/raid1/www/Hosts/bankrupt/TCRLA_Public/250117.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, January 17, 2025, Vol. 26, No. 13
Headlines
A R G E N T I N A
ARGENTINA: IMF Discusses Ex-Post Evaluation Exceptional Access
ARGENTINA: IMF Publishes Grim Evaluation of US$44-billion Deal
ARGENTINA: Scientists Warn Milei Wants to 'Deepen' Cuts
TECPETROL SA: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable
TECPETROL SA: Moody's Assigns B3 CFR & Rates New Unsecured Notes B3
B R A Z I L
BANCO BRADESCO: Fitch Assigns 'BB+(EXP)' Rating on New Unsec. Notes
BANCO BRADESCO: Moody's Rates New Senior Unsecured Notes 'Ba1'
GOL LINHAS: Unveils New Five-Year Plan Prior to Chapter 11 Exit
OI SA: Pay-TV Asset Sale Sparks Investor Interest
J A M A I C A
JAMAICA: Currency Redesign Rift
MFS CAPITAL: Gets Suspended From Trading Over Late Financials
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A R G E N T I N A
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ARGENTINA: IMF Discusses Ex-Post Evaluation Exceptional Access
--------------------------------------------------------------
The Executive Board of the International Monetary Fund (IMF) met to
discuss the Ex-Post Evaluation (EPE) of Argentina's exceptional
access under the 2022 extended arrangement under the Extended Fund
Facility (2022 EFF), which expired at the end of 2024.
As required in all cases of exceptional access (EA) to Fund
financing, this EPE assesses whether the macroeconomic strategy,
program design, and financing under the 30-month EFF arrangement
approved by the Executive Board in March 2022 (Press release No.
22/89) were appropriate and in line with Fund policies. The report
also includes an appendix with the authorities' reactions and views
on the 2022 EFF.
The 2022 EFF came about in extremely difficult circumstances.
Argentina was unable to regain external viability under the 2018
Stand-By Arrangement and faced large and concentrated repurchase
obligations to the Fund totaling about US$ 35 billion in 2022-23.
In addition, the country was grappling with high inflation, a
significant budget deficit, low international reserves, and
elevated public debt. The inability to meet obligations falling due
to the Fund could have led to severe and protracted consequences
for Argentina, significant reputational implications to the Fund,
and financial costs for the Fund and its members.
The EPE report concludes that, reflecting this difficult context,
as well as the challenging post-COVID conjuncture and the need to
secure ownership by a reluctant government, the design of the 2022
EFF did not provide for an adjustment commensurate with the scale
of Argentina's fiscal and balance of payments (BoP) problems. The
combination of a gradualist reform strategy in a country with
severely limited access to financial markets, large adverse shocks,
and progressively weaker policy implementation resulted in outcomes
in 2022-23 that fell well short of what was envisaged at the time
of program approval.
A major course correction subsequently undertaken by the Milei
government—notably a sharp fiscal consolidation, an upfront
devaluation, and an end to monetary financing of the budget helped
Argentina avert a full-blown crisis and make important strides
toward macroeconomic stabilization.
Overall, the 2022 EFF did not achieve its original macroeconomic
objectives, but it was successful in easing the burden of
Argentina's financial obligations to the Fund by rescheduling
repayments over 2026-34, and may have helped Argentina avoid even
worse outcomes in 2022-23.
The EPE report concludes that the experience with the 2022 EFF
affirms many lessons from previous Argentina EPEs and warrants
further reflection in several areas, including the suitability of
the Fund's lending policy framework to deal with high and
concentrated exposure cases as well as when resolution of a deeply
entrenched BoP problem may not be feasible through a single Fund
arrangement; the need for clearer commitments on specific
contingency plans when implementation risks are high; and the role
that assessments of countries' capacity to repay should play in
guiding the design of program safeguards, among others.
Executive Board Assessment
Executive Directors welcomed the comprehensive ex post evaluation
(EPE) of Argentina's exceptional access (EA) to Fund financing
under the 2022 Extended Arrangement under the Extended Fund
Facility (2022 EFF).
Directors regretted that the 2022 EFF did not achieve its
objectives. While recognizing that the program reflected difficult
trade-offs in a highly complex setting—and that the rescheduling
of Argentina's repayment obligations to the Fund likely helped
avoid potentially worse outcomes — they agreed that program
design did not provide for an adjustment commensurate to the scale
of the problem and risks of the situation. Furthermore, the
combination of a gradualist reform strategy, large adverse shocks,
and progressively weaker implementation resulted in outcomes
substantially worse than in the baseline by end‑2023. Directors
however welcomed the course correction and significant shift in
ownership and toward macroeconomic stabilization achieved since
December 2023.
With respect to the consistency of the 2022 EFF with Fund policies
and procedures, Directors expressed concern that the approval of
the program request and subsequent reviews relied on the
technicality of assessments of individual elements
(capacity-to-repay descriptors, the exceptional access criteria,
and strength of program design) as having been satisfied rather
than a holistic view of how the Fund's resources were safeguarded.
Directors also acknowledged that while policies regarding
enterprise risk management (ERM) were evolving during the period,
these risks could have been assessed and managed earlier, allowing
for broader and deeper Board discussions on mitigation options.
Directors underscored the continued relevance of the lessons drawn
by previous EPEs, including the importance of ensuring robustness
of the program to shocks, balancing ownership with the quality and
appropriateness of program policies, and a sharper and more
holistic application of the EA framework—where they also
highlighted the findings of the December 2024 IEO evaluation.
Directors broadly agreed that the experience of the 2022 EFF
demonstrates that the Fund's current lending policy framework may
not be perfectly suited to deal with cases of large and
concentrated Fund exposures, although a number of Directors
expressed reservations about some alternative policy options, such
as postponement of obligations to the Fund. Directors also
supported the need for early and comprehensive enterprise risk
discussions with the Board in such cases. While they generally
agreed with the need to explore alternative approaches in
circumstances where resolution of a deeply entrenched balance of
payments problem may not be feasible through a single arrangement,
a few Directors expressed reservations.
Directors supported further reflection in several other areas,
including: the role that the capacity-to-repay assessments should
play in the Fund's lending decisions; the provision of technical
assistance to facilitate debt restructuring outside of a
Fund-supported program; the practice of repeatedly approving
program reviews on the basis of "temporary" FX control measures;
the importance of clearer commitments to specific contingency plans
when program implementation risks are high; and how the Fund and
its shareholders deal with political pressure. A number of
Directors also emphasized the importance of effective external
communications.
Directors urged that the findings from this and previous EPEs
inform the ongoing discussions on a potential follow-up program
with Argentina.
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.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings upgraded Argentina's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'CCC' from 'CC',
and its Long-Term Local-Currency IDR to 'CCC' from 'CCC-'.
Argentina's upgrade to 'CCC' from 'CC' reflects developments that
have improved Fitch's confidence in the authorities' ability to
make upcoming foreign-currency bond payments without seeking relief
of some sort.
S&P, in March 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 S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
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. upgraded Argentina's Long-Term Foreign and Local
Currency Issuer Ratings to B (low) from CCC on November 25, 2024.
The trend on all ratings is Stable.
ARGENTINA: IMF Publishes Grim Evaluation of US$44-billion Deal
--------------------------------------------------------------
Buenos Aires Times reports that the International Monetary Fund
(IMF) published a sombre review of its most recent programme that
failed in Argentina, finishing a technical step needed before
President Javier Milei negotiates a new agreement this year.
IMF staff published an evaluation of Argentina's programme that
originally totalled US$44 billion, the lender's second-largest
programme in history only behind its 2018 deal with the nation,
according to Buenos Aires Times. By IMF rules, a country with
"exceptional access" to IMF money like Argentina's program can't
seek a new programme until the so-called ex-post evaluation of the
previous program finishes, the report notes.
IMF Chief Spokeswoman Julie Kozack confirmed in December that
negotiations have begun on a new program, which would be
Argentina's third deal in a saga now stretching on seven years.
Separately, Argentine Economy Minister Luis Caputo has said he
hopes to reach an agreement within the first four months of 2025,
the report relays.
Markets are keenly watching Caputo's negotiations with IMF staff to
see if the lender will provide fresh funding beyond US$44 billion,
as well as how and when Argentina decides to lift its framework of
currency and capital controls that prevent it from returning to
international markets, the report notes. Both issues are central
to ongoing negotiations, the report discloses.
The ex-post evaluation painted a grim picture of Argentina's latest
IMF programme that began in March 2022, the report recalls. Staff
detailed reckless policy decisions by the government of former
president Alberto Fernandez that derailed the programme and economy
in the run-up to the 2023 presidential election that Milei won in a
landslide, the report says.
By mid-2023, "the program was almost stopped," after "commitments
were repeatedly reneged on, and the authorities' policies veered
significantly off course ahead of the multi-stage electoral
process," according to the evaluation, the report says.
"In sum, Argentina again faced a full-blown economic crisis by the
time of the final round of the election," according to the report,
Buenos Aires Times relays.
After two years of talks, the 2022 program never had the widespread
support IMF staff sought as Argentina went through three economy
ministers in roughly a month, Buenos Aires Times discloses.
Although Fernandez supported a new law that congress would have to
approve the IMF deal, factions of his own Peronist party voted
against it, laying bare political infighting that exacerbated an
economic meltdown and eventually paved Milei's way to the
presidency, Buenos Aires Times adds.
Since he took office, Milei has faced his own tensions with the IMF
as one top staff negotiator already chose to step aside over policy
disagreements, the report notes. However, IMF leadership has
largely applauded Milei's historic austerity campaign that's helped
bring down inflation sooner than expected, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country’s economy is an upper middle-income economy for fiscal
year 2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings upgraded Argentina's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'CCC' from 'CC',
and its Long-Term Local-Currency IDR to 'CCC' from 'CCC-'.
Argentina's upgrade to 'CCC' from 'CC' reflects developments that
have improved Fitch's confidence in the authorities' ability to
make upcoming foreign-currency bond payments without seeking relief
of some sort.
S&P, in March 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 S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
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. upgraded Argentina's Long-Term Foreign and Local
Currency Issuer Ratings to B (low) from CCC on November 25, 2024.
The trend on all ratings is Stable.
ARGENTINA: Scientists Warn Milei Wants to 'Deepen' Cuts
-------------------------------------------------------
Buenos Aires Times reports scientists and academics in Argentina
condemned a resolution by President Javier Milei's government that
orders all scientific programs be assessed and evaluated as part of
a cost-cutting drive.
Experts wanted that the Milei administration wants to eliminate
research in social and environmental sciences and "deepen cuts"
across the public the sector, according to Buenos Aires Times.
"The new resolution published can only be understood as a prelude
to deepening the cuts," stated a communique from the Red de
Autoridades de Institutos de Ciencia y Tecnología de Argentina,
published on X, the report notes.
Another joint statement from federations representing university
lecturers and Scientific workers across Latin America warned that
the resolution "proposes the elimination of scientific research
related to social sciences, the environment, and global warming,
among others," the report relays.
The official resolution, published, stipulates that, due to
Argentina's "economic emergency," the Science & Technology
Secretariat must conduct a "thorough evaluation of all the programs
created" to decide whether they should continue, the report
discloses.
The government requests that the evaluation be conducted "verifying
its alignment with the Strategic Plan defined for 2024-2025," which
proposes the "development of technologies to serve the country's
economic growth and strategic development, focusing on
agroindustry, energy and mining, the knowledge economy and
innovation, and health," the report relays.
"Programmes whose objectives do not align with the aforementioned
Strategic Plan should be terminated," the resolution states, the
report notes.
Biochemist Rodrigo Quiroga, a researcher at the CONICET scientific
research institute, shared an excerpt from the resolution on X and
declared: "They are eliminating all the scientific programs in the
country, except those within the areas of agroindustry, energy,
mining, health, and the knowledge economy," the report discloses.
"Milei's government has just destroyed the Argentine scientific
system in one fell swoop," he wrote in a post on social media, the
report says.
Many Argentine scientists raised their voices last year to denounce
drastic budget cuts by the Milei administration, noting the
paralysation of scholarship and research programs as part of the
government's "chainsaw" approach to spending cuts, the report
relays.
Public spending dropped some 26 percent last year, according to he
Asociacion Argentina de Presupuesto y Administración Financiera
Pública (ASAP) NGO, the report adds.
About Argentina
Argentina is a country located mostly in the southern half of South
America. Its capital is Buenos Aires. Javier Milei is the current
president of Argentina after winning the November 19, 2023 general
election. He succeeded Alberto Angel Fernandez in the position.
Argentina has the third largest economy in Latin America. The
country’s economy is an upper middle-income economy for fiscal
year 2019, according to the World Bank. Historically, however, its
economic performance has been very uneven, with high economic
growth alternating with severe recessions, income maldistribution
and in the recent decades, increasing poverty.
In March 2022, the International Monetary Fund (IMF) approved a new
30-month arrangement under an Extended Fund Facility for Argentina
in the amount of SDR 31.914 billion (equivalent to US$44 billion,
or 1000 percent of quota). The IMF Executive Board's decision
allowed the authorities an immediate disbursement of an equivalent
of US$9.65 billion in March 2022.
Argentina's IMF-supported program seeks to improve public finances
and start to reduce persistent high inflation through a
multi-pronged strategy, involving a gradual elimination of monetary
financing of the fiscal deficit and enhancements in the monetary
policy framework.
In June 2024, the IMF Board completed an eighth review of the
Extended Arrangement under the Extended Fund Facility for
Argentina. The IMF Board's decision enabled a disbursement of
around US$800 million to support the authorities' efforts to
entrench the disinflation process, rebuild fiscal and external
buffers, and underpin the recovery.
On Nov. 15, 2024, Fitch Ratings upgraded Argentina's Long-Term
Foreign-Currency Issuer Default Rating (IDR) to 'CCC' from 'CC',
and its Long-Term Local-Currency IDR to 'CCC' from 'CCC-'.
Argentina's upgrade to 'CCC' from 'CC' reflects developments that
have improved Fitch's confidence in the authorities' ability to
make upcoming foreign-currency bond payments without seeking relief
of some sort.
S&P, in March 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 S&P ratings have
been affirmed as of August 2024. S&P said the stable outlook on
the long-term ratings balances the risks posed by pronounced
economic imbalances and other uncertainties with recent progress in
making fiscal adjustments, reducing inflation, and undertaking
structural reforms to address long-standing microeconomic
weaknesses that have contributed to poor economic performance for
many years that it would likely consider to be distressed.
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. upgraded Argentina's Long-Term Foreign and Local
Currency Issuer Ratings to B (low) from CCC on November 25, 2024.
The trend on all ratings is Stable.
TECPETROL SA: Fitch Assigns 'BB-' LongTerm IDRs, Outlook Stable
---------------------------------------------------------------
Fitch has published Tecpetrol S.A.'s Long-Term Foreign- and
Local-Currency IDR's at 'BB-' with Stable Rating Outlooks. Fitch
has assigned a 'BB-' rating to the proposed approximately $500
million notes. The stable outlook represents the company's strong
production profile and low leverage post-issuance.
Tecpetrol S.A.'s ratings are not constrained by the country ceiling
of Argentina given the implicit support and linkage with the
parent. The ratings are a result of Fitch's view on the Parent and
Subsidiary Linkage Rating Criteria. The net proceeds of the
proposed bonds will be used for capex, working capital and general
corporate purposes.
Key Rating Drivers
Parent-Subsidiary Relationship: Tecpetrol S.A.'s ratings reflect
its strategic importance to the Tecpetrol Internacional group, as
it generates nearly 70% of the group's EBITDA. Fitch expects this
percentage to grow with the shale oil fields development in the
Vaca Muerta operation, enhancing the subsidiary's significance for
parent support. The operational alignment, with complete management
overlap and similar branding, further reinforces the support.
A portion of Tecpetrol S.A.'s debt is currently guaranteed by its
parent, with a history of full guarantees on international bonds,
showcasing consistent support. While this new issuance by Tecpetrol
S.A. is not expected to be guaranteed by the parent, this history
demonstrates Tecpetrol Internacional SLU's willingness to provide
credit enhancements for its subsidiary. The combination of
strategic and operational incentives for support, along with this
legal track record results in a BB- rating for Tecpetrol S.A.,
significantly above the country ceiling of 'B-' for Argentine
issuers.
Strong Production and Hydrocarbon Reserve: Tecpetrol S.A.'s ratings
reflect the company's production size and proven reserves (1P),
both of which are consistent with the 'BB' ratings category. Fitch
expects production to average around 155,000 boed (80% gas and 20%
liquids) in 2024-2027. Tecpetrol S.A.'s last reported reserves were
662 million boe as of YE 2023 (94% gas and 6% liquids), and
consistent with the BB category, for which the reserve range is 400
million boe to 1.5 billion boe. Tecpetrol S.A.'s proved reserves
have grown at a CAGR of 10% in 2020-2023.
Fitch incorporated in its rating case, a deployment of 4 billion in
capex through the rating horizon for potential development of
unconventional fields, with $350 million taking place in 2025 in
Los Toldos II Este. Most of the new oil production will be
exported, decreasing the company's exposure to Argentina's
difficult operating environment with a country ceiling of 'B-'.
Limited Exports: Tecpetrol S.A.'s gas sales are 100% contracted,
mostly under Plan Gas in Argentina. Fitch assumes about 13.1
million (MM) cubic meters (m3)/d to be contracted in 2024-2028,
with winter peaks of 7.25MMm3/d in 2024 and 6MMm3/d in 2025-2028.
Tecpetrol S.A. also receives payments from the Argentine federal
government, namely CAMMESA and ENARSA, which are making payments on
time at 42 days and 60 days, respectively. As of 3Q24, Tecpetrol
S.A.'s exports made up about 21% of revenue, mostly from the oil
business. Fitch expects this share to remain stable and then
increase with potential developments in 2027.
Strong Financial Profile: Tecpetrol S.A.'s contracted volumes,
coupled with its low-cost production profile support its
predictable cash flow. Fitch expects EBITDA of around $750 million
in 2024 and to average at a similar level until 2027, when EBITDA
is estimated to increase to over $1 billion from Fitch's assumption
of addition of production fields. EBITDA margins are expected to
average 56% over the rating horizon. FCF is expected to be negative
over the rating horizon from heavy capex in Vaca Muerta to increase
production of shale oil. Fitch expects leverage metrics to average
below 2.0x through the rating horizon.
Derivation Summary
Tecpetrol S.A.'s production is expected to average around 155,000
boed over the rating horizon and maintain a strong 1P reserve life
between 11 and 15 years, which compares favorably with other 'BB'
rated oil and gas producers. These peers include Pan American
Energy (BB- /Stable) with 222,000 boed and 19 years of reserve
life, Vista Energy Argentina S.A.U (Vista Argentina) (BB-/Stable)
with 90,000 boed and 15 years reserve life, and YPF SA (CCC) with
600,000 of boed and 5.5 years.
Tecpetrol S.A.'s Argentine peers Vista Energy and Pan American
Energy are capped by Argentina's 'B-' Country Ceiling, but receives
multiple-notch uplift, due to its cash flows ex-Argentine EBITDA
and cash abroad, which cover HC Debt Service by over 1.5x for the
next three years. YPF's rating is equalized with the rating of
Argentina, due to the government's 51% ownership and the company's
strategic importance to the country.
Fitch expects Tecpetrol S.A.'s EBITDA leverage to remain below 2.0x
throughout the rating cycle. Compared with its peers, Fitch expects
the average leverage of these E&P companies to be below 2.0x over
the next three years. On a boe basis, Tecpetrol S.A.'s 2024 debt to
1P reserves are expected to be $1.1, stronger than Pan American
Energy ($2 boe) and Vista Energy ($4 boe).
Key Assumptions
Fitch makes the following assumptions within the rating case of the
Issuer:
- Fortin de Piedra gas production average of 19 million cubic
meters per day from 2024 through 2027;
- Weighted realized gas prices of $3.31 MMBTU over the rating
horizon;
- Fitch's Brent oil price assumptions $80 per bbl for 2024 and
$70/bbl for 2025, $65/bbl for the long term;
- Average gross production of 155kboe/d in 2024-2027;
- EBITDA margins expected to remain at an average of 56% from 2023
through 2027;
- Total capex of $4 billion through the rating horizon;
- No dividends paid over the rating horizon;
- EBITDA leverage at or below 2.0x over the rating horizon.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Perceived deterioration of implicit parent support;
- Deterioration of its liquidity profile due to the Argentine
Capital controls and/or material payment delays from Plan Gas.Ar;
- Cancellation or material amendment of Plan Gas.Ar could
negatively impact the rating.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Perceived improvement in implicit parent support.
Liquidity and Debt Structure
Strong Liquidity: Tecpetrol S.A. reported a cash position of $15
million in 3Q24. The company is expected to issue an approximately
$500 million dollar bond in January 2025. Additionally, In October
2024, the company issued two U.S. dollar-denominated bonds totaling
$67.4 million and $80.5 million in the local market, set to mature
in 2027 and 2029, respectively.
Issuer Profile
Tecpetrol S.A. is a midsized oil and gas exploration company with
148,000 boe/d average production as of 3Q24. Its main assets are in
the Neuquen basin (Vaca Muerta) in Argentina. Given the company's
strategic importance, implicit support is expected from its parent,
Tecpetrol Internacional S.L.
Date of Relevant Committee
December 16, 2024
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Fitch's latest quarterly Global Corporates Macro and Sector
Forecasts data file which aggregates key data points used in its
credit analysis. Fitch's macroeconomic forecasts, commodity price
assumptions, default rate forecasts, sector key performance
indicators and sector-level forecasts are among the data items
included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating
----------- ------
Tecpetrol S.A. LT IDR BB- Publish
LC LT IDR BB- Publish
senior unsecured LT BB- New Rating
TECPETROL SA: Moody's Assigns B3 CFR & Rates New Unsecured Notes B3
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Moody's Ratings has assigned a B3 corporate family rating to
Tecpetrol S.A. Moody's have also assigned a B3 foreign currency
rating to Tecpetrol's proposed senior unsecured notes (benchmark
size). The outlook is stable.
Net proceeds from the proposed issuance will be used for liability
management, investments in fixed assets, working capital, and other
general corporate purposes.
The rating of the proposed notes assumes that the final transaction
documents will not be materially different from draft legal
documentation reviewed by us to date and assume that these
agreements are legally valid, binding and enforceable.
RATINGS RATIONALE
The B3 ratings assigned to Tecpetrol reflect its robust competitive
position in the natural gas production in Argentina, bolstered by
high-quality assets and significant growth potential in both
production and reserve development. The rating is also supported by
its solid capital structure characterized by low leverage and
strong cash flow generation. The company's experienced management
team has a notable track record in developing unconventional
resources, contributing to its overall strength.
Given Tecpetrol's high exposure to Argentina's business
environment, its B3 ratings reflect Moody's view that the company's
creditworthiness cannot be completely de-linked from the credit
quality of the Argentine government and, thus, the ratings need to
closely reflect the risk that the company shares with the
sovereign. However, Tecpetrol's ratings surpass Argentina's rating
by four notches (Government of Argentina, Ca stable), which
reflects Tecpetrol's solid credit metrics for its rating position
and diversification of sales revenue through exports; its strong
sponsors, the Teching Group, and the strong liquidity of its parent
company, Tecpetrol Internacional S.L.U. (Tecpetrol Internacional),
which can support Tecpetrol if needed, bolstered by cash generation
from its international operations. These factors enhance
Tecpetrol's capacity to manage foreign currency debt.
Tecpetrol is a wholly owned subsidiary of Tecpetrol Internacional,
which is part of the Techint Group, a global conglomerate which
activities include the production of steel tubes, flat steel
products, the provision of engineering, construction and project
management services, oil and gas, and other types of services and
manufacturing. The Techint Group's companies have supported
Tecpetrol in developing Fortin de Piedra, currently Argentina's
largest shale gas block, demonstrating the Group's commitment to
the company's Argentine operations. Also, Tecpetrol Internacional
holds substantial cash reserves in foreign currency, providing
financial support to Tecpetrol if necessary. On multiple occasions,
Tecpetrol Internacional has explicitly supported Tecpetrol,
including guaranteeing its $500 million international bond issued
in 2017 and assisting in redeeming this bond due in December 2022
through an explicit guarantee of a $300 million loan from Itau
Unibanco S.A. Nassau Branch and Banco Santander S.A. Tecpetrol
Internacional does not provide an explicit guarantee to the
proposed notes issuance.
Tecpetrol´s ratings are mainly constrained by the concentration of
assets and oil and gas production in Argentina, although this is
partially mitigated by sales diversification through export markets
(around 20% of revenue). The company is also exposed to regulatory
risks within Argentina's local hydrocarbon market. Additionally,
the company is vulnerable to the volatility of energy commodity
prices, with approximately 70% of its revenues generated from
natural gas sales and around 30% from crude oil sales.
Tecpetrol primarily engages in oil and gas exploration and
extraction activities in Argentina. Strategically positioned in the
prolific Vaca Muerta shale region, Tecpetrol operates 205,100
acres, including Fortín de Piedra, the most important shale gas
field in Argentina, which as of September 2024 produced
approximately 14% of the country's gas output. Tecpetrol held 622.7
million barrels of oil equivalent (MMboe, conversion rate of 6,000
cubic feet = 1 boe of natural gas) of owned proved reserves as of
December 31, 2023. As of the last twelve months (LTM) through
September 2024, the company produced 129.5 thousand barrels of oil
equivalent per day (Mboe/d), including 682.3 million cubic feet per
day (MMcf/d) of natural gas and 15.3 Mboe/d of oil.
Tecpetrol's robust competitive position is boosted by substantial
growth potential in both production and reserve development. The
company plans to expand its shale oil operations in Vaca Muerta,
aiming to increase shale oil production from 10 Mboe/d to over 100
Mboe/d by 2027. Most of this growth will come from the Los Toldos
II Este concession (around 70 Mboe/d), with additional
contributions from Puesto Parada and Los Toldos I Norte. As a
result, Tecpetrol will rise production levels from around 129
Mboe/d as of LTM September 2024, to around 200-210 Mboe/d by 2027.
Despite the asset concentration in Argentina, the company has a
diverse range of sales through export markets, which constitute
about 20% of its revenue. The expansion in shale oil operations
will help the company diversify away from natural gas and into the
export markets. Crude oil produced in Vaca Muerta currently exceeds
domestic needs, so future production growth will primarily be
directed towards the export market. The project will benefit from
the company's experience in unconventional resource development and
from the new Argentine regulations encouraging large investments.
In this regard, in mid-2024, Argentina's Incentive Regime for Large
Investments (RIGI) was created to support energy and oil projects
with tax, customs, and foreign exchange benefits.
Tecpetrol has demonstrated strong profitability, with an average
EBITDA margin (Moody's-adjusted) of approximately 60%-70% for the
2020-2023 period, surpassing the sector average. The company has
consistently funded its growth through internal cash flow
generation and, to a lesser extent, with debt, maintaining leverage
at very low levels. Tecpetrol has kept a gross debt to EBITDA
(Moody's adjusted) ratio under 1.0x since 2021, peaking at 2.0x in
2018 during the ramp-up of its core shale gas project at Fortín de
Piedra. As of LTM September 2024, gross debt to EBITDA ratio was
0.6x.
During 2025-2027 Tecpetrol will invest around $2 billion in its
shale oil project in Vaca Muerta, which will in turn almost double
production levels. The project will be funded through a mix of new
debt, including the proposed notes' issuance, and internally
generated cash flow. Moody's expect total debt will rise to about
$1.5-$1.6 billion by 2026, from $602 million (including leases) as
of September 2024, before the project starts to rump up production
through 2026-2027 and the company gradually starts to reduce debt.
Once the project reaches full production, Moody's expect
Tecpetrol's EBITDA to increase to about $2 billion by 2027, from
$941 million in 2023, maintaining an EBITDA margin (Moody's
adjusted) of around 65% and assuming average international brent
price of $65/boe in 2025-2027, down from $70/boe in 2024, and a
domestic natural gas price of around $3.25-$3.50/million BTU in the
same period. As production ramps up and EBITDA grows, leverage will
decrease to around 0.7x-0.8x gross debt to EBITDA in 2027 from a
peak of around 1.5x-1.7x in 2026 and 1.2x in 2025, and from an
expected 0.7x by year-end 2024.
Tecpetrol's strong cash generation and long proven access to
various financial markets support its liquidity profile. The
company maintains high financial flexibility provided by its sound
capital structure with very low leverage. The parent company,
Tecpetrol Internacional, holds significant cash reserves in foreign
currency abroad to support Tecpetrol if necessary.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of Tecpetrol is contingent upon its relative positioning
in the event of an upgrade of the Government of Argentina's credit
rating, which is currently rated Ca with a stable outlook. Also, an
upgrade could also be supported by growth and diversification of
operations outside Argentina, while maintaining a good liquidity.
The ratings could be downgraded if the government of Argentina's Ca
rating is downgraded. Also, a downgrade could be triggered by
reduced liquidity at Tecpetrol and/or its parent, Tecpetrol
Internacional, coupled with a significant deterioration in credit
metrics.
The principal methodology used in these ratings was Independent
Exploration and Production published in December 2022.
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B R A Z I L
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BANCO BRADESCO: Fitch Assigns 'BB+(EXP)' Rating on New Unsec. Notes
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Fitch Ratings has assigned an expected Long-Term rating of
'BB+(EXP)' to Banco Bradesco S.A.'s (Bradesco) proposed senior
unsecured notes, acting through its Cayman Islands Branch. The
issuance is targeted for five years. The amount, rate of interest
and final maturity date will be determined at the time of
issuance.
The net proceeds will used by for general corporate purposes. The
final rating is contingent upon the receipt of final documents
conforming to the information already received.
Key Rating Drivers
The expected rating on the notes is at the same level of Bradesco's
Long-Term Foreign Currency Issuer Default Rating (IDR,
BB+/Negative) as the notes are senior obligations and the default
equates to default of bank and the expected recoveries are average
upon default. Bradesco's ratings are driven by its standalone
creditworthiness, as measured by its 'bb+' Viability Rating (VR).
For further information on Bradesco's rating rationale and
sensitivities please refer to latest press release "Fitch Affirms
Bradesco's IDRs at 'BB+'; Outlook Negative" dated Dec. 17, 2024.
Rating Sensitivities
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The rating of the notes could be downgraded in the event of a
downgrade of Bradesco's VR and IDR.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The rating of the notes could be upgraded in the event of an
upgrade of Bradesco's VR and IDR.
Date of Relevant Committee
December 16, 2024
Public Ratings with Credit Linkage to other ratings
Bradesco's Government Support Rating (GSR) is linked to Brazil's
sovereign rating
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
Entity/Debt Rating
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Banco Bradesco S.A.
senior unsecured LT BB+(EXP) Expected Rating
BANCO BRADESCO: Moody's Rates New Senior Unsecured Notes 'Ba1'
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Moody's Ratings has assigned a Ba1 long-term foreign currency
senior debt rating to the proposed senior unsecured notes to be
issued by Banco Bradesco S.A. (Bradesco), acting through its Grand
Cayman branch. The proposed notes, which will be issued under its
existing $10 billion senior unsecured Global MTN Program, rated
(P)Ba1, will be denominated and settled in US dollars, and will
mature in five years. The outlook on the debt rating is positive.
RATINGS RATIONALE
The Ba1 rating on the notes is in line with Bradesco's ba1 baseline
credit assessment (BCA), which reflects the bank's well-established
participation in the credit and insurance segments in Brazil, sound
liquidity and steady access to funding. These strengths are
counterbalanced by problem loan ratios that remain high, while the
bank maintains efforts to improve the quality of its loan book, and
a capital position that, according to Moody's metric, is still
below that of its global peers.
The bank's effort to originate new loan vintages under more
conservative risk policies have resulted in lower problem loans,
measured as 90+ days past due loans, at 4.66% of gross loans, in
September 2024, down from 6.76% one year prior. At the same date,
Bradesco had reserve coverage at 150% of problem loans, which
helped the bank to mitigate credit risk.
In September 2024, Bradesco's ratio of net income to tangible
assets, as per Moody's measure, was 0.95%, or virtually flat from
0.96% one year prior, supported by the bank's diversified
operations, including consistent contributions from insurance and
pension income. Additionally, continued improvement in loan quality
has allowed Bradesco to reduce the volume of loan-loss provisions,
also in line with the bank's focus on increasing the share of
secure lending in its loan book.
A higher growth in the volume of loans and government securities
relative to capital replenishment via earnings retention resulted
in a decline in Bradesco's core capital, measured by Moody's ratio
of tangible common equity to risk-weighted assets (TCE/RWA), was
7.29% in September 2024, down from 8.09% in the previous year.
Despite that, the bank's capital position has improved consistently
from its low point of 5.5% in March 2020.
Bradesco's long-term local and foreign currency deposit and Banco
Bradesco S.A., Grand Cayman Branch's foreign currency senior
unsecured debt ratings of Ba1 are at the same level as the
Government of Brazil's (Brazil) Ba1 sovereign rating. The outlook
on these ratings is positive and consistent with the positive
outlook at the Brazilian sovereign rating, reflecting Moody's
assumption of the high level of support from the federal government
to the bank.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
Bradesco's ratings could face positive pressure as a result of an
upgrade of Brazil's sovereign ratings due to Moody's assumption of
a high level of systemic support.
Downward pressure on Bradesco's BCA and ratings could develop if
there is sizable and consistent deterioration in asset risk and
profitability, leading to weaker capitalization. In addition, a
substantial weakening of the bank's internal capital generation and
risk absorption capacity due to subdued profitability and a
weakening of the bank's liquidity could also result in downgrade of
its BCA and ratings.
The principal methodology used in this rating was Banks published
in November 2024.
GOL LINHAS: Unveils New Five-Year Plan Prior to Chapter 11 Exit
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Reuters reports that Gol, the Brazilian airline, introduced a
revised five-year strategic plan as it moves toward exiting Chapter
11 bankruptcy, indicating that the new projections will serve as a
framework for its reorganization.
According to a securities filing, Gol expects to emerge from
Chapter 11 by May and anticipates substantial improvements in its
net leverage as it rebuilds its network and reaches "normal levels"
of core earnings by next year. The airline, one of Brazil's
largest, filed for Chapter 11 in early 2024 due to mounting debt, a
decline in traffic caused by the COVID-19 pandemic, and delays in
aircraft deliveries from Boeing (BA.N).
"We have secured lessor concessions, addressed maintenance and
overdue liabilities, initiated a profit improvement plan, and
reached key stakeholder agreements," said Gol's CEO, Celso Ferrer.
"These actions, once implemented through the reorganization plan,
will significantly reduce Gol's debt burden."
According to Reuters, Gol's five-year plan assumes the successful
completion of a $330 million capital raise as part of its Chapter
11 exit, along with $1.54 billion in exit debt. The airline warned
that this will lead to "significant dilution" of its existing
shares. The company expects its net leverage, measured by the net
debt/EBITDA ratio, to be 6.1 at the time of its Chapter 11 exit,
but it projects a rapid decline to 2.7 by the end of 2027 and 1.9
by the end of 2029. As part of the five-year plan, Gol anticipates
expanding its fleet to 167 aircraft by 2029, up from 137 this
year.
The airline exclusively operates Boeing 737 jets and is replacing
older models with new 737 MAX aircraft.
Gol holds about 30% of Brazil's domestic market share and remains a
leading player in the country's airline industry, alongside Azul,
the report states.
About Gol Linhas
GOL Linhas Aereas Inteligentes S.A. provides scheduled and
non-scheduled air transportation services for passengers and cargo;
and maintenance services for aircraft and components in Brazil and
internationally. The company offers Smiles, a frequent-flyerprogram
to approximately 20.5 million members, allowing clients to
accumulate and redeem miles. It operates a fleet of 146 Boeing 737
aircraft with 674 daily flights. The company was founded in 2000
and is headquartered in Sao Paulo, Brazil.
GOL Linhas Aereas Inteligentes S.A. and its affiliates and its
subsidiaries voluntarily filed for Chapter 11 protection (Bankr.
S.D.N.Y. Lead Case No. 24-10118) on Jan. 25, 2024.
GOL Linhas estimated $1 billion to $10 billion in assets as of the
bankruptcy filing.
The Debtors tapped Milbank Llp as counsel, Seabury Securities LLC
as restructuring advisor, financial advisor and investment banker,
Alixpartners, LLP, as financial advisor, and HUGHES Hubbard & Reed
LLP as aviation related counsel. Kroll Restructuring Administration
LLC is the claims agent.
OI SA: Pay-TV Asset Sale Sparks Investor Interest
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menafn.com reports that Oi SA, Brazil's telecommunications giant,
recently announced a binding offer from Mileto Tecnologia S.A. to
acquire its pay-TV assets. This news sent Oi's stock soaring by
6.67%, reaching R$1.44 on December 23, 2024, according to
menafn.com.
The offer includes Oi's subscriber base, terminal equipment, and
related rights and obligations, the report notes. The sale will
occur through an Isolated Productive Unit (UPI), the report
discloses.
This is a common method for companies in judicial reorganization to
sell assets without the burden of existing liabilities, the report
says. Oi granted Mileto exclusive negotiation rights, signaling a
serious commitment to this transaction, the report relays.
This potential sale aligns with Oi 's broader strategy to
streamline operations and focus on its fiber broadband business,
which the company views as key to future growth, the report notes.
Since filing for bankruptcy protection in June 2016, Oi has
actively divested assets to reduce debt and improve its financial
position, the report relays. In recent years, Oi has made
significant moves to stabilize its operations, the report
discloses.
In 2020, it sold its mobile assets for R$16.5 billion and delisted
its American Depositary Receipts from the New York Stock Exchange
in 2021, the report relays. The company also filed for Chapter 15
bankruptcy protection in the U.S. in early 2023, the report
recalls.
Oi's Financial Turnaround and Strategic Asset Sale
Despite a challenging market environment, Oi reported a net profit
of over R$15 billion in Q2 2024, reversing previous losses, the
report notes. However, revenue fell by 13%, highlighting ongoing
challenges as demand for legacy services declines, the report
says.
The pay-TV sector faces fierce competition from streaming services,
leading to a drop in subscribers for many traditional providers,
the report relays. Oi's subscriber base was approximately 900,000
as of August 2024, but this number likely decreased further, the
report discloses.
Mileto Tecnologia aims to revitalize the pay-TV business and could
bring fresh strategies to attract customers, the report says. The
acquisition group includes former Oi executive Roberto Guenzburger,
indicating potential for innovative approaches in a struggling
market, the report notes.
This asset sale represents a crucial step for Oi as it navigates
its restructuring process, the report relays. It reflects the
company's efforts to shed non-core operations and concentrate on
profitable segments like fiber optics and digital solutions for
businesses, the report adds.
About Oi SA
Headquartered in Rio de Janeiro, and operating almost exclusively
within Brazil, the Oi Group provides services like fixed-line data
transmission and network usage for phones, internet, and cable,
Wi-Fi hot-spots in public areas, and mobile phone and data
services, and employs approximately 142,000 direct and indirect
employees.
On June 20, 2016, pursuant to Brazilian Law No. 11.101/05 (the
'Brazilian Bankruptcy Law'), Oi S.A. and certain of its
subsidiaries filed for recuperao judicial (judicial
reorganization) in Brazil.
On June 21, 2016, OI SA and its affiliates Telemar Norte Leste
S.A. and Oi Brasil Holdings Cooperatief U.A. commenced Chapter 15
proceedings (Bankr. S.D.N.Y. Lead Case No. 16-11791). Ojas N. Shah,
as foreign representative, signed the petitions.
Coop and PTIF are also subject to proceedings in the Netherlands.
The Chapter 15 cases are assigned to Judge Sean H. Lane.
In the Chapter 15 cases, the Debtors are represented by John K.
Cunningham, Esq., and Mark P. Franke, Esq., at White & Case LLP,
in New York; and Jason N. Zakia, Esq., Richard S. Kebrdle, Esq.,
and Laura L. Femino, Esq., at White & Case LLP, in Miami, Florida.
On July 22, 2016, the New York Court recognized the Brazilian
Proceedings as foreign main proceedings with respect to the
Chapter 15 Debtors, and granted certain additional related relief.
The company exited bankruptcy protection in December 2022.
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J A M A I C A
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JAMAICA: Currency Redesign Rift
-------------------------------
Dashan Hendricks at Jamaica Observer reports that a dispute is
looming between the Bank of Jamaica (BOJ) and commercial banks over
plans to redesign the country's polymer banknotes, just two years
after their introduction, with the BOJ seeking to remove the
Jamaica 60th Independence anniversary insignia, a move banks claim
will come with significant costs.
The Bank of Jamaica, however, remains sceptical about the banks'
concerns, sources said, the report discloses.
The introduction of the polymer banknotes in June 2023 was a
significant upgrade to Jamaica's currency, with advanced security
features and improved durability which the central bank said will
help it save on the costs of acquiring the notes compared to the
cotton notes they replace, the report says. The new notes were
designed with the inclusion of the 60th anniversary insignia, to
commemorate Jamaica's 60th year of Independence from Britain, the
report relays. That 60th anniversary was celebrated in 2022,
though the commemorative notes were released almost a year later.
"Now they want to take [the 60th anniversary insignia] off, but
that is going back to reissuing the polymer notes. . . . and the
machines were calibrated for the design of the notes, and will have
to be recalibrated if the notes are redesigned to take off the 60th
anniversary," one source told Jamaica Observer.
Bank of Nova Scotia Jamaica (BNSJ), responding to BusinessWeek
queries on the matter in December, said adapting their automated
banking machines (ABMs) to read the redesigned notes "would require
a similar process to the adjustments done to adapt when the notes
were initially redesigned," the report notes.
It added that the "testing process will also be similar and
deployment of new file to recognise notes when deposited will be
the same," without elaborating further. BNSJ also pointed out that
machine downtime to facilitate the recalibration "would be similar
to the original project to migrate to polymer." It didn't quantify
how long that process could take in its responses, the report
discloses.
However, National Commercial Bank Jamaica (NCBJ) said the process
to recalibrate machines to read the proposed new design of the
notes without the 60th anniversary insignia could take almost a
whole year, the report says.
"The redesign of the notes, specifically the removal of the
anniversary insignia, will likely necessitate a reconfiguration of
the deposit module of ABMs in the network, to accurately recognise
and process a new banknote design," NCBJ told BusinessWeek, the
report relates.
The bank said it would require collaboration with the Bank of
Jamaica similar to the efforts undertaken when the current polymer
notes were introduced in June 2023, the report notes.
"Overall, the forecast effort could take up to 10 months to include
development, testing, implementation, and distribution of the new
notes," the bank added. It is not clear when that 10 months
timeline will start, but NCB, who gave the responses ahead of the
Christmas shopping season, said it would not start it then, to
minimise any disruptions that could be caused, the report says.
Pressed on the estimated costs of the recalibration, NCB said "it
will vary based on several factors," but added that the "adjustment
can cost up to $100 million for the NCB machines in the network,"
the report discloses.
Of the 855 ABMs that were in operation in October, about a third,
or 262 of the 855 active machines were operated by NCB. BNS, on the
other hand, had 259 active ABMs in the month, or about 30 per cent
of total, the report relays. Together, NCB and BNS operate nearly
two-thirds of all ABMs in Jamaica. Bank of Jamaica records show
900 ABMs were installed in October.
But the central bank is yet to be convinced about some of the
arguments proffered so far, the report notes.
"The issue with the removal of the 60th anniversary insignia, we
are getting exemplars to help them to adapt. We asked for some
costing in September, because they said it will cost. We have
spoken to the machine vendors and they have told us it is an
expensive operation, but we are not convinced, because we have done
it before and we have removed it and it wasn't an issue. They just
have to make the machines indifferent to the 60th anniversary
logo," the BOJ said in early December in response to the banksthe
report discloses.
The new notes without the 60th anniversary insignia are expected to
be rolled out from mid-year, the report notes.
The BOJ, in 2012, produced notes with insignia commemorating
Jamaica's 50th year of Independence from Britain and revert to
notes designed without the insignia without much problems, the
central bank highlighted further, the report says.
Still, the banks are ready to get onboard and move forward with the
project, the report relays.
"The recalibration effort would be a major undertaking; if a change
is required, we would seek to implement the new notes using a
phased execution approach, scheduling upgrades during off-peak
hours and prioritising high-trafficked locations to reduce customer
service disruptions," NCB said, the report adds.
About Jamaica
Jamaica is an island country situated in the Caribbean Sea. Jamaica
is an upper-middle income country with an economy heavily dependent
on tourism. Other major sectors of the Jamaican economy include
agriculture, mining, manufacturing, petroleum refining, financial
and insurance services.
In October 2023, Moody's upgraded the Government of Jamaica's
long-term issuer and senior unsecured ratings to B1 from B2, and
senior unsecured shelf rating to (P)B1 from (P)B2. The outlook has
been changed to positive from stable. In September 2023, S&P
Global Ratings raised its long-term foreign and local currency
sovereign credit ratings on Jamaica to 'BB-' from 'B+', and
affirmed its short-term foreign and local currency sovereign credit
ratings at 'B', with a stable outlook. In September 2024, S&P
affirmed 'BB-/B' sovereign ratings on Jamaica and revised outlook
to positive. In March 2022, Fitch Ratings affirmed Jamaica's
Long-Term Foreign Currency Issuer Default Rating (IDR) at 'B+'.
The Rating Outlook is Stable.
MFS CAPITAL: Gets Suspended From Trading Over Late Financials
-------------------------------------------------------------
Jamaica Observer reports that MFS Capital Partners Limited has
become the fifth company to be suspended from trading by the
Jamaica Stock Exchange (JSE) over late financials in 2024 and sixth
company this year to be suspended over breaches of the JSE's
rules.
The company was effectively suspended on December 31, the last
trading day in 2024, according to Jamaica Observer. This was due
to the company's June 2024 audited financial statements being
overdue by 93 days as at December 30, 2024 and its first quarter
report for the July to September 2024 period being overdue by 46
days, the report notes.
As a publicly listed company, MFS must meet certain reporting
requirements in order for its ordinary shares to continue trading
on the JSE, the report relays. It must submit a quarterly report
45 days after its most recent quarter ends, the report says. Based
on the reporting period chosen by MFS, its fourth quarter report
was published on August 26, 12 days later than the original
submission date, which allowed for it to submit its audited
financial statements by September 28, the report notes.
However, the audited financials have yet to be submitted along with
the Q1 report which was due on November 14, the report says. MFS
provided a delay notice where it indicated that the delay in
publishing its audited financials was due to the need to finalize
its audit with its auditors Baker Tilly, the report discloses. It
noted that it expects to publish its audited financials by January
10 but provided no timeline on the first quarter report
publication, Jamaica Observer discloses.
That is a problem for MFS shareholders since the company must
publish both its audited financials and quarterly report for the
JSE to consider readmitting its ordinary shares to trading, the
report relays. For the duration of the suspension, investors
cannot trade the company's shares and will have to wait on the
company to resolve any and all breaches with the JSE, the report
notes.
While this is MFS Capital's first suspension under its current
name, SSL Venture Capital Limited (SSLVC) voluntarily applied for a
suspension between June – August 2019 to address breaches related
to its 2019 audited financials where there was no audit opinion
expressed by its auditor, a breach of the JSE rules, the report
notes. SSLVC was originally listed as C2W Music Limited in May
2012, the report recalls.
This is another issue for MFS' shareholders who have seen the
company's stock price drop from $1.94 to $0.52 in 2024, a 73 per
cent erosion of value, the report relays. This is a far cry from
the $4.95 intraday peak MFS achieved in July 2022 where it also
closed at an all-time high of $4.42, the report says.
The drop in MFS' stock price has made it the second
worst-performing stock in 2024 just behind EduFocal Limited, which
was down 76.80 per cent, the report notes. EduFocal was suspended
by the JSE earlier this year for being late with its audited
financials, the report says. EquityLine Mortgage Investment
Corporation, IronRock Insurance Company Limited and Productive
Business Solutions Limited (PBS) were all suspended by the JSE for
late audited financials, the report relays. Kintyre Holdings (JA)
Limited (formerly iCreate Limited) was suspended for five months
during 2024 for different breaches of JSE rules, the report notes.
Apart from IronRock and EquityLine, nearly every company suspended
by the JSE has seen a decline in the price of their ordinary and
preference shares, the report discloses. EquityLine was delisted
by the JSE in October for a litany of breaches while IronRock was
up 54 per cent to make it the second-best performing stock on the
Junior Market and amongst the best-performing stock in 2024, the
report recalls.
MFS Changes
MFS completed its first acquisition under its new owners at the end
of March 2024 when it acquired 100 per cent of Micro-financing
Solutions Limited (MFS Limited) for $500 million or its effective
book value, the report notes.
The company had originally published its unaudited third quarter
financials in May with the initial consolidation of MFS Limited,
the report relays. However, the company published revised numbers
some months later with the revision notes listing 10 items of
correction which even included treatment with the appropriate
accounting principles, the report notes.
MFS Capital then released its unaudited fourth quarter report where
it reported consolidated revenue of $32.46 million but recorded a
consolidated net loss of $10.55 million, the report discloses. For
the overall unaudited 12 months, MFS' a 124 per cent rise in
consolidated revenue to $36.54 million, but generated a
consolidated net loss of $44.68 million compared to an unaudited
net profit of $9.58 million, the report notes. The company's 2023
audited financials showed that it had no consolidated revenue but
had $32.90 million in other operating income and a $8.74 million
consolidated net profit, the report relays.
Due to the acquisition of MFS Limited, MFS' asset base grew from
$65.64 million to $752.66 million, the report notes. However, its
consolidated debt load rose to $437.02 million when accounting for
the mixture of long-term debt and related party debt, the report
discloses. The company also moved from a shareholder deficit of
$39.91 million to consolidated shareholder's equity of $173.31
million, the report says. That was due to the company issuing
260.4 million new ordinary shares with a face value of $244.76
million, the report relays.
According to the company's shareholder holdings report, MFS
Acquisition added 261.54 million ordinary shares to its position
during the fourth quarter which moved its interest in the company
from 53.52 per cent to 72.02 per cent, the report notes. A
subsequent market disclosure noted that MFS Acquisition sold
84,166,667 shares on August 19 pursuant to a resolution approved at
the company's February 2024 annual general meeting (AGM), the
report discloses. MFS shareholders also approved the ability for
MFS Capital Partners to issue up to 380 million new ordinary shares
in a renounceable rights issue, the report says.
The company informed the market that its chief financial officer
(CFO), Dr Kesha Christie, had resigned on June 30, a year after she
took up the role, the report relays. Robert Barnes, MFS' chief
operating officer (COO), was stated to take over the CFO
responsibilities, the report adds.
*********
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