/raid1/www/Hosts/bankrupt/TCRLA_Public/240626.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
Wednesday, June 26, 2024, Vol. 25, No. 128
Headlines
A R G E N T I N A
ARGENTINA: Congress Win Puts Pressure on Milei to Deliver Promises
ARGENTINA: Has Surplus Harvest, But Farmers Want More From Milei
B R A Z I L
BRAZIL: Tax Authority to Summon Foreign Crypto Exchanges for Info
D O M I N I C A N R E P U B L I C
AEROPUERTOS DOMINICANOS XXI: Fitch Assigns BB+(EXP) on 2034 Notes
AEROPUERTOS DOMINICANOS: Moody's Rates $500MM Secured Notes 'Ba2'
DOMINICAN REPUBLIC: Beer Industry Injects 92.5BB Into Economy
DOMINICAN REPUBLIC: Deputies OKs Bill Creating Mitigation Corps
G R E N A D A
GRENADA: IMF Predicts Economic Growth of Nearly 4%
G U A T E M A L A
CENTRAL AMERICAN BOTTLING: Moody's Affirms Ba2 CFR, Outlook Stable
P U E R T O R I C O
VIGILANCIA VIRTUAL: Seeks to Hire Angel Mattei as Accountant
S U R I N A M E
SURINAME: Implements Ambitious Economic Reform Agenda, IMF Says
- - - - -
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A R G E N T I N A
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ARGENTINA: Congress Win Puts Pressure on Milei to Deliver Promises
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Martin Raschinsky at AFP News reports that President Javier Milei
has achieved his first legislative breakthrough after six months in
power with the approval of what he describes as the "most ambitious
reform in the last 40 years." But now, in the midst of an apparent
good run, he must deal with a society that is impatient for
economic results, according to AFP News.
Milei's so-called 'Ley de Bases' bill just scraped through the
Senate after a marathon session, and it has yet to be definitively
signed off by the Chamber of Deputies, AFP News notes. Still, it's
progress: in January, a version of the same law with some 600
articles, as against the current one with just over 200, had failed
in the lower house and been withdrawn, AFP News relays.
AFP News says that the negotiated and trimmed reform bill includes
the privatisation of some state-run companies, tax changes,
economic deregulation, the delegation of special powers to the
Executive branch and a special regime for large overseas
investors.
"It's the most important milestone since Milei became president,"
said political analyst Gustavo Cordoba. "He found a virtuous
circle to build power which proved successful," AFP News relays.
This shows that the outspoken head of state, who has insulted
Congress and its members by calling them a "rat's nest," or
responded to their decisions by saying that he doesn't give "a
damn" about them, is starting to "delegate to politics specialists
in negotiation," Cordoba explained, AFP News discloses.
In line with this, historian and political analyst Rosendo Fraga
stated that "the government has moved away from 'all or nothing,'
and that explains why it will accept a law that falls short of the
goals," AFP News notes.
AFP News relays that Cordoba stressed that, after the legislative
victory, "mileísmo was born." The government did "everything it
had to do to pass the law."
On the other side, the opposition is fragmented and rather
heterogeneous, AFP News notes.
"The opposition was not as up to the challenge of building power as
the government was, and it attended the session in an improvised
way," Cordoba highlighted, AFP News discloses.
The Senate vote took place in a context of heavy recession with
industrial activity and consumption collapsed, AFP News relays.
Half of the population lives in poverty, thousands of state workers
have been laid off and salaries and pensions have lost purchasing
power in the face of high inflation, AFP News says.
The government can boast achievements on that front: inflation
continued to slow down in May to a monthly 4.2 percent, the lowest
figure in two-and-a-half years, though over the last 12 months it
remains near 280 percent; meanwhile, public spending is being
brought under control, AFP News notes.
AFP News discloses that the International Monetary Fund gave Milei
another boost when it approved the eighth quarterly review of
Argentina's US$44-billion credit agreement and the immediate
disbursement of some US$800 million.
But the IMF also called on Milei's government to "improve the
quality of fiscal adjustment," AFP News says.
Society too is growing impatient, AFP News relays. The Senate
debate was accompanied by protests and clashes with security forces
outside Congress, AFP News notes. Dozens of people were wounded
and arrested, while two cars were set on fire, AFP News relays.
Milei has repeatedly asserted that his reform bill is key for the
country's economic take-off, AFP News says. With its approval,
that discursive tool has vanished, AFP News notes.
"People will say, 'OK, you already have the tools you need,' so the
time it takes to show results will work against him," Córdoba
pointed out, AFP News discloses.
According to several surveys, Milei still retains around 50 percent
approval among the population, AFP News notes.
In political scientist Iván Schuliaquer's opinion, "what a lot of
people still associate with Milei is hope, the possibility of a
future where that promise that after the adjustment there is growth
is kept, which a lot of players call into question," AFP News
relays.
In other words, the government now has less time to bring about
economic change, AFP News notes.
Back in May, Presidential Spokesperson Manuel Adorni said that the
'Ley de Bases' bill's RIGI (Regime of Incentive for Big Investment)
investment scheme would mean "more jobs, more companies paying
taxes in Argentina, [and] the development of an entire production
chain," AFP News discloses.
The controversial incentive scheme offers fiscal, customs and
foreign exchange advantages lasting 30 years for foreign capital
investors who put in more than US$200 million, AFP News relays.
The results of the RIGI scheme will not be immediate, experts warn.
Critics, meanwhile, accuse the government of intending to give a
blank cheque to foreign capitals, AFP News 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: Has Surplus Harvest, But Farmers Want More From Milei
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Buenos Aires Times reports that the pampas, Argentina's vast and
fertile grasslands outside Buenos Aires, grain silos overflow with
this year's harvest – but nobody is selling just yet.
Though the country's farmers largely gave their votes to President
Javier Milei in the November election, they now want him to deliver
on promises to slash taxes and ease exchange rate controls,
according to Buenos Aires Times.
Until then, their bumper harvest will sit, the report notes.
"The silos are full. One sells just enough to cover expenses,"
Ricardo Semino, a farmer from Lobos, 110 kilometres (68 miles)
southwest of Buenos Aires, told AFP as he finished harvesting his
corn and wheat fields. "Those who can wait, do so," he added.
After the country's worst drought in a century saw agricultural
exports plummet, leading to a shortfall of US$20 billion in
revenue, the industry is expecting an excellent harvest in 2024,
the report relays.
The latest estimate from the Rosario Board of Trade indicates that
the grain harvest could yield 131.1 million tons, a sharp rise from
the 82.2 million tons gathered in the previous year, the report
discloses.
But farmers say that low global prices and the delay in freeing up
the exchange rate at which producers can sell their goods abroad
have complicated the seemingly good news, the report notes.
Agriculture is a major part of Argentina's economy, accounting for
55 percent of the country's exports. It is among the world's
largest food producers, ranking third in soybeans behind only
Brazil and the United States, the report says.
Argentina usually sells about 70 percent of its agro-industrial
production, while the rest goes into storage, the report relays.
Agricultural exports are estimated at US$29.3 billion this year,
falling short of the average US$32 billion a year over the past
five years, the report discloses.
Unsold Crops
The combination of increased production and unfavourable economic
conditions has left Argentina's fields dotted with "silo bags" –
basically, tons of harvested soybeans and grains wrapped in
plastic, the report says. Semino said sending grain to actual silos
is a bit of a crapshoot, the report relays.
"Usually you speculate when you send [the grain] to the silo
plant," he explained.
"Nowadays the silo plants, which belong to big companies, give you
the possibility to deliver the grain and you can sell it within
five, six, seven months or a year," the report notes.
The Rosario Board of Trade estimates that there are some 35.6
million tons of unsold grains in the country, valued at almost
US$10.6 billion, the report relays.
Despite Milei's campaign promises, he raised taxes on exports of
soybean meal and oil from 31 to 33 percent upon taking office, the
report relays. Taxes also increased on fuel, the report notes.
Reforms to exchange rate controls have not been forthcoming, and no
timeline has been set. Inflation, though trending down, was still
at 276.4 percent in May year-on-year, the report relays.
Argentina has half a dozen dollar exchange rates, the report notes.
Exporters get a preferential rate, but still far less than the
value of the peso on the parallel informal market (1,300 pesos to
the dollar) – which is the rate producers use to pay for farming
supplies, the report discloses.
Six months into Milei's tenure, all of that translates into
uncertain costs for farmers, the report relays.
In the past year, "the price of a tractor went from US$170,000 to
US$250,000," Semino said, the report notes.
Nevertheless, support for Milei persists in the countryside, with
Semino explaining that a devaluation of the peso in December did
help farmers, the report notes.
'Moving Forward'
And despite all the uncertainty, the future still seems brighter,
the report relays.
Cristian Russo, head of estimates at the Rosario Board of Trade,
said strong rains had boosted projections for the wheat harvest,
with a 40 percent higher yield expected next season, the report
notes.
The agricultural sector does not stop production, no matter what
happens in government, Semino explained, the report relays.
"You get used to always moving forward," he said. "Nobody is going
to leave a field fallow because they are waiting for another
government. You have to plant it and get the most out of it," he
added.
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.
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B R A Z I L
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BRAZIL: Tax Authority to Summon Foreign Crypto Exchanges for Info
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globalinsolvency.com reports that Brazil's tax authority will soon
call foreign crypto exchanges not based in the country to explain
their operations and how they cooperate with local service
providers, government officials told Reuters.
The tax revenue service is expected to publish an ordinance
summoning these companies for further information, according to
globalinsolvency.com. Unlike exchanges formally established in
Brazil, they are not obligated to report transactions conducted on
their platforms, the report notes.
"It's an area of concern for us to understand first how they
operate here, whether there's any illegality or not. We are also
concerned about having information on Brazilian wealth subject to
taxation here," said Andrea Chaves, deputy secretary of inspection
at the federal revenue service, the report relays.
Wagner Lima, risk management coordinator at the revenue service,
said the government also aims to understand how these exchanges
cooperate with service providers in the country to ensure they
provide information as required by the tax revenue service under a
2019 regulation, the report discloses. Among the exchanges not
based in Brazil but operating in the country and even having
Portuguese-language websites are Binance, Coinbase, OKX, and
KuCoin, 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).
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D O M I N I C A N R E P U B L I C
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AEROPUERTOS DOMINICANOS XXI: Fitch Assigns BB+(EXP) on 2034 Notes
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Fitch Ratings has assigned a 'BB+(EXP)' expected rating to
Aeropuertos Dominicanos Siglo XXI, S.A.'s (Aerodom) USD notes for
up to USD500 million due in 2034. The Rating Outlook is Stable.
RATING RATIONALE
The rating reflects the risk regarding a six-airport portfolio
located in the Dominican Republic, one of the largest tourism
destinations in the Caribbean, which holds a significant market
share of the country's air traffic and cargo. Traffic in Santo
Domingo Airport (SDQ), which accounts for 85% of the portfolio's
total volume, has demonstrated low volatility and resilient traffic
patterns, partially supported by the Dominican diaspora. Traffic is
highly concentrated in international and leisure passengers,
heavily reliant on North American demand, and somewhat exposed to
competition from neighboring touristic destinations. The concession
allows for periodic tariff increases according to U.S.' inflation
and requires a USD830 million capex investment plan (CIP) through
maturity.
The rating also reflects the transaction's exposure to refinancing
risk as the totality of the debt is bullet, and to interest rate
volatility given the term loan carries a floating rate (SOFR).
Fitch believes refinancing risk is mitigated by Aerodom's proven
market access and long concession tail of 26 years after the bond
matures. The risk of rate volatility is substantially mitigated,
with only 44% of debt affected for five years, and given cash flow
is expected to easily cover minor interest rate hikes.
The debt will be USD denominated, senior secured and benefits from
a six-month offshore debt service reserve account (DSRA) to be
funded through Letters of Credit (LOCs) at closing, a capex
investment account to be funded with operating cashflows and 20% of
shareholders' distributions, and a suitable covenant package. The
risk of foreign currency variations is mitigated by the high
proportion of USD denominated revenues and high operational
margins.
Under the rating case, maximum leverage, measured as Net Debt to
EBITDA, is 4.3x and the issuer is expected to deleverage to around
3x in the 5th year, as EBITDA strengthens gradually. These metrics
are strong for the rating, according to Fitch's applicable
criteria. Fitch believes that Aerodom has sufficient liquidity to
preserve debt service if short-lived capital controls are imposed,
as over 90% of revenues are USD-denominated and around 75% are
collected offshore, and the transaction will have a six-month
offshore DSRA. The latter, coupled with robust financial metrics, a
strong ultimate parent and a concession clause that mentions that
existing or future exchange controls or funds transfers measures
shall not be applicable to the concession, support a two-notch
uplift from the 'BB-' Dominican Republic's Country Ceiling.
KEY RATING DRIVERS
Leisure-Oriented Portfolio Anchored by Capital City Airport
(Revenue Risk - Volume: Midrange):
Aerodom's six airports handle 36% of the Dominican Republic's
passenger volume, primarily leisure travellers and Visiting Friends
and Relatives (VFR), who exhibit low volatility. Traffic fully
recovered from coronavirus pandemic by 2022. Santo Domingo Airport
(SDQ) is the country's main airport, has a stable traffic profile
and serves diverse carriers, with potential for growth with
establishment of low-cost carrier Arajet's hub.
Gregorio Luperon Airport (POP), Aerodom's second most important
asset, accounts for 11% of the portfolio's traffic and faces
competition from Punta Cana Airport (PUJ) in the country's main
tourist destination. The portfolio's performance is partially
linked to economic conditions in North America and Europe, as more
than 95% of traffic is international.
Inflation Adjusted Tariffs (Revenue Risk - Price: Midrange):
The concession agreement allows for periodic tariff increases in
line with changes in the U.S. CPI without government approval, from
2024, which is a positive attribute. Aerodom was also granted an
additional increase of 18.4% to be implemented between 2023 and
2025 to make up for the suspension of tariffs during 2017-2023.
More than 90% of revenues are U.S. dollar-denominated and around
75% of total revenues are collected in offshore accounts. Tariffs
for commercial revenues are not subject to regulatory approval.
Well-Defined Capex Plan for Regional Airports (Infrastructure
Development and Renewal: Midrange):
Aerodom's infrastructure has a well-defined CIP to be funded with
its cashflow plus 20% of shareholder distributions. The concession
extension includes a commitment to build and operate a new terminal
with capacity of four million passengers at SDQ to be completed by
2028, as well as other capex and replacement expenditure (repex)
obligations. The budgeted capex exceeds the contractual USD830
million required by the concession through 2060, and is deemed
adequate by the independent engineer (IE). The portfolio benefits
from management by Vinci Airports, a reputable global operator with
proven experience in the sector and the LatAm region.
Bullet Debt, Adequate Covenants (Debt Structure: Midrange):
The rated debt is in U.S. dollars, senior secured, fixed-rate and
will be pari-passu with a U.S. dollar-denominated five-year
floating-rate term loan that will not be rated by Fitch. Fitch
includes the term loan in its financial projections. The interest
rate risk from the term loan is largely mitigated by the relatively
short term of the debt, its weight with respect to total debt (44%)
and Aerodom's ample projected cashflow available for debt service.
Refinance risk arises from the bullet debt structure, but it is
mitigated by Aerodom's proven market access and a 26-year
concession tail. Debt holders will benefit from a six-month
offshore DSRA to be funded through LOCs at closing and an adequate
covenant package that includes limits on additional indebtedness if
leverage reaches 5x. The foreign-currency risk is mitigated by the
high proportion of U.S. dollar denominated revenues (more than 90%)
and high operational margins.
Financial Profile
In Fitch's view, the most relevant financial metric for this
project is leverage, measured as net debt to EBITDA, given the
debt's bullet payment structure. Under the rating case, the maximum
leverage is 4.3x and will decline to around 3x in the fifth year,
as EBITDA strengthens gradually, which is considered positive for
the refinancing prospects. These metrics are strong for the rating,
according to Fitch's applicable criteria, but the rating is
ultimately constrained by risks related to general economic
conditions in the Dominican Republic, and the Country Ceiling.
PEER GROUP
Aerodom's closest regional peer is ACI Airport SudAmerica, S.A.
(ACI), whose senior secured debt is rated 'BB+'/Stable. ACI
operates the Carrasco International Airport in Uruguay. As with
Aerodom, ACI is an origin and destination (O&D) airport where
traffic is dominated by international passengers. ACI's volume and
price risk assessments are similar to Aerodom's, but it has a
stronger infrastructure assessment given the scope and size of
mandatory capex investments. ACI's debt structure is fully
amortizing and benefits from a partial cash-sweep and a springing
guarantee, though coverage ratios are lower than Aerodom's.
ACI's rating also reflects its dependence on structural liquidity
to meet obligations and a delayed recovery from the pandemic, which
is expected until 2024. In contrast, Aerodom's projected leverage
is considered strong for the rating. Uruguay's Country Celling of
'A-' is higher than Dominican Republic's 'BB-', hence it is not a
constrain for ACI's rating which is based on its financial profile.
Aerodom's rating is constrained by the Dominican Republic's Country
Ceiling and the company's buffer to support short lived capital
controls.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Deterioration in Fitch's view regarding Dominican Republic's risk
of imposing capital controls, affecting the ability to transfer
currency, and/or offshore revenue collection reduces over time.
- Traffic growth or overall financial performance consistently
below Fitch's rating case assumptions (7.2 and 7.6 million
passengers in 2024 and 2025, respectively), that could lead to a
leverage position around 5.0x on a sustained basis.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Improvement in Fitch's view regarding Dominican Republic's risk
of imposing capital controls, provided issuer's financial profile
is still consistent with a higher rating and offshore revenue
collection continues to be above 75% of total revenues.
TRANSACTION SUMMARY
Aerodom is the concessionaire of six airports in the Dominican
Republic: SDQ, POP, La Isabela (JBQ), El Catey (AZS), María Montez
(BRX), and Arroyo Barril (EPS). The Dominican Republic has record
of robust economic growth and, according to the traffic advisor, is
the largest Caribbean tourism market and one of the fastest-growing
economies in the region. In 2016, Aerodom was acquired by Vinci
Airports, which took over the airports' operations upon an
operation and maintenance (O&M) agreement set for the remainder of
the concession agreement. Vinci Airports is fully controlled by
Vinci S.A (the Sponsor).
Aerodom operates under a concession agreement that was granted in
1999 by the state through the Airport Commission. The agreement has
been amended over the years, including an extension in November
2023, with the concession now set to expire in March 2060. The
concession's updated terms also feature an automatic tariff
adjustment linked to changes in the U.S. CPI, economic equilibrium
clauses for downside protection, a termination payment clause that
could cover outstanding senior debt repayment, and a CIP in which
Aerodom is committed to invest USD830 million.
Of that amount, USD272 million is earmarked for the new terminal at
SDQ, the refurbishment of the existing one, and new control towers
at SDQ and POP. The CIP will cover all capex and repex needed to
ensure the portfolio copes with the envisioned traffic growth, and
improve and maintain the quality of services provided in all
airports.
Aerodom's airports are crucial to the Dominican Republic's
connectivity. They serve as key gateways for passengers and cargo
volumes, and handle 36% of the country's total traffic and more
than half of import and export volumes. Aerodom's traffic grew by a
Compound Annual Growth Rate (CAGR) of 2.7% over 2003-2023, with
international traffic, mainly tourists and non-resident Dominicans
VFR, accounting for 99.9% of all passengers.
Aerodom is seeking to refinance existing debt and to repay equity
invested in the recent extension payment of the concession via the
implementation of a USD900 million debt structure comprised of i)
USD500 million, 10-year, bullet secured notes in the 144A / Reg S
market (rated), and ii) USD400 million, 5-year, bullet senior
secured term loan (not rated).
Both tranches will be pari-passu and subject to cross-acceleration
features. Debt proceeds will be used to repay the existing debt,
pay the remaining concession extension fee, reimburse the payment
of the first concession fee instalment to the Sponsor, pay a
success fee to the Sponsor for the closing of the financing, and
cover transaction costs.
FINANCIAL ANALYSIS
Fitch's base case incorporates passenger traffic growth assumptions
of 13.7% and 11.5% for 2024 and 2025, respectively, and a CAGR of
3.6% from 2026 to 2034. Tariff increases are assumed to follow U.S.
CPI plus the agreed catch-up of 2.7% for 2024 and 2025, as per the
concession agreement. U.S.' inflation was assumed at 2.7% in 2024,
2.5% in 2025 and 2.1% from 2026 onwards. SOFR was assumed at 5.8%
in 2024, 4.9% in 2025 and an average of 4.2% from 2026 to 2034.
Operational and capital expenditures were as presented in Aerodom's
budget plus a 3% stress. Fitch's base case scenario resulted in
maximum leverage (2024) of 4.1x.
Fitch's rating case incorporates passenger traffic growth
assumptions of 9.8% and 4.4% for 2024 and 2025, respectively, and a
CAGR of 3.1% from 2026 to 2034. Inflation assumptions, tariff
increases and SOFR assumptions are in line with the Fitch's base
case. Operational and capital expenditures were as in Aerodom's
budget plus a 5% stress. Fitch's rating case scenario resulted in
maximum leverage (2024) of 4.3x.
Additional scenarios were run to measure the cash flow's
sensitivity to passenger volume and operational expenditures. The
structure is able to survive under different break-even analysis
scenarios of a constant 2.1% decline in traffic over 2024-2034, a
one-time plunge in traffic of 31% in 2027 or a 24% drop in traffic
in 2024. Opex and capex break-evens suggest the project could
withstand a 160% and 26% increase of opex and capex costs,
respectively. All break-evens assume the DSRA letter of credit
commitment is drawdown in full.
SECURITY
The debt will be secured on a first priority basis by a pledge of
100% of the shares of Aerodom.
DATE OF RELEVANT COMMITTEE
07 June 2024
Entity/Debt Rating
----------- ------
Aeropuertos Dominicanos
Siglo XXI, S.A.
Aeropuertos
Dominicanos Siglo XXI,
S.A./Airport Revenues
- Senior Secured Debt/1 LT LT BB+(EXP) Expected Rating
AEROPUERTOS DOMINICANOS: Moody's Rates $500MM Secured Notes 'Ba2'
-----------------------------------------------------------------
Moody's Ratings assigned a Ba2 rating to the upcoming issuance of
up to $500 million senior secured notes due 2034 issued by
Aeropuertos Dominicanos Siglo XXI, S.A. ("Aerodom" or the
"Issuer"). The rating outlook is positive.
RATINGS RATIONALE
The Ba2 rating assigned to the 10-year tenor $500 million
non-amortizing senior secured notes, takes into consideration that
the company's financing strategy entails a concomitant issuance of
a 5-year tenor $400 million non-amortizing senior secured bank-term
loan, that will rank pari-passu with the new senior secured notes.
The proceeds will be used for the repayment of existing debt,
repayment of shareholder loan, financing the concession extension
fee and other transaction costs.
Aerodom's credit quality reflects its strong market position in the
region, with robust service offerings, a diverse passenger profile
mix and improved concession terms. The rating is primarily
constrained by Aerodom's linkages with the concession grantor –
the Government of Dominican Republic (Ba3 positive), given its
exposure to the domestic operating environment and institutional
framework. The current one-notch rating difference compared to the
sovereign rating recognizes Aerodom's fundamentally stronger credit
profile relative to the Government, a large diversification of
revenues stemming from international passengers, evidence of good
access to global debt capital markets and the absence of exposure
to foreign currency volatility.
The Ba2 rating assigned reflects the robust improvements in the
recent concession agreement adjustment that incorporates a 30-year
extension through 2060 with significant enhancements and detailed
termination rights , in addition to the integration of annual
automatic tariff adjustments indexed to US CPI. The Ba2 rating also
reflects the solid structural enhancements that include a six-month
debt service reserve account and an off-shore revenue collection
account, which in addition to provisions in the concession
agreement, mitigate transfer and convertibility risks.
Relative to Aerodom's current debt profile, the new debt structure
captures some deterioration in key financial metrics, as reflected
in a decrease of the FFO / Debt leverage metric to levels of 14.5%
in 2024 from 26.2% in 2023, due to the additional leverage. The
non-amortizing debt profile introduces refinancing risk, but it is
mitigated by the qualitative improvements stemming from the new
long tenor of the concession and its embedded protections to
creditors, a 26-year concession tail after the maturity of the
notes, as well as the structural elements considered in the debt
terms.
Under the adjusted concession agreement, Moody's notes that Aerodom
has new obligations that include a concession extension fee payment
of $775 million that will be funded with the financing proceeds
(Aerodom paid on January 2nd the first installment of the upfront
fee of $300 million). Additionally, Aerodom has new significant
capital investment obligations of around $830 million through 2060.
The sizable CAPEX program will be funded with internal cash
generation and its outlay will include the development of a new
passenger terminal at Las Americas airport of roughly $250 million
during the 2025-28 period, the refurbishment of existing terminal
at Las Americas airport of around $16 million, a new control tower
at Las Americas airport of roughly $4 million and a new control
tower at Puerto Plata airport of approximately $2 million. Moody's
recognizes Aerodom's expertise and capabilities to execute the
material CAPEX program, supported by the independent technical
advisor. VINCI Airports' global footprint across 13 countries and
experience in the operation of over 70 airports provides evidence
of good track record and experience in the sector, a credit
positive.
Management projections display strong metrics with interest
coverage and FFO/Debt leverage ratios of 3.2x and 15.7% on a 3-year
average basis, respectively. Moody's Base Case considers
independent traffic consultant conservative traffic curves with an
additional sensitivity of 10% haircut on traffic volumes, which
aligns to Moody's traffic expectations for airports in the Americas
with regional concentration. Under this scenario, the interest
coverage ratio is 3.0x and the leverage ratio of Funds from
Operations FFO/Debt is 14.3%, on a 3-year average basis. Moody's
DSCR calculation of 2.56x on a 3-year average basis, entails a debt
service annuity to measure Aerodom's debt, considers the overall
debt repayment capacity during the extended concession life.
Moody's observes that dividend distributions, while still subject
to distribution tests, increase thus keeping retained cash flow
metrics constrained at 6.5% on a 3-year average basis.
OUTLOOK
The outlook is positive, in line with the rating outlook of the
Government of Dominican Republic and also reflecting Moody's
expectation of continuous stable traffic growth performance in the
region through the next 12-18 months underpinned by a strong travel
demand and a diversified passenger profile mix.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The rating would be upgraded if the credit rating of the Government
of Dominican Republic is upgraded while quantitatively, FFO/Debt
and (FFO + interest expense / interest expense) metrics remain
strongly positioned above 10% and 2.5x respectively, on a sustained
basis.
A rating downgrade is unlike at this time, given the positive
outlook. The rating would be downgraded if the rating of Dominican
Republic is downgraded. The rating would also face negative
pressure if the company faces substantial passenger traffic
volatility that reverts the expected traffic growth rate or
meaningful cost overrun, such that the FFO/Debt and (FFO + interest
expense / interest expense) metrics are positioned on a sustained
basis below 7% and 1.8x respectively.
PROFILE
Aerodom is the operator of six airports in the Dominican Republic
through a long-term concession granted by the government with and
extended tenor due 2060. The airport portfolio is composed by Las
Americas International Airport in Santo Domingo, the Gregorio
Luperón International Airport in Puerto Plata, El Catey
International Airport in Samaná, the María Montez International
Airport in Barahona, the Arroyo Barril Domestic Aerodrome in
Samaná and La Isabela International Airport in Santo Domingo.
The principal methodology used in these ratings was Privately
Managed Airports and Related Issuers published in November 2023.
DOMINICAN REPUBLIC: Beer Industry Injects 92.5BB Into Economy
-------------------------------------------------------------
Dominican Today reports that the Dominican Republic's beer industry
has made a significant contribution to the country's economy,
according to a recent study released by the consulting firm DASA.
In 2022, the industry generated a total of 92,483 million pesos,
making it a significant multiplier for productive chains and
creating over 50,000 jobs, according to Dominican Today.
The report highlights that the beer industry has a direct impact on
the economy, generating more than 3,000 direct jobs and nearly
48,000 indirect jobs through its influence on the acquisition of
goods and services throughout the value chain, Dominican Today
relays. Additionally, for every direct job in the brewing
industry, 16 additional jobs are created due to the acquisition of
local goods and services, Dominican Today notes.
In terms of employment, the study estimates that the sector pays
out an annual total of 13,748 million pesos in salaries to
employees, Dominican Today relays. Moreover, the industry
generates significant tax contributions for the government, with an
estimated total of 44,000 million pesos in 2022, the report
relays.
The beer industry has a ripple effect on various productive
sectors, including cardboard and paper manufacturing, glass
bottling, packaging materials, energy and fuels, entertainment and
advertising, transportation and logistics, machinery and equipment
maintenance services, among others, the report says. Furthermore,
it boosts sales in retail stores, with grocery stores reporting
between 28-33% of their sales coming from beer sales, the report
notes.
The study also highlights that the sector's purchases of domestic
goods and services exceed 14,000 million pesos annually, with 35%
going towards manufacturing and the rest towards services, the
report relays. Additionally, beer exports have reached $65 million
since 2019, the report notes.
Looking ahead, the report forecasts that the Dominican economy will
experience growth of 5.4% by the end of 2024, making it one of the
most dynamic economies in the region, the report says. This
positive outlook creates a favorable environment for business
development and growth, the report notes.
Overall, the Dominican Republic's beer industry plays a vital role
in driving economic growth and job creation, making it an important
contributor to the country's economic well-being, 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.
DOMINICAN REPUBLIC: Deputies OKs Bill Creating Mitigation Corps
---------------------------------------------------------------
Dominican Today reports that the Dominican Chamber of Deputies has
approved in first reading a bill creating the Specialized Emergency
and Disaster Mitigation Corps (Cemed), a new entity that will
develop non-war military operations to mitigate and respond to
emergencies and disasters.
Cemed, which will be under the control of the Ministry of Defense,
will be composed of members from the Army, Navy, and Air Force of
the Dominican Republic, according to Dominican Today. The Corps
will be led by a general, rear admiral, colonel, or ship captain
from one of the three military institutions, designated by the
President of the Republic, the report notes.
The bill aims to support national authorities in providing aid to
institutions responsible for mitigation tasks, the report relays.
This new entity is expected to improve the country's emergency
response capabilities, the report discloses.
The Chamber of Deputies also unanimously approved in first reading
a bill creating a regime of disqualifications for individuals who
have committed sexual infractions, the report notes. The
initiative, authored by Congresswoman Lourdes Aybar, aims to
prevent individuals who have committed sexual offenses from
exercising professions related to education, guidance, care, and
instruction of minors and people with special conditions, the
report relays.
The Registry of Disqualifications for Sexual Crimes (RIDS) will be
created to track individuals who are disqualified from working in
these areas, the report says. This new regime aims to protect
vulnerable populations and ensure their safety, the report notes.
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.
=============
G R E N A D A
=============
GRENADA: IMF Predicts Economic Growth of Nearly 4%
--------------------------------------------------
Jamaica Observer reports that the International Monetary Fund said
that Grenada's economy is experiencing "sustained, strong growth"
supported by a buoyant tourism sector and is projecting growth of
nearly four per cent this year.
In addition, the Washington-based financial institution said that a
surge in the citizenship by investment (CBI) revenue has resulted
in a large budget surplus, an increase in government deposits, and
lower public debt, according to Jamaica Observer.
Under the CBI, foreign investors are granted Grenadian citizenship
in return for making a substantial investment in the socio-economic
development of the country, the report notes.
The IMF, which sent a mission to Grenada earlier this month, said
that the key fiscal policy priorities are to improve the management
of these potentially volatile CBI revenues, contain the growth of
recurrent expenditures, and strengthen public financial management,
the report relays.
It said rising risks in the non-bank financial system call for
better data collection, greater supervisory oversight, and regional
supervisory cooperation, the report discloses.
"Reducing Grenada's dependency on imported fossil fuels, boosting
competitiveness, and investing in climate resilience are essential
to increase long-term growth," it added.
Jamaica Observer relays that the IMF said that Grenada's economy is
estimated to have expanded by 4.4 per cent last year, supported by
among-the-fastest growth in stay over arrivals in the Caribbean and
a continued uptick in spending per tourist.
It said construction activity moderated as major capital projects
were brought to completion and new projects linked to the recent
surge in CBI were slow to execute, the report notes.
Inflation declined to 2.2 per cent at end of last year, as food and
fuel price pressures eased. The current account deficit is
estimated to have narrowed, reflecting the increase in tourism
receipts, the report notes.
"Strong CBI revenues resulted in a large 2023 fiscal surplus of
eight per cent of GDP [gross domestic product], higher government
deposits of 17 per cent of GDP, and a decline in the public debt to
75 per cent of GDP. Financial system conditions remain stable,
with banks registering high levels of liquidity and modest levels
of non-performing loans," the report discloses.
The IMF said growth is projected to decelerate in the coming years
as capacity constraints weigh on tourism growth and investment, the
report relays.
It said the economy is projected to grow 3.9 per cent this year,
bolstered by another strong year of tourism activity, and that as
hotels are already close to their high-season capacity limits,
growth is projected to gradually slow to 2.7 per cent over the
medium term, the report relays.
"The outlook is sensitive, though, to the level of CBI inflows, the
degree to which those flows finance new growth-enhancing
investment, and the progress in completing the current pipeline of
hotel projects, including non-CBI-financed ones, the report notes.
"The clearing of the large backlog of CBI applications from the
recent surge is projected to result in a large 2024 budget surplus
of 9.5 per cent of GDP and further accumulation of government
deposits, the report relays.
"The CBI revenues are thereafter expected to normalize to pre-surge
levels. Nonetheless, sustained lower primary surpluses anchored in
the Government's fiscal rules framework are projected to support a
gradual reduction of public debt to the 60 per cent of GDP target
by the end of the decade," the IMF said, the report discloses.
It noted that the recent heightened international scrutiny over CBI
programs represents a risk to this important source of income and
that other important downside risks include a slowdown in key
tourist source markets, global commodity price volatility and the
ever-present threat of natural disasters, the report relays.
The Washington-based financial institution said that the high level
of government deposits and a falling debt-to-GDP ratio provide an
important buffer against unanticipated shocks, the report says.
It said the potential swings in CBI revenue warrant continued
careful management of public finances, the report notes.
The IMF said given the authorities' cautious treatment of CBI
revenues, the expected normalization of CBI revenue appears
manageable, the report says.
"Nonetheless, the uncertainty over the size of future inflows
underscores the need to contain growth in expenditures. Greater
prioritization over budget outlays and putting in place measures to
improve tax administration and raise tax revenues — through
adjusting the gasoline tax in context of instituting a symmetric
pass-through formula for gasoline prices — would prepare the
economy well for potential CBI shortfalls," the report adds.
=================
G U A T E M A L A
=================
CENTRAL AMERICAN BOTTLING: Moody's Affirms Ba2 CFR, Outlook Stable
------------------------------------------------------------------
Moody's Ratings affirmed The Central American Bottling Corp.'s
(CBC) Ba2 Corporate Family Rating and its Ba2 Senior Unsecured
Notes ratings. The outlook is maintained stable.
The affirmation follows CBC's amendment to the terms and conditions
of its 2029 senior notes following the approval of a consent
solicitation. The amendment increases permitted investments and
CBC's leverage ratio. Although an increase in leverage would be
high for CBC's current rating, Moody's believes the company will
rapidly reduce leverage given its strong operating performance in
recent years and the expectation of continued profitable organic
growth.
Specific amendments include investments in a permitted business of
up to an aggregate of $300 million and raising the allowed
debt/EBITDA ratio to 4.75x from 4.25x through March 2026; to 4.5x
from 4.0x through March 2027; and then lowering it to 4.25x through
March 2028 and then to 4.0x until maturity.
RATINGS RATIONALE
The Central American Bottling Corp. 's (CBC) Ba2 ratings reflect
its adequate credit metrics and liquidity; solid market position in
its territories of operation; diversified soft beverage product
portfolio; geographic diversification; and relationship with
PepsiCo, Inc. (PepsiCo, A1 stable), which has a 12% stake in CBC
and two seats on its board.
The ratings also incorporate CBC's relatively smaller scale than
that of its industry peers, its presence in some riskier markets
and the continued event risk because of its strategy to grow
through acquisitions. Strong competition in the territories in
which the company operates and its presence in some low-rated
countries with volatile economic or political conditions also
constrain the rating.
Between 2019 and 2023, CBC was able to sustain revenue growth at a
6.6% CAGR. As of year-end 2023, 41.6% of the company's net sales
were derived from carbonated soft drinks (CSD), a category that has
proved to be highly inelastic because of the strength of brands
under the PepsiCo portfolio in CBC's markets. As a result, CBC has
been able to sustain profitability despite high raw materials
costs. In 2021 and 2022, the EBITA margin was close to the 9.5%
average for the last five years. In 2023, the prices of raw
materials and commodities eased from 2022 levels, allowing the
company to expand its EBITA margin to 10.2%. Through 2026, Moody's
expects CBC to sustain annual revenue growth at close to 10%, while
maintaining EBITA margins above current 10% levels. Projects aiming
to improve costs and profitability under CBC's ongoing Project
Atlas support Moody's expectations and include revenue management
strategies, internal efficiencies and cost saving initiatives
focused on improving manufacturing, logistics and procurement
areas. Moody's expects that CBC will continue to mitigate the
effect of raw material price swings through hedging and procurement
hub.
CBC's strong operating results allowed it to deleverage using
proceeds of its 2022 issuance of $1.1 billion sustainability-linked
notes of 2029. Because of nearly $220 million in incremental debt
after the issuance, CBC's gross debt to EBITDA increased to 5.0x
from 4.4x in 2021, which CBC reduced to 4.2x by year-end 2023.
Moody's expects CBC's Moody's-adjusted EBITDA to average $470
million for the 2024-26 period. Even assuming no incremental cash
from investments and a nearly $300 million increase in debt to an
average of $1.8 billion through 2026 (if the consent is approved),
leverage should quickly fall below the 4.5x high end of Moody's
guidance for the current rating.
CBC has adequate liquidity. As of December 31, 2023, the company
reported cash on hand of $684 million and virtually no debt
maturities in the short run as the bulk of its debt is the $1.1
billion sustainability linked bond due in 2029. The company's free
cash flow (FCF) (i.e., cash from operations minus dividends minus
capital spending) improved due to a decrease in working capital and
higher cash from operations. As a result, the company improved it
FCF by $27 million in 2023, ending the year with a FCF of negative
$14 million. Moody's expects CBC to maintain cash balances
including short term investments above $320 million going forward
and to continue to prudently manage its capital structure.
The stable rating outlook incorporates Moody's expectation of a
slow improvement in profitability and cash generation, as well as a
gradual reduction in leverage over the next couple of years.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
A rating upgrade could be triggered as a result of an increase in
CBC's size while it maintains debt/EBITDA below 2.5x. In addition,
the company would need to generate FCF/debt of at least 15% on a
sustained basis.
A rating downgrade could be triggered if credit metrics deteriorate
significantly, for example, as a result of an acquisition or
because of negative results in the markets in which CBC operates.
An EBIT margin lower than 5%, debt/EBITDA above 4.5x or retained
cash flow/net debt below 12% on a sustained basis could also lead
to a rating downgrade.
The principal methodology used in these ratings was Soft Beverages
published in September 2022.
=====================
P U E R T O R I C O
=====================
VIGILANCIA VIRTUAL: Seeks to Hire Angel Mattei as Accountant
------------------------------------------------------------
Vigilancia Virtual y Policia Privada LLC seeks approval from the
U.S. Bankruptcy Court for the District of Puerto Rico to employ
Angel Mattei, a practicing accountant in San Juan, P.R.
The Debtor requires accounting services, which include the analysis
of bank accounts and accounting systems, financial consulting
services, and the filing of monthly operating reports and tax
returns.
The accountant will be paid $1,300 per month, plus reimbursement of
out-of-pocket expenses.
As disclosed in court filings, Angel Mattei is a "disinterested
person" within the meaning of Section 101(14) of the Bankruptcy
Code.
Angel L. Mattei holds office at:
Angel L. Mattei
Urb. Iglesias, 1450 Ave.
San Juan, PR 00921
Tel: (787) 789-6726
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 R I N A M E
===============
SURINAME: Implements Ambitious Economic Reform Agenda, IMF Says
---------------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF)
completed the sixth review under the Extended Fund Facility (EFF)
for Suriname. The completion of the review allows the authorities
to draw the equivalent of SDR 46.7 million (about USD 61.5
million), bringing total program disbursement to SDR 290.4 million
(about USD 382.6 million). In completing the review, the Executive
Board approved the authorities' request for a waiver of
non-observance of the end-March 2024 performance criteria on the
central government primary balance, the net international reserves
and net domestic assets of the central bank based on the corrective
actions the authorities have already taken and have committed to
undertake.
Suriname is implementing an ambitious economic reform agenda aimed
at restoring fiscal and debt sustainability through fiscal
consolidation and debt restructuring, protecting the vulnerable by
expanding social protection, upgrading the monetary and exchange
rate policy framework, addressing banking sector vulnerabilities,
and advancing the anti-corruption and governance agenda. These
policies are supported by the EFF arrangement, which was approved
by the Executive Board on December 22, 2021 (see Press Release No.
21/400).
Following the Executive Board discussion on Suriname, Mr. Kenji
Okamura, Deputy Managing Director, and Acting Chair, issued the
following statement:
"The authorities' reforms under the EFF-supported program are
increasingly reflected in macroeconomic stability and improving
investor perceptions. The economy is growing, inflation is
declining, donor support is increasing, and international bond
spreads have reached historic lows.
"The authorities' determination to carry out politically
challenging reforms is commendable. Full removal of fuel subsidies,
phasing out of electricity, water, and gas subsidies, broadening
the VAT base, and containing the public wage bill are politically
costly but necessary reforms. Structural reforms are proceeding
with a stronger impetus.
"Noteworthy progress has been made on debt restructuring. Bilateral
agreements with all official creditors and most commercial
creditors have been achieved. Domestic debt arrears have been
cleared.
"The near-term priority is to ensure continuous fiscal
consolidation, while protecting the vulnerable. Phasing out
subsidies and strengthening tax administration will help finance
higher social assistance and infrastructure spending. Implementing
the recently finalized social assistance reform plan will promote
more efficient and effective allocation of social assistance
spending. Strengthening commitment controls and addressing
weaknesses in cash management will contain public spending and
prevent accumulation of supplier arrears.
"Monetary policy is supporting disinflation. The authorities'
demonstrated commitment to flexible, market-determined exchange
rate is supporting international reserves accumulation.
Finalization of the central bank recapitalization plan will help
further strengthen its operational independence and financial
autonomy. Timely implementation of recapitalization plans of weaker
banks will bolster financial sector resilience. Additional steps to
improve liquidity management, enhance risk-based supervision, and
strengthen the AML/CFT framework would be important.
"The authorities should persevere with their ambitious structural
reform agenda to strengthen institutions, address governance
weaknesses, bolster climate resilience, and improve data quality,
including with continued capacity development support from the Fund
and other development partners."
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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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