/raid1/www/Hosts/bankrupt/TCRLA_Public/240604.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
Tuesday, June 4, 2024, Vol. 25, No. 112
Headlines
A R G E N T I N A
ARGENTINA: Faces Natural Gas Crunch as Worst Winter Looms
ARGENTINA: Recession Hits SMEs Hardest
B R A Z I L
BRAZIL: Inflation Expectations to Improve Over Time, Says Chief
BRAZIL: Service Sector Confidence Declines in May
DIA BRASIL: Banco Master's MAM Asset Takes Bold Step in Reviving
GENERAL SHOPPING: Fitch Affirms 'CC' LongTerm IDRs
D O M I N I C A N R E P U B L I C
DOMINICAN REPUBLIC: Significant Reduction in Banking Deserts
J A M A I C A
JAMAICA: Electricity and Water Supply Industry Up 6.7% in Q1
P U E R T O R I C O
VIGILANCIA VIRTUAL: To Tap Landrau Rivera & Assoc. as Counsel
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: Faces Natural Gas Crunch as Worst Winter Looms
---------------------------------------------------------
Buenos Aires Times reports that Argentina is scrambling to secure
supplies of fuel as winter bites in the southern hemisphere with
lower-than-expected temperatures boosting demand for home heating.
Extra imports are a headache for President Javier Milei's
government, which needs to build up reserves of dollars through
trade surpluses - not lose them - in order to lift currency
controls that have been strangling the economy, according to Buenos
Aires Times.
Milei's spokesman said consumer demand for natural gas has spiked
55 percent in recent weeks to nearly 70 million cubic metres a day,
the report notes. "We're making all efforts to avoid" a heating
shortage, Manuel Adorni told reporters at a daily press briefing.
"It's the harshest winter in the last 44 years," he added.
Buenos Aires Times discloses that with families in the Buenos Aires
metropolitan area, which is home to about a third of Argentina's 46
million people, switching on heating for longer in recent days, the
government has been caught off-guard. It's been forced to buy
additional natural gas and prioritise residential users by cutting
off supplies to factories and to drivers who run their cars on
compressed gas, the report relays.
As well as the purchases of liquefied natural gas (LNG) - including
a rare spot cargo for immediate delivery, for which it paid
above-market prices - the government also plans to import other
fuels to supply power plants that normally run on natural gas, the
report notes.
The predicament is a reality check for Argentina, which has vast
reserves of gas in the Vaca Muerta shale patch and ambitions to be
a net exporter, the report says. But the country needs to expand
transportation capacity to unlock more production, the report
notes.
While a new shale gas pipeline was added to the grid last year,
construction of compressor stations that would double its capacity
is delayed, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
ARGENTINA: Recession Hits SMEs Hardest
--------------------------------------
Buenos Aires Times reports that Argentina's deepening recession is
hitting the nation's small-and medium-sized businesses (SMEs or
PyMEs) the hardest: according to a new report, seven out of 10
reporting falling consumption.
The survey, conducted by the Industriales Pymes Argentinos (IPA)
and consulting its members, saw nearly 70 percent of industrial
SMEs respond that they are facing a crisis due to the collapse of
consumption in the domestic market, according to Buenos Aires
Times.
Of those polled, 31 percent of SMEs described their situation as
"very bad," with 38 percent concluding it is "bad," the report
notes.
Pessimism is running high, the poll showed. Some 55 percent of
manufacturing SMEs also expect the situation to worsen in the next
12 months, rather than improve, Buenos Aires Times relays. Only 21
percent expected conditions to improve over the next year, the
report discloses.
The depth of the crisis is beginning to affect employment,
according to IPA's members, with heavy lay-offs in the textile
sector, the report relays. Some 35 percent say they are assessing
dismissals and redundancies, the report notes.
SMEs are closely watching the policies introduced by President
Javier Milei's government, with 62 percent saying their evolution
depended on economic policy, the report says.
Seventy percent said that falling domestic demand was the worst
problem facing the sector, the report notes.
Around 48 percent of respondents said a high tax burden was
damaging their growth, while 39 percent attributed the crisis to
"uncertainty in terms of economic policy," the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country's economy is an upper middle-income economy for fiscal year
2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
The IMF's executive board completed on August 23, 2023, the fifth
and six reviews of Argentina's 30-month Extended Fund Facility
(EFF), and approved a US$7.5-billion disbursement to Argentina as
part of the larger program, which refinances payments Argentina
owes the institution from a previous bailout that failed to
stabilize the economy in 2018. Argentina would receive another IMF
disbursement in November of about US$2.75 billion pending another
staff-level agreement and board approval.
S&P Global Ratings, on March 15, 2024, raised its local currency
sovereign credit ratings on Argentina to 'CCC/C' from 'SD/SD' and
its national scale rating to 'raB+' from 'SD'. S&P also raised its
long-term foreign currency sovereign credit rating to 'CCC' from
'CCC-' and affirmed its 'C' short-term foreign currency rating. The
outlook on the long-term ratings is stable. In addition, S&P
revised its transfer and convertibility assessment to 'CCC' from
'CCC-'.
S&P said the stable outlook on the long-term ratings balances the
risks posed by pronounced economic imbalances and policy
uncertainties with the favorable change in near-term debt service
obligations. S&P also expect no further debt exchanges that it
would likely consider to be distressed.
Fitch Ratings upgraded on June 13, 2023, Argentina's Long-Term
Foreign Currency (FC) Issuer Default Rating (IDR) to 'CC' from
'C'and affirmed the Long-Term Local Currency (LC) IDR at 'CCC-'.
Fitch typically does not assign Outlooks to sovereigns with a
rating of 'CCC+' or below.
The upgrade of the FC IDR reflects that Fitch no longer deems a
default-like process to have begun, as the authorities have not
signaled a clear intention to follow through with an intra-public
debt swap announced in March. The new 'CC' rating signals a default
event of some sort appears probable in the coming years, regardless
of the outcome of upcoming elections. The affirmation of the LC IDR
at 'CCC-' follows the peso debt swap in June that Fitch did not
deem to be a "distressed debt exchange" (DDE).
Moody's Investors Service, in September 2022, affirmed Argentina's
Ca foreign-currency and local-currency long-term issuer and senior
unsecured ratings. The outlook remains stable. The decision to
affirm the Ca ratings balances Argentina's limited market access,
weak governance, and history of recurrent debt restructurings with
recent efforts to marshal fiscal and monetary measures to start
addressing underlying macroeconomic imbalances in the context of
the IMF program that was approved in 2022, according to Moody's.
DBRS, Inc. confirmed Argentina's Long-Term Foreign Currency Issuer
Rating at CCC and downgraded its Long-Term Local Currency Issuer
Rating to CCC from CCC (high) on March 3, 2023.
===========
B R A Z I L
===========
BRAZIL: Inflation Expectations to Improve Over Time, Says Chief
---------------------------------------------------------------
globalinsolvency.com, citing Reuters, reports that Brazil's central
bank chief Roberto Campos Neto said that policymakers believe
inflation expectations should stabilize and improve over time,
after recently citing concerns about them deviating from the
official target.
"It is generally possible to be optimistic when we look at the
reasons (for the unanchoring of inflation expectations)," he said
at an event organized by the business group Lide in Sao Paulo,
according to globalinsolvency.com.
Private economists surveyed weekly by the central bank raised their
inflation expectations to 3.86% this year, 3.75% for 2025, and
3.58% for 2026 - in the latter case, adjusting the projection
upwards after 46 weeks of stability, the report notes. The
government's official inflation target is 3%, the report relays.
Campos Neto said various factors have been affecting inflation
expectations, including uncertainties about monetary and fiscal
credibility, 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: Service Sector Confidence Declines in May
-------------------------------------------------
Richard Mann at Rio Times Online reports that the Service
Confidence Index (ICS) dropped by 0.6 points in May, reaching 94.2
points.
This marks the second consecutive decline, according to the
Getúlio Vargas Foundation (FGV) on May 29, according to Rio Times
Online.
However, the index remained stable in three-month moving averages
compared to April, the report notes.
FGV/Ibre economist Stefano Pacini highlighted that service sector
confidence fell for the third time in 2024, the report discloses.
"May's results reinforce the perception of a loss of momentum in
the sector," he said, the report relays. Trends varied across
different service segments and time frames, the report notes.
Despite resilient current demand, Pacini pointed out that negative
future expectations were widespread, the report says.
This suggests the service sector may not see a strong recovery in
the first half of the year, the report relays.
The macroeconomic environment, including ongoing interest rate cuts
and significant improvements in employment and income, could
restore sector confidence, the report discloses.
These factors might play a crucial role in the sector's future
performance, the report relays.
In May, the ICS decline mainly resulted from worsened expectations
for the coming months, Rio Times Online relays.
The Expectations Index (IE-S) dropped by 3.1 points to 91.3
points.
Brazil's Service Sector Confidence Declines in May
On the other hand, the Current Situation Index (ISA-S) increased by
1.9 points to 97.3 points, the report relays.
Both components of the ISA-S showed improvement, the report
discloses. The current demand volume rose by 2.3 points to 97.7
points, the report says.
The current business situation improved by 1.6 points to 96.9
points, the report notes.
Regarding future expectations, the IE-S decline stemmed from
deteriorating forecasts in both its components, the report relays.
The anticipated demand for the next three months fell by 2.9 points
to 91.6 points, the report notes.
The business trend for the next six months dropped by 3.4 points to
91.1 points, the lowest level since December 2023, the report
relates.
These figures highlight the ongoing challenges faced by the service
sector, the report notes.
They emphasize the need for sustained economic support to boost
confidence and foster recovery, 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).
DIA BRASIL: Banco Master's MAM Asset Takes Bold Step in Reviving
----------------------------------------------------------------
Richard Mann at Rio Times Online reports that MAM Asset Management
has struck a game-changing deal to take over Dia Brasil from
Spain's Grupo Dia.
The Brazilian supermarket chain has been under judicial
reorganization since March, according to Rio Times Online.
Although the financial details remain undisclosed, the deal holds
significant promise, the report notes.
MAM Asset, part of Sao Paulo-based Investment Bank Banco Master,
established a fund to acquire Dia Brasil's operations, the report
relays.
This transaction was carried out for an unnamed private investor,
without involvement from Banco Master or key figures Daniel Vorcaro
and Augusto Lima, the report discloses.
As part of the agreement announced on May 31, Grupo will inject 39
million euros into Dia Brasil, the report relays.
This amount is around R$220 million ($42.31 million), the report
discloses. This move marks Grupo Dia's complete exit from Brazil,
Rio Times Online says.
It also involves the sale of 100% of Dia Brasil's capital to MAM
Asset, the report relays. Consequently, Grupo Dia will limit its
responsibilities in the judicial reorganization process, Rio Times
Online notes.
Dia Brasil, burdened with a declared debt of R$1.081 billion
($207.88 million), had to take drastic measures, the report
relays.
It announced plans to close 343 of its 587 stores. Additionally,
it will close three distribution centers, the report says. The
company will focus its operations solely in Sao Paulo, the report
notes.
MAM Asset, led by Daniel Vorcaro, has built a strong reputation,
the report relays. The firm specializes in rescuing financially
troubled companies, the report discloses.
They often do this through asset managers or funds connected to
Banco Master, the report relays. Their strategy includes debt
renegotiation and value generation for shareholders, the report
notes.
Banco Master's MAM Asset Takes Bold Step in Reviving Dia Brasil
MAM Asset's aggressive moves are not new, the report relays. The
firm has significant stakes in various Brazilian companies, the
report notes. Some of these companies face financial difficulties,
the report discloses.
For instance, through WNT, Banco Master invested in Veste (formerly
Restoque), Westwing, and TC (formerly TradersClub).
Banco Master also invests in financially healthy companies.
Recently, it committed to support a R$ 1.5 billion ($288.46
million) capital increase for Oncoclínicas, the report relays.
They did this in collaboration with CEO and founder Bruno Ferrari,
the report notes.
This latest move by MAM Asset shows their commitment to
revitalizing Dia Brasil, the report relays. The deal promises a
fresh start for the supermarket chain, the report notes.
It highlights MAM Asset's prowess in turning around struggling
companies, the report discloses. This development matters as it
could reshape Brazil's retail landscape, 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).
GENERAL SHOPPING: Fitch Affirms 'CC' LongTerm IDRs
--------------------------------------------------
Fitch Ratings has affirmed General Shopping e Outlets do Brasil
S.A.'s (GSB) Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) at 'CC' and the Long-Term National Scale Rating at
'CC(bra)'. Fitch has also affirmed General Shopping Investment
Limited's senior secured notes due in 2026 at 'CC'/'RR4' and
subordinated perpetual notes at 'C'/'RR6'. Fitch affirmed General
Shopping Finance Limited's unsecured perpetual notes at 'C' and
revised Recovery Rating to 'RR6', from 'RR5'. Issuances are fully
and irrevocably guaranteed by GSB.
GSB's ratings reflect an elevated credit risk profile due to its
weakened business base. GSB's limited operating cash flow
generation is not commensurate with its aggressive capital
structure, which includes high debt obligations, net leverage above
20x, and low financial flexibility. Fitch understands that the
company remains strongly exposed to an event of default or a debt
restructuring process. GSB has limited alternatives to strengthen
its business base and raise new sources of cash given its reduced
unencumbered asset base.
KEY RATING DRIVERS
Compromised Business Model: GSB's business model became compromised
after its shareholders transferred a large part of the asset base
to a real estate investment fund in 2019. The transaction
materially reduced cash flow generation and exposed creditors to a
more limited group of performing assets. The asset base was reduced
to ownership in 15 properties, with an owned gross leasable area
(GLA) of only 86,000 sqm in April 2024, down from roughly 200,000
sqm before the transfer. Rental income constituted 38% of the total
gross revenues in 2023, whereas service exploitation accounted for
62%, a distribution that contrasts with the predominant revenue
structure of its main peers.
Unsustainable Capital Structure: GSB's financial leverage is
unsustainable in the medium-term. Net adjusted leverage was 25x and
net loan-to-value (LTV) ratio surpassed 100% in March 2024. Both
will remain high in the coming years due to limited cash flow
growth prospects. Foreign exchange (FX) exposure is significant,
with 100% of the EBITDA in Brazilian reais, while 84% of total debt
are denominated in U.S. dollars.
Debt profile is predominantly comprised of perpetual debt and GSB's
net equity is negative. Total adjusted debt was BRL1.4 billion at
end of March, comprised of BRL640 million in subordinated perpetual
notes (considering 50% equity credit), BRL496 million in unsecured
perpetual notes, BRL45 million secured notes due 2026 and BRL228
million in secured local debt.
Limited Capacity to Cover Debt Service: GSB's FCF is constantly
negative due to a combination of limited EBITDA generation and
excessive interest and investment disbursements. Resources from the
sale of assets in 2024 should provide some cash relief, but any
shortfall in performance against the base case may deplete the
remaining headroom. Fitch projects EBITDA in the BRL50
million-BRL60 million range for 2024/2025, with an accumulated
negative FCF of BRL185 million. Base case includes outflows from
annual interest payment between BRL70 million-BRL80 million, tax
refinancing liabilities and aggregated capex of BRL105 million for
2024/2025, plus debt of BRL43 million due from April to December
2024 and BRL48 million in 2025.
GSB's liquidity is supported by its cash position of BRL102 million
in March 2024, BRL120 million inflow from the sale of a 32%
interest in Parque Shopping Barueri in February 2024, of which
BRL62 million was received in 1Q24, and BRL30 million from approved
long-term secured financing to be disbursed up to YE 2024. The
reduction in operating cash flow generation from the sale of this
stake, which reduced own GLA by 12,000 sqm, has been offset by the
launch of Outlet Premium Imigrantes in April 2024, and the
expansion of Outlet Premium Sao Paulo, in December 2023. The
greenfield and the expansion have increased own GLA by 10,000 sqm.
Poor Financial Flexibility: GSB has exhausted its unencumbered
asset base, hindering the issuance of new secured debt, and the
likelihood of raising unsecured debt is low. The company will need
additional funding more intensely as from 2025 to rebuild cash
reserves and address higher debt maturities including its USD8.9
million 2026 secured notes. Fair value of properties is BRL732
million in March 2024, of which only BRL40 million are
unencumbered. Unencumbered assets/unsecured debt ratio is low at
0.04x.
ESG - Management Strategy and Governance Structure: GSB has a track
record of recurring operational and debt restructuring processes
during recent years due to challenges in implementing business
strategy and maintaining competitive positions within its key
markets. GSB's below-average execution of its strategy has
contributed to a materially weaker operational performance and
unsustainable capital structure. GSB's owners have strong influence
upon management, which has resulted in decisions related to the
company's operational and financial strategies that have been made
to the detriment of its creditors.
DERIVATION SUMMARY
GSB's 'CC' rating reflects the company's high financial leverage,
negative FCF, weak liquidity and a shrinking unencumbered assets
base, which compares negatively to its regional peers. GSB's
ratings are well below Brazilian peers ALLOS S.A., Iguatemi S.A.,
and Multiplan Empreendimentos Imobiliarios S.A., all rated
AAA(bra)/Stable.
KEY ASSUMPTIONS
- Own GLA decreasing by net 3,000 sqm in 2024 and steady as from
2025;
- Occupancy rate close to 95%;
- Investments of BRL75 million in 2024 and BRL30 million in 2025;
- No dividend payments;
- Receipt of BRL120 million in 2024 from sale of stake in Parque
Shopping Barueri.
RECOVERY ANALYSIS
Recovery Rating Assumptions: The recovery analysis assumes that GSB
would be considered a going concern in bankruptcy, and that the
company would be reorganized rather than liquidated. The going
concern EBITDA estimate reflects Fitch's view of a sustainable,
post-reorganization EBITDA level upon which Fitch bases the
valuation of the company, and is approximately 10% below the
expected 2024 EBITDA to reflect the company's operational
performance when facing a distress scenario. An enterprise
evaluation multiple of 6x is used to calculate a
post-reorganization valuation and reflects a midcycle multiple.
Fitch has assumed a 10% administrative claim.
The USD8.9 million secured notes due in 2026 have been assigned a
Recovery Rating of 'RR4'. The bespoke analysis indicated the
potential for a higher recovery; however, Fitch capped the ratings
at 'RR4' in accordance with its Country Specific Treatment of
Recovery Rating Criteria, which caps recovery ratings in Brazil at
'RR4' due to concerns about issues such as creditor's rights during
a debt restructuring or the consistent application of the rule of
law. The unsecured perpetual notes and the subordinated perpetual
notes have been notched down one notch from the IDR to indicate
poor recovery prospects in the event of a default.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Material improvement in the company's liquidity and financial
leverage through some combination of the following actions: equity
injection, asset sales with limited impact on cash flow generation,
and lower FX exposure.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade may occur if, in Fitch's judgment, a default or
default-like process has begun, which would be represented by a 'C'
rating;
- Formally filing for bankruptcy protection.
LIQUIDITY AND DEBT STRUCTURE
Weak Liquidity: As of March 31, 2024, GSB had BRL102 million of
readily available cash and total adjusted debt, considering the 50%
equity credit for the subordinated perpetual, of BRL1.4 billion.
Upcoming debt amortizations are BRL43 million from April to
December 2024, BRL48 million in 2025, BRL91 million (including
USD8.9 million of secured notes) in 2026. GSB's EBITDA interest
coverage ratio should remain weak and below 1x.
Equity Treatment Rationale: Fitch assumes the company will continue
deferring interest payments on the subordinated perpetual notes
during the foreseeable future. The subordinated perpetual notes
qualify for 50% equity credit as they meet Fitch's criteria with
regard to deep subordination, with an effective maturity of at
least five years, full discretion to defer coupons for at least
five years and limited events of default. These are key equity-like
characteristics.
Equity credit is limited to 50% given the hybrid's cumulative
interest coupon, a feature considered more debt-like in nature.
Since second-half 2015, the company has exercised its right to
defer the payment of interest under its USD150 million 12%
perpetual subordinated notes. The interest payment deferral does
not constitute an event of default under the indenture.
ISSUER PROFILE
GSB is a Brazilian shopping mall developer and operator. In April
2024, it managed 15 projects with an own GLA of 86,000 sqm.
SUMMARY OF FINANCIAL ADJUSTMENTS
- Fitch includes additional/amortization of tax instalments in
FFO;
- Fitch applies 50% equity credit on the subordinated perpetual
notes.
ESG CONSIDERATIONS
GSB has an ESG Relevance Score of '5' for management strategy due
to its track record of recurring operational and debt restructuring
processes during the past years due to challenges the company has
faced in implementing its strategy and maintaining competitive
positions within its key markets. GSB's below-average execution of
its strategy has contributed to a materially weaker operational
performance and unsustainable capital structure. This has a
negative impact on the credit profile, and is highly relevant to
the rating.
GSB has an ESG Relevance Score of '5' for its governance structure
due to the strong influence on GSB's owners upon management, which
has resulted in decisions related to the company's operational and
financial strategies that have been made to the detriment of its
creditors. This has a negative impact on the credit profile, and is
highly relevant to the ratings.
GSB has an ESG Relevance Score of '4' for group structure,
reflecting complexity, transparency and related-party transactions,
which has a negative impact on the credit profile, and is relevant
to the ratings in conjunction with other factors.
GSB also has an ESG Relevance Score of '4' for financial
transparency due to lack of quality of financial disclosure, 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 Recovery Prior
----------- ------ -------- -----
General Shopping
Investment Limited
Subordinated LT C Affirmed RR6 C
senior secured LT CC Affirmed RR4 CC
General Shopping
Finance Limited
(GSF)
senior
unsecured LT C Affirmed RR6 C
General Shopping
e Outlets do
Brasil S.A. LT IDR CC Affirmed CC
LC LT IDR CC Affirmed CC
Natl LT CC(bra)Affirmed CC(bra)
===================================
D O M I N I C A N R E P U B L I C
===================================
DOMINICAN REPUBLIC: Significant Reduction in Banking Deserts
------------------------------------------------------------
Dominican Today reports that between 2020 and 2024, the number of
municipalities in the Dominican Republic classified as "banking
deserts" - areas without branches, ATMs, or bank subagents
-decreased from eleven to just one, according to the Banking
Deserts study published by the Superintendency of Banks (SB).
The study highlights that the expansion of banking access points
(PAB) in 2023 aligns with a nine-year trend, reducing banking
deserts from 20 in 2015 to two by the end of 2023, according to
Dominican Today.
According to the report, Los Cacaos in San Cristobal is now the
only area in the country where residents must travel to another
district to access banking services, the report notes.
In 2023, in addition to Los Cacaos, the Cristobal municipality in
the Independencia province was also a banking desert, the report
relays. However, in the first quarter of 2024, Banco del Reserva
opened the first PAB in Cristobal, eliminating its status as a
banking desert, the report adds.
About Dominican Republic
The Dominican Republic is a Caribbean nation that shares the island
of Hispaniola with Haiti to the west. Capital city Santo Domingo
has Spanish landmarks like the Gothic Catedral Primada de America
dating back 5 centuries in its Zona Colonial district. Luis Rodolfo
Abinader Corona is the current president of the nation.
TCR-LA reported in April 2019 that Juan Del Rosario of the UASD
Economic Faculty cited a current economic slowdown for the
Dominican Republic and cautioned that if the trend continues,
growth would reach only 4% by 2023. Mr. Del Rosario said that if
that happens, "we'll face difficulties in meeting international
commitments."
An ongoing concern in the Dominican Republic is the inability of
participants in the electricity sector to establish financial
viability for the system.
On December 4, 2023, the TCR-LA reported that Fitch Ratings has
affirmed Dominican Republic's Long-Term Foreign-Currency Issuer
Default Rating (IDR) at 'BB-' and revised the Outlook to Positive
from Stable. Fitch says the Positive Outlook reflects a trend
improvement in governance, and robust growth prospects that should
lead to continued gains in per capita income. According to Fitch,
growth has decelerated in 2023, but it expects Dominican Republic
to recover to high levels during 2024-2025. External liquidity
metrics have improved in recent years, and foreign currency share
of government debt is on a downward path.
In August 2023, Moody's Investors Service changed the outlook on
the Government of Dominican Republic's ratings to positive from
stable and affirmed the local and foreign-currency long-term issuer
and senior unsecured ratings at Ba3. Moody's said the key drivers
for the outlook change to positive are: (i) sustained high growth
rates have enhanced the scale and wealth levels of the economy; and
(ii) a material decline in the government debt burden coupled with
improved fiscal policy effectiveness will support medium-term debt
sustainability.
The affirmation of the Ba3 ratings balances the Dominican
Republic's strong economic growth dynamics and relatively contained
susceptibility to event risks, with a comparatively weaker fiscal
position, reflecting long-standing credit challenges which include:
(i) a shallow revenue base compared to peers, (ii) weak debt
affordability metrics, and (iii) high exposure to foreign currency
borrowing.
S&P Global Ratings, in December 2022, raised its long-term foreign
and local currency sovereign credit ratings on the Dominican
Republic to 'BB' from 'BB-'. The outlook on the long-term ratings
is stable. S&P affirmed its 'B' short-term sovereign credit
ratings. S&P also revised its transfer and convertibility (T&C)
assessment to 'BBB-' from 'BB+'. The stable outlook reflects S&P's
expectation of continued favorable GDP growth and policy continuity
over the next 12-18 months that will likely stabilize the
government's debt burden.
In February 2023, S&P said its BB ratings reflect the country's
fast-growing and resilient economy. It also incorporates the
country's historical political and social challenges in passing
structural reforms to contain fiscal deficits, despite recent
improvements in the electricity sector. The ratings are constrained
by relatively high debt, a hefty interest burden, and limited
monetary policy flexibility.
=============
J A M A I C A
=============
JAMAICA: Electricity and Water Supply Industry Up 6.7% in Q1
------------------------------------------------------------
RJR News reports that there was an estimated 6.7 per cent increase
in Gross Domestic Product (GDP) in the Electricity and Water Supply
industry, in the first quarter, ended March.
The Planning Institute of Jamaica (PIOJ), said this was due to
increased consumption of electricity and water, according to RJR
News.
James Stewart, Senior Director in charge of Economic Planning and
Research at the PIOJ, says real valued added for electricity
increased by 8.2 per cent, the report notes.
This was reflected increased consumption for five of the six
categories: residential, general service, power service, large
power and largest power, the report relays.
"Residential, up 7.5 per cent; general service, that is small
businesses using less than 25 kilovolt ampere (KVA) 8.8 per cent;
power service, that is large businesses using more than 25 KVA but
less than 500 KVA, up 3.7 per cent; large power of 9 per cent; and
largest power, which are single locations that have a minimum peak
demand of 2000 KVA, up 19.1 per cent," the report notes.
Mr. Stewart said these increases were sufficient to outweigh the
decline recorded for street lighting and traffic signals, down 0.6
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 U E R T O R I C O
=====================
VIGILANCIA VIRTUAL: To Tap Landrau Rivera & Assoc. as Counsel
-------------------------------------------------------------
Vigilancia Virtual y Policia Privada LLC seeks approval from the
U.S. Bankruptcy Court for the District of Puerto Rico to employ the
law offices of Landrau Rivera & Assoc. as its counsel.
The firm will render these services:
(a) advise the Debtor with respect to its duties, powers, and
responsibilities in this case under the laws of the United States
and Puerto Rico in which it conducts its business, or is involved
in litigation;
(b) advise the Debtor in determination whether a
reorganization is feasible and, if not, aide it in the orderly
liquidation of its assets;
(c) assist the Debtor in negotiation with its creditors in
proposing a viable plan of reorganization;
(d) prepare legal papers;
(e) appear before the bankruptcy court, or any court in which
the Debtor asserts a claim interest or defense directly or
indirectly related to this bankruptcy case;
(f) employ other professional services as necessary to
complete the Debtor's financial reorganization with Chapter 11 of
the Bankruptcy Code; and
(g) perform other legal services.
The hourly rates of the firm's counsel and staff are as follows:
Noemi Landrau Rivera, Esq. $225
Legal and Financial Assistants $75
In addition, the firm will seek reimbursement for fees and
expenses.
The Debtor paid a retainer of $15,000.
Noemi Landrau Rivera, Esq., an attorney at Landrau Rivera &
Assoc.,
disclosed in a court filing that the firm is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
The firm can be reached through:
Noemi Landrau Rivera, Esq.
Landrau Rivera & Assoc.
P.O. Box 270219
San Juan, PR 00927-0219
Telephone: (787) 774-0224
Facsimile: (787) 793-1004
Email: nlandrau@landraulaw.com
About Vigilancia Virtual y Policia Privada
Vigilancia Virtual y Policia Privada LLC filed its voluntary
petition for relief under Chapter 11 of the Bankruptcy Code
(Bankr. D.P.R. Case No. 24-01678) on Apr. 24, 2024. In the petition
signed by Israel Martinez Gutierrez, president, the Debtor
disclosed
under $1 million in both assets and liabilities.
Judge Mildred Caban Flores oversees the case.
Landrau Rivera & Assoc., led by Noemi Landrau Rivera, Esq., serves
as the Debtor's legal counsel.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Latin America is a daily newsletter
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Fernandez, Julie Anne L. Toledo, Ivy B. Magdadaro, and Peter A.
Chapman, Editors.
Copyright 2024. All rights reserved. ISSN 1529-2746.
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