/raid1/www/Hosts/bankrupt/TCRLA_Public/231101.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, November 1, 2023, Vol. 24, No. 219
Headlines
A R G E N T I N A
ARGENTINA: Assets Brace for Sell-Off After Massa Forces Run-Off
ARGENTINA: Economy Grew Again in August Despite Inflation Spike
YPF SA: Urges US Judge to Put $16.1 Billion Judgment on Hold
B R A Z I L
BRAZIL: A $10 Billion Debt Wave Hits Retailers at Worst Time
E L S A L V A D O R
UNICOMER GROUP: S&P Affirms 'B+' ICR & Alters Outlook to Stable
P U E R T O R I C O
PONCE BAKERY: Unsecureds Will Get 100% of Claims in 60 Months
TOWER BONDING: A.M. Best Affirms 'B-' Finc'l. Strength Rating
- - - - -
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A R G E N T I N A
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ARGENTINA: Assets Brace for Sell-Off After Massa Forces Run-Off
---------------------------------------------------------------
Scott Squires & Giovanna Bellotti Azevedo at Bloomberg News report
that Argentina investors again braced for a sell-off after Economy
Minister Sergio Massa did better than forecast in the presidential
vote, dashing hopes for an outright win by a more market-friendly
candidate.
The country's dollar bonds - already trading below 30 cents on the
dollar - extended their losses, with five of them including the
2029 note figuring among the worst performers in emerging markets,
according to Bloomberg News. The peso may weaken on parallel
currency markets used to skirt controls on the expectation
Argentines will rush into dollars as the government continues
spending policies that are seen stoking inflation already running
over 130 percent, Bloomberg News says.
Massa surprised pundits by taking 37 percent of the vote, forcing a
second-round ballot next month with runner-up Javier Milei, the
firebrand libertarian outsider who got 30 percent support with 97
percent of votes counted, Bloomberg News notes. The biggest
question for investors is who backers of third-place candidate
Patricia Bullrich migrate to in the November 19 run-off, Bloomberg
News relays.
Bond prices will fall three to four cents on bets the government
will feel empowered to maintain its economic policies for longer,
fuelling further inflation and putting more downward pressure on
the peso, according to Alejo Costa, the chief strategist for BTG
Pactual in Buenos Aires, Bloomberg News discloses.
"The government will throw everything and the kitchen sink at it
ahead of the run-off, extending recent policies," Costa said. One
possibility is trying to win over voters with a fresh round of
spending the government can ill afford, he added.
In recent months, Massa has granted welfare checks to workers,
bonuses for retirees and tax cuts for 99 percent of the population,
the latter of which is expected to cost the government about 0.8
percent of GDP, or about US$3.5 billion at the official exchange
rate, Bloomberg News says. That's all added pressure to an already
dire economic situation, with the nation headed for its sixth
recession in a decade amid brutal inflation and a currency that's
lost more than 90 percent of its value in the past four years,
Bloomberg News discloses.
Investors had hoped for a stronger showing by Milei or Bullrich,
believing either one would pursue a more aggressive economic
overhaul as president, Bloomberg News notes.
"The market's preferred outcome would have been strong popular
support for Patricia Bullrich and her team of experienced orthodox
technocrats," Graham Stock, senior EM sovereign strategist at RBC
Bluebay Asset Management. "Massa and Milei both herald greater
uncertainty," Bloomberg News relays.
"Massa's first-round lead gives him incentive to postpone
realigning the official peso rate. A new interest rate hike is a
possibility — with few dollars in the reserve coffers, the
government may want to raise funding costs to reduce the demand for
greenbacks and ease the pressure on parallel markets," said Adriana
Dupita, Bloomberg's Argentina and Brazil economist, Bloomberg News
notes.
Milei won a following with a radical proposal to scrap the peso
entirely and use the US dollar as the country's official currency,
Bloomberg News relays. The move is seen as high-risk, with some
economists warning it could fuel even more inflation, Bloomberg
News says. His strong showing in the August primaries caught
markets by surprise, with investors rushing to sell the bonds amid
concerns about his ability to govern, Bloomberg News discloses.
"Milei should probably be viewed as a very slight favorite despite
failing to gain traction since the primaries," said Patrick
Esteruelas, the head of research for Emso Asset Management,
Bloomberg News notes. "He should still be the candidate best
positioned to capitalise on the enormous discontent with the
political establishment and the current economic context," he
added.
Argentina's peso initially strengthened in cryptocurrency markets,
gaining as much as 20 percent against a stable coin tied to the
dollar after preliminary results were released showing Massa ahead
before paring, Bloomberg News notes. Investors may have been
betting the government would delay a devaluation of the official
exchange rate, Bloomberg News 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
0its 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.
ARGENTINA: Economy Grew Again in August Despite Inflation Spike
---------------------------------------------------------------
Buenos Aires Times reports that Argentina's economy expanded in
August despite a steep currency devaluation that unleashed price
spirals not seen in three decades.
Economic activity grew 1.3 percent in August from a month earlier,
according to government data published, according to Buenos Aires
Times. From a year earlier, the gross domestic product proxy rose
0.3 percent, compared with economists' median estimate for a 2.2
percent decline, Buenos Aires Times notes.
The upset victory of outsider Javier Milei in mid-August's
presidential primary election sent the country's peso, bonds and
stocks into free fall and prompted the incumbent government to
devalue the official currency 18 percent and raise the key interest
rate 21 percentage points, Buenos Aires Times relays. Monthly
inflation in August accelerated 12.4 percent, a level not seen
since Argentina was exiting hyperinflation in the early 1990s,
Buenos Aires Times notes.
A general election saw Economy Minister Sergio Massa replace Milei
on top, making for a worst-case scenario for markets ahead of the
November runoff. The next government is expected to inherit a
recession coupled with triple-digit inflation, Buenos Aires Times
discloses.
Argentina's gross domestic product slumped 2.8 percent in the
second quarter, the deepest decline since the peak of the pandemic
in early 2020, Buenos Aires Times says. A record drought that
wiped out US$20 billion of agriculture exports and accelerated food
inflation took a heavy toll on the economy, Buenos Aires Times
relays. Economists surveyed by the Central Bank see GDP declining
2.8 percent this year and contracting again in 2024, Buenos Aires
Times 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
0its 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: Urges US Judge to Put $16.1 Billion Judgment on Hold
------------------------------------------------------------
Jonathan Stempel at Reuters reports that Argentina urged a U.S.
judge not to enforce a $16.1 billion judgment arising from the
government's 2012 seizure of a majority control in state-controlled
oil company YPF (YPFD.BA), while the cash-strapped country appeals
the judgment.
In a filing with the U.S. District Court in Manhattan, Argentina
said enforcing the "truly overwhelming" judgment or requiring that
it post bond would "cripple a nation already suffering from severe
inflation and drought," according to Reuters.
Argentina said enforcing the judgment, equal to nearly 20% of its
budget, would make it harder for the country to stabilize its
currency and reduce its $235 billion debt burden, the report
notes.
It also said enforcement would cause "serious hardship" to its more
than 45 million people, making it more difficult to provide energy,
health, transportation, water and sewage and other services, the
report relays.
The judgment arose from Argentina's decision to seize in April 2012
a 51% YPF stake held by Spain's Repsol (REP.MC), saying
underinvestment justified the takeover, without tendering for
shares held by minority investors, the report discloses.
Two investors, Petersen Energia and Eton Park Capital Management,
sued, and last month U.S. District Judge Loretta Preska awarded
them the $16.1 billion including interest, the report relates.
Burford Capital (BURF.L), which funded the litigation and last
month said it was entitled to a respective 35% and 73% of
Petersen's and Eton Park's damages, has called Preska's decision a
"complete win," the report notes.
Argentina had argued it should pay no more than $4.92 billion.
Repsol ultimately received about $5 billion of compensation, the
report says.
Lawyers for Petersen and Eton Park did not immediately respond to
requests for comment.
Preska would decide whether to stay enforcement of the judgment
while Argentina appealed to the 2nd U.S. Circuit Court of Appeals
in Manhattan, the report discloses.
The country is struggling with more than 100% inflation, scarce
foreign exchange reserves, and rising poverty, the report says.
It will next month hold a presidential election runoff between
Sergio Massa, economy minister of the ruling center-left Peronist
coalition, and Javier Milei, a far-right libertarian economist, the
report notes.
Massa's first-place finish in the general election was a surprise.
Milei had been leading many opinion polls, 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: A $10 Billion Debt Wave Hits Retailers at Worst Time
------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that Brazilian
retailers are struggling to survive long enough to enjoy the
benefit of falling interest rates.
The companies have high debt loads, as do their customers,
according to globalinsolvency.com.
Competition from online retailers like Amazon.com Inc. is heating
up, the report notes. And refinancing debt is more expensive at
home and abroad as yields rise and the market digests an accounting
scandal at Americanas SA, a nearly century-old company, the report
relays.
"We're talking about maybe the worst moment for Brazil retail since
I started covering the sector a decade ago," said Thiago Macruz, a
retail analyst and head of Brazil equity research at Itau BBA SA.
"It has been super-challenging for retailers, especially those that
cater to lower-income customers," the report discloses.
Cracks are already appearing in the industry. Casas Bahia, formerly
known as Via and one of Brazil's most popular retail chains, had to
sell equity at a steep discount last month to help pay down debt,
the report notes. Furniture retailer Tok&Stok said in late June
that it had restructured about 350 million reais (US$73.4 million)
of debt with banks and received a capital injection of 100 million
reais led by controlling shareholder Carlyle after failing to meet
some obligations, 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).
=====================
E L S A L V A D O R
=====================
UNICOMER GROUP: S&P Affirms 'B+' ICR & Alters Outlook to Stable
---------------------------------------------------------------
S&P Global Ratings, on Oct. 26, 2023, revised its outlook on El
Salvador-based retailer Unicomer Group to stable from negative. S&P
also affirmed its 'B+' issuer credit and issue-level ratings on
Unicomer.
The stable outlook reflects S&P's expectation that Unicomer retail
operations' adjusted net debt to EBITDA should be near 2.4x for the
next 12 months.
The outlook revision to stable reflects S&P's view of the lower
likelihood of a downside scenario in the next 12 months, as $385
million in proceeds from the bank loan alleviated the company's
refinancing risks. Unicomer will use part of the proceeds to redeem
the senior unsecured notes on Nov. 9, 2023, originally due on April
1, 2024. The current outstanding amount of the notes is close to
$327 million. The company will use the remaining proceeds for
general corporate purposes.
However, the company's liquidity position remains impaired in
comparison to the last few years, as short-term debt maturities
have outpaced its cash balance and funds from operations (FFO). A
consistent improvement in Unicomer's liquidity position, reflected
in stronger liquidity sources--such as higher cash balances or
FFO--or the lesser use of short-term financing, along with stable
leverage metrics, would increase the likelihood of a positive
rating action in the next 12 months.
The cancellation of CSF's acquisition will result in lower
financing needs, reducing net debt, as we had previously estimated
that Unicomer would have required additional debt to close the
transaction. S&P said, "Also, we also expect Unicomer to return the
equity injection of $80 million, which it received last year from
its shareholders to fund partially the acquisition, in the next 12
months. Moreover, our updated base-case scenario for the next 12
months assumes retail sales growth of 3%-5%, similar to our
previous expectation. However, Unicomer's consumer finance revenues
will grow more than previously expected, given a 26% increment in
its lending portfolio in fiscal year ended March 31, 2023. We
estimate the credit portfolio income will rise 15%-20% by the end
of fiscal 2024, which may bolster cash flow, depending on
management's strategy to reinvest cash flows to continue expanding
the portfolio. As a result, we now expect adjusted net debt to
EBITDA near 2.4x by the end of fiscal 2024, down from close to 3x
in our previous forecast."
During fiscal 2023, Unicomer's operations took a hit from one-off
expenses stemming from high inventory levels and sale discounts.
These expenses should fade away in the next 12 months thanks to the
recent normalization of inventory stock. At the same time,
consumption has surprised to the upside year-to-date, although the
economic outlooks for the company's key markets point to a modest
deceleration in 2024. S&P said, "As the consumer finance portfolio
grows, we expect nonperforming loans to remain relatively high, but
below 12%, while the unit's profitability should improve as well,
given our expectation of gradual easing of interest rates. We
estimate consolidated EBITDA margins near 12.6% by the end of
fiscal 2024 and 13.7% by the end of fiscal 2025, up from 11.8% at
the end of fiscal 2023. We also expect retail adjusted EBITDA
margins of 8.9% and 9.5%, respectively, up from 7.1% the last
fiscal year."
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P U E R T O R I C O
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PONCE BAKERY: Unsecureds Will Get 100% of Claims in 60 Months
-------------------------------------------------------------
Ponce Bakery, Inc., filed with the U.S. Bankruptcy Court for
District of Puerto Rico a Disclosure Statement describing Chapter
11 Plan dated October 19, 2023.
The Debtor is a corporation which administers two real properties
which are dedicated to the rental of commercial spaces.
The Debtor owns two real properties, located in Calle Celis
Aguilera #1, and Barrio Paso Seco, Road 153km 4.4, both in Santa
Isabel, PR. The Debtor's insider is Mr. Jose Luis Rosa Martinez who
is the sole stockholder of the corporation.
Debtor business was originally a bakery that operated at one of its
real properties. As a result of the impacts of the 2020 earthquake,
Hurricane Maria and the Pandemic, the business was severely
affected and ceased operating until the end of 2022. The Debtor
then decided to improve the building where the bakery was located
and built several commercial spaces that have been leased to seven
commercial clients.
Banco Popular initiated foreclosure proceedings to foreclose on the
two real properties due to non-payment of the mortgage contracts.
The Debtor then filed this bankruptcy proceedings to retain the two
properties and pay the bank.
Class 3 consists of General Unsecured Claims. The allowed unsecured
claims total $36,421.14. Debtor will pay 100% of the allowed
unsecured claims to be paid in 60 monthly payments of $654.44
including 3% interest per annum. Total payout shall be $39,266.40.
Insiders will receive no distributions from the proposed plan of
reorganization.
Payments and distributions under the Plan will be funded from the
Debtor's post-petition income from the operation of the business.
A full-text copy of the Disclosure Statement dated October 19,
2023
is available at https://urlcurt.com/u?l=lH0REK from
PacerMonitor.com at no charge.
Debtor's Counsel:
Modesto Bigas Mendez, Esq.
Modesto Bigas Law Office
PO Box 7462
Ponce, PR 00732
Tel: (787) 844-1444
Fax: (787) 842-4090
E-mail: modestobigas@yahoo.com
About Ponce Bakery
Ponce Bakery, Inc. is a corporation which administers two real
properties which are dedicated to the rental of commercial spaces.
The Debtor sought protection for relief under Chapter 11 of the
Bankruptcy Code (Bankr. D.P.R. Case No. 23-01719) on June 5, 2023,
with $500,001 to $1 million in assets and $100,001 to $500,000 in
liabilities. Judge Maria De Los Angeles Gonzalez oversees the
case.
The Debtor tapped Modesto Bigas-Mendez, Esq., at Modesto Bigas Law
Office as bankruptcy counsel, and Cynthia Garcia Fraticelli as
accountant.
TOWER BONDING: A.M. Best Affirms 'B-' Finc'l. Strength Rating
-------------------------------------------------------------
AM Best has revised the outlooks to positive from stable and
affirmed the Financial Strength Rating of B- (Fair) and the
Long-Term Issuer Credit Rating of "bb-" (Fair) of Tower Bonding &
Surety Company (Tower Bonding) (San Juan, PR).
These Credit Ratings (ratings) reflect Tower Bonding's balance
sheet strength, which AM Best assesses as adequate, as well as its
marginal operating performance, limited business profile and
marginal enterprise risk management (ERM).
The revision of the outlooks to positive reflects the sustained,
but somewhat variable, improvement in Tower Bonding's operating
profitability in recent years with this trend continuing through
the first half of 2023. Tower Bonding has reported favorable net
underwriting income and pre-tax operating results over the past
five years. The combined and operating ratios are elevated in
comparison with the AM Best composite average; however, the
composite is skewed by large national surety writers. The company's
elevated expense ratio is driven by a high commission and its other
expense structure.
Tower Bonding's balance sheet strength metrics have also improved
as the result of increased profitability, which has driven the
growth in policyholder surplus. The company's business profile
assessment is driven by a geographic concentration of risk and
limited product diversification as it writes bail bonds in Puerto
Rico, a market with challenging macroeconomic conditions. However,
Tower Bonding has minimal competition. The company's ERM is
assessed as marginal given its limited capabilities relative to its
risk profile.
*********
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
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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.
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