/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/231025.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, October 25, 2023, Vol. 24, No. 214 Headlines B E R M U D A APEX STRUCTURED: Fitch Affirms 'B' LongTerm IDR, Outlook Stable NABORS INDUSTRIES: Egan-Jones Hikes Sr. Unsecured Ratings to CCC+ B R A Z I L AMERICANAS SA: Fitch Affirms 'D' LongTerm IDRs BANPARA: Moody's Affirms 'Ba2' Deposit Ratings, Outlook Stable BRAZIL: Has Not Taken Stance on Credit Card Installment Limits LOCALIZA RENT A CAR: Fitch Affirms 'BB+' LongTerm IDRs NU FINANCEIRA: Moody's Assigns First Time 'Ba2' Deposit Ratings C A Y M A N I S L A N D S PIONEER MERGER: Chapter 15 Case Summary XANTHOS CAPITAL: Proof of Debt Due Dec. 8 XANTHOS PARTNERS: Proof of Debt Due Dec. 8 D O M I N I C A N R E P U B L I C DOMINICAN REPUBLIC: Moving Forward to Break Dependency P U E R T O R I C O GRUPO HIMA: Committee Hires Porzio Bromberg & Newman as Counsel - - - - - ============= B E R M U D A ============= APEX STRUCTURED: Fitch Affirms 'B' LongTerm IDR, Outlook Stable --------------------------------------------------------------- Fitch Ratings has affirmed Apex Structured Intermediate Holdings Limited's (Apex) Long-Term Issuer Default Rating (IDR) at 'B' with a Stable Outlook. Fitch has also affirmed Apex Group Treasury Limited's and Apex Group Treasury LLC's first-lien term loan B (TLB) at 'B+' with a Recovery Rating of 'RR3'. The ratings of Apex reflect the group's solid business risk profile characterised by strong geographic and customer diversification and its scale, combined with low churn levels and recurring revenue streams, which supports cash flow stability. The rating is, however, constrained by high leverage and weak interest coverage metrics. The business has solid growth prospects and positive free cash flow (FCF) generation starting from year to end-December 2024 (FY24) in its base case. The company has issued a USD400 million fungible TLB add-on to repay an outstanding USD385 million revolving credit facility (RCF). The new debt has reduced its recovery estimates on the TLB to 52% from 54% previously. This is still within the 'RR3' recovery band corresponding to a 'B+' instrument rating, but with limited headroom for further debt issuance. KEY RATING DRIVERS Strong Market Position: Following recent acquisitions including Sanne, MMC and Maitland, Apex has become one of the largest alternative asset services platforms globally with more than USD3 trillion assets on the platform (AOP), as of September 2023, and around USD1.3 billion of revenue expected in 2023 on a pro-forma basis. Apex has been outperforming its market in the past five years. Apex's main competitive advantages are its scale as well as product and geographical diversification, which enable it to be a single-source solution provider. Low Revenue Volatility: The majority of Apex's revenue is based on fixed fees. This limits volatility as a result of capital market movements as demonstrated during the Covid-19 pandemic. While average contract durations are not long, churn levels are minimal, as evident in Apex's retention rates of greater than 99%. This, combined with geographic diversification, an end-to-end product portfolio and low customer concentration, results in low revenue volatility. High Gross Leverage: Fitch estimates Fitch-defined EBITDA leverage to be around 9.6x at end-2022, pro forma for acquired and signed acquisitions in 2021-2023, and Fitch expects it to remain above its 7.5x negative rating sensitivity in 2023. The deleveraging is slower than Fitch had forecast due to a lower EBITDA margin. However, Apex maintains robust capacity to organically deleverage to 7.5x by end-2024 and to 6.4x by end-2025 in its base case, driven by increasing EBITDA supported by top-line growth and synergy realisation. The pace of deleveraging will also depend on the integration of its acquired companies. Low Interest Coverage: Apex's debt is at floating rates with margins ranging from 4% to 7.25% over Euribor, Libor and SOFR with only part of the company's debt being hedged. Fitch expects the company's EBITDA interest coverage to be below the negative sensitivity of 2x in FY23-25 as a result of rising interest rates and higher debt. However, Fitch expects interest coverage to improve to 2.1x by 2027 on increasing EBITDA. Good EBITDA Margins: Fitch estimates Apex's Fitch defined EBITDA margin was 31% in FY22, pro forma for the acquisitions in 2021-2023. This is lower than its previous expectation of 33% as a result of higher staff costs, but is still high versus some of its peers. Fitch expects the EBITDA margin to improve to 37% by 2025 supported by already actioned cost-cutting measures, economies of scale and synergy realisation. Cash-Generative Business: Apex has a scalable operating structure that is cash-generative. Fitch expects the enlarged group to generate negative FCF in 2023 as a result of increased interest payments and high integration costs. However, growing EBITDA and reduced integration costs should support positive FCF from 2024. M&A Growth Strategy: Fitch understands from Apex's management that following a period of high growth through M&A the group will pursue organic growth, with only small, accretive bolt-on M&A, thus the current rating and Stable Outlook assumes a more disciplined financial policy. Apex has made 41 acquisitions since 2017 and has typically financed transactions through a combination of equity and new debt. Acquisitions have helped improve Apex's product and geographic diversification and increase its market shares in several regions. Execution risks are manageable given Apex's successful record with acquisitions and synergy realisation. Revenue has also grown strongly organically in the low double digits in each of the past five years. DERIVATION SUMMARY Apex is one of the largest alternative asset services platforms globally by assets of platform. Its scale, diversification, low customer concentration and cash flow margins rank well compared with its peers', resulting in a slightly higher leverage capacity with upgrade and downgrade sensitivities of 6.0x and 7.5x, respectively (on a total debt-to-EBITDA basis). The nature of the business enables Apex to realise economies of scale, leading to an EBITDA margin in line with or above 'B' in Fitch's privately rated portfolio of direct peers. Fitch expects the FCF margin to be in line with or above privately rated 'B' category peers', due to low capex requirements and with no dividend payments expected in the near future. Apex has become more diversified than peers following the acquisition of Sanne, MMC, Maitland, Paxus and smaller companies in 2021-2023, and has low customer concentration risk. Apex is twice as large as TeamSystem Holding S.p.A. (B/Stable) by revenue and as is more geographically diversified. Apex's competitive position is not as strong as that of payments company Nexi S.p.A. (BB+/Stable) and sports data analytics provider Sportradar Management Ltd (BB-/Stable). KEY ASSUMPTIONS - Its forecast includes full consolidation of recent acquisitions - Pro forma revenue growth of 12% in 2023 and 7%-10% in 2024-2026 on alternative assets-under-management (AuM) growth, increasing outsourcing penetration and cross-selling opportunities - Pro-forma Fitch-defined EBITDA margin to improve to 37% by 2025 from 31% in 2022, supported by revenue growth and synergies - Restructuring costs of USD20 million a year included in other items before FFO - Working-capital requirements of 1.5% of revenues in 2023-2027 - Capex around 2.4% of revenue a year to 2026 - No dividend payments for the next four years - Preferred shares treated as equity Key Recovery Rating Assumptions - Apex would be reorganised as a going concern (GC) in bankruptcy rather than liquidated given its asset-light business model. - Fitch estimates that post-restructuring pro forma GC EBITDA would be around USD360 million. In this scenario, the stress on EBITDA could result from integration failure of acquired companies, combined with limited synergies, more competition leading to a fall in revenue losses and end-clients shifting from alternative funds to low-cost exchange-traded funds. - Fitch applies an enterprise value (EV) multiple of 6.0x to the GC EBITDA to calculate a post-reorganisation EV. The multiple is in line with that of similar peers. This reflects Apex's leading market position following the acquisitions in 2021-2023, good revenue visibility combined with geographic and customer diversification, and a strong cash-generative business. - Fitch deducts 10% of administrative claims from EV to account for bankruptcy and associated costs. The total amount of first-lien secured debt for claims includes USD3.3 billion senior secured first-lien term loans and an equally ranking USD460 million RCF that Fitch assumes to be fully drawn in distress. This results in the senior secured first-lien debt instrument rating of 'B+' with a Recovery Rating 'RR3' and 52% recovery expectations. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Continued organic growth supported by successful integration of acquired companies leading to significant synergies and EBITDA margin approaching 35% - Fitch-defined EBITDA leverage below 6.0x on a sustained basis - EBITDA interest coverage sustained above 3.0x - FCF margin over 10% on a sustained basis Factors that could, individually or collectively, lead to negative rating action/downgrade: - Material slowdown in organic growth due to intensified competition and slower than expected growth in global AuM - Failure to integrate acquired companies and extract synergies, or to benefit from scale economies, resulting in EBITDA and FCF margin consistently below 30% and 5%, respectively - Debt-funded acquisitions preventing deleveraging, resulting in Fitch-defined EBITDA leverage above 7.5x on a sustained basis - EBITDA interest coverage below 2.0x LIQUIDITY AND DEBT STRUCTURE Satisfactory Liquidity: Apex's pro-forma unrestricted cash is estimated around USD131 million at end-June 2023. The liquidity profile is underpinned by an USD460 million RCF, which Fitch expects to be undrawn at end-2023 following the term out transaction, positive expected FCF generation starting from 2024 and no near-term debt maturities, although the US dollar first-lien term loan has an amortising profile (1% a year). Refinancing risk is manageable with RCF maturing in 2026 and term loans in 2028-2029. ISSUER PROFILE Apex Group is a leading independent global provider of services to alternative investment management and corporate sectors. Services include fund, corporate and trust administration services, middle office, regulatory reporting, custody, depositary, and banking solutions. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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 on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Apex Group Treasury LLC senior secured LT B+ Affirmed RR3 B+ Apex Group Treasury Limited senior secured LT B+ Affirmed RR3 B+ Apex Structured Intermediate Holdings Limited LT IDR B Affirmed B NABORS INDUSTRIES: Egan-Jones Hikes Sr. Unsecured Ratings to CCC+ ----------------------------------------------------------------- Egan-Jones Ratings Company on September 28, 2023, upgraded the foreign currency and local currency senior unsecured ratings on debt issued by Nabors Industries, Inc. to CCC+ from CCC-. EJR also withdraws rating on commercial paper issued by the Company. Headquartered in Hamilton, Bermuda, Nabors Industries, Inc. provides oil and gas drilling services. =========== B R A Z I L =========== AMERICANAS SA: Fitch Affirms 'D' LongTerm IDRs ---------------------------------------------- Fitch Ratings has affirmed Americanas S.A.'s (Americanas) Long-Term Foreign Currency and Local Currency Issuer Default Ratings (IDRs) at 'D' and its Long-Term National Scale Rating at 'D(bra)'. Fitch has also affirmed the rating of the senior unsecured global notes issued by its wholly owned subsidiaries JSM Global S.a.r.l. and B2W Digital Lux S.a.r.l. at 'C'/RR5', and the rating of Americanas' unsecured debentures at 'D(bra)'. The ratings affirmation reflects the fact that Americanas continues under bankruptcy protection, which was assigned on Jan. 19, 2023. Since then, the company has not reached a final agreement with creditors yet. Once the Americanas completes its debt restructuring, Fitch will re-rate the company based on the new capital structure while considering its business risk. KEY RATING DRIVERS Debt Restructuring Pending: Americanas is under bankruptcy protection since Jan. 19, 2023, after its inability to negotiate with creditors and suppliers. The agreement between Americanas and its creditors is still under discussion. According to Judicial Administrator, as of Aug. 31, 2023, Americanas owes BRL20.6 billion of financial debt denominated in Reais and USD1.1 billion of dollar-denominated loans, not considering any Fitch adjustments. At that same date, cash were BRL1.8 billion. In March 2023, the Judicial Administrator had reported that Americanas had BRL16 billion of reverse factoring transactions, dated January 2023. Fitch believes that amount has not materially changed up to date. These numbers are unaudited. Lack of Updated Financial Information: Since entered in bankruptcy protection, Americanas has not released its 2022 Annual Financial Statements nor the statements ended in March and June 2023, which prevents Fitch to access its current business and financial profile. Fitch believes the agreement with creditors is most likely to reach to an end after the company releases its delayed statements, but the timeframe is uncertain. DERIVATION SUMMARY Americanas' 'D' IDRs reflect the fact that the company has been under bankruptcy protection since Jan. 19, 2023, and has not reached a final agreement with creditors. KEY ASSUMPTIONS Due to the lack of updated financial statements since September 2022 and visibility of the business trends, Fitch was not able to update projection. RECOVERY ANALYSIS - The recovery analysis assumes that Americanas would be liquidated in a bankruptcy rather than considered a going concern (GC); - Fitch assumed a 10% administrative claim. GC Approach Fitch excluded the going concern approach due to expectations of significant weakening in EBITDAR and business profile in the foreseeable future. Liquidation Approach Fitch considered 80% of the accounts receivables, 50% of the inventory and 50% of net PP&E reported in September 2022 to calculate the liquidation value (LV). The allocation of value in the liability waterfall corresponds to a 'RR5' recovery for the company's BRL43 billion debts, which Fitch assumed pari passu. The 'RR5' Recovery Rating reflects below-average recovery prospects, and indicates a recovery ranging from 11%-30%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Improvements in Americanas' capital structure after it reaches an agreement with creditors. Factors that could, individually or collectively, lead to negative rating action/downgrade: - The ratings are at the lowest level under Fitch's rating scale. LIQUIDITY AND DEBT STRUCTURE Americanas' liquidity is dramatically compromised. Fitch will re-access Americana's liquidity when its financial statements are public and the company completes the agreement with creditors. ISSUER PROFILE Americanas is one of the largest diversified retail chains in Brazil, with a wide platform of physical stores, e-commerce and fintech. It is listed on B3, being indirectly controlled by Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles. SUMMARY OF FINANCIAL ADJUSTMENTS - Fitch uses a multiple of 5x to capitalize Brazilian companies leasing adjusted debt; - Fitch includes the factoring of account receivables on debt. Fitch adjusts short-term and long-term marketable securities back to cash and equivalents. Fitch considers the financing to the marketplace sellers as finance activity. Applying methodology, the finance service activity has a debt/equity leverage ratio of 2.0x. The asset of the financial service activity corresponds to the receivables related to the marketplace business, so, half of this asset is financed by debt, which is deconsolidated from total debt. ESG CONSIDERATIONS Due to the lack of updated information and visibility of the business trends, Fitch was not able to update ESG Considerations. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- B2W Digital Lux S.a.r.l. senior unsecured LT C Affirmed RR5 C Americanas S.A. LT IDR D Affirmed D LC LT IDR D Affirmed D Natl LT D(bra) Affirmed D(bra) senior unsecured Natl LT D(bra) Affirmed D(bra) JSM Global S.a r.l. senior unsecured LT C Affirmed RR5 C BANPARA: Moody's Affirms 'Ba2' Deposit Ratings, Outlook Stable -------------------------------------------------------------- Moody's Investors Service has affirmed Banco do Estado do Para S.A.'s (Banpara) long- and short-term deposit ratings at Ba2 and Not Prime, as well as its long- and short-term counterparty risk ratings at Ba1 and Not Prime. Moody's also affirmed Banpara's standalone baseline credit assessment (BCA) and adjusted BCA both at ba2, and the bank's long- and short-term counterparty risk assessments at Ba1(cr) and Not Prime(cr). The outlook on Banpara's long-term deposit rating was maintained at stable. RATINGS RATIONALE In affirming Banpara's ratings and assessments, Moody's acknowledges the bank's consistently sound financial fundamentals, including adequate capitalization, strong earnings generation as well as controlled asset quality metrics, that is supported by a focus on low-risk lending segment and by an entrenched relationship with the public servants of its core local market operation. The bank's ratings are constrained by its limited business diversification outside payroll lending and geographic footprint in the State of Para, which exposes the bank to downturns in the local economy and challenge its competitive position in a market also targeted by other large retail banks in Brazil. The ba2 BCA also incorporates potential changes in regulations related to payroll lending, as well as Banpara's institutional linkage with the state government that results in governance risks in the form of potential changes to its management team every four years because of gubernatorial elections. Banpara's consolidated banking franchise in the state of Para is primarily focused on low-risk secured payroll lending to civil servants, which represented around 76% of its loan book in March 2023, supporting historically low delinquency metrics. Despite the sharp expansion in the past four years (CAGR of 25.7% between 2019 and 2022), problem loans ended March 2023 at 0.7%, well below the 3.1% industry average and flat compared to its five year average. At the same time, Banpara continued to maintain high loan loss buffers that accounted for 2.9x the volume of problem loans in March 2023, mitigating asset risks stemming from its growing exposure to small and mid-sized companies (SMEs). In March 2023, Banpara's capitalization, measured by Moody's ratio of tangible common equity to risk weighted assets (TCE/RWA), was 13.7%, falling in the past three years, reflecting the bank's accelerated credit expansion. Notwithstanding, the bank continues to have an adequate capital position to cope with its planned expansion, and high profitability grants a strong capital replenishment capacity to support this growth strategy. On a regulatory level, Common Equity Tier 1 (CET 1) ratio ended March 2023 at 15.8% remaining a credit strength for the bank when compared to the average CET1 ratio at other ba2 banks in Brazil. Banpara's funding is predominantly comprised by a granular low-cost deposit base (95.8% of total funding in March 2023), which has played a significant role in maintaining its historically high profitability alongside with the banks low credit cost. However, in March 2023, profitability, measured by net income to tangible assets, declined to 1.3%, from 2.3% average between 2019 and 2022 by the effect of higher benchmark rates on deposits that compressed its net interest margin. In addition, higher loan loss provisions related to its still small, but growing SME portfolio, have also weighed negatively on profitability. Looking forward, Moody's expect profitability to improve gradually as the easing cycle of domestic benchmark rates (Selic rate) should continue through 2024, supporting lower funding costs and asset quality trend. The bank's solid liquidity profile is underpinned by a low dependence on market funds, and it draws strength from a stable and diverse pool of deposit funding, which incorporates both individual savers and government sources. Banpara has consistently maintained adequate level of liquid assets, which have on average accounted for 28.0% of its tangible banking assets between 2019 and 2022. Banpara's Ba2 global local-currency deposit rating is aligned to its ba2 baseline credit assessment, and does not incorporate any support uplift from its shareholder, the State Government of Para, nor does it benefit from systemic support, given its small share of the national deposits market. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A rating upgrade at this moment is unlikely because, at ba2, Banpara's BCA is at the same level as the Government of Brazil's Ba2 senior unsecured bond rating. Banpara's rating could be downgraded if asset quality indicators deteriorate as the bank expands rapidly beyond its core products and local regional market, such as into riskier SME segment, which could weaken profitability and capital metrics. The bank's rating and assessment could also be downgraded if the sovereign rating is downgraded. The principal methodology used in these ratings was Banks Methodology published in July 2021. BRAZIL: Has Not Taken Stance on Credit Card Installment Limits -------------------------------------------------------------- globalinsolvency.com, citing Reuters, reports that Brazil's Finance Ministry has not taken a stance on limiting installments for credit card payments, the ministry's executive secretary, Dario Durigan, said. The central bank unveiled a proposal to card issuers and retailers, suggesting a maximum of 12 interest-free installments for credit card payments and limiting interchange fees paid by merchants to credit card issuers, according to globalinsolvency.com. Durigan said that while several stakeholders are exploring ways to reduce the cost of credit in credit cards in discussions with the central bank, the ministry views the solution proposed by Congress to cap the growth of credit card debt at the principal amount as a "balanced solution," the report notes. Congress passed a bill requiring credit card issuers to submit self-regulation measures to the National Monetary Council (CMN) outlining limits on interest rates and financial charges in revolving credit card lines, 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). LOCALIZA RENT A CAR: Fitch Affirms 'BB+' LongTerm IDRs ------------------------------------------------------ Fitch Ratings has affirmed Localiza Rent a Car S.A.'s (Localiza) Long-Term Local Currency (LC) and Foreign Currency (FC) Issuer Default Ratings (IDRs) at 'BB+', and the Long-Term National Scale Rating of Localiza and their wholly owned subsidiaries Localiza Fleet S.A. (Localiza Fleet), Companhia de Locacao das Americas (Locamerica) and Locamerica Rent a Car S.A. (Locamerica RaC) at 'AAA(bra)'. At the same time, Fitch has affirmed the senior unsecured debt instruments of Localiza and its subsidiaries at 'AAA(bra)'. The Rating Outlook for the corporate ratings is Stable. Localiza's ratings reflect its consistent leadership in the Brazilian car and fleet rental industry, with large scale and resilient operational performance throughout economic cycles. Localiza benefits from a diversified client base and long-term contracts for a significant part of its revenues. The analysis incorporates the maintenance of moderate consolidated financial leverage, despite the expectation of negative FCF due to high capex for fleet growth and renewal. The group has proven access to unsecured financing and, strong liquidity and a well spread debt amortization schedule. Fitch equalizes the ratings of Localiza and its subsidiaries reflecting the incentives that the parent has to support them. KEY RATING DRIVERS Solid Leading Market Position: Localiza's large scale, proven operating expertise, national footprint and a strong used car sale operation allows for competitive advantage on assets purchase and lower operating costs relative to peers and supports its prominent business position within the car and fleet rental industry in Brazil. As of June 2023, Localiza's total fleet of 587,424 vehicles, consisting of 306,870 in rent-a-car (RaC) and 280,554 in fleet management, secured a comfortable leadership in both markets. Fitch forecasts Localiza's own total fleet at around 645,000 vehicles in 2023 and 682,000 vehicles in 2024. Strong Operating Performance: Localiza's consolidated EBITDA should continue to expand based on organic growth and healthy rental margins, despite of lower and normalized profitability in the used car sales. Balanced demand and supply dynamics allow adequate rental rates, resulting in a return on invested capital (ROIC) spread in line with historic levels. Localiza should reach consolidated net revenue of around BRL30 billion and rental EBITDA at around BRL9.4 billion in 2023 and BRL39 billion and BRL11 billion in 2024, from BRL25.7 billion and BRL8.5 billion, respectively, in the LTM ended in June 2023. Moderate Leverage: Fitch expects Localiza to maintain its net adjusted leverage at moderate levels. Consolidated net leverage (IFRS-16 adjusted), measured by net debt/rental EBITDA, should range 2.5x-3.0x on the rating horizon, comparing with Localiza's average of 2.7x from 2019 to 2021 and with 4.8x in 2022 (due to a peak in capex). The company's BRL4.5 billion follow-on in the second quarter of 2023 led to a decline on leverage to 3.0x in the LTM ended in June 2023. Negative FCF: The capital-intensive nature of the rental industry, which demands sizable and regular investments to grow and renew the fleet, pressures Localiza's cash flow. FCF should remain negative, on average, at BRL24 billion from 2023 to 2025, pressured by annual average growth capex of BRL30 billion. Funds from operations (FFO) and cash flow from operations should be, on average, BRL6.8 billion and BRL6.2 billion, respectively, in the same period. Localiza has room to postpone fleet renewal and reduce expansion capex, if needed. Parent and Subsidiary Linkage: Localiza Fleet, Locamerica and Locamerica RaC's ratings reflect Localiza's high strategic and operational incentives to support them, according to Fitch's Parent and Subsidiary Rating Linkage Criteria, which equalizes the ratings of the four companies. The subsidiaries operate under a common brand and compose a synergic vehicle rental ecosystem, benefiting from greater bargaining power when buying and selling vehicles and negotiating with customers. Localiza also guarantees 100% of Localiza Fleet's debt. DERIVATION SUMMARY Compared with Localiza, Simpar S.A. (Simpar; FC and LC IDRs BB/Stable) has lower scale on car and fleet rental businesses and a weaker financial profile - with higher leverage and more pressured FCF. Positively, Simpar presents a more diversified business portfolio through operations in logistics and rental of heavy vehicles and machinery. Compared with Unidas Locacao e Servicos S.A. (Unidas, FC and LC IDRs BB-/Stable), Localiza has a much stronger business profile, higher liquidity, better access to credit market and lower leverage. Compared to CEMEX, S.A.B. de CV. (CEMEX; LC and FC IDRs BB+/Positive), Localiza has a more diversified business profile, higher profitability, less volatile cash flow generation and a more liquid/tradable asset base. On the other hand, CEMEX has higher scale, a historic of positive cash flow generation and relatively similar leverage on the rating horizon. KEY ASSUMPTIONS Fitch's Key Assumptions Within Its Rating Case for the Issuer - Total fleet growth around 8% on the next three years; - Average ticket for RaC increasing 8% in 2023 and 3.5% in 2024; - Average ticket for GTF increasing 19% in 2023 and 7.5% in 2023; - Average capex around BRL30 billion in 2023-2025; - Dividend payout around 30%-35% throughout the rating horizon. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade on Localiza's LC IDR and FC IDR would result from an improvement in Brazil's Local Current Rating and Country Ceiling, as well as a movement in its net debt-to-EBITDA ratio towards 2.0x on a recurring basis; - Upgrade not applicable to the National Scale ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: - Failure to preserve liquidity and inability to access adequate debt funding - Failure to preserve a debt structure consisting overwhelmingly of unsecured debt - Prolonged decline in demand coupled with company inability to adjust operation, leading to a higher than expected fall in operating cash flow; - Increase in total leverage to more than 4.5x and in net leverage to more than 3.5x on a regular basis; - A negative movement on Brazil's Country Ceiling could result in negative rating action for Localiza's FC IDR. LIQUIDITY AND DEBT STRUCTURE Robust Liquidity Profile: Localiza's robust liquidity position, ample access to different sources of funding, and track record of a proactive liability management are key credit considerations, with cash covering its short-term debt by an average over 2.5x during the last three years. The group's expected negative FCF, a result of organic growth and fleet renew, should be financed by a combination of cash and additional debt in the rating scenario. As of June 2023, Localiza had BRL9.7 billion of cash and equivalents and BRL37 billion of total debt, with BRL7.2 billion due in the short term - mainly bank loans - and an additional BRL6.7 billion up to 2025. The group's consolidated debt is mainly comprised of local capital market debt (79%) and bank loans (16%). Localiza's financial flexibility is also supported by the group's ability to postpone growth capex to adjust to the economic cycle and the groups considerable number of unencumbered assets, with the market value of the fleet over net debt at around 1.5x. ISSUER PROFILE Localiza is the largest car and fleet rental company in Brazil, either by fleet size or revenue. It operates in the RaC, Fleet Rental and Used Car Sale segments and fully owns Localiza Fleet, Locamerica and Locamerica RaC, among other not rated operating companies. The company is listed on the Brazilian stock exchange and its reference shareholders own 20.13% of the company, with 79.31% free float. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' 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 on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Prior ----------- ------ ----- Locamerica Rent a Car S.A. Natl LT AAA(bra)Affirmed AAA(bra) Localiza Fleet S.A. Natl LT AAA(bra)Affirmed AAA(bra) senior unsecured Natl LT AAA(bra)Affirmed AAA(bra) Companhia de Locacao das Americas - LOCAMERICA Natl LT AAA(bra)Affirmed AAA(bra) Localiza Rent a Car S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra)Affirmed AAA(bra) senior unsecured Natl LT AAA(bra)Affirmed AAA(bra) NU FINANCEIRA: Moody's Assigns First Time 'Ba2' Deposit Ratings --------------------------------------------------------------- Moody's Investors Service has assigned first-time long- and short-term local and foreign currency deposit ratings of Ba2 and Not Prime, respectively, to Nu Financeira S.A. - SCFI (Nubank), as well as long- and short-term local and foreign currency counterparty risk ratings of Ba1 and Not Prime, respectively. Concurrently, Moody's has assigned to Nubank baseline credit assessment (BCA) and adjusted BCA of ba2, and long- and short-term counterparty risk assessments (CR) of Ba1(cr) and Not Prime(cr), respectively. The outlook on the long-term deposit ratings is stable. As part of the rating action Moody's has also assigned first time long- and short-term foreign currency issuer ratings of Ba3 and Not Prime, respectively, to Nu Holdings Ltd, Nubank's holding company domiciled in the Cayman Islands. The outlook on the long-term issuer rating is stable. RATINGS RATIONALE Nu Financeira S.A. - SCFI's (Nubank) Ba2/Not Prime deposit ratings reflect the strong and unique franchise of Nubank as the fourth largest credit card lender in Brazil, also with operations in Mexico and Colombia, and a business model built entirely on a digital platform, with an operation that has grown intensively since its foundation in 2013. At the same time, the ratings consider Nubank's robust capitalization and access to a low-cost and granular core deposit base from roughly 80 million clients in Brazil. In addition, the ratings incorporate asset quality metrics for credit cards that have remained consistently below the industry's problem loan ratios in Brazil for that specific segment. Nevertheless, Nubank's ratings also reflect a high concentration of earnings stemming from credit card operations to underserved low-income individuals, to this date still the most relevant product in Nubank's business model, despite an ongoing strategy to originate new financial products and services. In June 2023, Nubank's problem loan ratio, measured as Stage 3 loans under IFRS to gross loans, was 7.22%, up from 4.84% one year prior. The increase in the problem loan ratio was in line with the industrywide weakening of asset quality metrics in the Brazilian financial system in the last 18 months, reflecting a persistently high level of household indebtedness amid weak economic activity. As a result, the volume of Nubank's problem loans jumped 1.21x in the 12 months ended in June 2023, while gross loans grew 48% in the same period. Despite that, Nubank maintained a robust volume of loan loss reserves, at 187.5% of Stage 3 loans and 13.5% of gross loans in June 2023, that provide an important cushion to absorb additional credit losses in the coming quarters. To this moment, Nubank's loans are still concentrated in credit cards (81% of gross loans), with a small participation of personal loans (19%). Underpinning Nubank's track record of asset quality metrics for credit cards are a robust technological architecture that use data analytics to analyze customer behavior and risk strategy, which provides very low entry limits to new clients that increase over time as Nubank gets more data on clients' spending habits. In the next 12 to 18 months, Moody's expect Nubank to maintain problem loan ratios below the industry's average for consumer loans, particularly as it expands into complementary products including secured payroll loans to government employees and pensioners. Capitalization is one key strength of Nubank's ba2 BCA. The strong capitalization at the conglomerate level has been backed by a series of capital injections between 2013 and 2019, followed by a $2.6 billion capital inflow from Nu Holdings Ltd's IPO on the New York Stock Exchange in October 2021. Moody's preferred capital ratio of tangible common equity (TCE) to adjusted risk-weighted assets (RWAs) for Nubank's consolidated operation, Nu Holdings Ltd, was 35.3% in June 2023. On a regulatory basis, the financial conglomerate of Nu Financeira in Brazil had a common equity tier 1 (CET1) ratio of 15.4% at the same date, well above the central bank's minimum requirement of 4.5%. Nubank's solid and high capital position has supported a strong operational expansion since its foundation. While business will continue to expand strongly in the next 12 to 18 months, we expect capitalization to remain well above minimum requirements and above other Brazilian banks with the Ba2 long-term deposit rating, supported by future internal capital generation. Nubank reported net profits in the first two quarters of 2023, following nine years of negative results amid sizeable investment in technology and people that supported the scalability of its online operations. In June 2023, Moody's ratio of net income to tangible assets for Nubank was 2.36%, up from -0.59% one year prior, well above the average of 1.20% by the large rated retail banks in Brazil. Despite its short history of positive results, Nubank's profitability profile has been structured on a low cost operation, with efficiency ratio as calculated by Moody's at 34.6% in June 2023, stemming from a lean workforce, light administrative expenses and low cost to acquire new customers compared to the largest traditional banks. Together, these strengths provide Nubank important competitive advantage against large incumbent retail banks in the segments of credit cards and personal loans. Nubank's main source of funding is short-term deposits with individuals, which is equally matched in terms of volume and average tenor to its credit card and personal loan operations. Nubank offers customers a digital account in which they can deposit funds that are either in bank deposit receipts (RDB), which are covered by Brazil's deposit insurance fund and can be used to fund lending, or in a payment account, from which funds must remain invested in government securities. The large volume of short-term and liquid deposits in Nubank's funding structure is a strength for its financial profile. As such, Nubank's loan to deposit ratio was 35% in June 2023, low compared with that of large retail banks. Liquidity is another positive driver of the Ba2 long-term deposit rating. In June 2023, liquid assets accounted for 50.5% of Nubank's tangible assets, well above the average ratio of 35.5% for the largest retail banks in Brazil. These liquid assets are high quality and comprised mainly of Brazilian government securities. In the last three years, the ratio declined gradually from 65.8%, in December 2020, reflecting Nubank's intense loan growth. Although further reduction in the ratio will likely ensue in the next 12 to 18 months, Nubank's overall volume of liquid assets will remain at robust levels and large enough to cover short-term liabilities. The assigned ratings also incorporate Nubank's environmental, social and governance (ESG) considerations, as per Moody's ESG classification. Moody's views Nubank's financial strategy and risk management practices as appropriate, including a solid capitalization, resulting in a governance issuer profile score (IPS) of G-2. Despite concentrated ownership of voting shares by one individual, Nu Holdings Ltd, Nubank's holding company, benefits from large number of independent members at the board and a strong risk management framework. As such, Corporate Governance remains a key credit consideration and requires ongoing monitoring. The stable outlook on Nubank's deposit ratings is based on Moody's expectation that the firm's ample capitalization and track record of cautious loan underwriting policy will continue to offset the higher credit risks stemming from its still-predominant exposure to unsecured retail loans. The Ba3 long-term issuer rating assigned to the group's holding company, Nu Holdings Ltd, is positioned one notch below Nubank's Ba2 deposit rating reflecting the structural subordination of the holding company's liabilities to the liabilities of Nubank and its other subsidiaries. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Nubank's ba2 BCA and Ba2 deposit ratings are at the same level as the Government of Brazil's (Brazil) Ba2 senior unsecured bond rating, therefore a rating upgrade is unlikely at this time. Conversely, downward rating pressure could arise from consistent deterioration in profitability aligned with a steady rise in asset quality metrics that would limit Nubank's capacity to absorb credit losses. In addition, net losses, while still maintaining strong growth, would consume Nubank's capital position, also with negative effect on ratings. Nu Holdings Ltd's long-term issuer rating is one notch below Nubank's adjusted BCA, and therefore, Nu Holdings Ltd's ratings would move in tandem with Nubank's adjusted BCA. Nubank's ratings are at the same level as Brazil's Ba2 bond rating, therefore, the ratings assigned to Nu Holdings Ltd would face downward pressure if Brazil's sovereign rating is downgraded or if Nubank's adjusted BCA was downgraded. The principal methodology used in these ratings was Banks Methodology published in July 2021. =========================== C A Y M A N I S L A N D S =========================== PIONEER MERGER: Chapter 15 Case Summary --------------------------------------- Chapter 15 Debtor: Pioneer Merger Corp. Flagship Building 142 Seafarers Way, PO Box 2507 George Town KY1-1104 Grand Cayman Business Description: The Debtor was created as a special purpose acquisition vehicle, commonly referred to as a SPAC. Chapter 15 Petition Date: October 19, 2023 Court: United States Bankruptcy Court Southern District of New York Case No.: 23-11663 Judge: Hon. David S. Jones Foreign Proceeding: In the Matter of Pioneer Merger Corp., Grand Court of the Cayman Islands Foreign Representatives: Alexander Lawson and Christopher Kennedy Flagship Building 142 Seafarers Way, PO Box 2507 George Town KY1-1104 Grand Cayman Foreign Representatives' Counsel: R. Craig Martin, Esq. Gregory M. Juell, Esq. Malithi P. Fernando, Esq. DLA PIPER LLP (US) 1251 Avenue of the Americas New York NY 10020 Tel: (212) 335-4500 Fax: (212) 335-4501 Email: craig.martin@us.dlapiper.com gregory.juell@us.dlapiper.com malithi.fernando@us.dlapiper.com Estimated Assets: Unknown Estimated Debt: Unknown A full-text copy of the Chapter 15 petition is available for free at PacerMonitor.com at: https://www.pacermonitor.com/view/AGUJGRA/Pioneer_Merger_Corp_and_Alexander__nysbke-23-11663__0001.0.pdf?mcid=tGE4TAMA XANTHOS CAPITAL: Proof of Debt Due Dec. 8 ----------------------------------------- Creditors of Xanthos Capital Partners Limited, in liquidation, should submit proof of debt not later than Dec. 8, 2023, to be included in the final distribution. The company's liquidators are: Naill Freeman Kalo (Cayman) Limited 38 Market Street, Suite 4208 PO Box 776, Canella Court Cayman Bay, Grand Cayman KYI-9006 Cayman Island XANTHOS PARTNERS: Proof of Debt Due Dec. 8 ------------------------------------------ Creditors of Xanthos Investment Partners Limited, in liquidation, should submit proof of debt not later than Dec. 8, 2023, to be included in the final distribution. The company's liquidators are: Naill Freeman Kalo (Cayman) Limited 38 Market Street, Suite 4208 PO Box 776, Canella Court Cayman Bay, Grand Cayman KYI-9006 Cayman Island =================================== D O M I N I C A N R E P U B L I C =================================== DOMINICAN REPUBLIC: Moving Forward to Break Dependency ------------------------------------------------------ Dominican Today reports that Dominican Republic Foreign Minister urges to diversify export markets to the Caribbean, prioritize border development projects, and strengthen the legal framework. Foreign Minister Roberto Alvarez affirmed that the Dominican Republic must move towards breaking its dependence on cheap labor in feasible economic sectors by investing, for example, in the automation of manual work, according to Dominican Today. He referred to the issue when describing it during a conference at the luncheon of the American Chamber of Commerce of the Dominican Republic (AMCHAMDR), the report notes. He urged diversification of export markets to the Caribbean, prioritizing border development projects, especially those of the Ministry of Economy, Planning and Development, and strengthening the legal framework to fight illegal migrant smuggling and human trafficking, the report relays. "We desire a vigorous, fair and transparent commercial exchange with Haiti and safe, orderly and regular immigration. But we have to accept the reality that for quite some time the Dominican State will bear the brunt of the burden to take effective measures in the bilateral relationship," Alvarez said, the report discloses. He added that we cannot respond to this moment out of frustration. "We must make the necessary sacrifices to have an institutional, fair and transparent relationship with Haiti," he said. "This must be a moment of inflection for us as well. The porosity of the border that facilitates unpunished crime demands a radical change. It is imperative to build a new border order: democratic, fair and institutional. This implies breaking with the harmful private interests on both sides of the border that benefit from illegal smuggling of goods, trafficking of drugs, arms and migrants, human trafficking and other crimes," said Alvarez, the report relays. The Foreign Minister stressed that Mirex is focused on strengthening relations with Caribbean countries, is expanding its diplomatic presence in the region, has signed agreements in various areas, and participates in high-level meetings, the report notes. He mentioned the Caribbean Community (Caricom), Guyana, Cuba, Antigua and Barbuda, Trinidad and Tobago, Suriname, and Jamaica, 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. TCR-LA reported in April 2019 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 has 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 wealth levels 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 over the next 12-18 months that will likely stabilize the government's debt burden. In February 2023, S&P said its BB ratings reflect the country's fast-growing and resilient economy. It also incorporates the country's historical political and social challenges in passing structural reforms to contain fiscal deficits, despite recent improvements in the electricity sector. The ratings are constrained by relatively high debt, a hefty interest burden, and limited monetary policy flexibility. Fitch Ratings, in December 2022, affirmed the Dominican Republic's Long-Term Foreign Currency Issuer Default Rating (IDR) at 'BB-' with a Stable Rating Outlook. ===================== P U E R T O R I C O ===================== GRUPO HIMA: Committee Hires Porzio Bromberg & Newman as Counsel --------------------------------------------------------------- The official committee of unsecured creditors of Grupo Hima San Pablo, Inc. and its affiliates seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Porzio, Bromberg & Newman, P.C., together with its wholly owned subsidiary Porzio Bromberg & Newman (PR), LLC, as its counsel. The firm's services include: a) assisting and advising the Committee in its discussions with the Debtors and other parties in interest regarding the overall administration of these case; b) representing the Committee at hearings to be held before this Court and communicating with the Committee regarding the matters heard and the issues raised as well as the decisions and consideration of this Court; c) assisting and advising the Committee in its examination and analysis of the conduct of the Debtors' affairs; d) reviewing and analyzing pleadings, orders, schedules, and other documents filed and to be filed with this Court by parties in interest in these cases; advising the Committee as to the necessity, propriety, and impact of the foregoing upon the Debtors' chapter 11 cases; and consenting or objecting to pleadings or orders on behalf of the Committee, as appropriate; e) assisting the Committee in preparing such applications, motions, memoranda, proposed orders, and other pleadings as may be required in support of positions taken by the Committee, including all trial preparation as may be necessary; f) conferring with the professionals retained by the Debtors and other parties in interest, as well as with such other professionals as may be selected and employed by Committee; g) coordinating the receipt and dissemination of information prepared by and received from the Debtors' professionals, as well as such information as may be received from professionals engaged by the Committee or other parties in interest in these cases; h) participating in such examinations of the Debtors and other witnesses as may be necessary in order to analyze and determinate, among other things, the Debtors' assets and financial condition, whether the Debtors have made any avoidable transfers of property, or whether causes of action exist on behalf of the Debtors' estates; i) negotiating and formulating a plan of reorganization for the Debtors; and j) assisting the Committee generally in performing such other services as may desirable or required for the discharge of the Committee's duties pursuant to Bankruptcy Code section 1103. The firm will be paid at these rates: Francisco E. Colon-Ramirez, Esq. $760 per hour Robert M. Schechter, Esq. $795 per hour Rachel A. Parisi, Esq. $735 per hour Principals $735 to $1,095 per hour Associates $440 to $595 per hour Paraprofessional $300 to $350 per hour Porzio has agreed to maintain a blended rate per billing cycle of $600 per hour. Francisco Colon-Ramirez, Esq., member at Porzio, disclosed in a court filing that his firm is a "disinterested person" pursuant to Section 101(14) of the Bankruptcy Code. The firm can be reached at: Francisco E. Colon-Ramirez, Esq. PORZIO, BROMBERG & NEWMAN (PR), LLC PO Box 361920 San Juan, PR 00936-1920 Telephone: (973) 475-1733 Facsimile: (973) 538-5146 E-mail: fecolon@pbnlaw.com About Grupo Hima San Pablo, Inc. Grupo HIMA San Pablo, Inc. serves as a diversified healthcare services holding Debtors pursuant to a corporate reorganization of several businesses related by common ownership. Through its subsidiaries and affiliates, the Debtors 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 Debtors, Home Care Service (including infusion therapies and wound care), a free-standing Ambulatory Center and a 16-Ambulance Service Debtors. 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. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. 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