/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/231215.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 Friday, December 15, 2023, Vol. 24, No. 251 Headlines A R G E N T I N A PAN AMERICAN: Fitch Affirms 'BB-' Long-Term FC IDR, Outlook Stable B R A Z I L BRAZIL: Economic Outlook Updated by Fitch GLOBO COMUNICACAO: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable GOL LINGAS: Eyes Restructuring Just Months After Last Overhaul TUPY SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable E C U A D O R ECUADOR: IMF Directors Encourage Continued Collaboration M E X I C O FIDEICOMISO IRREVOCABLE: S&P Ups A-1 Note Rating to 'BB+(sf)' P A R A G U A Y BANCO BASA: Moody's Affirms 'Ba2' LT Deposit Rating, Outlook Stable P U E R T O R I C O ACADEMIA SANTA: Seeks to Hire Tamarez CPA LLC as Accountant S U R I N A M E SURINAME: Completes Debt Restructuring With Bondholders X X X X X X X X LATAM: Value of Goods Exports Decline in First Half of Year - - - - - ================= A R G E N T I N A ================= PAN AMERICAN: Fitch Affirms 'BB-' Long-Term FC IDR, Outlook Stable ------------------------------------------------------------------ Fitch Ratings has affirmed Pan American Energy S.L.'s (PAE) Long-Term Foreign Currency (FC) Issuer Default Rating (IDR) and its Long-Term Local Currency (LC) IDR at 'BB-'. The Rating Outlook is Stable. Fitch has also affirmed the ratings of the senior secured and unsecured notes issued by Pan American Energy, S.L., Argentine Branch, which are guaranteed by Pan American Energy S.L. at 'BB-'. PAE's 'BB-' ratings reflect its stable production track record, large reserve base, and low leverage. The applicable Country Ceiling is Bolivia's 'B-' rating, given that hard-currency cash flows from operations in Mexico are not enough to cover HC interest expenses yet. The FC IDR is three-notches above the Country Ceiling given that cash held abroad by the company, and cash flows from its Mexican and Bolivian operations, adequately cover the next 24 months of debt service by a ratio in excess of 1.5x. Fitch estimates EBITDA from Mexico and Bolivia represent 8% and 5% of total EBITDA, respectively. KEY RATING DRIVERS Geographic Diversification: PAE's operations in Mexico and Bolivia are positive credit considerations. Still, the company's overall credit quality remains highly tied to Argentina, as PAE's operations in that country represents an estimated 90% of its EBITDA by FY2023. An increase contribution to EBITDA from Mexico and Bolivia during the rating horizon could result in the applicable Country Ceiling changing from Bolivia (Country Ceiling of B-) to Mexico (Country Ceiling of BBB+), per Fitch's Corporate Rating Criteria. Integrated Business Model: PAE's energy business model in Argentina gives the company flexibility to optimize profitability. It's oil and gas (O&G) business is the largest privately owned, with 16% market share in oil production and 14% in gas production; and it's the third largest refiner with a 15% market share. PAE has a strong and stable production profile that is consistent with a higher rating category. Fitch's base case assumes production will average 222kboe/d over the rating horizon. PAE reported 1,643MMboe in 1P reserves, consistent with the 'BBB' rating category. Solid Leverage Metrics: The company's capital structure remains strong with gross leverage of 1.1x as of LTM June 2023. Total debt to 1P reserves was USD1.55/boe as of FY 2022. Fitch estimates the company's gross leverage will average 1.3x between 2023-2026, assuming debt close to USD2.8billion and average EBITDA per year of USD2.1 billion over the next three years. The company has solid access to capital and will likely refinance its debt at competitive rates, especially with its Mexican asset in full operation. Strong Ownership: PAE is rated on a standalone basis. Per Fitch's parent-subsidiary criteria, it views the legal, strategic and operational incentive from its shareholders as low. The company's primary shareholders, which is a 50/50 strategic alliance between BP plc (A+/Stable) and BC Energy Investments Corp. ([BC Energy] formerly known as Bridas Corporation). BC Energy is also a 50/50 joint venture between Bridas Energy Holdings Ltd. and CNOOC Limited (A+/Stable). Despite this, PAE's ratings are not impacted by those of its shareholders. The company stands to benefit from their industry and international expertise and relationships with global creditors. DERIVATION SUMMARY PAE's FC IDR continues to be constrained by the Argentine Operating Environment (OE) of 'b'; however, its medium production size of 222kboed and strong 1P reserve life of close to 20 years compare favorably to other 'BB' rated oil and gas E&P producers. These peers include Murphy Oil Corporation (BB+/Stable) with 196kboed and YPF SA (CCC-) with 529kboed. Further, PAE reported 1,643 million boe of 1P reserves at the end of 2022 equating to a reserve life of 20.2 years, higher than Murphy Oil's at 10 years. Fitch expects the company will be able to maintain its strong reserve life. Fitch estimates PAE 2023 EBITDA gross leverage to be 1.3x, higher than Murphy Oil of 0.8x. On debt to 1P reserve basis, Fitch estimates PAE's debt as of 2022 to 1P reserves at USD1.55boe lower than Murphy Oil at USD2.63boe and YPF at USD6.50boe. PAE operates in a lower OE, which is a constraining factor for its ratings, but receives a three-notch uplift from the Country Ceiling due to its cash flows from export revenues and cash flows from abroad. KEY ASSUMPTIONS - Fitch's price deck is applied at USD80bbl in 2023, USD75bbl in 2024, USD70bbl in 2025 and USD65bbl in 2026; - Reserve replacement ratio of 102% per annum; - Domestic gas price of USD3.7MMBTU in 2023 and USD3.50MMBTU over the rated horizon; - Average gross production of 222kboe/d between 2023-2026; - Production cost of $11.0boe between 2022-2025; - Royalties of $7.0boe between 2022-2025; - SG&A of $6.0boe between 2022-2025; - Annual consolidated capex averaging of USD1,700 million per year from 2023-2026; - No dividend payments. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade - Cash flows from operations in Mexico adequately covering hard currency gross interest expense by at least 2.5x for 12 months, while maintaining hard currency debt service coverage ratio above 1.5x. Factors that could, individually or collectively, lead to negative rating action/downgrade - Downgrade of the Country Ceiling of Bolivia; - PAE's ratings could be negatively affected if hard-currency liquidity is weakened by capital controls; - Inability to renew hard-currency committed credit lines from highly rated international banks. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Fitch believes PAE can comfortably service debt with cash on hand and cash flows through the rating horizon in the event the company faces a challenging financing environment due to the Argentina's capital controls. PAE also has a strong track record of tapping local and international markets and accessing capital at competitive rate. ISSUER PROFILE PAE is a leading integrated energy company with upstream and downstream operations in Argentina, as well as upstream operations in Bolivia and Mexico. It's the second largest oil and gas producer in Argentina and the largest exporter of oil. ESG CONSIDERATIONS Fitch has revised Pan American Energy's ESG Relevance Score for GHG Emissions & Air Quality to '4' from '3' due to the growing importance of the continued development and execution of the company's energy-transition strategy. This has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. 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 ----------- ------ ----- Pan American Energy, S.L. LT IDR BB- Affirmed BB- LC LT IDR BB- Affirmed BB- Pan American Energy, S.L., Argentine Branch senior unsecured LT BB- Affirmed BB- senior secured LT BB- Affirmed BB- =========== B R A Z I L =========== BRAZIL: Economic Outlook Updated by Fitch ----------------------------------------- Richard Mann at Rio Times Online reports that Fitch, a top risk assessment agency, has modified its growth predictions for Brazil's economy. In 2023, the growth forecast is now 3.0%, down from the earlier 3.2%, according to Rio Times Online. Yet, 2024 shows promise, with projections increasing from 1.3% to 1.5%, the report notes. These changes are due to various economic elements, the report relays. The high Selic rate, Brazil's base interest rate, is a key factor, the report relays. This rate greatly impacts borrowing costs for businesses and consumers, the report notes. A high Selic rate typically slows economic activities by raising loan costs, the report says. This has affected Brazil's economic growth, 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). GLOBO COMUNICACAO: Fitch Affirms 'BB+' LongTerm IDR, Outlook Stable ------------------------------------------------------------------- Fitch Ratings has downgraded Globo Comunicacao e Participacoes S.A. (Globo)'s Long-Term (LT) Local Currency (LC) Issuer Default Rating (IDR) to 'BB+' from 'BBB-'. In addition, Fitch has affirmed Globo's LT Foreign Currency (FC) IDR and U.S. dollar-denominated unsecured notes at 'BB+'. The National Scale rating has been affirmed at 'AAA(bra)'. The Rating Outlook is Stable. The downgrade of the LT LC IDR reflects Globo's volatile operating results, its lower profitability compared with its investment-grade international peers, and the challenging industry trend toward audience fragmentation across digital and linear distribution platforms and the decline of the Pay-TV subscription base. These factors are mitigated by Globo's conservative financial policy as reflected in its net cash balance, improved performance in 2023, and strong competitive position within the Brazilian media sector with local solid content (including live events and shows), a market still characterized by Free-to-air (FTA) TV as the most dominant advertising platform in Brazil, and the company's multiplatform and direct to consumer strategy. KEY RATING DRIVERS Challenging Sector Environment: Globo faces intense competition from other platforms for viewers and advertisers. The media landscape has been affected by increasing viewership fragmentation owing to shifting consumer preferences for on-demand and over-the-top (OTT) viewing and the expanding number of offerings from new media players. The Brazilian pay-tv market has shrunk, with 12.5 million subscribers at 3Q23 from 19.5 million in 2014. Globo's strategy to address the market changes and the decline of its traditional TV broadcasting business included its investment in live events, local production, digital strategy and Globoplay subscription video-on-demand service. Low Margins Expected to Continue: Globo's EBITDA margins are forecast to be in the mid-single digits over the next two years due to the challenging environment for the sector and the higher operating cost base from scaling the company's streaming platform. The base case scenario considers net revenues of BRL15.5 billion to BRL16 billion range in 2023-2024 with middle-single digit EBITDA margins. Fitch expects a rebound of EBITDA to about BRL1.1 billion-BRL1.2 billion in 2023 from minus BRL60 million in 2022, driven by advertising revenue growth and through several cost initiatives. Strong Cash Position: The rating is supported by Globo's strong net cash position that entirely covers its total debt and provides the company with significant financial flexibility. The company has one of the region's strongest financial structures with cash and equivalents of BRL13.8 billion, substantially higher than its total debt of BRL5.4 billion as of 3Q23. The company is expected to maintain a solid cash position over the rating horizon without adding meaningful debt. Fitch does not rule out the company's use of cash for acquisitions in the future. The company paid BRL653 million in acquisitions in 9M23, mainly related to its 27% of equity interest in Eletromidia, which is the largest out of home (OOH) media company in Brazil with extensive operations in the largest cities in the country. Robust Business Position: Globo's strong business position as Brazil's leading media company is an essential pillar for the ratings. The company has a TV broadcasting audience share of around 35%, with a 38% share during prime time. Globo also has several channels to distribute produced content. Globoplay is expanding its subscriber base through investments in content, new production and partnerships and bundled offerings, which should continue to play an important strategic role for Globo. DERIVATION SUMMARY Globo is well-positioned relative to its peers in terms of financial profile. Compared with U.S.-based investment-grade media companies such as Paramount Global (BBB/Stable), Warner Bros discovery Inc (BBB-) and The Walt Disney Corporation (A-), Globo's lower profitability, geographical diversification and its high reliance on cyclical advertising revenue generation is a weakness, as there is a declining percentage spent on Brazilian television broadcast advertising space and pay-tv penetration. This lack of cash flow diversification is offset by its materially stronger capital structure and strong domestic market position. KEY ASSUMPTIONS - Revenue in the BRL15.5 billion to BRL16 billion range in 2023-2024; - Single-digit EBITDA margin in 2023 and 2024; - Average annual capex of around BRL200 million to BRL300 million; - No material incremental debt added to the capital structure. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - An upgrade is unlikely, absent a significant improvement in its EBITDA margin in line with investment-grade companies and sustained positive FCF excluding net interest expenses; - Improvement in the industry fundamentals resulting in a stabilization of Pay-Tv subscribers base. Factors that could, individually or collectively, lead to negative rating action/downgrade: - A downgrade of Brazil's Foreign Currency IDR would likely result in a negative rating action for Globo's Foreign Currency IDR and U.S. dollar-denominated notes; - A downgrade could occur if there is a significant deterioration in the company's strong liquidity resulting in positive net debt amount; - Persistent negative operating EBITDA margin could result in a lower rating. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Globo has a net cash position, with total debt of BRL5.4 billion and Fitch-adjusted cash and cash equivalents of BRL13.2 billion as of Sept. 30, 2023. Practically all of the company's debt consists of four U.S. dollar-denominated senior unsecured notes due in 2025, 2027, 2030 and 2032. Approximately 85% of Globo's debt matures in 2030 and 2032. Globo hedges its operational and financial exposure to foreign currency considering a 24-month period ahead and has entered into a swap to CDI for its notes due 2030 and 2032 notes to maturity. ISSUER PROFILE Globo is the largest media group in Brazil, operating through the leading broadcast television and pay-TV networks. The company also owns and operates a streaming platform (Globoplay) focused on Brazilian users. Globo is owned by the Marinho family. 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 ----------- ------ ----- Globo Comunicacao e Participacoes S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Downgrade BBB- Natl LT AAA(bra)Affirmed AAA(bra) senior unsecured LT BB+ Affirmed BB+ GOL LINGAS: Eyes Restructuring Just Months After Last Overhaul -------------------------------------------------------------- Bloomberg News reports that Gol Linhas Aereas Inteligentes SA plans to restructure its balance sheet yet again as it buckles under a heavy debt load and the high costs of operating an airline in Brazil. Gol hired Seabury Capital to help review its debt and other financial obligations, and free up cash by renegotiating its deals with lessors, the company said in a filing, according to Bloomberg News. The move triggered a downgrade to CCC- from CCC+ by S&P Global Ratings, which warned of room for a further cut amid refinancing risks, the report notes. The hiring follows a string of corporate actions that have raised questions about the Sao Paulo-based low-cost carrier's ability to navigate an air travel industry that was upended by the Covid-19 pandemic, the report relays. The company avoided bankruptcy protection as many of its peers went through Chapter 11 reorganizations, notes the report. But it has been forced to carry out 10 liability management processes or capital raises since early 2020, the company said in March, the report relays. As reported in the Troubled Company Reporter-Latin America on Dec. 8, 2023, Fitch Ratings has downgraded GOL Linhas Aereas Inteligentes S.A.'s (GOL) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'CCC-' from 'CCC+', and its Long-Term National Scale to 'CCC-(bra)' from 'CCC(bra)'. Fitch has also downgraded GOL Finance Inc.'s unsecured bonds to 'CC/RR5' from 'CCC/RR5'. The downgrades reflect increasing risks of GOL's debt restructuring as a result of its ongoing high refinancing risks, operating cash flow pressure due to current and deferred leases payments and weak liquidity position. The assessment incorporates the company´s recent announcement of hiring a financial advisor to review its capital structure. TUPY SA: Fitch Affirms 'BB+' LongTerm IDRs, Outlook Stable ---------------------------------------------------------- Fitch Ratings has affirmed Tupy S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings at 'BB+', as well as the Long-Term National Scale Rating at 'AAA(bra)'. Fitch has also affirmed Tupy Overseas S.A.'s USD375 million senior unsecured notes due 2031 at 'BB+'. The Rating Outlook for the corporate ratings is Stable. The ratings reflect Tupy's improved scale, diversification and credit metrics resulting from the recent acquisitions of Teksid's operations in 2021 and MWM from Navistar Inc. in 2022. Ratings remain constrained by Tupy's relatively small scale and moderate geographic diversification when compared with other global auto parts companies. The high cyclicality and competitive environment of the auto industry also limits ratings. The ratings incorporate Tupy's strong market position in the production of high-value-added cast iron structural components, such as engine blocks and cylinder heads, its long-term relationships with original equipment manufacturers (OEMs), and the significant use of its products in transportation, infrastructure and agricultural machinery. Fitch's analysis also incorporates Tupy's capacity to maintain adequate operating margins during adverse economic environments. Tupy's flexibility to rapidly adjust production, high proportion of variable costs as well as its conservative capital structure and disciplined liquidity management were also embedded in its ratings. KEY RATING DRIVERS Improved Business Profile: Tupy has strengthened its business profile over the last three years. The acquisition of Teksid and MWM have allowed Tupy an increase in scale and diversification that is positive for the company, in particular since the automotive sector is subject to high cyclicality. As such, Tupy has been able to partly mitigate the impact of much weaker demand for heavy vehicles in 2023 while maintaining healthy liquidity and manageable credit metrics. Sales of heavy vehicles, particularly in Brazil, experienced a significant contraction primarily due to the implementation of new emissions regulation (Proconve P8/Euro 6) and the effect of tighter credit conditions resulting from higher interest rates. Fitch expects overall sale volumes for Tupy to remain relatively weak in 2024. While volumes in Brazil should gradually recover in 2024, foreign sales may be lower as the U.S. and European economies are expected to slow down. Cyclical Industry and Competition: Tupy is exposed to the highly cyclical and competitive auto industry, which is affected by macroeconomic cycles, volatility in raw-material prices, particularly scrap and steel, as well as by technological shifts, fuel alternatives and stringent legislation on CO2 emissions. As inherent to a Tier-1 supplier, Tupy's two largest customers account for approximately 25% of sales as of 3Q23 and contracts have no minimum volume, in spite of their long-term nature. Positively, Tupy supplies a variety of structural components to each customer in different countries, making shifting cost considerably high. Capital intensity is high in the industry, particularly for manufacturers of high-added-value products such as Tupy, which results in high barriers to entry. Gradual Operational Growth: Fitch believes the benefits from Tupy's recent acquisitions will occur more gradually given the aforementioned impact of higher rates, global economic slowdown and new emission standards in Brazil. Fitch estimates revenues to remain above BRL11 billion in 2023 and 2024. Sales volumes are to remain relatively weak through 2024 and gradually improve in 2025. Tupy revenues may reach BRL12 billion by 2026. Fitch forecasts EBITDA margins to approach 11% in 2024 and 2025. EBITDA margins should gradually improve as the synergies from the Teksid and MWM acquisitions are fully realized and volumes increase. Conservative Capital Structure: Fitch expects Tupy to preserve a conservative capital structure consistent with the company's financial policies. Fitch forecasts net leverage to be around 2x in 2023. The company should gradually de-lever to below 2.5x gross leverage and 2x net leverage as EBITDA rises over the ratings horizon. Fitch expects Tupy to be FCF negative in 2023, but it should gradually turn positive beyond that. Tupy has a comfortable debt maturity profile and is expected to maintain good levels of liquidity. Threats from Electric Vehicles: Fitch believes risks associated with demand for lowering carbon emissions globally are manageable for Tupy. Around 90% of its revenues derive from commercial vehicles, including heavy commercial and heavy machinery, which demand power, strength and autonomy. In Fitch's view, traditional electric powertrains that run on batteries are less suitable for such vehicles. Fitch believes that there will be several fuel alternatives potentially more efficient than electricity for heavy machinery, including biofuels and hydrogen fuel-cell technology. MWMs energy and decarbonization products and solutions should allow Tupy to access opportunities in alternative energy sources, in particular, in the biofuels sector. More stringent environmental policies in large economies can temporarily disrupt production volumes and affect market share dynamics over time. However, near-term credit implications for tier-1 auto suppliers should be more limited and in line with the industry as a whole. Mexican Country Ceiling: In accordance with Fitch's Non-Financial Corporates Exceeding the Country Ceiling Rating Criteria, Tupy's ratings are not constrained by Brazil's 'BB+' Country Ceiling, given the company's operating cash flows from assets in Mexico, exports and offshore hard currency deposits are sufficient to service its hard currency debt. Hence, Mexico's 'BBB+' Country Ceiling is applicable to Tupy's ratings. At this point, however, Tupy's rating remain within Brazil's country ceiling of 'BB+'. DERIVATION SUMMARY Ratings of auto parts companies are usually constrained by the sector's volatility, capital and labor intensity characteristics, and natural client concentration. Tupy's low leverage and strong liquidity compares well with its peers. The 'BB+' rating reflects its small scale and moderate diversification, as well as its high exposure to OEMs. Tupy's credit profile is stronger than that of Tenneco Inc. (B/Stable). Tenneco's rating reflects its significantly more leveraged capital structure. Tupy's ratings compare with Dana Incorporated (DAN; BB+/Negative). DAN's leverage metrics are considerably higher than Tupy's, but it is a leading global supplier of driveline components for light, commercial and off-road vehicles, with significantly larger scale and diversification. Metalsa, S.A. de C.V. (BBB-/ Stable) and Nemak, S.A.B. de C.V. (BBB-/Stable) are rated at investment grade due to their conservative capital structures, larger scale and wider geographic diversification. However, with the acquisitions of Teksid assets and MWM, Tupy has significantly increased its scale and overall diversification reducing the gap with its Mexican counterparts. KEY ASSUMPTIONS - Volumes decrease in 2024 by 5%. Volumes recover gradually in Brazil, but remain week overseas; - EBITDA margins slightly above 10% in 2023, increasing to 11% in 2024; - Prices increase in line with inflation and benefited by pass-through pricing; - BRL to USD to remain at between 5.0-5.5 for 2023-2026. MXN to USD to remain between 17.5-18.5; - CAPEX intensity between 4.5%-5.0% of revenues for 2023-2026; - Company will maintain prudent working capital management; - Dividend pay-out ratio of 25%. RATING SENSITIVITIES Factors that could, individually or collectively, lead to positive rating action/upgrade: - Further improvement of Tupy's geographic footprint, client diversification, and scale while materially improving FCF; - EBITDA gross leverage below sustained below 2x; - EBITDA net leverage consistently below 1.5x; - Maintenance of robust liquidity. Factors that could, individually or collectively, lead to negative rating action/downgrade: - EBITDA gross leverage sustained above 2.5x; - EBITDA net leverage consistently above 2x; - Deterioration of robust liquidity. LIQUIDITY AND DEBT STRUCTURE Strong Liquidity: Fitch expects Tupy to maintain strong liquidity during the rating horizon as part of its conservative financial policy. The company ended the 3Q23 with close to BRL1.1 billion in cash and cash equivalents in comparison to BRL170 million in short-term debt. Total debt and debt service increased materially after the acquisition of MWM, which was partly financed by a local debenture with a variable rate, but the larger scale of the company means that liquidity and overall leverage remain stable and with an improving trend. Tupy also has a comfortable debt maturity profile with no major maturities until 2026 when the amortization of half of the BRL1 billion local debenture is due. The sole international USD375 million bond is a bullet payment due in 2031. ISSUER PROFILE Tupy is a Tier-1 and Tier-2 global automotive supplier founded in 1938, in Joinville, Santa Catarina (Southern region of Brazil). It currently stands out as one of the world's largest independent manufacturers of high-value-added cast iron structural components, such as engine blocks and cylinder heads. 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 ----------- ------ ----- Tupy Overseas S.A. senior unsecured LT BB+ Affirmed BB+ Tupy S.A. LT IDR BB+ Affirmed BB+ LC LT IDR BB+ Affirmed BB+ Natl LT AAA(bra)Affirmed AAA(bra) ============= E C U A D O R ============= ECUADOR: IMF Directors Encourage Continued Collaboration -------------------------------------------------------- IMF Executive Board Discusses the Ex-Post Evaluation of Ecuador's Exceptional Access Under the 2020 Extended Fund Facility December 4, 2023 The Executive Board of the International Monetary Fund (IMF) met on November 29, 2023 to discuss the Ex-Post Evaluation (EPE) of Ecuador's Exceptional Access Under the 2020 Extended Fund Facility (EFF). The 2020 EFF arrangement approved by the Executive Board on September 30, 2020 (Press release No. 20/302) followed Fund emergency support to Ecuador in May 2020 and the previous EFF arrangement approved by the IMF Executive Board in March 2019 that was canceled in May 2020. The total amount of arrangements implied exceptional access to Fund resources and therefore led to an EPE of the 2020 EFF. The EPE reviews the program design and outcomes, examines the application of Fund policies, and assesses the achievements under the 27-months arrangement. In the early months of the pandemic, the Ecuadorian authorities used the Fund's Rapid Financing Instrument (RFI) to meet urgent balance of payment needs stemming from the outbreak of COVID-19 and to support healthcare and social protection. They also conducted a successful debt exchange with external bondholders. The 2020 EFF arrangement aimed to support Ecuador's policies to stabilize the economy and protect lives and livelihoods, expand the coverage of social assistance programs, ensure fiscal and debt sustainability, and strengthen domestic institutions. The EFF concluded on December 14, 2022. The EPE report finds that the EFF program achieved its primary objective of restoring macroeconomic stability against the backdrop of a historic economic downturn. Most of the program conditionality was eventually implemented, despite some delays to fiscal and structural reforms. The authorities strengthened fiscal buffers, taking advantage of higher oil prices. Fiscal structural reforms comprehensively revamped Ecuador's fiscal framework, although their successful implementation will hinge on building and retaining institutional capacity. Passing the COMYF reform was a major achievement to strengthen the Central Bank's independence and the dollarization regime. Nevertheless, market access has not been restored due to political uncertainty and remaining large fiscal vulnerabilities, including the strong reliance of government revenues on volatile oil prices. The report also finds that extensive technical assistance provided to the authorities has helped to strengthen capacity in critical areas, especially fiscal accounting. Ultimately, reform efforts will need to be reinvigorated to ensure fiscal sustainability and restore market access. Finally, the EPE finds that Fund policies and procedures for financing under exceptional access were followed. Executive Board Assessment Executive Directors welcomed the ex-post evaluation (EPE) of Ecuador's 2020 Extended Fund Facility (EFF). They noted that the large and frontloaded financing provided to Ecuador was instrumental in supporting the country during the COVID-19 pandemic, stabilizing the economy against the background of a historic economic downturn, and accommodating the mounting financing needs, especially spending on health and social protection. Directors also welcomed that the program catalyzed financing from other international financial institutions and a successful debt restructuring, which was critical for the success of the program. Directors agreed that policy implementation under the EFF was broadly in line with program objectives. They welcomed the implementation of the reform agenda to boost fiscal resilience and strengthen institutions, including amendments to the monetary and financial code that helped strengthen central bank independence and the dollarization regime. However, Directors noted that vulnerabilities persist and more reforms will be needed to restore market access which remains elusive. In this context, they acknowledged that the program was implemented in a fragmented political environment and highlighted the importance of contingency planning in initial program design when uncertainty is high, as well as of appropriate political assurances to protect against policy reversals. Directors observed that saving the windfall from higher-than-expected oil prices and expenditure restraint supported by the program allowed Ecuador to rebuild fiscal and external buffers. However, they underscored that non-oil revenues remain relatively low and noted that conditionality could have put greater emphasis on the quality and composition of fiscal consolidation. Directors considered that the suspension of the fuel subsidy reform following the social unrest and the redesign of the tax reform during the program hindered the authorities' consolidation efforts and allowed vulnerabilities to linger. In this context, some Directors pointed out the significantly frontloaded disbursements and backloaded conditionality, which pushed some of the fiscal consolidation beyond the program duration, noting the staff's assessment that reform implementation could have benefited from extending the program. However, Directors generally agreed that frontloading the disbursements was necessary for program success, and some Directors supported the authorities' view that an extension was not necessary as the program achieved its objectives. More careful sequencing of the reforms and clearer communication with regard to the social measures implemented to offset the impact of the fuel subsidy reform could have also been beneficial. Directors welcomed the EPE's finding that the exceptional access policy was applied in line with Fund practices. However, they agreed that, while Ecuador clearly met criteria for exceptional access at the start of the program, assessment of some exceptional access criteria, particularly with regard to market access and implementation capacity, became increasingly difficult as the program proceeded. In this regard, they noted that the EPE's findings should provide a valuable input for future implementation of the EA framework and looked forward to the outcomes of the ongoing IEO evaluation. Directors noted that the program was a good example of successfully integrating capacity development and program design and encouraged continued collaboration between the authorities and the Fund. =========== M E X I C O =========== FIDEICOMISO IRREVOCABLE: S&P Ups A-1 Note Rating to 'BB+(sf)' ------------------------------------------------------------- S&P Global Ratings raised its long-term global and national scale ratings on Fideicomiso Irrevocable y Traslativo de Dominio Numero 2400's class A-1 and class A-2 notes due 2034. The notes are backed by a first-lien perfected security interest in a portfolio of nine properties developed by Grupo GICSA S.A.B. de C.V. (GICSA; CCC+/Stable/mxB/Stable) and serviced by its subsidiary, Desarrolladora 2054 S.A.P.I. de C.V. (Desarrolladora 2054; not rated), which are located in Mexico and have a combined gross leasable area of retail, office, and mixed-use space. The rating upgrades reflect the transaction's improved loan-to-value (LTV) ratios for both classes, as well as S&P's updated view that operational risk is slightly lower, considering the current credit quality of the portfolio servicer. S&P said, "The rating actions also reflect the observed performance recovery in the securitized portfolio since our last rating action. Based on the servicer's reports, as of September 2023, the properties registered an average vacancy rate of 10.1%, which is below the adjusted vacancy rate of 16.0% observed in our last rating action in November 2021. In the underlying portfolio, we noted that shopping centers have shown greater recovery, with an average vacancy rate of 8.5% as of September 2023, compared to office buildings, which averaged 11.3% as of the same date. "As a result, we adjusted our property vacancy rate assumption downwards to 12.6% from 20.1% used in our last rating action. This primarily incorporates occupancy rates on the securitized properties, as well as the trends observed in the Mexican market for shopping centers and offices." Greater generation of net operating income (NOI). Based on servicer reports, the accumulated NOI as of September 2023 was MXN1.07 billion, slightly higher than that of the same period a year before. At the end of 2022, the portfolio reported a NOI of $1.34 billion pesos (MXN), up from MXN1.30 billion and MXN1.22 billion in 2020 and 2021, respectively, which reflects the greater occupancy in the properties. This has also translated into higher levels of collections on the trust accounts. S&P said, "Our updated property valuations, combined with lower debt levels, resulted in improved leverage metrics. We updated our valuation on the securitized portfolio to incorporate our property vacancy rate assumptions, as well as the most recent properties' rent rolls. Based on our analysis, we determined a MXN1.23 billion net cash flow from the properties, up from our previous estimate of MXN1.16 billion. "We also revised our capitalization rate assumptions slightly upwards to 9.50% from 9.25% to incorporate market trends, the current interest rate environment, and our view that some uncertainty still persists in the Mexican office space. As a result, we determined a total property value of MXN12.9 billion, compared to MXN12.5 billion at the time of our last rating action." Since February 2023, the transaction began to amortize the notes' unpaid balance according to its amortization schedule. To date, three principal payments have been made for approximately 1.75% of the issued amount. S&P said, "Considering our updated valuation, combined with the outstanding balance of the debt, we determined an S&P Global Ratings LTV ratio (after exchange rate stress) of 68.4% for classes A-1 USD and A-1 MXN, and 73.0% for class A-2 MXN. These LTV ratios show improvement compared to those previously observed and are consistent with the current ratings. "The upgraded ratings also reflect our view of the transaction's lower operational risk, although this continues to constrain the ratings. We updated our disruption risk assessment on Desarrolladora 2054 in its role as servicer, which was reduced to "high" from "very high". "This reflects our view on the company's better operating condition, which incorporates GICSA's (the servicer's parent company) improved credit quality since our last rating action. However, our operational risk assessment still limits the ratings reflecting the company's current rating level of 'CCC+'. This considers our view on the company's highly leveraged financial profile, along with its unsustainable capital structure in the long term. "We will continue to monitor the performance of the securitized properties, as well as that of the transaction servicer. Ratings may be negatively affected if vacancy rates increase beyond our expectations. Additionally, a decrease in net cash flow could pressure the transaction's LTV ratios and could have a negative impact on the ratings. Furthermore, a deterioration on the servicer's credit quality could result in higher operational risk for the transaction, affecting the level of services provided to the securitized portfolio, and which could pressure the ratings downward." Ratings Raised Fideicomiso Irrevocable y Traslativo de Dominio Numero 2400 Class Senior A-1 MXN to 'BB+(sf)' from 'BB (sf)' Class Senior A-1 MXN to 'mxAA- (sf)' from 'mxA (sf)' Class Senior A-1 USD to 'BB+ (sf)' from 'BB' Class Senior A-1 USD to 'mxAA- (sf)' from 'mxA (sf)' Class Senior A-2 MXN to 'BB+(sf)' from 'BB-(sf)' Class Senior A-2 MXN to 'mxA+(sf)' from 'mxBBB+(sf)' MXN--Mexican pesos. USD--U.S. dollars. =============== P A R A G U A Y =============== BANCO BASA: Moody's Affirms 'Ba2' LT Deposit Rating, Outlook Stable ------------------------------------------------------------------- Moody's Investors Service has affirmed all ratings and assessments assigned to Banco Basa S.A., including its long- and short-term local and foreign currency bank deposit ratings of Ba2 and Not Prime, respectively, as well as its long- and short-term local and foreign currency counterparty risk ratings of Ba1 and Not Prime, respectively. The bank's ba3 baseline credit assessment and ba3 adjusted baseline credit assessment were also affirmed, along with its long- and short-term counterparty risk assessments of Ba1(cr) and Not Prime(cr), respectively. The long-term bank deposit rating outlook was maintained stable. RATINGS RATIONALE The affirmation of Banco Basa's baseline credit assessment (BCA) at ba3 reflects the bank's adequate capital position, and gradual increase in business diversification that will reinforce earnings recurrence. While the bank has a largely deposit-based funding, the ba3 BCA also factors the relatively concentrated and price-sensitive nature of its corporate depositor base, along with a liquidity position that lags behind the industry average. Banco Basa's Ba2 long-term deposit ratings incorporate one notch of uplift as a result of Moody's assessment of a moderate probability of government support to the bank in an event of stress, reflective of its moderate deposit market share of 4% as of September 2023. Banco Basa's asset quality has consistently outperformed the system-average, a testament to its adequate underwriting standards. However, restrained credit origination, along with the lagged impact of the severe drought on rural loans in 2021, drove problem loan ratio to 3% in September 2023, from 2% a year earlier. In addition, Banco Basa's intention to expand into higher-risk personal and small to medium-sized enterprise (SME) loans, although beneficial for margins and portfolio granularity, adds pressure to future loan quality as the bank positions its franchise in a highly competitive retail banking market in Paraguay. Moody's notes that the use of guarantees, receding inflation and good economic growth prospects for 2024 will partially offset future asset risks. Over the last two years, heightened competition for both loans and deposits in the Paraguayan banking system has curtailed Banco Basa's credit growth. However, this has not impacted net interest margin (NIM), which improved to 4.2% in the first nine months of 2023, compared to 3.6% in 2021. Higher NIMs offset increased loan loss provisions in the period, helping the bank to maintain net income to tangible banking assets at a steady 1.2% and 1.3% range since 2021. While Banco Basa is poised to reap mid-term benefits from efficiency gains, thanks to its investments in technology and new business initiatives, it will likely continue to face intense competition from larger market players in its targeted segments. Concurrently, its strategy of focusing on retail lending could potentially exert upward pressure on provisioning costs. In terms of capitalization, Banco Basa reported a tangible common equity ratio at 13.5% in September 2023, up by 200 basis points since December 2019. While the improved capital position resulted from no dividend payouts over the past three years and moderate balance sheet growth in the last 12 months, Moody's expect the bank to sustain capital at this level as it continues to prioritize margins rather than growth amid a competitive landscape. The stable outlook on Banco Basa's ratings is based on Moody's expectation that the bank's capitalization and highly collateralized portfolio will continue to offset risks arising from the bank's elevated borrower and sector concentrations, while its riskier retail loan portfolio will grow only gradually. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Upward pressure on Banco Basa's BCA could arise if the bank reports sustained strengthening and diversification of both profitability and funding profiles, which would help to enhance its competitive position in Paraguay, and improve future earnings generation and capital replenishment capacity. Conversely, the BCA could face downward pressure in case of a sharp asset quality deterioration over the next outlook horizon as the bank moves towards retail banking businesses. Weaker capitalization, or a significant decline in liquid resources and funding quality could also pressure the BCA down. PRINCIPAL METHODOLOGY The principal methodology used in these ratings was Banks Methodology published in July 2021. ===================== P U E R T O R I C O ===================== ACADEMIA SANTA: Seeks to Hire Tamarez CPA LLC as Accountant ----------------------------------------------------------- Academia Santa Teresita De Naranjito, Inc. seeks approval from the U.S. Bankruptcy Court for the District of Puerto Rico to employ Tamarez CPA, LLC as accountant. The firm will render these services: a) reconcile financial information to assist the Debtor in the preparation of monthly operating reports; b) assist in the reconciliation and clarification of proofs of claim filed and amount due to creditors; c) provide general accounting and tax services to prepare quarterly and year-end reports and income tax; and d) assist in the preparation of the supporting documents for the Chapter 11 reorganization plan, including negotiation with creditors. Tamarez CPA will charge these hourly fees: Albert Tamarez-Vasquez, CPA, CIRA $165 per hour CPA Supervisor $110 per hour Senior Accountant $90 per hour Staff Accountant $70 per hour The firm received a post-petition retainer in the amount of $4,000. Albert Tamarez Vasquez, CPA, owner of Tamarez CPA, disclosed in a court filing that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code. The firm can be reached through: Albert Tamarez Vasquez, CPA Tamarez CPA, LLC 1519 Ave. Ponce De Leon, Suite 412 San Juan, PR 00909 Telephone: (787) 795-2855 Facsimile: (787) 200-7912 Email: atamarez@tamarezcpa.com About Academia Santa Teresita De Naranjito, Inc. Academia Santa Teresita De Naranjito, Inc., filed a Chapter 11 bankruptcy petition (Bankr. D.P.R. Case No. 23-03352) on October 17, 2023, disclosing under $1 million in both assets and liabilities. The Debtor is represented by Licenciado Carlos Alberto Ruiz, LLC. =============== S U R I N A M E =============== SURINAME: Completes Debt Restructuring With Bondholders ------------------------------------------------------- RJR News reports that Suriname completed its debt restructuring with international creditors with the issuance of a new bond. The operation alleviates debt service by US$972 million over 2020-2026 and allows the government to devote significantly higher spending to society during trying times, according to RJR News. In a statement, the Ministry of Finance and Planning said the transaction puts an end to complicated negotiations with bondholders and is the first successful sovereign debt restructuring achieved with bondholders since the pandemic, the report notes. =============== X X X X X X X X =============== LATAM: Value of Goods Exports Decline in First Half of Year ----------------------------------------------------------- RJR News reports that the Inter-American Development Bank said that the value of goods exports from Latin America and the Caribbean declined by 2.7 per cent year-on-year in the first half of 2023 after expanding 17 per cent last year. In a new report, the IDB found that the figures mark the end of the post-Covid recovery and that the decrease is due to falling prices and lower growth in export volumes, according to RJR News. The IDB said during the same period, world trade went from 11.9 percent growth to a five per cent year-on-year decline, the report notes. The report finds that growth of service exports from Latin America and the Caribbean slowed slightly in the first quarter of 2023, reaching 27.8 per cent, compared to 37.7 percent in 2022, RJR News adds. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A. Chapman, Editors. Copyright 2023. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or 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. 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