/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/240329.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, March 29, 2024, Vol. 25, No. 65 Headlines B E R M U D A BITTREX GLOBAL: Liquidators to Pay Back Creditors B R A Z I L AEGEA SANEAMENTO: Moody's Affirms Ba2 CFR, Outlook Remains Stable BRAZIL: JPMorgan Sees Three Interest Rate Cuts Ahead BRAZIL: Sees Capital Outflow as U.S. Rates Soar C H I L E WOM CHILE: Bondholders Hire Advisers Ahead of Possible Talks J A M A I C A JAMAICA: Banks Urged to Ensure Inclusivity Along With Changes P E R U PERU: IMF Says Economy is Recovering after Consecutive Shocks P U E R T O R I C O ZAGACITY TECH: Plan Exclusivity Period Extended to May 30 U R U G U A Y NARANJAL/LITORAL URUGUAY 2: Moody's Ups Subordinate Rating to Ba1 - - - - - ============= B E R M U D A ============= BITTREX GLOBAL: Liquidators to Pay Back Creditors ------------------------------------------------- Duncan Hall at Royal Gazette reports that customers of Bittrex Global (Bermuda) Ltd, the failed cryptocurrency exchange, will be able to claim their funds, the company's joint provisional liquidators have revealed. Bittrex Global, which had offices in Bermuda and Liechtenstein, announced last November that it was ceasing operations and winding down, according to Royal Gazette. As part of that process, Bittrex Global Bermuda applied to appoint an independent, third-party liquidator to oversee the process, the report notes. Margot MacInnis, Andrew Howie and Carmel King of Grant Thornton have been appointed as joint provisional liquidators of Bittrex Global Bermuda, the report notes. Control of the company has now been handed over to them, under the supervision of the Supreme Court of Bermuda, the report relays. The company's petition for its winding up was presented to the Supreme Court on March 8 and is set for hearing on March 28, the report says. In an e-mail addressed: "Dear Bittrex Global User", the JPLs wrote: "The purpose of the liquidation process, governed by the laws of Bermuda, is to ensure an orderly wind-up of the company and ensure that there will be independent oversight and total transparency in the process, the report notes. "We have been working closely with the company and the Bermuda Monetary Authority for a number of weeks and have developed a liquidation plan that envisages all Bittrex Global Bermuda users being able to claim their funds and all other creditors being paid in full in an orderly and efficient manner. "We have temporarily halted withdrawals while we establish the process for doing so. The plan anticipates that the court will enable withdrawals to be re-enabled in the coming weeks," the report adds. =========== B R A Z I L =========== AEGEA SANEAMENTO: Moody's Affirms Ba2 CFR, Outlook Remains Stable ----------------------------------------------------------------- Moody's Ratings has affirmed the Ba2 rating of AEGEA Saneamento e Participacoes S.A.'s (AEGEA) Corporate Family Rating and Aegea Finance S.a r.l.'s ("Aegea Finance") senior unsecured rating at Ba3. The outlook remains stable. RATINGS RATIONALE AEGEA Saneamento e Participacoes S.A.'s Ba2 corporate family rating (CFR) is supported by its diverse portfolio of water and sewage concessions operating under long-term regulated contracts that derives predictable operating cash flows. It further incorporates Moody's views on the overall benign business environment for the water and sewage sector in Brazil (Ba2 stable) with an evolving regulatory framework that allows adequate returns on investments. The rating further considers the company's currently adequate liquidity profile, which Moody's expects to continue to be prudently managed in line with the company's financial policy. Execution risks are also factored in the rating, given the company's rapid growth strategy that will translate into additional financing needs to support new investments amid still high borrowing costs that will constrain cash flow generation and the pace of leverage reduction through at least 2025. Aegea Finance's Senior Unsecured rating of Ba3 is positioned one notch below AEGEA's CFR to reflect the structural subordination since AEGEA does not hold any operations and is strictly a vehicle for controlling stakes on the operating subsidiaries. AEGEA largely depends on the regular payment of dividends from its operating subsidiaries to allow the company to meet its debt obligations, equity investment commitments and potential cash requirements related to its guarantees. AEGEA's expansion strategy entails execution risks, which are partially mitigated by the company's demonstrated track record of integrating and revamping new acquisitions. The company's long-term debt profile and continued access to diversified funding sources further mitigates the financial risk. Nonetheless, the rapid growth have a prolonged impact to its capital structure requiring additional debt to sustain large investment requirements and a prolonged period of negative free cash flow generation. Complex financial arrangements have been used for new investments, with the purpose to commit with the covenant thresholds of its existing debt. Still, the overall group indebtedness has increased taking into consideration off-balance guarantees and encumbered cash at the subsidiaries levels which are reflected on the ratings. The stable outlook is based on Moody's assessment that AEGEA is likely to maintain its adequate liquidity position for the forthcoming 12-18 months, with credit metrics that remain appropriately positioned for the Ba2 rating category. These include a debt to capitalization ratio around 70% and funds from operations (FFO) interest coverage ratio above 1.8x. These metrics incorporate an assumption of steady enhancement in internal cash generation, contingent upon the successful implementation of the Corsan turnaround strategy and the maturation of other assets. AEGEA's liquidity profile is currently adequate for the next 12 months. As of fiscal year end, the company reported an unrestricted consolidated cash balance of BRL4.8 billion that compares to BRL1.5 billion in debt maturities in 2024 and BRL4.2 billion in 2025, considering Parsan's debt maturity. While at the holding level, AEGEA reported a cash position of BRL2.5 billion compared to BRL500 million in debt maturities in 2024 and BRL600 million in 2025. However, the company still depends on sound access to the banking and capital markets to address refinancing needs in 2025-2026. From 2024 through 2025, Moody's expect AEGEA to receive about BRL600 million per year in dividends from its operating subsidiaries and invested companies, and an additional BRL700 million once Águas do Rio (AdR) starts paying dividends in 2026. Aegea Finance's senior unsecured notes are fully guaranteed by AEGEA and ranks pari-passu to its outstanding and future unsecured debt. As of December 2023, debt at the holding company level represented around 32% of total consolidated debt. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS A rating upgrade could be triggered as new operations mature alleviating execution risks, combined with a simplification of the corporate structure and a visible deleveraging trend. Positive rating pressure would also build with evidence of strong shareholder support through planned equity injections or higher cash retention. Quantitatively, an upgrade would require funds from operations (FFO) interest coverage stays above 2.5x and debt/capitalization stays below 70% on a sustained basis. The rating could be downgraded if there is further deterioration in the company's liquidity or leverage metrics. Quantitatively, downward pressure will increase if the FFO interest coverage stays below 1.8x or if the debt/capitalization approaches 80% on a sustained basis. The rating could also come under pressure if there is deterioration in subsidiaries' performance, such that it hurts cash generation or lead to noncompliance with contractual targets. Moody's perception of reduced financial flexibility of the operating subsidiaries to support debt service at the holding company level could also imply further notching down of the Notes due to structural considerations. ISSUER PROFILE AEGEA is one of the largest private water and sewage players operating basic sanitation assets in Brazil under full or partial concession contracts and public-private partnerships (PPPs). The company's is present in more than 500 municipalities located in 14 states, serving a population of more than 31 million people through concessions with an average contracted life of 31 years. In 2023, according to Moody's standard adjustments, AEGEA reported net revenue of BRL8.6 billion and EBITDA of BRL4.9 billion. In addition, company's FFO interest coverage was 1.8x in the year and Debt to Capitalization 66%. AEGEA's shareholders are Equipav (52.8% stake), the Government of Singapore Investment Corporation (34.3% stake) and Itausa S.A. (12.9% stake). The company holds minority stake in Águas do Rio. CEDAE, Rio de Janeiro's state-owned water utility, tendered Blocks 1 (AdR 1) and 4 (AdR 4) to these entities for water and sewage services in the metropolitan area of Rio de Janeiro in 2021. In 2023, AdR reported a net revenue of BRL6.2 billion and EBITDA of BRL1.9 billion. Although not consolidated into AEGEA's financials, AdR's assets are accounted for using the equity income method and hold strategic importance for the company. LIST OF AFFECTED RATINGS Issuer: AEGEA Saneamento e Participacoes S.A. Affirmations: Corporate Family Rating, Affirmed Ba2 Outlook Actions: Outlook, Remains Stable Issuer: Aegea Finance S.a r.l. Affirmations: Backed Senior Unsecured Regular Bond/Debenture, Affirmed Ba3 Outlook Actions: Outlook, Remains Stable The principal methodology used in these ratings was Regulated Water Utilities published in August 2023. BRAZIL: JPMorgan Sees Three Interest Rate Cuts Ahead ---------------------------------------------------- Richard Mann at Rio Times Online reports that Brazil's Central Bank is planning more interest rate cuts in 2024. JPMorgan and UBS BB, two big banks, see these cuts differently. Yet, both agree on the general economic trend, according to Rio Times Online. JPMorgan sees three cuts coming. First, they expect two cuts of 0.5% each, the report notes. Then, they see one more cut of 0.25%, the report relays. They believe the final rate will be 9.5%, 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. S&P Global Ratings raised on Dec. 19, 2023, its long-term global scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the long-term ratings is stable. S&P affirmed Brazil's global scale short-term ratings at 'B' and its national scale long-term rating at 'brAAA'. S&P also raised the transfer and convertibility assessment on the country to 'BBB-' from 'BB+'. S&P said, "The stable outlook reflects our expectation that Brazil will maintain a strong external position, thanks to strong commodity output and limited external financing needs. We also believe Brazil's institutional framework can sustain stable and pragmatic policymaking based on extensive checks and balances across the executive, legislative, and judicial branches of government. We expect a very gradual fiscal correction but anticipate fiscal deficits will remain large." Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook. Fitch said Brazil's ratings are supported by its large and diverse economy, high per-capita income, and deep domestic markets and a large cash cushion that support the sovereign's financing flexibility and its high local-currency debt share. Strong external finances support resilience to shocks, underpinned by a flexible exchange rate, robust international reserves and a sovereign net external creditor position. The ratings are constrained by weak economic growth potential, relatively low governance scores, high and rising government debt/GDP, and budgetary rigidities. A new fiscal framework introduced this year aims to anchor a gradual consolidation process and address these fiscal weaknesses, but its effectiveness is increasingly unclear. 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). BRAZIL: Sees Capital Outflow as U.S. Rates Soar ----------------------------------------------- Richard Mann at Rio Times Online reports that foreign investors have pulled out BRL694 million ($138.8 million) from Brazil's B3 stock market, continuing a 10-day withdrawal streak. This activity deepens a 2024 trend of BRL24.16 billion ($4.832 billion) in net outflows, a sharp reversal from the previous year's BRL44.9 billion ($8.98 billion) inflow, according to Rio Times Online. This retreat is partly due to the uncertainty in the United States over the timing of interest rate cuts following unexpectedly high inflation figures at 3.2%, the report notes. 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. S&P Global Ratings raised on Dec. 19, 2023, its long-term global scale ratings on Brazil to 'BB' from 'BB-'. The outlook on the long-term ratings is stable. S&P affirmed Brazil's global scale short-term ratings at 'B' and its national scale long-term rating at 'brAAA'. S&P also raised the transfer and convertibility assessment on the country to 'BBB-' from 'BB+'. S&P said, "The stable outlook reflects our expectation that Brazil will maintain a strong external position, thanks to strong commodity output and limited external financing needs. We also believe Brazil's institutional framework can sustain stable and pragmatic policymaking based on extensive checks and balances across the executive, legislative, and judicial branches of government. We expect a very gradual fiscal correction but anticipate fiscal deficits will remain large." Fitch Ratings affirmed on Dec. 15, 2023, Brazil's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB' with a Stable Outlook. Fitch said Brazil's ratings are supported by its large and diverse economy, high per-capita income, and deep domestic markets and a large cash cushion that support the sovereign's financing flexibility and its high local-currency debt share. Strong external finances support resilience to shocks, underpinned by a flexible exchange rate, robust international reserves and a sovereign net external creditor position. The ratings are constrained by weak economic growth potential, relatively low governance scores, high and rising government debt/GDP, and budgetary rigidities. A new fiscal framework introduced this year aims to anchor a gradual consolidation process and address these fiscal weaknesses, but its effectiveness is increasingly unclear. 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). ========= C H I L E ========= WOM CHILE: Bondholders Hire Advisers Ahead of Possible Talks ------------------------------------------------------------ Bloomberg News reports that WOM Chile and some of its creditors have tapped advisers ahead of potential debt talks. Holders of global bonds issued by the mobile operator began working with Dechert LLP, according to the people, who asked not to be named as the negotiations are private, according to Bloomberg News. They didn't identify members of the bondholder group that retained the law firm. Some bondholders also hired Ducera Partners LLC as an adviser, according to two other people familiar with the matter, the report notes. The company is working with law firm White & Case LLP, according to another person familiar with the matter, the report relays. It had already hired Rothschild last year to help it refinance its debt coming due this year, the report says. "The news suggests that a potentially lengthy in or out-of-court restructuring process is becoming increasingly likely," Sebastian Hofmeister, who follows the company for Lucror Analytics, wrote in a note, the report adds. WOM bonds collapsed last week as Moody’s Ratings cut its credit score deeper into junk, recounts Bloomberg News. The closely held company is struggling to convince investors it can manage a $348 million bond payment due in November. In a statement, WOM said "options to refinance" the 2024 bond have taken longer than expected but it's still analyzing alternatives to meet the obligation before November, the report adds. ============= J A M A I C A ============= JAMAICA: Banks Urged to Ensure Inclusivity Along With Changes ------------------------------------------------------------- Javaughn Keyes at RJR News reports that financial institutions are being urged to make well-designed plans for digital and technological changes. Minister with responsibility for Digital Transformation Dr. Dana Morris Dixon, says as technology evolves in the banking sector, the changes must be inclusive, according to RJR News. "Through digital platforms, banking services are no longer confined to brick and mortar establishments, but are accessible to anyone with a smartphone or computer. This branch and your online banking platform are testament to that," she said at the opening of Sagicor Bank's New Brunswick Village branch in Spanish Town, the report notes. "This democratization of banking services is crucial for reaching underserved communities, allowing them to partake in financial systems that were previously out of reach. When we close branches, we are excluding some people from the financial services space," the minister added, the report notes. She said the use of artificial intelligence must also be closely assessed, the report relays. "In the banking sector and around the world, they are using more artificial intelligence. And it is useful because it makes the services more efficient. It makes you go in and out more quickly. Customer service is actually better. But as we use artificial intelligence, I maintain that we also have to look at safeguarding those concepts of inclusion, so fairness and non-discrimination is a key element. "When we use AI in banking, usually it's around algorithms. It is very important that we scrutinise all these algorithms and ensure that no Jamaican is disadvantaged because of where they come from, or disadvantaged because whether or not they are male or female," she urged, 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. ======= P E R U ======= PERU: IMF Says Economy is Recovering after Consecutive Shocks ------------------------------------------------------------- An International Monetary Fund (IMF) mission met with the Peruvian authorities and other counterparts during February 21 - March 7 to discuss recent economic developments and policy priorities. This concluding statement summarizes the mission's main takeaways. The Economy is Recovering after Consecutive Shocks The economy had a slight contraction in 2023, due to multiple consecutive shocks, while inflation decelerated rapidly. Economic growth declined to -0.6 percent in 2023, due to climate-related shocks and social turmoil. Inflation is converging towards the target thanks to the BCRP's decisive monetary policy tightening. Strong supervision maintained financial stability. The fiscal position remained strong, although the fiscal deficit (of the non-financial public sector) reached 2.8 percent of GDP (above the fiscal rule target of 2.4 percent of GDP), reflecting a shortfall in tax revenues due to the economic slowdown. Led by sizable import compression and better terms of trade, the current account registered a surplus of 0.6 percent of GDP. International reserves remain at a comfortable level of about 28 percent of GDP. A rebound is expected in 2024 with growth converging towards its potential over the medium term. A strong recovery in agriculture and fishing after El Niño ends, ongoing momentum in mining, and a looser monetary policy (consistent with lower inflation) are expected to support a growth revival. However, only a modest recovery in private consumption and investment is expected, as political uncertainty continues to hamper consumer and business confidence. Real GDP is projected to grow by around 2.5 percent in 2024 with a negative output gap closing gradually until 2026. The current account is envisaged to return to a low deficit in 2024 as growth normalizes and to stabilize at about -1.5 percent of GDP in the medium term. Inflation is expected to decrease towards the middle of the target band, aided by the normalization of supply shocks and a negative output gap, while the BCRP continues with its easing cycle to bring the policy rate to a neutral level. Evolving risks are broadly balanced, and Peru has ample buffers to cope with shocks. Key domestic risks include an intensification of political uncertainty, social unrest, and climate-related shocks. Key external risks comprise weak trading-partner growth, commodity price volatility, and a sharp tightening of global financial conditions. On the upside, a decisive resurgence in confidence, catalyzed by large infrastructure and mining projects, could strengthen private consumption and investment. Peru's proven macroeconomic resilience is reinforced by very strong buffers including low public debt, abundant international reserves, access to international capital markets on favorable terms, and access to the Flexible Credit Line (FCL). Ensuring a Resilient and Inclusive Recovery The BCRP's data-driven monetary policy easing remains appropriate. With inflation entering the target band and anchored inflation expectations, additional data-dependent monetary policy easing is warranted. With the interest rate differential against the U.S. expected to narrow, the BCRP should continue to allow exchange rate flexibility. The authorities could use targeted macroprudential measures to facilitate de-dollarization. Credit dollarization has fallen from around 49 percent in mid-2013 to 22 percent in 2022, but the trend has stalled. The authorities could consider foreign exchange targeted macroprudential measures and removing hurdles to the development of capital markets to reduce unhedged positions. The authorities remain committed to the fiscal prudence. The 2024 budget envisages a deficit of the non-financial public sector of 2 percent of GDP, consistent with the fiscal rule target. While the required adjustment is within reach, given available fiscal space, if lingering effects from the shocks in 2023 lead to lower-than-expected revenues, delaying the consolidation by one year (setting a fiscal target for 2024 of 2.5 percent of GDP instead of 2.0 percent) could help support the growth recovery and lessen the risk of missing the target again. New tax benefit and unfunded spending initiatives by Congress would also jeopardize attaining the target. Recent announcements to restructure the governance of Petro-Peru are steps in the right direction, but further financial support should be conditional on the viability of the firm. Improving fiscal policy guidance could also bolster fiscal policy credibility. Revenue mobilization measures could strengthen fiscal consolidation plans in the medium term. The fiscal deficit is set to gradually decline by 0.5 percent of GDP per year to reach a deficit of 1 percent of GDP by 2026, to preserve medium-term fiscal sustainability. To achieve these targets, a more balanced composition of the envisaged consolidation would be preferable, given Peru's relatively low tax burden. To increase revenues, the authorities could also consider expanding taxes to the digital economy; homogenizing the tax rates on capital and labor income; and curtailing sectoral tax benefits, special regimes, and other tax expenditures. Personal income tax revenues are modest, partly due to low rates, but also because of the high-income thresholds that effectively exempt the majority of formal workers. The authorities' plans to improve tax administration and compliance are important but will likely require additional resources for the tax authority. A long-awaited pension reform is urgently needed to address low coverage and adequacy. A reform proposal is being considered by Congress with noteworthy initiatives, such as expanding the minimum and social pension, introducing automatic enrollment, and periodically assessing parameters. However, the proposal could maximize its impact by clarifying the language limiting withdrawals, increasing the coverage and benefit amounts for the minimum and social pensions (to reduce old-age poverty with only a limited fiscal cost), and improving the targeting of the non-contributory pension. Over the medium term, a comprehensive pension reform remains essential to fully address weak coverage and adequacy. New rounds of early withdrawals from the private pension scheme are ill advised, as they undermine old-age income support and the functioning of the domestic capital market. Enhancing Financial Sector Resilience Systemic risks are limited, but the authorities should continue to closely monitor and proactively contain financial vulnerabilities. Banks remain profitable, with ample liquidity and capital buffers. As the economy recovers, non-performing loans are expected to decline gradually. The regulator should remain vigilant of emerging pockets of vulnerability, particularly in small financial institutions (which were relatively more affected by weak economic growth) and ensure that private pension funds have appropriate liquidity cushions against potential withdrawals. Fully operationalizing new regulations and closing remaining gaps would enhance financial resilience. Most financial institutions are prepared for the full implementation of the Basel III capital requirement in September 2024. New rules for countercyclical capital buffers and provisioning will be effective in June 2024, but the SBS should consider recalibrating their activation criteria. Recovery and resolution plans for domestic systemically important banks have been submitted for review and should be later extended to the financial group level. The authorities should build on their success and continue lowering barriers to entry for Fintech providers, while maintaining appropriate risk-based regulation, implementing interoperability regulations, and introducing frameworks for Open Banking and Finance. Lifting Productivity and Boosting Resilience Policies to boost productivity should focus on removing constraints for firms to grow. GDP growth has disappointed since 2014, with average and potential growth falling to about 2.5 percent, driven by a decline in total factor productivity growth, which has been broad based across firm size, region, and industry. This decline could be related to special corporate tax regimes, as well as labor legislations and regulations that do not create incentives for formalization and growth. Progress in improving regulatory quality, particularly in simplifying procedures for business formalization and construction and operating licenses, is welcome. Efforts should continue to focus on simplifying legislations and regulations that impose excessive costs for formalizing or growing a business. Given Peru's high vulnerability to climate change, increased efforts in building resilience are needed to unlock output gains. Climate change will likely increase damages from natural disasters and undermine potential growth in the future. The authorities have made progress in enhancing public infrastructure, bolstering financial resilience, and identifying adaptation gaps. Nevertheless, climate spending remains low, budget planning lacks adequate costing of key adaptation measures, and territorial planning should be strengthened. Scaling up investments in climate adaptation and resilience would unlock significant potential output gains and fiscal savings over the long term. A recent government initiative to shift the focus to ex-ante resilience building to climate change is a positive step. Digital technologies and artificial intelligence offer a pathway to enhance productivity. There has been progress in FinTech and GovTech, including recent innovations in digital payments and wallets that have increased financial account ownership, as well as VAT e-invoicing and electronic tax payments. Artificial intelligence holds the potential to elevate productivity, especially in the finance, government, education, health, IT, and construction sectors, by increasing the quality-to-price ratio and improving services. Automation through artificial intelligence also presents social challenges as workers will need to transition to new jobs. It is crucial, therefore, to encourage workers to develop skills for effectively integrating artificial intelligence into their work. Effective governance institutions would also reinforce inclusive growth. The authorities reaffirmed their commitment to combating corruption to attract investment and augment the trust in government. Several anti-corruption frameworks are in place (such as integrity officers in public agencies, digital platforms for citizen complaints, and a beneficial ownership registry), but their implementation must be prioritized and supported with adequate resources. Independence and integrity of judicial bodies should be enhanced through robust judicial vetting processes and reduction in the high reliance on temporary judges. Improving coordination among relevant agencies could contribute to effective prosecution and ending corruption impunity. A more ambitious reform agenda is required to durably raise growth. Government's efforts in cutting red tape and unblocking large infrastructure projects, streamlining the tax system, and reforming the procurement framework; and the recently approved political reform are welcome. The OECD accession process provides a clear roadmap for critical reforms to enhance local government capacity, improve the business climate, reduce informality, and reform the civil service, to boost productivity and green and inclusive growth. ===================== P U E R T O R I C O ===================== ZAGACITY TECH: Plan Exclusivity Period Extended to May 30 --------------------------------------------------------- Judge Mildred Caban Flores of the U.S. Bankruptcy Court for the District of Puerto Rico extended Zagacity Tech LLC's exclusive periods to file a chapter 11 plan of reorganization and disclosure statement, and solicit acceptances thereof to May 30 and June 15, 2024, respectively. As shared by Troubled Company Reporter, the Debtor will be in a better position to present a plan once it has time to finalize its reorganization strategy and as soon as the governmental creditor's bar date elapses. Debtor continues to be in constant communication with its financial advisor and counsel for the prosecution of the case and continues to work to increase the feasibility of its operations. The Debtor claims that it needs time to continue the formulation of the exit strategy and negotiations, for which resolution is crucial for the Debtor's reorganization prospects. Zagacity Tech, LLC, is represented by: Javier Vilarino, Esq. Vilarino & Associates, LLC P.O. Box 9022515 San Juan, PR 00902-2515 Telephone: (787) 565-9894 Email: jvilarino@vilarinolaw.com About Zagacity Tech Zagacity Tech LLC distributes and sells technological products, home appliances, audio and TV, in the home and commercial lines. Zagacity Tech LLC filed its voluntary petition for relief under Chapter 11 of the Bankruptcy Code (Bankr. D.P.R. Case No. 23-03787) on November 17, 2023. The petition was signed by Nestor G. Cardona as president. At the time of filing, the Debtor estimated $1 million to $10 million in both assets and liabilities. The Debtor tapped Javier Vilarino, Esq., at Vilarino & Associates LLC as counsel and Albert Tamarez Vasquez, CPA, at Tamarez CPA, LLC as accountant. ============= U R U G U A Y ============= NARANJAL/LITORAL URUGUAY 2: Moody's Ups Subordinate Rating to Ba1 ----------------------------------------------------------------- Moody's Ratings has upgraded the senior secured rating of Naranjal/Litoral Uruguay Issuer 1's (Naranjal/Litoral) to Baa2 from Baa3 and the subordinate rating of Naranjal/Litoral Uruguay Issuer 2's (Naranjal/Litoral) to Ba1 from Ba2. The outlook was changed to stable from positive. RATINGS RATIONALE The rating upgrade reflects the improvements in the project's cash generation profile following the higher than expected inflation period in 2021 and 2022. The power purchase agreement (PPA) signed with UTE in 2017 established a remuneration of $85.36 per megawatt hour (MWh) generated, annually adjusted by the US Producer Price Index for Finished Goods. While Moody's projections at the time the rating was assigned took into account PPA prices at $99.02/MWh for 2024, the inflation has been such that actual PPA prices reached $114.77/MWh. While costs have adjusted at a slower pace, both the margin and the dollar amount of cash flow from operations have increased, while the debt service is fixed. This dynamic have resulted in Moody's forecasting permanently higher senior debt service coverage ratio for the project, that will remain at an average of 1.53x from 2024 until bond maturity in 2042, while the initial projections embedded a ratio of 1.23x for the same period. The operation and maintenance service agreement provides for fixed costs with a 2% annual step up rate through 2027. As other solar projects in the region, generation in 2023 was slightly lower than expected, mainly explained by the above average rainfall during the "El Niño" weather phenomenon. Nonetheless, generation during the last three years remains 0.8% higher than expected by Moody's. Even with lower generation in 2023, the project recorded a senior debt service coverage ratio of 1.56x for the year. Naranjal/Litoral Uruguay Issuer 1's Baa2 senior secured rating reflects the project's long-term, fixed-price power purchase agreement (PPA) with the Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE), Uruguay's government-owned electricity company. The Government of Uruguay (Baa1 stable) acts as a guarantor of UTE's obligations. The PPAs do not require minimum production levels and include compensation provisions for curtailment and defined termination payments. The standard project finance creditor protections are embedded in the bond structure, including a first lien on assets, well-defined cash flow waterfalls, limitations in incurring additional debt and debt distribution tests. Moody's also view the project liquidity favorably, as the project relies on a senior debt service reserve account sized to 12 months of debt service, an advantage over its local peers. Naranjal/Litoral Uruguay Issuer 2's Ba1 subordinated debt rating considers the lower ranking of these notes in the waterfall schedule and the second lien on the project's assets. It also incorporates the existence of a distribution test that could stop debt service on the subordinated notes should the senior debt service coverage ratio (SDSCR) in any year be below 1.15 times. While the existence of a twelve month debt service reserve account mitigates default risk, the two notch difference in the ratings between the senior secured and the subordinated notes reflect this potential restriction on cash flows for the subordinated debt. The stable rating outlook takes into consideration Moody's expectations of stable and predictable cash flow from long-term PPAs. The outlook also incorporates Moody's view of a senior debt service coverage ratio (SDSCR) in the range of 1.35x-1.65x. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS Higher-than-expected energy production or cash flow generation driven by further inflation leading to an SDSCR above 1.70x could exert upward pressure on the rating. A rating upgrade of the Uruguayan government, as the owner of the off-taker responsible for making payments under the PPA (UTE), would also be an important rating consideration. Conversely, an unforeseen reduction in cash flow or operational problems that lead to an SDSCR below 1.4x for an extended period could exert downward pressure on the rating. Additionally, given the linkages with the credit quality of the Government of Uruguay, a multi-notch downgrade of the sovereign rating could also lead to a downgrade of the project's ratings. COMPANY PROFILE The issuers of the notes Naranjal/Litoral Uruguay Issuer 1 and Naranjal/Litoral Uruguay Issuer 2 are two special purpose vehicles, established solely for the purpose of issuing the senior and subordinated B Notes to fund the senior B loan participation and the subordinated B loan participation, per the participation agreement with the Inter-American Investment Corporation ("IDB Invest"), the lender of record. The proceeds from the notes were provided by IDB Invest to Colidim S.A. and Jolipark S.A., the borrowers, which are wholly owned by Global Infrastructure Partners. LIST OF AFFECTED RATINGS Issuer: Naranjal/Litoral Uruguay Issuer 1 Affirmations: Senior Secured Regular Bond/Debenture, Upgraded to Baa2 from Baa3 Outlook Actions: Outlook, Changed to Stable from Positive Issuer: Naranjal/Litoral Uruguay Issuer 2 Affirmations: Subordinate Regular Bond/Debenture, Upgraded to Ba1 from Ba2 Outlook Actions: Outlook, Changed to Stable from Positive The principal methodology used in these ratings was Power Generation Projects published in June 2023. ********* 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 2024. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is US$775 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter A. Chapman at 215-945-7000. . * * * End of Transmission * * *