60 days after the date of this appointment,
and not less frequently than at 60-day intervals thereafter,
report
to the court after notice to the parties in interest, at a hearing
or in writing, regarding the quality of care provided to patients
of the debtor; and
* if it is determined that the quality of patient care
provided to patients of the debtor is declining significantly or is
otherwise being materially compromised, file with the court a
motion or a written report, with notice to the parties in interest
immediately upon making such determination; and
* maintain any information obtained under Section 333 of the
Bankruptcy Code that relates to patients (including information
relating to patient records) as confidential information.
The ombudsman may be reached at:
Edna Diaz De Jesus
Procuradora del Paciente Oficina del Procurador del Paciente
PO Box 11247
San Juan, Puerto Rico 00910-2347
Tel (787) 977-0909
Fax (787) 977-0915
About Grupo Hima San Pablo
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.
The U.S. Trustee for Region 21 appointed an official committee of
unsecured creditors on Sept. 7, 2023.
LUCENA DAIRY: Court OKs Cash Collateral Access Thru Oct 10
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The U.S. Bankruptcy Court for the District of Puerto Rico
authorized Lucena Dairy Inc. to continue using cash collateral on
an interim basis in accordance with the budget, through October 10,
2023 as agreed by the Debtor and Condado 4 LLC.
The court said the hearing set for for September 26, 2023 and
September 27, 2023, at 9:30 AM are vacated and set aside, and a
cash collateral hearing is scheduled for October 24, 2023 at 9:30
AM, via Microsoft Teams Video & Audio Conferencing and/or
Telephonic Hearings.
As previously reported by the Troubled Company Reporter, Condado 4
LLC holds a pre-petition security interest over the cash
collateral. As of the Petition Date Debtor has estimated Condado's
claims in the approximate amount of $11 million.
Condado's collateral from the Debtor is valued at approximately
$1.2 million. Condado also has liens over the real property that
the Debtor leases from Debtor's shareholders.
To the extent of any diminution in the value of the Prepetition
Secured Party's respective interests in their collateral (including
cash collateral) from the Petition Date arising from the use, sale,
or lease of such collateral or the imposition of the automatic:
stay, such Prepetition Secured Party was granted (i) replacement
liens of the same priority on the same assets that serve as
preparation collateral of the Debtors and (ii) direct the Debtor to
make a payment as additional adequate protection to the Prepetition
Secured Creditor in the amount of $10,000, per month, upon entry of
the Final Order.
A copy of the court's order is available at
https://urlcurt.com/u?l=6IHOFB from PacerMonitor.com.
About Lucena Dairy Inc.
Lucena Dairy Inc. is engaged in the production of cows' milk and
other dairy products and in raising dairy heifer replacements.
The Debtor sought protection under Chapter 11 of the U.S.
Bankruptcy Code (Bankr. D. P.R. Case No. 23-02835) on September 8,
2023. In the petition signed by Jorge Lucena Betancourt, president,
the Debtor disclosed $1,905,560 in assets and $11,464,130 in
liabilities.
Judge Edward A. Godoy oversees the case.
Carmen D. Conde Torres, Esq., at C. Conde & Associates, represents
the Debtor as legal counsel.
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T R I N I D A D A N D T O B A G O
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TRINIDAD & TOBAGO: To Continue Seeking Access to EU Markets
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RJR News reports that the Trinidad & Tobago government says it will
continue to seek access to markets in the European Union after a
ban was imposed on fish products from the twin island republic.
The EU ban is due to the failure by Port of Spain to certify that
fish caught by local vessels and exported to the EU do not stem
from illegal fishing activities, according to RJR News.
In a statement, the Ministry of Trade and Industry, noted however
that only 0.022 per cent of Trinidad and Tobago's fisheries exports
are destined to the EU, the report notes.
The European Commission has listed Trinidad and Tobago as a
non-co-operating country in the fight against illegal, unreported
and unregulated fishing, the report adds.
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S U B S C R I P T I O N I N F O R M A T I O N
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2023. All rights reserved. ISSN 1529-2746.
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contact Peter A. Chapman at 215-945-7000.
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