/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/240524.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, May 24, 2024, Vol. 25, No. 105 Headlines A R G E N T I N A PAMPA ENERGIA: Fitch Affirms 'B-' LongTerm IDR, Outlook Stable B R A Z I L AUREN ENERGIA: Fitch Puts BB+ Foreign Currency IDR on Watch Neg. AZUL SA: CEO Touts M&A as Fix for Troubled Airlines BANCO BV: Moody's Affirms 'Ba2' Deposit Ratings, Outlook Stable BANCO DE BRASILIA: Fitch Lowers LongTerm IDRs to 'B-' CESP: S&P Puts 'BB' ICR on Watch Neg. on AES Brasil Acquisition YINSON BORONIA: Fitch Gives 'BB+(EXP)' Rating on $1.03BB Sec. Notes YINSON BORONIA: Moody's Rates New Senior Secured Notes 'Ba1' C H I L E LATAM AIRLINES: Expands Frequency of Brazil International Flights C O L O M B I A COLOMBIA: Millions Face Two New Fees on Their Pension Fund Savings J A M A I C A JAMAICA: Cost of Food and Non-Alcoholic Drinks up 3.5% in April P E R U PETROLEOS DEL PERU: Fitch Lowers LongTerm IDRs to CCC+ P U E R T O R I C O AGREGADOS FURIA: Case Summary & 10 Unsecured Creditors S U R I N A M E SURINAME: CBS Prepares to Defend Exchange Rate U R U G U A Y URUGUAY: First IPO Under New Rules Set for June With Tech Firm V E N E Z U E L A CITGO PETROLEUM: Bidders Can Be Asked How Accommodate Claims - - - - - ================= A R G E N T I N A ================= PAMPA ENERGIA: Fitch Affirms 'B-' LongTerm IDR, Outlook Stable -------------------------------------------------------------- Fitch Ratings has affirmed Pampa Energia S.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'B-'. Fitch has also affirmed Pampa's senior unsecured notes at 'B'/'RR3'. The Rating Outlooks for the Foreign and Local Currency IDRs is Stable. Pampa's Long-Term Foreign Currency IDR is constrained by Argentina's 'B-' Country Ceiling, which limits the Foreign Currency rating by incorporating transfer and convertibility risk. The ratings reflect Pampa's strong operating performance despite the country's economic challenges, such as hyperinflation and regulatory unpredictability. The company's ratings also reflect exposure to Compañía Administradora del Mercado Mayorista Eléctrico (CAMMESA). CAMMESA is responsible for managing wholesale electricity market transactions in Argentina. It relies on government subsidies to cover the cost of the electricity generated. This adds an additional layer of risk to Pampa Energia's operations since a portion of Pampa Energia's revenues depends on receiving payments from CAMMESA. KEY RATING DRIVERS Strong Operator; Weak Operating Environment: Pampa is an integrated energy company in Argentina with significant market shares across its business segments: 15% in power generation, 8% in exploration and production (E&P), and between 94%-100% in petrochemicals. Although Pampa primarily operates within the challenging economic climate of Argentina, characterized by high inflation, unemployment, high cost of capital, capital controls, and an unstable regulatory environment, the company has maintained a conservative leverage profile and strong liquidity. This resilience is a result of Pampa's continuous efforts to adapt its financial strategies to preserve its strong credit standing. In 2023, approximately 37% of Pampa's revenues came from power generation, 33% from E&P, and 29% came from the petrochemical segment. The EBITDA breakdown was 46%, 40%, and 6%, respectively. With the PEPE VI expansion, Fitch expects power generation revenue to increase by approximately 13%, given the increased renewable capacity of 140MW for an average awarded price of USD62 per MWh. Additionally, given the Néstor Kirchner Gas Pipeline will have been operational for a full year, average shale gas production is anticipated to increase by around 30%, with EBITDA of approximately USD400 million anticipated from the E&P segment in 2024. Solid Leverage Profile Despite Increased Working Capital Needs: Fitch's base case forecasts total debt/EBITDA (leverage) will be 1.9x in 2024, slightly below 2.1x, roughly the same as 2023. This is despite increased delays in CAMMESA payments, which comprise roughly 45% of Pampa's revenues, and debt issued to manage working capital needs. Currently, CAMMESA's payment delays are at a record-high at over 120 days from its contracted 42 days. Despite an impairment loss of USD34 million over CAMMESA receivables already booked in 1Q24 by Pampa, Fitch estimates leverage will decline to 1.6x in 2025. Fitch expects net debt/EBITDA to be 0.9x in 2024, and EBITDA interest coverage is projected to remain solid, averaging 6x over the forecast period. Pampa does not face major maturities until January 2027. Gas and Renewables Expansion Affects Cash Flow: Fitch estimates balanced FCF in 2024 despite a boost in Pampa's capital investment to increase gas production and advance expansion of its PEPE VI wind farm. The company estimates total capex of approximately USD1.1 billion over the 2024 to 2026 period. The company has predictable cash flow as most of its EBITDA comes from U.S.-dollar-denominated contracts with government-related entities. Pampa's two main business segments, upstream and power generation, comprised roughly 78% of EBITDA in 2023, with generation representing 57% of total consolidated EBITDA. Plan Gas Supports Liquidity: Pampa was awarded contracts under Plan Gas in December 2022 for a daily volume of 4.8 million cubic meters per day (m3d) of gas at a guaranteed average price of USD3.50 per million Btu through 2024. This was in addition to the extension of its nine million m3d of production commitment until December 2028. Incremental revenue from these awards will help maintain the company's solid financial position. DERIVATION SUMMARY Pampa's ratings are constrained by Argentina's 'B-' Country Ceiling. Pampa's generation business compares with those of AES Argentina Generacion S.A. (CCC-), Genneia S.A. (CCC-), Generacion Mediterranea S.A. (GEMSA; CCC-) and MSU Energy (CCC-). The company's gas production business most compares with Canacol Energy Ltd. (CCC). In integrated energy, Pampa's closest peer is Capex S.A. (CCC+). Pampa and Central Puerto S.A. (not rated) are power producers with the largest market share in Argentina by installed capacity in 2023 with 15% each, followed AES Argentina at 7%. In addition, Pampa is a leading developer in the sector and has added 1.2GW of installed capacity since 2018. The company expects to add another 140MW by the end of 2024. Pampa is expected to have the lowest gross leverage ratios among generation companies in the country, averaging 1.6x over the rating horizon, compared with AES Argentina's 1.9x, Genneia's 2.8x, GEMSA's 5.1x and MSU Energy's 3.8x. Capex is the company's closest peer in Argentina, and like Pama, is an integrated gas producer and generation company. Fitch expects Capex's gross leverage to be higher than Pampa's, averaging 2.5x over the rated horizon. Pampa's upstream segment compares favorably with other gas concentrated production companies like Canacol. Pampa's production is expected to average 107,000 barrels of oil equivalent per day (boed) over the 2024-2026 period, higher than Canacol's 27,000 boed. Pampa's PDP and 1P reserve life in 2023 of 3.0 years and 8.6 years, respectively, compares with Canacol's 5.7 years and 6.3 years and CGC's 2.0 years and 4.6 years. KEY ASSUMPTIONS - Daily oil production average of 4,800 barrels per day in 2024-2026; - Daily gas production average of 107,000 boed in 2024-2026; - Average realized natural gas price of USD3.50 per million Btu, flat over the rated horizon under Plan Gas; - Average realized Brent crude oil price of $80 per barrel in 2024, $70 per barrel in 2025, and $65 per barrel in 2026. - Installed year-end capacity of 5,332 MW in 2023, 5,472 MW in 2024 and each year thereafter; - Average monomic price of USD35.64 per MWh in through 2026; - Load factor across entire portfolio average of 45% in 2023 and 43% thereafter; - CAMMESA payments received within 80 days post-2024. - Fitch average and end of period ARS/USD exchange rates; - Average annual capex of USD370 million over the 2024-2026 period; - No dividends. - Debt issuances of around USD350 million in 2024. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade in Argentina's Country Ceiling; - Contracted exports with high quality off-takers, or PPAs with non-regulated customers, with a long-term tenure with adequate legal protections to avoid interference from the federal government. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A downgrade of Argentina's Country Ceiling; - Significant delays in payments that negatively affect working capital, liquidity and leverage, or revision of existing contracts with CAMMESA; - Amendments to capital control rules that weaken the company's ability to access capital and refinance debt; - Significant deterioration of credit metrics, with total debt/EBITDA of 4.5x or more; - Should Fitch believe a default of some type appears probable, or a default or default-like process has begun, which would be represented by a 'CC' or 'C' rating. LIQUIDITY AND DEBT STRUCTURE Adequate Liquidity: Pampa reported a consolidated cash position of USD171 million and marketable securities of USD471 million at YE23. The combined USD642 million in cash and equivalents provides the company with liquidity to cover over four years of interest expense. However, Pampa is affected by crippling inflation, which limits its financial flexibility and could affect debt repayment. The company's debt and interest expense are predominately in U.S. dollars, and Fitch's rating case assumes it will continue to access the official exchange to service its debt. ISSUER PROFILE Pampa is the largest independent energy integrated company in Argentina. Pampa and its subsidiaries are engaged in generation and transmission of electricity in Argentina, and oil and gas exploration and production, refining, petrochemicals and hydrocarbon commercialization and transportation in Argentina. ESG CONSIDERATIONS The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. Entity/Debt Rating Recovery Prior ----------- ------ -------- ----- Pampa Energia S.A. LT IDR B- Affirmed B- LC LT IDR B- Affirmed B- senior unsecured LT B Affirmed RR3 B =========== B R A Z I L =========== AUREN ENERGIA: Fitch Puts BB+ Foreign Currency IDR on Watch Neg. ---------------------------------------------------------------- Fitch Ratings has placed Auren Energia S.A.'s 'BB+' Long-Term Foreign and 'BBB-' Local Currency Issuer Default Ratings (IDRs) on Rating Watch Negative. Fitch has also placed the 'AAA(bra)'Long-Term National Ratings for Auren and CESP - Companhia Energetica de Sao Paulo (Cesp), as well as their debenture issuances, on Negative Watch. The Negative Watch reflects the expected deterioration of Auren's consolidated financial profile, potentially leading to a downgrade of the company's Local Currency IDR up to three notches, depending on the final capital structure and deleverage trend after the conclusion of the announced AES Brasil Energia S.A. acquisition. Auren's business profile benefits from the potential operating synergies from the acquisition, relevant gains of scale and greater diversification of its asset portfolio. The Negative Watch will be resolved after the conclusion of the transaction, which may take more than six months. KEY RATING DRIVERS High Financial Leverage: On May 15th, 2024, Auren announced plans to acquire AES Brasil for BRL7.0 billion, with a mix of equity and a variable cash component ranging from BRL3.3 billion to BRL7.0 billion. Backed by a strong cash reserve of BRL 4.3 billion and a BRL 5.4 billion four-year term loan, Auren expects to finalize the acquisition by October 2024, pending legal and regulatory clearances, including AES Brasil creditor consent. Assuming 70% of the acquisition is in cash, Fitch believes Auren's net debt-to-EBITDA ratio will increase to approximately 5.4x in 2024 and BRL5.2x in 2025, up from 2.0x in March 2024. This forecast is on a pro forma and consolidated basis and does not consider potential synergies that may arise from the acquisition; however, it incorporates some reduction in dividends. These levels are significantly above the current downgrade sensitivity of 3.0x. Fitch projects consolidated EBITDA of BRL3.4 billion in 2024 and BRL3.6 billion in 2025, with approximately 44% coming from AES Brasil's assets. Stronger Business Profile: The acquisition would improve Auren's business scale and asset diversification, with assured energy increasing to 3.7 aGW in 2024 (+2.1 aGW) and the portfolio remaining highly contracted. Contribution from wind assets would grow to 35% in 2024 from an estimated 29% without the acquisition. The contribution from solar assets would decrease to 5% from 9%. The new mix would favor the expansion into solar, which offers higher growth prospects, but lower pricing. If Auren successfully acquires AES Brasil, it will face challenges recontracting nearly one-third of its portfolio by 2032. This is because AES Brasil's hydro power concessions, which represent 1.2 average gigawatts (aGW), are set to expire by that time. DERIVATION SUMMARY Not applicable. KEY ASSUMPTIONS - Full consolidation of AES Brasil in 2024, with cash payment of BRL4.9 billion to AES Brasil's shareholders; - Disbursement in 2024 of BRL5.4 billion from a four-year term loan; - No equity issuance. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - The Negative Watch may be removed if Auren raises significant equity to partly finance the acquisition. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - The acquisition closes with no significant issuance of equity, which would result in a downgrade of the Local Currency IDR up to three notches, with the Foreign Currency IDR being equalized with the Local Currency IDR. LIQUIDITY AND DEBT STRUCTURE Comfortable Liquidity: Assuming that 70% of the acquisition, which amounts to BRL4.9 billion, is settled in cash and that a majority of AES Brasil's creditors approve change of control and flexibilization covenants, Fitch believes Auren would end 2024 with a comfortable cash balance of approximately BRL7.8 billion. This is equivalent to 2.4x the short-term debt. This estimate also assumes the available BRL5.4 billion four-year term loan is fully disbursed and no debt acceleration from AES Brasil's or Auren's creditors. Auren's consolidated cash and equivalents were BRL3.1 billion at March 2024, compared to total debt of BRL6.5 billion and short-term debt of BRL859 million. The company raised long-term debentures of BRL1.5 billion during the second quarter of 2024. AES Brasil had cash and equivalents of BRL2.4 billion at March 2024, and total debt of BRL12.5 billion. In April 2024, the group raised a total of BRL1.7 billion in long-term debt and used the proceeds for refinancing. Considering payments made after March 2024, the balance of debt due in 2024 is approximately BRL806 million. ISSUER PROFILE Auren is a mid-sized power generation company in Brazil, with 1.6 aGW of assured energy in operation and 167 aMW under construction, proportional to equity participations in the assets. Porto Primavera hydro plant, operated by the fully-owned subsidiary Cesp, is the group's main asset. Entity/Debt Rating Prior ----------- ------ ----- CESP - Companhia Energetica de Sao Paulo Natl LT AAA(bra)Rating Watch On AAA(bra) senior unsecured Natl LT AAA(bra)Rating Watch On AAA(bra) Auren Energia S.A. LT IDR BB+ Rating Watch On BB+ LC LT IDR BBB- Rating Watch On BBB- Natl LT AAA(bra)Rating Watch On AAA(bra) senior unsecured Natl LT AAA(bra)Rating Watch On AAA(bra) AZUL SA: CEO Touts M&A as Fix for Troubled Airlines --------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that consolidation would lower the cost of capital for Latin American airlines, resulting in better services for customers, according to Azul SA Chief Executive Officer John Peter Rodgerson. "We've always been big believers in consolidation," Rodgerson said in an interview in New York. "The product improves for customers, and it could really strengthen a great market in Brazil that we're seeing today." Rodgerson declined to comment on "active" M&A processes. Azul is said to be exploring a merger with Gol Linhas Aereas Inteligentes SA, with talks underway for a potential deal with the controlling shareholder of the struggling rival Brazilian airline, according to globalinsolvency.com. Latin American airlines have largely struggled since the pandemic as governments across the region offered little help for the sector, the report notes. Avianca Holdings SA, Latam Airlines Group SA and Grupo Aeromexico SAB filed for bankruptcy in 2020, the report recalls. Brazil's Gol filed for protection from creditors in late January after a dozen debt exchanges, the report notes. The Azul CEO has met with Brazilian President Luiz Inacio Lula da Silva to discuss a plan to use public funds as collateral for loans, giving airlines some breathing room, the report relays. He said the government understands the importance of providing debt relief, and is actively working on a solution, which should come "in a few months," the report adds. As reported in the Troubled Company Reporter-Latin America in July 2023, Fitch Ratings downgraded Azul S.A.'s (Azul) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'RD' from 'C', following the conclusion of its exchange offer, which Fitch considered a distressed debt exchange (DDE). Simultaneously, Fitch has upgraded Azul's IDRs to 'B-' from 'RD' to reflect its post-restructuring risk profile. BANCO BV: Moody's Affirms 'Ba2' Deposit Ratings, Outlook Stable --------------------------------------------------------------- Moody's Ratings has affirmed all ratings and assessments assigned to Banco BV (BV), including the bank's Ba2/Not Prime long and short-term local and foreign currency deposit ratings as well as its foreign currency senior unsecured debt, senior unsecured MTN Program and other short term debt ratings of Ba2, (P)Ba2, and (P)Not Prime, respectively. Moody's also affirmed the bank's ba3 baseline credit assessment (BCA), ba2 adjusted BCA, Ba1/Not Prime long and short-term local and foreign currency counterparty risk ratings, and Ba1(cr)/Not Prime(cr) long and short-term counterparty risk assessments. The outlook on the long-term deposits and senior unsecured debt ratings remains stable. RATINGS RATIONALE The rating action reflects Moody's expectation of a gradual improvement in BV's asset quality and profitability metrics over the next 12 to 18 months. Falling problem loan formation will allow for a reduction in credit costs, enabling the bank to cautiously rekindle its risk appetite for higher-yield loans. In addition, the bank's strategy to expand lending to the commercial segment and new clients in consumer financing, as well as to increase revenue diversification via growth of non-interest income, will yield better risk-adjusted returns in the medium term. However, intense competition in BV's new target markets, combined with the country's still-high interest rates and indebtedness level, will hinder a more pronounced improvement of profitability. BV's ba3 BCA is still limited by the bank's lower-than-peers' ratio of tangible common equity (TCE) to risk weighted assets (RWAs), as measured by Moody's, at 6.8% in March 2024. The large stock of deferred tax assets (DTAs) on BV's balance sheet and other intangibles, which Moody's deducts from common equity to reflect loss absorption capacity, is the main constraint to the ratings. BV's Common Equity Tier 1 ratio of 12.9% is, however, in line with peers. The problem loan ratio of BV declined to 6.8% in March 2024, from 7.1% a year earlier, reflecting the de-risking strategies the bank has implemented since the end of 2021, the write-off of loans that accounted for 5.2% of the credit portfolio in the trailing twelve months, as well as the improvement of households' disposable income stemming from low inflation and a strong job market. Looking forward, problem loans should continue to decline gradually as better-quality loan vintages increase in proportion of total outstanding loans. The sizable volume of loan loss reserves (LLR), at 120% of problem loans in March 2024, provides a good buffer against potential asset risks. In December 2023, BV reported net income of BRL1.3 billion, equivalent to 0.9% of tangible assets, showing a decrease from the 1.2% average ratio from 2018-2022. The bank's bottom-line result was affected primarily by a 68% rise in provision for loan losses, while margins remained squeezed due to BV's more selective approach to riskier loan origination. BV's earnings quality and recurrence are set to improve, contingent on the success of its strategy to leverage on a broader product offering and on technology investments to expand both cross-selling and customer base, also resulting in improved efficiency metrics. The stable outlook incorporates Moody's expectation that BV's financial profile will remain consistent with a ba3 BCA over the next 12-18 months, supported by a strong liquidity, steady access to term funding and gradually improving asset quality and profitability. BV's Ba2 local and foreign currency deposit ratings incorporate a one-notch uplift to reflect Moody's assessment of high probability of affiliate support from its shareholder Banco do Brasil S.A. (BB, Ba2 positive, ba2). BB owns 50% of BV and it purchases BV's consumer loans from time to time at market conditions. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS BV's BCA could be upgraded if the bank reports a sustained improvement in business diversification and capitalization. At this point, an upgrade on the Ba2 deposit rating would depend on both BV's standalone BCA and the Government of Brazil's sovereign rating being upgraded simultaneously. Conversely, downward pressures to BV's BCA and ratings could arise from sharp asset quality deterioration over the next outlook horizon, resulting in consistent weakening of its capital ratios, or a significant decline in liquid resources and funding quality. The principal methodology used in these ratings was Banks Methodology published in March 2024. BANCO DE BRASILIA: Fitch Lowers LongTerm IDRs to 'B-' ----------------------------------------------------- Fitch Ratings has downgraded Banco de Brasilia S.A.'s (BRB) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B-' from 'B', Shareholder Support Rating (SSR) to 'b-' from 'b' and Long-Term National Rating to 'BBB+(bra)' from 'A-(bra) '. Fitch has maintained the Rating Watch Negative (RWN) on BRB's IDRs, National Ratings, SSR, and 'b-' VR. The downgrades follow Fitch's reassessment of BRB's shareholder support, which is highly influenced by a lower propensity of support compared to other rated subnational commercial banks. The RWN for BRB's IDRs, National Ratings, SSR, and VR reflect Fitch's ongoing views about BRB's challenges regarding capitalization. Additionally, the RWN reflects issues with the timeliness of shareholder support for the bank, given BRB's core equity capital remain close to regulatory minimum requirements. KEY RATING DRIVERS IDRs, SHAREHOLDER SUPPORT RATING AND NATIONAL RATINGS Support Driven Ratings: The IDRs, SSRs and National Ratings of BRB are based on the ability and willingness of its parent, the Government of Federal District (GDF) to provide timely support to the bank, if needed. Fitch believes the incentives for GDF to provide BRB support stem from the bank's strategic importance as the local government's main financial agent. Additionally, BRB has a meaningful market share in loans and deposits in the Federal District, its home town. Timeliness Constrains Support: Fitch believes that GDF is capable of supporting BRB; however, their willingness to provide such support has weakened. This is due to BRB's continued weak core capital position and GDF's lack of necessary capital support for its bank subsidiary. A breach of the minimum required capitalization could pose a risk to the support-based ratings and lead Fitch to reassess BRB's importance to the state. National Ratings: BRB's National Ratings are notched from Fitch's view of GDF's creditworthiness on the national scale. Fitch believes the bank's National Rating better reflects its creditworthiness relative to its respective supporting entity. VIABILITY RATING BRB's VR Captures its Standalone Profile: The RWN for BRB's VR reflects the near-term downside risks to the bank's core capital buffers and business model stabilization. The current VR is one notch below the implied 'b' VR, as the bank's capitalization and leverage highly influence the VR and is a weak link in the bank's creditworthiness. Capital Adequacy Concerns: BRB's common equity tier 1 (CET1) ratio of 7.87% at end-4Q23 improved marginally from 7.59% at 3Q23, which Fitch considers a narrow buffer against the minimum requirement of 7.0%. While the Tier 1 and Total Regulatory Capital ratios of 9.47% and 14.68%, provide adequate buffers over their minimum requirements, the tighter CET1 reduces the bank's flexibility to respond to adverse shocks and grow the business. Capital Increase Underway: On May 14, 2024, BRB's board of directors approved a capital increase plan of up to BRL1 billion and placed by BRB's minority shareholders. Subject to execution risks, regulatory approvals and the disclosed final amount, the completion of the capital measures, if successful, would support BRB's ability to more sustainably meet capitalization and growth requirements. Under Fitch's pro-forma calculations, using December 2023 financials, the new capital would potentially benefit CET1 ratio to levels around 11.5%. Execution Risks: BRB's business and earnings profile is pressured by uncertain core earnings prospects and capital constraints. This makes it difficult for the bank to increase business volumes and defend earnings against unexpected shocks in the medium term. Management continues to perform RWA optimization and portfolio sales to avoid breaching regulatory requirements. The bank plans to conduct a follow-on, aiming to raise an additional BRL1 billion-BRL2 billion. This is expected to begin when market conditions become favorable. Profitability Stabilization: In 2023, BRB's operating profit-to-risk-weighted assets (RWAs) ratio was 0.5%, from 0.6% in 2022 and a four-year average of 1.65%. The bank's profits for the past two years were boosted by non-recurring events. However, the 2023 figures were primarily driven by operational earnings and supplemented by portfolio assignment activities and tax credits. Nevertheless, high loan provisions continue to weigh on the bank's profit generation capacity, with this trend expected to persist in the near future. Controlled Asset Quality: Loans classified in the 'D-H' range stood at 4.3% of gross loans at YE 2023, from 3.4% at YE 2022. The fall was mostly driven by the credit card segment. During the same period, non-performing loans (NPLs) were 2.3% of gross loans from 2.1% one year before. Fitch expects asset quality trends to remain linked with the bank's growth appetite for unsecured loans, although these will remain manageable given BRB's high proportion of secured loans in its portfolio. Adequate Funding and Liquidity: BRB's funding and liquidity profile has remained stable. BRB benefits from a stable and diversified customer base, funding its loan book through a combination of retail deposits (24% of deposits as of 2023), judicial deposits (42%), deposits from its majority shareholder, the Federal District Government (8%) and from corporates/ institutions (17%). The bank's liquidity position is adequate against short-term maturities. Fitch aims to resolve the RWN in the next six months depending how the bank's capitalization and profitability positions evolve. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade IDRs, SSR AND NATIONAL RATINGS The ratings could be downgraded by multiple notches if Fitch believes BRB's strategic role and importance to the state have diminished, and if there is a capital breach and/or regulatory intervention. VR The ratings are primarily sensitive to BRB's capitalization. The VR could be downgraded if capital optimization measures, including potential reductions in RWAs, were unsuccessful and insufficient to prevent a regulatory capital breach. The ratings would also come under pressure if its earnings prospects materially weaken and delay the improvement of capital generation. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade IDR, SSR and NATIONAL RATINGS There is limited scope for upward rating action given the RWN. However, positive changes in Fitch's assessment of GDF's ability and willingness to provide support to BRB could affect the ratings. VR The VR could be removed from RWN if the bank managed to bring sustainable relief to its capital position without compromising structural profitability, for instance through fresh capital injections. If the bank successfully raises capital inorganically, there could potential upside to the VR. Over time, the ratings could be upgraded if there is a clear path to business model stabilization and sustainable core profitability as well as adequate capitalization and buffers. VR ADJUSTMENTS The Viability Rating has been assigned below the implied Viability Rating due to the following adjustment reason: Weakest Link - Capitalization & Leverage (negative). The Business Profile score has been assigned below the implied score due to the following adjustment reason: Management and Governance (negative). The Asset Quality score has been assigned below the implied score due to the following adjustment reason: Underwriting Standards and Growth (negative). The Earnings & Profitability score has been assigned below the implied score due to the following adjustment reason: Historical and Future Metrics (negative). PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS BRB's ratings are driven by GDF's ratings. ESG CONSIDERATIONS BRB - Banco de Brasilia SA has an ESG Relevance Score of '4' for Financial Transparency due to problems in the presentation of financial statements in the past that raise concerns about their governance, which has a negative impact on the credit profile, and is relevant to the rating[s] 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 ----------- ------ ----- BRB - Banco de Brasilia SA LT IDR B- Downgrade B ST IDR B Rating Watch Maintained B LC LT IDR B- Downgrade B LC ST IDR B Rating Watch Maintained B Natl LT BBB+(bra)Downgrade A-(bra) Natl ST F2(bra) Downgrade F1(bra) Viability b- Rating Watch Maintained b- Shareholder Support b- Downgrade b CESP: S&P Puts 'BB' ICR on Watch Neg. on AES Brasil Acquisition --------------------------------------------------------------- S&P Global Ratings placed its 'BB' global scale and 'brAAA' national scale ratings on CESP - Companhia Energetica de Sao Paulo (CESP) on CreditWatch with negative implications. Given Auren Energia S.A.'s May 15 announcement that it had signed an agreement to acquire AES Brasil Energia S.A. and other Brazilian entities indirectly controlled by The AES Corp., we expect Auren's credit metrics to deteriorate -- although to an uncertain extent currently -- due to the equity payment and R$9 billion in AES Brasil's net debt that the company will incorporate. The CreditWatch negative listing reflects the potential downgrade of CESP due to the increase in Auren's leverage. S&P expects to resolve the CreditWatch once and if the transaction is completed, and it can assess its implications in terms of Auren's capital structure and business profile. The business combination of Auren and AES Brasil will be implemented through a corporate reorganization, turning the latter into a wholly-owned subsidiary of Auren, and merging the shareholding bases of both entities. According to the transaction's terms, each shareholder of AES Brasil may choose among the following: -- Receive 10% in cash and 90% in Auren's shares; -- Receive 50% in cash and 50% in shares; and -- 100% in cash. AES (BBB-/Stable/A-3), which has a 47.3% stake in AES Brasil, has already indicated its option for an all-cash transaction, while Votorantim S.A. (BBB/Stable/--; with a 4.1% stake) opted for the first option. The remaining shareholders (with a combined 48.6% stake) have until the end of September, according to the company's tentative timetable, to choose among the options. In case any shareholder doesn't do so, the first option would be applied. Given the abovementioned options, Auren would disburse between R$3.29 billion and R$6.95 billion for the acquisition, which will cause its leverage to jump, although currently to an unknown extent. Nevertheless, S&P believes Auren has enough liquidity to withstand the cash outlays, as the company has secured a R$5.4 billion syndicated credit facility. This, together with its R$4.6 billion in cash position as of the end of April 2024, results in significant financial flexibility. The acquisition's completion requires conditions precedent, including regulatory and antitrust approvals. The combined entity will have pro forma revenue of R$9.6 billion and EBITDA of R$3.5 billion as of 2023. It will also become the third-largest power generator in Brazil with total installed capacity of 8.8 gigawatts (GW; 2.4x of Auren's current capacity), with a 100% renewable energy portfolio comprising hydroelectric (54% of total capacity), wind (36%), and solar (10%) assets. In addition to increasing diversification and scale, Auren expects to improve its operating efficiency by capturing synergies, including reducing selling, general, and administrative expenses (by R$120 million per year, which is 25% of total combined costs); tax planning (utilizing accumulated tax losses of R$790 million to offset AES Brasil's income); improving the performance of the acquired entity's assets (increasing its current availability from 88% to Auren's average of 93%-95%); and increasing its commercialization margins from a broader portfolio mix. YINSON BORONIA: Fitch Gives 'BB+(EXP)' Rating on $1.03BB Sec. Notes ------------------------------------------------------------------- Fitch expects to rate Yinson Boronia Production B.V.'s senior secured notes as follows: - $1.035 billion Senior Secured Notes 'BB+'; Outlook Stable; TRANSACTION SUMMARY Fitch expects the proceeds of this transaction to be used to refinance the original funding of the floating-production storage and offloading (FPSO) unit, Anna Nery, which operates in the Marlim Field in the post-salt layer of the Campos Basin, off Brazil. The transaction is backed by a first-priority mortgage on the vessel and cash flows from the underlying charter agreement between Yinson Boronia Production B.V. (SPV), as owner and issuer, and Petroleo Brasileiro S.A. (Petrobras, BB/Stable), as offtaker. The agreement is in place until April 2048. Additionally, Fitch expects that within 60 days of repayment of the original debt the issuer will release the liens on the collateral securing the existing obligations and perfect the collateral of this transaction's notes. This timeline can be further extended by an additional 60 days if the issuer injects equity into the transaction in an amount equal to the first interest payment. The first interest payment (first principal payment is due in January 2025) on the notes will occur in July 2024 in order to align Yinson's fiscal year end in January with semi-annual principal and interest payments on the notes. In case the collateral is not released and perfected within 60 days, either equity or note proceeds will be used to make this payment. The financial structure considers a fully amortizing transaction. Fitch's rating addresses the timely payment of interest and timely payment of principal on a semiannual basis until legal final maturity in July 2042. KEY RATING DRIVERS Offtaker Obligation Strength Exceeds Petrobras' IDR: The offtaking party in the charter agreement is Petrobras, the state-owned oil company of Brazil. Fitch rates Petrobras in line with the Brazilian sovereign (BB/Stable). The charter contract between the operator and an offtaker of an FPSO is considered to be a strategic long-term contract to produce hydrocarbons in a specific area, as FPSOs are built to suit. The contract's long-term nature (25 years), the low cost against cash flow generation, and the complexity of the vessel make the contract and use of the vessel highly strategic to Petrobras. Even under distressed environments, these contracts and obligations are likely to be honored and can be differentiated from other corporate debt obligations. The charter contract may be considered an operational/net revenue cost to Petrobras to continue business operations and produces low break-even cash flow generation. For these reasons, Fitch determines the strength of the offtaker's payment obligation to be one-notch above Petrobras's credit quality at 'BB+'. Sovereign Event Risk; Transfer and Convertibility (T&C) Mitigated: The transaction's reserve account of six months of debt service and offshore payment obligations offer sufficient protection to mitigate potential transfer and convertibility (T&C) restrictions and exceed Brazil's Country Ceiling of 'BB+' by one notch. However, event risk is linked to the operating environment, with Petrobras as a state-owned enterprise, potentially subject to political interference, limiting the uplift over Brazil's Long-Term IDR to two notches, and therefore 'BBB-'. The transaction's limiting factor is Fitch's assessment of the strength of the offtaker's payment obligation, which is assessed at 'BB+'. Experienced Operator Mitigates Risk: The operator, Yinson Production, is a global player in building and managing FPSOs and operates in Brazil, Ghana, Vietnam, Nigeria, and Malaysia. Yinson entered the Brazil market four years ago and has two vessels contracted to come online in the next several years. A bankruptcy of Yinson could expose the transaction to a potential termination of the underlying charter and services agreement. Fitch assesses Yinson's credit quality to be near investment grade and as a result, Yinson does not limit the transaction's rating. Strong Financial Metrics: Fitch's cash flow analysis has assessed the repayment of the fully amortizing debt, assuming timely interest and principal payments under a nondeferrable sculpted amortization schedule and a cash trapping condition should the debt service coverage ratio (DSCR) fall below 1.15x. Fitch's base case expects the DSCR to be between 1.26x-1.28x, which is in line with investment grade metrics and does not pose a constraint to the transaction's rating. At the 'BB' stress case it drops to 1.10x-1.16x, which remains sufficient for to support the rating. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade As described in Key Rating Drivers, the rating of the transaction is linked to Petrobras' IDR, with an uplift of one notch. Therefore, a Petrobras downgrade could trigger a downgrade of the notes. Both ratings are on a Stable Outlook. The other counterparty that could constrain the rating is the operator, whose credit quality is assessed to be near investment grade and as a result, does not limit the rating but could pose a constraint should the credit quality deteriorate. Finally, the cash flow analysis results in a sufficient output, consistent with ratings in the 'BBB' category and does not currently pose a constraint to the transaction rating. Although the DSCR and ultimate debt repayment depend on uptime, maintenance days, opex and CPI, none of these variables is likely to materially affect the rating under Fitch's stress case. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction rating. Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade The rating is influenced by transaction counterparties, the operating environment and credit metrics. An upgrade of Brazil (which would likely also result in an upgrade of Petrobras) or an upgrade of the operator may result in an upgrade of the transaction rating. However, Fitch does not anticipate such as scenario as the rating is on a Stable Outlook. CRITERIA VARIATION The rating assigned is one notch above the offtaker's IDR. According to "Oil Vessel-Backed Financing Rating Criteria" when determining the strength of the offtaker's payment obligation for sole-offtaker, the strength of the offtaker's obligation is typically equalized or notched down from the offtaker's IDR. However, in this case, Fitch considers the strategic importance of the charter contract to Petrobras and very favorable economics when determining the strength of the obligation. For this transaction, Fitch believes the strength of the offtaker's payment obligation is equivalent to one notch above Petrobras' IDR and equivalent to a 'BB+', as such this is treated as a criteria variation. USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. 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. YINSON BORONIA: Moody's Rates New Senior Secured Notes 'Ba1' ------------------------------------------------------------ Moody's Ratings has assigned a first time Ba1 rating to the senior secured notes to be issued by Yinson Boronia Production B.V. ("Yinson Boronia", "The issuer") in the amount of up to $1,035 million with a final maturity in July 2042. The rating outlook rating is stable. Proceeds of the issuance will be used to fully amortize approximately USD740 million in Yinson Boronia existing debt incurred for the construction of the FPSO Anna Nery and pay related issuance costs, with remaining proceeds made available to the shareholders. The assigned rating is based on preliminary documentation. Moody's does not anticipate changes in the main conditions of the notes. Should issuance conditions and/or final documentation materially deviate from the original ones submitted and reviewed by the rating agency, Moody's will assess the impact that these differences may have on the ratings and act accordingly. RATINGS RATIONALE The Ba1 rating reflects Moody's view of the project's low fundamental risk profile, which is supported by FPSO Anna Nery's fully contracted revenue profile with Petroleo Brasileiro S.A.- PETROBRAS ("Petrobras", Ba1 stable), pursuant to 25-year charter and services agreements that provide for a stable and predictable availability-based revenue stream during the life of the transaction. It also considers the contractual structure that entails limited volatility on cash flows with regular interruptions in production for maintenance. The rating further factors the high importance of the FPSO for Petrobras, given the strong economics of the Marlim oil filed carrying an estimated pre-tax net present value (NPV) of USD11 billion and a forward-looking breakeven price of USD30.8/bbl. The sponsors' profile with willingness to provide additional financial support, if needed, is also an important credit consideration. The Ba1 rating also considers the proven technology employed in the FPSO Anna Nery, as a mid-sized vessel with converted hull to operate under a vertically integrated business model without dry-docking. Yinson's group expertise in offshore oil services, as one of the largest independent owner and operator of FPSOs globally and growing presence in Brazil, supports a view that the vessel operates on par with other Brazilian FPSOs, despite its short track record of operations. This assumption is based on the favorable operating track record of the sponsor Yinson Production Offshore PTE LTD (YPOPL), who presented an average historical uptime is 99.7% for its total fleet, having effectively remediated disruptions that occurred during the ramp-up of Yinson Boronia. From first oil in May 2023 to March 2024 the FPSO Anna Nery's average commercial uptime was 97.2%. The rating considers the project's moderate leverage profile. Under Moody's base case, debt service coverage ratio (DSCR) yields an average 1.26x and a minimum 1.22x over the life of the transaction. Moody's base case assumes an average 97.5% commercial uptime, a 15% cost contingency (5% in addition to the independent engineer assumption) and an average of 7.5 maintenance days per year during the charter agreement term. It also considers 2 days of gas flaring per year. The leverage profile is strengthened by the resilience of revenue upon significant stresses to unplanned maintenance and uptime, given lower dependence on bonus payments. A Moody's breakeven analysis indicates that DSCRs reach 1.0x when commercial uptime drops to 84.3% on annual average, or when costs increase by an average 64%. The rating is directly limited to Petrobras' credit quality, the sole project offtaker for the charter and service agreement. Notably, sovereign linkages also exist mainly through Brazil's regulatory framework, set by the Petroleum National Agency (ANP), and therefore exposure to interference of the Government of Brazil (Brazil, Ba2 positive) given its operation in Brazilian waters. Nonetheless, relevance of the FPSO to Petrobras' revenue stream combined with the substantial royalty and tax generation of the oil field provide an alignment on the economic interests mitigating corporate and sovereign risks. Furthermore, the charter payment structure with an offshore collection account for USD-charter payments and revenues in BRL-services, sized to meet onshore operating expenses in local currency, significantly reduce foreign exchange risks. The preliminary scorecard-indicated outcome is Baa2, which is two notches above the final scorecard-indicated outcome because of constraints to the credit quality of Petrobras (Ba1, stable), as the project's single offtaker. The assigned rating is in line with the scorecard indicated-outcome. DEBT STRUCTURE AND SECURITY Incorporated in the rating is the fully amortizing nature of the debt structure, which includes a full collateral package typical to project finance transactions. The proposed debt includes provisions for a 6-month of Debt Service Reserve Account ("DSRA") and 3-month Operating and Maintenance Reserve Account ("OMRA"), which can be replaced by a letter of credits ("LCs") from investment grade (IG) counterparties. The LCs will be recourse to the project, but technically subordinated to the cash flows for senior secured note holders in an event of disbursement. The security package encompasses rights over the charter agreement, rights over the proceeds in the collection, project rights under insurance policies and proceeds, a pledge of 100% equity interests in the Issuer for step-in rights in an event of default, a subordination deed for any intercompany loans made by the shareholder or affiliates, a conditional assignment in respect of the O&M agreement and a mortgage of the vessel. The project also includes a clear cash waterfall favoring O&M expenses, debt payments, and reserve provisions before dividend distributions. Furthermore, shareholder distributions must pass a covenants test ensuring no default, a minimum 1.15x historical DSCR, fully funded collateral accounts, and at least one scheduled principal payment. The issuer has the right to issue Additional Notes in the last five years of the transaction without a Note holders' consent, provided that the Issuer maintains a minimum DSCR of 1.30x and receives rating confirmation by at least one agencies, while also in compliance with other provisions of the indenture. The assigned rating also incorporates Yinson Boronia's environmental, social and governance (ESG) considerations, as per Moody's General Principles for Assessing Environmental, Social and Governance Risks methodology. Moody's ESG credit impact score CIS-3 for Yinson Boronia indicates that ESG considerations have a limited impact on the current rating with potential for greater negative impact over time through the exposure to environmental risks, such as oil spills that result in extraordinary maintenance requirements or affecting production uptime. RATING OUTLOOK The stable outlook reflects Moody's expectation that the project will operate in line with its historical performance, translating into DSCRs sustained above 1.2x, and that the economics of the oil field will remain attractive to the offtaker. The stable outlook is also in line with the stable outlook on Petrobras' rating. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING The rating could be upgraded if Petrobras' rating is upgraded. Upward pressure on the rating is also contingent upon an upgrade of Brazil's sovereign rating. An upgrade would also require Yinson Boronia to demonstrate stable operating performance in line or above Moody's base case scenario. Conversely, the rating could be downgraded if uptime performance deteriorates or operating costs increase substantially, such that DSCRs approach 1.15x. A rating downgrade would also be triggered upon a similar action on the ratings of Petrobras or the Government of Brazil. ISSUER PROFILE Yinson Boronia is a Dutch registered special purpose vehicle, ultimately owned (indirectly) by Yinson Holdings Berhad (75%) and Sumitomo Corporation in (25%) (collectively, the "Sponsors"). According to the company's management, Yinson Holdings Berhad has signed a Memorandum of Understanding (MoU) for the sale of up to 10% of its shareholdings to K-Line, a strategic partner, which will not be onerous to the Project Co. The rating would be unchanged under this scenario. Yinson Boronia operates FPSO Anna Nery, it is contracted by Petroleo Brasileiro S.A. - PETROBRAS ("Petrobras", Ba1 stable) under a 25-year charter and services agreement. The vessel was delivered within the schedule in March 2023 (Acceptance Date), and it is fully operational since May 2023 (First Oil). Designed for 34 years of continuous production, without dry-docking, this mid-sized FPSO has an oil production capacity of 70,000 barrels of oil per day (bopd), gas production capacity of 142 million standard cubic feet per day (MMscfd) and an oil storage capacity of 1,712,106 barrels (bbl). The maximum Persons on Board (POB) for the facility is 140, but it can increase in up to 150 during offshore campaign maintenance. The vessel operates on the Marlim field in the Eastern part of the Campos basin, located approximately 150km offshore Rio de Janeiro, Brazil. The water depth ranges between 650 and 1,050 meters. Oil production on this field commenced in 1991, accounting for 12% of the Brazilian output. Since 2019, Petrobras has been executing a revitalization plan to this field that considers installing two new FPSOs to produce from a mixture of existing and new wells. Market consultant Rystad report indicates the remaining resources have an expected end of life by 2052. The principal methodology used in this rating was Generic Project Finance Methodology published in January 2022. ========= C H I L E ========= LATAM AIRLINES: Expands Frequency of Brazil International Flights ----------------------------------------------------------------- Gabriel Araujo at Reuters reports that LATAM Airlines (LTM.SN) will increase the frequency of seven of its international routes connecting Brazil to the United States and countries in Europe and Africa. The move by Chile-based LATAM, whose local unit is currently Brazil's No. 1 carrier in international operations by market share, comes as rival Air France KLM (AIRF.PA), opens new tab also announced it would add a new route to the South American nation, according to Reuters. Carriers have been enjoying healthy demand for air travel in Latin America's largest economy and expressed optimism about the Brazilian market, even as they struggle to add capacity during an ongoing aircraft shortage, the report notes. LATAM said starting Oct. 27, it will increase flights from Sao Paulo to Orlando, Los Angeles, Johannesburg, Milan, Rome, Madrid and Lisbon by 38% when compared to the same period a year ago, the report relays. All flights will be operated by widebody aircraft seating up to 410 passengers, LATAM said, such as the Boeing 777 (BA.N), opens new tab, the report relays. The company's long-haul fleet also includes the Boeing 787, the report discloses. The South American airline has been growing since its exit in late 2022 from a bankruptcy process triggered by a drop in traffic related to the coronavirus pandemic, the report notes. It expects to post record core earnings in 2024 backed by increased demand, the report says. Earlier, Air France KLM said it would also bump up its operations in Brazil with a new flight connecting Paris and Salvador three times a week from late October, the report notes. "Brazil is one of the countries that received the most investments from Air France in recent months," the carrier's South America head Manuel Flahault said, adding the flights will be operated by Airbus A350 (AIR.PA), opens new tab planes, the report discloses. With the move, Air France KLM will get back to the number of weekly flights it had in Brazil before the COVID-19 pandemic, with 44 operations a week also serving Sao Paulo, Rio de Janeiro, Fortaleza and Belem, the report relays. Air France has a commercial partnership with Brazilian airline Gol (GOLL4.SA) in the country. =============== C O L O M B I A =============== COLOMBIA: Millions Face Two New Fees on Their Pension Fund Savings ------------------------------------------------------------------ globalinsolvency.com, citing Bloomberg News, reports that millions of Colombians will need to pay two new fees on their pension savings according to latest draft of the pension bill sent to the Lower House. Lawmakers modified the bill to allow fund managers to charge a fee of as much as 2% on profits, while also retaining a controversial annual fee of up to 0.7% on assets under management, according to globalinsolvency.com. Currently, so-called obligatory pension funds charge a fee upfront, but nothing after that, the report notes. Congress defied calls by President Gustavo Petro to push more savings automatically into the public system, the report relays. Workers earning 2.3 times the minimum wage per month or less will be obliged to contribute to the public system, according to the latest draft, whereas Petro had wanted to lift this threshold to 4 times, the report discloses. Petro has repeatedly criticized private pension funds, claiming that their returns are too low, and that they should repatriate money invested overseas, the report notes. The so-called obligatory pension funds covered by the changes had 405 trillion pesos ($106 billion) under management at the end of 2023, the report relays. Asofondos, the lobby group that represents the pension fund industry, estimates that the reform will apply to about half of those assets, the report adds. ============= J A M A I C A ============= JAMAICA: Cost of Food and Non-Alcoholic Drinks up 3.5% in April --------------------------------------------------------------- RJR News reports that consumers paid an average 3.5 per cent more for 'Food and Non-Alcoholic Beverages' for the 12 months to April this year. However, looking at the month of April alone, the Statistical Institute of Jamaica (STATIN), says the prices fell by 0.6 per cent, according to RJR News. Compared to March 2024, 'Food' prices fell marginally by 0.7 per cent, the report notes. STATIN says the main contributor to the decline was a 3.7 per cent fall in the cost of 'Vegetables, Tubers, Plantains, Cooking Bananas and Pulses,' the report relays. On the other hand, 'Non-Alcoholic Beverages' increased by an average 0.4 per cent, 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 ======= PETROLEOS DEL PERU: Fitch Lowers LongTerm IDRs to CCC+ ------------------------------------------------------ Fitch Ratings has downgraded Petroleos del Peru - Petroperu S.A.'s (Petroperu) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'CCC+' from 'B+'. Fitch has also downgraded the rating of Petroperu's senior unsecured notes to 'CCC+' from 'B+', and revised Petroperu's Standalone Credit Profile (SCP) to 'cc' from 'ccc-'. The downgrade to a 'CCC+' rating is the result of a revision in the government-related entity (GRE) criteria, which was driven by two key developments: the revision of the SCP from 'ccc-' to 'cc', and the adjustment of the GRE score. Fitch's evaluation indicates that, when assessed on a standalone basis, default of some kind appears probable due to liquidity constraints, which supports its placement in the 'cc' rating category. Additionally, the "Preservation of Government Policy Role" factor previously rated as 'strong' has been reclassified to 'not applicable,' which has led to a decrease in the GRE score from 25 to 15, moderate expectation of support. Consequently, this change has reduced the uplift derived from the GRE criteria from a previous +5 to a current +3. This reassessment is underpinned by Petroperu's significant loss of market share, which plummeted from 45% to 25%. This decline underscores the availability of alternative sources for the country to obtain refined products, suggesting a reduced reliance on Petroperu for this purpose. KEY RATING DRIVERS GRE Criteria Application: Petroperu's ratings are linked with the sovereign's through Fitch's GRE criteria. The company is rated on a bottom-ups +3 basis due to a GRE assessment score of 15-category E, moderate expectation of support. These factors, coupled with a 11-notch differential between the SCP and the sovereign rating, resulted in a 'CCC+' rating. The GRE criteria incorporates four factors: 1) Decision Making and Oversight, which was rated 'Strong.' Petroperu is 100% owned by the Peruvian government, through the Ministry of Energy and Mines (40%) and the Ministry of Economy and Finance (60%), with frequent oversight; 2) Precedents of Support, assessed as Not Applicable, which reflects how the government's record of assistance has only addressed immediate needs for the continuation of the company's operations, but not for the long-term improvement of capital structure; 3) Preservation of Provision of Public Service or Sovereignty or Strategic Assets, deemed as Not Applicable as the loss of market share from 45% to 25% has resulted in minimal disruption, contrary to expectations, and access to imported fuels continues to be a viable alternative; 4) Contagion Risk, rated as 'Strong' as Petroperu is high profile for its government, given its role and status; its default is likely to disrupt access to (or cost of) financing for the government or its other GREs. Constrained Liquidity: Petroperu faces a severe liquidity crunch as the cash forecasted to be generated within the year will not suffice to cover its debt repayments. Consequently, the company is compelled to depend extensively on external funding sources to prevent defaulting. Fitch has projected an EBITDA of $119 million for 2024 against debt repayments amounting to $175 million. According to Fitch's analysis, the company is experiencing a monthly cash burn rate of about $200 million during this period, while its refinery remains non-operational. This leads to an anticipated cash shortfall of $280 million, even after receiving an $800 million loan disbursed earlier in the year, evidencing a liquidity strain that could result in a default-like event reflective of a 'cc' rating. Limited Visibility on Additional Government Support: Fitch does not anticipate substantial support from the national government for Petroperu's capital structure in the short term. While the government provided liquidity in 2022 to meet immediate requirements, these measures did not address the fundamental problem of high indebtedness. Operational challenges related to the completion timeline of the Talara Refinery and the cash demands of its ramp-up have led to further financial needs that the company will need to get fulfilled from external sources in 2024. Petroperu has requested $2.5 billion from the government, which has been met with a tepid response—a loan of $800 million from Banco de la Nación and an increase in the existing guarantees to $1.0 billion from $500 million. These steps address immediate liquidity issues but do not resolve the structural deficiencies in the balance sheet. Unsustainable Capital Structure: Without significant governmental support, Fitch forecasts Petroperu's gross debt/EBITDA ratio to approach 50x. With EBITDA estimated at $120 million and total debt predicted to surpass $5.6 billion, the structural debt is expected to average around $5.7 billion over the next two years. In the absence of government intervention for debt repayment, Fitch projects the gross leverage to reach 12x in 2025, potentially decreasing to approximately 9.5x in 2026 as the Talara Refinery begins to operate commercially and achieve financial viability. The ramp-up phase has been costly, necessitating the importation of high volumes of crude at elevated prices due to global market conditions, which further weakened the company's liquidity and leverage. DERIVATION SUMMARY Petroperu's rating linkage to the Peruvian sovereign rating is weaker than that of most national oil and gas companies (NOCs) in the region, including Empresa Nacional del Petroleo (ENAP; A-/Stable), YPF S.A. (CCC-), Ecopetrol S.A. (BB+/Stable) and Petroleo Brasileiro S.A. (Petrobras; BB/Stable). In Latin America, most NOCs are of significant strategic importance for energy supply to their countries, and a default could have potentially negative social and financial implications at a national level. Like its peers, Petroperu has legal ties to the government through its majority ownership and strong operational control. KEY ASSUMPTIONS - Fitch's Brent oil price at USD82/barrel (bbl) in 2023, USD80/bbl in 2024, USD70/bbl in 2025 and long-term prices at USD60/bbl; - Domestic sales of 74,000 bbl/day in 2023, 93,000 bbl/day in 2024 and 115,000 bbl/day long term; - Talara Refinery enters commercial production in 2024, achieving crack spreads of USD10/bbl in 2024, USD12/bbl in 2025 and USD15/bbl long term; - Impact of FCK unit shut down of $200 million to EBITDA; - Rollover of short-term working capital facilities; - Average capex of USD290 million per year through the rating horizon. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade - An upgrade can be considered if the government makes a capital injection that improves the company credit profile, capitalizes its loans, and/or guarantees a greater portion of Petroperu's debt to materially improve leverage metrics. Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade - A Fitch-defined default process has commenced. LIQUIDITY AND DEBT STRUCTURE Deteriorated Liquidity: As of March 2024, Petroperu reported USD81 million in cash on hand, compared with USD41 million in December 2023. As of December 2023, the company had revolving credit lines for up to USD3.5 billion, USD865 million of which is unavailable and under evaluation by different banks due to ESG and government support concerns and USD410 million is under review. Out of bank lines, USD1.2 billion are utilized, leaving availability of USD75 million, per company's disclosure. Petroperu is currently negotiating a $100 million line and a $500 million with international banks. Both lines are for one year. Government funding: In 2024 the company received a $800 million loan from Banco de la Nación guaranteed by the shareholder, plus an additional $500 million in letters of credit for import of crude and fuel. The government is assessing the company's request to capitalize a $750 million shareholder loan with maturity in December 2024, and the extension for one more year of the $1.0 billion letters of credit. ISSUER PROFILE Petroleos del Peru - Petroperu S.A. (Petroperu) is a Peruvian state-owned petroleum company under private law and dedicated to oil production, transportation, refining, distribution and marketing of fuels and other petroleum-derived products. Refineries are located at Talara, Iquitos and Conchan. ESG CONSIDERATIONS Petroperu has an ESG Relevance Score of '4' for Management Strategy due to its nature as a majority government-owned entity and the inherent governance risk that arises with a dominant state shareholder, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Petroperu has an ESG Relevance Score of '4' for Group Structure due to its nature as a majority government-owned entity and the inherent governance risk that arises with a dominant state shareholder, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Petroperu has an ESG Relevance Score of '4' for Governance Structure due to its nature as a majority government-owned entity and the inherent governance risk that arises with a dominant state shareholder, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Petroperu has an ESG Relevance Score of '4' for Financial Transparency due to a history of delayed delivery of audited financial statements, which 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 ----------- ------ ----- Petroleos del Peru - Petroperu S.A. LT IDR CCC+ Downgrade B+ LC LT IDR CCC+ Downgrade B+ senior unsecured LT CCC+ Downgrade B+ ===================== P U E R T O R I C O ===================== AGREGADOS FURIA: Case Summary & 10 Unsecured Creditors ------------------------------------------------------ Debtor: Agregados Furia Inc. Carr 140 KM 65.8 Bo. Florida Afuera Barceloneta, PR 00617 Business Description: The Debtor is in the business of non- metallic mineral mining and quarrying. Chapter 11 Petition Date: May 21, 2024 Court: United States Bankruptcy Court District of Puerto Rico Case No.: 24-02130 Debtor's Counsel: Amarys V. Bolorin Solivan, Esq. LUGO MENDER GROUP, LLC 100 Carr 165 Suite 501 Guaynabo, PR 00968-8052 Tel: (787) 707-0404 Fax: (787) 707-0412 E-mail: a.bolorin@lugomender.com Estimated Assets: $1 million to $10 million Estimated Liabilities: $1 million to $10 million The petition was signed by Carmen L. Alvarado Torres as authorized representative. A full-text copy of the petition containing, among other items, a list of the Debtor's 10 unsecured creditors is availablefor free at PacerMonitor.com at: https://www.pacermonitor.com/view/RMSB3QQ/AGREGADOS_FURIA_INC__prbke-24-02130__0001.0.pdf?mcid=tGE4TAMA =============== S U R I N A M E =============== SURINAME: CBS Prepares to Defend Exchange Rate ---------------------------------------------- RJR News reports that the Central Bank of Suriname says it has sufficient foreign exchange to defend the exchange rate should there be pressure on it due to the high demand in the market. Governor Maurice Roemer says the agreement with the International Monetary Fund regarding the measures taken to ensure economic recovery in the CARICOM country includes provisions to defend the exchange rate, according to RJR News. He noted that people who need foreign currency can no longer go to the Central Bank but have to go to the cambios, or commercial banks, the report notes. ============= U R U G U A Y ============= URUGUAY: First IPO Under New Rules Set for June With Tech Firm -------------------------------------------------------------- globalinsolvency.com, citing Bloomberg News, reports that Uruguay's first initial public offering under streamlined regulations introduced two years ago is expected to launch in late June, testing investor appetite for the South American country's tech sector. Zorzal Inversiones Tecnologicas SA will sell as much as $15.5 million in shares, which it will use to buy minority stakes in at least five profitable local tech companies with annual sales of $3 million or more, said Jaime Miller, general partner at Montevideo-based investment banking firm Capital Oriental that is structuring the IPO and will also run Zorzal, according to globalinsolvency.com. "We have an industry with a lot of companies that are growing, profitable with good cash flow and there are people abroad who want to buy them," said Miller, the report notes. "This issuance is very much targeted to retail investors at brokerage houses," he added. Uruguay's stable politics and economy plus generous tax breaks have created a $2.8 billion tech industry that punches well above its weight in the region, the report relays. This country of 3.4 million people wedged between Argentina and Brazil had the highest per capita IT exports in South America in 2022, according to data compiled by export promotion agency Uruguay XXI, the report adds. ================= V E N E Z U E L A ================= CITGO PETROLEUM: Bidders Can Be Asked How Accommodate Claims ------------------------------------------------------------ globalinsolvency.com, citing Reuters, reports that bidders in a U.S. court auction of shares that will decide the ownership of Venezuela-owned U.S. oil refiner Citgo Petroleum can be required to say if their binding offers cover claims by Venezuela bondholders in a separate court action, a U.S. District Court judge ruled. The decision lets bidders seeking to place multi-billion dollar offers for a Citgo parent's shares to be asked if they plan to set aside cash or consider how they may accommodate Venezuela 2020 note holders seeking payment of $3 billion in principal debt, according to globalinsolvency.com. The 2020 bondholders' claims are not part of the Delaware court case but their claims loom over the ongoing share auction to satisfy $21.3 billion in claims for debt defaults and expropriations, the report notes. There are 18 Venezuela creditors, including Crystallex, ConocoPhillips, Huntington Ingalls, in the Delaware case, the report relays. Reuters said that the court will accept binding second-round bids through June 11 and could choose a winner later this year, the report notes. The auction has drawn interest from Elliot Investment Management and a bidding group being organized by Centerview Partners, the report relays. Some creditors, including ConocoPhillips, are considering using their claims against Venezuela as credit bids, people close to the matter have said, the report notes. A proposed instruction to bidders disclosed for the first time in a court filing disclosed the court officer handling the share sale has held discussions with the 2020 bondholders, the report relays. Their claims are pending in a New York case. The ruling by U.S. Judge Leonard Stark came after Venezuela objected to a court officer's revised bidding instructions that Venezuela and some creditors called unclear, the report notes. Stark rejected the motion to delay the auction, saying the court officer could make changes he feels will maximize the value of bids received, the report relays. About CITGO Petroleum Citgo Petroleum Corporation is a United States-based refiner, transporter and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. Based in Houston, Texas, Citgo is majority-owned by PDVSA, a state-owned company of the Venezuelan government (although due to U.S. sanctions, in 2019, they no longer economically benefit from Citgo.) As reported in the Troubled Company Reporter-Latin America in June 2022, S&P Global Ratings affirmed its 'B-' long-term issuer credit ratings on CITGO Holding Inc. and core subsidiary CITGO Petroleum Corp. ********* 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 * * *