/raid1/www/Hosts/bankrupt/TCRLA_Public/231123.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, November 23, 2023, Vol. 24, No. 235
Headlines
A R G E N T I N A
ARGENTINA: Black Market Peso Slides With Eyes On Milei
ARGENTINA: To Focus on Infrastructure to Ramp Up Oil, Gas Output
YPF SA: Argentina Granted Delay on Payment of $16.1 Billion
B R A Z I L
BRAZIL: Inflation Dips Back Toward Target Range
GENERAL MOTORS: Cancels 1,245 Layoffs at Local Factories in Brazil
PETROLEO BRASILEIRO: Refineries Recorded Sharp Drop in Production
STONECO LTD: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
C H I L E
FALABELLA S.A.: S&P Downgrades ICR to 'BB+', Outlook Negative
J A M A I C A
JAMAICA: Cost of Goods and Services up by 5.1% in October
M E X I C O
TV AZTECA: Mediation Ends Without Deal on Notes
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A R G E N T I N A
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ARGENTINA: Black Market Peso Slides With Eyes On Milei
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Marc Jones, Jorge Otaola and Walter Bianchi at Reuters report that
Argentina's black market peso fell 12% on Nov. 21 to 1,045 per
dollar, in the first trading day after libertarian Javier Milei won
the country's presidential election, while stocks and bonds jumped
on hopes of a more market-friendly economic policy.
Argentina's local markets reopened after a holiday, with investors
focusing on Milei's call to slash spending after he won the
weekend's presidential election, according to Reuters.
The local S&P Merval stock index (.MERV) rose 23%, led by a near
39% surge in shares of state energy firm YPF (YPFD.BA), catching up
with a sharp rise in its U.S.-listed stock on Nov. 20. Milei has
hinted he could privatize the company.
Milei's dollar plans, however, which may include a sharp
devaluation or even a parallel use of the peso and U.S. dollar, put
pressure on the embattled local currency, the report notes. The
official exchange rate is near 356 per dollar, held by tight
capital controls, the report relays. A move to the 1,045 black
market rate would imply a devaluation of close to 66%, the report
says.
Milei has promised to deliver economic shock therapy to the
long-troubled economy, with the peso's overvaluation seen at the
heart of the country's economic strife.
"Argentina is facing significant policy change, which reinforces
its track record of deep swings in policy alongside changes in
government," S&P Global Ratings analysts said in a note, the report
discloses.
Milei had also heavily criticized China and Brazil, two of
Argentina's main trading partners, in the run-up to the elections,
the report says.
Morgan Stanley analysts said they expected the peso to drop 80%
over the next six weeks, the report relays. Milei, in the run-up
to the election, said he wanted to ditch the currency altogether in
favor of the dollar, though he has walked that back, the report
discloses.
"The big question is obviously what happens to the currency now
given Milei's comments before the elections," said Viktor Szabo, an
emerging markets portfolio manager at Abrdn in London, the report
relates. "The black market is far away from the official rates so
some adjustment needs to happen. The issue is how quickly that
happens."
Milei, who will take office on Dec. 10, did not refer to
"dollarization" in his first speech, raising questions about how
quickly he might pursue scrapping the peso, the report notes.
He has pledged wholesale economic change for the battered economy,
with inflation at 143% and set to spiral as the peso devalues, the
report relays.
International bonds rose on Nov. 22 for a second straight day,
marking gains of as much as 1.7 cents on the 2029 note, the report
discloses. All six restructured dollar bonds traded above 30 cents
and up to 35 cents on the dollar, the report says.
On equities, the Global X MSCI Argentina ETF dipped 0.4% after
jumping over 11% on Nov. 21. The 22.8% gain in the local Merval was
the largest daily percentage increase on record, according to LSEG
data, relays the report.
U.S.-listed shares of Argentine banks held onto most of their Nov.
21 gains, 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 will be succeeded by Javier Milei who won the
presidential election on November 19, 2023. Milei is scheduled to
be sworn in as President of Argentina on December 10, 2023.
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: To Focus on Infrastructure to Ramp Up Oil, Gas Output
----------------------------------------------------------------
spglobal.com reports that Argentina's incoming Infrastructure
Minister Guillermo Ferraro will prioritize building roads and other
infrastructure to support a ramp-up in oil and natural gas
production in Vaca Muerta shale play, he said Nov. 21.
"We are going to seriously develop infrastructure for Vaca Muerta,"
Ferraro, who will oversee energy affairs, said in an interview on
Radio Mitre, according to spglobal.com.
Vaca Muerta, located in an arid and sparse region of northern
Patagonia, is largely supplied by trucks, which bring in vast
amounts of sand and water for fracking, the report notes.
Ferraro called this inefficient, adding that the construction of an
aqueduct, loading terminals and a railroad would be better, the
report relays.
The past two governments -- on the political right and then the
left -- have been seeking financing for this more than $1 billion
railroad project since 2018, most recently from China, the report
relays. The country, however, fell into a financial crisis that
year that is still keeping away capital for building the proposed
North Patagonia Train, or Norpatagonico, the report notes.
The Norpatagonico has been designed to move sand, seamless steel
tubes, building materials and other supplies to Vaca Muerta and
take crude oil out of the play, as well as fruit, manufactured
products, minerals, methanol and other goods, the report discloses.
The train, a large portion of which will run on an existing but
to-be-revamped line, will move the goods to Bahia Blanca, an
Atlantic port in Buenos Aires province, for export or domestic
delivery, the report says.
Private Investment
Ferraro said that investment for this and other projects will be
sought from the private sector, unlike the outgoing administration
of President Alberto Fernandez, which put a focus on state
oversight and control over projects, often via concessions with
private investors, the report relays.
"The approach we have is that the state has to reduce its
participation in the economy to make room for the private sector,"
Ferraro said, the report notes. "There is an enormous opportunity
for the private sector to invest in Argentina," he added.
Ferraro said there is a more than 20-year deficit in infrastructure
in the country, adding that to close this gap and build new
projects will require annual investments equivalent to 15% of the
country's gross domestic product, the report discloses. That is
more than the 1%-1.5% of GDP that has been invested over the past
few years, he added.
The key for attracting this investment, he said, is for there to be
"a credible government," the report relays.
Ferraro will take his post Dec. 10 with President-elect Javier
Milei, who on the Nov. 19 runoff election against the ruling
party's Economy Minister Sergio Massa as Argentinians
overwhelmingly voted for change amid a worsening financial crisis,
the report notes.
New Energy Secretary
Ferraro said his energy secretary will be Eduardo Rodriguez
Chirillo, a lawyer who advised Milei on energy affairs during the
campaign, the report relays.
The energy secretary will run a team of professionals, Ferraro
added.
"In the rest of the departments there will be very proven,
well-known and trustworthy people for the private sector, with
experience in the sector," he said, notes the report.
They will oversee a sector that is one of the fastest growing in
Argentina, led by Vaca Muerta, the report discloses. The play is
expected to drive production growth in Neuquen to 400,000 b/d by
early 2024, up from 330,000 b/d currently, before increasing to 1
million b/d by 2027 or 2028, according to a forecast by the
provincial government, home to most of the acreage in the shale
deposit, 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 will be succeeded by Javier Milei who won the
presidential election on November 19, 2023. Milei is scheduled to
be sworn in as President of Argentina on December 10, 2023.
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: Argentina Granted Delay on Payment of $16.1 Billion
-----------------------------------------------------------
Bob Van Voris at Bloomberg News reports that a US judge agreed to
temporarily delay enforcement of a $16.1 billion court judgment
against Argentina over its 2012 expropriation of oil company YPF SA
while the South American nation pursues a court appeal.
Argentina is seeking review of the Sept. 15 award and asked to
avoid paying while the appeal is being considered, according to
Bloomberg News. The judgment is owed to former YPF shareholders
led by the litigation funder Burford Capital, which stands to take
about $6.2 billion, the report notes.
US District Judge Loretta Preska allowed Argentina to delay payment
without an appeal bond securing the full amount if it pledges the
nation's 51% equity interest in YPF and its receivables tied to a
dam and hydroelectric power plant built between Argentina and
Paraguay, Bloomberg News says.
The investors said Argentina's YPF stake is worth between $2.35
billion and $3.05 billion, Bloomberg News discloses. An additional
$4 billion in payments owed by Paraguay to Argentina over the next
30 years for the Yacyreta Dam, if securitized, would yield an
additional $2 billion in value, according to the judge, Bloomberg
News relays.
Preska suspended enforcement of the judgment until Dec. 5 to allow
Argentina to arrange for the pledges, Bloomberg News notes. She
also required the country to seek expedited consideration from the
higher court, the Second US Circuit Court of Appeals in Manhattan,
Bloomberg News says.
As reported in the Troubled Company Reporter-Latin America on Nov.
01, 2023, Jonathan Stempel at Reuters said 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 noted. 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
relayed.
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 disclosed. 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 related.
The case is Petersen Energia Inversora SAU. v. Argentine Republic,
15-cv-02739, US District Court, Southern District of New York
(Manhattan).
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: Inflation Dips Back Toward Target Range
-----------------------------------------------
Bloomberg News reports that Brazil's annual inflation rate dropped
more than expected, nearing the target range after policymakers
committed to maintaining their current pace of interest rate cuts
for the coming months.
Official data released Friday, November 10, showed consumer prices
rose 4.82% in October from a year earlier, below the 4.87% median
estimate of analysts surveyed by Bloomberg. Monthly inflation hit
0.24%, the report notes.
The central bank is set to deliver two more half-point cuts in as
many meetings and bring the benchmark Selic to 11.25% by the end of
January, the report relays. Double-digit borrowing costs are
starting to cool economic activity while favorable base effects and
waning transportation pressures are helping rein in year-on-year
inflation readings, the report adds.
Swap rates on the contracts due in January 2025, which indicate
market sentiment about monetary policy at the end of next year,
fell eight points in morning trading following the
slower-than-expected inflation reading, notes the report.
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).
GENERAL MOTORS: Cancels 1,245 Layoffs at Local Factories in Brazil
------------------------------------------------------------------
Reuters reports that General Motors will cancel 1,245 layoffs at
its factories in Sao Jose dos Campos, Sao Caetano do Sul and Mogi
das Cruzes in the state of Sao Paulo, the union representing
metalworkers said.
The announcement was made a day after a Brazilian labor court
rejected the U.S. automaker's request for an injunction to maintain
the layoffs, notes the report.
Saving the jobs was a "historic victory" following a 13-day strike,
the Sindmetal union said in a statement, adding that GM
representatives will meet union leaders to confirm the decision,
Reuters relates.
PETROLEO BRASILEIRO: Refineries Recorded Sharp Drop in Production
-----------------------------------------------------------------
Richard Mann at Rio Times Online reports that the sudden drop in
demand for fuels prompted a sharp reduction in the utilization
factor of Petroleo Brasileiro S.A. or Petrobras' refineries, which
are now prioritizing the production of Liquefied Petroleum Gas
(LPG) to supply the domestic market, in addition to importing the
raw material, said the director of the National Petroleum, Natural
Gas and Biofuels Agency (ANP), Felipe Kury.
Failing to mention the extent of the drop in refineries, Kury
repeated data earlier confirmed by the president of the state-owned
company, Roberto Castello Branco, of sharp slumps in consumption of
fuels, according to Rio Times Online.
About Petrobras
Petroleo Brasileiro S.A. or Petrobras (in English, Brazilian
Petroleum Corporation - Petrobras) is a semi-public Brazilian
multinational corporation in the petroleum industry headquartered
in Rio de Janeiro, Brazil. Petrobras control significant oil and
energy assets in 16 countries in Africa, the Americas, Europe and
Asia. But, Brazil represents majority of its production.
The Brazilian government directly owns 54% of Petrobras' common
shares with voting rights, while the Brazilian Development Bank
and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control
5%, bringing the State's direct and indirect ownership to 64%.
A corruption scandal was uncovered in 2014 that involved
Petrobras.
The scandal related to money laundering that involved Petrobras
executives. The executives were alleged to get received kickbacks
from overpriced contracts, to the tune of about $3 billion in
total. Over a thousand warrants were issued against politicians
and businessmen in relation to the scandal. In 2016, Marcelo
Odebrecht, CEO of Odebrecht, was sentenced to 19 years in prison
after being convicted of paying more than $30 million in bribes to
Petrobras executives.
In January 2018, Petrobras agreed to pay $2.95 billion to settle a
U.S. class action corruption lawsuit. In September 2018,
Petrobras agreed to pay $853.2 million to settle with Brazilian and
U.S. authorities.
In July 2022, Fitch Ratings affirmed Petrobras' BB- Long-Term
Issuer Default Rating. In addition, Fitch has revised the Rating
Outlook to Stable from Negative following a similar revision to
Brazil's Sovereign Rating Outlook. Also in July 2022, Egan-Jones
Ratings Company upgraded the foreign currency and local currency
senior unsecured ratings on debt issued by Petrobras to BB+ from
BB.
STONECO LTD: Moody's Affirms 'Ba2' CFR, Outlook Remains Stable
--------------------------------------------------------------
Moody's Investors Service has affirmed the Ba2 corporate family
rating of StoneCo Ltd. (Stone), as well as its backed senior
unsecured notes fully and unconditionally guaranteed by Stone
Instituicao de Pagamento S.A. (formerly Stone Pagamentos S.A.). The
issuer's outlook was maintained stable.
RATINGS RATIONALE
The Ba2 ratings reflect Stone's position as the largest independent
payment acquirer in Brazil, supported by an innovative, competitive
business model that balances growth and profitability, and strong
cash generation, predominantly catering to small and medium-sized
businesses (SMBs). Moody's expects Stone to sustain a
higher-than-industry growth trajectory over the coming years
supported by continuous product expansion, including software and
banking services that broaden the company's large addressable
markets. The company's cloud-based platform aligns it with the
architecture of the service sector's digital transformation and
technological advances.
Stone's profitability has consistently improved since the company
addressed problematic loans and began repricing products for
merchants, reaching a net income to average managed assets of 2.9%
in the nine months ended in September 30, 2023 (annualized).
Moody's expect the combination of operating leverage gains,
declining policy rate and potential to scale value-added services
to keep supporting Stone's strong performance through 2024. About a
third of the company's profitability depends on the financial
income it generates from the prepayment of receivables, a product
whose profitability is highly susceptible to substantial market
funding availability, regulatory changes, rate hikes and
intensifying competition.
Loan loss provisions, aggressive pricing strategies across the
industry, and the significant rise of the Government of Brazil's
policy rate impacted profitability metrics in 2021 and the first
half of 2022, but Stone maintained strong cash generation and a
solid liquidity profile during the period of compressed margins.
The company's annualized funds from operations (FFO)/debt ratio for
the nine months ended in September 30, 2023 was 90%, compared to
50% for the full-year 2022. In September 2023, Stone's cash and net
receivables accounted for 2 times its balance sheet debt, that
includes BRL1.6 billion of bank debt due within 12 months, $500
million in bonds due 2028 and BRL324 million of receivables
investment funds (FIDCs).
Although Stone's funding needs continue to grow along with its
total payment volume, the company has increasingly relied on
non-recourse sales of credit card receivables and its own capital
to fund the operation rather than debt. In September 2023, the
annualized debt represented 1.4 times EBITDA when we factor in the
interest expenses associated with the true-sale of receivables.
This adjusted ratio provides a more comprehensive view of Stone's
financial leverage by deducting from Moody's EBITDA calculation the
cash flows securing non-recourse financing. Stone sells its credit
card receivables to a diverse pool of banks and institutional
investors. Moody's believes that steady access to this non-recourse
funding source is supported by a well-regulated and predictable
card scheme in Brazil, and high quality of Stone's receivables
primarily comprised by well-entrenched banks in the country.
Stone's short operating history and quick ramp-up amid a rapidly
evolving and easily disrupted industry constrain its ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Stone's corporate family rating and senior unsecured debt rating of
Ba2 currently do not face upward pressure because they are at the
same level of the Brazilian sovereign bond rating. A change in the
Government of Brazil's creditworthiness leading to a downgrade
though would lead to a downgrade of Stone's Ba2 ratings.
A significant deterioration in the company's liquidity or a shift
towards a more aggressive strategic policy such as a large
debt-funded acquisition could lead to a downgrade in Stone's
ratings. A sustained fall in profitability from increased
competition or changes in the regulatory environment could also
create downward ratings pressure.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Finance
Companies Methodology published in November 2019.
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C H I L E
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FALABELLA S.A.: S&P Downgrades ICR to 'BB+', Outlook Negative
-------------------------------------------------------------
S&P Global Ratings lowered its issuer credit and issue-level
ratings on Falabella S.A. to 'BB+' from 'BBB-'.
S&P said, "The negative outlook reflects that a small deviation
from our base-case scenario could result in leverage above our
downside triggers. We could lower the ratings if the company is
unable to reverse top-line revenue declines, improve gradually
margins and cash flow, and achieve significant progress in its
asset sale plan.
"Falabella's top-line revenue declined 11% in the third quarter
year over year, primarily stemming from challenging macroeconomic
conditions, high inflation and interest rates. These factors have
taken a toll on consumption across most countries in which the
company operates, especially in the construction sector and
Falabella's department stores business. Although the company
implemented cost-saving and efficiency measures, we believe that
they won't be able to mitigate the likely 10% decline in revenue in
fiscal 2023. We expect S&P Global Ratings'-adjusted debt to EBITDA
to be about 7.0x in 2023, up from an already high 5.9x at the end
of 2022. The projected metric will deviate significantly for the
second consecutive year from the leverage threshold for an
investment-grade rating.
"For 2024, we expect top-line revenue to recover due to a gradual
rebound in consumption, mainly in the construction segment, and
better macroeconomic prospects. These factors will translate into
same store sales (SSS) growth above inflation across most segments
and countries in which Falabella operates. We believe the full
impact of cost savings implemented in 2023 and inventory reduction
will allow EBITDA margin to improve. We expect to see further
strategic initiatives regarding discontinuation or revision of
certain products and business lines, which could also strengthen
profitability.
"In addition, the company recently announced its plan to sell
non-core assets for $800 million - $1.0 billion in the next 12-15
months. We believe that this, combined with higher cash flow, could
allow Falabella to reduce leverage to about 4.5x in 2024 and below
4x in 2025. Yet, we acknowledge this will require not only
successful sales execution but also improved macroeconomic trends.
"Falabella remains susceptible to intensified competitive pressures
from other pure e-commerce players. Our longer-term view is that
changing consumer buying habits will be difficult to navigate,
which increases the potential for operational missteps. A declining
physical store traffic, shifting category preferences, and online
price transparency are persistent longer-term risks for Falabella's
business. While we continue to view the company as having leading
omni-channel capabilities in Chile, we think a continued shift to
online shopping and competition from e-commerce players could
continue to reduce traffic at brick-and-mortar locations and
margins.
"As of September 2023, Falabella had CLP600 billion in cash on its
balance sheet. We anticipate minimal dividend payments for 2023 and
2024, some rationalization of capital expenditures (capex), and no
meaningful debt maturities until 2025. This will allow the company
to maintain healthy liquidity levels, providing cushion to
implement its restructuring strategy in order to adapt the
company's operational and capital structure to new industry
dynamics."
=============
J A M A I C A
=============
JAMAICA: Cost of Goods and Services up by 5.1% in October
---------------------------------------------------------
RJR News reports that the cost of goods and services increased by
5.1 per cent on an annual basis as at October.
The Statistical Institute of Jamaica (STATIN) says the point to
point inflation rate was influenced mainly by an 8.3 per cent
increase in the cost of 'Food and Non-Alcoholic Beverages' and a 13
per cent jump in the costs associated with 'Restaurants and
Accommodations Services,' according to RJR News.
STATIN says a 3.5 per cent drop in the costs in the 'Housing,
Water, Electricity, Gas and Other Fuels' division tempered a
further increase, the report notes.
This is the second consecutive month inflation has fallen within
the Bank of Jamaica's 4 to 6 per cent target, the report relays.
Looking at the month of October specifically, prices went up by
almost a per cent, the report says.
The 0.8 per cent increase was linked to the 1.7 per cent upward
movement in costs associated with 'Housing, Water, Electricity, Gas
and Other Fuels,' the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea.
Jamaica is an upper-middle income country with an economy heavily
dependent on tourism. Other major sectors of the Jamaican economy
include agriculture, mining, manufacturing, petroleum refining,
financial and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. The upgrade of Jamaica's
rating to B1 reflects the government's sustained commitment to
fiscal consolidation and debt reduction. The positive outlook
reflects Moody's assessment that a continuation of the favorable
fiscal trajectory will further increase Jamaica's credit
resilience.
S&P Global Ratings raised on September 13, 2023, its long-term
foreign and local currency sovereign credit ratings on Jamaica to
'BB-' from 'B+', and affirmed its short-term foreign and local
currency sovereign credit ratings at 'B'. The stable outlook
reflects S&P's expectation that the government will remain
committed to prudent fiscal policies and reducing debt, as well as
supportive economic policies including a flexible exchange rate
regime and effective monetary policy.
In March 2022, Fitch Ratings affirmed Jamaica's Long-Term Foreign
Currency Issuer Default Rating (IDR) at 'B+'. The Rating Outlook is
Stable.
===========
M E X I C O
===========
TV AZTECA: Mediation Ends Without Deal on Notes
-----------------------------------------------
TV Azteca, S.A.B. de C.V. (BMV: AZTECACPO; Latibex: XTZA), one of
the two largest producers of Spanish-language television
programming in the world, announced Nov 14, 2023, that it has
completed court-supervised mediation proceedings with an ad hoc
group of unaffiliated holders (the "Holders") of the Company's
Senior Notes due 2024 and The Bank of New York Mellon, the trustee
under the notes.
For a period of 67 days beginning on Sept. 7, 2023, the Company,
the trustee and the Holders participated in a U.S. court-ordered
mediation supervised by Retired Bankruptcy Judge Kevin J. Carey.
The parties engaged in extensive good faith negotiations and
exchanged multiple proposals designed to restructure the 2024
notes. At the conclusion of the mediation, the parties were
unable to reach a consensual resolution.
The Company continues to believe that a consensual restructuring of
its 2024 notes is in the best interests of all parties and remains
committed to continued dialogue with the Holders in an effort to
achieve that result.
In connection with the mediation, the Company executed separate
confidentiality agreements with each of the Holders and the trustee
and provided them with certain non-public information relating to
the Company. Pursuant to the confidentiality agreements, the
Company agreed to publicly disclose the necessary Cleansing
Materials (as defined in the confidentiality agreements) following
conclusion of the mediation.
Paul, Weiss, Rifkind, Wharton & Garrison LLP served as US legal
counsel, Moelis & Company LLC and Alfaro, Davila y Scherer, S.C.
served as financial advisors, and Sainz Abogados, S.C. and Rivera
Gaxiola, Kálloi, Fernández, Del Castillo, Quevedo, Lagos y
Machuca Abogados served as Mexican legal counsel to the Company.
About TV Azteca
TV Azteca is one of the two largest producers of Spanish-language
television programming in the world, operating four television
networks in Mexico: Azteca uno, Azteca 7, adn40 and a mAis +,
through more than 300 owned and operated stations across the
country. The company also owns TV Azteca Digital, operator of
several of the most visited digital platforms and social networks
in Mexico.
TV Azteca is a Grupo Salinas company (www.gruposalinas.com), a
group of dynamic, fast growing, and technologically advanced
companies focused on creating economic value through market
innovation and goods and services that improve standards of living;
social value to improve community wellbeing; and environmental
value by reducing the negative impact of its business activities.
Created by Mexican entrepreneur Ricardo B. Salinas
(www.ricardosalinas.com), Grupo Salinas operates as a management
development and decision forum for the top leaders of member
companies. These companies include TV Azteca (www.TVazteca.com;
www.irtvazteca.com), Grupo Elektra (www.grupoelektra.com.mx),
Banco Azteca (www.bancoazteca.com.mx), Purpose Financial
(havepurpose.com), Afore Azteca (www.aforeazteca.com.mx), Seguros
Azteca (www.segurosazteca.com.mx), Punto Casa de Bolsa
(www.puntocasadebolsa.mx), Totalplay (irtotalplay.mx;
www.totalplay.com.mx) and Totalplay Empresarial
(totalplayempresarial.com.mx). TV Azteca and Grupo Elektra trade
shares on the Mexican Stock Market and in Spains' Latibex market.
Each of the Grupo Salinas companies operates independently, with
its own management, board of directors and shareholders. Grupo
Salinas has no equity holdings. The group of companies shares a
common vision, values, and strategies for achieving rapid growth,
superior results and world-class performance.
Involuntary Chapter 11
On March 20, 2023, Plenisfer Investments SICAV â€" Destination
Value Total Return, Cyrus Opportunities Master Fund II, Ltd., and
Sandpiper Limited (collectively, the "Petitioning Creditors") filed
involuntary Chapter 11 petitions against TV Azteca, S.A.B. de C.V.
and thirty-four TV Azteca subsidiaries in the United States
Bankruptcy Court for the Southern District of New York. Nos.
23-10385 & 23-10419 (Bankr. S.D.N.Y. Mar. 20, 2023).
On Nov. 20, 2023, the U.S. Bankruptcy Court for the Southern
District of New York granted the Alleged Debtors' motion to dismiss
the involuntary Chapter 11 cases, finding that the Petitioning
Creditors' claims are subject to a bona fide dispute.
AKIN GUMP STRAUSS HAUER FELD is representing the Petitioning
Creditors in the U.S. cases. PAUL WEISS RIFKIND WHARTON GARRISON
LLP is serving as attorneys for the Alleged Debtors.
*********
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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