/raid1/www/Hosts/bankrupt/TCRLA_Public/240614.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, June 14, 2024, Vol. 25, No. 120
Headlines
A R G E N T I N A
ARGENTINA: President Milei Cancels G7
BLOCKFI INC: Pays $150,000 Civil Penalty in Bond Fight
B A H A M A S
FTX GROUP: Seeks to Stop Outside Litigation Against Insiders
B R A Z I L
BANCO YAMAHA: Moody's Affirms Ba1 Deposit Ratings, Outlook Stable
P U E R T O R I C O
FIRSTBANK PUERTO: Fitch Hikes LT IDR to 'BB+', Outlook Stable
V E N E Z U E L A
CITGO PETROLEUM: Opposition Presses U.S. Officials to Halt Sale
- - - - -
=================
A R G E N T I N A
=================
ARGENTINA: President Milei Cancels G7
-------------------------------------
Manuela Tobias & Samy Adghirni at Bloomberg News reports that
President Javier Milei has cancelled a trip to Italy for Group of
Seven summit and backed out of a scheduled meeting with France's
Emmanuel Macron, according to people with knowledge of his plans.
Milei had been scheduled to attend the G7 after receiving an invite
from Italian Prime Minister Giorgia Meloni, and was set to hold
bilateral talks with Macron in Paris on June 19, according to
Bloomberg News. The change in schedule, however, came ahead of a
crucial moment for his sprawling package of pro-market reforms in
Argentina's Senate, where opposition lawmakers have threatened to
strip several major provisions in a key vote, Bloomberg News
relays.
Ongoing negotiations over the reform package contributed to Milei's
cancellation of the visit with Macron, according to one person
familiar, who requested anonymity to discuss the situation,
Bloomberg News discloses. Milei now intends to kick off his
European tour on June 21 to attend award ceremonies in Spain and
Germany instead, Bloomberg News says.
The delayed departure will significantly alter the scope of the
trip, Bloomberg News notes. In Italy, the Argentine was set to
cross paths with one of his chief political foes — Brazil
President Luiz Inacio Lula da Silva — for the first time since
taking office, Bloomberg News relays. He would have attended
alongside Pope Francis, with whom Milei patched up his relationship
after the pair traded barbs throughout Argentina's presidential
campaign, Bloomberg News adds.
Milei's new travel dates also put at risk his attendance at the
Ukraine summit in Switzerland, where President Volodymyr Zelenskyy
is set to present a blueprint for peace in his nation's ongoing war
with Russia, Bloomberg News relays.
Milei's reform package, split between two bills, passed Argentina's
lower house in April but is now facing fresh challenges in the
Senate, Bloomberg News relays. Lawmakers are attempting to strip
the bills of provisions that would reintroduce income taxes and
privatize state-run companies, two measures meant to help the
government close a chronic spending gap, Bloomberg News notes.
Instead, Milei will return to Madrid, which he visited last month,
to receive an award from a libertarian institute in the city's
casino, according to the organisation's website, the report says.
Milei will also receive an award from the Hayek Society in Hamburg
on June 22, followed by a meeting with German Chancellor Olaf
Scholz, the report notes.
Milei's last trip to Madrid, where he spoke at a far-right rally
for an opposition party, unleashed an all-out diplomatic brawl with
Spanish Prime Minister Pedro Sanchez, Bloomberg News relays.
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.
BLOCKFI INC: Pays $150,000 Civil Penalty in Bond Fight
------------------------------------------------------
Parker Quinlan of Law360 reports that bankrupt BlockFi Inc. agrees
to $150,000 penalty in Connecticut bond row.
Bankrupt cryptocurrency lender BlockFi has reached a deal with
Connecticut's banking regulator to pay a $150,000 civil penalty
over claims the company failed to maintain a required surety bond,
and a decision in November 2020 to halt account withdrawals from
the platform.
About BlockFi Inc.
BlockFi Inc. says it's building a bridge between digital assets and
traditional financial and wealth management products to advance the
overall digital asset ecosystem for individual and institutional
investors.
BlockFi was founded in 2017 by Zac Prince and Flori Marquez and in
its early days had backing from influential Wall Street investors
like Mike Novogratz and, later on, Valar Ventures, a Peter
Thiel-backed venture fund as well as Winklevoss Capital, among
others. BlockFi made waves in 2019 when it began providing
interest-bearing accounts with returns paid in Bitcoin and Ether,
with its program attracting millions of dollars in deposits right
away.
BlockFi grew during the pandemic years and had offices in New York,
New Jersey, Singapore, Poland and Argentina.
BlockFi worked with FTX US after it took an $80 million hit from
the bad debt of crypto hedge fund Three Arrows Capital, which
imploded after the TerraUSD stablecoin wipeout in May 2022.
BlockFi had significant exposure to the companies founded by former
FTX Chief Executive Officer Sam Bankman-Fried. BlockFi received a
$400 million credit line from FTX US in an agreement that also gave
FTX the option to acquire BlockFi through a bailout orchestrated by
Bankman-Fried over the summer. BlockFi also had collateralized
loans to Alameda Research, the trading firm co-founded by
Bankman-Fried.
BlockFi is the latest crypto firm to seek bankruptcy amid a
prolonged slump in digital asset prices. Lenders Celsius Network
LLC and Voyager Digital Holdings Inc. also filed for court
protection this year. Kirkland & Ellis is also advising Celsius and
Voyager in their separate Chapter 11 cases.
BlockFi Inc. and eight affiliates sought protection under Chapter
11 of the Bankruptcy Code (Bankr. D.N.J. Lead Case No. 22-19361) on
Nov. 28, 2022. In the petitions signed by their chief executive
officer, Zachary Prince, the Debtors reported $1 billion to $10
billion in both assets and liabilities.
Judge Michael B. Kaplan oversees the cases.
The Debtors tapped Kirkland & Ellis and Haynes and Boone, LLP, as
general bankruptcy counsels; Walkers (Bermuda) Limited as special
Bermuda counsel; Cole Schotz, P.C., as local counsel; Berkeley
Research Group, LLC as financial advisor; Moelis & Company as
investment banker; and Street Advisory Group, LLC, as strategic and
communications advisor. Kroll Restructuring Administration, LLC,
is the notice and claims agent.
=============
B A H A M A S
=============
FTX GROUP: Seeks to Stop Outside Litigation Against Insiders
------------------------------------------------------------
Dietrich Knauth at Reuters reports that FTX Group asked a U.S.
judge to stop outside litigation against company insiders and
venture capital firms accused of playing a role in the bankrupt
crypto exchange's collapse, saying the lawsuits undermine FTX's own
effort to repay customers.
The lawsuits, including class action complaints filed by FTX
customers, could eat into an estimated $16 billion recovery that
the company intends to pay customers in its bankruptcy, FTX said in
court documents filed in federal court in Miami, according to
Reuters.
The class action litigation recently resumed after being placed on
pause during the criminal trial of FTX founder Sam Bankman-Fried.
He was sentenced in March to 25 years in prison for stealing from
FTX customers and using their funds to prop up his own risky
investments, the report notes.
Plaintiffs in the class action lawsuits are seeking to take control
of assets seized by federal prosecutors, litigate claims already
being pursued by FTX, and charge 33% in attorneys' fees on
recoveries that the class action lawyers had no role in obtaining,
according to FTX.
FTX said that the class action lawyers were trying to pocket up to
$400 million in legal fees "despite having to date provided next to
no monetary benefit" for FTX customers and other victims.
Adam Moskowitz, a lead lawyer for the plaintiffs, said he looked
forward to U.S. Judge K. Michael Moore's review of all of his
clients' settlements and pending claims, including a fraud lawsuit
filed against Sullivan & Cromwell, the law firm managing FTX's
bankruptcy.
"Our goal is to provide relief for all FTX victims and we
appreciate all parties that are helping our efforts," Moskowitz
said.
FTX, which filed for bankruptcy in November 2022, recently
announced that it will repay customers more than 100% of what they
are owed - with the major caveat that it would evaluate customer
claims based on much-lower cryptocurrency prices from November
2022, when it filed for bankruptcy.
FTX has gathered as much as $16 billion to repay customers by
selling assets and filing lawsuits to claw back money paid by FTX
before it collapsed.
FTX in the court filing said that settlements in the class action
threatened to wipe out the company's legal claims against insiders
that have pleaded guilty or been convicted of crimes, including
Caroline Ellison, Gary Wang, and Nishad Singh, and interfere with
its efforts to claw back funds from investment firms.
About FTX Group
FTX is the world's second-largest cryptocurrency firm. FTX is a
cryptocurrency exchange built by traders, for traders. FTX offers
innovative products including industry-first derivatives, options,
volatility products and leveraged tokens.
Then CEO and co-founder Sam Bankman-Fried said Nov. 10, 2022, that
FTX paused customer withdrawals after it was hit with roughly $5
billion worth of withdrawal requests.
Faced with liquidity issues, FTX on Nov. 9, 2022, struck a deal to
sell itself to its giant rival Binance, but Binance walked away
from the deal amid reports on FTX regarding mishandled customer
funds and alleged US agency investigations. Bankman-Fried agreed to
step aside, and restructuring vet John J. Ray III was quickly
Named new CEO.
FTX Trading Ltd (d/b/a FTX.com), West Realm Shires Services Inc.
(d/b/a FTX US), Alameda Research Ltd. and certain affiliated
companies then commenced Chapter 11 proceedings (Bankr. D. Del.
Lead Case No. 22-11068) on an emergency basis on Nov. 11, 2022.
Additional entities sought Chapter 11 protection on Nov. 14, 2022.
FTX Trading and its affiliates each listed $10 billion to $50
billion in assets and liabilities, making FTX the biggest
bankruptcy filer in the US this year.
According to Reuters, SBF shared a document with investors on Nov.
10, 2022, showing FTX had $13.86 billion in liabilities and $14.6
billion in assets. However, only $900 million of those assets were
liquid, leading to the cash crunch that ended with the company
filing for bankruptcy.
The Hon. John T. Dorsey is the case judge.
The Debtors tapped Sullivan & Cromwell, LLP as bankruptcy counsel;
Landis Rath & Cobb, LLP as local counsel; and Alvarez & Marsal
North America, LLC as financial advisor. Kroll is the claims
agent,
maintaining the page https://cases.ra.kroll.com/FTX/Home-Index
The Official Committee of Unsecured Creditors tapped Paul Hastings
as counsel, FTI Consulting, Inc., as financial advisor, and
Jefferies LLC as the investment banker. Young Conaway Stargatt &
Taylor LLP is the Committee's Delaware and conflicts counsel.
Montgomery McCracken Walker & Rhoads LLP, led by partners Gregory
T. Donilon, Edward L. Schnitzer, and David M. Banker, is
representing Sam Bankman-Fried in the Chapter 11 cases.
White-collar crime specialist Mark S. Cohen has reportedly been
hired to represent SBF in litigation. Lawyers at Paul Weiss
previously represented SBF but later renounced representing the
entrepreneur due to a conflict of interest.
===========
B R A Z I L
===========
BANCO YAMAHA: Moody's Affirms Ba1 Deposit Ratings, Outlook Stable
-----------------------------------------------------------------
Moody's Ratings has affirmed Banco Yamaha Motor Do Brasil S.A.'s
long- and short-term local and foreign currency deposit ratings at
Ba1 and Not Prime, respectively. The rating agency has also
affirmed the bank's long- and short-term local and foreign currency
Counterparty Risk Ratings at Baa3 and P-3 and long- and short-term
Counterparty Risk Assessments at Baa3(cr) and P-3(cr),
respectively. Concurrently, Moody's downgraded the bank's Baseline
Credit Assessment (BCA) to b1 from ba3, and affirmed its adjusted
BCA at ba1 that incorporates support from its parent Yamaha Motor
Company Limited (Baa1 stable). The outlook on the long-term deposit
ratings remains stable.
RATINGS RATIONALE
The downgrade of Banco Yamaha' BCA to b1 from ba3, reflects the
deterioration in asset quality metrics reported by the bank over
the past two years and the decline in its core capitalization that
followed the strategy to accelerate loan growth since 2021 amid a
highly competitive segment of motorcycle financing in Brazil. The
b1 BCA also reflects the increased volatility indicated through
its profitability metrics that arise from the bank's high
sensitivity to interest rates and higher provisioning expenses.
Between 2021 and 2023, the bank's loan portfolio grew 28.7% on
average year over year, reaching BRL2.95 billion, which pressured
its tangible common equity to risk weighted assets ratio (TCE /
RWA) in the period. In December 2023, TCE/RWA stood at 9.7%, down
from 24.7% at the end of 2021. In the same period, there was a
sharp increase in problem loan ratio driven by the high interest
rate and inflationary conditions that affected particularly the
low income individuals, Banco Yamaha's core segment. Problem loan
ratio increased 9.3% of gross loans as of December 2023, up from
6.7% in 2021, while the industry's overall retail delinquency
decreased.
At the same time, the bank presented a sluggish performance, with
net income to tangible asset ratio down from 3.4% on average in the
past four years to a negative 0.8% at the end of 2023. Banco
Yamaha's bottom line result was hit by the high interest rates,
increased provisioning expenses and higher funding costs, all
factors that constrained its margins that reduced from 21.0% in
2021 to 12.8% in 2023.
Banco Yamaha's b1 BCA also considers the high portion of wholesale
funding resources and the low level of liquidity maintained by the
bank. In addition, while approximately 8% of its funding mix are
from related parties through time deposits, the majority of its
resources refers to borrowings and interbank deposits with Japanese
and Brazilian large financial institutions and local capital
markets issuances, resulting in a concentrated funding mix. Despite
the bank's recent efforts to improve funding diversification,
Moody's expect no material change in its funding profile in the
next 12 to 18 months because these deposits tend to be more
confidence sensitive than traditional retail deposits.
Additionally, when compared to other banks with similar ratings,
Banco Yamaha's stock of liquid assets is fairly modest. As of
December 2023, the ratio of liquid assets to tangible banking
assets was reported at 16%.
The affirmation of Banco Yamaha's Ba1 deposit rating is
underpinned by the bank's well established captive operation of
Yamaha Motors do Brasil, and Moody's acknowledgement of the
affiliate of Japan's Yamaha Motor Company Limited (Baa1 stable).
Solely engaged in financing sales of Yamaha's motorcycles, the
bank's strategy and operations are closely tied to those of the
manufacturing company and the rating, therefore, incorporates
Moody's assessment of a very high probability of support from its
ultimate parent in Japan. This assessment results in three notches
of uplift to Moody's b1 BCA for Banco Yamaha.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Banco Yamaha's BCA could be upgraded if there is a material
improvement in its standalone liquidity and funding profile, and
the bank is able to sustainably increase funding diversification, a
key strength to maintain a high growth path. The deposit ratings
could also be affected positively if there is an upgrade of the
parent's Baa1 issuer rating.
Banco Yamaha's b1 BCA and ba1 adjusted BCA could face negative
pressures if there is further deterioration of its asset quality,
capitalization and profitability indicators due to a material
increase in provisions for loan losses and in funding costs, which
could imply risks of adverse selection. A consistent decline in
profitability could compromise the bank's capacity to replenish
capital through earnings, which could be negative in the long run.
The principal methodology used in these ratings was Banks
Methodology published in March 2024.
=====================
P U E R T O R I C O
=====================
FIRSTBANK PUERTO: Fitch Hikes LT IDR to 'BB+', Outlook Stable
-------------------------------------------------------------
Fitch Ratings has upgraded FirstBank Puerto Rico's (FirstBank)
Long-Term Issuer Default Ratings (IDRs) to 'BB+' from 'BB' and its
Viability Rating (VR) to 'bb+' from 'bb'. Fitch has also affirmed
the bank's Short-term IDRs at 'B'. The Rating Outlook is Stable.
Fitch has affirmed First Bancorp's (FBP) IDR at 'BB' and its VR at
'bb'. The Rating Outlook for FBP has been revised to Stable from
Positive.
KEY RATING DRIVERS
Ratings Upgrade: The upgrade of FirstBank reflects its financial
resilience, proven business model, strategic execution and solid
market position in Puerto Rico. While the bank has above-average
profitability and capitalization compared to U.S. mainland banks,
stronger core metrics are appropriate for Puerto Rico's more
challenging operating environment.
Holding Company Notched from Bank: Fitch affirmed the VR of the
holding company FBP at 'bb' and revised the Outlook on the
Long-term IDR to Stable from Positive, resulting in a one-notch
rating difference with its main operating subsidiary, FirstBank.
The notching reflects incrementally weaker holding company
liquidity management relative to peers, including an elevated
reliance on FirstBank upstream dividends to meet near-term
shareholder dividends and other expected cash outflows. Although
FBP's Outlook is Stable, an improvement in holding company
liquidity management could result in an equalization of its rating
with that of FirstBank.
Improved Operating Environment: Fitch has revised FirstBank's
Operating Environment score upward to 'bbb'. The revision is based
on recent positive economic developments such as the resolution of
the local government's debt restructuring, ongoing distribution of
disaster recovery funds, strong tourism industry growth, and
slowing outmigration trends. The Operating Environment influences
its assessments of other rating drivers, so this change triggered a
re-evaluation of FBP's business profile, asset quality and funding
and liquidity, providing more headroom at its current rating
level.
The bank has a relatively low labor force participation rate,
ongoing demographic challenges, and geographic vulnerability to
extreme weather events. However, Fitch does not anticipate this
will affect the bank's performance over the rating horizon.
Business Profile Underpins Upgrade: The upgrade is underpinned by
the bank's strong position in Puerto Rico. It is the second-largest
player across most business segments, a status reinforced by its
2020 acquisition of Banco Santander Puerto Rico (BSPR). FBP's
financial profile has exhibited consistent resilience amid tough
local economic conditions over an extended period. However, Fitch
views FBP's business model as somewhat less robust compared to its
higher-rated peers in Puerto Rico and the U.S. mainland, due to the
bank's limited revenue diversification.
Improved Risk Profile: Fitch views FBP's underwriting standards and
risk controls as appropriate for its current rating level. The
bank's risk profile improved over the past several years due to
strategic de-risking of its loan portfolio by moving away from
higher-loss asset classes. Apart from the 2020 acquisition of BSPR,
loan growth at the bank has been muted. Additionally, the bank's
risk management practices, particularly in handling interest rate
risk, contribute to its risk profile. This is demonstrated by the
moderate duration of its investment portfolio and the small
proportion of securities classified as held-to-maturity.
Asset Quality Normalizing: Credit metrics continued to normalize
during 2023, but performance is still better than the bank's
pre-pandemic levels. Fitch factored in the revised accounting
standard for troubled debt restructurings, which contributed to a
reduction in FBP's impaired loan ratio in 2023 relative to
historical figures. FBP's net charge-offs have declined to 36 bps
as of 1Q24, down from 57 bps at YE23, and are significantly lower
than the pre-COVID ratio of 90 bps at YE19.
Fitch anticipates continued normalization within the bank's
consumer and commercial real estate portfolios, much like its
peers. Over the medium term, however, Fitch expects the bank's
credit metrics to continue performing better than pre-pandemic
levels, supported by positive trends in the local operating
environment, including federal aid and a robust tourism sector,
which should help mitigate broader economic pressures stemming from
higher interest rates for longer.
Earnings Strength Supports Upgrade: FBP's profitability continues
to be a ratings strength. The bank's operating profit to
risk-weighted assets ratio stood at 3% in 1Q24, remaining robust in
comparison to most of its U.S. mainland peers. Additionally,
earnings are bolstered by a cost-effective business model, as
evidenced by the bank's efficiency ratio of 50%, which compares
favorably with local and U.S. mid-tier peer group. While credit
quality deterioration could necessitate further building of
reserves and potentially pressure earnings, Fitch expects this
impact to be manageable for FBP.
Solid Capital Levels: FBP's capital ratios, which are high compared
to most U.S. mainland banks, are solid and supportive of the bank's
rating. The bank's regulatory common equity Tier 1 (CET 1) ratio as
of 1Q24 was 15.9%, a modest decline from 16.1% at YE23. Adjusted
for accumulated other comprehensive income, FBP's CET1 ratio
improved to 10.9% as of 1Q24 compared to 10.5% at 1Q23 as
unrealized losses in its securities portfolio decreased. Fitch
expects capital ratios may decline modestly from current levels
over the next few years through increased shareholder returns.
However, Fitch expects FBP to sustain higher capital ratios than
similarly sized banks in the U.S. given the island's relatively
weaker operating environment.
Strong Funding Base: Fitch considers FBP's funding profile to be
robust, underscored by a stable and granular deposit base, along
with a cost of deposits that is competitively lower than that of
mainland peers. In the past year, the bank's loans grew by 6%,
surpassing the deposit growth of 3%, with the loan-to-deposit ratio
increasing to 74.5% in 1Q24 from 72% in 1Q23. Fitch expects a
slight increase in the bank's loan-to-deposit ratio due to moderate
loan demand in Puerto Rico. Excluding public sector collateralized
deposits, FBP's loan-to-deposit ratio would be approximately 89%,
marginally higher than the median for U.S. mainland peers of 86%.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Negative rating action could result from significant deterioration
in asset quality, particularly a reversion of the net chargeoff
ratio above the long-term historical average, or a sustained
decline of the CET1 ratio below the benchmark level for this
operating environment (13%).
Rating pressure could also occur if the bank were to experience
volatility or a decline in operating profitability below 1% of
risk-weighted assets over multiple quarters.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Positive rating momentum would be contingent on improved
non-interest income contribution and on further development of the
bank's franchise without materially increasing its risk appetite.
A sustained improvement in the bank's asset quality metrics, as
measured by a reduction to the four-year average impaired loans
ratio below 4%, could also support a positive rating action.
In addition, should FBP significantly improve the holding company's
liquidity on an unconsolidated basis to cover a minimum of 1.0x
expected annual outflows (including interest, expenses and
dividends), it could result in a positive rating action, including
equalizing the holding company and bank ratings.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Long- and Short-Term Deposit Ratings: Long-term deposits at
FirstBank are rated one-notch higher than its Long-Term IDR because
U.S. uninsured deposits benefit from depositor preference. U.S.
depositor preference gives deposit liabilities superior recovery
prospects in the event of default. Fitch rates FirstBank's
short-term uninsured deposits 'F3', in accordance with Fitch's
"Bank Rating Criteria," based on the bank's long-term deposit
rating and Fitch's assessment of the bank's funding and liquidity
profile.
Government Support: FBP's and FirstBank's Government Support
Ratings (GSRs) are rated 'No Support' (ns). Fitch views the
probability of support as unlikely.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Long- and Short-Term Deposit Ratings Sensitivities: The long-term
deposit ratings and short-term deposit ratings of FirstBank are
sensitive to changes in the company's Long-Term IDR.
Government Support Rating: The GSR would be sensitive to any change
in U.S. sovereign support, which Fitch believes is unlikely.
VR ADJUSTMENTS
FBP's VR has been assigned at 'bb', below the implied VR of 'bb+'
due to a negative adjustment for the Risk Profile, reflecting BHC
liquidity management.
The Operating Environment score of 'bbb' has been assigned below
the 'aa' category implied score due to the following reason:
Regional Focus
The Earnings and Profitability score of 'bb+' has been assigned
below the implied score of 'bbb' due to the following reason:
Revenue Diversification.
ESG CONSIDERATIONS
First Bancorp's ESG Relevance Score for 'Exposure to Environmental
Impacts' is a '3', which is higher than the bank sector default
score of '2' due to the heightened risk of natural disasters in the
bank's primary operating environment of Puerto Rico. While this is
an emerging factor that requires monitoring, an ESG Relevance Score
of '3' implies it is minimally relevant to the rating.
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
----------- ------ -----
FirstBank
Puerto Rico LT IDR BB+ Upgrade BB
ST IDR B Affirmed B
Viability bb+ Upgrade bb
Government Support ns Affirmed ns
long-term
deposits LT BBB- Upgrade BB+
short-term
deposits ST F3 Upgrade B
First BanCorp LT IDR BB Affirmed BB
ST IDR B Affirmed B
Viability bb Affirmed bb
Government Support ns Affirmed ns
=================
V E N E Z U E L A
=================
CITGO PETROLEUM: Opposition Presses U.S. Officials to Halt Sale
---------------------------------------------------------------
globalinsolvency.com, citing Bloomberg News, reports that
Venezuela's opposition is ramping up lobbying efforts in
Washington, trying to persuade the Biden administration to
intervene in the court-ordered sale of Citgo Petroleum Corp.'s
parent company in the U.S.
The company is the South American nation's most important foreign
asset and its shares are due to be auctioned by July 15, according
to globalinsolvency.com.
The opposition fears Nicolas Maduro could blame them for Citgo's
loss ahead of crucial presidential elections set for the end of
next month, the report relays.
So the opposition-appointed, ad-hoc board that represents state oil
company Petroleos de Venezuela SA in U.S. courts is seeking
congressional support for measures that could safeguard the asset
from creditors, the report discloses.
In a letter sent to Treasury Secretary Janet Yellen and Attorney
General Merrick Garland, a bipartisan group of lawmakers is urging
the administration to "bar the continuation of the sale process
through its economic powers, revoke its favorable sanctions
licensing policy regarding the sale announced in May 2023" and
establish an "equitable and orderly" alternate process for
resolving claims against Venezuela's government and PDVSA, the
report notes.
globalinsolvency.com relays that representatives Debbie Wasserman
Schultz and Maria Elvira Salazar, a Florida Democrat and Republican
respectively, co-authored the letter.
Other signatories include Democratic representatives Joaquin
Castro, Jared Moskowitz, Darren Soto and Susan Wild, plus Senator
Robert Menendez, as well as Republican representatives Carlos
Gimenez and Michael Waltz, the report discloses.
It's a last-minute effort to avoid the sale of Citgo's parent, PDV
Holding, which is being targeted by tens of creditors to pay-off
over $20 billions in claims against Venezuela, the report says.
The process, started by a Canadian mining company that had its
assets expropriated by late Venezuelan President Hugo Chavez, is
being led by District Judge Leonard Stark in Delaware, the report
notes. A final round of bids is set to take place, the report
adds.
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
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